Compagnie Generale des Etablissements

Write a full valuation report for a listed
company.
Company chosen: Compagnie Generale des Etablissements Michelin SCA – France –
Automotive Aftermarket – http://www.michelin.com
You are required to submit a PowerPoint/PDF report, following the order and suggested length
of the questions below, below, plus the supporting Excel Financial Model you will develop. Both
files will contribute to your evaluation
Assignment questions & structure to be followed in your presentation

Preliminary analysis of the company Clearly develop a (1 slide): a. Short description of the company and its reference specific industry segment ¨ b. SWOT analysis c. Summary of industry current/future trends and growth forecastsHistorical financial statements analysis Develop, for the last 4 years (if any), reporting Excel tables and commenting key items (2 slides): a. Reorganized balance sheet and income statement b. Newly-built cash flows c. Key ratios (at least I/S margins, working capital ratios, financial leverage, profitability)Forecast assumptions Starting from the reorganized financials, choose and describe the main assumptions that will be used to forecast the BS and the IS. Comment in particular on (1 slide): a. Sales assumptions; b. CAPEX assumptions; c. Working capital assumptions; d. Financial debt assumptions;Final operating model Apply the chosen assumptions in an Excel financial model (at least 3 years). Report Excel tables and comment any peculiar/changing trend (3 slides, 1 per statement): a. Forecast balance sheet b. Forecast income statement c. Forecast cash flowsMarket multiples Build a sample of comparable companies and build the following multiples (actual multiples), showing your assumptions, sources and reporting Excel tables with all computations (1 slide): a. EV/Sales b. EV/EBITDA c. P/EDiscount rates Develop the relevant discount rates (kEU, kEL, kD, WACC), reporting Excel tables and explain your calculations, assumptions and the sources you used (1 slide).Valuation method Perform a company valuation with the following methods, clearly reporting Excel calculations, assumptions and sources. For each method, show the items between EV and equity value (2 slides): a. DCF asset-side b. DCF equity side c. APV d. Multiples (the three above)Conclusions (1 slide) a. Comment on differences across methods, with a football field, and choose a final value; b. Compare your results (on a per-share basis) with broker’s target prices (if available) and current stock price on the market. Give an investment recommendation (Buy/Sell/Hold).Sensitivity analyses For DCF asset-side, DCF equity side valuation, perform only one of these two sensitivity analyses, reporting Excel outputs (2 slides): a. A scenario analysis, with a base, best and worst case, showing and explaining the choice and the amounts of the varying variables; b. A Monte Carlo simulation, clearly explaining the varying variables and the model assumptions. General valuation guidelines for the assignment The valuation date should be as of the closing of the last historical fiscal year. The whole Assignment must refer to the consolidated financials of the listed company. Since listed companies publish financial statements which both include, in the same file, consolidated accounts and the separated accounts of the controlling / listed entity, choose carefully. Consolidated financial statements can be found on the Investor Relations section of a company’s website (for example, for Campari you can try googling “Campari investors relations” and you would directly get the link: http://www.camparigroup.com/en/investor) At http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html you can find industry betas. For comparable companies estimates (for forward + 1 year multiples) please refer to analysis estimates from any reliable source (you don’t have to build comparable companies’ estimates yourself). Risk free rates: use Bloomberg, Datastream or any other reliable source Market risk premium: o Damodaran:http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html o Fernandez: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2450452 Betas: use Bloomberg, Datastream or any other reliable source to download beta inputs following the estimation techniques seen in class. Debt spread on cost of debt: you may use Damodaran’s cost of debt rating model: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/spreadsh.htm then download the model “Estimate a synthetic rating & cost of debt”. You can find broker reports examples on Borsa Italiana’s website on each company’s page (e.g., for OVS, please see http://www.borsaitaliana.it/media/star/db/pdf/105059.pdf )

Sample Solution
Compagnie Generale des Etablissements

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