Equity Method of Investment Assessment 2022

Running head: EQUITY METHOD OF INVESTMENT
Equity Method of Investment
Name of the Student:
Name of the University:
Author’s Note

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EQUITY METHOD OF INVESTMENT
Table of Contents
Introduction:....................................................................................................................................2
Investment Summary:......................................................................................................................2
Business Description:......................................................................................................................2
Industry overview and competitive positioning:.............................................................................3
Financial projections:.......................................................................................................................5
Valuation:........................................................................................................................................8
Sensitivity analysis:.......................................................................................................................10
Conclusion:....................................................................................................................................11
References and Bibliography:........................................................................................................13

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EQUITY METHOD OF INVESTMENT
Introduction:
The overall assessment mainly aims in evaluating the investment scope in in JB Hi Fi,
which is evaluated by analyzing the financial projections, valuation and Industry overview
conditions of the company. The overall analysis is based on company performance and the future
projections of the current cash flows that is been conducted by the organization. Further analysis
has been created by projecting future incomes and cash flow conditions of the company. With
the utilization of the cash flow conditions, the DCF model is used for determining the theoretical
share price for the organization, which is compared for detecting whether the value is at market
premium or discount.
Investment Summary:
The financial analysis of JB Hi Fi directly helps in understanding the current progression
of the company, which is relatively used for projecting future incomes. The calculations
conducted in the projection have relatively helped in understanding the future profitability that
could be achieved by the company over a period of time. In addition, the industry overview and
competitive positioning of JB Hi Fi is also detected to be positive, which will contribute to the
future incomes of the organization. Thus, investments in JB Hi Fi would be attractive and
strategic move by an investor, as it would ensure high growth and future income. The DCF
model also indicated that the current share price value of the organization is at a discount, which
would help investors generate higher returns in the long run.
Business Description:
JB hi fi was established in 1974, where the equity floatation occurred in 2003, while it is
currently ranked as the seventh largest consumer electronics and home appliance retailer in the

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EQUITY METHOD OF INVESTMENT
world. The company relatively falls under the retail industry where its major products are
consumer electronics, big appliances and small appliances. The organization has witnessed an
overall net income of $249.80 million in 2019 in comparison to 233.20 in 2018. The overall net
income of the company grew by 7.12% in one year, whereas the revenue increment was only
3.52% (Investors.jbhifi.com.au 2019). This indicates that the growth in net income was fueled by
the reduction in expenses conducted by the organization over the period of time.
Industry overview and competitive positioning:
SWOT Analysis:
Strengths
 The consumer base of the organisation is
well established
 The organisation has a competitive cost
structure
 The organisation has good reputation
which has enabled Jb Hi Fi to create brand
equity
 There is low employee turnover, as the
work force is steady
 However, there is high inventory turnover
rate
 The company has high product diversity,
which is essential in retail business
(Investors.jbhifi.com.au 2019).
Weakness
 The company does not have a business
model, which incentivizes for consumer
loyalty
 High competition of e-retailers, as price
competency increases in both online and in
retail stores.
 Both Amazon and Reliance can be major
concern for the organisation, as it could
create demand and supply imbalance in the
market.
Opportunities
 Rising demand for consumer goods
supplied by the organisation, where a
steady growth in global market is
Threats
 Increment in competition after the
augmentation of Amazon in Australia
 Changing landscape of physical stores and