BAFI1045 – Equity Investment and Portfolio Management
Assessment 2 – Company Valuation Assignment
Assessment Task 2 Company Valuation Report
Company Singapore Airlines
Marks/Weighting 50 marks, accounting for 50% of the total grade for this course
Submission Date Sunday, 21 September 2025, 5:00 pm Singapore Time
Word Limit
Maximum 5,000 words
(excluding ToC, Appendix, Executive Summary and References)
Content in excess of the word limit will not be read or marked
Submission The assignment will be submitted via Canvas, Turnitin
Rubric A marking rubric is provided on Canvas.
Format You must upload your file in PDF format
The assessment is submitted as a group assignment with a minimum of 3 and a maximum of 4 students per group.
You are required to analyse a listed company and prepare an investment recommendation report. The report provides an assessment of the company’s current position and future prospects, incorporating the use of various valuation techniques to arrive at estimates of the intrinsic value of the company’s shares.
Your report should make a case for the company’s shares to be rated in one of the following ways:
|
Sell
|
Hold
|
Buy
|
|
The shares should be sold, as a
materially negative return is
anticipated in the next six to 12
months.
|
The shares will have neither a
materially positive return nor a
materially negative return in the
next six to 12 months.
|
The shares should be bought, as a
materially positive return is
expected in the next six to 12
months.
|
Your report should fulfil the following minimum requirements.
Company Analysis
Provide an overview of the company’s history, operations and any structural changes it has undergone since it began. This is to understand how the company got to where it is today and what may occur in the future. Discuss any market-relevant news or events that have happened to the company, particularly in the last 12 to 24 months.
ESG Factors
Discuss the ESG factors relevant to the company, including analysis of the company’s contribution to the conservation of the natural world, consideration of people and relationships and its internal governance standards. Since sustainability is an important aspect of a firm’s operations, any relevant initiatives undertaken by the company should be discussed in detail.
Industry Analysis
Analyse the structure of the industry in which the firm operates and whether it is domestically focused or has a global nature. Identify the industry’s major companies, their locations, and how they compete for supremacy within the industry. Consider global macroeconomic and microeconomic variables (economic, social and political) which may affect the fortunes of the industry in which the target company operates.
• Are there any geopolitical factors that may affect the supply of or demand for this industry?
• If so, how do they affect the industry and the company you are analysing?
Evaluate the relative historical financial performance of the company among its peers
• identify the firm’s TWO major listed competitors and discuss why they have been selected as peers for comparison
• identify and explain the relevance of three financial ratios of your choice (not to include ROE, Net Profit Margin, Total Asset Turnover or Financial Leverage) for the company and its peers over a historical period of five financial years.
• in choosing these ratios, you should consider various aspects of the firm’s financial standing and select ratios that describe the firm’s debt servicing ability, profitability and asset efficiency
• explain the performance of the company compared to its peers using this analysis
analyse and explain the reasons for changes in these ratios over the past five years compared to the average of the past five years
do not simply describe the changes in the ratios; look for reasons why they have fluctuated over the analysis period, and consider if these factors may recur in future
Estimate the ROE of the company and two major competitors for the most recent five years using the DuPont ROE approach.
• DuPont Analysis should be done using the 3-step procedure
• 3 steps: Net Profit Margin, Total Asset Turnover and Financial Leverage
• show your own calculations for each component over the previous five years for the company and its three selected competitors
• analyse the company’s and your selected peer companies’ ROEs over the five years
• compare the DuPont ROE of the company with its three peer group companies
• show and describe how the three components of ROE have changed over the analysis
period and find reasons for these changes for each of the companies
analyse and comment on the reasons for the change in ROE for the firm and its competitors with reference to the difference in the three components over five years
relevant charts/graphs should be used to illustrate these figures
Analyse the company’s/industry’s current issues and explain the effect of these issues on the company’s future earnings
a) Atthe Macroeconomic Level
• general factors that apply to the industry and the company (GDP, employment, interest rates, regulation, global factors, supply, demand, inflation, etc.)
b) Atthe Microeconomic Level
• the company- and industry-specific factors (operations, financials, objectives, competition, etc.)
c) As a Porter analysis
• analyse the company’s position in its industry using Porter’s Five Forces
the macro and micro analyses should be supported with graphs, tables and figures for both the recent past and forecasts, as relevant to your analysis
Intrinsic Value Estimation
Start your valuation analysis with the estimation of the required return using CAPM
You will require three inputs to calculate the CAPM required return
The CAPM required return will be used as the discount rate in your valuation models
1. A Calculation of the Company’s 5-Year Daily Beta
• use the daily closing price data for the company and the market index to calculate daily holding period yields for the most recent five years. Using this data, you can estimate raw beta by using regression analysis in Excel.
• attach your ANOVA table output in the report
Adjust the Raw Beta using the formula: Adjusted Beta = (0.67 x Raw Beta) + 0.33
2. The Risk-Free Rate of Return
• use the 10-year government bond yield as a proxy for the risk-free rate
3. The Market Return
• use an estimate of the broad market return
Estimate the intrinsic value of the company’s shares using the Dividend Discount Model
• you must use a Multi-Stage DDM. Follow the methodology discussed in the Equity Valuation slides
• calculate the growth rate for Period 1 using the Retention Ratio and ROE formula using data for the past five years
• if you believe this is not appropriate, please use your own estimated growth rate.
