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Security Analysis and Pricing (TFIN203) Group Project Each group will be assigned an industry and students have the freedom to choose a stock within the assigned industry. The project should have two...

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Security Analysis and Pricing (TFIN203)

Group Project

Each group will be assigned an industry and students have the freedom to choose a stock within the assigned industry. The project should have two parts. Part one contains a detailed analysis of the company in the context of its industry (valuation with comparable). It should focus on the financial characteristics of the company relative to its main industry competitors. The second part emphasizes on the stock valuation of the company. The analysis should include the statistical models covered in the course, for example, the CAPM and DDM. If you wish, you can also try the FCF approach. The main paper should be 8-10 pages long and double spaced (you can put detailed calculations in an appendix that doesn’t count for pages). It is due in week11.

Project DetailsIntroduction

The purpose of the project
Introduction of the company (its products and industry)Main competitors

Financial analysis

  •  Financial characteristics of the company relative to its industry competitors, for example, sales, EPS, DPS, risk analysis, growth, and other ratios

  •  Where the company stands within the industryStock valuation

  •  Emphasize on stock valuation of the company with statistical models covered in the course, for example, CAPM model, dividend valuation model, FCF approach, etc.

  •  You can estimate beta by yourself or get it from third-party source. E.g. online broker or database

  •  Value the stock

Conclusions

Summarize the project
What you learn from the exercise

Requirements:

  •  The project report must be submitted through TURNITIN by the strictly enforced deadline. Late submission will attract immediate fail (zero mark) for this assessment.

  •  The project report must NOT exceed 2000 words excluding references, graphs and tables. Contents in excess of the word limit will be automatically ignored and not marked.

  •  All graphs, tables and diagrams etc. must be attached as appendix and properly REFERENCED in text.

  •  The project report must be typed in Time New Roman, SIZE 12 WITH 1.5 SPACES.

  •  All group members should contribute comparable amount of effort and must participate

    in content-generating. Typewriting only does not satisfy this requirement.

  •  Complaints about other group members’ lackof effort should be directed to

    XXXXXXXXXX

Answered Same Day May 20, 2020 TFIN203

Solution

Shakeel answered on May 20 2020
130 Votes
Financial Analysis
of
                                        
Introduction and Purpose of Analysis
The effective and efficient financial management is one of the key drivers for the growth and success of business. It doesn’t provide system and mechanism of running the cu
ent business processes but also provides the ground for framing better management policy and strategy on which the future growth and sustainability lies. JB Hi-Fi is one of the respected names among the retail entertainment and electronic goods industry. The financial statement of a year is a report card of what the business has done is past one year. But the company’s real performance can only be assessed by comparing its performance with its peers and Industry. After all, higher revenue and profit is not the ultimate goal of any business. The sustainability of business in long run is more important. Thus, company must know how to improve its overall performance so it may lead the industry and effectively face the competitors. Comparative financial analysis makes the company resilient against any adversity and prepares a solid ground for its growth and expansion. On the basis of available data and information, a more robust and effective business policy can be prepared that will not only helpful for company’s own growth but also enhance the investors’ confidence and believe.
Therefore, the purpose of this financial analysis is to know the financial position of JB Hi-Fi ltd in its Industry as well as against its competitors. Further, different stock valuation approaches like PE method, FCF method and Constant dividend growth model are used to measure the intrinsic value of stock so a co
ect decision can be made by investors for either purchasing or selling the stocks.
About Company
JB Hi-Fi is a prominent name in consumer goods industry, specialized in making Video games, Blue rays, DVDs, CDs, electronic hardware and home appliances. It is Australia based company established in 1973. First store was opened in Melbourne subu
area and later on it expanded to other parts of Australia. By the end of 2000, it opened ten stores across the country and more recently in 2016; this figure has risen to 194. Apart from Australia, Company has successfully made its reach to New Zealand. It got listed on Australian Stock Exchange in 2003 and subsequently, the business got a fresh energy to expand many folds across the Australia and New Zealand. The gaming business is unique in itself and have a strong potential of growth. JB Hi-Fi is not the single company in this field. Harvey Norman, Myer, David Jones, Target Australia are some of the major competitors in this industry.
Table 1 gives the key statistics of JB Hi-Fi as on June 2017. Company has total assets of 2,557 million, whopping 156% higher than the previous year’s total assets while Equity is around 854 million. Revenue is 5,628 million while net income is 172 million. The total market cap of stock is 2.70 Billion which is huge in its sector.
In Graph 1, the stock price movement over past five years is shown. There has always been a large variation in stock price but from Jan 2014 onwards, the stock price significantly rises and on Aug 2016 it touches the highest level of 29.33. After a significant downtrend for next one year, the price again surges to 29.23 in Jan 2018. Cu
ently it is priced at 23.51.
Peers’ Analysis
Table 2 and 3 shows the Peer analysis of JB Hi-Fi at May 2018. Jiangsu Hongtu High Technology Ltd, Joshin Denki Co ltd, Nojima Corp, T-Gaia Corp and Bic Camera Inc are some of the major competitors of JB Hi-Fi ltd. Bic Camera Inc. has highest revenue of 820.16 billion while net income of 15.79 billion followed by T-Gaia Corp and Nojima Corp. JB Hi-Fi has lowest revenue and income both among its peers. Its revenue is only 6.70 billion while net income is 213.70 million. Market cap is also at the lowest level of 2.70 billion. But, JB Hi-Fi has maximum number of employees working there. The total strength of employees is 11.85k followed by Bic Camera Inc (8.35k) and Jiangsu Hongtu High Technology Co ltd (6.72k).
As far as growth rate is concerned, JB Hi-Fi reported the highest revenue growth rate of 42.32%...
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