代写FINM3005 Corporate Valuation FINM6005 Applied Valuation Semester 1, 2025代写Processing

FINM3005 Corporate Valuation

FINM6005 Applied Valuation

Semester 1, 2025

Assignment Guidelines

The assignment is to be undertaken in groups of 5 – 6 students. All students must sign up for an assignment group at Wattle by Wednesday Week 3. Signing up for assignment groups is not restricted by tutorial enrolment. Any individuals not in a group and small groups of less than 5 students by this time will be randomly allocated to a group by Friday Week 3. All students within a group will be awarded the same assignment grade.

Teams need to submit an assignment involving analysis of the listed company which will be discussed in lectures and workshops. This  note  sets  down  the  objectives  for  the assignment, lists what needs to be submitted, and provides some direction on how to approach the particular phase of analysis. The guidelines can be considered ‘soft’, in the sense that teams have discretion on how they  approach each task. Also, there may be other aspects not included on the list that should be  considered. The  overall aim  is  to produce analysis that is suitable given the stated objective. Teams  should think about what is required for an informed judgement on the company, rather than just use the guidelines as a checklist to follow.

Assignment Summary

Due Date	11:59pm, 11th May
Weighting (%)	35% (or 40% if quiz is redeemed)
Objectives	• Build and submit company model, including forecasts • Generate a DCF valuation with all assumptions and material information substantiated • Value the company based on selected multiple-based and asset-based methods • Submit worksheets where appropriate • Write-up the company outlook and your analysis in a research note format
Length (excluding title page, contents and references)	Recommended: 4-6 pages of body, plus 2 pages of appendices

Submission Details

1. Online submission at Wattle. No hard copy or no email submission is accepted. 2. Upload your files in Excel, Word or PDF format, max size of uploads 2GB, max 5 files per group. One submission from each group is required. 3. All files submitted to be named as follows: FINM3005 Assignment (number) - Group (number) - (description) FINM3006 Assignment (number) - Group (number) - (description) Example 1: FINM3005 Assignment - Group 01 - Company Model.xls Example 2: FINM3005 Assignment - Group 01 - Final Report.docx 4. The usual assignment cover is not required for online submissions. 5. You must click “Submit” button to confirm the files are final for grading.

Extensions & Late Penalties

No extensions, refer to Course Outline for late penalties

Assignment - Company Model and DCF Valuation; Multiple- and/or Asset- based Valuation; Research Note

Objective: Produce a company model, including forecasts; generate a DCF valuation; round out the valuation with a range of appropriate multiple-based or asset-based valuations; and write-up your analysis in a research note format.

What You Need To Submit

•   Your company model, including:

•   integrated financial accounts

•   company forecasts

•   DCF valuation

•   summary tables and charts

•   explanatory notes incorporated within the model as appropriate

•   Scenario analysis

•   Additional worksheets that detail all the multiple-based and/or asset-based analysis

•   A research note summarizing your valuation analysis

Guidelines

The first part of the assignment  establishes  the  foundation.  It  involves  building  a  company model;  making  forecasts;   generating  a  DCF  valuation;  and setting out the assumptions for analysis.

The second  part of the  assignment  completes the valuation analysis  by  undertaking  some appropriately selected multiple-  based and/or asset-based valuation techniques. Listed below is a complete list of potential valuation  measures. T he  required valuation measures are two appropriate multiple- and/or asset-based valuation.  The  option will  be  left  open  for  groups to evaluate further measures  in  order  to  earn  additional marks. Rather than addressing every item on the list below, groups should only consider  valuation metrics that make sense for the company. For assessment purposes, you will be evaluated  on the quality and not quantity of your analysis. It is recommended that you provide a “Valuation  Summary” table, which includes DCF valuation and a composite valuation.

