Need financial, forecasting, valuation and sensitivity analysis about JB HI-FI.
JB HI-FI analysis according to excel attachment.
1. Financial Analysis (Class 4) - Reformat the Financial Statements - This means to separate operating from financing items to reformat the balance sheet and income statement. First reformat the Statement of Changes in Shareholders' Equity to obtain the net transactions with shareholders and the comprehensive income and comprehensive income adjustment (CI). Use the comprehensive income adjustment to ensure the income statement is measuring comprehensive NOPAT and comprehensive net income. Again, consider whether any accounting adjustments for temporary distortions are required (see Classes 2 and 3). Cash and cash equivalents can be large and need to be carefully classified because putting cash in the wrong category relative to your company's business model will distort the financial statements and forecasts. Please read Penman (2013) Chapters 8, 9 and 10.
2. Financial Analysis - Advanced Du Pont (Class 5) - Please compute the advanced Du Pont ratios using the adjusted and reformatted financial statements derived from A, B and C above. Common size statements are also useful. One more time, think about whether the ratios point to some temporary distortions that might need adjustment (see Classes 2 and 3). Temporary distortions will include numbers in the balance sheet and income statement that are transitory and not relevant to forecasting the future. Doing a good job of identifying and adjusting temporary distortions in Steps A, B and C will lead to more useful financial information on which to base your forecasting!!
3. Prospective Analysis - Forecasting (Class 6) - Please use the 11 step process that we cover in Class 6 (and is developed in Penman 2013, Chapter 15 and 16). Do not use historical averages to forecast the company's future because they do not work going forward. Averages do not work because the future is different from the past. Use what you learned from your strategy analysis to do the forecasting (and valuation) for three scenarios: best, average, and worst case scenarios.
4. Prospective Analysis - Valuation (Classes 7, 8, 9, 10) - Use the models we learn (dividend discount, residual income, residual operating income, and discounted free cash flow). You will need to assume a dividend payout ratio ('d'/NOPAT) if the company does not pay dividends. Adjust the ratio if there are large share issues or buybacks in net capital contributions ('d') otherwise you will be forecasting these annually forever! Again, no averages - e.g., do not average the cost of capital across a number of years.
5. Sensitivity Analysis - In your spreadsheet, compute sensitivity analysis for the assumptions in your analysis for the three scenarios: best, average, and worst case scenarios. That has been developed from your strategy analysis in step F). Examine the sensitivity of major items such as sales growth rate, PM, ATO, and cost of capital. Sensitivity analysis is critical because the future is uncertain and the possible set of outcomes for the firm is not known and is instead estimated based on fundamental information.
6. Make a Buy, Sell, or Hold Recommendation for your firm - Do this by comparing your range of values per share for the company's equity with the market share trading price. Choose the most likely scenario outcome (which would usually be your average scenario but not always if you are bullish on your company) according to your analysis and make a recommendation. Justify your recommendation, meaning discuss the scenario events that could lead to deviations from your recommendation.
Attachment:- Assignment Files.rar