Business Valuation - Assignment
Added on 2021-06-14
22 Pages5749 Words33 Views
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Business ValuationName of the Student Name of the UniversityAuthor Note
Executive SummaryThe purpose of this valuation report was to investigate whether the investor shouldconsider the IPO opportunity of Duxton Broadacre Farm Ltd as probable investmentoption or not. In order to find out whether to invest or not, the analyst has performed alist of analysis stating from financial performance over the last three years to valuationof stock price basis the future projections. Additionally, the analyst has also used riskassessment models to explain associate risk with such investment. While, the financial performance of the organisation over the last two years has showna balanced performance; valuation models indicates that the investor can opt this IPOas a short term investment opportunity.
Table of Contents1.0 Introduction:............................................................................................................41.1 IPO background...................................................................................................41.2 Analysis of Industry............................................................................................51.3 Firm Competitive strategy...................................................................................62.0 Analysis of accounting method and earning management.......................................73.0 Analysis of performance using financial ratio analysis...........................................83.1 Ratio Analysis.....................................................................................................83.2 DoPont Analysis..................................................................................................93.3 Risk Analysis.....................................................................................................104.0 Financial forecasting.............................................................................................115.0 Estimation of cost of capital..................................................................................126.0 Equity valuation Model.........................................................................................126.1 Dividend Discount Model.................................................................................126.2 Residual Earning Model....................................................................................136.3 Discounted Cash Flow Model...........................................................................136.4 P/B Ratio...........................................................................................................146.5 Ohlson model....................................................................................................157.0 Conclusion............................................................................................................158.0 References.............................................................................................................17Appendix.....................................................................................................................18
1.0 Introduction: This particular business valuation report has considered Duxton Broadacre Farm Ltdas the case organisation, which is currently going to public through initial publicofferings (IPO). The Company tries to produce revenue and capital additions forInvestors through the activity of broadacre cultivates in Australia, that are situated toprofit by potential increment in grain costs (among other commodity costs) andincrease in land values. The Company expects to centre on utilizing an enhanced cultivating model to augmentreturn on its advantages and make investor wealthy. The Company additionally meansto develop the business consistently and what's more, precisely deal with the primaryconcern while responding rapidly to acquisition opportunities.1.1 IPO backgroundThe organisation offered 8000000 shares which can go up to 14666667 with an offerprice of $1.5 to raise minimum of $12 million and maximum of $22 millioninvestment (Upcomingfloats.com.au, 2018). Although, the offering date was 13November 2017 and the Closing Date was 22 December 2017, this is still open as thedirectors consulting with their lead manager extended the IPO period. On completion of this offer, the post offer capital structure will look like:MinimumSubscription $12millionMaximumSubscription $22millionNumber of Shares on issue atincorporation2,94,63,6812,94,63,681Shares Issued under the Offer80,00,0001,46,66,667Total Shares on issue at Completionof the Offer3,74,63,6814,41,30,348Table: Proposed Capital Structure(Upcomingfloats.com.au, 2018).Continues of the Offer will be utilized to get ranches that fit the firm venture criteria,pay for general working capital, to diminish a part of the debt capital and to pay theexpenses of the Offer and posting on ASX.The Offer exhibited in this Prospectus is available to financial specialists who have anenrolled address in Australia and New Zealand. The Offer is likewise open to certain"discount" or "expert" financial specialists in Hong Kong and Singapore.
1.2 Analysis of IndustryWorldwide grain utilization has reliably ascended over the past 50 years and is reliedupon to proceed in the same fashion (Upcomingfloats.com.au, 2018).. Thisdevelopment has been, and is probably going to keep on being, driven by populacedevelopment and rising per capita earnings in developing economies.As earnings rise, eating designs move to additional westernized diets and customarystaple sustenance, such as rice, are progressively substituted by different grains, meatand dairy items. Rising buyer riches in creating nations two-fold affects grain requestby means of direct utilization and aberrant utilization as feedstock for different items.Figure: Snapshot of the Australian Grain Industry(Upcomingfloats.com.au, 2018).Worldwide interest for grains is required to increment throughout the following fiveyears. By 2025, worldwide per grain utilization is conjecture to increment by 14%over its current level, to achieve 2.8 billion tons devoured. This development popularis probably going to keep on being driven by populace development, and asubstitution of wheat for conventional grains in developing districts for example, Asiaand Africa.
Figure: Global Grain Production and Consumption (million tonnes)(Upcomingfloats.com.au, 2018).1.3 Firm Competitive strategy In 2016/17, Australia created 45 million tons of grains from 22.9 million hectares,creating $13.5 billion in income. The Australian grain industry sends out around 60%of this creation (by esteem and 70% by volume), with the other 40% being devoureddomestically. Grain generation is transcendently engaged in New South Wales,Victoria, South Australia and Western Australia (Upcomingfloats.com.au, 2018)..The lion's share of world grain crops are expended in developing countries. Populationdevelopment and proceeding with financial improvement are key drivers of expandingworldwide grain consumption. As worldwide populace develops, the interest forgrains will expand all the more quickly. Grain is required not just for humanutilization, yet in addition as bolster for creatures. Request, particularly inside risingeconomies, is figure to overwhelm supply, which will keep on supporting a solid faremarket. The Australian grain industry is all around situated to take care of thisexpanding demand: Globally, Australian grain has a positive notoriety, including its spotless andgreen picture what's more, reliably high quality; Australian grain sends out record for 10% of the worldwide market andproduced $8.1 billion in 2016. Asian nations constitute 63% of Australia's grainsends out, with the greater part (30%) being sent out to South East Asia;Australian grain fares to China have expanded fourfold finished the previoussix years, driven by an expanded interest for noodles, bread and preparedproducts;
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