equity research - Российская экономическая школа uralsib capital mikhail...
TRANSCRIPT
Equity Research
Agenda
Sell-side overview – Models, reports, meetings
– Marketing, IPO research
– Pros and cons of being an analyst
– Criticism
Buy-side overview – Equity research and portfolio
management
– Key traps on buy-side
– Public analytics on buy-side
Q&A – Personal qualities, lifestyle
– Recruiting, interviews, internships
– …
Participants
Andrew Kucherov
MAE-2008, Grandis Capital
Valentina Bogomolova MAE-2005, Uralsib Capital
Mikhail Ganelin MiF-2009, Troika Dialog
Vladislav Nigmatullin MAE-2004
Sergey Arinin J.P. Morgan
Valentin Preobrazhensky MiF-2009, Avega Capital
Alexei Debelov MAE-2004, Third Rome
Evgeniy Grigoriev MAE-2005, VTB Capital IM
Madina Baikadamova MAE-2011, Renaissance Capital
Denis Inchenkov MAE-2011, Da Vinci
Stanislav Kondratiev MAE-2011, Uralsib Capital
Irina Nazarova MAE-2011, J.P. Morgan
Anton Onishchuck MAE-2010, Da Vinci
Ilya Piterskiy MAE-2010, Deutsche Bank
Ilya Potapkin MAE-2011, Wermuth AM
Alexander Semeyko MAE-2011, Troika Dialog AM
Sell-side overview
Andrew Kucherov
MAE-2008
Current: Grandis Capital
Past: Bank of Moscow, MDM Bank
Models and ideas of some core forecasting techniques
Key question – what is the real fair value? Company financial model: revenue costs CAPEX DCF model: terminal growth rate WACC Multiples model: target multiple valuation Final valuation
Example: NMLK DCF model USD mn 2009 2010 2011E 2012E 2013E 2014E 2015E 2016E
Revenue 6140 8351 11664 14044 16312 17846 18475 19071
EBITDA 1444 2348 2362 2807 3446 4323 4406 4471
margin % 24% 28% 20% 20% 21% 24% 24% 23%
EBIT 891 1794 1650 1962 2576 3439 3516 3579
Taxes 178 359 330 392 515 688 703 716
NOPAT 713 1436 1320 1570 2061 2751 2813 2863
+ Depreciation 553 554 712 845 870 884 890 893
- CAPEX -1050 -1272 -2005 -1446 -1341 -1015 -939 -916
Change in working capital 317 -527 449 -228 -361 -657 -121 -116
FCF 533 190 476 742 1229 1964 2642 2724
WACC Calculation Sensitivity analysis
Terminal growth rate 3,5%
Dis
cou
nt
rate
(W
AC
C)
Discount rate (WACC)
Cost of Equity 14,1% 10,9% 11,4% 11,9% 12,4% 12,9% 13,4% 13,9%
After tax cost of debt 5,6% 5,0% 6,2 5,6 5,2 4,8 4,5 4,2 3,9
Debt/(Debt+Equity) 20% 4,5% 5,7 5,3 4,9 4,5 4,2 3,9 3,7
WACC 12,4% 4,0% 5,3 4,9 4,6 4,3 4,0 3,8 3,5
DCF 6962 3,5% 5,0 4,6 4,3 4,1 3,8 3,6 3,4
Terminal value 31799 3,0% 4,7 4,4 4,1 3,9 3,6 3,4 3,3
Discounted terminal value 19947 2,5% 4,5 4,2 3,9 3,7 3,5 3,3 3,1
Total DCF 26909 2,0% 4,2 4,0 3,7 3,5 3,3 3,2 3,0
Net Debt of 31/12/11 2592
Equity value (common shares) 24317
Number of common shares, mn 5993
Target price, $ 4,06
SOURCE: company data; Grandis Capital estimates
SOURCE: company data; Grandis Capital estimates
NMLK: Multiples model
0
2
4
6
8
10
12
14
16
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
Target leading EV/EBITDA
7,5
EBITDA 2012 estimate, USD mln
2 807
EV estimate, USD mln 21056
Net Debt, as of 30.09.2011, USD mln 2933
Fair capitalization estimate, USD mln
18123
Fair price estimate, USD/share
3,02
NMLK: Final valuation
Multiples valuation EV/EBITDA 7.5X, USD per share Weight 0.5 3,02
DCF valuation, USD per share Weight 0.5 4,06
Fair value, USD per share 3,54
