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CLCDT19 - Principle of Investment Group Assignment
CLCDT19 - Principle of Investment Group Assignment
CLCDT19 - Principle of Investment Group Assignment
Required:
Assuming you are recruited as an investment analyst for the APD Investment Fund. The Chief
Investment Officer (CIO) has asked you to write a report with a 2200-word limit to recommend a
relevant action regarding the shares of the company of your choice. The action should be Buy, Hold, or
Sell. To do this, you must complete a report that addresses all problems below.
To handle the requirements below, you must form and work in a group of 4-5 students. Your group
should select companies in the same industry, sector or with similar characteristics. You are required to
discuss within your group to produce the same approach for data calculations, such as performance
indicators or valuation methods. Below is the instruction on the assignment content that I expect to see in
your report.
- This is one-page summary that summarises all key points including findings and
recommendations made in the following parts of the report. You should write this part to reflect
the rationale behind the recommended action. The number of words for this part is not counted
toward the overall word-count of the coursework.
- In this part you should introduce the company but focus mostly on how it makes money. The key
drivers of revenues and costs should be identified. The analysis should be supported with
relevant data from the company’s annual reports and industry. Furthermore, you should compare
the business model within an economy and assess whether the business model is effective in the
current situation of the economy.
- In this part, you should compare the financial performance of your company with other
companies in your group. You should decide on the set of financial indicators or ratios used for
this purpose. Your analysis should offer an explanation for the differences/similarities in
performance between these companies.
- In addition to the above, you are required to calculate the beta of your company. The beta should
be used as an indicator of the market risk. You should explain if the financial performance trend
justifies the company’s beta. To calculate beta, you should collect the weekly data on your
company’s share prices for the last 52 weeks. The regression results should be put in Appendix.
- You are required to use three separate methods to value the shares of the company of your
choice.
- Comparative Valuation: You must use relevant ratios for this purpose, including Price to
Earnings (PE ratio), Price to Book (PB ratio), Price to Sales (PS ratio) and any other ratios that
you are confident as indicators to evaluate the company. This analysis should be done using the
other companies in your group as benchmark companies.
- Valuation using Dividend Growth Model : You must use historical dividends and make
reasonable assumptions to compute the value per share.
- Valuation using Free Cash Flow: You must compute the cash flows in the past 5 years and
make relevant assumptions to prepare a 5-year cash flow projection and a terminal cash flow for
the company. The value per share should be then calculated using discounted cash flow
technique.
- You should now be able to compare your valuations with the market price of your company’s
shares and recommend an appropriate action: buy, hold or sell.
- You should not forget to remind about potential risks or factors that would make your
recommendation change. For example, you may highlight any factor that would make your
valuations change and the expected changes in valuations.
- In this part, you should put the 3-5-year past financial performance and 5-year financial
projection that you have used in the Equity Valuation for information purpose.
Appendix
- This part is used for any further explanation or workings that you want to add to your main texts
(all parts above). This part will not be used for marking purpose but will be used to look for
further information. For example, in your main text analysis, you may need to provide only the
results of your valuation but you may want to post the equations that are used for calculations in
here. Similarly, you can use beta in the main text but regression results should be posted here.
- Word-count is not applied to Appendix but you must decide which information to be presented in
main texts and in Appendix because only information in main texts will be assessed for marking
purpose.
In addition to the quality of the above works, the assessment marking is also based on the following
criteria (10 marks):
- Average answers will simply list the key findings from the
reports.
- Better answers should critically discuss the key findings in
support of their recommended action.
Business Model (500 words, 10 marks) 10 marks
- Average answers will list the main drivers or factors that have
influence the revenues and costs of the company.
- Better answers should critically discuss how the company has
made money and how the drivers/factors could be in the
future.
Financial Performance (500 words, 10 marks) 10 marks
- Average answers will simply compare the value per share with
the market price of the shares and recommend an action.
- Better answers should critically discuss the range of valuation
and the risks before making final recommendation.
Evidence of task completion should be included within an appendix and is separate from the word count.
Please follow to the formatting guidelines:
- Font / Size: Arial or Times New Roman / size 13
- Spacing / Sides: 1.5 / Single Sided
- Pagination required? Yes
- Margins: At least 2.54 to left and right and text ‘justified’
- Referencing: Full compliance with Harvard protocols (For the reference of Harvard
protocols, you can read this link.
Note usual practice is to allow +/-10%. If you submit an assignment which exceeds the prescribed word
limit, marking will cease at the point at which the limit has been exceeded and the mark will be awarded
on the basis of the extent to which the criteria for assessment have been met up to that point.
Instruction: Please fill in the form below and submit to the lecturer (Each member need to
submit a separate self-evaluation form.
Please access this link for the self-evaluation template