Valuation Workshop

Session I: Industry Analysis

Speakers
Sebastian Colina Eliane Porturas

Intern at PwC, Deals at Corporate Finance Private Equity Analyst at Nexus Group
CFA Level I Candidate (Dec 2019) Passed CFA Level III Exam (June 2018)
CEFIMEC Member since January 2019 CEFIMEC Member since March 2018
Contents

1. Introduction
2. Business Description

3. Industry Analysis

4. First Valuation Competition

1. Introduction
1. Introduction – What is Value?

Value
≠ Price

Fair Value Company

PV of the cash flows Asset's sale price Valuation
generated by an agreed upon by a Under Valuation
asset willing buyer and seller Methods
1. Introduction – Valuation Purpose

IPO’s Deals and

Capital
Projects

Valuation

Investment Reporting
1. Introduction – Valuation Scope

Industry Company Valuation

Macroeconomic Business Corporate Valuation

Projections
trends segment strategy Methods

Industry Competitive Financial Investment Sensitivity

specifics position performance risks analysis

Value Investment
drivers
Recommendation
1. Introduction – Valuation Report and Session Dynamics

Contents of a typical Valuation Report Session Dynamics

1. Executive Summary

2. Business Description Theory

Session 1
3. Industry Overview

4. Company Analysis Session 2 Practice

5. Valuation
Sessions
6. Investment Risks 3&4

7. Investment Recommendations
2. Business Description
2. Business Description – Basic Concepts

Why What Where

Company sources:
• Company description
Gain a real understanding • Corporate Structure: • Corporate presentations
of Company operations owners and subsidiaries • Annual Reports
• How does it generate • Business segment Other sources:
revenues? • Revenue Breakdown • Analyst coverage (SAB
• Which assets/facilities • Number of facilities research areas, risk rating
does it need? • Company Strategy agencies)
• Which are the • Specialized media
Company’s future plans • Sector reports (Maximixe,
and strategy? Apoyo, sector specific
organizations)
2. Business Description – Cementos Pacasmayo
Company Cementos Pacasmayo S.A.A. Industry Building Materials Country Peru

Stock Market BVL / NYSE Ticker CPACASC1 Last Price S/. 5.7

Business Segment
• Engaged in the production of cement, concrete and precast products
• Geographic monopoly due to trasport costs
• Vertical integration:

Tembladera Tioyacu Bayóvar 4 y Birrilá

Quarries (Cajamarca) (Rioja) (Piura)

Cement Planta Planta Planta

plants Pacasmayo Selva Piura

303 retailers and 462 stores under the DINO Brand

Distribution
(Chimbote, Trujillo, Chiclayo, Piura Tumbes, Jaén, Cajamarca,
network Rioja, Tarapoto, Iquitos)
2. Business Description – Cementos Pacasmayo
Company Cementos Pacasmayo S.A.A. Industry Building Materials Country Peru

Stock Market BVL / NYSE Ticker CPACASC1 Last Price S/. 5.7

Revenue Breakdown Corporate Structure Company Strategy

By product
2%
Cement 13%
DINO S.R.L
• Expand our construction sulution
Concrete
products
• Create innovative products for
Preclast Cementos Selva our current and future customers

Grupo Holchschild
85% S.A.A. • Dominate new building materials
Cementos
technologies
By Client Pacasmayo
Calizas del Norte • Digital transformation of all our
S.A.C.
S.A.A. core processes
Retail Salmueras
18%
Suramericanas
Private Sector
25% 57%
Infrastructure ET Guadalupe
Projects E.I.R.L.
3. Industry Analysis
3. Industry Analysis – Basic Concepts

Definition Industry vs. Sector Principal Business Activity

Sector.- Group of related Source of company’s

industries majority revenues and/or
earnings.
Group of companies offering Example Healthcare sector:
similar products and/or pharmaceutical, Separate reporting of
services biotechnology, medical different business segments
device, medical supply,
hospital, and managed care
industries
3. Industry Analysis – Framework
CFA L1 – Equity, Introduction to Industry and Company Analysis
3. Industry Analysis – Business Life Cycle

Recovery
Sales
Business Study
Revenues
Decline

Time/Stage
Embryonic Growth Mature
3. Industry Analysis – Porter’s Five Forces
3. Industry Analysis – External Influences

Macroeconomic New Demographic

trends Technologies Changes

Goverment politics Social

and purchases Influence
3. Industry Analysis – Value Drivers
Key concepts to understand the Value Driver

Business
indicator

Its part of the

Company Value Driver Generates
Breaking points
management

Let’s practice

Aceros Clínica
Wong Camposol
Arequipa Centenario
 3. Visa – Company key concepts
Company Visa Inc. Industry Financial Services Country United States

Valuation Date 31/12/2018 Ticker NYSE:V Last Price $

Visa Inc. is leader and one of the largest
Key characteristics international networks by any card metric.
¿Why?
Main Features

The increasing transition to digital payments has

Key challenge/problem bypassed the requirement of it services. The technology investment
required to process the
volume of payments has
Develop a digital payment platform that reaches more made a barriers of entry.
Key future objective consumers and how to further convert paper Furthermore, it has a large
payments across the world. portfolio of loyal costumers.

1.1% 0.8%
2.3% Visa
Global Cards 44.8% Union Card
24.5%
Market Share Mastercard
Amex
(Bil. Transactions) JCB
Diners Club / Discovery
26.7%
Source: The Nilson Report
 3. Visa – Industry analysis
Revenues composition Breaking Value Drivers
3.6%
34.2%
Service revenues
27.6%
Data processing revenues

International transaction revenues Payments Processed Cross-Border

34.6% Volume Transactions Volume
Other revenues
Source: Visa Inc. Financial Statements

Global payment methods distribution (2018)

12.7% 17.7% 13.7% 16.3%

29.3% 34.0% 23.0%
37.3% Credit Card
47.7% 48.3%
49.7% 62.7%
48.3% 49.3% Debit Card
46.0% 42.3%

39.7% Cash
32.7% 35.3%
22.3% 23.7% 20.0% 20.3% 20.3%

Department Discount Gas Station Supremarket Restaurant Fast-food Coffe Shop Payment
Store Store Restaurant Average
Source: TSYS 2018. Consumer Payment Study
 3. Visa – Industry analysis
GDP breakdown (USD / %) Accounts (%, ages 15+) 2011-2017
11,000 GDP per Capita GDP Growth 4.0%
Africa
3.0% Latin America & Caribean
10,500
2.0% Europe & Asia Central

10,000 South Asia

1.0%
East Asia & Pacific
9,500 0.0%
2013 2014 2015 2016 2017 0% 20% 40% 60% 80% 100%
Source: World Bank Source: Global Financial Inclusion Database

Dow Jones U.S. Financial Services Index (USD) ATM per 100k persons & global population (bil.)
1400 7600 50
Global Population ATM Index
1200 7500 40
1000
7400
800 30
7300
600
20
400 7200
200 7100 10
0
1/1/13 16/5/14 28/9/15 9/2/17 24/6/18 7000 0
2013 2014 2015 2016 2017
Source: Yahoo Finance Source: TSYS 2018. Consumer Payment Study
4. Valuation Competition
4. 1st Valuation Competition - UNMSM

• Teams and restrictions

• Relation with Valuation Workshop

• Key dates
Thank you!