Question 1 (15 Marks)

XYZ Ltd is a family-owned company that operates in the consumer staples industry in Australia. The company's management plans to expand its operations by raising capital through an initial public offering in future. Being an unlisted firm, XYZ doesn't have its current market price. The management of XYZ is seeking your advice on calculating XYZ's relative value and recommends four related firms to be used for calculation purposes:

1.Use annual reports 2019 of following firms to extract required financial information:

a.Tabcorp Holding (TAH)

b.Domino's Pizza (DMP)

c.Harvey Norman(HVN)

d.JB HI-FI (JBH)

2.Use three industry multiples in the analysis:

a.Price to book value

b.Price to sales

c.Price to earnings

3.Closing share prices:

a.Tabcorp Holding (TAH) - $4.408

b.Domino's Pizza (DMP) -$37.64

c.Harvey Norman(HVN)-$3.914

d.JB HI-FI (JBH) -$25.850

4.XYZ ltd had opening net book value of $1,265,487 and number of shares of 550,678 (both values in thousand), respectively. Also, XYZ reported $2,300,600 sales and $175,000 net earnings.

Using the above information, you are required to:

a)Calculate multiples as above (12*0.5=6 marks)

b)Calculate enterprise value of XYZ based on each multiple(1*3 = 3 marks)

c)Calculate overall enterprise value of XYZ-average value (1 mark)

d)Assume XYZ's shares being traded at $9.30 per share currently, would

you recommend to buy this share, justify your choice? (1+1= 2 marks)

e)Discuss the limitations of the analysis (1*3 = 3 marks)