[SOLVED] CS Excel BAFI1045 Investment Assignment

BAFI1045 Investment Assignment
Group Company Valuation Assignment (40%) and Individual Presentation (10%)
RMIT University

Todays Agenda
1. Assignment Briefing
2. How to estimate expected return using CAPM (raw data)
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BAFI 1045 Investment
Group Company Valuation Assignment and Individual Presentation
Assessment Task 1:
Company Valuation Report (Group Assessment) and an Individual Presentation
Company to Research: Singapore Press Holdings (SPH)
Marks/Weighting: 50 marks and accounts for 50% of the total grade for this course
(i) Company Valuation Report (Group Assessment) 40 marks (ii) Individual Presentation (Video) 10 marks
Assignment Due Date:
Sunday of Week 10 (21st March 2021, 10 pm, SG)
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BAFI 1045 Investment
Group Company Valuation Assignment and Individual Presentation
Word Limit/Length:
Company Valuation Report Maximum 5,000 words (excluding Executive Summary, appendix, references)
Individual Presentation (Video) Maximum 10 minutes.
Submission Instructions:
The assignment will be submitted via Canvas, Turnitin Rubric/Marking criteria: A marking rubric is provided on Canvas.
Group Disputes/Free Rider Problem:
This must be brought to lecturers attention 2 Weeks prior to dateline.
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BAFI 1045 Investment
Group Company Valuation Assignment and Individual Presentation
You are required to analyse a listed company and prepare an investment recommendation report.
The report provides an assessment of the companys current position and future prospects, incorporating the use of various valuation techniques to arrive at estimates of the intrinsic value of the companys shares.
Your report should make a case for the companys shares to be rated in one of the following ways (Recommendation):
Sell
Hold
Buy
The shares should be sold, as a materially negative return is expected in the next 6 to 12 months.
The shares will have neither a materially positive return nor a materially negative return in the next 6 to 12 months.
The shares should be bought, as a materially positive return is expected in the next 6 to 12 months.
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Part I
The final submission should fulfil the following minimum requirements:
1. Introduction & Background
Company
Provide an overview of the companys history, operations and any structural changes it has undergone since it began. This is to understand how the company got to where it is today and what may occur in the future.
Industry
Analyse the structure of the industry in which the firm operates and whether it is domestic-focussed or has a global nature. Identify the industrys major companies and where they operate.
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Part I
2. Historical Financial Performance (Topic 6)
Evaluate the relative historical financial performance of the company among its 2 major competitors/peers
Identify the firms 2 major competitors and discuss why they have been selected
Identify, and explain the relevance of, 5 financial ratios of your choice (not to include ROE, Net Profit Margin, Total Asset Turnover or Financial Leverage) for the company and its peers
Explain the performance of the company compared to its 2 major competitors/peers using this analysis
Analyse and explain the reasons for changes in these ratios over the past five years
Do not simply describe the changes in the ratios
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Part I 3. Historical Dupont ROE (Topic 6)
Estimate the ROE of the company and its 2 major competitors for most recent 5 years using the DuPont ROE approach.
DuPont Analysis should be done using the 3-step procedure:
3 steps: Net Profit Margin, Total Asset Turnover and Financial Leverage
Analyse the companys and your selected peer companies ROEs over the period
Show your own calculations for each component over the previous 5 years for the company and its 2 selected competitors
compare the DuPont ROE of the company with its 2 peer group companies
analyse and comment on the reasons for the change in ROE for the firm and its competitors with reference to the change in the 3 components over 5 years
relevant charts/graphs may be used to illustrate these figures
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Part I
4. Company & Industry Analysis and Potential Impact on Future
Earnings (Topic 5)
Analyse the companys/industrys current issues and explain
the effect of these issues on the companys future earnings
a) At the Microeconomic Level:
The company and industry-specific factors (operation, financials, objectives, competition, etc.)
Use SWOT Analysis
b) At the Macroeconomic Level:
General factors that apply for the industry (GDP, employment, growth of the industry, regulation, global factors, supply, demand, world commodity prices, etc.)
Use Porters 5 Forces Analysis
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Part II
1. Estimation of Expected Return, E(ri), using CAPM (Topic 4)
The estimated CAPM required return should be used as the discount rate in your valuation models
E(ri) = Rf + i [E(Rm)Rf]
Expected = return on a security
Risk- + free Rate
Beta of x Market risk
the premium security
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Part II
(i). An Estimate of the companys Beta, i.
