Investment &financial Analysis Assignment

Assignment Course: Higher Diploma of Accounting and Finance Subject: Investment and financial analysis Lecturer: Mr. Naresh Name: Tu Xiangyun (Fiona) Student ID: 27354 Submission date: 11th of September,2009

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Content page Q1 Background ………………………………………………..3 Ratio analysis……………………………………………………….3 Q2………………………………………………………………5 Appendix………………………………………………………6

1. Performance a financial ratio analysis on a listed company for a three year period under following headings: 2

Liquidity ratios Profitability ratios Gearing ratios Background: The company I want to analysis is Fraser and Neave which Limited ("F&NL" or the "Group") had its origins, more than a century ago, in the spirited decisions of two enterprising young men, John Fraser and David Neave, who diversified from their printing business to pioneer the aerated water business in Southeast Asia in 1883. From a soft drinks base, F&NL ventured into the business of brewing in 1931, dairies in 1959 and glass bottle manufacturing in 1972, property development and management in 1990 and publishing & printing in 2000. Today, F&NL is a leading Pan Asian Consumer Group with core expertise and dominant standing in the Food and Beverage, Property and Publishing & Printing industries. Leveraging on its strengths in marketing and distribution; research and development; brands and financial management; as well as years of acquisition experience, it provides key resources and sets strategic directions for its subsidiary companies across all three industries. F&NL owns an impressive array of renowned brands that enjoy market leadership across a mix of beer, dairies, soft drinks and beverages; residential properties, retail malls and serviced residences; as well as publishing and printing services. Listed on the Singapore Exchange Securities Trading Limited (SGX-ST), F&NL has shareholders' funds and total assets employed of close to S$5 billion and S$11 billion, respectively. In addition, the Group is present in over 20 countries spanning Asia Pacific, Europe and USA and employs more than 14,500 people worldwide. Year 2008 Profitability: 1. 2. 3. 4.

Gross profit margin=gross profit/sales*100%=1656474/49513918100%=33.45% Net profit margin=NPBIT/sales*100%=776591/4951391*100%=15.68% ROCE=NPBIT/net assets*100%=776591/6418516*100%=12.1%

Liquidity: 1. Current ratio=current assets/current liabilities=12286491/7099803=1.7:1 2. Acid test=current assets-stock/current liabilities=12286491-468502/7099803 =1.7:1 Gearing:

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1. Gearing ratio=debt/equity*100%=1247022/6418516*100%=19.43% 2. Debt ratio=debt/total assets*100%=1247022/13518319*100%=9.22% Year 2007 Profitability: 1. Gross profit margin=gross profit/sales*100%=1533204/4731174*100%=32.4% 2. Net profit margin=NPBIT/sales*100%=732102/4731174*100%=15.47% 3. ROCE=NPBIT/net assets*100%=732102/6387044*100%=11.46% Liquidity: 1. Current ratio=current assets/current liabilities=11715015/6490609=1.8:1 2. Acid test=current assets-stock/current liabilities=11715015-480063/6490609=1.7:1

Gearing: 1. Gearing ratio=debt/equity*100%=1185014/6382044*100%=18.57% 2. Debt ratio=debt/total assets*100%=1185014/12872653*100%=9.21%

Year 2006 Profitability: 1. Gross profit margin=gross profit/sales*100%=1246441/3802272*100%=32.78% 2. Net profit margin=NPBIT/sales*100%=597026/3802272*100%=15.7% 3. ROCE=NPBIT/net assets*100%=537000/3600000*100%=14.92% Liquidity: 1. Current ratio=current assets/current liabilities=22579/16172=1.4:1 2. Acid test=current assets-stock/current liabilities=22579-3655/16172=1.17:1

Gearing:

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1. Gearing ratio=debt/equity*100%=2829/5231*100%=54.08% 2. Debt ratio=debt/total assets*100%=2829/9667*100%=29.26%

2. Using information in the annual of the listed company selected, calculate a suitable share valuation for a potential investor who is seeking your advic State any assumptions and limitations of your analysis and calculation. The cost of equity is the cost to the company of providing equity holders with the return they require on their investment. The primary financial objective is to maximize the return to equity shareholders. This return is as the future dividend yield and capital growth. Until new shareholders become members of the company, the objective above is concerned with existing shareholders. Company management will need to offer new shareholders the minimum acceptable future return on the funds they put into the company, thereby retaining as much benefit as possible for existing shareholders. In practice, this return will be such as to provide new shareholders with the same future returns as existing shareholders expect to obtain on their investment at market values. It is important to appreciate that there are a number of problems and specific assumptions in this model. (a) Anticipated values for dividends and prices - all of the dividends and prices used in the model are the investor's estimates of the future. (b) Assumption of investor rationality - the model assumes investors act rationally and make their decisions about share transactions on the basis of financial evaluation. (c) Application of discounting - it assumes that the conventional compound interest approach equates cash flows at different points in time. (d) Share prices are ex dividend (e) Dividends are paid annually with the next dividend payable in one year.

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