For this assignment, you will be wearing the hat of an equity analyst of a London-based investment bank. You are tasked with the production of a 2000-word equity research report of ONE of the companies that you know well and whose shares are FTSE100 constituents.
The Assessment Task
For this assignment, you will be wearing the hat of an equity analyst of a London-based investment bank. You are tasked with the production of a 2000-word equity research report of ONE of the companies that you know well and whose shares are FTSE100 constituents.
Students are required to:
| Select ONE target corporation from FTSE100 and write an equity research report which is similar in style and format to reports written by equity analysts. (Note that the bigger the firm is, the more information you can collect about it. On the other hand, less diversified firms and firms listed in a single stock exchange are “cleaner” to value).Analyse the key industry, market, financial and risk aspects surrounding the chosen company by applying the knowledge gained from the module which may include, but not be limited to, industry analysis, security valuation, technical and fundamental analyses, Markowitz’s Portfolio Theory, Efficient Market Hypothesis, smart beta, etc…Include a valuation and a recommendation of the selected stock in the analysis which are supported by both qualitative and quantitative analysis.Cover the essential parts in the report as suggested by the CFA institute in the link below https://www.cfainstitute.org/-/media/documents/support/research-challenge/challenge/rc-equity-research-report-essentials.ashx |
Please note that assessment presentation is assessed. Poor presentation will be penalised.
- This assessment MUST be typed and submitted in Microsoft Word.
- Format – letter in Calibri font with letter size 12 and 1.5 line spacing.
- A title page, detailed table of contents and list of appendices (if any) should be included. The title page should contain the topic and title of the assessment, module code and module title, student name and student ID, world counts, and date of submission.
- All supporting documentations (tables, figures, diagrams) should be included in the main content, not as part of the appendices.
- All tables and diagrams should have a number and a title.
- All pages should be numbered.
Note:
- Appendices should only be used for non-essential supplementary information. The document should be able to stand without appendices. Content in the appendices will not be marked.
- Please use small tables and graphs in the text where data is discussed. Please do not include any large tables or complete financial reports in the text or appendices. Avoid descriptive writing, for instance merely repeating figures in the paragraphs.
The report should cover the key features as follow:
| Word limit of 2,000 words (excluding bibliography and any appendices) | Suggested Word Count |
| First Page The first page contains all the key information in the report. It can be thought as the executive summary, which is supported by the remaining report and the appendices. The following information should be included on the first page: Firm name, Exchange, Ticker, Industry, Current stock price, Your main recommendation (Buy/Sell/Hold), Recent news, Some fundamental information (key ratios and selected items on the financial statements) in the historical 3 years, a graph of recent price performance, estimated Beta, Highlights. | 50-100 |
| Investment Summary State your recommendation here (Buy/Hold/Sell, target price). For example, “We issue a Buy recommendation on stock X on the basis of the relative valuation models using [P/E, P/B, P/CF, P/Sale, etc].” Back up your recommendation with key rationales: merits and concerns. You need to make sure the recommendation and the rationales are consistent. | 200-300 |
| Business Description Brief description of the firm, core business (key products/services, contribution to revenues). Description of business model, e.g. how the firm makes profit, where are the main sources of revenues and costs. | 400 |
| Industry Overview and Competitive Positioning Overview of the market, market shares of key players and selected firm, recent trends in the past 5 years. The competitive strategies of selected firm, the market positioning of the firm and the key players along this dimension. | 400 |
| Financial Analysis Tabulate the important financial ratios (grouped in categories, e.g. profitability, liquidity, efficiency, leverage, etc) using the historical financials for the last 3 years. The assumptions and detailed forecast should be reported in an appendix. | 400-500 |
| Valuation At least two valuation methods must be used. Note that in this assignment, you are only required to use the relative valuation approach. For example, several multiples can be used, Price-to Earnings (P/E), Price-to-Book value of equity (P/B) and Price-to-Sales (P/S) and Price-to-Free Cash Flow (P/FCF). You need to compare the price multipliers with peers or industry average and conduct whether the selected is relatively overvalued or undervalued. You may also want to report sensitivity analysis of your valuation models by changing certain key assumptions. | 400-500 |
| Investment Risks Summarising the key risks | 100-200 |
| Disclosures Ownership and disclosure of material conflicts of interest | 50 |
| Total | 2000-2200 |
| Appendices Appendices need to include all information/calculations needed to support the main report and may include the following items: Glossary Financial analysis: 3 year’s historical Balance Sheet and Income Statement. Key base case assumptions Detailed method and calculation of all your valuation models |
Report examples
The following links are examples for equity research report from professional investment analysts, which contains the essential parts recommended by the CFA Institute:
- https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=em&document_id=1080565301&serialid=6m3%2F3JVrXxkMkutdm%2Bc%2BO8SDHvVKuo19Ab6XSotZ844%3D
- https://seekingalpha.com/uploads/2017/4/2/4974797/Equity-Research-Report-Expedia.pdf
- https://cdn2.hubspot.net/hubfs/416543/docs/BW_FZO_update_23_May_2017.pdf?t=1496037690027
- https://youtube-breakingintowallstreet-com.s3.amazonaws.com/SHAW-Equity-Research-Report.pdf
Learning Outcomes
On successful completion of this assessment, you will be able to:
| Subject-Specific Knowledge, Understanding & Application |
| b) Apply both qualitative and quantitative analytical skills in assessing and evaluating investment opportunities. |
| c) Critically evaluate contrasting approaches and strategies in asset allocation and portfolio management in the global investment industry context. |
| e) Justify chosen sustainable solutions and associated decisions to address complex, concrete and abstract problems. |
| f) Communicate information and articulate complex arguments convincingly, to influence and persuade stakeholders. |
Your grade will depend on the extent to which you meet these learning outcomes in the way relevant for this assessment. Please see the grading rubric at the end of this assessment brief for further details of the criteria against which you will be assessed.
Word Limits (where appropriate)
The maximum word limit for this assessment is 2000 words
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