Notes for the Assignment
The group (up to five members) project completed in two parts requires you to conduct an analysis of a business. A key feature of the project is that it requires you to identify and obtain the relevant information. Thus, in addition to being evaluated on your ability to apply the tools of analysis described in the course, you will also be evaluated on your ability to identify and obtain the relevant information. Your assignment should use only publicly available information, and you should provide a reference list of the information you use. Do not use inside information obtained from personal company contacts etc.
Choice of company: You will choose one company from the list on UTSOnline. Valuation and assessment: Your group will evaluate and report (in two parts) on your chosen company as though you were a prospective management consultant.
Group assignment
Write-up is limited to 10 pages of text with 10 pages of supporting tables. Please use a font size of 12 and 2.5cm margins.
1. Macro economic Analysis
Describe the firm's economic environment and evaluate how this has impacted historic firm performance and is likely relevant to future performance.
- Look at the Global economy over the last 5 years - what has been going on? What is predicted to happen?
- Look at individual economies that affect your firm also for the last 5 years - what has been going on? What is predicted to happen?
- USE REAL DATA!!! Not "the economy is good/bad" language
- Analyse at least: GDP, Inflation, Cost of Debt
2. Industry Analysis
Perform an industry analysis and evaluate the level of competition in the industry or industries that your firm operates in.
- Use Porters Five Forces (all of them) to analyse each of your industries
- USE DATA
- Form a conclusion for each force, and for the industry overall (that is, the level of competition is high/moderate/low)
3. Business Strategy Analysis
Identify the key success factors and the key risks of the firm's strategy. Discuss the sustainability of profits generated by the strategy
- Identify the key success factors
- Identify the key risks (don't just list the ones that your company tells you)
- What will happen in the future for your business? (sustainability)
4. Accounting Analysis
Assess the degree to which the firm's accounting reflects the underlying business reality. Identify any accounting distortions and evaluate their impact on profits and the sustainability of profits.
- Use the 6 steps discussed in class (and in your text book).
- If you find anything and note it in step 5, you MUST fix it in step 6.
- There is every likelihood that you will find nothing! (audit!!)
Individual Assignment
Part 1: Write-up is limited to 2 pages of text with 2 pages of supporting materials, the reformatting, as an appendix. Please use a font size of 12 and 2.5cm margins.
1. Reformatted Financial Statements and Financial Analysis (10 marks) Reformat at least the last 5 years of your company's financial statements. Use ratio analysis and cash flow analysis to evaluate the current and past performance of the business and assess its sustainability.
- Reformat at least 5 years
- Prepare 4 years of ratios
- Prepare risk ratios for cash flow analysis
- WRITE UP - what happened AND WHY the ratios/ cash flow changed
Part 2&3: Write-up limited to 10 pages of text with 10 pages of supporting tables. Please use a font size of 12 and 2.5cm margins.
2. Prospective Analysis
Forecast future financial performance. Use the four valuation models outlined in class to produce an estimate of firm value, and compare to stock price. Perform sensitivity analysis and discuss the results.
- Prepare your forecasts and write up the reasons for your forecast assumptions
- Prepare your valuations and write up just the $ answers to your 4 models, as well as include share price on the date of your valuation (the date of your last set of reformatted financial statements (table 1)
- For all of your forecasting and cost of capital assumptions1, write up your reasons for your optimistic and pessimistic outcomes (best and worst they ever did in last 5 years perhaps?) and calculate your sensitivity analysis. Only use the AOI model and Table 2 reports your sensitivity results. Again compare to share price and discuss your results
3. Application
Using your sensitivity analysis, and as a potential management consultant to your chosen firm, provide a discussion as to the possible opportunities for improvement, and potential challenges for your firm. Provide remedies for these concerns. You should be quite specific in any recommendations you make.
- Your sensitivity testing will show you that your firm will be more sensitive to one of: sales growth/cost of capital, PM, AO.
- Depending on which of the three above is most important to your firm, come up with some ideas for specific things that your firm can do. For example, if sales growth matters don't just say "increase sales". You need to come up with creative ideas for your firm to increase sales. You never know, yours may be the next assignment sent on to your firm!
Companies for Group and Individual Assignment
Autumn 2017
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Company name
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ASX code
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InvoCare Limited
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IVC
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SkyCity Entertainment Group Limited
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SKC
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Myer Holdings Limited
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MYR
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Tassal Group Limited
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TGR
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OrotonGroup Limited
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ORL
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Treasury Wines
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TWE
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Blackmores Limited
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BKL
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Cochlear Limited
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COH
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JB Hi-Fi Limited
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JBH
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Domino's Pizza
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IDE,
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