FINC6021 – Corporate Valuation Assignment
Valuing an ASX listed company
You are required to select and analyze one of the following companies listed on ASX.
Company Sector
Ansell Ltd (ANN.AX)
Healthcare
Equipment&Services
Costa Group Holdings (CGC.AX) Food, Beverage & Tobacco
JB Hi-Fi Limited Retailing
Silver Lake Resources Ltd (SLR.AX) Materials
As an analyst, your task is to perform a financial analysis of your selected company as a
suitable stock for selection in an investment portfolio. In this assignment, your ultimate goal
is to make an investment recommendation to potential investors on the stock of the chosen
company based on the current stock price (Assume current stock price is set as of 1 March
2023).
Part 1 – Estimate the growth rate of the firm’s revenue. (3 marks)
Conduct an analysis of the economy, industry and firm that informs an estimate of a short-
term growth rate (i.e., the annual growth rate from the previous year) for the firm’s revenue
you have chosen. You have the discretion to decide the length of the short-term window
based on lecture examples and analysis. Specific guidelines are shown below:
(i) Compile a profile of the selected company including a recent history of its
business activities and its business model by discussing the demand for the
company’s products and the supply chain followed in the production and
distribution process.
(ii) Strategically analyse the industry to which your selected company belongs and
operates in from the perspective of how attractive it is for offering your company
prospects of sustained profitability. Identify a peer group of companies that are
engaged in similar business activities as those of your company to enable
comparison with the business of your company. For your company, discuss the
competitive strategies in place and how well it is executing them.
(iii) Outline the economic factors that drive the growth of the firm and the industry it
operates in.
Hints: Use information on your chosen companies’ web site (strategy and annual reports);
industry reports and economic and population projections to estimate the growth rate for
your chosen company. Morningstar DatAnalysis provides up-to-date firm information too.
Explain in detail why you decide on the estimate.
Part 2 – Estimating Cost of Debt through rigorous market research and financial
statement analysis (2 marks)
i) Demonstrate skills to gather reliable data and estimate cost of debt
independently;
ii) Demonstrate skills to cross-check the estimates of cost of debt through
alternative approaches.
Part 3: Estimate Cost of Equity Capital (6 marks)
Use the two approaches, Capital Asset Pricing Model (CAPM) and dividend discount model,
to estimate cost of equity capital for the firm.
i) Demonstrate skills to gather reliable data and estimate cost of equity independently;
ii) Demonstrate skills to cross-check the estimates of cost of equity through alternative
approaches.
Part 4. Develop the inputs that will be used to estimate the value of the company that you
have selected. Specifically: (5 marks)
(iv) Construct a pro-forma statement as an integrated model of your company’s
financial statements. The key in this task is to justify with evidence the
assumptions imposed on other key input variables including COGs, operating
expense, CAPEX, depreciation, net working capital and tax. It is acceptable to use
arguments employed in Part I if needed.
(v) Use the pro-forma to derive cash flows that can be used in a Discounted Cash
Flow based valuation of the company.
(vi) Estimate weighted average cost of capital
Part 5 (2 marks)
(vii) Estimate the intrinsic value of your company based on the pro-forma constructed
in previous questions. Make a recommendation for stock investors from the
following relative to the company’s share price as of 1 March 2023:
(a) Strong buy
(b) Buy
(c) Hold
(d) Underperform
(e) Sell
Part 6. Report writing quality (2 marks)
Please refer to the marking rubric on Part 6 for detail.
Notes:
a. You should directly answer each of the listed questions; formulating a formal
strategic business report is not required;
b. Use the annual reports, but not interim reports, in the financial analysis;
c. This assignment emphasizes on your group’s independent research efforts and skills
of collecting and processing information. It is about you and your teammates
crunching numbers and pitching a convincing story together to potential stock
investors using credible references. Using industry opinions drawn from other
research sources such as IBISWorld, Bloomberg’s analyst reports is considered
inadequate evidence for justification. Instead, vigilant investors should always be
doubtful and have independent thinking based on evidence given that any
information, once become known knowledge, will be incorporated into stock price in
an efficient market.
d. Written assignments submitted after due time (5:00 pm 3 May) but before the
closing date (5:00 pm on 10 May), will incur penalties based on the number of days
the work is submitted after the due date. No marks will be awarded for an
assignment submitted after the closing date.
