FINC3015 Case Study 1 Tutorial Workshop Model

Disclaimer: The contents of this file have been prepared exclusively for the use
2022 Semester 1 FINC3015 students at the University of Sydney for tutorial /
workshop lessons. Numbers have been altered and are only to be used for the
purposes of teaching and should not be used as an indicative valuation of JBH

Legend
Black Formula
Blue Manual input
Green Links to another sheet
Assumptions
pared exclusively for the use of
sity of Sydney for tutorial /
d are only to be used for the
n indicative valuation of JBH.
 FINC3015 Tutorial Case Study: JB Hi-Fi Limited (ASX: JBH)
Financial Statements
Historical
(AU$m, June y/e) FY2018 FY2019 FY2020 FY2021

Active case 3 Bear Case

### Income Statement Assumptions

Revenue Assumptions
Revenue Growth 3.5% 11.6% 12.6%
Bull Case [1]
Base Case [2]
Bear Case [3]
Expense Assumptions
Cost of Sales / Revenue 78.6% 78.5% 78.6% 77.8%
Occupancy Expense / Revenue 4.5% 4.3% 4.0% 3.3%
Sales and Marketing Expenses / Revenue 10.1% 10.3% 9.9% 9.5%
Bull Case [1]
Base Case [2]
Bear Case [3]
Administration Expenses / Revenue 0.6% 0.6% 0.5% 0.5%
Other Income / (Expenses) / Revenue 0.0% 0.1% 0.0% 0.0%
Depreciation Expense / Net PP&E 30.5% 31.3% 31.8%
Amortisation Expense / Net Intangibles 0.0% 0.0% 0.0%
Interest Rate on Cash 0.0% 0.9% 0.6%
Interest Rate on Debt 3.0% 8.3% No debt
Tax Rate (Tax / EBT) 28.7% 30.4% 31.8% 29.8%
Abnormals - (1) - -
Change in Shares Oustanding 0 (0) (0)
Dividend Payout Ratio 60.9% 66.0% 70.3% 65.7%

Income Statement
Revenue 6,854 7,095 7,919 8,916
Cost of Sales (5,384) (5,568) (6,225) (6,939)
Gross Profit 1,470 1,527 1,694 1,977
Occupancy Expense (306) (306) (313) (294)
Sales and Marketing Expenses (695) (731) (786) (846)
Administration Expenses (42) (45) (42) (41)
Other Income / (Expenses) 1 (10) - -
EBITDA (Pre-AASB 16) 428 435 553 797
Depreciation (61) (60) (60) (55)
Amortisation - - - -
EBIT 367 375 493 742
Interest Revenue 1 - 1 2
Interest Expense (15) (14) (36) (25)
Pre Tax Profit 353 361 458 719
Tax Expense (101) (110) (146) (214)
NPAT excl. Abnormals 251 251 312 505
Abnormals - (1) - -
Statutory NPAT 251 250 312 505

Weighted Average Diluted Number of Shares 116 116 116 116

Basic EPS (cents/share) 217 215 269 437
DPS (cents/share) 132 142 189 287
Dividends 152 157 172 310
 EBITDA margin 6.2% 6.1% 7.0% 8.9%

x Balance Sheet Assumptions

Operating Assumptions
Cash / Revenue 1.05% 1.68% 3.18% 2.95%
Recievables (DSO) 11 12 10 9
Inventories (DIO) 60 58 43 49
Other Current Assets 43 35 35 36
Future Tax Benefit - 3 22 30
Other Non-Current Assets 57 41 681 575
Payables (DPO) 45 47 50 41
Deferred Revenue / Revenue 2.20% 2.30% 2.48% 2.39%
Other Current Liabilities 101 52 295 365
Provisions 13 8 42 43
Other Non-Current Liabilities 145 131 659 549
Capex Assumptions
PP&E Growth Capex (7) (19) (3)
Bull Case [1]
Base Case [2]
Bear Case [3]
Depreciation (61) (60) (60) (55)
Intangibles Growth Capex - (6) -
Amortisation Expense - - - -
Change in Goodwill 11 0 0
Financing Assumptions
Issuances (Repayments) of Debt (30) (439) -
Change in Share Capital (7) (32) (10)
Change in Reserves 11 13 17

