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RAD X

FROM THE ROOTS UP


Training Academy

presents

Investment
Valuation
Your Course Presenter:

Hamed Behairy, CFA


With 12 years of experience
in financial analysis, consultation
and training, Hamed, as a renowned
modeller worldwide, has substantial
experience in training corporate
executives on strategic matters
including valuation financial analysis
and corporate restructuring.

www.radixacademy.com +27 (0)82 621 3077 +27 (0)86 620 2013 training@radixacademy.com
M
Introduction

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To
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Value companies with proven models and tools

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ith
In real life, the main challenge in valuing different entities is the ability to understand and quantify

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the various inputs. If the inputs are nonsensical, the valuation output will unquestionably be

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nonsensical. For this reason, a large section of this course is devoted to understanding and modeling
valuation inputs including adjustments to financial statements.

This intensive three day workshop offers in-depth and practical analysis of the different valuation techniques that
can be used to value different entities. It will also examine the use of real options modeling that are used to value
patents, contracts, natural resources and for various other applications. The workshop will focus on the framework
that can be used to pick the right model for any task and it will also extensively expose delegates to the modeling
of various real life valuation cases.

Companies are valued for the purposes of


Attend this course and addresses fundamental investment, mergers and acquisitions or as part of
questions like: internal measures of financial control. There are
· How to calculate the cost of capital that a business many different approaches to the valuation of
should cover? companies and it is paramount to know when and
· Why is there a need to adjust the accounting how to apply what method. It is also essential to
records? understand that company valuation is not an
· What is the true meaning of normalized free cash absolute science but also based on interpretation
flows? and judgment. In the broadest possible terms, firms
· How do employee options affect valuation?
or assets can be valued in one of four ways: asset
· How to calculate capitalizations rates in valuing
properties?
based valuation approaches, discounted cash flow
· How to model the control premiums and liquidity valuation approaches, relative valuation
discounts in private entities? approaches and option pricing approaches.

The concepts and models taught are designed to be


of practical benefit to attendees and are immediately usable in the workplace. This highly practical course will lead
you quickly from the basics through the more advanced valuation methodologies and modeling techniques.

The hundreds of participants who attended this course in different parts of the world indicate that they gained
valuable knowledge and experience that will greatly assist them in their careers. Due to the outstanding success of
this course, the presenter was asked to develop Valuation II to show more applications. Only the participants who
attended Valuation I will be allowed to participate in Valuation II.

Who should attend?

Ÿ Portfolio managers, Ÿ Compliance officers


Ÿ Research analysts, Ÿ Senior managers
Ÿ Investment bankers, Ÿ Corporate accountants
Ÿ Corporate financiers, Ÿ Auditors
Ÿ Financial advisors,
Ÿ Strategic planners,
Ÿ Private equity managers,
Ÿ Hedge fund managers,
Ÿ Transactors,
Ÿ Corporate Lawyers,
Ÿ Trustees
Ÿ Venture capitalists
Ÿ Risk controller
Course Outline

Day 1 Day 1(Continued)


