BFF3351 Investment Banking: Windlab Limited Prospectus Report

This report provides a comprehensive analysis of Windlab Limited's prospectus, focusing on its suitability for investment. It begins with an executive summary and an introduction to the capital market, specifically the primary market and initial public offerings (IPOs). The report then offers a company overview, detailing Windlab's business model and activities in the renewable energy sector. A detailed analysis of the prospectus follows, including qualitative components such as business description, customer base, competitors, growth drivers, and fund-raising rationale. The report applies Porter's Five Forces model to assess the company's competitive position and conducts a revenue and cost analysis based on financial statements. Finally, it performs a relative valuation to determine investment feasibility and concludes that the prospectus is essential for investors. The report draws on data from 2014 to 2017, assessing revenue growth, cost management, and key financial metrics like EBITDA, to provide a well-rounded investment assessment. The report is a student assignment for the Investment Banking course BFF3351 at Monash University.

Running head: INVESTMENT BANKING
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Name of the Student
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Author Note

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Executive Summary
The purpose of this project is to prepare a report on the suitability of the investment by
analyzing the prospectus of Windlab Limited. The report clearly explains the concept of
capital market, initial public offerings and prospectus. It clearly analyses the report of the
company and has discussed about the company and its activities. The company’s growth plan
and the requirement of raising funds have also been discussed. Porter’s Five Forces Analysis
has showed the competitive position of the company in the market. The financial position in
relation to the sales and the cost has been done. Relative valuation has been done in order to
check the investment feasibility. The report ends by concluding that the prospectus of the
company is an essential before public offering as it helps the investors in taking decisions
related to investing in the company.

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Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Company Overview...............................................................................................................3
Prospectus..............................................................................................................................4
Qualitative Components.........................................................................................................4
Porters Five Forces Model:....................................................................................................6
Revenue and Cost Analysis....................................................................................................7
Relative Valuation..................................................................................................................8
Conclusion..................................................................................................................................8
References and Bibliography...................................................................................................10

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Introduction
The financial system is a broad structure that performs a lot of function. The financial
system can be divided into two distinct parts – Money Market and the Capital Market (Vatn,
2015). This report deals with the activities of the capital market. Capital market is the place
where the savings and investments are channelized. There are people who have excess capital
and there are people who are in need of capital. The capital market therefore channelizes the
funds from those who have to those who need those funds. The capital market can be divided
into primary market and secondary market (Christensen, Hail & Leuz, 2016). The primary
market is the place where new securities are created and floated to the public for the first
time. One example of the primary market is the initial public offering, which constitute the
main discussion of this report. The secondary market is usually the stock market. After the
IPO a Company can again opt for issuing shares. In such cases, the securities are traded via
listing on the stock exchanges. In order to issue shares in the market, the companies need to
prepare a prospectus that will attract the customers (Souitaris et al., 2019). The main motive
of this report is to prepare a report on the suitability of the investment by analyzing the
prospectus of Windlab Limited.
Discussion
Company Overview
The company is a global renewable energy development company that was
established for commercializing the world leading modelling of atmosphere as well as
assessment of wind energy technology. It was developed by one of the premium research
institutes of Australia, the CSIRO. The company aims in developing, financing, constructing
and operating a high quality wind farms all over the world, with more certainty and less risks.

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The company has played a foundation role in creating the wind industry of Australia and now
it is the leader in developing the industries in Southern Africa (Windlab Limited, 2019).
Prospectus
In order to analyze the prospectus, the concept of prospectus must be clear. The
prospectus of the company refers to the legal document that is issued by the companies which
offers their securities for sale (Crain, Parrino & Srinivasan, 2017). The prospectus is
generally issued when the company issues its share in the market for the first time. The role
of prospectus is to make the investors aware of investment risks.
Qualitative Components
1. What business is the company in?
The company is into the business of developing wind energy globally. The company
enjoys a competitive advantage in developing global wind energy project. It
participates in the wind generation projects since its beginning through the process of
development, construction, financing and assets management of the operating wind
farms. The company was founded in the year 2003 in order to commercialize the
leading modelling season of atmosphere as well as wind energy assessment
technology.
2. Who are their customers?
The main operations of Windlab is based in Australia, apart from its offices at South
Africa, Kenya, Tanzania and USA. The customers are therefore all those electricity
suppliers who need the resource for electric production and the big business units of
Ararat, Brisbane and Canberra of Australia, Nairobi of Kenya, Cape Town of South
Africa, Dar es Salaam of Tanzania and Michigan of USA, that needs energy efficient
resources.
3. Who are the major participant and the competitors?

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The major competitors of Windlab are Pfister Energy, United Wind, EDP Renvaveis
SA, Wind capital Group, Wind Analytics, Arista, Alter Systems, Iberdrola
Renewables, Next Era Energy and National Grid.
4. What will drive the growth for the company?
The technology used by the company is developed by Australia’s scientific research
institute CSIRO. The company has continued expanding the Windlab’s 7500MW of
renewable energy development pipeline that has been maturing rapidly. It has made a
lot of research and development in the year 2014. It opened the WindScape Institute
that consists of the most highly trained physicists and engineers and most of them are
convocated from Australian National University. Canberra have unique innovative
technological base and they are very active in nature. These innovation are pursued by
the help of collaboration among the private and the government enterprises. All these
strengths that are discussed here helps in driving the growth for the company.
5. Why are they raising funds?
They are raising the fund for the following reasons:
 Funding the business for achieving the business objectives.
 For the construction of the Kennedy Energy Park Phase I and thereafter allow the
company to maintain its current equity interest of 50%.
 In order to create a market that will be liquid in nature and to create opportunity
for the others to invest in the shares.
 To create additional financial flexibility and to get access to the capital markets.
 To increase the position of the company and take the advantages of being listed in
the Australian Stock Exchange.
6. Are their claims about growth reasonable?

