Jan 29 2010 Sap

Stock Analyst Program 2010 Driss Kaitouni [email_address] Jamie Tucker [email_address] Honours in Investment Management, Wharton Exchange Fall 2009 January 29, 2009

Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Stock Analyst Program 2010

Winter 2010 Overview ,[object Object],[object Object],Stock Analyst Program 2010 Date Topic Date Topic Jan 29 Overview, Valuation, Resources to Start Mar 5 More applied valuation Feb 5 What is price action? Industries & Multiples Analysis Mar 12 Applied Technical Analysis (equities, commodities, FX) Feb 12 Stock Picking & Strategy/Money Management Mar 19 TBD Feb 19 Cancelled: Reading Week Mar 26 TBD Feb 29 Cancelled: Reading Week Apr 2 Final SAP Presentations

Equity Analysis Techniques Top Down Analysis Bottom Up Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Stock Analyst Program 2010

Research Report Composition ,[object Object],[object Object],Stock Analyst Program 2010

Evaluation Criteria (1) ,[object Object],[object Object],Research Report Evaluation Stock Analyst Program 2010

Macroeconomic Analysis (1) ,[object Object],[object Object],Cycle Significance and Composition The Indicators ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Stock Analyst Program 2010

Macroeconomic Analysis cont’d. ,[object Object],Alternative Measures (1) ,[object Object],[object Object],Stock Analyst Program 2010

[object Object],Economic Calendar Stock Analyst Program 2010

Pick A Sector ,[object Object],[object Object],Visit http://www.mscibarra.com/products/indices/gics/gics_structure.html Stock Analyst Program 2010 Sector # Sector Market Allocation 10 Energy 11.03% 15 Materials 7.42% 20 Industrials 9.98% 25 Consumer Discretionary 8.56% 30 Consumer Staples 10.15% 35 Health Care 9.54% 40 Financials 21.62% 45 Information Technology 12.01% 50 Telecommunication Services 5.08% 55 Utilities 4.66%

Industry Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Important Considerations Stock Analyst Program 2010

[object Object],Valuation Methodology * Often not available Stock Analyst Program 2010

4 Current Share Price: €16.25 (1) ____________________ Note: (1) Share price at end of trading session of 30 March 2009 as provided by Bloomberg (2) Based on target prices issued by brokers since December 2008 (3) Multiples based on historical trading statistics. EBITDA estimates as per broker consensus (4) Transaction multiples based on comparable deals Strong fundamentals suggest upside potential of current share price ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Target Range: - € 43 € 50 Valuation Methodology Share Price (in EURm) Last 3 Months (1) Last 6 Months (1) 2009E EBITDA (3) 2010E EBITDA (3) Transaction multiples 2008E EBITDA (4) SOTP Base Case Concensus Analyst Estimates (2) Trading multiples Trading Range € 16 € 100 € 57 € 39 € 43 € 40 € 16 € 115 € 97 € 61 € 64 € 75 € 31 € 20 € 0 € 25 € 50 € 75 € 100 € 125 Stock Analyst Program 2010

Valuation Methodology ,[object Object],[object Object],[object Object],[object Object],[object Object],Discounted Cash Flow (DCF) Precedent Transactions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Comparable Transactions Stock Analyst Program 2010

DCF- Methodology Discounted Cash Flow Method Stock Analyst Program 2010

DCF- Methodology ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Discounted Cash Flow Method Stock Analyst Program 2010

DCF- Methodology Discounted Cash Flow Method Sensitivity Analysis Stock Analyst Program 2010

Multiples Analysis- Methodology Multiples Analysis Stock Analyst Program 2010

Multiples Analysis- Methodology PE Multiple PE ratio = Share Price/EPS Rationale - How many times does the company trade at compared to its Net Profit per share EV/EBIT EV = Enterprise Value = Market Cap. + MV of debt (actuality the BV of debt) Market value of the firm less debt compared to its net income EV/EBITDA MV of the firm less debt compares with its approximate measure of cash value Depreciation and Amortization – non-cash items added back to EBIT EV/BV of Assets MV of the firm less debt compared to its asset value on the books Now looking at an asset base value of the firm compared to the market value adjusted for debt Multiples Analysis Stock Analyst Program 2010

Multiples Analysis- Methodology Issues with multiples - Hard to find truly comparable peer firms – subjectivity… - Dependence on accounting policies – GAAP, AASB etc…differ according to jurisdiction - Cyclicality of earnings, timing of year end - Discriminates against firms with negative equity - Hard to conduct sensitivity analysis - ranges Multiples Analysis Stock Analyst Program 2010

Important Ratios Activity Ratios Liquidity Ratios 1. Sourced to CFA institute, Financial Statement Analysis. Stock Analyst Program 2010

Important Ratios Solvency Ratios Profitability Ratios 1. Sourced to CFA institute, Financial Statement Analysis. Stock Analyst Program 2010

Important Ratios Performance Ratios Coverage Ratios 1. Sourced to CFA institute, Financial Statement Analysis. Stock Analyst Program 2010

How to Start… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Important Resources Stock Analyst Program 2010

How to Start… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Important Resources Stock Analyst Program 2010

Other Useful Resources Stock Analyst Program 2010

Research Report Composition ,[object Object],Date Topic Date Topic Jan 29 Overview, Valuation, Resources to Start Mar 5 More applied valuation Feb 5 What is price action? Industries & Multiples Analysis Mar 12 Applied Technical Analysis (equities, commodities, FX) Feb 12 Stock Picking & Strategy/Money Management Mar 19 TBD Feb 19 Cancelled: Reading Week Mar 26 TBD Feb 29 Cancelled: Reading Week Apr 2 Final SAP Presentations Stock Analyst Program 2010

Jan 29 2010 Sap

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Jan 29 2010 Sap

Editor's Notes