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    Assessment 2 - Company Valuation Report Structure-1

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    Assessment 2 - Company Valuation Report Structure-1

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    Assessment 2 - Company Valuation Report Structure-1

    Uploaded by

    lequanganh10705
    asm

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    BAFI3194 Equity

    Investment and Portfolio


    Management

    Company Valuation Report


    1
    Important notes

    • This is individual assessment.


    • If you analyze a firm not given by your lecturer of tutorial class, the mark is automatically 0.
    • We set the limit of 12 pages that excludes the table of content, appendix and references. This doesn't mean that you need
    to hit 12 pages. Some students in the past tried to follow the structure of the CFA report samples below, which is
    unnecessary. Please focus on what is asked by following the "Company Valuation Report Structure" slide. We count quality,
    not quantity. You are not given mark for things not being told to do. The maximum 12 pages give you more than enough
    space to organize and elaborate your ideas and presentation of the report.
    • Provide references/sources of data.
    • Not copy and paste from other reports.
    • Not turn paragraphs into photos. It is plagiarism and the university treats this very seriously.

    2
    Executive/Valuation Summary
    • Valuation findings
    • Price target: xxx VND ‘000;
    • Current Price (of date when you finalize the report): xxx VND ‘000
    • Upside/Downside: xxx %,
    • Rating: Buy/Sell/Hold

    • Thesis/Key factors for rating: State and justify company’s value-changing factors (value-changing drivers), e.g.
    • Revenues: Expected changes driven by dynamics in market, demand, competition, regulatory changes or major
    corporate actions
    • Margins: Expected margins => driven by cost management, change in product/service portfolios,
    productivity/efficiency …
    • Opportunistic factors expected to cause a value twist: Identify and quantify its effect to projected financials.

    • Summary of financials: 3 historical and 5 projected years of key items in the financial ratio and DCF approach such as
    sales, CAPEX, profit margins, turnover ratios, etc.

    3
    Part 1 - Conduct Financial Performance

    1. Revenue by products/services:
    • Break down revenue to understand the revenue-generating operation, to judge the
    relative importance and to justify the changes among them
    • Revenue growth

    2. Profit margins:
    • select 2-3 key ratios that are most relevant to your company for analysis
    • earnings quality

    4
    Part 1 - Conduct Financial Performance

    3. Operating efficiency:
    • select 2-3 key ratios that are most relevant to your company for analysis

    4. Liquidity:
    • select 2-3 key ratios that are most relevant to your company for analysis

    5. DuPont ROE Analysis & Peer comparison


    • 3-step decomposition: Profit Margin (profitability), Total Asset Turnover (efficiency)
    and Financial Leverage (usage of debt)
    • estimate and compare Dupont ROEs of minimum 3 competitors by using financial
    ratios to justify discrepancies in ROEs to find out the company’s
    competitive advantages/disadvantages.

    5
    Part 2 - Valuation
    1. Estimate risk and required rate of return: using CAPM (see slide 7 to the end)

    2. Estimate value of the company using:


    • DCF : Dividend or Free Cash-flow-to-Equity model
    • Estimate Dividend/FCFE
    • Estimate growth rates of Dividend/FCFE
    • Provide explicit assumptions on input factors to the model selected
    • Relative Valuation: Price-Earnings (P/E) or Price/Sales (PS) model
    • Obtain/Estimate historical PE or PS
    • Estimate expected earnings or sales
    • Provide justification on the PE or PS ratio used to estimate value

    6
    Part 3 – Evaluation of the
    company’s value
    1. Why the value of the company differs from the current/recent share price?
    2. Which model is the most appropriate and why?
    3. Final target price and rating/recommendation

    7
    1. CAPM estimate: Risk-free rate of
    return (RFR)
    • CAPM:

    • Risk-free asset: 10-year Viet Nam Government Bond yield


    • Key source of Information: Refinitiv Eikon
    • Other sources: HNX, ADB, TradingEconomics, etc.

    8
    2. CAPM estimate: Stock Market
    Expected Return E(Rm)

    • The expected return on market E(Rm) is assumed at 9-12%.

    9
    3. CAPM estimate: Beta – Regression
    analysis
    DATE
    12/11/2013
    MSN Closing Price Daily Return VNIndex VNIndex Daily Return
    80.00 -0.62% 497.65 -0.68%
    11/11/2013 80.50 0.00% 501.08 0.50%
    8/11/2013 80.50 0.00% 498.61 -0.25%
    7/11/2013 80.50 0.00% 499.86 -0.53%
    6/11/2013 80.50 0.63% 502.52 0.55%
    5/11/2013 80.00 -1.84% 499.79 0.55%
    4/11/2013 81.50 0.00% 497.07 0.00%
    1/11/2013 81.50 0.00% 497.08 -0.07%
    31/10/2013 81.50 0.00% 497.41 -0.33%
    30/10/2013 81.50 0.62% 499.07 0.40%
    29/10/2013
    28/10/2013
    81.00
    80.50
    0.62%
    -1.23%
    497.08
    496.46
    0.12%
    -0.86%
    Monthly, 5-year data
    25/10/2013
    24/10/2013
    81.50
    81.50
    0.00%
    0.00%
    500.75
    501.17
    -0.08%
    -0.57%
    Source: Refinitiv Eikon
    23/10/2013 81.50 0.00% 504.05 0.70%
    22/10/2013 81.50 -0.61% 500.57 -0.20%
    21/10/2013 82.00 1.23% 501.57 0.15%
    18/10/2013 81.00 -1.82% 500.83 0.25%
    17/10/2013 82.50 0.61% 499.59 0.13%
    16/10/2013 82.00 0.00% 498.96 0.65%
    15/10/2013 82.00 0.00% 495.72 0.43%
    14/10/2013 82.00 0.00% 493.62 -0.18%
    11/10/2013 82.00 -1.20% 494.53 -0.06%
    10/10/2013 83.00 -0.60% 494.81 -1.17%
    9/10/2013 83.50 -1.18% 500.67 -0.31%
    8/10/2013 84.50 1.20% 502.22 0.35%
    7/10/2013 83.50 -0.60% 500.47 0.60%
    4/10/2013 84.00 -1.18% 497.50 1.06%
    3/10/2013 85.00 -1.16% 492.30 -0.42%
    2/10/2013 86.00 0.58% 494.39 0.44%
    1/10/2013 85.50 0.00% 492.24 -0.08%

    10
    Beta (continued)
    SUMMARY OUTPUT

    Regression Statistics
    Multiple R 0.478865998
    R Square 0.229312644
    Adjusted R Square 0.217079511
    Standard Error 0.009081528
    Observations 65

    ANOVA
    df SS MS F Significance F
    Regression 1 0.001545995 0.001546 18.74521027 5.46E-05
    Residual 63 0.005195871 8.25E-05
    Total 64 0.006741866

    Coefficients Standard Error t Stat P-value Lower 95%Upper 95%Lower 95.0%


    Upper 95.0%
    Intercept -0.001483972 0.001126431 -1.31741 0.192472592 -0.00373 0.000767 -0.00373 0.000767
    X Variable 1 0.634990401 0.146663485 4.329574 5.45547E-05 0.341907 0.928074 0.341907 0.928074

    2/3 (Raw Beta) + 1/3 (1)


    Adjusted Raw
    Beta Beta
    11

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