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
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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:
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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
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Lecture 2: Extracting key
drivers of value
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Lecture 3: Valuing a growth
business
Lecture 4: Valuing a cyclical
business
Lecture 5: Valuing risk
Lecture 6: Security pricing for
an issuer
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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
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
Case Study (Stable Growth Business)
Case Study (High Growth Business)
Reconciliation of techniques
Recognition of cycle
Techniques to predict a cycle
Valuing the cycle – Adapting the tools
Case study
Reconciliation of techniques
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
Case Study
Techniques used
Potential stakeholders
Deriving an edge
Learning Outcomes
At the end of this course, students are expected to acquire
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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
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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