University Report: Analysis of Issues Effecting Bingo Industries

This report provides a detailed analysis of Bingo Industries, an Australian waste management company. It examines the company's financial performance, including market capitalization, enterprise value, and EBITDA, and addresses the issues impacting the Bingo industry. The report analyzes the impact of declining apartment construction on the company's share prices and profitability, including the decision to delay price rises. It also includes the forecasted and pro forma income statements to assess the company's financial health and the impact of acquiring DADI. The report calculates key financial ratios like EBITDA multiple and evaluates the company's valuation, providing insights into the company's financial strategies and future performance. The analysis is based on financial data and market trends, offering a comprehensive overview of Bingo Industries' financial position.

Running head: ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
Analysis of Issues Effecting BINGO Industry:
Name of the Student:
Name of the University:
Student ID:
Author note:

1ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
Table of Contents
Answer to Question 1:.........................................................................................................................3
Answer to Question 2..........................................................................................................................4
Answer to Question 3..........................................................................................................................5
Answer to Question 4..........................................................................................................................5
Answer to Question 5..........................................................................................................................6
Answer to Question 6..........................................................................................................................6
Answer to Question 7..........................................................................................................................7
Answer to Question 8..........................................................................................................................7
Answer to Question 9..........................................................................................................................7
Answer to Question 10........................................................................................................................8
Reference.............................................................................................................................................9

2ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
Answer to Question 1:
Answer to 1.A
BINGO Industry is an Australian based one of the largest waste management company,
where the business model of the company is as such that the company provides solution of waste
management and recycling, process includes collection of wastes, processing, separation and then
recycling and finally disposal of the items, executed by overall 800 staff and the collection and
disposal is done with the help of 250 specialized vehicles. The company primary have the only
household customers, but the current plan of the company includes supply of skip bins all over
Australia, which is used for household wastes as well as corporates. The other part of the model is
the waste management, which includes commercial wastes services management, where only the
commercial wastes of any business are collected and recycled and it also includes landfill
diversion, resource recovery, liquid waste management, soil containment, commercial education
and apartment construction. After collection, the recycling process is done in their recycling centers
across NSW and Victoria, and the wastes are dumped1.
Answer to 1.B
During May 2017, the company’s share pricesuddenly have shown a downfall in the
market, where the price if the shares reduced and the some investor’s started dumping shares. The
key issue recognized and also addressed by the CEO of the company is due to the faster decline in
the apartment construction market of BINGO Industry, the volumes of the buildings and the
demolition collection business have been cut by the market. Thus, due to the cut in volume, a
1"Australian Waste Management Company Overview | ASX Listed | Bingo
Industries." Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.

3ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
decision taken by the management to delay the price rise, to the customers, hence the profit
forecasting have shown such a decrease2.
To overcome this stage, the first impact on the company is that. Bingo have declared that
the underlying earnings before interest, tax, depreciation and amortization (EBITDA), can now be
expected to be compared flat with that of the last year, where the previous forecasting have
considered 15 to 20 percent of the growth. Though, the company have addressed that increase in
the competition of building and collection market is the key reason for the decline in the profit
margins, but it is been observed that when the volumes of the construction of the building and
apartments were ahead of the last year, still the growth in the market have not match or been able to
touch the forecasted profit margin. Hence, the company have decided not to imply the price rise
effect on the consumers until 2019-2020, which means the company will bear the wholeincreased
costs for two consecutive year, that will directly affect the tipping and transport cost i.e. the tipping
and transport costs will incease in a constant basis3.
Answer to Question 2
The above table shows the market capitalization of BINGO Industries, which amounts to
around $10,047,013,000 at the end 31st December, 2018.The ratio is calculated by dividing cost per
share of the company by the total number of share for that year. Hence, it can be told that the
2Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.
3Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.

4ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
market capitalization of the company is very good, i.e. the company’s value in the stock market is
comparatively high and the company is efficiently able to capitalize its equity4.
The above table is showing the enterprise value of BINGO, which is calculated by
deducting the value of the cash and cash equivalent from the sum of the market capitalization and
the total debt.The enterprise value of BINGO as on 31st December. 2018, is resulted to
$10,229,301,000, which is a very impressive value of any company in the market, from the
investor’s perspective5.The enterprise value is the approximate value of the business considering
the market capitalization.
The annualized return on equity of the company is calculated by dividing the net operating
income of the company by the average shareholder’s equity. The average shareholder’s equity is
calculated by adding the shareholder’s equity as on 1H19 with the shareholder’s equity as on 1H18,
and then diving the um by 2. The annualized return on Equity for the first half of 2019, is
calculated to 0.03% (approximately), which is not quite impressive and it could be due to the
impact of bearing the cost of price rise6.
4Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.
5Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.
6Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.

5ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
The statutory EBITDA for 1H19 is shown in the above table and calculated by deducting
the depreciation and amortization value for the first half of 2019, from the EBIT 1H19. This is the
general EBITDA of the company which helps to the original value of the EBITDA of the company,
but it includes the fixed costs in the income statement7.
The above table has shown the underlying EBITDA for 1H19, which is calculated not only
by deducting the depreciation and amortization, but also deducting the fixed costs of the company
7Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.

6ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
for the first half of 2019. This value resulted to $39,197,000 and shows the actual earning of the
firm from operations, because it omits the fixed costs from the expenses8.
The above table have shown the value of the Net Debt of the companyfor the end of 2018.
The Net value resulted to the amount of $206,808,000, which is calculated by dividing the total
liabilities by the amount of total current assets as the end of 2018. This helps to identify the actual
debt of the company9.
The Net tangible assets of the company is resulted to $455,885,000 in the end of December,
2018. The company’s net tangible assets does not includes the intangible assets such as the value of
8Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.
9Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.

7ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
goodwill, which means that the this value shows the actual assets of the company that could be
used to pay the debt of the company10.The above ratio is calculated by dividing total assets by the
total of intangible assets.
Answer to Question 3
The following is the forecasted Income statement of Bingo Industries Limitedfor the year
2020:
The above income statement have prepared to calculate the forecasted EBITDA FY20. In
the above income statement of the company, it can be noticed that the growth rate of income from
operations have increased only to 10%. The growth rate of 10% have assumed because, the effect
of the acquisition of DADI is not considered, but as per their plans and market strategy to their
waste management department, it is expected that there will be growth in the operation, due to the
synergy effect. As mentioned above, since the company is expected to absorb the cost of price rise,
10Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.

8ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
hence the company cannot generate enough incomes. Thus, the other income is assumed to be same
as it will have no impact on it.
In the expenses, the tipping and transportation costs have increased immensely, due to the
announcement made by the company, where the CEO of the company have declared not to
implement the effect of price rise to the customer, as such the company will bear the total costs of
rising price for about two years. The increase in the tipping and transportation charges is assume
11%, by considering the effect. There is simultaneous growth on the expenses of the company is
assumed, and thus all the costs have also increased by 10%, which as same as the income growth
rate.
In the above Income statement, the standard Australian income tax rate is charged, which is
30% to the EBITand then the value of the net earnings of the company resulted to positive, i.e. the
company makes a profitof $433,505,390as on 31st December, 2020.
From the above Income statement, the forecasted EBITDA is calculated, which is resulted
to $654,359,040. The EBITDA calculated is the statutory EBITDA for the year 2020, which is
comparatively higher than the last year even after the higher tipping and transportation cost.The
above EBITDA is calculated by adding the value of the EBIT derived from the above income
statement and the value of depreciation and amortisation, which is also derived from the income
statement.
Answer to Question 4
The following is the pro forma income statement of Bingo Industry for the year ended 31st
December, 2020:

9ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
The above income statement is the pro forma forecasted income statement of Bingo
Industry, which is prepared to calculate the pro forma forecasted EBITDA of the company where
the impact of the acquisition of DADI is shown. Bingo have acquired 80% of DADI, thus the
impact will definitely be a raise revenue generation, as the assets of the company will also increase

10ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
with the value of the DADI’s assets. Thus in the above income statement, the growth rate in the
income from operation is shown 12%, which 2% more than the growth rate assumed in the above
forecasted income statement. The increase of 2% is assumed due to the synergy effect of the
acquisition. All the incomes assumed to raised by 12%.
In the expense, all the costs will have simultaneous effect, thus all the costs are also
increased by 12% except the tipping and transportation costs. The tipping and transportation cost
will have the same effect as before, due to the impact of company bearing the costs of price rises
and hence it will only be increased by 11%.
In this Income statement also, the standard Australian income tax rate is considered, which
is ‘30%’ and after deducting the tax from the EBIT, the net earnings of the company is resulted to
$439,303,920, which is more than that of the previous forecasted net earnings. This is increase is
surely due to the synergy effect of the acquisition of the company.
The pro forma forecasted EBITDA of the company for the year ended 31st December, 2020
is resulted to $662,642,660. As already discussed the synergy affect also effected the EBITDA of
the company. Thus, on the basis of the pro forma EBITDA, it can be concluded that the company’s
decision of acquiring DADI, will increase the total income and also in the valuation of the
company.

11ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
Answer to Question 5
The above table shows the EBITDA multiple of the company, which isbased on the pro
forma forecasted income statement and the pro forma forecasted EBITDA. The above EBITDA
multiple shows the value for the year 2020, calculated by dividing the enterprise value of the
company for the period 2020, by the PRO forma forecasted EBITDA calculated above. The
Enterprise value of the company have assumed to be as same as that in the year ended 2018. The
Enterprise value will remain constant because it will not have any major impact on the enterprise
value. The EBITDA multiple resulted to 15.44% as calculated above. The EBITDA multiple is
calculated to determine the value of the business. It is used to determine the valuation of the
businesswhich is then used to compare it with the value of the other businesses.
Answer to Question 6
The following table shows the calculation of the forecasted valuation of BINGO Industry
for the year ended 31st December, 2020:
In the above table the model of forecasting business valuation is considered. In the above
model the company’s valuation is calculated by calculating the ratios, which are ‘EV/Sales’,
‘EV/EBITDA’ and the ‘price-earnings ratio’ (P/E). In determining the valuation ratios the market
data used are the ‘price of share’ and the ‘enterprise value’. To determine the forecasted market
price of the share, the Gordon Growth Model is used, where the price is calculated with the help of
factors such as dividend for the last year, rate of return on shareholder’s investment and the

12ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
constant growth rate of dividend. In the market data the Enterprise value is taken as same as taken
in calculating the EBITDA multiple, as the Enterprise value is assumed to be constant till the year
2020.
Gordon Growth Model: (to determine the future market price)
In determining the valuation of the company, the financial data used are the Sales,
EBITDA, EBIT and the Earnings. The value of the sales is taken from the pro forma forecasted
income statement of the company for the year 2020. The value of the EBITDA taken is the pro
forma EBITDA calculated above from the pro forma income statement. The value of the EBIT is
also taken from the pro forma forecasted income statement of the company and the value of the
earnings is the net profit of the company as determined in the above pro forma income statement in
the answer to question 4. The EV/Sales is resulted to 30.42, which means that the contribution of
the sales operations on the valuation of the company is very impressive. The value of the EV/Sales
ratio is quite higher than the critical point, which implies a strong financial position of the
company.
The value of the EV/EBITDA as calculated above is resulted to 15.44, the EV/EBITDA is
calculated to determine the company’s value affected by EBITDA in the balance sheet. Evaluating
EV/EBITDA is the second phase of valuation. The value of the EV/EBITDA, determined is higher
than that of the require critical point as per the Australian Standard. Thus, this also indicates a
strong valuation of the company.
The value of the Price- earnings ratio (P/E) as calculated in the above table is resulted
to0.0048. The price-earnings ratio is calculated by dividing the forecasted market price of the

13ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
shares of the Bingo Industry; which is calculated by Gordon growth model; by the net earnings of
the company derived from the pro forma forecasted Income statement of the company. The price-
earningratio is calculated to determine the expected price per share of the company based on their
earnings. The PE ratio is seemed to be increasing from the previous PE ratio, so does the market
value. Hence, it can be also concluded from the PE ratio that the market valuation of the company
will be increasing due to the effect of the acquisition of DADI.

14ANALYSIS OF ISSUES EFFECTING BINGO INDUSTRY
References
"Australian Waste Management Company Overview | ASX Listed | Bingo
Industries." Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.
Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.
Openbriefing.com. N.p., 2019. Web. 4 Apr. 2019.
Bingoindustries.com.au. N.p., 2019. Web. 4 Apr. 2019.