Business Valuation Group Project Report

Groups will undertake this project for an Australian listed company, chosen by the group from a list of companies.[Our chosen company is Chesapeake Energy Corporation] To initially commence the project, you need to obtain the information on the chosen company.[Our chosen company is Chesapeake Energy Corporation] The report for this project will be prepared using economic, business strategy and industry analysis, corporate governance analysis, accrual quality, accounting analysis, financial analysis, forecasting, risk analysis followed by valuation of the company’s shares. The group will prepare a report that presents a case for the acquisition of substantial number of shares in the project company.

It is suggested that the number of words/ sentences for each section/subsection are proportionate to the marks allocated. No appendix is allowed in the report. All tables and illustrations must be included in the main report. Tables, illustrations and charts are not included in the word count (unless very wordy). Reference list is required and is not counted towards the word limit.

*THE PART I AM IN CHARGE OF ARE [Abstract, table of contents, introduction of the project and introduction of the company]&[ Capital market analysis] *I will provide detailed GUIDELINE documents later.[JUST REFER TO “FRONT END”&”SECTION A:CAPITAL MARKET ANALYSIS”]

Please note that, currently, just need to finish these 2 parts.[Front End]&[ Section A: Capital market analysis]
OTHER PARTS ARE BELONG TO MY OTHER GROUP MEMBERS.
And our chosen company is Chesapeake Energy Corporation
Also, please refer to the suggested approximate word count in the guideline; As for the “Front End” part, I think maybe around 600 words?

ACF5130 Financial Statement Analysis and Business Valuation
Business Valuation Group Project Report Structure and Guideline (Part I and II)

