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Valuation Mod-9 Oil and Gas Field Services

Valuation Mod-9 Oil and Gas Field Services. Chris Jennis 3 /24/2014. Agenda Abnormal Growth Model Module 9 Summary Analyst Forecast Equity Valuation Adjusting Value Estimates Sensitivity Analysis Questions. Abnormal Enterprise Income Growth Model. Module 9 Valuation of Equity

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Valuation Mod-9 Oil and Gas Field Services

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  1. Valuation Mod-9Oil and Gas Field Services Chris Jennis 3/24/2014

  2. Agenda Abnormal Growth Model Module 9 Summary Analyst Forecast Equity Valuation Adjusting Value Estimates Sensitivity Analysis Questions

  3. Abnormal Enterprise Income Growth Model

  4. Module 9 • Valuation of Equity • VEnt- VD = Veq • Valuation Formulas for Equity • Dividend Discount Model • Residual Income Model • Use of Analysts’ forecasts • Provided earnings and dividends can indicate value • Adjusting Valuation to Valuation Date • Value today, not at date of last balance sheet • Assuming payoffs occur evenly during year • Sensitivity Analysis • Refine analysis with different inputs

  5. Valuing Equity

  6. Analysts’ Forecast

  7. Equity Valuation using Dividend Discount Model = 104.09

  8. Equity Valuation using Residual Income Model =72.08 (assuming g=3%) When Veq=87.76 (PriceLine) g=5.4% Analysis:

  9. Long-term Growth in Earnings/Sales g=5.4% 1.054= CI(t+1)-.01052*53.93 3.91 CI(t+1)= 10.110 1+gincome= 10.110/8.96 = 1.129 (growth rate outside of horizon)

  10. Adjusting Value Estimate 1st Adjustment: Adjusting Date [VJan2014*(1+r)^79/365] [124,347*(1.1004)^79/365] $130,887 2nd Adjustment: Mid-Year Adjustment (1+rEnt)^.5 (1.1004)^.5 1.0502 126,948*1.0502= $133,626

  11. Sensitivity Analysis Market Value= $128,964 Enterprise Value > Market Value: Market Undervalued, Buy Enterprise Value < Market Value: Market Overvalued, Sell

  12. Questions?

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