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Billabong Financial Analysis

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Information about Billabong Financial Analysis

Published on January 2, 2008

Author: jhol.in.my.soul

Source: slideshare.net

Description

Billabong International analysis from Corporate Finance Perspective
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A FINANCIAL ANALYSIS BY: SHETTY SEKHAWAT SINGH MOH & THAKKAR ASX:BBG

INTRODUCTION FOUNDED IN 1973, LISTED IN 2000 BRANDS INCLUDE : MAJOR COMPETITORS: DIVERSIFICATION AND EXPANSION IN LAST 7 YEARS 8 ACQUISITIONS AND 1 JOINT VENTURE SINCE 2001

FOUNDED IN 1973, LISTED IN 2000

BRANDS INCLUDE :

MAJOR COMPETITORS:

DIVERSIFICATION AND EXPANSION IN LAST 7 YEARS

8 ACQUISITIONS AND 1 JOINT VENTURE SINCE 2001

INTRODUCTION SALES JUMPED 21% TO $1.0182 BILLION IN 2006 CONSTANTLY INCREASING NPAT, LAST RECORDED $145.9 MILLION HEALTHY INDUSTRY, HEALTHY FINANCIALS, STRONG COMPETITION ISSUES STOCK OPTIONS TO SENIOR MANAGEMENT

SALES JUMPED 21% TO $1.0182 BILLION IN 2006

CONSTANTLY INCREASING NPAT, LAST RECORDED $145.9 MILLION

HEALTHY INDUSTRY, HEALTHY FINANCIALS, STRONG COMPETITION

ISSUES STOCK OPTIONS TO SENIOR MANAGEMENT

CAPITAL STRUCTURE

CAPITAL STRUCTURE DEBT TO EQUITY RATIOS 74.23% 20.72% 133.11%

CAPITAL STRUCTURE

CAPITAL STRUCTURE 91.92% 95.92% 96.89% 95.73% 93.65% 91.22% Interest Burden ratio 75.40% 68.51% 68.36% 68.06% 70.01% 67.51% Tax Burden Ratio 1.83 1.77 1.46 1.56 1.50 1.32 Leverage Ratio 2007 2006 2005 2004 2003 2002  

CAPITAL STRUCTURE COST OF BILLABONG’S CAPITAL (UNLEVERED) = 22.23% COST OF EQUITY CAPITAL WHEN LEVERED= 33.36% WACC FOR BILLABONG = 28.03 %

COST OF BILLABONG’S CAPITAL (UNLEVERED) = 22.23%

COST OF EQUITY CAPITAL WHEN LEVERED= 33.36%

WACC FOR BILLABONG = 28.03 %

DIVIDEND POLICY TWICE A YEAR, FULLY FRANKED FIXED PAYOUT RATIO ~ 62%

TWICE A YEAR, FULLY FRANKED

FIXED PAYOUT RATIO ~ 62%

DIVIDEND POLICY

DIVIDEND POLICY

DIVIDENDS POLICY NO BUYBACKS / SPLITS OPTIMISTIC VIEW ON THE PERMANENCY OF RISE IN EARNINGS ‘ s’ = 1

NO BUYBACKS / SPLITS

OPTIMISTIC VIEW ON THE PERMANENCY OF RISE IN EARNINGS ‘ s’ = 1

OPTIMAL DIVIDEND POLICY ALTERNATIVES TO DIVIDEND PAYMENTS : REPURCHASES, PAYBACK DEBT PESSIMISTIC ‘ s’

ALTERNATIVES TO DIVIDEND PAYMENTS : REPURCHASES, PAYBACK DEBT

PESSIMISTIC ‘ s’

VALUATION STEPS: GET TOTAL DEBT & COST OF DEBT GET TOTAL EQUITY GET TOTAL V = D+E

STEPS:

GET TOTAL DEBT & COST OF DEBT

GET TOTAL EQUITY

GET TOTAL V = D+E

VALUATION GET Re= Rf + β (Rm-Rf)= 16.75% where, Rf based on 10 yr treasury bond Rm based on AOI over the past 5 years β found out be regressing BBG’s returns against AOI PUT EVERYTHING INTO FORMULA WACC FOUND OUT TO BE 15.41%

GET Re= Rf + β (Rm-Rf)= 16.75%

where, Rf based on 10 yr treasury bond

Rm based on AOI over the past 5 years

β found out be regressing BBG’s returns against AOI

PUT EVERYTHING INTO FORMULA

WACC FOUND OUT TO BE 15.41%

VALUATION SHARE PRICE WAS FOUND TO BE $18.15 (GROWTH RATE = 6%) SENSITIVITY ANALYSIS

SHARE PRICE WAS FOUND TO BE $18.15

(GROWTH RATE = 6%)

SENSITIVITY ANALYSIS

EVENT STUDY THE EVENT CHOSEN IS RESIGNATION OF CEO (MATTHEW PERRIN) OF BILLABONG ON 31ST OCTOBER 2002.

THE EVENT CHOSEN IS RESIGNATION OF CEO (MATTHEW PERRIN) OF BILLABONG ON 31ST OCTOBER 2002.

EVENT STUDY

Market Model

CAR (Event Window).

CAR (Pre-Event) The t-stats for these windows posted a result between -0.4097 and 0.3899, which underwent hypothesis testing at 95% confidence interval. Null hypothesis was consistently accepted in all cases, since result is in acceptance region (-2.045<t<2.045) and thus proving that there was no significant movement to show abnormal returns during the pre-event period.

CAR (Event Announcement) The t-stat test suggests that there are no significant changes to the returns during the event window H 0 Rejected (0.2760) -2.1100% 1 H 0 Rejected (0.5354) -4.0928% 0 H 0 Rejected (0.4831) -3.6934% -1 Result t-stat AR Event Days Single Day Abnormal Return

CAR (Post-Event) . The Calculation of the t-stats was the same as in pre event and it ranged from -1.3257 to 0.1766, which goes to show the stability of the company’s returns and its ability to absorb the effect of the events and not show abnormal return

Event summary NO ABNORMAL RETURNS PRE-EVENT. NO ABNORMAL RETURNS ON EVENT DATE. NO ABNORMAL RETURNS POST DATE.

NO ABNORMAL RETURNS PRE-EVENT.

NO ABNORMAL RETURNS ON EVENT DATE.

NO ABNORMAL RETURNS POST DATE.

QUESTIONS ?

 

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