Financial Modeling Project Report: Mainfreight Limited Valuation

This report presents a financial modeling analysis of Mainfreight Limited, a New Zealand-based logistics and transport company. It includes a business overview, highlighting the company's key threats and opportunities within the industry, such as pollution concerns, fluctuating fuel prices, and competition. The report calculates and analyzes the intrinsic value of Mainfreight's stock using a discounted cash flow model, comparing it to the current market price. Key assumptions driving the valuation, such as the cost of capital, debt levels, and dividend growth, are discussed. The analysis concludes that the intrinsic value is significantly lower than the market price, suggesting investors should consider selling their shares. The report also notes the company's improved financial performance and market position over the past five years, anticipating continued growth in the future.

Running Head: Financial Modelling
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Project Report: Financial Modelling

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Contents
Introduction.......................................................................................................................3
Business overview............................................................................................................3
Key threats and opportunities...........................................................................................3
Calculation and analysis of intrinsic value.......................................................................4
Key assumptions...............................................................................................................4
Conclusion........................................................................................................................4
References.........................................................................................................................5

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Introduction:
Financial modelling is a tool to evaluate the financial situation of a company. It takes
the concern of present data of the company and forecast in a better way. On the other hand,
this process also helps the company to predict the future financial performance and the
financial position of the company. In the report, financial modelling process study has been
evaluated on Mainfreight Limited. The key threats and opportunity of the company and the
industry has been discussed as well as a study has been conducted on the market and intrinsic
stock price of the company.
Business overview:
Mainfreight Limited is a New Zealand company which operates its business in
logistic and transport industry. The company is situated in Auckland. Company has started its
operations in 1978. The company is the largest freight company in the market of New
Zealand. The company is offering its services in worldwide. The current position of the
company is quite better at international level as well (Home, 2018).
Key threats and opportunities:
The key threats and opportunity of the company and the industry has been evaluated
which are as follows:
1. No profit fall because of various difficulties in certain regions
2. Pollution from transporting products which is not good for the health and the
environment
3. Difficult routes such as desert road or cook straight which leads to delay in couriering
the products to customers.
4. Continuous changes in the fuel prices
5. Changes into the courier prices and the services also affect the company’s operations
and the revenue of the company (Market Publisher, 2018).
6. The main threat of the company is from the competitor companies which are offering
the substitute services

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7. The main top competitors of the company are CEVA group plc, APL logistic
America, UTi worldwide Inc.
8. Environment issues could delay the couriers of the customers as well as the safety
issues are also required to be account (Certo, 2018).
9. These issues could effect on the supply chain of the company on huge level that will
not be beneficial to the company.
Calculation and analysis of intrinsic value:
The current market price of the company is 24.01 whereas the intrinsic value of the
company on the basis of discounted cash flow of the company is $ 6.07. Intrinsic value is the
actual value of the shares of a company which is calculated on the basis of the assets of the
company. On the other hand, market price is the current price of the shares on which it is
traded in the market (Nofsinger, 2016). The calculation explains about the huge difference
among the market price and the intrinsic price of the company. The intrinsic value of the
shares of the company is quite lower than the market value of the company. It explains that
the investors should sell the shares in market right now so that the good returns could be got
back by the stockholders of the company (Ferrell & Fraedrich, 2015).
Key assumptions:
The calculation on the stock price of the comapny explains that the huge changes have
occurred into the stock price of the company. The main reason behind these changes is the
high cost of capital of the company and the great level of debts of the company in terms of
terminal value of cash flows of the company. The market stock price of the company is better
due to its dividend growth which is 20.48% and the better market position of the market. The
industry position has also been enhanced and the total GDP contribution of the industry has
been enhanced in the market (Aharoni, 2015). It also affected the market stock price of the
company (Excel File). According to the recommendation, investors must not buy the stock of
the company and must sell the balance stock of the company for the better returns.
Conclusion:
To conclude, the financial performance and the position of the company is better and
it explains about some better trend in last 5 year which would also enhance the position of the
company in next5 years. On the basis of the calculations and the analysis, it has been found

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that the intrinsic value of the shares of the company is quite lower than the market value of
the company. It explains that the investors should sell the shares in market right now so that
the good returns could be got back by the stockholders of the company.

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References:
Aharoni, Y. (2015). The foreign investment decision process. In International Business
Strategy (pp. 24-34). Routledge.
Certo, S. C. (2018). Supervision: Concepts and skill-building. McGraw-Hill Education.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases.
Nelson Education.
Home. (2018). MainFreight Limited. (Online). Retrieved as on 24th April 2018 from:
https://www.mainfreight.com/global/en/global-home.aspx
Market Publisher. (2018). MainFreight Limited. (Online). Retrieved as on 24th April 2018
from:
https://marketpublishers.com/report/industry/machinery_equipment/mainfreight_limite
d_swot_analysis_bac.html.
Nofsinger, J. R. (2016). The psychology of investing. Routledge.