Sections    Sub-sections    Suggestions on content    Maximum marks    Suggested approximate word count
Front end    Abstract, table of contents, introduction of the project and introduction of the company    3
Section A    Capital market analysis        12    600
Share ownership     Information on share ownership will include, the analysis of major shareholders (e.g. institutional shareholders) and the quality of these shareholders    2    100
Share trading and liquidity    Information on the volume of trading and frequency of trading    2    100
52 weeks high and low    Provide 52 weeks high and low share price. Include a 12 month stock performance chart of major competitors    2    100
News and disclosure analysis    Analyse and comment briefly on all the major events (minimum 3), news and announcements in the last six months affecting the share price significantly.    3    150
Analyst coverage    Investigate the analysts forecast dispersion, analysts opinion and earnings surprises     3    150
Section B    Business Analysis        15    900
Macroeconomic Analysis     Macro-economic analysis may include the impact of interest rates, exchange rates, a country’s demographic changes, global economic conditions (if applicable), the effect of an economic crisis. Social and political issues can also be considered if applicable. The economic analysis issues identified should be directly related to the company. A general discussion on economic issues without linking it to your company will not fetch marks. Link the macro economic analysis to the economy of your company’s markets    4    240
Industry Analysis (Porter’s five forces)
Focus only on Porter’s five force analysis. No other analysis (e.g. PEST) is required. If a particular force is more important for your company, then focus more on that.  Some form of statistical/numerical or illustrative (e.g. name of competitors, size of market) analysis will fetch more marks. Mere theoretical discussion of the five forces will not be sufficient.
Segment analysis (both business and geographical) is important and required (if applicable)
Choice of right competitive companies (for comparison) is important and has to be global companies (data on overseas companies is in Osiris)    8    480
Business Strategy Analysis
Discuss the current strategies of the company, any planned strategies for growth/expansion and analyse whether these strategies are working to generate value. The strategy should be linked to the industry of the company and its macroeconomic environment    3    180
Section C    Management quality and corporate governance analysis
8    400
Management quality    Analyse the quality of senior executives of the company. The analysis will include comments on the education, experience, tenure, compensation and shareholding.    3    150
Corporate governance analysis
Discuss the key corporate governance issues. This will include internal corporate governance (e.g. internal control, independence of the board, role of audit committee, independence, accounting/financial expertise of audit committee, remuneration committee and nomination committee) and external monitoring/ governance (e.g. external auditor, independence and quality of external auditor, analysts following, institutional shareholding, dual listing etc.). Comparison against best practice (one of top 50 listed firms) is recommended.    5    250
Section D    Earnings quality        7    100
Quantitative Earnings Quality Assessment     When assessing quality of earnings quantitatively, you need to consider measure of earnings persistence (EP) and discretionary accrual (DA). Data has to be provided.    7    100
Section E    Accounting Analysis        7    700
Key Accounting Policies
Identify and briefly discuss the key (not all) accounting policies (or accounting items) that drive the company’s business    1    100
Assessing Accounting Flexibility
For the above stated accounting policies discuss whether there is flexibility and how the company may be able to use the flexibility to manipulate the accounts.    1    100
Quality of Disclosure
Discussion should focus on the quality of disclosure of accounting information (e.g. informativeness, ease) in the financial reports. This may include the presentation of income statement, balance sheet, cash flow statement, statement of changes in equity and the notes accompanying the statements. A comparison against a large company’s financial report may help identify best practice.    1    100
Red Flags Identification and Accounting Analysis Implementation
Identify potential red flags. The number of red flags will differ from company to company. A potential red flag need not require financial adjustment. Identification of red flags should include an explanation why it is considered a red flag and why an adjustment is required (or not required). 2-4 high quality potential red flags will be sufficient. Need to implement accounting analysis and change the financials as and when necessary.    4    400
Section F    Financial Analysis        5    500
Profitability analysis    Many of the ratios are available in Osiris. Identify the more important ones. Merely stating the ratios will not fetch marks. A brief discussion on key ratios is required. Comparison against peer and industry is important (both time series and cross sectional).    1    100
Asset management analysis    Many of the ratios are available in Osiris. Identify the more important ones. Merely stating the ratios will not fetch marks. A brief discussion on key ratios is required. Comparison against peer and industry is important (both time series and cross sectional).    1    100
Debt and safety analysis     Many of the ratios are available in Osiris. Identify the more important ones. Merely stating the ratios will not fetch marks. A brief discussion on key ratios is required. Comparison against peer and industry is important (both time series and cross sectional).     1    100
Cash Flow Analysis
Many of the cash flow ratios are available in database. Identify the more important ones. A brief discussion on the company’s cash flow position is required. Comparison against peer and industry is important (both time series and cross sectional).    1    100
Credit analysis    Include credit ratings for your company from credit rating agencies (if any). Conduct the distress analysis and measure Altman’s Z score across two recent years.    1    100
Section G    Forecasting         10    1000
Forecasting with assumptions including scenario analysis
Forecast of key financials is required (only the condensed financial report). Forecast data should be supported by your assumptions/reasoning for each of the forecast data (e.g. sales growth rate).
Forecasting discussion should include segment analysis.
Scenario analysis needs to be performed. Three scenarios are to be considered – optimistic, pessimistic and most likely. The three scenarios will consider differences in growth rate and/or profit margin.
Forecast should be based on Arrium (or Bluescope) illustration template using eVal.    10    1200
Section H    Risk analysis        2    200
Identify  and analyse the types of risks faced by the company    Identify and analyse the major types of risks faced by the company. Risk category can be broad and will include the following six categories of risk: strategic, operational, management, political, financial and exogenous.
You can use a risk matrix to rank the company based on the six risk categories and provide an example of each of the six risk types faced by your company    2    200
Section I    Cost of capital        2    100
Cost of equity and WACC calculation
Information on credit risk and other types of risks faced by the company should be considered in the estimation of cost of equity and cost of capital.
Estimate cost of capital (debt and equity) using CAPM.    2    100
Section J    Valuation        3    200
Valuation: Any two appropriate models including scenario analysis     Any two appropriate valuation models are required. Valuation should also include scenario analysis. The suggested models are FCF and abnormal (residual) earnings. Scenario analysis will result in a range of values. The most likely value has to be provided.     2    100
Valuation multiples    Compare (against major regional and global companies) and comment on the trailing P/E ratio, forward P/E ratio and market to book ratio    1    100
Conclusion    Report outlined and recommendation for investors on the value/price for the company     1
Deductions    Report should be professionally  written    Abstract, report formatting, data sources, headings for any tables, grammar, layout logical for reader. (Up to 15 marks deducted for non compliance)
TOTAL     (Marked out of 45%)    45    5000
Other comments:
The project report is divided into two parts.
Part I consists of acquisition analysis, capital market analysis, business analysis, corporate governance analysis and accrual quality (15% of the unit – roughly 2,000 words).
Part II consists of accounting analysis, financial analysis, forecasting, risk analysis, cost of capital and valuation (30% of the unit – roughly 3,000 words).