Use the daily closing price data of the company and the market index to calculate daily holding period yields for the most recent 5 years. Using this data, you can estimate raw beta by using regression analysis in Excel. Attach details of your work as an Appendix.
Adjust the Raw Beta using the formula: Adjusted Beta = [(0.67) x Raw Beta] + 0.33
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Part II (ii). The Risk-Free Rate of Return
Use the 10-year Singapore Government bond yield as a proxy for the RFR.
(iii). The Market Return
Please use an estimate of the market return, E(Rm)
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Part II
2. Intrinsic Value Estimation: Using Discounted Cash Flow Models
(i) Dividend Discount Model (Topic 8 Part I)
Estimate the intrinsic value of the companys shares using the
dividend discount model (DDM)
You must use a 3 Stage DDM. Follow the methodology discussed in Equity Valuation slides
Justify the number of years used for each of your growth periods
Determine the growth rate for Period 1 using the Retention Ratio
and ROE formula (g = RR x ROE)
Estimate the growth rate for Period 2 using your discussion in the
companys/industry current issues section (Part I, no. 4)
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Part II
Estimate the terminal (Period 3) growth rate using a proxy that represents the long-term growth rate and calculate the terminal value
Calculate the present value of each future dividend and the terminal value, then add them to calculate the intrinsic value of the company
Provide justification and reasoning if you use a different growth rate than the one calculated for Period 1
Provide justification and reasoning for your growth rate assumptions for growth in Period 2 and Period 3
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Part II
(ii). FreeCashFlowtoEquity(FCFE)Model(Topic8PartII)
Estimate the intrinsic value of the companys shares using the Free Cash Flow to Equity (FCFE) model
You must use a 3 stage FCFE model to calculate the intrinsic value of the stock
Source the components for FCFE from the companys financial statements using Eikon
Calculate the FCFE per share over the past 5 years. The average growth in FCFE per share will be the growth rate for Period 1
Formula FCFE = Net Income + (Depreciation Expense Capital Expenditures) in Working Capital Principal Debt Repayments + New Debt Issues OR FCFE = Cash from Operating Activities Capital Expenditures + Net Debt Issued (Repaid)
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Part II
Estimate the growth of FCFE for Period 2 using your macro and micro analysis (Part I, no. 4)
Estimate the terminal (Period 3) growth rate using a proxy that represents the long-term growth rate and calculate the terminal value
Calculate the present value of each future years FCFE to calculate present value, then add them to calculate the intrinsic value of the company
Provide justification and reasoning if you use a different growth rate than the one calculated for Period 1
Provide justification and reasoning for your growth rate assumptions for growth in Period 2 and Period 3
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Part II
3. Intrinsic Value Estimation: Using Relative Valuation
Techniques (Topic 8 Part II)
(i). INTRINSIC or JUSTIFIED Price-to-Book Ratio (P/B)
(ii). INTRINSICorJUSTIFIEDPrice-to-EarningsRatio(P/E)
Calculate and compare the Intrinsic or Justified Price-to-Book
and Price-to-Earnings ratio for the company
Determine the relative valuation of the firm using these
multiples (Do not attempt to calculate the share price) Analyse and comment on the relative valuation of the firm in
comparison to what is being traded in the market.
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Part II
4. Technical Analysis
(i) Share Price Performance
Using relevant charts, evaluate the companys share price performance over the last 5 years
Compare the relative performance of the company to the broad market index
Compare the relative performance of the company to its 2 peers Comment on these charts, referencing reasons for any
significant changes you have identified
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Part II
(ii). Moving Average and Volume Analysis
Use 50-day vs 200-day moving average lines and volume analysis to identify Buy/Sell/Hold signals
Show, and comment on, these analysis with reference to charts sourced from Eikon
Use volume analysis to confirm your price signals
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Part III Conclusion and Recommendation
Evaluation of Findings and Recommendations
Why do the intrinsic values you have calculated differ from the
current/recent share price?
How does this difference inform your investment recommendation?
What is your investment decision based on your evaluation?
Is your recommendation to Buy, Sell or Hold shares in this company?
Is it different from the signal obtained from the technical analysis? Why?
Does your qualitative analysis agree with your quantitative analysis? If not, why not?
