Conducted by an expert with over 25 years of experience in the sector, this practical, computer-based 1-day programme has been designed to develop the participants' understanding of the key issues when valuing Emerging Market (EM) companies.
You will learn about main issues to consider when valuing emerging market companies including currency volatility and country risks, calculate DCF and decide on the best use of trading multiples in Emerging Markets. You will work through different case studies and real life examples.
Due to the nature of the course number of places is limited and participants are required to bring laptops. We can provide one for an additional fee.
What will you learn
At the end of this programme, the participants will be able to:
- Understand the key challenges arising from EM companies, namely currency volatility, lack of market data and country risk premium;
- Compute a Discounted Cash Flows (DCF) and trading multiples valuation of EM companies;
- Analyse and choose the appropriate currency in cash flow forecast and discount rate;
- Decide on appropriate risk-free rate, equity risk premium, beta and country risk premium to be used in the discount rate;
- Decide on sensible use of trading multiples in EM.
Main topics covered during this training
- Considerations when analysing Emerging Markets
- Key valuation issues to consider
- Information Gap and Accounting Standards
- Free Cash Flows
- Discount Rate - Cost of Debt
- Discount Rate - Cost of Equity
- Trading Multiples in Emerging Markets
Key Topics Covered:
- How does EM differ from developed markets
- Should DCF be the main source of value?
- Are local trading multiples available?
- Key valuation issues to consider
Information Gap and Accounting Standards
- Access to data/financial statements
- IFRS reporting or local GAAP?
- Inflation accounting use in hyperinflation countries
Free Cash Flows
- Choice of currency in valuation
- Nominal vs. real cash flows
- Use of forward rates for foreign exchange conversion
- Significant risk from nationalisation or expropriation
Case Study I: Participants reconcile various methodologies: nominal and real LC cash flows and US$ nominal cash flows
Discount Rate - Cost of Debt
- Any public traded bonds outstanding?
- Local currency or US$
- Use of default spread with synthetic rating
Country risk based on:
- Credit Default Swap (CDS) spread
- EM bond yield
- Pitfall of double-counting or triple-counting risks
Case Study II: Participants calculate the cost of debt for Gerdau Steel
Discount Rate - Cost of Equity
Country risk premium methods
- Sovereign default spread method
- Relative equity market volatility method
- Scaling up US$ equity risk premium based on volatility of EM index vs. S&P 500
- Scaling up the bonds default spread by the relative volatility of EM equity market relative to the EM government bond
- Beta reliable and liquid?
- Use of ADR or GDR betas?
- Choice of well-diversified global index
- Unlevering and relevering peer set
Case Study III: Participants calculate the cost of equity for Gerdau Steel
Trading Multiples in Emerging Markets
- Size of sample: less than a handful real comparables?
- Considering other EM regions?
- Using discount to developed markets trading range
Final Case Study
Participants value MTN, the South African mobile operator based on DCF and multiples methodologies, calculating the relevant discount rate including country risk premium and beta
Serge is an experienced Corporate Finance professional with over 20 years' experience in M&A and capital market transactions. He has successfully completed in excess of EUR 30 billion across multiple geographies (US, Europe, MENA).He began his career as a Credit Analyst at Banque Continentale in Luxembourg, before moving to the Investment Banking division at Citigroup (ex-Salomon Smith Barney) in London and New York where he worked on variety of M&A, LBO and debt offerings, mainly for financial services clients. He became Vice-President in the internal M&A department of Barclays Bank in London before moving on to a Directorship role at the Investment Banking division of Commercial International Bank (CIB), Egypt. Whilst there, he successfully completed several transactions including two sell-side M&A, one follow-on equity offering and a delisting. He worked extensively with leading sovereign wealth funds, private equity firms and prominent families in the Middle East.
Serge has an MBA from the Kellogg School of Management in Chicago and a Bachelor of Science from the International Management Institute of Paris.
For more information about this training visit https://www.researchandmarkets.com/r/y3unhv