Upside, % 61%
Purpose of company meetings Types of meetings: conference calls analysts meetings site visits Client meetings
Company meetings, client meetings, site visits
Reports – reasons for writing
Purpose Structure: company description market outlook operational and financial estimates valuation Sales / Analyst side Types of distribution:
pdf hard copy
Sell-side overview
Valentina Bogomolova MAE-2005
Current: Uralsib Capital
Past: Nomura, Lehman Brothers, Alfabank, HansaBank
Marketing / IPO research
Sell-side overview
Mikhail Ganelin MiF-2009
Troika Dialog
Pros and Cons of being an analyst
Sell-side overview
Vladislav Nigmatullin
MAE-2004
Aton, MDM Bank, J.P.Morgan
Sell-side overview
Sergey Arinin
J.P.Morgan
Buy-side overview
Valentin Preobrazhensky
MiF-2009
Current: Avega Capital
Past: Proactive Capital, Marcuard Spectrum, Cambridge Energy Research Associates, RAO “UES of Russia”, Sberbank of Russia, Vneshekonombank
Equity research and portfolio management
Buy-side overview
Alexei Debelov
MiF-2009
Current: Avega Capital
Past: Proactive Capital, Marcuard Spectrum, Cambridge Energy Research Associates, RAO “UES of Russia”, Sberbank of Russia, Vneshekonombank
Key traps on buy-side
Public Analytics On Buy-side
New Economic School, Moscow
January 2012
Evgeniy Grigoriev ,
Portfolio Management Department
Targeting the audience
Relationship with public and peers
Buy-side strategy on equity asset class
ERP expectations
Role of equity in allocation
News triggers and surprises
Submitting alpha
Content
Slide 17
26.01.2012
Targeting the audience
Risks of releasing data to the public are enormous …
Reputational
Cloning strategies
Distortion of investment sentiment and inducement of bubbles
Sell-side front-running
…
Is it better not to be public?
Slide 18
26.01.2012
Top 15 Asset Management companies
Russia Rest of World
Asset under Management, USD bl. 45 14 500
Have public research … 8 of 15 15 of 15
Research focus … primary on alpha primary on strategy
Relationship with public and peers
Research is not about participating in writing papers, journalistic articles, or entering
in discussions on opinion and ST results. Why?
… financial industry has its weaknesses, but financial disorder could be worse
… markets could be wrong when short-term focus prevails
Slide 19
26.01.2012
Top 15 Asset Management companies – types of equity research (max 15/% of public)
Russia Rest of World (max 15)
Expectations on ERP 8 (100%) 9 (60%)
Role of equity in allocation 1 (13%) 8 (53%)
Triggers and surprises analysis 4 (50%) 10 (67%)
Indicator studies 1 (13%) 2 (13%)
Sector/industry studies 5 (63%) 6 (40%)
Wealth management studies 3 (38%) 7 (47%)
Submitting alpha reports 8 (100%) 3 (20%)
Buy-side strategy on equity asset class
ERP expectations
Defensive / Cyclical depending on business cycle
• Does equity really beat fixed income? Exceptions refutes the rule
• Are LT growth assumptions different for state-owned and innovative companies ?
Role of equity in allocation
Fed model, CAPM etc.
• Does asset allocation really meet investor’s long-term goals?
News triggers and surprises:
Portfolio managers should be prepared to all risks
• Which stories drive the market?