Balance Sheet
Current Assets
Cash 72 119 252 263
Receivables 205 236 220 212
Inventories 891 887 739 939
Other Current Assets 43 35 35 36
Total Current Assets 1,211 1,277 1,246 1,449

Non Current Assets

Net PP&E 198 192 172 169
Gross PP&E 525 555 682 668
Accumulated Depreciation (326) (364) (510) (499)
Intangibles (ExGW) 290 290 284 284
Goodwill 736 747 747 747
Future Tax Benefit - 3 22 30
Other Non Current Assets 57 41 681 575
Total Non Current Assets 1,281 1,272 1,907 1,806
Total Assets 2,492 2,549 3,152 3,255

Current Liabilities
Payables & Accruals 665 712 854 777
Deferred Revenue 151 163 197 213
Other Current Liabilities 101 52 295 365
Total Current Liabilities 917 927 1,346 1,355

Non Current Liabilities

Long-Term Debt 469 439 - -
Provisions 13 8 42 43
 Other Non Current Liabilities 145 131 659 549
Total Non Current Liabilities 627 578 701 592
Total Liabilities 1,544 1,505 2,047 1,947

Shareholder's Equity
Share Capital 442 435 403 393
Reserves 43 54 67 84
Retained Earnings 463 556 636 832
Total Equity 948 1,044 1,106 1,308
Total Liabilities + Equity 2,492 2,549 3,152 3,255

Total Assets 2,452 2,492 3,152 3,255

Total Liabilities & Shareholder Equity 2,452 2,492 3,152 3,255
Balance Check YES YES YES YES

The Plug
Trial Assets
Trial Liabilities & Equity
The Plug

Cash Flow Statement

Operating Cash Flows
Sales 7,552 7,805 8,759 9,837
Payments to Suppliers and Employees (7,131) (7,374) (7,625) (9,097)
Interest and Bill Discounts Received 1 1 1 2
Interest and Other Finance Costs Paid (15) (14) (36) (25)
Income Taxes Paid (115) (116) (118) (159)
Cash from Operating Activities 292 302 981 559
Investing Cash Flows
Acquisitions - - - -
Capex (54) (59) (43) (58)
Proceeds from Sale of PPE 0 0 0 -
Cash from Investing Activities (54) (59) (43) (58)
Financing Cash Flows
Share Issuance 3 (7) 1 -
Proceeds (Repayments) of Debt (90) (31) (440) -
Debt Issue Costs (1) (1) (0) -
Share Buybacks - - - -
Share Issue Costs - - - -
Dividends Paid (152) (157) (172) (310)
Other Financing Cash Flows - - (195) (179)
Cash from Financing Activities (239) (195) (806) (489)

Net Increase in Cash 1 47 133 12

Cash at Beginning of Period 73 72 119 252
Effects of Exchange Rates 0 0 (0) -
Cash at End of Period 72 119 252 263

Cash Flow Statement (Pro-Forma)

Operating Cash Flows
Net Income (NPAT)
Add Back: Depreciation
Add Back: Amortisation
Change in Net Working Capital
Change in Future Tax Benefit
Change in Other Non-Current Assets
Change in Provisions
 Change in Other Non-Current Liabilities
Cash Flow from Operating Activities
Investing Cash Flows
PP&E Capex
Intangibles Capex
Change in Goodwill
Cash Flow from Investing Activities
Financing Cash Flows
Proceeds (Repayments) of LT Debt
Change in Share Capital
Change in Reserves
Dividends Paid
Cash Flow from Financing Activities

Cash at Beginning of Period

Net Change in Cash
Cash at End of Period

Calculations
Net Working Capital
Change in NWC
Total Capex

Ratios
Profitability
Gross Margin 21% 22% 21% 22%
EBITDA margin 6% 6% 7% 9%
EBIT margin 5% 5% 6% 8%
NPAT margin 4% 4% 4% 6%
Efficiency
ROE 27% 24% 28% 39%
ROA 10% 10% 10% 16%
ROIC 18% 18% 30% 40%
Leverage/Solvency
Current ratio 1.3x 1.4x 0.9x 1.1x
Net debt / EBITDA 0.9x 0.7x -0.5x -0.3x
Interest cover ratio 24.48x 26.21x 13.54x 30.03x
Debt service cover ratio 24.48x 8.4x 1.04x 30.03x
Asset Management
Asset turnover 2.75x 2.78x 2.51x 2.74x
Fixed asset turnover 5.35x 5.58x 4.15x 4.94x

