Fluent Essays

Capstone analysis Page 1 of 3 Group Project Deliverables Your group must submit three items the deadline of midterm week BEFORE class: ✓ a one page equity research summary (DRAFT, Not Marked) ✓ a Powerpoint presentation to be used during an in-class presentation the week of the midterm ✓ an Excel file calculating the numbers you use in your summary & presentation The One Page Equity Research Summary (5\% of grade, DRAFT when presenting, finalized the week AFTER the midterm) There is an example of the Summary Document linked on the class website. There are a few guidelines to follow:  All company information is on ONE page  Your references (you need them) are on another page in APA style The design, layout and information on the page is all up to you. Dont copy this example exactly. Have fun with it but be sure it easily readable. Main text must be no smaller than 10 point and text on graphs and charts no smaller than 8 point. Notice in the example there is a lot of white space. Dont cram too much in. The idea of this summary is to give a quick but informed overview about the company and the investment opportunity. Think of it as a written report given to an extremely busy top-level executive in a company. The executive just has time to read one page and make a decision on whether to invest or not. There is one single goal of this one-page document for the reader. It answers, Should I invest money in this company or not? See the document CFA Equity Report Essentials file for the official categories you should have in your summary. https://www.cfainstitute.org/-/media/documents/support/research-challenge/challenge/rc-equity- research-report-essentials.ashx Some questions this summary should answer: o What does this company do? o How does it earn money? o What makes it a good or poor investment risk? o Using quantifiable numbers, ratios, and graphs show the current and/or historical information of the company focused on company equity. o How does this company compare to others in the same field and market? Use quantifiable information that is referenced facts or numbers. The educational goal for this summary is to figure out what the vitally important investment information is for a company. In-depth investment research reports can be huge with dozens of graphs, ratios, industry analysis, and so much more. What does your group think the most valuable and informative information will be? Page 2 of 3 The PowerPoint Presentation (7\% of grade) The PowerPoint presentation must have at least one slide for each of the following: o Your Investment Recommendation with at least 3 reasons to support your viewpoint o Business Description o Industry Overview and Competitive Positioning o Investment Summary o Valuation o Financial Analysis (using ratios) o Investment Risks o Environmental, Social & Governance (ESG) o References  All slide text and slide elements must be easily readable, especially labels on charts or graphs.  Any quoted sources, charts, graphs must be properly referenced using APA 7 style.  This PowerPoint presentation is a DRAFT of the version you will finish by the end of the semester. For the midterm presentation focus a slide or two on the Financial Analysis (using ratios) o For full marks on your DRAFT, you need to have started a slide for each of the above topics and present a Financial Analysis using at least five ratios. o For each of the five ratios, relate the number you compute to the company’s financial performance. This is a DRAFT since you will continue to research your companies every week until the end of the term. Definitions for all but the first and last slide are from the document CFA Equity Report Essentials at https://www.cfainstitute.org/-/media/documents/support/research-challenge/challenge/rc-equity-research- report-essentials.ashx. The Excel File (required, but not graded separately) For any number you calculate, please include it in the Excel file. There are two goals with this Excel sheet: • Make sure you understand what numbers are making up the ratio or calculation. • Force you to decide on just those ratios and calculations you consider important. I dont want to see a wall of numbers in your presentations. I want to see key indicators you think are important and have you understand why they are important. If you are going to use a ratio or other financial indicator, Id like to see it calculated in your Excel sheet. If it is extremely complex, I dont need you to do it. I dont need calculations using every years information for the last 20 years. During class, your group will give a verbal presentation about your company. o It will follow the rules for the Recorded Presentation below and use your slides. o It will use your DRAFT slides and information so it doesn’t need to be perfect. You will receive verbal feedback directly after your presentation. This feedback is meant to be a general guide for your slides and presentation. It is the only feedback you will receive. https://www.cfainstitute.org/-/media/documents/support/research-challenge/challenge/rc-equity-research-report-essentials.ashx https://www.cfainstitute.org/-/media/documents/support/research-challenge/challenge/rc-equity-research-report-essentials.ashx Titic Highlight Titic Highlight Titic Highlight Page 3 of 3 Between your DRAFT and Final Submission, you will update your group presentation. During the time between your draft presentation and final recorded submission, you will apply what you learn during each week’s class to your company. For the final submission of your presentation, include this refined company information. Your group must submit three items by the deadline the week of the final: ✓ a recorded presentation as detailed below ✓ the PowerPoint presentation you use in your recorded presentation ✓ an Excel file calculating the numbers you use in your summary & presentation A Recorded Presentation (THIS IS DUE AT THE END OF THE SEMESTER) (8\% of grade)  This must be 8 minutes or less. Note that is one minute or less per subject in your PowerPoint presentation.  