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BUSN2036 Major Assignment – Company Analysis Report
Assessment Weighting: 50% of the course grade
Due Date: 5:00 pm 20 May 2022 – Week 11 Friday (composition of groups
must be finalised by end of March).
Submission Details: Upload an electronic copy of your assignment to Wattle via the
‘Turnitin’ assignment link. Please attach a completed cover sheet
(available at: https://rsa.anu.edu.au/study/forms-and-coversheets)

Page Limit: Absolute maximum of 25 pages (± 0 pages) (not counting title/cover
page, member contribution statement, table of content, references and
appendices). So, please only include charts and tables that are of
primary importance inside the 25 pages and leave those of lower
importance in appendices.

You must communicate concisely and effectively. Contents exceeded
the limit will not be marked.

Assignment Structure: 1. Cover sheet filled and signed
2. Statement of each member’s contribution (assumed to be equal if
none included).
3. Main content of the assignment (including a title page, executive
summary containing the recommendation, etc., which conforms to a
professional business report)
4. Appendices
5. References
* See the Checklist on the last page.


NOTE: Further (clarifying) information regarding assignment requirements may be posted on Wattle.
It is a requirement of this assignment that you check the Course Wattle Site regularly to familiarise
yourself with any additional information that may be provided.

GROUP ASSIGNMENT:
This assignment must be completed in groups of up to three students (from any tutorial classes).
Wattle has a specific forum to facilitate the forming of groups.
Doing this assignment individually is allowed if you struggle to find a group. Please be forewarned of
the high time commitment involved for this 50% assignment, especially if you are doing it on your
own.
It is highly recommended that you form your group by the End of March.

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REQUIREMENTS:
Write a report examining the performance and financial position of AGL
Energy Limited (ASX:AGL), a large Australian listed company, for the
purpose of advising a group of wealthy investor clients who are considering
purchasing shares in that company. Your report should include (at least) the
following sections:
Business and Strategic Analysis, including:
 An analysis of the impact of economy-wide and industry-wide factors upon the AGL’ current
and expected future performance. You should also identify AGL’s closest competitor and
analyse the extent of similarity between the competitor and AGL. It is not always possible to
identify competitors that are in the exact line of business as the company you are analysing.
Sometimes using the ‘segment reporting’ section of firm’s annual reports helps to identify
parts of companies’ operations that are similar. The ‘segment reports’ will also help you
identify the different industries in which AGL operates.
 An analysis of the impact of AGL’s competitive and corporate strategy upon its current and
expected future performance
 Chapter 2 of your textbook introduces many of the issues relevant to this section of your
report.
Accounting Analysis, including:
 An analysis of AGL’s accounting policies and discretionary accounting decisions relevant to
the evaluation of current and expected future performance. Focus your analysis of policies
that have the greatest potential to influence your assessment of the firm’s performance and
position (e.g. policies that affect assets that comprise a large proportion of AGL’s balance
sheet are going to be more important than policies that affect assets that AGL holds low
balanced of). Simply transcribing AGL’s stated policies is NOT analysis.
 A comparison of AGL’s accounting policies with the chosen competitor identified in your
strategy analysis above.
 Re-cast AGL’s financial statements and that of its competitor, for each of the last 5 years, to
improve comparability across these firms, and to facilitate the projection of future
performance (required later in this assignment). There is no one universally agreed way in
recasting statements. You may simply adopt the recasting format by Morningstar DatAnalysis
if you agree with their format.
 An adjusted set of financial statements for each firm, for each of the last 5 years, in which
non-cancellable operating leases are brought ‘onto the balance sheet’ (see Lectures 3 and 4).
The adjusted financial statements should be of similar presentational form to the re-cast
financial statements described in the point above.
 Chapters 3 and 4 of your textbook introduce many of the issues relevant to this section of
your report.
Financial Analysis, including:
 an estimation and analysis of ratios relevant to assessing the profitability, leverage, and asset
management of AGL, and its competitor. Ratios used to analyse firms’ leverage should be
presented in both ‘as reported’ and ‘lease-adjusted’ form (using data from the lease-adjusted
financial statements produced in your ‘accounting analysis’ section).
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 Please note that you are expected to calculate ratios yourself and not rely on ratios already
computed on DatAnalysis Premium or any other website. A collection of textbook ratio
definitions can be found in a PDF titled “BUSN2036 Financial Ratios” on Wattle.
 A time-series analysis of these ratios for AGL and its competitor over the past 5-years (or
longer). Presenting graphs of the time-series behaviour of key ratios would be a very good
idea.
 A discussion and analysis of AGL’s overall financial position and profitability.
 Chapter 5 of your textbook introduces many of the issues relevant to this section of your
report. You may find each company’s segment reports (see notes to accounts) useful when
analysing companies’ relative performance.
Prospective Analysis, including:
 Specific forecasts for all financial statement items (applying a level of detail similar to Table
6.2 in your textbook) extending to (at least) 5 years in the future and forecasts of the
behaviour of these forecasting items after the end of the specific forecasting period.
Supporting calculations and assumptions must be clearly explained, and assumptions should
be consistent with earlier parts of the assignment (particularly the ‘strategic analysis’ section).
 A valuation of the firm’s equity, using discounted free cash flows and at least one other
method that is most appropriate for the company (e.g., valuation based on abnormal earnings,
valuation based on abnormal ROE, or others --- taught or not taught in the class).
 In addition to the earnings and cash flow measures forecast above, valuation will require the
estimation of the firm’s cost of equity capital. You should explain and justify the method
chosen to estimate the cost of equity. It is acceptable (but not mandatory) to use the Capital
Asset Pricing Model (CAPM) to estimate this. Company Betas are available on DatAnalysis
Premium. Estimates of the Market Risk Premium currently applying in Australia are available
from a number of internet-based sources. You may find two recent research on Wattle useful:
“2018 CAANZ Market Risk Premium AU” and “2018 KPMG Equity market research
summary US”.
 A sensitivity analysis, demonstrating the effect on your valuation(s) of varying the key
assumptions underpinning your valuation. The sensitivity analysis should be informed by
sound economic logic and, where possible, uncertainties identified in your earlier analysis.
Think about what the biggest factors of valuation of companies in that particular industry are.
Some general examples include the impact of variations in future sales growth, gross margins,
other cost ratios. The sensitivity of the cost of equity and terminal growth assumptions should
also be investigated and analysed.
 Make sure you are considering sensible scenarios. For example, if you decide to test the
impact of sales growth being a lot higher than your baseline forecast, you need to explain (or
speculate upon) the economic circumstances that might cause this high growth to occur. Do
not just pick a insensible number and say ‘I wonder what would happen if profit margins were
200%?’.
Investment Recommendation
 Drawing upon the analysis above, advise your client on the suitability of the company for
equity investment. You should clearly explain the key assumptions that you have in your
analysis, and the extent to which your recommendation relies on the validity of those
assumptions. It may help to make assumptions regarding your client’s tolerance for risk and
their likely investment horizon, and to state these assumptions clearly in your report. There is
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no ‘right’ or ‘wrong’ recommendation. What is important is that you present a sound
justification for your recommendation, based on a logical discussion of the analysis presented
in the earlier sections.