Free Cash Flow to Firm (DCF)

ASSUMPTIONS
Forecast WACC 9% >> Link to WACC Sheet
Terminal WACC 7% >> Link to WACC Sheet
Terminal Growth Rate 2.5% >> Generally between inflation (2%) & GDP gr

Tax Rate

FCFF
EBIT
LESS: Taxes
ADD BACK: D&A
LESS: Capex
LESS: Change in Working Capital
Nominal FCFF
Growth on pcp
Discounted FCFF

PV (FCFF) 1,298
Terminal Value 7,761
PV (Terminal Value) 5,044
Enterprise Value 6,343
LESS:Debt & debt equiv. (59) Net Debt = Debt & debt equiv. - cash & cash
ADD: Cash & cash equiv. 126 equiv.
Equity Value 6,409
Diluted Shares Outstanding 114
Value per Share $ 56.12
Current Value per Share $ 42.07
Premium (Discount) to Current Value 33%

TGR
 Forecast
FY2022 FY2023E FY2024E FY2025E FY2026E FY2027E

3.5% 2.0% 2.0% 1.5% 1.0% 0.5%

6.0% 6.0% 5.5% 5.0% 4.5%
4.0% 4.0% 3.5% 3.0% 2.5%
2.0% 2.0% 1.5% 1.0% 0.5%

77.5% 78.2% 78.2% 78.0% 77.8% 77.6%

3.3% 4.2% 4.2% 4.2% 4.2% 4.2%
9.5% 11.9% 11.9% 11.9% 11.9% 11.9%
7.9% 7.9% 7.9% 7.9% 7.9%
9.9% 9.9% 9.9% 9.9% 9.9%
11.9% 11.9% 11.9% 11.9% 11.9%
0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
30.8% 31.1% 31.1% 31.1% 31.1% 31.1%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 3.0% 3.0% 3.0% 3.0% 3.0%
No debt 8.0% 8.0% 8.0% 8.0% 8.0%
29.4% 30% 30% 30% 30% 30%
- 0 0 0 0 0
(1) 0 0 0 0 0
65.4% 65.6% 65.6% 65.6% 65.6% 65.6%

9,232 9,417 9,605 9,749 9,847 9,896

(7,152) (7,362) (7,510) (7,603) (7,659) (7,678)
2,080 2,054 2,095 2,146 2,187 2,218
(303) (400) (408) (414) (418) (420)
(881) (930) (1,141) (1,158) (1,170) (1,176)
(42) (51) (50) (49) (49) (50)
- - - - - -
855 674 496 525 551 573
(52) (53) (59) (65) (68) (71)
- - - - - -
803 621 438 460 483 502
- 4 9 14 19 24
(20) (5) (11) (18) (24) (30)
783 620 435 456 478 496
(230) (186) (131) (137) (143) (149)
552 434 305 320 334 347
- - - - - -
552 434 305 320 334 347

114 114 114 114 114 114

484 380 267 280 293 304
316 249 175 184 192 199
310 285 200 210 220 228
 9.3% 7.2% 5.2% 5.4% 5.6% 5.8%

1.36% 1.36% 1.36% 1.36% 1.36% 1.36%

5 5 5 5 5 5
58 58 58 58 58 58
31 31 31 31 31 31
31 31 31 31 31 31
506 506 506 506 506 506
37 37 37 37 37 37
2.75% 2.75% 2.75% 2.75% 2.75% 2.75%
331 331 331 331 331 331
43 10 10 10 10 10
473 473 473 473 473 473

- 20 20 10 10 10
8 8 8 8 8
10 10 10 10 10
20 20 10 10 10
(52) (53) (59) (65) (68) (71)
- - - - - -
- - - - - -
0 - - - - -

59 80 80 80 80 80
(46) - - - - -
(61) - - - - -

125.6 292 451 627 810 999

132.6 135 138 140 141 142
1,135.3 1,169 1,192 1,207 1,216 1,219
31.2 31 31 31 31 31
1,425 1,627 1,812 2,005 2,199 2,391