e. Submitting the written report in PDF: One cover page PLUS a 4-page limit on the main
text of the report (excluding references and appendices); your name and student ID
number must be clearly stated on the cover page. Font size should be set to 12.
f. Given the page limit, you can relegate detailed calculation steps for complex tasks
such as pro-forma statements, and CAPM estimation to appendices. In fact, using
appendices is much better than omitting the calculation steps completely in your
report. Professional analysts should ensure the accuracy and reliability of their
forecasts! If you decide to include supplementary information in appendices, note
that marking process focuses on the 4-page main text. The markers will only look at
the appendices if they are referenced in the main text.
g. Plagiarism is not allowed. Turnitin is enabled for this assignment to ensure academic
integrity and equity across class.
Appendix A. Marking Rubric
Meets Expectations Adequate Needs Improvement
Identify information
that can be used to
determine each
growth rate
(Part I, i-iii)
One or more
relevant sources of
information for each
growth rate has
been identified.
One information
source identified for
each growth rate.
Inappropriate or too
few information
sources identified.
Describe how each
growth rate was
determined
(Part I, i-iii)
Approach to
determining each
rate is relevant and
accurately
described.
Relationship
between
information sources
and rate determined
is clearly explained
and accurate.
Approach to
determining rates is
mostly accurate,
there are minor
errors.
Relationship to
information sources
is mostly clear or has
minor errors.
Approach to
determining rates is
not relevant or
vague and
incomplete.
Relationship
between
information sources
is unclear or
inaccurate.
Estimate cost of
debt
(Part II)
Estimation is clear
and accurate.
Connections
between the
information used,
method used to
determine are
correct.
Adequate efforts are
exerted to validate
the estimate and
make an attempt to
arrive at a plausible
estimate
Estimation is clear
and accurate.
Connections
between the
information used,
method used to
determine are
correct.
Some efforts are
exerted to validate
the estimate and
make an attempt to
arrive at a plausible
estimate
Estimation is unclear
and inaccurate
No clear efforts are
exerted to validate
the estimate and
make an attempt to
arrive at a plausible
estimate
Estimate cost of
equity (Part III)
Data is correctly
sourced;
The two valuation
models and other key
input variables are
correctly estimated;
Adequate efforts are
made to validate the
cost of equity
estimate
Data sources are
mostly correct;
The two valuation
models and other key
input variables are
mostly estimated
correctly ;
Some efforts are
made to validate the
cost of equity
estimate
Data sources are
incorrect;
The valuation models
and other key input
variables are
incorrect;
No efforts are made
to validate the
estimate
Forecast the inputs for
valuation of the
company
(Part IV)
Key components of a
pro-forma statement
are clearly identified
and justified with
evidence;
The connection
between a pro-forma
and FCF statement is
correct
Estimation of WACC is
correct
Key components of a
pro-forma statement
are mostly identified
and weakly justified
with evidence;
The connection
between a pro-forma
and FCF statement is
mostly correct ;
Estimation of WACC is
mostly correct
While key
components of a pro-
forma statement are
identified they cannot
be justified with
evidence;
The connection
between a pro-forma
and FCF statement is
incorrect;
Estimation of WACC is
incorrect
Calculate intrinsic
value and share price
and draw a useful
investment conclusion
(Part V)
Calculation is correctly
executed based on the
information shown in
previous parts. A
conclusion is drawn
based on the
discounted cash flow
analysis with clear
explanations.
Calculation of intrinsic
firm value and share
price is generally
correct with some
inconsistencies with
the pro form financial
statements. The
investment conclusion
is generally consistent
with the discounted
cash flow analysis.
Calculation is
incorrectly executed
and the investment
conclusion is not
supportive of the
calculation.
Writing quality Report is well
organised and the
logic is easy to follow.
There are no spelling
or grammatical errors
and terminology is
clearly defined.
Report is generally
well organised and
most of the argument
is easy to follow.
There are only a few
minor spelling or
grammatical errors, or
terms are not clearly
defined.
Report is poorly
organised and difficult
to read – does not
flow logically from one
part to another. There
are multiple spelling
and/or grammatical
errors; technical terms
may not be defined or
are poorly defined.