Risk

1. • Bond valuation
• Stock valuation
Bond and Stock valuation
Ch. 5 and 7, 3rd meeting
Time Value of Money and Bond Valuation
1

2. Apa yang dimaksud dengan
obligasi?
Bonds, Stocks and their valuation
2
 Instrumen keuangan jangka panjang yang
menjelaskan bahwa peminjam akan
melakukan pembayaran bunga dan pokok
pinjaman pada tanggal tertentu kepada
pemegang obligasi tersebut.

3. Features of bond
Bonds, Stocks and their valuation
3
 Nilai nominal (Par value) – jumlah yang
akan dilunasi oleh penerbit obligasi pada
saat jatuh tempo (di USA umumnya $1,000,
di Indonesia bisa berbeda-beda).
 Kupon (coupon interest rate) – suku bunga
yang disebutkan (biasanya tetap) yang akan
dibayar oleh penerbit. Kalikan dengan nilai
nominal maka akan diperoleh bunga dalam
rupiah.
 Maturity date – kapan obligasi akan dilunasi.
 Issue date – kapan obligasi diterbitkan.

4. Nilai aset finansial
Bonds, Stocks and their valuation
4
n
d
n
2
d
2
1
d
1
B
)
r
(1
CF
...
)
r
(1
CF
)
r
(1
CF
)
(V
Value







Nilai suatu aset merupakan present value
manfaat di masa yang akan datang yang
diterima oleh pemilik aset tersebut

5. Nilai obligasi, rd, dan tenor
Bonds, Stocks and their valuation
5
 Karena arus kas yang diterima pemilik
obligasi jumlahnya konstan, maka
peningkatan (penurunan) rd akan menurunkan
(meningkatkan) VB.
 Apabila rd > kupon, VB < nilai nominal.
Obligasi tersebut disebut discount bond.
 Apabila rd < kupon, VB > nilai nominal.
Obligasi tersebut disebut premium bond.
 Apabila rd konstan, discount atau premium
tersebut menurun apabila tenor obligasi makin
pendek (lihat Table 1).
 Pada saat jatuh tempo, nilai setiap obligasi
sama dengan nilai nominalnya.

6. Table1.
Discounts dan premiums obligasi dengan kupon 9% fixed,
nominal Rp1.000000 (dalam ribuan Rp)
Time Value of Money and Bond Valuation
6
Years to
maturity
VB when rd
is 10%
Discount
when rd is
10%
VB when rd
is 8%
Premium
when rd is
8%
5 962.1 37.9 1,039.9 39.9
4 968.3 31.7 1,033.1 33.1
3 975.1 24.9 1,025.8 25.8
2 982.6 17.4 1,017.8 17.8
1 990.9 9.1 1,009.3 9.3

7. Tingkat keuntungan obligasi
Bonds, Stocks and their valuation
7
 Yield to maturity (YTM) adalah tingkat
keuntungan yang diperoleh dari suatu obligasi
apabila obligasi tersebut dipegangn sampai
jatuh tempo. Dalam situasi ekuilibrium YTM =
rd.
 Contoh: Obligasi dengan tenor 4 tahun mempunyai
kupon 9% per tahun dengan nilai nominal Rp1
million diperdagangkan dengan harga Rp1.033,1
ribu. Berapa tingkat keuntungan yang diperoleh
oleh pemilik obligasi tersebut apabila obligasi
tersebut dipegang sampai jatuh tempo?
 Gunakan Excel atau lihat tabel pada slide 6,
YTMnya = 8%.

8. Bond yields (cont’d)
Bonds, Stocks and their valuation
8
 Current yield (CY) is the annual interest
payment on a bond divided by the bond’s
current price.
 Using the same example, the CY = 90 / 1,033.1 =
8.71%
 Notice that CY is not equal to YTM. CY does
not take into account capital gains or losses
that will be realized if the bond is held until
maturity
 YTM = Current yield + Capital gains yield
 For nominal Rp100 million 4 years maturity 9%
coupon bonds with the price of Rp1,033.1
thousand,
CGY = YTM – CY

9. Untuk menilai risiko gagal bayar obligasi,
obligasi-obligasi tersebut diperingkat oleh rating
agency
Bonds, Stocks and their valuation
9
Rating
agencie
s
Investment grades Junk bonds
Moody’s Aaa Aa A
Baa
Ba B Caa
C
S & P AAA AA A
BBB
BB B CCC
D
Baik Moody’s dan S & P telah memodifikasi rating mereka.
Moody’s menggunakan tanda 1, 2, dan 3, dimana 1
mengindikasikan paling kuat dan 3 paling lemah. Karena itu
Aa2 menunjukkan rata-rata Aa sementara Aa3 adalah yang
terlemah dalam kelompok tersebut. S & P menggunakan
sistem plus dan minus. Jadi A+ menunjukkan A terkuat
sementara A- adalah A terlemah.
Di Indonesia Pefindo mempunyai kerjasama teknikal dengan
S & P.

