Premier Foods

This is a structured individual assignment and involves all aspects of valuation techniques. Your case company is Premier Foods (Premierfoods Investors/Investor Centre) listed on the London Stock Exchange. You are assessed based partly on your technical skills, but also the extent to which you understand the materials covered in the module. Good discussion should include relevant readings and examples, as well as refer tightly to your own analysis to support your arguments. The overall word count is 2500 words. You are required to provide full disclosure of necessary valuation techniques in an appendix, including full reformulation and value-relevant ratio analysis. Word limit for each section provides guidance only.

Task 1: Reformulate Premier Foods fiscal year 2014 till the latest available annual balance sheets and income statements. (600 words; 25%)

a) Clearly demonstrate net operating assets (NOA), net debt, net operating profit after tax (NOPAT), financial cost after tax, and tax rate.

It is essential to show the full reformulation in appendix. No Excel submission is required.

b) Briefly discuss Premier Foods’ key fundamental information.

c) Discuss the role of reformulation in valuation. Your discussion should include the theoretical justification of reformulation.

d) Analyse Premier Foods free cash flows during the period of analysis.

Task 2: Based on your reformulation, illustrate the advanced Dupont analysis. (700 words; 30%)

a) Clearly demonstrate return on equity (ROE), return on operating assets (RNOA), financial leverage, and spread of operating profitability over the analysed period. This part of the task assesses your technical skills.

b) Critically discuss Premier Foods’ past and current performance in relation to its strategy and external macroeconomic and trading conditions. It is desirable that you discuss top-line performance (e.g. segment sales performance), operating efficiency, and investment management.

Task 3: Compute abnormal operating profit (AOP) from 2014 to 2020 (250 words; 10%)

a) Assume a constant cost of capital based on your justifications, discuss how Premier Foods’ AOP has developed over the analysed period.

b) Critically discuss whether Premier Foods is potentially a growth firm

Task 4: Summary. Based on your analysis above, discuss Premier Foods intrinsic value at 28 March 2020. Carefully refer to relevant academic readings and your previous analyses. (950 words; 35%)

a) The first part of your discussion should include the clear justifications of your projection of sales growth rates, detailed operating profit margin, as well as operating asset turnover. Bearing in mind that these forecast inputs follow mean-reverting behaviours.

b) The second part of your discussion should include potential upside and downside scenarios to conclude the report.