169 189 209 219 229 239

661 733 812 887 965 1,046
(492) (544) (603) (668) (736) (807)
284 284 284 284 284 284
747 747 747 747 747 747
30.6 31 31 31 31 31
505.7 506 506 506 506 506
1,737 1,757 1,777 1,787 1,797 1,807
3,161 3,384 3,589 3,792 3,995 4,198

721.6 743 758 767 773 775

253.5 259 264 268 270 272
331.2 331 331 331 331 331
1,306 1,333 1,353 1,366 1,374 1,378

59.4 139 219 299 379 459

42.7 10 10 10 10 10
 472.7 473 473 473 473 473
575 622 702 782 862 942
1,881 1,955 2,055 2,148 2,236 2,320

346.8 347 347 347 347 347

22.8 23 23 23 23 23
910.7 1,060 1,165 1,274 1,389 1,508
1,280 1,429 1,534 1,644 1,759 1,878
3,161 3,384 3,589 3,792 3,995 4,198

3,161 3,384 3,589 3,792 3,995 4,198

3,161 3,384 3,589 3,792 3,995 4,198
YES YES YES YES YES YES

3,384 3,589 3,792 3,995 4,198

3,384 3,589 3,792 3,995 4,198
- - - - -

10,195
(9,284)
1
(20)
(264)
627

-
(58)
0
(57)

-
60
(1)
(250)
(1)
(310)
(206)
(707)

(137)
263
(0)
126

434 305 320 334 347

53 59 65 68 71
- - - - -
(10) (6) (4) (2) (0)
- - - - -
- - - - -
(33) - - - -
 - - - - -
444 357 381 401 418

(73) (79) (75) (78) (81)

- - - - -
- - - - -
(73) (79) (75) (78) (81)

80 80 80 80 80
- - - - -
- - - - -
(285) (200) (210) (220) (228)
(205) (120) (130) (140) (148)

126 292 451 627 810

167 159 176 183 189
292 451 627 810 999

(7) 3 9 12 14 15
10 6 4 2 0
73 79 75 78 81

23% 22% 22% 22% 22% 22%

9% 7% 5% 5% 6% 6%
9% 7% 5% 5% 5% 5%
6% 5% 3% 3% 3% 4%

43% 30% 20% 19% 19% 18%

17% 13% 8% 8% 8% 8%
42% 28% 17% 17% 16% 15%

1.1x 1.2x 1.3x 1.5x 1.6x 1.7x

-0.1x -0.2x -0.5x -0.6x -0.8x -0.9x
39.94x 130.69x 39.25x 26.24x 20.16x 16.53x
39.94x 130.69x 39.25x 26.24x 20.16x 16.53x

2.92x 2.78x 2.68x 2.57x 2.46x 2.36x

5.32x 5.36x 5.41x 5.46x 5.48x 5.48x

n inflation (2%) & GDP growth (3-3.5%)

30% 30% 30% 30% 30%

1 2 3 4 5
621 438 460 483 502
(186) (131) (138) (145) (150)
53 59 65 68 71
(73) (79) (75) (78) (81)
(10) (6) (4) (2) (0)
 405 280 309 326 341
-31% 10% 6% 5%
372 236 238 231 221

debt equiv. - cash & cash

DCF Sensitivity Analysis - Share price vs Terminal WACC and TGR

Terminal WACC
$ 56.12 6.50% 6.75% 7.00% 7.25% 7.50%
3.50%
3.00%
2.50%
2.00%
1.50%

Data Table:

Shortcut: ALT-D-T (Windows only)

Toolbar: Data --> What-If Analysis --> Data Table

Row Input = item in row (here, terminal WACC)

Column Input = input in column (here, TGR)
 Reminder: The assumptions in this model
are for illustrative purposes only. Your case
study requires you to forumlate your own
view and assumptions

1. Create new rows for scenarios then complete the below: FY23
>> use the choose function Revenue Growth
>> toggle from base
>> bring original assumption into base case 6.0%
>> toggle from base 5.0%
base case assumption in the middle >> 4.0%
3.0%
2.0%
>> use the choose function
>> toggle from base
>> bring original assumption into base case
>> toggle from base