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Their claims about the growth are reasonable in nature. The additional funds that will
be raised from the IPO will help them in investing the money in research and
development. This investment will boost up the innovation and the technology of the
company thereby increasing their overall efficiency and productivity of the company.
Wind energy are relatively cheap in nature. It addresses the poverty that exists in the
society. The company will create around 2000 jobs directly in the backward and rural
areas. Study says that in Australia it has been found that 33 jobs were created for
every job that was created in the wind farm. More job creation means more growth
and expansion of the business.
7. How are they driving growth: increasing sale or reducing cost?
The sales is increasing and the cost has been reduced. They are also driving the
growth through the help of corporate governance and sustainability. The wind energy
provides with a reliable, matured and cheap source of energy. Thereafter the cost
reduces. The cost of power from fossils and fuel are climbing and are continuing to
climb up where as the cost of power from wind is falling. The major benefit is that it
does not need factoring in the load shedding costs and the generators that are used for
peak powers. The financial statement clearly shows that there has been an increase in
the revenue in the recent years and the rate of increase in the expenditure is less than
the rate of increase in the revenue and hence the profitability has increased.
Porters Five Forces Model:
The Porter Five Forces Model helps the company in understanding the competitive
position of the organization. It can be determined by assessing the industrial rivalry, threats of
substitutes, threats of entry into the market, bargaining powers of the buyers and bargaining
powers off the suppliers (Zhao et al., 2016). From the analysis of the financial report of the
organization, it can be clearly seen that the industry has a large number of competitors and

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the market is also attractive in nature. The market is profitable and the costs incurred are also
affordable by any kind of investors. So, it is clear that the threats of entry and the threats of
substitute is high. The bargaining power of the buyers are high as there are not many buyers
available and hence they can affect the price. The bargaining power of the supplier is low as
the parts required to make the windmill and any other parts of the windmill is available to a
large number of suppliers and the switching cost is also low. Therefore it can be concluded
from the Porter Five Forces Analysis that industrial rivalry is high, threats of new entry is
high, the bargaining power of the buyers are high and the bargaining power of the supplier is
low.
Revenue and Cost Analysis
$000 GROWTH
2014 2015 2016 2017 2015 2016 2017
REVENUE 5137 9099 17082 23232 177% 188% 136%
GROSS
MARGIN
4604 5113 13642 20031 111% 267% 147%
COST OF
SALES
533 3986 3440 3201 748% 86% 93%
EBITDA 1395 2029 9923 13468 145% 489% 136%
The growth rate of the revenue as per the financial statement shows an increasing trend. The
revenue of 2017 is approximately 4.52 times of the sales of 2014. It can be seen from the
above table that the year 2016 has performed the best. In both the year 2015 and 2016 there
has been a huge growth in both the revenue and the gross margin as well. There has been
177% growth rate in the revenue in the year 2015, which increased to 188% in the year 2016.
Although there has been growth in the revenue of the year 2017 yet it can be analysed that
this growth is increasing at a decreasing rate. However when the cost of sales is analysed, it
can be clearly seen that there has been and reduction in the cost of sales in 2016 and 2017.
The implication of the increase in the revenue is that investments are taking place and the

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market is performing well and the sales volume is increasing. The decrease in the cost of
sales implies that the cost of operations has reduced. The company is able to manage its
operations efficiently and the cost of the raw materials are also getting reduced. The EBITDA
has also show significant growth in the year 2015 and 2016.
Relative Valuation
Relative Valuation for the company will be done based on the industry Price/Earnings
ratio for the Windlab Limited Company, which was around 13.6 times and the Earnings Per
Share for the company was around -0.06 times. Relative valuation shows the valuation using
multiples notion of a company comparing the price of the asset similar to the market value of
similar assets in the industry (Windlab Ltd Prospects, 2018).
Relative Valuation method will be done determining the valuation of the various
investment done by the company in the form of comparing it with the similar entities.
Windlab Limited would be compared with the help of the various industry standards ratios
like Price/Earnings Ratio taking the market capitalisation and the pro-forma NPAT that
would be around 14.4 times (Windlab Limited, 2019). On the basis of earnings and pricing
the market valuation for the company is relatively well balanced for the company. Relative
Valuation for the company will be dependent on the various technique assessing the fair
value for the company in contrast to the various multiple technique that will be applied by the
company (Windlab Ltd Prospects, 2018). While conducting the relative valuation for the
company it is important the growth prospects for the company concerning the future
prospects of the company would be taken into consideration for understanding the vision of
the company. Earnings and movement in the market capitalisations for the Windlab Energy
Company and earnings for the industry average will be taken into consideration for the
relative valuation analysis.

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Conclusion
It can be inferred from the above discussion that the prospectus is and important
document that helps in determining and analysing a lot of data. In this report it has been seen
that the prospectus has given the readers with a lot of financial as well as qualitative
information. The company has clearly mentioned the reason for the raising of funds that have
been analysed from the prospectus. It can be said that the business is trying to raise money for
further growth and expansion and easy achievement of the goals. The competitors are
determined and the customers that the company is serving has been also analysed. The porter
five forces analysis shows the competitive position of the business and states that the
company is high competition from its rivals and the industry is an attractive industry. The
financial analysis states that the company has performed well over the years and the sales and
the profitability of the company has improved. The cost of production has reduced because of
the operational efficiency of the business. All these information helps the prospective
investors to decide upon the condition of the company and thereafter they are able to make
investment decisions.

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References and Bibliography
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