BAFI-1070 Financial Statement Analysis

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BAFI-1070 Financial Statement Analysis

RMIT Classification: Trusted
BAFI-1070 Financial Statement Analysis
Assignment – Due Date: 2th October 2020 23:59pm(Melbourne Time)
This assignment and its presentation comprises 40% of your overall grade in BAFI-1070
You are required to write a report of Fortescue Metals Group LTD (FMG). The report should be about fundamental analysis of this firm, including the firm’s business analysis, proper financial analysis, valuation and recommendation.
The final conclusion will have to mention whether you would recommend FMG as Buy or not. This assignment is more of a test for the understanding of the process rather than just the final conclusion.
Marks will be given for:
1. Format of presentation: word selection, conciseness, logical structure and presentation (you must streamline the writing style between writers, the report has to be read as one, rather than collection of writings)
2. Business Analysis(industry and company strategy analysis): descriptions of relevant economic and industry information, company position in the industry, and company strategy
3. Financial Analysis, forecasting, data description, comparative presentation, ratio analysis and comments
4. Forecasting and Valuation: methodology used, assumptions, reasoning for selection, final calculation and comparison to actual market prices
5. Conclusion: considerations both qualitative and quantitative, limitation, pro-contra argumentation, and final recommendation.
Your main source of information should be the firms’ latest annual reports, added by public information such as websites, databases, current news etc.
• Industry analysis: prepare a brief for the industry, relevant economic data and description of major players, ranking, major competitors and other pertinent information. Describe the competition status in this industry with evidence.
• Company strategy analysis: prepare company brief, outlining the short history, core activities, competitive situation, the markets they operate, major risk factors and how the company respond to them. Please clarify the company’s business strategy.
• Financial Analysis: Determine key ratios for the past 5 years and interpret how these ratios have improved or deteriorated. Present your analysis of the financial data and discuss this company’s performance. To obtain the unbiased information, at least one benchmark should be used to compare with FMG’ performance. Conclude how the financial picture related to the stated business strategy.
RMIT Classification: Trusted
• Forecasting and Valuation: Discuss company’s situation and forecast the financial data in following years and determine which valuation methods you think will be the most appropriate. Your discussion must be related to the previous financial analysis. At least two different valuation models should be employed (Free Cash Flow model is compulsory).
• On valuation, you need to make estimates for market returns, risk free rate, company beta, growth and others. On each estimate, you have to state your assumptions (and sources, as needed, the data may be from secondary sources) and short discussion on how you come to that conclusion.
• Compare these valuation results with the market price. In most cases the valuation will differ from the actual (i.e. underpriced / overpriced). Discuss those differences, what are your conclusions? Looking back to all the previous discussions to business analysis, do you think the company could successfully implement the business strategy? Is sensitivity analysis necessary?
• Recommendation: considering all the information above, and including your own qualifications / limitations that you can think of, state whether this company is recommended for BUY? State your discussions and reasoning in short paragraphs of conclusion and recommendation.
• The whole report should be written in a formal research report format. The maximum number of words for this assignment is 4000 words (outside of appendices).
• An electronic copy of calculation spreadsheet, Turnitin originality report and signed assignment contribution form should be included when submitting the assignment online.
Note: This is a group assignment that may have members up to 4 students.

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