BKAR3043 FINANCIAL ACCOUNTING & REPORTING IV (A202)
PROJECT 2
CORPORATE VALUATION
SUBMISSION DATE: 24/6/2021
REQUIREMENT AND GUIDELINES
Introduction
GRD Berhad is an investment company planning to invest in company with strong financial
performance and position. You as the leader of the investment analysts team in GRD Berhad
require to find a suitable company for investments by applying relevant valuation techniques.
The objective of this project is to allow students to critically analyze the companies financial
information using the asset-based approach, earnings approach and free cash flow techniques
including price to earnings ratio (P/E) for the Malaysian listed firms for year 2019 to identify
a suitable company for the investment.
Instructions
1.
2.
Select FIVE public listed companies from the same sector (which making a profit for
the year) with the most recent annual report (YE 2019) with a Consolidated Statement
of Cash Flow. No Duplication among the Groups. Firms chosen should be from same
sectors.
Answer the following questions:
Part I: The Roles of Corporate Valuation and Background
(1) Describe the meaning of corporate valuation.
(2) Discuss briefly the background of the FIVE companies
Part II: Analyze and Evaluate Using Asset Based Approach and EPS
For EPS–find in Consolidated Statement of Profit or Loss.
Step 1:
Company (Co): One / Two/ Three/ Four / Five Co 1 Co 2 Co 3
EPS
Market value per share [Share Price/ Total
number of outstanding shares]
P/E ratio [Earnings per share /
Market value per share]
Asset Based Approach= total net asset value,
less total liabilities, according to consolidated
statement of financial position.
Co 4
Co 5
(1)
(2)
(3)
(4)
(5)
(6)
Define and purpose of (1) P/E Ratio
After step (1) evaluates each company’s PE Ratio.
Describe the purpose of asset based approach
To discuss the asset based approach results for the companies.
Compare the companies asset based approach results.
Justify the asset based approach results for the companies.
Part III: Analyze and Evaluate Using Earnings Approach
(1)
Analyse the past 3 years Earnings Before Interest and Tax for the FIVE
companies for year 2019 and predict the future earnings. Rate of return is 8
percent.
Formula : Annual Future Earnings/Required Rate of Return
Company (Co): One / Two/ Three/
Four / Five
Co 1
Co 2
Co 3
Co 4
Co 5
Earnings Before Interest and
Tax – obtain from Group Statement
of Profit or Loss
(2) Describe the purpose of earnings approach
(3) After step (1), compare and justify each company’s earnings approach results.
Part IV: Analyze and Evaluate Using Free Cash Flow
Compute the chosen companies free cash flow and use it to evaluate the free cash flow
accordingly.
Free cash flow formula :
Net Income
+ Depreciation/Amortization (obtain from Consolidated Statement of Profit or Loss)
- Change in Working Capital = (Current Year Current Asset – Current Liabilities) –
(Previous Year Current Asset – Current Liabilities) (obtain from Consolidated
Statement of Financial Position-Group). E.g. to attain change in working capital for year
2019, you need previous year 2018 current asset n current liabilities.
- Capital Expenditure (obtain from Consolidated Statement of Cash Flow under
investing)
= Free Cash Flow
(2) Compute and analyse free cash flow
Company (Co): One / Two/ Three/
Four / Five
Net Income
+ Depreciation/Amortization
Co 1
Co 2
Co 3
Co 4
Co 5
- Change in Working Capital
-Capital Expenditure
Free Cash Flow
(2)
(3)
(4)
(5)
Describe the purpose of free cash flow
After step (1) evaluate each company’s free cash flow performance.
Compare the companies free cash flow performance.
Justify the free cash flow performance of the companies
Part IV Recommendation
To write recommendation with reasons whether to invest in which company based on
the results of Part II to Part IV.
Part V: Conclusion
To write conclusion (limit to 300 words)
Part VI: Reflective Statements
To write a reflective statement on what you have learned from this project (limit to 50
words)
Report Format:
1.
Form a group consisting of 5-7 members.
2.
Prepare a report (MAX - 30 pages). Please use Times New Roman, font size 12 and
single spacing.
3.
To state the members name on the cover page of the report/ Submission by soft-copy
upload to UUMOL.
4.
The marks will be given if sufficient details and explanations provided to justify the
answers.
5.
Assessment Rubric: Critical Thinking and Problem Solving (CTPS) and Teamwork.
ALL THE BEST