Corporate Valuation – 2021 (T3)

This exam starts at 10am of Monday, the 24th March, and ends at 10pm of that same
day. By no means I think that you will need these 12 hours to do this exam. This
extended period was just thought to allow you to better manage your workload and
other eventually overlapping exams.

Needless to remind you that, as always, but specially under the current
circumstances, I count on you to stick to the highest ethical standards while
answering this exam. As a reminder, please copy the pledge of honor below to the
top of your exam, and write your name and student number on it.

PLEDGE OF HONOR: I declare, on my honor, that I will not use, nor directly or
indirectly contribute to the use, of any dishonest method in the execution of this
exam.

Name and student number: ________________________________

Final Exam

At the end of 2016, you were invited to serve as Executive Director of a large
European investment fund. Anticipating that the health sector would be a promising
industry in the future, you asked your team to assess the opportunity to invest in
various listed healthcare companies, among which Biocartis1.

Biocartis is a Belgium company that has developed successful innovative molecular

diagnostic solutions, with a focus on oncology and infectious diseases. Its fully-
automated IdyllaTM platform offers rapid, easy and highly accurate molecular
information and diagnosis, supporting clinicians in the appropriate choice of
treatment.

1
Though Biocartis is healthcare company, you don’t need to know anything about the sector to make
this exam.

1
In its last presentation to investors, the company described its business model as
based on the number of installed units (IdyllaTM equipment), average utilization of
equipment by clients (which drives the acquisition of consumables/cartridges), and
on the average selling price of those consumables. Given that the company produces
the consumables in-house, the gross margin is then determined by the volume of
sales and the manufacturing cost of the cartridges.2

While the company sells its products in many geographies, the manufacturing
process is centralised in two factories in Belgium.

After some work, your team came up with the attached valuation model (excel file
“Final Exam – 2021 (T3).xlsx”), reaching a value per share of approx. €14, while the
company’s share price at the time was approx. €11. On one hand, the results seemed

2
For the purpose of this exam, you don’t need to know nor investigate any further the company’s
business model.

2
promising, but on the other hand, you were really not sure that your team had done
a good job… - thus, you decided to review the model.

In this final exam you are required to review the excel valuation model
attached, pointing out:

(i) what is incorrect (if anything), why, and what would be the correct
way of doing it, and

(ii) presenting your suggestions to improve the valuation (if anything

requires improvement), also explaining why you believe those
suggestions would be appropriate in the specific case.

In none of the cases are you asked to actually apply your suggestions,
but just to explain what would be the correct/best valuation procedures.
For that purpose, you should prepare a comprehensive written report
(as much as you can, considering a limit of max. 6 pages), and not submit
any (revised or otherwise) excel model.

- Feel free to organize your work and comments as you think fit, covering the
topics that you would find most relevant in the valuation of Biocartis – e.g.
assumptions considered, methodology of projections, cash flows calculations,
discount rate, calculation of the equity fair value, etc.
- Make sure that your report is well organized, simple and straight to the point –
for example, write your ideas in simple bullet points.
- Don’t waste your time data mining, or trying to build your own alternative
valuation model – that’s not the purpose of this exercise.
- You are not supposed to confirm or look for any additional financial, commercial
or business information provided by the company.

Use the Moodle platform to send your report (in word, with a maximum of 6 pages,
font 12, Georgia, line spacing 1,5, no annexes allowed) until 10pm. No reports
will be accepted after cut-off time.

Good luck!

Rosário André