Reference no: EM133811172
Homework: LBA- DCF Analysis
You are working at an investment bank as a financial analyst, and in your role, your manager has asked you to understand more about potential investment opportunities in a UAE company. You will select which UAE company to assess. Once you have done so, you will perform a DCF analysis of that company, so that your investment bank can better understand its valuation. You will provide a write-up of your findings to your manager. In your write-up of this company, you will do the following:
A. Clearly identify the company you are assessing
B. Perform a DCF analysis of the company, which should include
a. Calculating the 2018-2022 FCF
b. Forecasting the 2023-2028 FCF
c. Calculating the TV and NPV of the company
C. Based on your DCF analysis, determine whether or not this company is a worthwhile investment for your firm and explain your rationale
IMPORTANT NOTES:
A. Choose a public company traded in the stock market of the country you are residing in right now.
a. To assist you in selecting a company, refer to the listed companies in the Abu Dhabi Securities Exchange (list) and the Dubai Financial Market (list). You should select a company that has at least 4 years of available data in Bloomberg (please ensure that you can find the data before selecting the company).
B. In your DCF analysis, to arrive at an appropriate valuation: Estimate FCF for 2022 (assume 2022 as Year 0 and include it in your valuation), project it over the next five years (2023-2028), and estimate a terminal value if you think the store will continue indefinitely (estimate a reasonable terminal growth rate).
C. Calculate your own WACC. Use CAPM to calculate the cost of capital. Assume a beta based on the systematic risk by looking up betas of public companies that are in the same industry and geography (Yahoo Finance shows equity betas which you will need to adjust by using Hamada's Equation to account for the public companies' debt; this is because you need an asset beta for your store given the assumption of no debt) or estimate your own beta using market data.
D. Be sure you justify the key assumptions (revenue growth rate, working capital changes, terminal growth rate etc.).
E. For your write-up, focus on stating and justifying your assumptions, discussing each valuation result, comparing the results across the techniques, and comparing them with recommendation(s) made by the financial analyst(s) (if available).
F. Your valuation techniques and estimation approach could be explained further in an Appendix.
G. Your models and calculations should be submitted as a google sheet. The assumptions and given values should be colored blue and your calculations should be in black. Leave the formulas and links as is. The grader should be able to follow your calculations.
H. You will need to attach your Bloomberg Lab data download as part of your submission.
I. In addition to this, use and tag the following GLO's wherever appropriate: #modeling and #estimation.