10. Mengapa perusahaan menerbitkan
obligasi?
Bonds, Stocks and their valuation
10
 Karena perusahaan memerlukan dana jangka
panjang
 Coupon ratesnya lebih rendah dari suku
bunga pinjaman dari bank. Berikut ini
beberapa contoh.
Companies Coupon rate
Banks
borrowing rate
PT. Central Proteina Prima Tbk 11.00% 13.25%
PT. Truba Alam Manunggal
Engineering Tbk 11.75%
12.25% -
14.5%
PT. Bentoel Internasional
Investama Tbk 10.50% 12.75%

11. Checking your understanding
Time Value of Money and Bond Valuation
11
For the next meeting, look at Waskita Karya financial reports 2013
and 2012. Compare the interest rates on bank loans and the bonds
issued at April 2012. What is (are) your conclusion(s)?

12. Tipe-tipe obligasi korporasi
Time Value of Money and Bond Valuation
12
 Jenisnya bermacam-macam, tetapi jenis yang
sering diterbitkan adalah;
 Fixed coupon bond – pays fixed interest for its
entire life.
 Floating coupon bond – pays interest that fluctuates
with shifts in the general loevel of interest rate.
 Zero coupon bond – pays no interest, therefore it is
sold at discount.
 Convertible bond – a bond that can be converted
into stocks at the maturity date.
 Bond with warrant – warrant is a right to buy
company’s stock that issue the bond at specified
term. It is attached to the bond.

13. Facts about common stock
Time Value of Money, Risk and Return, and
CAPM
13
 Represents ownership
 Ownership implies control
 Stockholders elect directors and
commissioners (Indonesia adopts two boards
system)
 Directors elect management
 Management’s goal: Maximize the stock price

14. Different approaches for valuing
common stock
Time Value of Money, Risk and Return, and
CAPM
14
 Dividend model
 Using the multiples of comparable firms
 Corporate value model*
* Will be discussed at 6th meeting (Ch.13)

15. Dividend model
Time Value of Money, Risk and Return, and
CAPM
15











)
r
(1
D
...
)
r
(1
D
)
r
(1
D
)
r
(1
D
P
s
3
s
3
2
s
2
1
s
1
0
^
Value of a stock is the present value of the
future dividends expected to be generated by
the stock.
Which can be written as






1
t
0
)
(1
D
t
s
t
r
P

16. Simplification
Time Value of Money, Risk and Return, and
CAPM
16
 No growth model
 All earnings are distributed as dividend,
hence the earnings are constant (no growth)
and dividend also constant.
 If E = earnings per share, and D = dividend
per share, then E = D. Since E or D are
constant from year one until infinity, the
equation can be written as,
s
s
0
^
r
D
r
E
P 


17. Simplification
Time Value of Money, Risk and Return, and
CAPM
17
 Constant growth model
 Some earnings are retained and the proportion of
retained earnings (= b) is constant.
 The retained earnings are reinvested and generate
return of R. R can be measured by ROE. And R is
assumed constant.
 As a result E and D grow at the rate of g, where g =
b (R), which is also constant.
 The formula converges to,
g
-
r
D
g
-
r
g)
(1
D
P
s
1
s
0
0
^




18. Examples
Time Value of Money, Risk and Return, and
CAPM
18
 No growth model
 PT. ABCD is expected to obtain earnings per
share next year, E, of Rp100. if all earnings
are distributed as dividend then E will be
constant. Investors require rate of return of
16%. What is the estimate theoretical value
of ABCD stock?
Rp625
0.16
Rp100
P0
^



19. Examples
Time Value of Money, Risk and Return, and
CAPM
19
 Constant growth model
 If 60% of the earnings are retained (= b) and
reinvested, the reinvestment rate of return (=
R) is 20%.
 Therefore the g = 0.6 (0.2) = 0.12, and D1 =
0.4 (Rp100) = Rp40. What is the theoretical
value?
Rp1,000
0.12
-
0.16
Rp40
P0
^



20. Some terminologies
Time Value of Money, Risk and Return, and
CAPM
20
 Proportion of earnings distributed as dividend =
dividend payout ratio (DPR). In the example = 0.4.
 Proportion of reinvested earnings = plowback ratio. In
the example = 0.6.
 If all earnings are distributed as dividend, the P0 =
Rp625. if some are retained, the P0 = Rp1,000. the
difference betwee the two theoretical values, that is
Rp375, is termed as PV of Growth Opportunities
(PVGO).
 The growth of dividend and earnings as the result of
the reinvestment is termed as sustainable growth
rate. In the example = 0.12

21. How to estimate rs?
Time Value of Money, Risk and Return, and
CAPM
21
 If rRF = 7%, rM = 12%, and β = 1.2, what is the
required rate of return on the firm’s stock?
 Use the SML of CAPM to calculate the
required rate of return (ks):
rs = rRF + (rM – rRF)β
= 7% + (12% - 7%)1.2
= 13%

22. Non-constant growth stock
Time Value of Money, Risk and Return, and
CAPM
22
 Most companies have not reached constant
growth stage. As a result the constant growth
model is not appropriate to apply.
 Therefore we need to estimate the dividends
for some years (usually for 5-6 years) and
then they are estimated to grow at a constant
rate afterwards.

23. Firm multiples method
Time Value of Money, Risk and Return, and
CAPM
23
 Analysts often use the following multiples to
value stocks.
 P / E or Price Earnings Ratio. Stock price is the
multiple of earnings per share.
 PBV or Price to Book Value (sometimes it is called
as Market to Book Value). Stock price is the multiple
of book value per share.
 EXAMPLE: Based on comparable firms,
estimate the appropriate P/E. Multiply this by
expected earnings to back out an estimate of
the stock price.