Introduction to valuation: Estimating Growth:
Ÿ The five myths about valuation Ÿ The three ways of estimating growth rates
Ÿ The principles and practice of time value for money Ÿ Extrapolation and its danger
Ÿ Exercise 1: modeling a straight bond valuation Ÿ High growth period vs. stable growth period
Ÿ Benjamin Graham's safety margin Ÿ Length of the high growth period
Ÿ Introduction to DCF Ÿ Fundamental growth rate
Ÿ Some useful Excel modeling tips Ÿ Effect of ROC and Reinvestment rate on growth rate
Ÿ Exercise 9: calculating the fundamental growth rate of a listed
Risk Parameters and expected return: company
Ÿ What is risk and how to measure it? Ÿ High growth rate estimation vs. stable growth rate assumption
Ÿ Models of default risk and CAPM Ÿ Real vs. nominal growth rates
Ÿ Market risk premium meaning and measurement. Ÿ The three growth patterns and which to use
Ÿ Risk free rates and market risk premium around the world Ÿ Exercise 10: modeling the three growth patterns
Ÿ How often to review assumptions
Ÿ Estimating risk parameters and cost of financing
Ÿ After all, what is beta?
Ÿ Exercise 2: modeling regression beta calculation of a listed Day 2
company Tying up loose ends:
Ÿ Exercise 3: modeling bottom up beta calculation of the same Ÿ Effect of management options on valuation
company Ÿ Exercise 11: valuing management options of a listed company
Ÿ Using published betas Ÿ Effect of minority interest on valuation
Ÿ Equity risk and expected returns Ÿ Exercise 12: applying relative valuation to minority interest
Ÿ Reviewing the country risk premium of various countries Ÿ Valuing operating and non-operating assets
worldwide Ÿ Effect of contingent claims
Ÿ Exercise 4: modeling the cost of equity of a local and a foreign
company Putting it all together:
Ÿ The three ways of calculating cost of debt
Ÿ Book value or market value of debt and equity? Ÿ Case study 3: full valuation of a cement company covering all
Ÿ Exercise 5: modeling synthetic rating for a listed and a private the previous topics
company
Ÿ Cost of capital modeling Dividend discount models (DDM):
Ÿ The explicit and implicit costs of financing. Meaning and Ÿ Gordon growth model
importance Ÿ Versions of the model
Ÿ What happens practically when companies don't meet their cost Ÿ Issues in using DDM
of capital? Ÿ Exercise 13: valuing S&P 500 using DDM
Ÿ The practice of changing assumptions in the stable growth
period Ÿ Case study 4: valuing a utility company using DDM
Ÿ Some analysts don't use CAPM. Practical alternatives?
Ÿ What does Warren Buffet use as cost of capital? Free cash flow to equity and free cash flow to the firm:
Ÿ Adjusting the accounting records
Ÿ Case study 1: calculating the cost of capital of Marriott Ÿ The cost of capital approach
Ÿ Effect of leverage on firm value
Financial Statements adjustment:
Ÿ The reasons for adjusting financial statements Relative valuation:
Ÿ Capitalizing operating leases Ÿ Standardized values and multiples
Ÿ The capitalization rate Ÿ Three different ways to using multiples
Ÿ Exercise 6: modeling the adjustment to EBIT and adjustment to Ÿ Exercise 14: using regression analysis with multiples
total debt Ÿ Earnings multiples
Ÿ Capitalizing R&D Ÿ Book value multiples
Ÿ Nature of industry and how many years to look back Ÿ Sales multiples
Ÿ Exercise 7: modeling the tax effect of R&D adjustment and final Ÿ Calculation of terminal value using multiples
effect on EBIT Ÿ Presentation of a fully automated model developed by Hamed Behairy using
multiples to screen for quality and cheap investment ideas worldwide.
Ÿ Case study 2: capitalizing operating leases and R&D at
Boeing Valuing financial services firms:
Ÿ What is unique?
Free Cash Flow to Equity (FCFE) vs Free Cash Flow to Firm Ÿ General framework
(FCFF): Ÿ Excess return model
Ÿ Meaning, measurement and modeling Ÿ Valuing financial services firms using DDM
Ÿ Which one to use? Why? Ÿ Exercise 15: valuing Morgan Stanley using Excess Return Model
Ÿ Normalizing EBIT, capex and working capital Ÿ Exercise 16: Valuing Morgan Stanley using multiples
Ÿ What does and doesn't capex include?
Ÿ Why we need the non-cash, non-debt working capital? Valuing distressed firms and firms with negative earnings:
Ÿ Adjustments required if firms have negative working capital Ÿ Distressed firms: implications of viewing equity as an option
Ÿ Marginal vs. effective tax rate Ÿ Negative earnings: causes and consequences
Ÿ Stable debt policy and FCFE Ÿ Exercise 17: once off charge at Daimler Chrysler
Ÿ FCFE and leverage. Is there a free lunch? Ÿ Exercise 18: temporary or sector wide reasons at Volvo
Ÿ Exercise 8: calculating FCFF of a listed company
Course Info

Day 3
I s ED
OM
Valuing private companies:
Ÿ What makes them different?
Ÿ Estimating the cost of capital for private companies
U S T
Ÿ Charging for higher risk: haircut from valuation or increasing the cost
of capital?
C In-hours training – we will
Ÿ Estimating the size of liquidity discount
Ÿ Estimating the value of control premiumExercise 19: modeling
come to you!
valuation of a private company If you have 15 or more delegates who are
Ÿ Case study 4: Building a venture capital valuation model in
interested in this course, we can come to you
Excel using sensitivity analysis for different exit options and customise the course content to your
Ÿ Using IRR in venture capital valuation
particular needs. Kindly contact us for more details
Ÿ IPEVCVG (International Private Equity and Venture Capital Valuation
Ÿ Guidelines) developed by 35 internatinal private equity and venture
Ÿ capital associations

Real options valuation:


