You have been approached by a brokerage house and you have been asked to prepare an investment research report on a non-financial company listed in the UK. You will need to obtain annual reports of your chosen company (you should analyse the reports corresponding to at least four accounting periods).
The report should contain between 3,500 and 4,500 words, excluding appendices, tables, graphs and references.
The report should be original. However, to support your arguments, you are allowed to quote reports on your company prepared by professional analysts or other parties.
The unit outline indicates potentially helpful resources (websites and databases). More suggestions on each of the steps of the analysis will be provided during the lectures.
The completed essay must be submitted via the Assignment Tool on Moodle in Word format by 14:00 on 13 May 2023.
Required
The report on your chosen company should include:
a) Business strategy analysis. Perform industry analysis (using Porter’s five forces model), competitive strategy analysis and, if relevant, corporate strategy analysis.
b) Accounting analysis. Identify principal accounting policies; assess accounting flexibility; evaluate accounting strategy; evaluate the quality of disclosure. You are not required to: identify red flags; standardise the financial statements or undo accounting distortions.
c) Financial analysis. Evaluate overall profitability. Evaluate operating management, investment management, financing strategy and dividend policy. To appropriately interpret the ratios you should compare them to those of the industry or of selected peers. You are not required to perform cash flow analysis.
d) Prospective analysis:
i. Forecasting. Use reasonable simplifying assumptions on the value driver of the model used. It is advisable to consider different scenarios.
ii. Valuation. Use the following two models: Discounted Cash Flow Model and Abnormal Earnings Model. In addition, comment on the multiples. What is your buy/hold/sell recommendation? You should disclose your assumptions and workings.