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Important Points to be Covered Regarding Valuation Models:
Explain any assumptions you have made in implementing your models.
Where appropriate, explain how you arrived at the variables you are using. For example, it is not enough to say you are assuming a 2% growth rate. You will be expected to provide justification for your 2% growth rate.
Its not enough to simply describe the financial ratios. You must find reasons why they are changing, especially if there are significant changes year-to-year. This will require in-depth research.
You must use Refinitiv Eikon Online and IBISWorld as major data sources. These can be supplemented with data from the companies annual reports and other sources you have found.
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Presentation of Report
The report is to be presented in the form of a stock analysts investment report. It should have an Executive Summary, outlining the main findings, at the beginning. The remainder can be structured in line with the above points. Attach details of your working and calculations, and any other relevant information, as an Appendix. DO NOT send a separate Excel file. Dont include all the data for the beta calculation, just the regression statistics from Excel.
Illustrate your arguments with relevant charts and diagrams.
Relate all the information in your analysis to your investment recommendation.
Build a case for your recommendation by using your findings from each of the points above.
Your report should look professional.
DO NOT attach information you have used in compiling the report (annual reports, newspaper articles, etc.) to the report.
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Executive Summary
An executive summary is often written for leaders in a business or organisation, such as CEOs, department heads, or supervisors, so they can get critical information quickly to decide a course of action.
An executive summary should summarise the key points of the report.
It should restate the purpose of the report, highlight the major points of the report, and describe any results, conclusions, or recommendations from the report.
It should include enough information so the reader can understand what is discussed in the full report, without having to read it. Do not state your methodology in the Executive Summary.
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References and Citations
Use proper citations and references and include a list of references you use in your report. Failure to do so will result in a lower grade. RMIT provides a web site which explains the use of the Harvard reference system. Please consult it here:
https://www.lib.rmit.edu.au/easy-cite/
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Suggested Format for Your Assignment
1. RMIT Assignment Cover Page, signed by all team members
2. Professional first page with major details such as recommendation,
price targets, price chart (similar to a brokers report)
3. Executive Summary
4. Table of Contents
5. Introduction
6. Main body of your report
7. Conclusion and restatement of recommendation
8. References
9. Appendices
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Individual Presentation (10%)
You will need to pitch this stock to your clients in your Presentation. The aim of the presentation is to explain and justify the buy/sell/hold recommendation to potential investors.
Each of you will need to present a comprehensive analysis. That means you do not only present the part of the research that you are mainly responsible for but the full analysis. You will need to present company analysis, macroeconomic and industry analysis, equity valuation and other important analysis contained in your group report.
Your slides should look professional and well structured. There is no minimum/maximum number of slides. As the analyst, you will need to decide the contents and number of slides to present it professionally to your clients/investors.
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Some Useful Resources for This Assignment
Reilly, Frank K., Keith C. Brown and Sanford Leeds, Investment Analysis and Portfolio Management (11th Edition), Thomson South-Western, 2019.
You should also conduct your own analysis using the companies web sites, annual reports,
Refinitiv Eikon, IBISWorld and any other sources you consider to be relevant for your report.
The more resources you use for your research, the better your analysis will be.
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Assignment Submission Procedure
All assignments must be submitted online through the course Canvas Turnitin for a plagiarism check. They must be accompanied by an assignment cover sheet.
Penalties for Late Submission
All assignments will be marked as if submitted on time. Late submissions of assignments without special consideration or extension will be automatically penalised at a rate of 10% of the total marks available per day (or part of a day) late.
For example, if an assignment is worth 20 marks and it is submitted 1 day late, a penalty of 10% or 2 marks will apply. This will be deducted from the assessed mark.
Assignments will not be accepted if more than five days late, unless special consideration or an extension of time has been approved.
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An Important Note on Plagiarism What is Plagiarism?
Plagiarism is the presentation of the work, ideas or creation of another person without appropriate referencing, as though it is ones own. Plagiarism can occur in oral and written presentations and is never acceptable. The use of another persons work or ideas must be acknowledged. Failure to do so may result in charges of academic misconduct, which carry a range of penalties including cancellation of results and exclusion from the course.
Students are advised to read and understand the Universitys policy on plagiarism.
Do Not Plagiarise!
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Next Week:
Equity Valuation (Part I)
Casio FC-100V
TI BA II Plus

Now:
Assignment Requirement Part II(1)