Coursework Task: PART 2

The coursework is an ongoing project where you will receive instructions each week. The final objective is to use all the financial analysis tools and write a professional debt and equity report on a company of your choice.

 

PART 2: Weeks 2-3 (introduction section in final report).

AIM : get to know your industry and peers.

• Introduce your company – points to consider: products, markets, countries, peers, management team, key events to name a few
• Briefly explain the key strategy and industry  of your company –using Porter’s forces. You can use PESTLE analysis as alternative framework too.

FAQs

1. You can choose any framework to describe your industry and competitive forces
2. The peers do not have to be from the same country.

Coursework Tasks PART 3

AIM: Get to know the accounting policies 

PART 3: Weeks 3-5

• Familiarize yourself with the annual reports and identify main (3-5 as a guideline) accounting policies of your company.
• Flag up any potential problems/red flags in the accounting practices.
• Think about how these policies may impact ratios and subsequent financial analysis .

PART 4: Financial Analysis: Weeks 4 -6

Aim: Get to know the financials

• Comment on the performance of your company using ratio and cash flow analysis.
• Calculate and comment on the overall profitability and sustainable growth rate of your firm.

FAQs.

• Students may choose to compare performance of their company with previous years (time series), with a suitable competitor (cross-sectional), industry as a whole or a benchmark they may deem suitable.
• The emphasis of the report should be on analyzing ratios and linking them to company strategy and relevant news (NOT on calculating ratios).
• You can calculate your own ratios or use ratios from Bloomberg or Thomson Reuters (must indicate source in your reports and show any own calculations). ⁺⁺⁺
• Remember to select ratios which are most relevant to your company and link them to your strategy and accounting analysis (copying and pasting all the ratios will not fetch you marks).
• Tables and graphs DO NOT count towards word count.
• Spend time, effort and thought into creating your own peer set using qualitative and quantitative criteria.

PART 5: Weeks 5-8 (Credit analysis)

• Comment on the capital structure (proportion of debt and equity) and type of debt financing of your firm.
• Propose a suitable debt rating for your firm based on your earlier industry, accounting and financial analysis.

NOTE

• You may refer to Moody’s or S&P debt ratings for their firm (if it exists). However, you need to calculate your own debt rating and comment on it.

PART 6 : Prospective analysis (final part)

AIM: RATE THE EQUITY

Forecasting

• Based on your strategy, accounting and financial analysis -forecast sales and earnings for your company for the next two years.

Valuation

• Value your firm using comparable multiples. (Not DCF)

Recommendation

• Based on your valuation and financial analysis issue a recommendation for the firm (Sell/Hold/Buy). You could use the current share price as a benchmark.

Note

Clearly indicate the assumptions underlying your forecasts.

It’s the logic of the forecasts not the accuracy of numbers that will get you marks.

All your calculations for forecasted sales and earnings must be attached as an appendix.

The emphasis should be on deriving your own forecast based on the news and historical share price that you have been following and analysis in weeks 1-9. *

All calculations for comparable multiple valuation must be attached as an appendix. – Clearly stating the comparable firms, the price multiple for the comparables and the method by which you calculated the share value for your firm.

A large proportion of your analysis will have been for fiscal year ending 2018 as 2019 annual reports may not be publicly available yet. You can do your financial analysis till 2018 and then based on semi-annual or quarterly reports, unaudited reports,  share price performance of the company and current events in 2019-202 you should aim to forecast figures for the next two fiscal years (2020, 2021). Therefore, in some/most cases 2019 is a ‘missing’ year.

*The marks will be based on the strength of your assumptions. Bloomberg and other data providers provide their forecasts – there are no marks for copying and pasting Bloomberg forecasts.