Ÿ Introduction to Black-Scholes model
Ÿ Payoffs of put vs. call options and long vs. short options
Ÿ Exercise 20: Using Black-Scholes model to value financial options
Ÿ Real options: meaning and applications
Ÿ Valuing a patent
Ÿ Exercise 21: model of a pharmaceutical patent valuation
Ÿ Valuing natural resources as options
Ÿ Exercise 22: model of an oil mine valuation
Ÿ Valuing a contract with options to expand or abandon
Ÿ Exercise 23: model of value to expand operations of Disney in Latin
America Day 1 Schedule
Ÿ Exercise 24: model of value to abandon of Disney from a
construction contract Registeration: 08:00
First session: 08:30 - 11:00
Second Session: 11:10 - 13:10
Valuing properties: Lunch: 13:10 - 14:10
Ÿ Real vs. financial assets Third session: 14:10 - 16:00
Ÿ DCF, relative valuation Fourth session: 16:10 - 17:35
Ÿ Capitalization rates
Ÿ Exercise 25: valuing a building in New York Day 2 Schedule
Ÿ Case study 5: valuing a piece of land in South Africa. First session: 08:30 - 11:00
Second Session: 11:10 - 13:10
Lunch: 13:10 - 14:10
General framework: Third session: 14:10 - 16:00
Ÿ Choosing the right DCF model Fourth session: 16:10 - 17:35
Ÿ Choosing the right relative valuation model
Ÿ When should you use the option pricing model? Day 3 Schedule
Ÿ Conclusion
First session: 08:30 - 11:00
Second Session: 11:10 - 13:10
Lunch: 13:10 - 14:10
Third session: 14:10 - 16:00
Fourth session: 16:10 - 17:35

Why Radix Training Academy (Pty) Ltd


Radix Training Academy (Pty) Ltd offers its clients outstanding financial services in three spheres: training, consultation and
modeling solutions. Our clients span from major listed companies and financial institutions to small and medium enterprises.
Radix offers a number of public and in-house financial training courses around the world directly through Radix or through
one of our affiliates. All the courses are intended to be of a practical nature. The common theme of all courses is the heavy
use of modeling and case studies with minimum theoretical discussions. We start from the roots up. However complicated
financial concepts purport to be, we aim to show you exactly how fantastically uncomplicated learning about them or
modeling them can be. Radix also offers Excel modeling and Business Intelligence solutions. There is no modeling task that
is too big or too small. We will ensure that all assignments are adhered to in the most professional way. Radix provides
financial consulting services to corporates, financial institutions and central banks to create effective solutions to the
complicated problems they are facing in various areas.
About the presenter

Hamed Behairy, CFA, an


internationally renowned financial
consultant and trainer over the past
14 years.

With more than 14 years of experience


in the fields of financial analysis,
modelling, corporate governance,
consultation and training, Hamed has Recent attendees:
been consistently acclaimed as one of The presenter has taught delegates on various
the top financial consultants in South topics from over 130 companies worldwide including
Africa. the following. Please contact us for the various
programs that Radix offers
The presenter is widely renowned in
different parts of the world as a ABSA
seasoned valuation modelling expert. Adcock Ingram
Afgri Operations
Hamed is the founder and CEO of Allan Gray
Radix Training Academy (Pty) Ltd and Astro Media- Malaysia
cofounder and CEO of Radix Banco Commercial De Investimentos- Mozambique
Corporate Governance (Pty) Ltd based in Cape Town, South Africa. Radix shares Blue Financial Services
the spirit of doing things right, and getting things done in the most professional way. Business Connexion
CBZ Bank Holdings- Zimbabwe
Hamed has an extensive training experience. His workshops combine professional Citigroup
knowledge along with excellent presentation skills. Participants' comments of Department of Public Enterprises
Hamed's workshops indicate that they leave with deep understanding of the material Ellies Holdings
covered and conclusive ability to apply these concepts at their workplace upon Eskom Holdings
completion of his courses. He has substantial experience in training corporate Exxaro Resources
Financial Services Board FSB
executives on strategic matters including valuation modelling, corporate
Gold Fields Group
restructuring, M&A modelling, applied corporate finance modelling, financial analysis Government Institutions Pension Fund- Namibia
modelling, attribution analysis modelling and other modelling courses. Hamed Grindrod Bank
worked as a financial analyst and modeller in an asset management company. Investec Asset Management
While lecturing accounting and financial analysis at the University of Alexandria, Khazanah (Central Bank)- Malaysia
Hamed was awarded the best teaching talented lecturer. Metropolitan Life
Munich Reinsurance
Hamed is a Chartered Financial Analyst (CFA). He qualified with Bcom (honours) in National Empowerment Fund (NEF)
accounting - cum laude with first class honour, and Bcom (honours) in Financial Nedbank
Analysis and Portfolio Management - cum laude, with first class honour. Hamed's Old Mutual
hands-on training approach is mixed with energy, humour and continuous RMB
interaction with delegates. The systematic build up of his workshops ensures a Standard Bank
Symmetry Multi Managers
bottom-up explanation, leading delegates quickly from the basics through the more UBS Investment Bank
advanced topics. Virgin Money

The price of the Course includes:

Course attendance for three days in a minimum of 4-star Conference Facility For More info
All course notes
Visit our Website
CD with all relevant modules HERE
One month window period after the course to ask any question
or
Email us
Daily breakfast, lunch and two coffee breaks with snacks.

If needed, we can assist with finding suitable accommodation nearby


HERE
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FROM THE ROOTS UP
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