MBA Finance Assignment

MASTER OF BUSINESS ADMINISTRATION

M.A. IN MANAGEMENT STUDIES,

UNIVERSITY OF HERTFORDSHIRE

ACC6202 BUSINESS ACCOUNTING AND FINANCE

MAY 2015

INDIVIDUAL ASSIGNMENT #2 (40%)

Guidelines:

This is an individual assignment worth 40%

Framework:

You are a research analyst under a fund manager of an investment company. In your rotation program, you have been given the task to construct an equally weighted stock portfolio of FIVE stocks trading in the stock markets. The selection of stocks should be based on the criteria of under-valuation in the markets, for which the intrinsic values must be calculated by you. In case you are unable to discover undervalued companies, then you may choose over-valued companies; however your analysis should indicate this fact and its limitations. In addition, you must perform an analysis of the financial ratios to determine if the company is in good standing and has positive future prospects. You may choose any industries but try to diversify.

Therefore you will be selecting THREE companies, valuing them using capital investment decision tools learnt in class (intrinsic values), evaluating them using financial analysis tools, and then investing in them in a portfolio setting. You will subsequently track their performance in the stock market over 4 weeks (based on a marked to market every Friday close) and monitor your profit and loss situation over the course of the investment horizon. The company has allocated a budget of MYR 1000,000 (or USD100,000) for your investment project.

IMPORTANT REPORT FORMAT GUIDELINES

A) Attach “ASSESSMENT MARKS FORM” as COVER PAGE of report.

B) Use double sided printing. Don’t waste paper. (save trees!)

C) Exhibits/Appendix to be attached as a soft copy on CD ONLY.

D) DO NOT INCLUDE appendix in your written report except references/journals

E) Submitted report should NOT have more than 8-10 pages! (12 Font, Single space)

F) Binding is not necessary. Staple is sufficient. (Maximum TAPE Bind)

TOTAL Page Limit: 8 Pages (DO NOT EXCEED)

“SUBMIT ONE COPY ONLY”

NOTE: PRINT YOUR PICTURE ON 1ST OR 2ND PAGE

Instructions follow…

Requirement

1. Pick any THREE companies in the stock market. Under or overvalued. Apply investment appraisal tools to discuss valuation of these companies including future growth prospects. If your company is over-valued, indicate limitations in your analysis. Use multiple growth model (DCF) to find intrinsic values. Analyse the financial health of these companies using tools learnt in class. Also discuss your view on the future performance of the companies. List assumptions used as the basis for your forward view. Do not include ratio calculations in the main body. Attach calculations as exhibits and use the ratios in your written analysis.

(50 marks)

2. Construct a portfolio by investing in these chosen companies and track their performance over 4 weeks. Follow the step by step guide provided below to implement this part.

(20 marks)

3. Compare the working capital management for a case company which will be provided as a separate hand-out in class. You should describe your calculation related to the working capital management of company.

(10 marks)

4. Prepare simplified Operating/Financial budgets for a case company which will be provided as a separate hand-out in class. You must indicate the set of assumptions used in your projections (relevant to the industry) in preparing these budgets.

(10 marks)

Overall Report Presentation (10 marks)

Total = 100 Marks (40%)

Note: References must be attached with report

NOTE: PRINT YOUR PICTURE ON 1ST OR 2ND PAGE

Step by Step Guide Follows…

Step by Step Guide

MBA-Stock Simulation Game

Step 1 (Organize) – BEGIN NOW!

Recreate the Excel Stock Market Trading Handout for a Stock Portfolio (Active). Each portfolio has starting value of MYR One Million (or $1,000,000). You may choose to create your own portfolio format. The handout is just a guide to get you started. Feel free to be creative.

Step 2 (Stock Research & Portfolio Construction)

Go to the internet and find out how to get stock market and company information. Hint: yahoo finance, msn-money, cnbc.com, cnn-money, and many more are available with free company and stock information. Find the relevant site which has your country’s stock information.

Pick stocks of your choice & find their symbols. Learn to discover company fundamental and technical information when you need it. This step will be required for valuation purposes.

You may pick stocks in any ONE country. Include exchange rate at the time of opening positions. At the end you will need to convert the proceeds back to Malaysian currency.

Number of stocks to pick: (in your portfolio)

a) Active = 3 stocks

Step 3 (Managing your trades & learning by doing)

Create and fill out your Excel Trading sheets & keep record of your trading data on a weekly basis. (Mark to Market as of Friday close values). For Active portfolio you may trade as frequently as you wish. Make sure you use FORMULAS in the spreadsheet cells.

Note: Many questions & problems will arise in the beginning. You are required to find solutions by yourself through proactive initiative. Ask instructor ONLY after you have given up!

Step 4 (Journal Log – your personal reflection diary) – as CD ONLY

Create a learning journal and log all your buy/sell decisions and reasoning through the project duration. Include your analysis, valuation basis, learning experience , mistakes, and any other relevant reasoning used while making your decision. Your task is to reflect on your decisions, self-discover mistakes you make and indicate learning from those mistakes by associating correct methodology and solution as learnt in class sessions.

NOTE: Personal journal should be attached with report

Step 5 (Completion)

Hand in 7-page paper (detailed outline given) with journal entries at end of semester. Report should be to the point and have a corporate valuation focus.

Stock Market Game

MBA ACC 6202

Report Layout Guidelines

NOTE: DO NOT EXCEED PAGE LIMITS (8 Pages)

Keep all writing as precise as possible.

Focus on analysis & less on fact compilation!

1. Executive Summary

2. World Overview Snapshot (Analyze) – 2 Pages

a. Europe, Asia, US and Malaysia–pick one country in each region & cover briefly

b. Analyze their GDP, interest rates, inflation, & currencies trends (keep it short)

3. Portfolio Construction – 4 Pages

a. Construct 1 Portfolio of 3 stocks. Explain basic profile of each stock, and explain why you are buying.

b. Discuss your asset allocation decision (why you chose particular weights)

c. Run Portfolios through semester. Buy/Sell & trade! (use weekly data)

d. Calculate for Individual Stocks

i. Intrinsic Values(use MGM)

ii. Stock Historical(1 year chart)

iii. Is your company over/under valued? Was your decision a mistake?

e. Identify your mistakes & present an analysis of corrective measures you took

f. Analyze your performance, & summarize your learning outcome

4. Your Learning Summary and Conclusions – 1 page (what did you learn?)

5. Journal entries and Exhibits – (attach at end of report)

6. Prepare for a “Viva Session” on the report submitted to qualify for scoring.

NOTES:

a) Report should be written by you & not pasted from web or other sources. Each sentence should be your own!

b) References must be provided when using information from other sources.

1. Demonstration of your analysis, reflection, & learning is most important.

1. Do not exceed page limits. Trading managers require short and to the point reports!

GOOD LUCK & ENJOY TRADING STOCKS …Happy Learning!

1