The assignment has to be submitted in two stages. The first stage is due on Friday week 8 and the second stage is due on Friday week 12.
There is a strict word limit of 5000 words for the two stages combined. Introduction and conclusion not included in the word limit. It is suggested that the number of words/ sentences for each section/subsection are proportionate to the marks allocated. No appendix is allowed in the report. All tables and illustrations must be included in the main report. Tables, illustrations and charts are not included in the word count (unless very wordy). Reference list is required and is not counted towards the word limit.

Students submit a soft copy of the assignment. The soft copy should be a word file.
For the first submission (Part I), a single word file should be emailed to Mukesh.garg@monash.edu.

For the second submission (Part II) single attachment of the file along with the excel file (eVal software) needs to be emailed only to Egor.evdokimov@monash.edu

GROUP PROJECT (45% for written report)
1    Students will form a group of 3 students from the same seminar    Week 1-2
2    Choose an Australian company from the list provided by the lecturer. No two groups can follow the same company in the same seminar.    Week 1-2
3    Complete the group information form and submit it to your lecturer. The group members will make a choice on the company and presentation week but final decision is made by the lecturer on a first come first serve basis.     Week 1-2
4    The lecturer will suggest you a day for your seminar presentation
There will be 1-2 presentation each week and all group members have to present.    Week 1-2
5    Written report has to be submitted for the first stage (part I) by week 8 by email to mukesh.garg@monash.edu as a word document.
Week 8
6    Complete written report (part II) has to be submitted by week 12 by email to mukesh.garg@monash.edu as a word document.
Week 12

GROUP PROJECT PRESENTATION (5% for presentation)
There are nine different presentation topics, one for each week starting week 5.
The presentation should be based on the content for that part of the assignment (as per topic of presentation)
1    Students will only make one presentation in the semester    Week 5 onwards
2    The presentation topic is fixed for each week.
3    There can be two to three presentations each week
4    Lecturer will provide the feedback and marks back to the presentation group by the following week.  The mark for presentation is 5% out of 100.
5    The presentation is strictly for 10 minutes
6    The lecturer may spend up to 5 minutes, asking questions and providing feedback.

Business Valuation Group Project Report

Groups will undertake this project for an Australian listed company, chosen by the group from a list of companies.[Our chosen company is Chesapeake Energy Corporation] To initially commence the project, you need to obtain the information on the chosen company.[Our chosen company is Chesapeake Energy Corporation] The report for this project will be prepared using economic, business strategy and industry analysis, corporate governance analysis, accrual quality, accounting analysis, financial analysis, forecasting, risk analysis followed by valuation of the company’s shares. The group will prepare a report that presents a case for the acquisition of substantial number of shares in the project company.

It is suggested that the number of words/ sentences for each section/subsection are proportionate to the marks allocated. No appendix is allowed in the report. All tables and illustrations must be included in the main report. Tables, illustrations and charts are not included in the word count (unless very wordy). Reference list is required and is not counted towards the word limit.

*THE PART I AM IN CHARGE OF ARE [Abstract, table of contents, introduction of the project and introduction of the company]&[ Capital market analysis] *I will provide detailed GUIDELINE documents later.[JUST REFER TO “FRONT END”&”SECTION A:CAPITAL MARKET ANALYSIS”]

Please note that, currently, just need to finish these 2 parts.[Front End]&[ Section A: Capital market analysis]
OTHER PARTS ARE BELONG TO MY OTHER GROUP MEMBERS.
And our chosen company is Chesapeake Energy Corporation
Also, please refer to the suggested approximate word count in the guideline; As for the “Front End” part, I think maybe around 600 words?

ACF5130 Financial Statement Analysis and Business Valuation
Business Valuation Group Project Report Structure and Guideline (Part I and II)

