Module FIN5A3: Company Analysis & ValuationGroup AssignmentThis task is to be performed in study groups (see later). Select a public, preferably anoperating company of your choice for your analysis and valuation, discuss your choice withother groups to avoid duplication and ensure industry diversity. If you are desperate toanalyse a company that is not public, profitable or dividend-paying, please discuss with thelecturer. Please inform the lecturer of your choice by Wednesday 10th April.In order to use as many methods of analysis as possible, it would be better if your company ispublicly listed on a recognized US, UK or EU exchange, has profits or at least cash flows. Itshould also pay a dividend.For this assignment, assume you are either a group of bankers preparing the information for aclient who is interested in buying all the equity of the company you are analyzing, or a groupof sell-side analysts making an investment recommendation on a stock. Make sure youanswer these questions: Is the company you are working on a good investment compared to others in thesame sector and/or geography? How much do you think that it is worth? Is the share price right? If not why? How much should you bid for the company?Your classmates and the City analysts who will review your presentations will act as clients, sobe ready to answer their challenging questions. You will be presenting in front of externalinvestors and analysts who do this for a living. Use the feedback to optimize your writtensubmission in the time between the presentation and the submission date.Start working on your presentation after the mid-term and gradually incorporate thematerials covered during the classes. Monitor the company related news, as well as researchmajor events in the companys recent history. Download available annual reports and othercompany information. If you need figures like the companys WACC from Bloomberg, pleaseask your lecturer.You will make a presentation in PowerPoint on the afternoon of either Week 10 or 11between 12:00 and 11:00 and also write report in Word format (no more than 20 pages,excluding the attachments, tables and figures), which is to be submitted by Turnitin beforethe deadline, midnight on Sunday 8th May 2016. To help marking, e-mail your spreadsheetanalysis to the lecturer.The purpose of the task is to demonstrate how you can apply the concepts learnedduring the course to a target company. It is about 40% of the marks are to calculate ratiosand a valuation that you can support, but 60% of the answer to interpret them. You shoulddemonstrate your ability to work with the financial statements and annual reports of thecompany, financial information databases, news and analytical reports. While its importantto include as much background depth as you feel necessary within the limitations of thedocument and presentation, this is not a marketing accounting or strategy module, so mainlyrefer to aspects of your company that create or destroy value and demonstrate whether ornot it is a good investment.Overview of the Company:Part 1. Industry trends and prospects (this is just for an introduction on the company andsector, do not spend most of the time on this section) This should be your introduction to your company, be no more than two or threepages of your report and two or three slides in your presentation. Not all the bullet points have to be covered in Part 1. Identify major developments in the sector, in which your company operates, suchas new products, innovations, increase/decrease of product demand, change ofdemand preferences, manufacturing innovations etc. These should be thechanges and trends, which influence your companys operations, productionplans and competitive position. Use this information as a basis for analysis inparts 3, 4 & 5. Identify the major players in the industry, which are direct competitors of yourcompany (peer companies) Feel free to add any other information you find interesting and relevant to yourCompanys performancePart 2. Financial ratios analysis Calculate the ratios for your company (use the major ratios learned during thecourse and any other you feel are important). If your company is not an operatingcompany, then stockturn, for example may not be relevant. At least three yearswill be needed to show the historical (longitudinal) dynamics. Be able to explainany negative or positive trends you observe Calculate or find from the databases the ratios for one or two major competitors(the most recent year will be sufficient). Compare your companys ratios to theratios of the competitors. Comment on any significant negative or positivedifferencesPart 3. Comment on the companys business model, is it viable? How the company enters into the new markets or therapeutic areas (via organicgrowth, e.g. creating own business or via buying other companies (mergers andacquisitions, M&A) If the company did any interesting deals during recent times, you can give someinformation on themPart 4. Comment on the companys strategy Is the company developing new products and how they would influencecompanys revenues/market share/costs and overall competitive position in theindustry (this is related to the industry overview in part 1) Is the company planning to enter new markets locally or globally? Look for any information related to funding, e.g. issue of new bonds, issue ofadditional shares, planned increase/decrease of proportion of debt in the capitalstructurePart 5. Conduct company valuation Use comparative valuation methods we discussed during the class. You canselect several ratios for your and comparable companies, such as P/E,Price/Sales, Price/Book and profitability margins, liquidity and cash flow ratios.This information is available in Bloomberg, Reuters and company accounts. Use discounted cash flow (DCF) method of Rappaport. Project at least the 5-yearfuture growth of the company based on industry and company overview andstate any assumptions during the forecast period and afterwards. You should beable to explain why you are using certain growth rates. This should be related tothe market forecast made in the previous parts of the presentation. Also, youshould be able to explain how you calculated, or where you obtained theweighted average cost of capital (WACC).Selected sources of information:1. Company web-site (annual reports, press-releases, news)2. Bloomberg database3. Reuters database, as well as Reuters web-site4. Wall Street Journal5. Financial Times6. CNBS.com PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT
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