Company Name: Stockland FP Ordinary/Units Stapled Securities (SGP)

SWOT Analysis

1) Provide a description on the business of your selected company. Prepare a SWOT analysis in identifying the Strengths, Weaknesses, Opportunities, and Threats for your selected company relative to its competitor within the same industry based on the current Australian economy and financial landscape.

Cash Flows

2) Based on the 2019 financial year-end earnings of your selected company, compute the free cash flows and discuss how you estimate all the inputs needed for this calculation.

Firms Growth

3) Estimate the growth of the firm using the following three approaches.

Historical geometric growth rate o You may select the length of the horizon.

Analysts consensus estimates of future earnings and growth

o Based on analyst recommendations report.

Fundamental analysis

o Retention ratio * Return on equity (ROE)

Actual Growth

4) Select an actual growth based on the three approaches above.

Your choice can combine the above estimates in any way you feel appropriate. In making your choice, emphasize the advantages and disadvantages of each approach and how that led to your weighting of estimates.

Discuss how long you might expect this growth rate to persist and what you expect the growth rate to be thereafter.

Equity Calculation

5) Compute the cost of equity using the capital asset pricing model (CAPM). Compute the cost of debt based on the yield to maturity (YTM) of the long-term corporate bonds.

Capital Cost

6) Compute the weighted average cost of capital (WACC). Assume a corporate tax rate of 30%.

7) Use both the dividend-discount model (DDM) and discounted free-cash-flow method (DCF) to estimate the price per share of your selected company.

Comparison to Current Market

8) Compare your valuations based on DDM and DCF to the current market value. Provide some explanations why your valuation differs from market valuation (if it does differ). Discuss the limitation of the DDM and DCF analysis.

Future Predictions

9) What would the estimates of growth rate in both DDM and DCF models have to be in order for your valuations in question (7) to be closely aligned with the market valuation? Are these estimates realistic? Discuss.

Variation Factors

10) Given the slowdown in Australias economy in recent years, comment on how your valuations in question (7) change if:

(1) risk-free rate decreases by 1%;

(2) growth rate decreases by 1%;

(3) WACC decreases by 1%. Provide a general assessment on the sensitivity of your estimates.

In other words, do your valuation estimates being more or less sensitive to the changes in the risk-free rate, growth rate, and WACC.

Comparisons and Recommendations

Provide an assessment on your selected company( Stockland FP Ordinary/Units Stapled Securities ) in terms of its valuation relative to its competitor (at least two companies) within the same industry. Comparison can be done using valuation multiples as discussed in the lecture. In your capacity as an analyst, would you recommend investors buying/selling your selected company and explain why?

Ticker	Company	Sector	Market Cap
GMG	Goodman Group FP Ordinary/Units Stapled Securities	Real Estate	24,445,900,000
SCG	Scentre Group FP Ordinary/Units Stapled Securities	Real Estate	20,086,700,000
IAG	Insurance Australia	Financials	17,702,600,000
STO	Santos Limited	Energy	17,039,500,000
QBE	QBE Insurance Group	Financials	16,852,500,000
SUN	Suncorp Group Limited	Financials	16,341,900,000
AMC	Amcor Plc Cdi 1:1 Foreign Exempt NYSE	Materials	16,290,600,000
ASX	ASX Limited	Financials	15,179,800,000
REA	REA Group	Information Technology	13,645,600,000
DXS	Dexus FP Units Stapled Securities	Real Estate	12,833,200,000
MGR	Mirvac Group FP Ordinary/Units Stapled Securities	Real Estate	12,509,900,000
JHX	James Hardie Indust Chess Depositary Interests 1:1	Materials	12,346,400,000
FPH	Fisher & Paykel H Foreign Exempt NZX	Health Care	12,120,500,000
TWE	Treasury Wine Estate	Consumer Staples	11,691,900,000
XRO	Xero Limited	Information Technology	11,322,200,000
OSH	Oil Search Limited 10 Toea	Energy	11,054,400,000
SGP	Stockland FP Ordinary/Units Stapled Securities	Real Estate	11,015,700,000
GPT	GPT Group FP Ordinary/Units Stapled Securities	Real Estate	10,908,400,000
VCX	Vicinity Centres FP Ordinary/Units Stapled Securities	Real Estate	9,364,720,000
RMD	Resmed Inc Cdi 10:1 Foreign Exempt NYSE	Health Care	9,190,970,000