Sections    Sub-sections    Suggestions on content    Maximum marks    Suggested approximate word count
Front end    Abstract, table of contents, introduction of the project and introduction of the company    3
Section A    Capital market analysis        12    600
Share ownership     Information on share ownership will include, the analysis of major shareholders (e.g. institutional shareholders) and the quality of these shareholders    2    100
Share trading and liquidity    Information on the volume of trading and frequency of trading    2    100
52 weeks high and low    Provide 52 weeks high and low share price. Include a 12 month stock performance chart of major competitors    2    100
News and disclosure analysis    Analyse and comment briefly on all the major events (minimum 3), news and announcements in the last six months affecting the share price significantly.    3    150
Analyst coverage    Investigate the analysts forecast dispersion, analysts opinion and earnings surprises     3    150
Section B    Business Analysis        15    900
Macroeconomic Analysis     Macro-economic analysis may include the impact of interest rates, exchange rates, a country’s demographic changes, global economic conditions (if applicable), the effect of an economic crisis. Social and political issues can also be considered if applicable. The economic analysis issues identified should be directly related to the company. A general discussion on economic issues without linking it to your company will not fetch marks. Link the macro economic analysis to the economy of your company’s markets    4    240
Industry Analysis (Porter’s five forces)
Focus only on Porter’s five force analysis. No other analysis (e.g. PEST) is required. If a particular force is more important for your company, then focus more on that.  Some form of statistical/numerical or illustrative (e.g. name of competitors, size of market) analysis will fetch more marks. Mere theoretical discussion of the five forces will not be sufficient.
Segment analysis (both business and geographical) is important and required (if applicable)
Choice of right competitive companies (for comparison) is important and has to be global companies (data on overseas companies is in Osiris)    8    480
Business Strategy Analysis
Discuss the current strategies of the company, any planned strategies for growth/expansion and analyse whether these strategies are working to generate value. The strategy should be linked to the industry of the company and its macroeconomic environment    3    180
Section C    Management quality and corporate governance analysis
8    400
Management quality    Analyse the quality of senior executives of the company. The analysis will include comments on the education, experience, tenure, compensation and shareholding.    3    150
Corporate governance analysis
Discuss the key corporate governance issues. This will include internal corporate governance (e.g. internal control, independence of the board, role of audit committee, independence, accounting/financial expertise of audit committee, remuneration committee and nomination committee) and external monitoring/ governance (e.g. external auditor, independence and quality of external auditor, analysts following, institutional shareholding, dual listing etc.). Comparison against best practice (one of top 50 listed firms) is recommended.    5    250
Section D    Earnings quality        7    100
Quantitative Earnings Quality Assessment     When assessing quality of earnings quantitatively, you need to consider measure of earnings persistence (EP) and discretionary accrual (DA). Data has to be provided.    7    100
Section E    Accounting Analysis        7    700
Key Accounting Policies
Identify and briefly discuss the key (not all) accounting policies (or accounting items) that drive the company’s business    1    100
Assessing Accounting Flexibility
For the above stated accounting policies discuss whether there is flexibility and how the company may be able to use the flexibility to manipulate the accounts.    1    100
Quality of Disclosure
Discussion should focus on the quality of disclosure of accounting information (e.g. informativeness, ease) in the financial reports. This may include the presentation of income statement, balance sheet, cash flow statement, statement of changes in equity and the notes accompanying the statements. A comparison against a large company’s financial report may help identify best practice.    1    100
Red Flags Identification and Accounting Analysis Implementation
Identify potential red flags. The number of red flags will differ from company to company. A potential red flag need not require financial adjustment. Identification of red flags should include an explanation why it is considered a red flag and why an adjustment is required (or not required). 2-4 high quality potential red flags will be sufficient. Need to implement accounting analysis and change the financials as and when necessary.    4    400
Section F    Financial Analysis        5    500
Profitability analysis    Many of the ratios are available in Osiris. Identify the more important ones. Merely stating the ratios will not fetch marks. A brief discussion on key ratios is required. Comparison against peer and industry is important (both time series and cross sectional).    1    100
Asset management analysis    Many of the ratios are available in Osiris. Identify the more important ones. Merely stating the ratios will not fetch marks. A brief discussion on key ratios is required. Comparison against peer and industry is important (both time series and cross sectional).    1    100
Debt and safety analysis     Many of the ratios are available in Osiris. Identify the more important ones. Merely stating the ratios will not fetch marks. A brief discussion on key ratios is required. Comparison against peer and industry is important (both time series and cross sectional).     1    100
Cash Flow Analysis
Many of the cash flow ratios are available in database. Identify the more important ones. A brief discussion on the company’s cash flow position is required. Comparison against peer and industry is important (both time series and cross sectional).    1    100
Credit analysis    Include credit ratings for your company from credit rating agencies (if any). Conduct the distress analysis and measure Altman’s Z score across two recent years.    1    100
Section G    Forecasting         10    1000
Forecasting with assumptions including scenario analysis
Forecast of key financials is required (only the condensed financial report). Forecast data should be supported by your assumptions/reasoning for each of the forecast data (e.g. sales growth rate).
Forecasting discussion should include segment analysis.
Scenario analysis needs to be performed. Three scenarios are to be considered – optimistic, pessimistic and most likely. The three scenarios will consider differences in growth rate and/or profit margin.
Forecast should be based on Arrium (or Bluescope) illustration template using eVal.    10    1200
Section H    Risk analysis        2    200
Identify  and analyse the types of risks faced by the company    Identify and analyse the major types of risks faced by the company. Risk category can be broad and will include the following six categories of risk: strategic, operational, management, political, financial and exogenous.
You can use a risk matrix to rank the company based on the six risk categories and provide an example of each of the six risk types faced by your company    2    200
Section I    Cost of capital        2    100
Cost of equity and WACC calculation
Information on credit risk and other types of risks faced by the company should be considered in the estimation of cost of equity and cost of capital.
Estimate cost of capital (debt and equity) using CAPM.    2    100
Section J    Valuation        3    200
Valuation: Any two appropriate models including scenario analysis     Any two appropriate valuation models are required. Valuation should also include scenario analysis. The suggested models are FCF and abnormal (residual) earnings. Scenario analysis will result in a range of values. The most likely value has to be provided.     2    100
Valuation multiples    Compare (against major regional and global companies) and comment on the trailing P/E ratio, forward P/E ratio and market to book ratio    1    100
Conclusion    Report outlined and recommendation for investors on the value/price for the company     1
Deductions    Report should be professionally  written    Abstract, report formatting, data sources, headings for any tables, grammar, layout logical for reader. (Up to 15 marks deducted for non compliance)
TOTAL     (Marked out of 45%)    45    5000
Other comments:
The project report is divided into two parts.
Part I consists of acquisition analysis, capital market analysis, business analysis, corporate governance analysis and accrual quality (15% of the unit – roughly 2,000 words).
Part II consists of accounting analysis, financial analysis, forecasting, risk analysis, cost of capital and valuation (30% of the unit – roughly 3,000 words).

