2201AFE Corporate Finance and Griffith Best Quity Management


Part A: Case study report for selected company
The purpose of this case study is to allow students to take some of the main concepts introduced in the course and provide a framework for applying them to a company of their choosing. One of the best ways of learning corporate finance is to apply the models and theories we encounter to the real-world contexts and problems. You will: 
Task: Evaluate stock price, and estimate the impact of an important announcement on its stock prices
You have recently started an internship position with Griffith Best Equity Management (GEM), a large asset management company with A$750 million Assets Under Management located in Brisbane CBD. The company’s core investment focuses on domestic share market, however, investments in share markets have provided lower than expected returns in the recent years. 
GEM’s Chief Investment Officer (CIO) has assigned you to perform an investment appraisal on a single company listed on the ASX300 and provide recommendation if the company analyzed should be included as part of GEM’s investment.
Your personal values and experiences are important, you should base your response on the evidence provided in these tasks along with your knowledge gained in the course. It is important that you provide clear evidence of your ability to apply your knowledge of finance as learned in the course to the task. The CIO has requested that your analysis must be up-to-date analysis with at least 3 years of data. 
Your report must address the following issues, the first four issues are related the corporate governance (task 1), and the fifth issue is related to the share price analysis (task 2):
1.A brief description of the company analyzed
2.Information of the CEO of the company 
3.The Board of Directors of the company 
4.Societal Constraints 
5.Analysis of company’s share price using 
a)the Dividend Discount Model (1-stage and 2-stage). You will determine if the share price is priced fairly or over/under-valued.
b)News/Announcement effect on company’s share price. You will investigate the speed of share price adjustment to these announcements using graphs. You will discuss the share performance over the last 3 years, showing the major events (announcements) in the life of the company and discuss how these events (announcements) have impacted the share price. 
c)On the same chart, present the performance of the major competitor and the market for comparison. 
d)You will need to show calculations for 5 (a), (b), (c) and a graph for (d)
Your current internship position is under 3 months’ probation period. Upon completing the task on hand, your department secretary will arrange a meeting with CIO to discuss whether you have passed the probation period and be promoted to a Junior Corporate Finance Analyst.
Task: Evaluate stock price, and estimate the impact of an important announcement on its stock prices
1.Evaluate stock price, and estimate the impact of an important announcement on its stock prices 
a)Stock beta: Download 3 years of weekly stock returns and ASX300 market index returns ending December 2020 from Yahoo Finance and estimate the stock beta. Does the estimate of stock beta make sense to you? (The normal range of beta is from 0.5 to 3.) Provide reasoning, why or why not? If not, you have to use the stock beta from Yahoo Finance for the later parts.
b)Estimate the Cost of equity, using the CAPM return. Assume the market risk premium, Rm-Rf=6%, and use the current 10-year Government bond yield for the risk-free rate.
c)DPS is the total annual dividend per share paid for the financial year. Based on the previous 5-year pattern of DPS payments, estimate the intrinsic values using 1-stage models (the constant dividend growth model), and the 2-stage non-constant dividend growth model. Please use the 10-year Government bond yield as the Dividend growth rate in the equilibrium stage. You need to choose which model is the most appropriate one to use, and compare the intrinsic value versus the share price as of November 2020 (‘current price’).  Would you recommend to buy or sell the shares in November 2020?
a)You will study an announcement in 2018-2020 from this company from ASX 300 firms (https://www.asx300list.com/). The announcement can be a new product, a scandal, an earnings announcement, a change in strategy, etc. What is your expectation of the market reaction to the announcement, good or bad news?
Please download the daily stock prices from one month before to one month after the announcement date, and compute the cumulative holding period returns and plot them in a graph. 

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