Monday, 5 October 2015

Discounted Cash Flow ~ An Overview

DCF short for discounted cash flow analysis is a way to evaluate a company, project or assets. Cash flows for the future are assumed and discounted considering cost of capital to get the current values. Sum of future cash flows outgoing or incoming is net present value (NPV) that’s taken as price or value of cash flows. Discounted cash flow analysis is used to determine the worth of an investment in simplified terms. It is used in real estate development, investment finance, patent evaluation and corporate financial management.

As Matthew Roddan from Project Ninety Nine says, understanding the probability of risk and profits is very important in an investment decision. Investment decisions are made for profits and understanding what one can expect is very important to determine the suitability of an investment. Exponential discounting is the most common method deployed for discounting, to evaluate future cash flows answering the question – what would be the returns for an investment at a specific rate of return, as against cash flow expected in the future? Hyperbolic discounting is another method, though not deployed widely. Discount rate is the right weighted average cost of capital (WACC) and it reflects cash flow risks.

Discounted cash flow analysis is important for any investor to determine if or not an investment decision is suitable. Let’s look at it this way – consider the investment as a business or a company. DCF is a way to determine a company worth currently, based on calculations for the future. Though this is a useful method, it does have hiccups. Being a mechanical evaluation tool, it is bond by a principle and even simple changes in one value could result in major changes in value. So, instead of determining values for infinity a cap is used – say 10 years. This way, estimation becomes measurable.

Besides, Discounted Cash Flow is a method that uses intrinsic valuation for companies that have predictable flow of cash. It is used for companies that have been around for a while, though it is also used for IT companies that are expected to grow swiftly. This means, when a start-up or developing firm is evaluated, the results could go right or horribly wrong! As an investor, you must be able to weigh your options and prepare for both, says Matthew Roddan of Project Ninety Nine. This way or that, evaluating an investment is important for any investor and determining the right investments is done based on calculations that are probabilities and possibilities, not a definitive. The calculated risk should be something you would be able to manage, irrespective of whether it turns our favorable or not! 

Saturday, 3 October 2015

Dubai International Financial Centre By Matthew Roddan

The Dubai International Financial Centre also called DIFC is located in Emirate of Dubai and is a federal financial free zone in United Arab Emirates. Established in 2004 through a decree, DIFC is a sprawling 110 acres. Legal systems and courts are different from UAE, with a jurisdiction over commercial, corporate, employment, trusts, civil and securities law affairs. The main aim of DIFC is to offer a platform for financial and business institutions to enter in or out of emerging marks in the region and to create an ambiance for progress, growth and economic development in UAE by offering adequate infrastructure and legal backing on par with international standards.

Under the constitution of UAE, DIFC is independent judicially with commercial and civil laws different from that of UAE. DIFC laws are in English to avoid ambiguity and DIFC has courts and judges from jurisdictions with common law like Singapore, England and Hong Kong. Though DIFC has independent laws, the immigration rules and criminal law is the same as UAE. DIFC-LCIA Arbitration Centre is modeled after London Court of International Arbitration. DIFC Authority is the main governing body for DIFC and DFSA (Dubai Financial Services Authority) regulate financial services in DIFC, though it is different from UAE federal Securities and Commodities Authority that governs outside of DIFC.

Financial institutions can submit applications for a license and they’re benefitted from the 0% tax for income and profits, no limitations on Forex or profit/capital repatriation, 100% foreign ownership, business continuity and operational support amenities. Dubai International Financial Exchange is a privately owned financial exchange for DIFC and was listed as DIFX and rebranded as NASDAQ Dubai in 2008. DFSA regulates NASDAQ Dubai.

Dubai International Financial Centre Complex houses a hotel, Ritz Carlton that was opened in 2011. Dubai International Financial Centre also houses art galleries, restaurants and an array of outlets for shopping extravaganza. The Dubai shopping season has garnered acclaim worldwide and the number of tourists visiting during this season shoots through the sky. Many entrepreneurs would like to have a business established in DIFC and it isn’t surprising considering the perks and profits businesses get here. Matthew Roddan of Project Ninety Nine would recommend suitable and innovative project launch here, when an able leader is helming it.