D&A and Interest Calcs use prior year ending

balance (or average) - see RHS

𝑅𝑒𝑣𝑒𝑛𝑢𝑒_(𝑡+1 )=𝑅𝑒𝑣𝑒𝑛𝑢𝑒_𝑡∗(1+𝑔)
𝐶𝑂𝐺𝑆=𝐶𝑜𝑔𝑠/𝑅𝑒𝑣𝑒𝑛𝑢𝑒∗𝑅𝑒𝑣𝑒𝑛𝑢𝑒_𝑡

𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛=(𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛/(𝑛𝑒𝑡 𝑃𝑃&𝑒))∗𝑛𝑒𝑡 𝑃𝑃&𝐸_(𝑡−1)

𝐴𝑚𝑜𝑟𝑡𝑖𝑠𝑎𝑡𝑖𝑜𝑛=(𝐴𝑚𝑜𝑟𝑡𝑖𝑠𝑎𝑡𝑖𝑜𝑛/(𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡)))∗𝐼𝑛𝑡𝑎𝑛𝑔𝑖𝑏𝑙𝑒 𝑎𝑠𝑠𝑒𝑡𝑠_(𝑡−1 ) (𝑒𝑥 𝑔𝑜𝑜𝑑𝑤𝑖𝑙𝑙)

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒=𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒 𝑜𝑛 𝑐𝑎𝑠ℎ ∗(𝑐𝑎𝑠ℎ 𝑎𝑛𝑑 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠)

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒=𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒 𝑜𝑛 𝑑𝑒𝑏𝑡+(𝑡𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡)

𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒=(𝑡𝑎𝑥 𝑒𝑥𝑝𝑒𝑛𝑠𝑒)/𝐸𝐵𝑇

Create our own capex scenario mechanics from scratch

>> link to CFS

Operating
Operating
Operating

Investing
Investing
Investing
Investing
Investing
Operating
Operating

Operating
Operating
Operating

Financing
Operating
Operating

Financing
Financing
Operating
 𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑁𝑊𝐶=𝑐𝑎𝑠ℎ 𝑜𝑢𝑡𝑓𝑙𝑜𝑤 𝑎𝑠 𝑚𝑜𝑟𝑒 𝑐𝑎𝑠ℎ 𝑡𝑖𝑒𝑑 𝑢𝑝 𝑖𝑛 𝑏𝑢𝑠𝑖𝑛𝑒𝑠𝑠

Calculations needed for CFS items

<< Same as ICR given no debt repayments forecasted

Free cash flow to firm (discount at WACC)

𝐹𝐶𝐹𝐹=𝐸𝐵𝐼𝑇×(1−𝑇)+𝐷&𝐴 −𝐶𝑎𝑝𝑒𝑥 −

Free cash flow to equity (discount at Cost of Equity)

𝐹𝐶𝐹𝐸=𝐸𝐵𝑇(1−𝑇)+𝐷&𝐴 −𝐶𝑎𝑝𝑒𝑥 −∆
𝐹𝐶𝐹𝐸=𝐹𝐶𝐹𝐹−𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡(1−𝑇)+𝑛𝑒𝑡 𝑏𝑜

Time Horizon Determination

Qualitatively: Steady cash flow growth ('steady state')
Quantitatively:
- FCFF growth approaches our terminal growth rate
- ROIC converges with WACC
- ROE converges with CoE
Time Horizon Determination
Qualitatively: Steady cash flow growth ('steady state')
Quantitatively:
- FCFF growth approaches our terminal growth rate
- ROIC converges with WACC
- ROE converges with CoE
- NWC stabilises (change should be steady/slow)

COMPROMISE between accurate assumptions and 'steady state'

Terminal Value = 〖𝐹𝐶𝐹𝐹〗 _(𝑡+1)/(𝑊𝐴𝐶𝐶 − 𝑔)

Equity Research:

Two types of report:

1. Initiation - first report from an analyst
2. Regular - talkS about what has change

Structure:
1. Intro - company, industry, macro, etc.
2. Thesis points - what you think the ma
3. Catalysts - what is going to 'wake up' t
4. Valuation - apply the most relevant va
5. Risks - what could go wrong + supporti
6. Financial Analysis - comparing to othe
 One way sensitivity tables