• estimate dividends for a total of six future years, then apply the constant growth formula to find the terminal value in Year 6
• calculate the present value of each future year’s dividend and the terminal value, then add them to calculate the intrinsic value of the company
provide justification if you use a different growth rate than the one calculated for Period 1
explain your growth rate assumptions using the discussion in the macro and micro analysis
estimate the terminal growth rate using a proxy that represents the long-term growth rate and calculate the terminal value. Explain why you chose this rate for terminal growth
Estimate the intrinsic value of the company’s shares using the Free Cash Flow to Equity (FCFE) model
• you must use a Multi-Stage FCFE model to calculate the intrinsic value of the stock
• source the components for FCFE from the company’s financial statements using Workspace
• calculate the FCFE per share over the past six years. The average growth in FCFE per share for the last six years will be the growth rate for Period 1
• estimate the growth of FCFE for Period 2 using your macro and micro-analysis
• estimate FCFE per share for a total of six future years, then apply the constant growth formula to find the terminal value in Year 6
• calculate the present value of each future year’s FCFE to calculate the present value, then add them to calculate the intrinsic value of the company
provide justification if you use a different growth rate than the one calculated for Period 1
provide justification for your growth rate assumptions
estimate the terminal growth rate using a proxy that represents the long-term growth rate and calculate the terminal value. Explain why you chose this rate for terminal growth
are your estimated growth rates and years the same as those used for your DDM model or different? Why?
Apply Relative Valuation techniques to ascertain the valuation of the firm
• compare Price-to-Book Value and Price-to-Earnings ratios for the company and its peers over the preceding five years.
• note any changes in the ratios and the reasons for these changes
• determine the relative valuation of the firm using these multiples (do not attempt to
calculate the share price)
analyse and comment on the relative valuation of the firm in comparison to its peers
are the company’s shares overvalued or undervalued according to this methodology?
Using relevant charts, evaluate the company’s share price performance over the last five years
• compare the relative performance of the company to the Index
• compare the relative performance of the company to its peers
common-base charts from Workspace must be used for all multiple data series charts to give the best view of the return relationships between the stocks being compared
comment on these charts, giving reasons for any significant changes you have identified
Perform. a technical analysis of share price movements over the last five years
• use 50-day vs 200-day simple moving average lines and volume analysis to identify the most recent Buy and/or Sell signals where these SMA lines intersect
• on a separate chart, draw support and resistance lines to indicate price trends and
channels in the most recent 12 months using the charting tools in Workspace
show and comment on these analyses with reference to charts sourced from Workspace
use volume analysis to confirm your price signals
label all important chart points clearly using the Workspace chart tools
Evaluate your findings
• Why do the intrinsic values you have calculated differ from the current/recent share price?
• How does this difference inform your investment recommendation?
• What is your investment decision based on your evaluation?
• Is your recommendation to Buy, Sell or Hold shares in this company?
• Is this conclusion different from the signal obtained from the technical analysis? Why?
• Does your qualitative analysis agree with your quantitative analysis? If not, why not?
Your investment recommendation
• Your analysis should logically support your recommendation
• use graphs and data of both historical and forecast data to support your analysis
• it’s important to link your conclusion to the various assessments and calculations you have made in the individual parts of the report
• note that not all your analyses will unequivocally support your conclusion; this is typical in real-world financial analysis
General guidance for students
Important points regarding Valuation Models
• explain any assumptions you have made in implementing your models.
• where appropriate, explain how you arrived at the variables you are using. For example, it is not sufficient to state that you are assuming a 2% growth rate. You will be expected to justify your 2% growth rate.
• it’s not enough to simply describe the financial ratios. You must find reasons why they are changing, especially if there are significant changes year to year. This will require in- depth research.
• you must use LSEG Workspace and IBISWorld as major data sources. These can be supplemented with data from the companies’ annual reports and other sources you have found.
• while using LSEG Workspace
1. use the web version, not the Windows software version
2. use domestic currency for financial analysis
3. set LSEG Financials as the fundamental source of data in Workspace
Executive Summary
An executive summary is often written for leaders in a business or organisation, such as CEOs, department heads, or supervisors, so they can quickly access critical information to inform their decision-making. An executive summary should summarise the key points of the report. It should restate the report’s purpose, highlight its major points, and describe any key results, conclusions, or recommendations from the report. It should include enough information so that the reader can understand what is discussed in the full report without having to read it.
References and Citations
Use proper citations and references, and include a list of references you use in your report. Failure to do so will result in a lower grade. RMIT provides a website that explains the use of the Harvard reference system. Please consult it here:
https://www.lib.rmit.edu.au/easy-cite/
Presentation of Report
The submission should be presented in the form of a stock analyst’s investment report. It should include an Executive Summary that outlines the main findings at the beginning. The remainder can be structured in line with the above points. Attach details of your work and calculations, as well as any other relevant information, as an appendix. relate all the information in your analysis to your investment recommendation
• build a case for your recommendation using your findings from each of the points above
• your report should look professional, with charts and diagrams as required to illustrate your points
• enhance your arguments with relevant charts and numbers from various sources
• charts copied from Workspace should be easily readable, meaning that the scale, data points and annotations should be clear and not blurred or distorted
• a penalty will be applied for charts that are not readable
• do not upload a separate Excel file. Don’t include all the data for the beta calculation; only the ANOVA table from Excel should be in the report
• do not attach information you have used in compiling the report (annual reports, newspaper articles, etc.)
• include the report’s word count on the front page. The markers won’t read or mark any part of the report after 5,000 words
Some useful resources for this assignment include
Reilly, Frank K., Keith C. Brown and Sanford Leeds, Investment Analysis and Portfolio Management (11th Edition), Thomson South-Western, 2019.
You should also conduct your own analysis using the companies’ websites, annual reports, LSEG Workspace, IBISWorld, and any other relevant sources for your report. The more resources you use for your research, the better your analysis will be.
Assignment submission procedure
All assignments must be submitted online through the course Canvas Turnitin for a plagiarism check. An assignment cover sheet must accompany them. If your similarity score is greater than 20% you must edit and resubmit as your report contains too much unoriginal material.