Question:
1) Forecast the P&L for the next five years based on the reconstructed P&L
2) By varying the growth rate, the WACC or any other variables you have used, one variable at a time and hold every other variable constant, find out the value of the variable that will cause the estimated share price to equal the actual market price.
P&L statement(Smillion 2014 2015 2016 2018 Revenue from the sale of ds and services 1,746.60 2,023.40 2,298.80 2,468.30 2,606.20 Cost of sales 1,235.20-1,368.901,527.20-1,634.60 -1,742.40 511.40 654.50 771.60 833.70 863.80 Share of net profit of joint venture entities 11.70 13.20 12.70 Other revenue 58.60 55.90 39.20 31.20 Interest income 3.50 total o rating income 67.80 53.90 45.80 73.60 ex Warehouse and distribution costs 176.50-191.00214.00- 233.40 252.20 Selling, administration and other 240.80278.30324.80340.20358.70 rating costs Other expenses 17.50 25.50 25.20 26.5026.40 Total o ratin 434.80494.80-564.00600.10 637.30 EBIT 144.40213.60 254.80 279.40 300.10 Financial expense 21.10 20.70 21.10 12.60 12.20 EBT 123.30192.90 233.70 266.80 287.90 64.40 Tax 24.20 46.20 61.70 81.30 99.10146.70 169.30205.10 206.60 PAT 27.50% forecast 4 rating cash flow (Smillion) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 |%change Revenue (assume 74.11% is cash, 25.89% is credit) | 1,294.41 | 1,499.54 | 1,703.64 | 1,829.26 | 1,931.45 | 2,136.28 | 2,362.83 | 2,613.40 | 2,890.54| 3,197.08 | 3.536. 12 11% 10% rating cost 434.80494.80 564.00 600.10 637.30 701.64 772.48 850.47 936.34 1,030.87 1,134.95 2% Depreciation 76.8 77.8 88.5 84.4 86.51 88.66 90.88 93.14 95.47 97.85 rating cash flow (R-E)(1-tc)+dep tc 644.33749.83 849.12 915.48 961.47 1,063.90 1,177.38 1,303.11 1,442.41 1,596.751,767.76 Change in NWC 42.20 47.19 201.00 30.80 20.10 81.70 52 59.01 Total after tax net cash flow 443.33 780.63 795.52 935.58 879.77 1,030.16 1,139.65 1,260.92 1,395.23 1,543.99 1,708.75 2014 2024 |%chan 2015 2016 2017 2018 2019 2020 2021 2022 2023 NWC 12% 201.00 170.20 223.80203.70 285.40319.15 356.88399.08 446.27499.03 558.04 Total Discounted After Tax OCF (a 949.60968.38 987.65 1,007.391,027.63 4,940.65 Discounted Terminal Value(b 5,439.68-5,439.68 Present Value of Asset (a+b 499.03 Equity (Asset Value +debt 364.77 Shares Issue 1.16 Share Price (cent per shares 3.15 Actual Share Price 31 March 2018 (Yahoo Finance 5.28 Cost of Equit Re = Rf + (Rm-Rf Rf (average for 5 years 2.22% Equity Beta (B) 1.39 Market Risk Premium ( Rm 4.75% 5.74% Re Interest expense/Debt balance Cost Of Debt (Rd Interest Expense (2018 12.20 Debt Balance (2017 326.10 4% Rd Total Dividends ( Growth rate Year 45| 29.39% 2014 82 2015 2016 145 147 2017 163 2018 0.2 After tax OCF / (k-g) Terminal Value After tax OCF 2024 1,708.75 8.48% 29.39% TV 8,173.00 Debt Equity Ratio 0.74 0.74 0.76 0.68 0.68 Average D/E ratio 0.72 Debt Value Ratio 