Valuation

implement
ation
Hello
!
KELOMPOK 6
CHANTYA ALYA S (06)
JOSAFAT BENIAH P.S (17)
NUR SIFA S (28)
SYAHPUTRA DHIGDA B (36)

2
 3 Discount Rates Used
in This
Analysis
1. Cost of Capital 2. Cost of Capital
– Equity – Debt 3. Cost of Capital
– For the firm and
a. CAPM a.Loan
operation
Normal Return = b. Bond
Risk Free Return + Used in DCF and
(Risk Premium x residual abnormal
CAPM beta) operating earnings
valuations
b. DDM
DDM/Vcs= D1/(Kcs -
g)
D1 = Do (1+g)

3
Weighted average cos
t of
capital (wacc)
Discount rate to value a company’s asses (debt + equity) is the
WACC, which takes into account debt and equity sources of
financing.

4
Valuation

5
Key drivers of forecas
ts
1. Sales growth over the prior year
2. the ratio of net operating profit after tax to sales
3. the ratio of after-tax net interest expense to net
debt,
4. the ratio of net operating working capital to sales
5. the ratio of net operating long-term assets to
sales, and
6. the ratio of net debt to net capital.

6
 Valuation forecasts
Financial items used in Valuation
Variabel Forecasts :
Net operating profit after tax Net incomes + net int. expense x (1- tax rate)
(NOPAT)
After tax net interest (Int. expense – Interest income) x (1- tax rate)
expense
Net operating working capital (Current assets – *Excess cash and short-term investments)
–
( Current liabilities – Interest bearing current liabilities)
Net operating long term (Long-term assets – Non-interest-bearing longterm
assets liabilities)
Net debt Net debt All interest-bearing liabilities – Excess cash
Net capital Net debt + Shareholders’ equity
*excess cash
Operating = cash is the cash
assets Net on the balance
operating workingsheet
capital-+cash needed for
Net operating longsupporting
- term
operations assets

7
Valuatio
n
Forecast
s
8
Performan
ce

9
Performance Forecasts

Abnormal
Abnormal Abnormal
operating
ROE NOPAT
ROA

Free cash
Free cash
Abnormal flow to
flow to
Earnings debt &
equity
equity

10
 Performance Forecasts
Estimated Abnormal
Operating ROA

Operating ROA - WACC

*operating ROA is the ratio of NOPAT during

the year to net assets at the beginning of the
year

11
 Performance Forecasts
Estimated Abnormal
ROE

ROE – cost of equity

*ROE is the ratio of net income to beginning-of-

year equity

12
 Performance Forecasts
Estimated Abnormal
NOPAT

NOPAT - total net capital beginning of the year x

WACC

13
 Performance Forecasts
Estimated Abnormal
Earnings

Net income – shareholder’s equity at the beginning

of the year x cost of equity

14
 Performance Forecasts
Estimated FCF to debt &
equity

NOPAT - the increase in operating working

capital - the increase in net long term assets

15
 Performance Forecasts
Estimated FCF to equity

net income - the increase in operating working capital -

the increase in net long-term assets + the increase in net
debt

16
performanc
e Forecasts

17
Terminal
value
18
Discounted dividend model
× TV constant in × TV continues with
perpetuity growth in
perpetuity
dT +1 dT +1
TVT = PT = TVT = PT =
r r -g

19
Steps in valuation
× Forecast dividends

× Estimate cost of capital for equity

× Calculate forecast dividend growth patterns to estimate TV
calculation method
• Zero
• Perpetuity or
• Perpetuity with growth

× Calculate TV at time T (where growth pattern stabilises)

× Discount forecast dividends to TV year and discount TV, add
together for total value of equity

20
Perpet
uity

21
Growth in
perpetuity

22
Abnormal earning
× When × When × When
Abnormal Abnormal Abnormal
Earning= 0 Earning Earnings
continues in continues in
perpetuity perpetuity
with growth