SPREADSHEETS
What to put in the main text and what to put in appendices?
In your main text, try to avoid ‘bogging down’ your report with lengthy detailed computations. Use
the main text to identify the key information that is required to understand your analysis, and put
details of your calculations in Appendices. Each Appendix should be clearly numbered (i.e. Appendix
1, 2, 3, etc.), and it should be easy for the reader to find the appropriate Appendix should they need
more detail on a calculation presented in the main text (i.e. refer to them in-text where appropriate,
e.g. “see A1 for detailed calculations”).
Within your Appendices you should detail the method by which all calculations are made, and
assumptions underpinning calculations, the precise source of the data used in calculations.
Your Appendices are not limited by the word/page count.
Do I need to submit the spreadsheets?
You are not required to submit the spreadsheets. However, it is a requirement of this assignment that
you keep an electronic copy of all documents/spreadsheets used in your assignment. You may be
required to submit these files directly to the Course Convenor if there is doubt regarding the
originality of any part of your report, or to try to better understand how you have made your
calculations. Do not destroy the electronic copy of your assignment until the final results for this
course have been confirmed.

ALLOCATION OF MARKS TO INDIVIDUAL STUDENTS WITH YOUR GROUP
While there are several separate requirements of this assignment, and it is permissible to allocate
specific tasks to particular group members, your final report should integrate the content of each of
the above analyses such that the report reads cohesively. For example, the Strategic Analysis should
inform the Prospective Analysis. Your Accounting Analysis may affects the
identification/measurement of the key ratios that you choose to analyse in your Financial Analysis.
Assignments in groups should not read as though they were completed by individuals who never
communicated with each other.
The first page of your assignment (following the cover page) should contain a brief statement, signed
by all group members, outlining each member’s contribution to the assignments. For example, if
group members each worked evenly on every section of the assignment, disclose this. By default, all
group members will receive the same mark. However, if one section of the assignment is significantly
better than the others, and if all group members agree (in writing) that an individual contributed more
heavily to that section than the other, the convenor may allocate may allocate marks differently.

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REFERENCING
Your report must be original and properly referenced in accordance with the requirements of the
University’s Academic Misconduct Rules:
• Please use the Harvard (author-date) system
• You must clearly identify whether material that you are referencing is a direct quote from the
source (place in quotation marks) or a paraphrasing of the source
• As you will frequently be referring to financial statement data in this assignment, it is
acceptable to make a single initial acknowledgement (via footnote) of the source(s) of that
data. However, any text drawn from or based on discussion in AGL’s annual reports should
be properly referenced.
• You cannot ‘re-cycle’ material that you have submitted for assessment in another assignment.
• If you have any doubt regarding referencing requirements, you may find further details at :
http://www.anu.edu.au/students/learning-development/academic-integrity.


Checklist
# Assignment Requirements ✓
1 Group assignment cover page – filled? Signed?
2 Group member contribution statement
e.g. “All members contributed equally.”
If not included, by default, all group members will receive the same mark.

3 Title page of the report – remember this is a share recommendation report for investor
clients.

4 Executive summary of the report findings (including the recommendation) – usually no
longer than a page.

5 Contents of the report that should at least contain the following sections
- Business & Strategic analysis
- Accounting analysis
- Financial analysis
- Prospective analysis & Valuation
- Recommendation

6 Appendices – properly numbered and referenced in text?
7 References – Harvard referencing system
8 Page limit – Maximum of 25 pages (excluding cover page, member contribution
statement, title page, table of content – if any, references and appendices).