Company Valuation

Question Description

You are required to select and analyse one of the following companies from the Health Care sector:

COH	Cochlear Limited	https://www.cochlear.com/intl/home (Links to an external site.)
CSL	CSL Limited	https://www.csl.com (Links to an external site.)
RHC	Ramsay Health Care	https://www.ramsayhealth.com (Links to an external site.)
SHL	Sonic Healthcare	https://www.sonichealthcare.com (Links to an external site.)

Section 1 – Estimate growth rates. 750 Words

Conduct an analysis of the economy, industry and firm that informs and estimate of short, medium and long term growth rates for the firm you have chosen. Specifically:

Compile a profile of the selected company including a recent history of its business activities and its business model by discussing the demand for the company’s products and the supply chain followed in the production and distribution process.
Strategically analyse the industry to which your selected company belongs and operates in from the perspective of how attractive it is for offering your company prospects of sustained profitability.
Identify a peer group of companies that are engaged in similar business activities as those of your company to enable comparison with the business of your company.
For your company, discuss the competitive strategies in place and how well it is executing them.
Assess the relationship between economic factors and the how they affect your company’s industry at both the national and international market levels using a top-down approach. A theme may emerge that could help you determine assumptions for forecasting revenue growth and managing capital returns.

Using the analysis you have carried out to estimate three (3) growth rates;

1-3 years
4-7 years
A long term rate,

for your chosen company.

Explain how your analysis supports your decision for each rate.
What do the rates imply for the future performance of your company?

Section 2 – Constructing the quantitative inputs. 750 Words

Develop, and describe how you went about developing, the inputs that will be used to estimate the value of the company that you have selected. Specifically:

Construct pro-forma financial statements as an integrated model of your company’s financial statements using the growth rates proposed in Part 1.
Use the pro-forma to derive cash flows that can be used in a Discounted Cash Flow based valuation of the company.
Propose and estimate an appropriate ratio for use in relative valuation.
Calculate a discount rate for use in your valuation. Outline and justify the assumptions that you have made in constructing the discount rate.

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