Analysis Essay

8089 Words Mar 13th, 2012 33 Pages
Contents Page
1.0 Executive summary 1
2.0 Introduction 2
3.0 Business context 3 3.1 Company profile 3 3.2 Company history 4 3.3 Key management 4 3.4 Ownership structure 6 3.5 Recent financial performance 8
4.0 Characteristics of industrial market 10 4.1 Major players 10 4.2 Market share 10 4.3 Turnover 12 4.4 Industry life cycle 13
5.0 Current issues and their impact on Sino Techfibre 14 5.1 SWOT analysis 14 5.1.1 Strengths 14 5.1.2 Weaknesses 14 5.1.3 Opportunities 14 5.1.4 Threats 15 5.2 Globalisation 16 5.3 Porter’s five forces 16
6.0 Profit/loss statement 18
7.0 Balance sheet 19
8.0 Assumptions and predictions for 2010, 2011 and 2012 22
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A forecasted profit and loss statement and balance sheet are done to reflect the potential impact of the issues and also add more realism to the valuation models. After which, Sino Techfibre’s future share price will be forecasted through five different share valuation models, based on a set of calculated assumptions. Lastly, sensitivity of Sino Techfibre’s share price to the various variables and assumptions will be calculated in a sensitivity model. The report concludes with an account of whether Sino Techfibre’s shares are overpriced or underpriced, with recommendations of whether investors should invest or not.

Introduction

Investors conduct fundamental and technical analyses of an organisation before deciding whether it is worthy of their investment. Fundamental analysis is the study of all variables that affect a company’s stock value, which consists of two approaches, namely the Top Down approach, which looks at the broad base economy followed by the industry performance and finally to the company itself, and the Bottom Up approach, which derives figures based on the company’s financial statements using ratios, such as net profit ratio and price/earnings ratio, to aid investors in their analysis (Investopedia 2010).

The following valuation analysis will be done using the Top Down approach. This approach looks at macroeconomic factors affecting the broad base economy and the performance of the industry Sino Techfibre operates in. It is to

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