23
Steps in valuation
× Forecast CSP (clean surplus profit) and book values of equity
× Estimate cost of capital for equity
× Calculate abnormal earnings = CSP – opening BVE (for that
year) x cost of capital for equity
× Calculate the forecasted abnormal earnings growth patterns
and estimate the TV method (0, perpetuity or perpetuity
with growth)
× Calculate TV at time T (where growth pattern stabilises)
× Discount the forecasted abnormal earnings to the TV year
and discount the TV, add together with the opening book
value to get the total value
24
AE = 0

25
AE continues
in perpetuity

26
in
perpetuit
y
With
growth

27
Kelebihan dae kekurangan dae
× Fokus pada value × Kompleks
drivers × Masalah distorsi
× Berkaitan dengan akuntansi
laporan keuangan × Time Horizon
× Menggunakan
akrual basis

28
Abnormal operating earning -
steps
× Forecast NOPAT and net operating assets
× Estimate cost of capital (WACC) for the firm
× Calculate abnormal operating earnings = NOPAT – opening NOA
(for that year) x cost of capital for firm
× Calculate forecast abnormal operating earnings growth
patterns to estimate TV calculation method (0, perpetuity or
perpetuity with growth)
× Calculate TV at time T (where growth pattern stabilises)
× Discount forecast abnormal operating earnings to TV year,
discount the TV, add together + opening NOA for total firm
value
× Firm value less book value of debt = equity value

29
30
Discounted cash flow model
× Level perpetuity × Growth perpetuity

TV
 
TV
 

31
Step valuation
× Forecast free cash flow
× Estimate cost of capital for the firm
× Calculate forecast FCF growth patterns to estimate
TV calculation method (0, perpetuity or perpetuity with
growth)
× Calculate TV at time T (where growth pattern stabilises)
× Discount forecast FCF to TV year, discount the TV,
add together for total firm value
× Firm value less book value of debt = equity value

32
33
COMPUTING
ESTIMATED VALUES

34
Mengestimasi nilai
aset dan ekuitas
Sigma menggunak
an tiga metode
Metode Estimasi Aset Metode Estimasi Equity
1. Abnormal operating 1. Operating ROE
ROA 2. Abnormal NOPAT
2. Abnormal NOPAT
3. Free cash flow to
3. Free cash flows to debt
equity
and equity

35
 Abnormal return meth
od
Estimated value of assets

(Book value of net assets at the beginning of 1999) × (1 + PV of

abnormal operating ROA for 1999–2003+ Terminal value)

= $715 million × (1 + 0.215 + 0.269)

= $715 million × (1.484)
= $1,061.1 million

36
Abnormal return meth
od
Estimated value of
equity

(Book value of equity at the beginning of 1999) × (1 + PV of

abnormal ROE for 1999–2003 + Terminal value beyond 2003)

= $429 million × (1 + 0.338 + 0.265)

= $429 million × (1.603)
= $687.7 million

37
ABNORMAL EARNINGS
M ET H O D
Estimated value of
asset
Book value of assets at the beginning of 1999 + PV of
abnormal NOPAT for 1999–2003 + Terminal value
beyond 2003

= $715 million + $153.7 million + $192 million

= $1,060.7 million

38
ABNORMAL EARNINGS
M ET H O D
Estimated value of
equity
Book value of equity at the beginning of 1999 + PV of
abnormal earnings for 1999–2003 + Terminal value beyond
2003

= $429 million + $144.8 million + $113.5 million

= $687.3 million

39
FREE CASH FLOW M
E THO D
Estimated value of
asset

PV of free cash flow to debt and equity for 1999–2003 +

Terminal value beyond 2003

= $170.8 million + $890.3 million

= $1,061.1 million

40
FREE CASH FLOW M
E THO D
Estimated value of
equity

PV of free cash flow to equity for 1999–2003 + Terminal value

beyond 2003

= $205 million + $482.6 million

= $687.6 million

41
Nilai estimasi yang disajikan di
atas menunjukkan bahwa ketiga
metode menghasilkan estimasi
nilai yang sama (kecuali untuk
perbedaan kecil karena
pembulatan) - nilai estimasi aset
Sigma
adalah sekitar $1061 juta, dan nilai
estimasi ekuitasnya adalah sekitar
$687 juta.
THAN
KS!
Any questions?

43