The research note is the third major item you are required to submit. It should summarize: (a) your major modelling choices and  key  assumptions,  (b) your outlook  for the company  and its  industry,  plus  associated forecasts; and, (c) your DCF valuation and other valuation matrix, and how they link to the outlook. Your analysis should be supported by appropriate charts and tables.  Assume  the  target   audience   involves   professional   investors  who   have  a  good understanding of company modelling and valuation, and are largely interested in understanding the basis of your analysis and DCF valuation.

More detailed suggestions are provided below.

More Detailed Suggestions

Company Model

The company model itself is the first major item in the assignment. It is envisaged that  groups will build upon the KGW model template found on Wattle. Augmentations to the KGW model should facilitate an insightful and meaningful analysis of the company, focusing on key drivers of the  business and the company valuation. The augmented model should contain the following:

•   A meaningful amount of historical data (ideally 5-10 years, unless unavailable or irrelevant)

•    Separate analysis of key business segments (all linked into central accounts)

•    Model focused around key drivers of the overall business and/or its segments

•    Estimation of continuing value (making clear assumptions about future return on capital, etc)

•   Valuation of non-operating assets (i.e. other items of value not included in DCF valuation)

•    Estimation of cost of capital (use dedicated worksheet(s), and justify inputs where appropriate)

•    Division of DCF-based enterprise valuation into equity and non-equity claims

•    Estimate of equity value per share

•   Assumptions and inputs clearly identified (ideally consolidated into separate worksheet)

•   Analysis of ROIC, including decomposition (important for linking valuation to business outlook)

•    Summary tables and charts (including charts of key value drivers / ROIC decomposition)

It  is  highly  recommended  that  a  separate  sheet  be  established    to   carry   all    key   input assumptions  (e.g.  margin components, growth  rates, capital  spending  determinants, cost of capital inputs, etc), as well as to gather the main output, with all being linked to the model. It is much easier to make use of the model under such a structure, rather than having the  main inputs and outputs spread throughout the model. Using a distinct colour for input assumptions is  also a useful practice, as it makes them easy to spot.

Explanatory notes should be included within the model itself, as needed for the marker (and other team members) to understand the work done. Notes should identify items such as key assumptions,  sources, methods used, basis for forecasts, etc. They can be used to describe modelling details: ‘big  picture’ modelling choices may be discussed in the report. Ways to include explanatory notes include:

−   Create a “Notes” column, perhaps to the right of the modelled cells, −   Insert a text box (see “Insert” tab)

−   Insert comments within the relevant cell itself (see “Review” tab)

Alternative Valuation Measures

P/E

Cash flow multiple

Enterprise value

Dividend yield

Price/sales

Price/book

Sum-Of-The-Parts  (SOTP),  or  break-up

valuation Takeover valuation

Composite valuation (summarizes all measures examined, including DCF valuation)

While there is no prescription for the format, an ideal submission might incorporate these elements:

•  Valuation  clearly focused on prospective rather than historic earnings or cash flows (which means  accessing consensus broker forecasts to form. prospective ratings for comparatives).

•  Analysis should ideally address “absolute” as well as “relative” valuation issues, i.e. not only how the  stock is priced versus its comparatives or the market, but some sense of whether the stock itself or its comparative group is cheap or expensive in its own right.

•  A solid basis for establishing appropriate valuation multiples. Possibilities include reference to history, relative versus the market, comparative companies, or fundamental determinants.

•  Purvey of a sense for the links to valuation theory; such as considerations of ‘growth’ potential, extent to which earnings are a good proxy for distributable cash flow, and risk / discount rate.

•  Identification of key issues impacting your findings, e.g. validity of comparisons; sustainability of  earnings; accounting or other normalisation issues; etc.

•  Dilution of EPS, etc is required for share issues, claims like convertibles, options, etc

Research Note

The research note is the third major item you are required to submit. It should summarize: (a) your major modelling choices and  key  assumptions,  (b) your outlook  for the company  and its  industry,  plus  associated forecasts; and, (c) your DCF valuation and other valuation matrix, and how they link to the outlook. Your analysis should be supported by appropriate charts and tables.  Assume  the  target   audience   involves   professional   investors  who   have  a  good understanding of company modelling and valuation, and are largely interested in understanding the basis of your analysis and DCF valuation.

