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建立人际资源圈保富集团（BBY）贴现现金流估值的报告--论文代写范文
2016-04-29 来源: 51Due教员组 类别: Paper范文
51Due论文代写网精选paper代写范文:“保富集团（BBY）贴现现金流估值的报告”。这篇论文是关于对保富集团（BBY）贴现现金流估值的报告，并论述了价值驱动的理由，对敏感性分析以及收入变化敏感性进行了论述。
1. Report for Balfour Beatty (BBY) discounted free cash flow valuation
A common goal for managers among companies is maximising shareholders’ wealth, which demonstrated by the stock value. Analysed by Rappaport (1986) value drivers and demonstrated by excel model, this report will come out with a general idea about the financial evaluation of Balfour Beatty over a 4 year period, 2007-2011. The seven drivers are as follows:
• Sales growth rate
• Operating profit margin
• Income tax rate
• Investment in fixed assets
• Incremental investment in working capital
• Cost of capital
• Forecast duration
Balfour Beatty Plc.
Balfour Beatty is one of the UK's largest construction companies. It is the world's top 40 contractors, the annual turnover of $ 3.5 billion, including one billion from oversea. The core business includes civil engineering, building construction, reconstruction, highways and tunnels.
2. Justification for value Drivers
Balfour Beatty experienced several prominent achievements in the year. With an order book increase by £1.1billion to £15.2bn an increase of 8% on the year before, in keeping with the companies 7% constant currency. Of which £7.2bn of the order book is based upon work expected to be carried out during 2012. An increase of 9% over the previous year ending order book of £6.6bn, furthermore average cash flows were reported strong at £435m nearly 35% higher than 2009 (£283m), despite the negative working capital, as a result of lower constructions volumes, historical analysis, and the company growth in new markets, will result in a further growth of working capital, which is predicted at 8% yearly increase and a fixed capital investment of 3%.
Revenues from joint ventures and associates increased by 2% to £10,541million from 2010 -2011, this was largely due to acquisition and consolidation of Parsons Brinckerhoff, which accounted for 13% growth, however weak UK & US construction markets contributed to a reduction in revenue over the previous year of 11% analyzing previous year’s sales growth, although of set by a previous year reduction in sales, a strong order book, could suggests a steady growth in revenue of 5%.
However EBITA was up 20% to £319m lifting the company profit margin to 1.5% this was in part due to the consolidation of Parsons Brinckerhoff, however also to stronger financial and operational performance in the Professional Services. Balfour Beatty Plc. Furthermore the firm increased its focus on markets with the greatest opportunities for growth. The company has opened offices in India whilst building on its market share in Australia and Canada thus, based on historical data, and the strength of Balfour Beatty order book, we can predict the company profit margins will increase to 2%.
Balfour Beatty Plc. pre-exceptional tax charge for the year was £83m an increase from £69m the previous year. The group effective tax rate, after eliminating the finance costs of the company preferences shares, which doesn’t draw tax relief. The effective interest rate would be 33.7 % a decrease from the previous year of 35.2% we can assume the tax rate will maintain a level rate of 34%.
Due to high operating costs, and interest rates, Balfour Beatty required rate of return is 10%, we can assume the required rate of return in the current economic climate will stay at a steady rate of return of 10%. The discount rate was arrived by inputting updated market data into a capital pricing model, based on the industry average beta rating of 1.5, a risk free rate of 2.93, which was based on the UK government 10y bond interest rate, and a market premium rate of 8%. http://www.liuxuelw.com/yglw/
The WACC of Balfour Beatty Plc. is currently about 5.32%, however due to increase in the UK and US inflation and interest rates, which is currently about 4% we therefore expect a Balfour Beatty average WACC of 6%. This figure is especially based upon the increase in UK and US inflation and interest rates, which will affect the required rate of return on both equity and debt ( please check appendix for full calculations).
Debt and marketable securities have been compiled from deposits and cash of £380m, and debt comprised of present value of pension scheme obligation of (£16 million).
3. Sensitivity Analysis
3.1 Sensitivity to operating margin change
The historic data of Balfour Beatty Plc. Shows the operating profit margin varied from its lowest of 1.50% to highest recording of 1.83%. a range of 0.5 to 2.5 is seen as a reasonable parameter for the sensitivity analysis. The analysis suggest a 0.5% change in the company operating margin, would cause a 29% increase, or if the latter was true, a 33% decrease in shareholder valuation £917.
3.2 Sensitivity to revenue change
Balfour Beatty historic revenue rate for the years 2007-2010 stated the growth ranged from between 44.11% in 2007 to 3.15% in 2010, however on the assumption Balfour Beatty would follow the previous years of revenue growth, it is credible to analysis the sensitivity outcome between a range of 3% to 11%. A 2% increase or decrease in revenue would result in a 2.42 decrease in shareholders’ value and a 2.53 increase in shareholders’ value, based on the current model valuation of £917.
3.3 Sensitivity to required rate of return
The range of sensitivity was determined by analysis calculating the WACC, the overcall cost of equity and debt for Balfour Beatty Plc. is set at a fixed beta rating 1.1. Based on historic returns on the 10 year UK government bond the range for the risk free rate was defined at an average of 2.93%. The WACC shown in more detail in the appendix predicts a range between 8 and 12% a change of plus or minus of the required rate of return would result in a 16% reduction and14% increase of the shareholder’s value based on the current model valuation of £917.
3.4 Simultaneous sensitivity analysis
The simultaneous change of various factors, can have an adverse or positive affect on shareholder’s value, more specifically when two or more factors cause a value change in the same direction. For example the table above highlights the possible affects when two factors change, in different and the same direction. For this purpose the two factors highlighted are profit margin and required rate of return.
This table shows the worst and best case scenarios if the two factors were to change. The table highlights based on the current valuation the best possible outcome would result in a shareholders value of 2,192 and the lowest value would be £88-. Required rate of return could be suggested to have a lower impact on shareholders’ value, then the company profit margin. The table is a good indication of how different factors can significantly impact shareholders value.
4. Model and Market price comparison and limitations
Rappaport (1986) considered other issues with regards to shareholder valuations, evaluation of business performance and so on. The current market value of Balfour Beatty is about 1.3 billion Our model values the shareholder at just under 1 billion which is very close to the actual market price. However, as the discussion above has shown, this valuation is very sensitive to certain value drivers. In particular the terminal value which accounts for nearly 72% of the company value is an important driver of the shareholder value. The shareholder value is in particular sensitive to the operating margins and revenue growth, but also to the other forecasts that were made. As all value drivers depend on assumptions that are made for the future, these are not certain. Consequently there remains uncertainty about the revenue growth, and group operating margins. It is also important to remember that each industry has specific value drivers that need to be considered when evaluating a company. A complete valuation therefore normally not only includes one method but uses additional approaches that in particular capture the specifics of the company that is valued.
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