DCF - FINA537 Equity Valuation Professor Laura Xiaolei Liu...

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1 FINA537 Equity Valuation Professor Laura Xiaolei Liu Introduction
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2 Who? • Professor Laura Xiaolei Liu ¾ Phone: 23587661 ¾ E-mail: fnliu@ust.hk • TA: Mike Qinghao Mao ¾ E-mail: mikemqh@ust.hk
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3 Why? • On August 6, 2009, Standard & Poor’s issue the equity research report on “Cathay Pacific Airways (0293.HK)” Trading Sell! ¾ Understand how do they get the recommendation ¾ Being able to generate the analyst report by yourselves
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4 Why? • Real Gold Mining Ltd (0246.HK) raised $1.03 billion in its IPO on February, 2009. It is sold at HKD6.25 per share in HK. ¾ Understand where the number (HK$4.95) comes from
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5 Why? • Peter Lynch’s fund Magellan, earns return of 29% per year v.s. 14% of S&P 500 from 1977-1990 ¾ Learn basic trading strategies used in mutual fund / hedge fund
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6 What? • Primary Objectives ¾ Learn how to value the equity of a particular company ± For a public firm, write a financial analyst report ± For an IPO firm, set the IPO price ± For a private firm, know the basic VC/PE valuation technique ± For a Merge and Acquisition deal, determine the offer price ¾ Learn how to form trading strategy to pick groups of stocks, which are “under-valued” or “over-valued”
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7 What … Course outlines Three approaches to value equity of a particular firm ¾ Discount Cash Flow ± Dividend discount model ± Discounted free cash flow model ± How to make forecast ± Estimate discount rate (WACC and APV) ¾ Valuation using multiples ± Financial multiples ± Non-Financial multiples – Subscriber oriented model ¾ Real options
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8 What … Course outlines • Specific topics ¾ Where does the growth come from? ¾ How to estimate non-operating asset? ¾ Pre-money valuation v.s. Post-money valuation ¾ Sum of the parts valuation method for conglomerate ¾ Valuation for private firms
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9 What … Course outlines • Real examples ¾ Coca-Cola (forecasting) ¾ Boston Beer’s IPO (valuation using multiples) ¾ Youtube (PE valuation) ¾ Chow sang sang (SOTP valuation method) ¾ Dixon’s acquisition (estimate financing effects)
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10 What … Courses outlines • Trading strategies ¾ Market efficiency ¾ Popular trading strategies used on Wall Street these days!
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11 How? • Attend the class • Lecture Notes & Reading materials ¾ accessible through the class website on LMES. • References ¾ Valuation, Analyzing Global Investment opportunities by Sheridan Titman, John Martin and Ravi Anshuman ¾ Valuation, Measuring and Managing the Value of Companies by Tim Koller, Marc Goedhart and David Wessels
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12 How?. .. Class participation • There will be 10 points on class participation, including asking and answering questions
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13 How… Practice questions • There will be 6 sets of practice questions, which have been posted on website. • You don’t need to turn in the answers, but you are encouraged to do it yourself and compare with the answers
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14 How… Assignments • 4 cases will be assigned ¾ Discounted cash flow model ¾ IPO valuation ¾ Acquisition ¾ Real option • Group assignments, no more than 6 students each group
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15 How… Grading • Class participation 10% • Four (group) cases 40% • Final Exam 50% Total 100%
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1 FINA 537 Equity Valuation Professor Laura Xiaolei Liu Dividend Discount Model
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DCF - FINA537 Equity Valuation Professor Laura Xiaolei Liu...

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