Slide 20
26.01.2012
Submitting performance: Buffett’s letter samples
…
Slide 21
26.01.2012
LT focus: 5-year time horizon is the best to estimate equity results
There is no way to forecast the equity market
Do not disclose industry and companies names in which you invest
Corporate governance and management has a crucial role in LT equity results
Contacts
Evgeniy Grigoriev
Senior Analyst
VTB Capital Investment Management
Tel: +7(495) 2876808
E-mail: [email protected]
www.vtbcapital.com
Graduate Development Programmes:
Elevate and Fixed Term Analyst 2012
Elevate
Opportunity to be part of VTB Capital’s pipeline of high potential (HiPo) talent for professional
ranks through a development and rotational programme with key Investment Banking divisions
at the start of your career
Programme Structure:
Four 12 week rotations across Fixed Income, Equities, Research, Global Banking, Structuring
Six week training in London at the Program start: professional skills, VTBC induction, technical and
interpersonal skills
Professional certification
Written development plan and regular progress review
Mentor to be assigned to every programme participant
Programme Start date – September 3rd, 2012
Duration – 16 months
Up to 15 participants between Moscow and London
Successful Elevate graduates to be hired as Senior Analyst or Associate at the end of the programme
Target Audience:
Recent graduate or within 1 year of graduation
Fluent English
Motivated/ambitious, appetite for learning, collegiate, with an international outlook
Legally able to work in Russia and/or UK
24
Elevate
Training Programme Framework
Professional Training:
Financial Products
Risk Analysis
Credit risk simulations
Global Markets
Corporate Finance
Asset and Liability Management
Structured Finance
Project Finance
Trade Finance
Leveraged Finance
Asset Management
Portfolio Management
Qualitative Skills:
Communications
Rational Decision Making
Influencing
Presentation Skills
Business Writing
Additional developmental activities:
Simulations
Project work
Case studies
Morning Discussion
Intro and final testing
Feed-back from trainers
Feed-back from VTBC Business Rep-s
Peer review
25
Fixed Term Analyst Programme (FTA)
Opportunity for undergraduate students to try themselves in their first Investment Banking
job
Program Structure:
Assignment within one business area
Two days training provided at beginning of the Programme: VTBC Induction, Intro to Investment
Banking, Interpersonal Skills
Start date – July 2nd , 2012
Duration – 2 months. Successful FTA’s contracts could be extended for up to 12 months maximum.
Up to 45 FTA’s throughout the year split per business globally (front office and support departments)
Successful FTA graduates are candidates for Elevate or full time Analyst position
Target Audience:
Students immediately before or in the final year of study
Fluent English
Motivated/ambitious, appetite for learning, collegiate, international outlook
Legally eligible to work in Russia and/or UK
26
Application and Selection
Elevate 2012 (Moscow):
• Online Application – February 1st to April 14th
• Assessment center - April - May 2012
• Job offers issued in May - June 2012, start date September 3rd, 2012
Elevate 2012 (London):
• Online Application – November 14th to March 1st
• Assessment center – March – April 2012
• Job offers issued in April 2012, start date September 3rd, 2012
FTA, Summer 2012 (Moscow):
• Online Application – February 1st to April 14th
• Assessment centre - April – May - June 2012
• Job offers issued in May - June 2012, start date July 2nd, 2012
FTA, Summer 2012 (London):
• Online application - November 14th to March 1st
• Assessment Centre - March - April 2012
• Job offer issued in April 2012, start date July 2nd, 2012
Selection process will consist of:
Verbal and Numerical Testing
Group exercise
Panel interview with Business and HR
27
Contacts
General information and Online application
http://www.vtbcapital.com
Information on VTB Capital Graduate Development Programme
Irina Shakhmametova
Graduate
Tel: +7 (495) 967 1503
E-mail: [email protected]
http://www.e-Graduate.ru
Q&A
Sergey Arinin
J.P. Morgan
Madina Baikadamova MAE-2011, Renaissance Capital
Valentina Bogomolova MAE-2005, Uralsib Capital
Alexei Debelov MAE-2004, Third Rome
Mikhail Ganelin MiF-2009, Troika Dialog
Evgeniy Grigoriev MAE-2005, VTB Capital IM
Denis Inchenkov MAE-2011, Da Vinci
Stanislav Kondratiev MAE-2011, Uralsib Capital
Andrew Kucherov MAE-2008, Grandis Capital
Irina Nazarova MAE-2011, J.P. Morgan
Vladislav Nigmatullin MAE-2004
Anton Onishchuck MAE-2010, Da Vinci
Ilya Piterskiy MAE-2010, Deutsche Bank
Ilya Potapkin MAE-2011, Wermuth AM
Valentin Preobrazhensky MiF-2009, Avega Capital
Alexander Semeyko MAE-2011, Troika Dialog AM