The assignment has to be submitted in two stages. The first stage is due on Friday week 8 and the second stage is due on Friday week 12.
There is a strict word limit of 5000 words for the two stages combined. Introduction and conclusion not included in the word limit. It is suggested that the number of words/ sentences for each section/subsection are proportionate to the marks allocated. No appendix is allowed in the report. All tables and illustrations must be included in the main report. Tables, illustrations and charts are not included in the word count (unless very wordy). Reference list is required and is not counted towards the word limit.

Students submit a soft copy of the assignment. The soft copy should be a word file.
For the first submission (Part I), a single word file should be emailed to Mukesh.garg@monash.edu.

For the second submission (Part II) single attachment of the file along with the excel file (eVal software) needs to be emailed only to Egor.evdokimov@monash.edu

GROUP PROJECT (45% for written report)
1    Students will form a group of 3 students from the same seminar    Week 1-2
2    Choose an Australian company from the list provided by the lecturer. No two groups can follow the same company in the same seminar.    Week 1-2
3    Complete the group information form and submit it to your lecturer. The group members will make a choice on the company and presentation week but final decision is made by the lecturer on a first come first serve basis.     Week 1-2
4    The lecturer will suggest you a day for your seminar presentation
There will be 1-2 presentation each week and all group members have to present.    Week 1-2
5    Written report has to be submitted for the first stage (part I) by week 8 by email to mukesh.garg@monash.edu as a word document.
Week 8
6    Complete written report (part II) has to be submitted by week 12 by email to mukesh.garg@monash.edu as a word document.
Week 12

GROUP PROJECT PRESENTATION (5% for presentation)
There are nine different presentation topics, one for each week starting week 5.
The presentation should be based on the content for that part of the assignment (as per topic of presentation)
1    Students will only make one presentation in the semester    Week 5 onwards
2    The presentation topic is fixed for each week.
3    There can be two to three presentations each week
4    Lecturer will provide the feedback and marks back to the presentation group by the following week.  The mark for presentation is 5% out of 100.
5    The presentation is strictly for 10 minutes
6    The lecturer may spend up to 5 minutes, asking questions and providing feedback.