FY23 FY23
Share price Revenue Growth
56
6.0%
5.0%
4.0%
3.0%
2.0%

Data Table:

Shortcut: ALT-D-T (Windows only)

Toolbar: Data --> What-If Analysis --> Data Table

Row Input = item in row (here N/A as one-way data table)

Column Input = input in column (here, revenue growth)

−1 ) (𝑒𝑥 𝑔𝑜𝑜𝑑𝑤𝑖𝑙𝑙)
 𝐶𝑎𝑠ℎ 𝐶𝑜𝑛𝑣𝑒𝑟𝑠𝑖𝑜𝑛 𝐶𝑦𝑐𝑙𝑒=𝐷𝐼𝑂+𝐷𝑆𝑂 −𝐷𝑃𝑂
𝐷𝑎𝑦𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔=𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠/𝑠𝑎𝑙𝑒𝑠×365

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟=𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦/𝐶𝑂𝐺𝑆×365

𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟=𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠/𝐶𝑂𝐺𝑆×365

𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑒𝑥=𝑀𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 𝑐𝑎𝑝𝑒𝑥+𝑔𝑟𝑜𝑤𝑡ℎ 𝑐𝑎𝑝𝑒𝑥

𝑀𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒 𝑐𝑎𝑝𝑒𝑥=𝑑𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛

Cash will be forecaset using cash

flow statement --> cash / revenue
used for example only
 𝑅𝐸_𝑡=𝑅𝐸_(𝑡−1 )+𝑁𝐼_𝑡−𝐷𝑖𝑣_𝑡

The Plug (no longer needed once we have a CFS):

Historical CFS provided for reference ony

Unlike for the IS and BS, we do not use
the historical lines items for our CFS -
we start again

We do not need the historical CFS for our 3

statement model

Increase in Asset / Decrease in Liability = Cash Outflow

Decrease in Asset / Increase in Liability = Cash Inflow
For B/S calcs on cash flow statement:
(1) For assets use -> -(current year - previous year)
(2) For liabilities use -> (current year - previous year)
Start with NPAT as good indicator of income vs. expenses,
but need to add back non-cash expense (D&A)

Then we work through our BS items to make sure all are

reflected on our CFS
 Start with NPAT as good indicator of income vs. expenses,
but need to add back non-cash expense (D&A)

Then we work through our BS items to make sure all are

reflected on our CFS

𝐹𝐹=𝐸𝐵𝐼𝑇×(1−𝑇)+𝐷&𝐴 −𝐶𝑎𝑝𝑒𝑥 −∆𝑁𝑊𝐶

𝐶𝐹𝐸=𝐸𝐵𝑇(1−𝑇)+𝐷&𝐴 −𝐶𝑎𝑝𝑒𝑥 −∆𝑁𝑊𝐶+𝑛𝑒𝑡 𝑏𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔

𝐹𝐸=𝐹𝐶𝐹𝐹−𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡(1−𝑇)+𝑛𝑒𝑡 𝑏𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔
 y state'

/(𝑊𝐴𝐶𝐶 − 𝑔) Exit multiple method --> entails using a multiple to multiplty final
years earnings to imply a terminal value

uity Research:

o types of report:
nitiation - first report from an analyst on a company (long)
Regular - talkS about what has changed (shorter)

ucture:
ntro - company, industry, macro, etc.
hesis points - what you think the market has missed
Catalysts - what is going to 'wake up' the market
Valuation - apply the most relevant valuation methods
Risks - what could go wrong + supporting sensitivity + scenario
inancial Analysis - comparing to other companies (ratios, etc.)
 3. Build the COGS/ EBITDA Mar
FY23 FY23 FY23 FY23
NPAT Cost of Sales (%) EBITDA Margin Cost of Sales (%)
434.04 7.2%
82.2% 82.20%
80.2% 80.20%
78.2% 78.20%
76.2% 76.20%
74.2% 74.20%

Could also do a two way sensitivity on P&L factors

For example revenue growth and a particualr operating expense

assumption as a % of revenue
cs on cash flow statement:
-> -(current year - previous year)
se -> (current year - previous year)
multiplty final
the COGS/ EBITDA Margin table from scratch
FY23
EBITDA Margin (%)
7.2%