ACCT6003 Fundamental Analysis for Equity Investment
Week 9 Assignment on Reformulation and ReOI valuation
For this assignment you are required to reformulate the 2024 and 2023 statements of Vista Group International Limited (ASX ticker VGL) and then perform a Residual Operating Income (ReOI) valuation exercise using the reformulated statements and the following model assumptions:
• An analyst claims that VGL’s annual WACC is 6%.
• The analyst also claims that the residual operating income will grow in perpetuity after 2024 by 3% per annum.
• The ASX price of VGL as at year end 31 December 2024 was $2.84 per share.
All the information you need to complete the reformulation can be found in VGL’s published 2024 annual report. On Canvas, you are also provided with an Excel template to complete this assignment. Submit for assessment only the completed Excel spreadsheet. Do not submit a report.
Required:
(1) Using the provided Excel template, for 2023 and 2024, you are required to reformulate VGL’s consolidated Income Statement together with the Statement of Other Comprehensive Income in the worksheet named ‘Q1 IS reformulation’, and also reformulate the Consolidated Statement of Financial Position in the worksheet named ‘Q1 BS reformulation’. Follow the reformulation steps presented in the Week 8 lecture. The reformulated balance sheet must satisfy the accounting identity of CSE = NOA – NFL – MI or CSE = NOA + NFA – MI, and the reformulated income statement must satisfy the accounting identity CI = OI – NFE – MIC or CI = OI + NFI – MIC, where MI is minority interest on the balance sheet MIC is the minority interest component on the income statement. Note that Minority Interest is also known as Non-Controlling Interest. You are also required to check that total Operating Assets plus Total Financial assets is equal to Total Assets as reported in the published Balance Sheet. The same for total operating Liabilities plus total Financial Liabilities being equal to Total Liabilities as reported. You are required to perform. these checks in the reformulated statements as indicated in the Excel template. You are required to discover information from the annual reports to produce a detailed breakdown analysis of the components of operating items and reference the source of information from the annual reports where you discovered the breakdown. [4 marks]
(2) In the Excel worksheet named ‘Q2 ReOI,, you are required to apply the Residual Operating Income (ReOI) valuation model to estimate the intrinsic equity price per share for VGL as at 31 December 2024, as described in the Week 8 lecture notes. [1 mark]
(3) Assume that there is no available information for forming any finite horizon forecasts and that all analysts in the market rely entirely on forecasting only a terminal value at the year-end of 2024 to estimate the intrinsic price of equity. If there is no available information, then how can the analyst explain the difference between the estimated intrinsic price per share from Q2 and the actual price of VGL trading on the ASX at $2.84? What information can the analyst use to explain the difference and make sense of the difference. In less than 200 words, you are required to record your answer to this question in the worksheet named ‘Q3 Discussion ,. [1 mark]