FN368 FINANCE & RISK MANAGEMENT COURSEWORK
Whitbread plc is a hospitality company that operates hotels, coffee shops and restaurants. There are two distinct segments; Hotels and Restaurants and Costa. Whitbread’s brands include Beefeater, Brewers Fayre, Table Table and Whitbread Inns. They operate over 730 Premier Inns, over 2000 coffee shops in the UK, and have over 1,200 coffee stores internationally. Recently, following a strict cost management policy, Whitbread have made market share gains and increased their revenues and profits (The Financial Times, 24th October, 2017).
Whitbread plc have continued to make increases to their dividends and their share price as at 24th October 2017 is £3,759. Whitbread plc has a market capitalisation of around £7.23 bn and its shares are traded on the main market of the London Stock Exchange.
Whitbread plc website provides information useful for investors, including the latest annual and interim reports, dividend information, and information about their plans. You can also find useful information on the London Stock Exchange website. Both sources are book marked on your Aspire reading list.
From the perspective of an existing investor in a small number of shares, you are required to provide a variety of possible share valuations for Whitbread plc as at the end of February 2018. Your share valuations should include the use of the following methods:
- Cash flows
- P:E ratio
You may calculate more than one valuation for each method. In addition you should provide a critical evaluation of each equity valuation method used in terms of theoretical soundness and practicality.
Your conclusion should advise the investor whether they should continue to hold the shares, sell the shares, or buy more, and your recommendation should be supported by a brief summary that explains the reasons for your decision.
You will need to analyse the recent financial performance of Whitbread plc in order to inform your valuations and set them in context. Your analysis should
include ratios suitable for the investor you are advising and marks will be awarded for the relevancy of the ratios selected, and their interpretation, rather than their calculation.
Your detailed workings should be contained within a spreadsheet in the appendices, but there should be sufficient detail in the main report to show the assumptions that each valuation is based on.
Learning outcomes being assessed:
Marks will be awarded for the student`s ability to:
- Demonstrate a comprehensive understanding of valuation methods and evaluate the practical application of those methods
- Apply appropriate valuation techniques to a real company and perform relevant calculations based on, and informed by, information gathered and selected1
- Present evidence of wide reading and a clear appreciation of the value and limitations of the methods used
- Present a clear and well-structured report in good written style, to be properly referenced and to include a bibliography in the appendices. Students are directed to the presentation guidelines in their course handbook, and the Brighton Business School Referencing Handbook.
You are expected to make extensive use of Reuters/Fame or similar as an information source for ratios, betas, company reports, share prices, news and other financial information such as analysts’ forecasts but you must provide your own share valuations using your own cost of capital estimates.
FN368 Coursework Feedback
1) A variety of share valuations using at least four approaches; have these methods been appropriately applied; are the valuations well informed; are any assumptions made realistic /35
2) Are the calculations of cost of capital accurate and is the approach sound; has data been used appropriately /10
3) Critical evaluation of valuation methods; does the evaluation demonstrate understanding of the weaknesses and strengths of the valuation methods; does the discussion recognise practical issues in the application of the methods; is there evidence of wide reading /20
4) Appendices; do they provide an adequate level of supporting detail; are they clearly laid out; do they support the valuations sufficiently /10
5) Ratios; have ratios been selected and used that are suitable and relevant; have they been adequately and appropriately interpreted; have they been used to inform the valuations /15
6) Is the report clear and well- structured; is a list of references included; is the report appropriately referenced; is the report within the word count /10
Total Mark = /100