Accounting
Name 5 line items on the balance sheet
Assets(Cash, PPE, AR)
Liabilities (Debts, AP, Deferred Revenue)
Shareholder (Retained Earnings)
When looking at an acquisition of a company, do you pay more attention to Enterprise or Equity Value?
Pay more attention to Enterprise Value because that is how much an acquirer really "pays" and includes the often mandatory debt repayment.
What are the 4 major valuation methodologies?
DCF, Comparable Comps, Precedent Transactions, LBO
Walk me through how you get from Revenue to Free Cash Flow in the projections.
NOPAT + Non-cash adjustments - CAPEX - Change in NWC
What are all the desks in GIC
US Equities, Global Equities, Emerging Markets, Debt, REIT, Tech, Special Situations
How do the 3 statements link together?
Net Income -> CFS, Retained Earnings
Change in Cash -> Balance Sheet
What's the formula for Enterprise Value?
EV = Equity Value + Debt + Preferred Stock + Minority Interest - Cash
How do you take into account a company's competitive advantage in a valuation (multiples focused)?
1. Look at the 75th percentile or higher for the multiples rather than the Medians. 2. Add in a premium to some of the multiples. 3. Use more aggressive projections for the company.
How do you calculate the Cost of Equity?
Cost of Equity = Risk-Free Rate + Beta * Equity Risk Premium
How long ago does GIC's roots start?
2005
Walk through $10 increase in depreciation.
You should know this.
How does issuing $200m in Equity for an IPO affect Enterprise Value?
+200 Equity Value -200 Cash (increase in cash is subtracted from EV) EV unchanged
Is a company with a 50x P/E overvalued or undervalued? Why?
A P/E multiple alone does not tell us if it is over or undervalued. We would need to look at the industry average, the expectations for the company's growth and forward performance, and other qualitative and quantitative considerations.
How do you unlever and relever beta?
Un-Levered Beta = Levered Beta / (1 + ((1 - Tax Rate) x (Total Debt/Equity))) Levered Beta = Un-Levered Beta x (1 + ((1 - Tax Rate) x (Total Debt/Equity)))
What 4 clubs joined to form the current GIC (at least name 2)?
Michigan Commodities Group, Real Portfolio Management, Hail Capital Management and former Global Investments Committee
How does an increase Liabilities affect Cash Flow Statement?
And an increase in Liabilities INCREASES Cash Flow
What characteristics of a company would generate a higher valuation multiple?
● Higher growth projections than peers ● Market leadership / economic moat ● Access to proprietary information or key patents ● Geographic superiority or access to geographically limited resources ● Key personnel such as talented upper management
What is the difference between intrinsic value and relative value?
Intrinsic - Looking at just the internal aspects of a company. Relative value - found by taking into account the value of similar assets, often gauged by trading multiples and financial metrics
Tell me 3 places where taxes affect a DCF
- Calculating Beta (conversion from unlevered to levered) - Calculating FCF (NOPAT) - Calculating Cost of Debt (interest is tax deductible)
What desk currently accounts for most of our portfolio?
US Equities
What does negative Working Capital mean? Is that a bad sign?
Negative Working Capital is not necessarily a bad sign. It depends on the type of company and the specific situation.
A company has a stock price of $20 a share and a P/E of 20x (so EPS is 1). The company has 10M shares outstanding. How does a 2-for-1 stock split affect EV?
Does not affect EV, there are now 20m shares outstanding and EPS is now 0.5.
Both M&A premiums analysis and precedent transactions involve looking at previous M&A transactions. What's the difference in how we select them?
• All the sellers in the M&A premiums analysis must be public. • Usually we use a broader set of transactions for M&A premiums - we might use fewer than 10 precedent transactions but we might have dozens of M&A premiums. The industry and financial screens are usually less stringent.
In a DCF valuation, which of the following 3 actions increases the valuation the most: a $10 decrease in capital expenditures, a $10 decrease in expenses or a $10 increase in revenues?
First would be a decrease in capital expenditure, Second would be a decrease in expenses because is only affected by tax, Last would be an increase in revenues because any generation of revenues requires associated COGS
Name everyone on board and their position.
Dhiya Krishna - President Juliana Corey - VP ED Vardaan - Operations Aman - Development Akshitha - Internal Shaunna - External Adam - Investments Nathan - Portfolio