0.78 0.83 0.75 0.84 0.76 Equity Value Ratio 1.10 1.06 1.10 1.14 1.13 - (D/v) * Rd (1-tc) (E/V) * Re) Weight Cost of Capital (k 79% 4% Rd 1-Tc E/V 110% 574% Re 8.48% WACC P&L statement(Smillion 2014 2015 2016 2018 Revenue from the sale of ds and services 1,746.60 2,023.40 2,298.80 2,468.30 2,606.20 Cost of sales 1,235.20-1,368.901,527.20-1,634.60 -1,742.40 511.40 654.50 771.60 833.70 863.80 Share of net profit of joint venture entities 11.70 13.20 12.70 Other revenue 58.60 55.90 39.20 31.20 Interest income 3.50 total o rating income 67.80 53.90 45.80 73.60 ex Warehouse and distribution costs 176.50-191.00214.00- 233.40 252.20 Selling, administration and other 240.80278.30324.80340.20358.70 rating costs Other expenses 17.50 25.50 25.20 26.5026.40 Total o ratin 434.80494.80-564.00600.10 637.30 EBIT 144.40213.60 254.80 279.40 300.10 Financial expense 21.10 20.70 21.10 12.60 12.20 EBT 123.30192.90 233.70 266.80 287.90 64.40 Tax 24.20 46.20 61.70 81.30 99.10146.70 169.30205.10 206.60 PAT 27.50% forecast 4 rating cash flow (Smillion) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 |%change Revenue (assume 74.11% is cash, 25.89% is credit) | 1,294.41 | 1,499.54 | 1,703.64 | 1,829.26 | 1,931.45 | 2,136.28 | 2,362.83 | 2,613.40 | 2,890.54| 3,197.08 | 3.536. 12 11% 10% rating cost 434.80494.80 564.00 600.10 637.30 701.64 772.48 850.47 936.34 1,030.87 1,134.95 2% Depreciation 76.8 77.8 88.5 84.4 86.51 88.66 90.88 93.14 95.47 97.85 rating cash flow (R-E)(1-tc)+dep tc 644.33749.83 849.12 915.48 961.47 1,063.90 1,177.38 1,303.11 1,442.41 1,596.751,767.76 Change in NWC 42.20 47.19 201.00 30.80 20.10 81.70 52 59.01 Total after tax net cash flow 443.33 780.63 795.52 935.58 879.77 1,030.16 1,139.65 1,260.92 1,395.23 1,543.99 1,708.75 2014 2024 |%chan 2015 2016 2017 2018 2019 2020 2021 2022 2023 NWC 12% 201.00 170.20 223.80203.70 285.40319.15 356.88399.08 446.27499.03 558.04 Total Discounted After Tax OCF (a 949.60968.38 987.65 1,007.391,027.63 4,940.65 Discounted Terminal Value(b 5,439.68-5,439.68 Present Value of Asset (a+b 499.03 Equity (Asset Value +debt 364.77 Shares Issue 1.16 Share Price (cent per shares 3.15 Actual Share Price 31 March 2018 (Yahoo Finance 5.28 Cost of Equit Re = Rf + (Rm-Rf Rf (average for 5 years 2.22% Equity Beta (B) 1.39 Market Risk Premium ( Rm 4.75% 5.74% Re Interest expense/Debt balance Cost Of Debt (Rd Interest Expense (2018 12.20 Debt Balance (2017 326.10 4% Rd Total Dividends ( Growth rate Year 45| 29.39% 2014 82 2015 2016 145 147 2017 163 2018 0.2 After tax OCF / (k-g) Terminal Value After tax OCF 2024 1,708.75 8.48% 29.39% TV 8,173.00 Debt Equity Ratio 0.74 0.74 0.76 0.68 0.68 Average D/E ratio 0.72 Debt Value Ratio 0.78 0.83 0.75 0.84 0.76 Equity Value Ratio 1.10 1.06 1.10 1.14 1.13 - (D/v) * Rd (1-tc) (E/V) * Re) Weight Cost of Capital (k 79% 4% Rd 1-Tc E/V 110% 574% Re 8.48% WACC
