Write a persuasive and professional equity analysis report based on discounted cash flow valuation method for the company “HOWDENS JOINERY PLC”.
You will need to use the report attached called “HOWDENS REPORT.pdf” as a starting point and deriving the discounted valuations independently based on your own assumptions of Free cash flows, WACC and terminal value.
1) Propose a buy/sell/hold recommendation for your chosen company based on a discounted cash flow valuation.
• Choose a forecast horizon and based on your sales and earnings forecasts, (HAS TO BE BASED ON ATTACHED FILE CALLED “HOWDENS REPORT.pdf”) forecast free cash flows.
• Estimate a WACC for your company clearly stating the assumptions.
• Estimate a terminal value for the company after the forecast horizon, clearly stating the assumptions.
• Calculate the enterprise or equity value for the company.
2) How does the enterprise (or equity) value based on discounted cash flow method compare to that of comparable multiples method (COMPARABLE MULTIPLE METHOD CAN BE FOUND IN ATTACHED FILE CALLED “HOWDENS REPORT.pdf”). Compare and contrast the methods and comment on which method you find more suitable for your chosen company.
3) Discuss any two key challenges you faced while doing the discounted valuation.
Additioanlly, I have attached a file below called “SAMPLE.pdf” which will be indicative of the level of techinality and how the report should be structured.
IMPORTANT: The report must not exceed 5 pages. Penalties apply if you exceed : -3 for each extra page. Appendix should only contain information that guides the understanding of the report such as supporting calculations. The appendix will not be marked. (there is no page limit for appendix). The full report must have a minimum font size of 12 (does not includes tables, footnotes, graphs). Page limit does not include a cover page, table of contents, bibliography and appendix. SEE ATTACHED FILE “SAMPLE.pdf” FOR FURTHER CLARITY OF WHAT IS EXPECTED.
Please indicate all sources of information and detailed calculations in appendix. Excel sheets are quite hard to read so please make sure I can understand your calculations. For example : state clearly ‘Beta has been chosen from source xyz .. and it is 1.19.’ I should be able to calculate back the EV myself from the information provided by you.
ALL key calculations should be attached in the main report (WACC, forecasted FCFs, and DCF model). Assumptions must be clearly stated and linked to numbers. The strength of the assumptions and its link to numbers are key.
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