All group members should participate in the presentation. It is up to your group how much each person presents.  Don’t just read the text on the slide, please. Your verbal presentation should add additional information or an opinion to your slides. That means don’t just read the material on the slides. Try to tell the meaning and/or impact behind what you have on the slide. For example, assume you are showing a historical chart of a company’s share price. Try to give your audience a verbal explanation of why there is a dip or surge. Tell your audience if it was the 2008 housing crisis or did the company release a very successful new product. Another example is when you are presenting ratios. Be sure to speak of what the computed number tells you about the company’s financial health instead of just stating the number.  The recording file needs to be UNDER 20 MB to upload to Moodle. Zoom is a good way to record your presentation but you can use any software you like. Submit in an MP4 file format OR you may upload a link to the video if it is hosted somewhere else. Smaller formats such as Zooms default recording size of 640 x 360 may fit. If you decide to go HD, it likely wont be under 20 MB. If your file is above 20 MB, submit a link to an online repository (google drive, youtube, etc.) where I can download it. Do not email me with the file or link. I will not be grading on the video quality of the file unless it is so bad that I cant read the slides or understand people speaking. There are many applications that will allow you to cut and splice and re-encode a video to make it smaller. One free option is ShotCut on the PC but there are many, many more. Every term at least 1 group has an issue where the file size is too large for the upload and ends up submitting late. This is your warning now. Give yourself enough time to fix any file size issues before the submission deadline.  The PowerPoint File (required, but not graded separately) The PowerPoint presentation you use in your recorded presentation  The Excel File (required, but not graded separately) The updated Excel File for any calculated numbers used in your presentation. ------------- This is the end of the Group Project Requirements ------------- Company Data In C$ Dividend $0.34 Shares O/S (mm) 146.3 Yield 6.93\% Market Cap (bn) $2.870 Consensus Estimates In C$ (FY – Dec.) 2018A 2019A 2020E 2021E AFFO/Share $1.96 $2.14 $2.23 $2.11 EBITDA (mm) $393.2 $402.3 $459.7 $470.7 Valuation 2018A 2019A 2020E 2021E EV/EBITDA 10.7x 11.1x 10.3x 10.9x GEI - TSX Rating Outperform Price: Oct-30 $19.62 Target $26.00 Total Rtn 32.5\% ⚫ Gibson Energy (“Gibson” or “GEI”) is a leading Canadian midstream company based in Calgary, Alberta. The Company’s operations consist of Infrastructure and Marketing segments strategically located in Western Canada that are engaged in storage and distribution of hydrocarbons across North America. ⚫ The Company generates stable, fee-based cash flows through its Infrastructure segment which includes 14 mmbbls of oil storage terminals, processing facilities, gathering pipelines, and exclusive rail terminal access in Hardisty (Gibson Energy Inc, 2020). ⚫ Gibson’s Marketing segment involves purchasing, selling, storing, and blending of hydrocarbons which helps to drive volumes to the Company’s infrastructure assets and earns margins by capturing quality locational or timely arbitrage opportunities. - 2 4 6 8 5 15 25 35 May Nov May Nov 2 YR Price Volume Chart LHS: Price (C$) / RHS: Volume (mm) Business Description Industry Overview & Positioning ⚫ Well-positioned asset base in Hardisty: Gibson is the second largest storage operator in Hardisty and has developed leading pipeline connectivity over decades, evidencing Gibson’s difficult-to- replicate storage asset position (Gibson Energy Inc, 2020). ⚫ Quality contract profile: Gibson generates 80\% of its cash flows through long-term, fee-based contracts that remove volume and commodity price risk and allow the company to deploy capital into Infrastructure growth projects and its attractive dividend yield (Gibson Energy Inc, 2020). ⚫ Attractive internal and external growth prospects: Gibson has sizable undeveloped acreage available for terminal expansions and is positioned to benefit from additional external pipeline takeaway (KXL, Line 3, and TMX) that would increase storage demand. ⚫ Strong defensive positioning: With leverage of 2.7x Net Debt-to- EBITDA and no material debt maturities until 2025, Gibson has the best liquidity position in its peer group (Bloomberg L.P., 2020). Investment Summary ⚫ Gibson primarily operates in the oil & gas storage segment of the energy infrastructure sector which is consolidated among a few major players. Gibson is the third largest operator in Western Canada and operates 35\% of all storage in Hardisty (Oil Sands Magazine, 2020). ◼ Peer group includes Pembina Pipeline, Inter Pipeline, Keyera, TC Energy, and Enbridge. ⚫ The Company has been in Hardisty since the 1960’s and has been able to develop best-in-class connectivity to inbound and outbound pipelines as aa result. This connectively advantage allows Gibson to provide cost advantages relative to its peers. Furthermore, the business has exclusive rail terminal access out of Hardisty, making Gibson the sole point of DRU egress out of Western Canada (Gibson Energy Inc, 2020). ⚫ Gibson is the only Canadian energy infrastructure company that has a storage-focused strategy which