Bma5331 Applied Security Analysis and Valuation Workshop Course Description



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BMA5331 Applied Security Analysis and Valuation Workshop

Course Description

This course is on equity valuation. As there are many methods to value equities, this course will discuss which methodology works under what conditions and why? Some of the methods are well established and others are relatively new. The course will evaluate a portfolio of approaches to come up with a consistent approach to valuation. Besides valuing equities the course will also cover what we can learn from prevailing prices?

It is a practical course where the emphasis is on application to real life situations. The focus is on “learning by doing”. The course will use numerous contemporary case studies and many different techniques to value equities. Each class will have a case situation, which is live or near-live. These would allow students to appreciate current market practices and prepare them for a career in investment management, investment banking and corporate finance.

The module aims to do the following



  • To provide students with different security valuation approaches and their relative merits

  • To introduce students to security valuation for different kinds of businesses and for differing stakeholder objectives.

  • To provide a framework for assessing risks and interpreting market prices.

Who should take this course?

If you are interested in a career in in Investment Management (mutual fund manager, hedge fund manager, equity analyst), Investment Banking (M&A, Equity Capital Markets, Sell side equity research, analyst, investment advisory) and Corporate Finance (CFO, M&A, Treasury) or a managerial role in these professions, this course will prepare you for the industry. The emphasis in the course is to build on finance concepts to learn application in contemporary market examples and learn by doing. This course should prepare students to start contributing in their roles in finance industry immediately upon graduation.



Instructor

Sunil Gupta is a senior executive in the finance industry who is a long time resident of Singapore. During his career of more than 25 years in financial services, his many jobs include Global Head of Technology and CleanTech Banking coverage at Standard Chartered Bank, Chief Operating Officer for Morgan Stanley (Asia), Head of Technology and Cleantech research at Morgan Stanley, CEO for Natwest Markets, India and CEO for Crosby Securities, India.

Sunil has extensive experience in equity analysis and valuation and has been top ranked by reputable industry polls conducted by Institutional Investor, Greenwich, Euromoney and Asia Money for seven different investment categories – Asian Hardware Technology, Asian Semiconductors, Asian Internet, Global CleanTech, Asian Conglomerates, Singapore Equities and Indian Equities. He has covered many markets such as – Hong Kong, Korea, Taiwan, China, Singapore, Asean, India, US and developed Europe. He has first hand experience of many economic and financial market cycles such as the initial Gulf crisis in 1990, The Asian crisis in 1997, Dot com bust in 2001 and the global financial crisis in 2008.

Asia Focus

This course will leverage on extensive experience of the instructor in Asia. This course would be useful for anybody thinking of practicing a career in finance or doing business in Asia. The course will discuss unique characteristics of Asian markets such as:



  • Asymmetric information and ways to deal with it

  • High growth situations with inherently higher volatility resulting in idiosyncratic risks

  • Unique interplay of political, regulatory and economic changes

  • Challenging yet rewarding situations from monetary and intellectual perspective

Course Outline

Lecture 1: Valuation Approaches

  • Making sense of the valuation alphabet soup

  • Intrinsic Value – DCF, DDM, EVA

  • Relative Valuation – P/E, P/BV, P/Revenue, EV/EBITDA - Relative to history, Relative to peers

  • What are the strengths and weaknesses of each valuation methodology?

  • Case Study on use of different tools

Lecture 2: Extracting key drivers of value

  • Industry structure, Comparative advantage, Key success factors, S-curves

  • Framework to dissect the business

  • Modelling, Forecasting versus Hypothesis

  • Learning about implicit and explicit biases and methodology for isolating potential bias

Lecture 3: Valuing a growth business

  • Case Study (Stable Growth Business)

  • Case Study (High Growth Business)

  • Reconciliation of techniques

Lecture 4: Valuing a cyclical business

  • Recognition of cycle

  • Techniques to predict a cycle

  • Valuing the cycle – Adapting the tools

  • Case study

  • Reconciliation of techniques

Lecture 5: Valuing risk

  • What is in the price? Deriving fundamentals from price

  • Price versus Value – Explaining divergence and exploiting the gap

  • Where do you spend maximum resource – eps or multiple?

  • Sensitivity versus scenarios

  • Validation and back testing

  • Case Study

Lecture 6: Security pricing for an issuer

  • Case Study

  • Techniques used

  • Potential stakeholders

  • Deriving an edge

Learning Outcomes

At the end of this course, students are expected to acquire



  • An appreciation for key differences between different valuation techniques and understanding which technique works best under what business and industry environment.

  • Appreciate the differences in valuation for stakeholders with differing objectives

  • Ability to identify, quantify and value risk

Course Pedagogy

Lectures and Asian case studies based on actual experiences of the instructor. As this course relies on extensive discussions and learning by doing, the size of the class would be limited to 25 students.



Evaluation and Grading

Case Summary reports (Group) 45%

Class Participation (Individual) 15%

Peer Review (Individual) 15%

In class Tests: (Individual) 25%

Pre-requisites

This course requires students to have done core finance courses and ideally one additional elective.

Core Requirements – BMA 5008 (Financial Management)

Elective Courses - BMA 5302 (Investment Analysis and Management) or BMA5xxx (Value Investing in Asia)



Reading List

    • Investment Valuation: Tools and Techniques for Determining the Value of any Asset - Aswath Damodaran

    • Investments - Zvi Bodie, Alex Kane, Alan Marcus

    • Expectations Investing – Alfred Rappaport, Michael Mauboussin

    • Applied Equity Analysis – James English

    • Valuation: Measuring and Managing the Value of Companies - McKinsey & Company Inc., Tim Koller, Marc Goedhart, David Wessels


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