BAFI1012 RMIT Semester 3: 2024 – Firm Analysis Report : Corporate Finance, Assignment, Singapore

Task:

As the financial manager of the specific company assigned to you, you will analyse the finances of your company and circulate a report to the senior management of the company. The assignment will cover various topics including bond valuation, share valuation, risk and return, payout policy, cost of capital and capital structure.

For this assignment, you will be assigned a specific company (listed in Singapore) and tasked with writing a comprehensive firm analysis report. As the financial manager of the designated company, you will analyse the finances of your company and circulate the report to the senior management of the company. Each part of the assignment relates to a Corporate Finance topic covered in a different study week. In order to write a high-quality report, you will need to work on this assignment throughout the semester, and focus on each of the different parts of the assignment during the relevant study week.

Part A: Company Overview

Provide an overview of the company details, including the company’s name, the industry it operates in, the company’s core business activities, products and/or services it offers, and its major competitors. Additionally, include information about the stock exchange on which the firm’s stock is listed, its ticker symbol, and a list of a maximum of five of the firm’s outstanding bonds, including coupon rates and maturity dates. This page will also be the front page of your assignment, so make sure it looks attractive and professional. Feel free to add additional information which you think is relevant.

Information on listed companies and their stocks is available on public investing websites, such as investing.com, or Yahoo Finance. Bond information is available in Bondsupermart. Dividend history of a company is available on Yahoo Finance, search for the company’s stock, then go to Historical Data, and select Show: Dividends Only.

Part B: Company Financials

Your task for this part of the assignment is to describe the company’s financial situation during the past couple of years. One place to find the company’s financial statements is investing.com (select your company, and click on Financials). Investigate which events have affected your company’s financial situation during the past couple of years, and explain what we can expect for the coming years. Your analysis should be based on at least 3 recent business publications from reputable sources (which are NOT publications of the company itself).

CORPORATE FINANCE

The topic of this part of the assignment is covered in Week 3. Your task is to analyse one of the firm’s outstanding bonds. First, compute the credit spread of this bond, by calculating the yield-to-maturity on this bond, and comparing it with the yield on government bonds of comparable duration. (For information on Singapore government bond yields see Singapore’s central bank website, select relevant Bond Yield and monthly for Frequency). Second, explain which credit rating you expect your company to receive from the credit rating agencies, based on your analysis of the company bond, as well as your analysis in Part B of the assignment, and explain why.

Part D: Share Analysis

The topic of this part of the assignment is covered in Week 4. The task is to analyse your company’s shares. First, provide a graph and comment on the company’s stock price changes in the previous three years. Explain what factors have caused the stock price to develop as it did, and link this investigation to your analysis in Part B of the assignment. Secondly, provide an overview of the firm’s dividend payments during the previous 5 years. If your company paid dividends more than once a year, sum up all dividends to find the total yearly dividend. Using the dividend discount model, estimate the return that investors currently require for holding your company’s stock. For your estimation, decide whether to use the average dividend growth rate observed over the past five years or to apply alternative assumptions regarding future dividend payments. Justify your choice of method and assumptions.

Part E: Risk Analysis

The topic of this part of the assignment is covered in Weeks 7 and 8. Estimate the amount of systematic risk in your company’s shares and compare it with the systematic risk of two competitors’ shares. You are required to conduct your own estimation without replying on the beta values found online. Your discussion should include an explanation of the factors that might explain the differences and similarities in systematic risk of these shares.

Part F: Payout Policy

This topic is covered in Week 10. In this part of the assignment, you will provide an overview of the company’s payout policy in the past five years. Which percentage of the company’s earnings was distributed to investors as dividends? Which percentage of earnings was reinvested in the company? Did the company engage in dividend smoothing? Did the company do any share repurchases in recent years? (One way to find out about share repurchases is to investigate any changes in number of outstanding shares on the company’s balance sheets between different years). Why did the company make these decisions?

Part G: Cost of Capital and Capital Structure (1 – 2 pages)

The topic of this part of the assignment is covered in Week 9 and Week 11. First, find out what the capital structure of your firm looks like, and use this information, plus your results in the previous parts of this assignment, to estimate your company’s weighted average cost of capital (WACC). Second, compare the capital structure of your firm with two competitors. What factors could possibly explain the similarities/differences in capital structure between these companies?