The format of the research note is at the discretion of the groups: do what you think is necessary to   best present your analysis within the recommended page limits. You may structure your submission  in  an  analyst   report  format   (see  Assignment  folder  at  Wattle  for  example) . Nevertheless, for groups looking for some guidance,  the following broad structure is suggested:

• Body of report (4-6 pages)

1. Summary (1 paragraph) – Convey your key messages right up front.

2. Background (1 paragraph) – Brief description of company, industry and structure of model

3. Outlook (2-4 pages) –  Describe what you have assumed about the company and industry outlook,  and how it links to your modelling. Aspects like revenue growth and margins would be addressed    here.  ROIC  might  also  be  addressed,  especially  if  your  analysis  hinges  on sustainable profitability.

4. Other (0-½ page) – Some aspects such as capex, growth opportunities and valuation of non- operating assets might be presented in a separate section.

5. DCF valuation (1 page) – As well as presenting the valuation, cover off on any other relevant items for the DCF analysis, such as cost of capital and continuing value assumptions.

• Appendices (3 page limit) - Use this space to make more detail available, in support of the write-up  appearing in the body. If anything appears in the appendix, it should be referenced in the body.

• Tables and Charts – Exhibits that are central to your story should be included in the body; others can appear in the appendix. While this choice is up to each group, the body of the report might contain at  least the following:

− Summary table – provides an overview of the key inputs and outputs

− Presentation of key value drivers – the marker expects to see charts or a table of the four key value  drivers of revenue growth, margins (EBITA margin, NOPLAT margin), capital efficiency (capital  turnover) and ROIC (possibly before and after goodwill and intangibles). These may appear under  either the outlook or the DCF valuation section, as appropriate.

Other tables and charts that may prove useful, some of which might appear in the appendix, include:

− DCF valuation summary

− Cost of capital calculations

− Condensed financial statements (worth doing; look at a few broker reports for ideas on set-up).

• Other

− Title page:  You   might  show  company  and  team,   possibly  your   DCF  valuation   and recommendation.

− Referencing: Teams are expected to acknowledge sources whenever reliance is placed on data, analysis or statements arising from private third-party sources.   Information that is generally known to ‘the market’, such as company announcements, need not be referenced. (Note: These guidelines apply for all submissions under FINM 3005.)

− Presentation: It counts, so make your report as polished and readable as possible. Using two- thirds   of the page for text and one-third margin for charts and tables can be a good idea. Selective use of  dot points is recommended, especially when listing facts or assumptions.

− The research note should stand alone: It should not be necessary for the marker to look at any excel files to  understand your analysis. (But it doesn’t mean that the marker won’t look at your excel files.)

Good presentation –Presentation will be evaluated as a separate category in  its own right. Some tips:

•   Have a look at some broker reports as guide to potential formats.

•   Try to present a clear and definite message. Strong views have much greater impact than a  collection of wishy-washy thoughts.

•   Ensure that the report is logically structured. State your main message(s) at the very front,  then proceed to justify your stance. Tell a story.

•   Remember that readers will want to  understand the foundations of your view. Make evident  sure  the  key  assumptions,  logic  and  analysis  underpinning  your  view; and  provide  some sense of how your stance might be wrong.

•   You  should  write  as  if  the  target  audience  is  professional  investors  with  a  good understanding  of the principles of valuation and investment.

•   The   aim  is  to  inform  rather  than  impress  with   volume.   If  your  case  can  be presented using less pages, all the better.

• DO  NOT describe the charts/tables  (they are self-explainable) in words unless it is absolutely necessary for presenting your insights.

Scenario analysis - This is compulsory.

Sensitivity  analysis –  This  is  optional.  Nevertheless,  additional  marks  may  be  awarded for groups which include sensitivity analysis in a manner that enhances  their investment case. See Lecture 9 for further details on how to conduct the analysis.