The location of a business is very important and DIFC is one location businesses should consider. Not just for expansions, even new launches that are good would sure thrive and flourish here. There’s a reason why it is called Financial Centre and you must try it, to believe it.

Friday, 2 October 2015

What’s a Medium Term Note?

Medium-term note or MTN is when a debt note maturity period is 5 – 10 years, though technically the repayment duration or maturity period could be less than a year to a 100 years! These debt notes can be issued on floating or fixed coupon basis. Floating rate MTNs are either simple where the coupon is aligned
Euribor +/- basis points or it could be notes with complex structure and linked to indices, swap treasuries, etc.  If they’re issued to investors who aren’t residents of the US, they’re termed "Euro Medium Term Notes". Issuing MTNs to US-based investors calls for a US MTN program.

MTNs can come with fixed maturity date or come with put options, embedded call wherein MTNs could be redeemed per pre-accepted terms or speculations. MTN is usually issued for unsecured investment debts, with fixed rates, though it offers flexibility to both the issuer and investor when it comes to documentation and structure. While many use bank instruments for PPP and have an idea of how MTNs work, many don’t know how it really works! It is funny how they’re rising in popularity and many deploy it for different purposes, without knowing how these instruments work or what it really is! Matthew Roddan of Project Ninety Nine explains MTNs are a great way to get into PPP, especially since not many have the funds required to invest in PPP from their resources. Since PPP is gaining exposure and many would like to know if or not PPPs are what stuffs that make a mythical legend, let’s understand MTNs better.

According to Matthew Roddan, many aspire to invest in PPP but end up being unable to do so by trusting wrong people (brokers) or because they don’t have enough resources. The former is truer and why many think PPPs don’t exist. So, let’s understand MTNs better and how they can be used for PPP. MTNs are instruments of debt issued by banks and are sold to investors with a good face value, annual interest rate and maturity date. So, if you hold a note from Bank of America that’s worth 100 million, with interest rate of 7% each year, you will get 7 million till the instrument matures, after which you can cash it for its worth!

While MTNs are very similar to debt notes, it is more popular because of its price, flexibility, resale potential and option to be bought at a discount instead of its face value. According to Matthew Roddan from Project Ninety Nine, MTNs are available for more than fifty years and can effectively compete with any bank instrument. Since they were available for discounted rate, it became popular after “trading bank instruments” gained notoriety in the secondary market. PPP reign began soon after and Internet has made it even more popular and widely available. If you have an interest in PPP, MTNs Project Ninety Nine are your go-to option.

Wednesday, 16 September 2015

Matthew Roddan

Matthew Roddan is the founder of Project 99 an innovative and new approach to project funding, providing funding solutions to projects throughout the world.

Matthew now offers only distinct consultancy services on a referral only basis. This work includes four major elements starting with forming private equity and similar entities; working on transactions for such funds; working on a wide array of cross-border joint ventures involving emerging markets and ending with working on various infrastructure projects in emerging markets which includes a wide range of credit & capital raise real estate based projects.

His works as a representative includes setting up a collective investment scheme investing in offline agreements for the purchase of gold in Africa, Central and Eastern Europe, southeastern Europe and African areas.

He has also represented many private companies in making various investments in developments that include financing and restructuring of investments, establishing joint ventures connected to construction, real estate, financial and franchise projects in Africa, central & South America, South Asia and the Middle East regions.

Dealing with high net worth individuals in debt finance programs and advising on their risk or reward structure is another area of work as a representative.

Matthews work with Project99 involves the establishment of banking facilities for clients in jurisdictions such as Singapore, Dubai and Liechtenstein. Clients funds remain under their control at all times whilst also being able to leverage the funds for use in managed buy sell programs. The nature of the funding mechanisms offered require specialist knowledge and understanding of the the sale and purchase of bank debt.