Report | Living Cell Technologies

EXECUTIVE SUMMARY:
This report is prepared to value debt, shares and cost of capital of Living Cell Technologies
(LCT). Preparing this report has helped to understand the valuation and cost of capital concept
thoroughly. It has helped to observe the cost of debt and cost of equity of the company and how
weighted average cost of capital is used in investment-making decisions. Market analysis of
industry of Living Cell Technologies has helped to compare LCT with its peers.
1 | P a g e

CONTENTS
EXECUTIVE SUMMARY
DEBT VALUATION 3
SHARE VALUATION 4-5
COST OF CAPITAL 6-9
MARKET ANALYSIS 10
REFERENCES 11
2 | P a g e

(I) DEBT VALUATION:
1. Short term debts means any financial obligation which is either due within a 12-
month period or within current financial year. It forms part of current liabilities on
company’s balance sheet. (Investopedia, n.d.)
Long term debts, also called as long term loans, refer to those financial
obligations which become due in a more than 12-month period. (Investopedia,
n.d.)
Observing the company’s balance sheet, it has been seen that the company does
not have any short term or long term debts.
2. The industry peers of the company are CSL, Sirtex Medical, Mesoblast etc.
As on 30th June, 2016, CSL has both long term ($3081.0) and short term debts
($62.3). Similarly, the other industry peers of LCT has either short term or long
term or both short term and long term debts. Therefore, the debt structure of LCT
is not consistent with that of industry.
3. As discussed already above that LCT does not have any short term or long term
debt so the industry which LCT operates in does not influence the proportion of
short term and long term debts of the company.
4. Cost of Debt refers to the interest at a fixed rate of interest paid by the firm on its
debt. It basically provides an idea that how much a firm is required to pay as
interest for using the debt. Debt includes loans, bonds, term loans, etc.
(Investopedia, n.d.)
Observing the company’s balance sheet, it has been seen that the company does
not have debt, so there is no cost of debt to the company.
3 | P a g e

(II) SHARE VALUATION:
1. The cost of equity refers to the return on the investment which is made by the
stakeholders in the firm. However, the return on investment is not fixed as there is
no fixed rate of interest, but the firm is required to pay the return on the
investment to the stakeholders as they expect some return on their investment.
Cost of equity = D1
P0
Where, D1= dividend to be paid by company
P0= current market price of company
D1= nil
Since there is nil dividend so there is no cost of equity to the company.
2. As on 30/06/2017,
Revenue = $841,447
Earnings = $(3,123,208)
EPS:-
Basic EPS (cents) = (0.69)
Diluted EPS (cents) = (0.69)
Dividends = Nil
The loss of the company has been reduced from $(7043402) in the year ended 30th
June, 2015 as the previous year loss include 50% of the loss of 50% owned joint
venture company Diatranz Otsuka Limited(DOL).
Revenue and other income has decreased from $ 1044639 because of the reduced
level of services required by DOL.
3. Valuation of Stock:
Comparables Approach i.e. P/E
Share Price (in cents) 0.07
Earnings per share (cents per share) (0.69)
= 0.07/(0.69)
= (10.14)cents
Dividend growth rate model: P=D/k-g
Where: P=security's price
4 | P a g e