The recommendation: Groups are expected to come up with a recommendation of either ‘Buy’, ‘Hold’ or ‘Sell’. This recommendation should reflect an ‘investment’ rather than ‘trading’ view. That is, you  should be informing investors with a horizon of (say) 1-3 years how they should be approaching the stock. Feel free to add some colours around the recommendation within the   text.   For   example,   you   might  wish  to  flag  developments  that  would  change  your recommendation (e.g. events that would turn  a hold into a buy or sell). Or you might wish to highlight shorter-term ‘trading’  considerations that an  investor may wish to take into account when adjusting their position.

Some Advice on Valuation Measures

Below is a sketch of what is expected under selected measures. More detailed guidance will be  provided via lectures, workshops and selected postings on Wattle.

PE

•  The main aim is to come up with an estimate of the target PE for your stock, and derive a valuation  by: Price = PE * EPS.

•  First decide the best way to arrive at the target PE, then arrive at your estimate using the data at  your disposal. Explain what you have done in the report. Data series provided should be used  selectively and intelligently. Don’t try to analyze everything that has been made available.

•  Some aspects you might consider:

−  Trading history of the absolute (raw) PE and relative PE versus market and/or comparable companies, perhaps considering the industry as well as the company itself

−  Reliability of comparatives; implication of any difference for the multiple

−  Fundamental determinants of PEs as discussed in lectures: (a) extent to which EPS varies from  maintainable cash flows; (b) growth potential; (c) relative risk / discount rate. (Try to demonstrate an appreciation of these issues when justifying your chosen PE, and discussing issues such as the  relevance of historical data.)

−  Relation between prospective and ‘trend’ earnings

•  Your  PE  should  be  applied  to  normalized,  diluted  EPS.  Provide  a  table  setting  out  your calculations.  It is acceptable to place this table in the appendix.

Enterprise Value

•  The aim is to derive a valuation as follows: (a) estimate enterprise value by applying a target multiple  to either EBIT, EBITA or EBITDA from operations; (b) add neon-operating assets; (c) deduct other  financial claims (net debt, etc) to get an equity value; (d) divide by number of shares.

•  This part should be largely approached as a relative valuation exercise, i.e. select a target multiple    for  your  company  by  reference  to  the  multiples  for  a  selection  of  comparable companies. Some data on comparable companies will  be  provided  by the  lecturer in due course, although teams  may look further afield if so inclined. In instances where information is required that is difficult to source,  it may be sufficient to flag what you would have done if more information were available.

•  To limit an opened-ended exercise, you are only expected to estimate multiples for 2 comps.

•  Create  a  table  setting  out  the  calculations  for  each  company.  Include this table  in your submission.

Asset Valuations

• Price/asset backing – The aim is to select a target Price/Asset Backing ratio, and apply this ratio to  asset backing per share to arrive at a valuation. The approach should be similar to P/E analysis, i.e. decide the target ratio after examining a range of relative and absolute data, taking into account  fundamental determinants.

• SOTP – A value is derived by breaking the company into parts, valuing each part by reference to the  value on which similar assets trade in the market, adjusting for any corporate overheads and non-  equity claims, and dividing by number of shares. The basis of the reference values should be made clear. Presentation might be done via a single table plus accompanying notes.

• Takeover valuation – The  idea  is to estimate what a  potential  bidder  might  pay for the company. The price up to which a successful bid would be both EPS-neutral and NPV-neutral should be  considered. Assumptions will need to be made about synergy benefits and funding costs, which may  require forming some sense of the nature of any prospective bidder.

You may use alternative comparable companies. Ask the lecturer for help on data.

Valuation Summary Table

It  is  recommended  that  a  ‘Valuation  Summary’  table  be  provided,  which  does  the following:

•  Reports all valuation measures in one place, including your DCF valuation

•  Summarizes by averaging across valuation measures (either simple or weighted average), to generate a ‘composite valuation’ .

•  Consider providing a  high/low range for each valuation measure, as well as the composite valuation