You are Clara Cleary, a UNSW Bachelor of Commerce graduate in 2020 who quickly found employment in Felicity Trust, a financial services company that specialises in providing syndicate loans to large Australian businesses. You have been asked by your manager – Lucy Brooks – to prepare a report that will help Felicity Trust decide on its continued involvement in a syndicated loan that is due to roll over on 31 August 2021. This is the first task your manager has asked you to complete independently, and you want to make sure you impress! You know from your peers that Lucy is very busy and will not read any report that is greater than four pages long. Luckily, you took notes when the task was assigned to you, which should be strictly followed to prepare the report. These are as follows:
1. A description of the business and the nature of its operations. This should focus on providing a short explanation of the business’s history, how it generates revenue, and who forms its customer base (5 Marks);
2. An analysis of the financial performance and financial position of the company (35 Marks);
3. Identify two risks from reading the reports prepared by key management personnel (i.e. Board Chair and/or CEO) in the 2020 annual report that may impact the company’s future financial performance and/or financial position. You should explain clearly how the risks you identify may impact on the ratios discussed
in part 2 above (10 Marks);
4. Using two EV Multiples and two Equity Multiples of two similar companies to your assigned company:
a) Provide a market valuation range and mid-point of your allocated company’s outstanding equity. Provide the evidence of data collected with proper referencing and the calculations to substantiate your valuation. (10 marks)
b) Compare your allocated company with the two similar companies and determine which of the two is the most similar. Provide evidence of the comparison. (10 marks)
c) Based on this comparison, narrow the valuation range and mid-point found in part (a) to something more reasonable. Show how you go about implementing this adjustment. (5 marks)
5. A short description on whether you would recommend Felicity Trust continuing its involvement in the syndicate loan. (5 marks)