allows its business to be shielded from energy market volatility relative to its commodity-exposed peers that have been hit harder by 2020 market conditions. ⚫ As a result of Gibson’s wide moat at Hardisty and highly contracted business model, the company can achieve strong financial performance regardless of energy prices and sentiment. Gibson Energy Energy Infrastructure ⚫ Analysis of various value drivers implies that Gibson trades below its intrinsic value. Median valuation price suggests a 10.5x EV/EBITDA trading multiple in contrast to its current 8.8x EV/EBITDA multiple (Bloomberg L.P., 2020). Valuation $10.96 $22.00 $22.84 $25.65 $23.47 $28.34 $30.00 $26.59 $28.78 $27.21 52 wk hi/lo Analyst Targets Comps Precedents DCF Range Median $26.00 Current $19.62 Note: All financial information from Bloomberg L.P. as of October 30, 2020. DCF Range based on company guidance. References Bloomberg L.P. (2020). Gibson Energy Financial Statement Analysis, 2018 - 2021. Retrieved November 5, 2020 from SFU Bloomberg Terminal. Gibson Energy Inc. (2020). November 2020 Investor Presentation. Retrieved from https://www.gibsonenergy.com/getattachment/56dfdce7-bea9-4531-9739- 36aab749e6f7/November-2020-Investor-Presentation Oil Sands Magazine (2020). Oil Storage Terminals. Retrieved November 5, 2020 from https://www.oilsandsmagazine.com/projects/crude-oil-storage-terminals 2 EQUITY RESEARCH REPORT ESSENTIALS An equity research report can include varying levels of detail, and although there is no industry standard when it comes to format, there are common elements to all thorough and effective equity research reports. This guide includes some fundamental features and information that should be considered essential to every research report, as well as some tips for making your analysis and report as effective as possible. BASIC INFORMATION The research report should begin with some basic information about the firm, including the company’s ticker symbol, the primary exchange where its shares are traded, the primary sector and industry where it operates, the investment recommendation, the current stock price and market capitalization, and the target stock price. In addition, the liquidity and float of a security are important considerations for the equity analyst. The liquidity of a stock refers to the degree to which it can be purchased and sold without affecting the price. The analyst should understand that periods of financial stress can affect the liquidity of a security. A stock’s float refers to the number of shares that are publicly owned and available for trading and generally excludes restricted shares and the holdings of insiders. The float of a stock can be significantly smaller than its market capitalization and thus is an important consideration for large institutional investors, especially when it comes to investing in companies with smaller market capitalizations. Consequently, a relatively small float deserves mention. Finally, it is good practice to identify the major shareholders of a firm. BUSINESS DESCRIPTION This section should include a detailed description of the company and its products and services. It should convey a clear understanding of the company’s economics, including a discussion of the key drivers of revenues and expenses. Much of this information can be sourced from the company itself and via its regulatory filings as well as industry publications. INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING This section should include an overview of the industry dynamics, including a competitive analysis of the industry. Most firms’ annual reports include some discussion of the competitive environment. A group of peer companies should be developed for a competitive analysis. The “Porter’s Five Forces” framework for industry analysis is an effective tool for examining the health and competitive intensity of an industry. Production capacity levels, pricing, distribution, and stability of market share are also important considerations. It is important to note that there are different paths to success. Strength of brand, cost leadership, and access to protected technology or resources are just some of the ways in which companies set themselves apart from the competition. Famed investor Warren Buffett describes a firm’s competitive advantage as an economic “moat.” He says, “In business, I look for economic castles protected by unbreachable moats.” INVESTMENT SUMMARY This section should include a brief description of the company, significant recent developments, an earnings forecast, a valuation summary, and the recommended investment action. If the purchase or sale of a security is being advised, there should be a clear and concise explanation as to why the security is deemed to be mispriced. That is, what is the market currently not properly discounting in the stock’s price, and what will prompt the market to re-price the security? VALUATION This section should include a thorough valuation analysis of the company using conventional valuation metrics and formulas. Equity valuation models can derive either absolute or relative values. Absolute valuation models derive an asset’s intrinsic value and generally take the form of discounted cash flow models. Relative equity valuation models estimate a stock’s value relative to another stock CFA Institute EQUITY RESEARCH REPORT ESSENTIALS SEPTEMBER 2020 and can be based on a number of different metrics, including price/sales, price/earnings, price/cash flow, and price/book value. Because model outputs can vary, more than one valuation model should be used. FINANCIAL ANALYSIS This section should include a detailed analysis of the company’s historical financial performance and a forecast of future performance. Financial results are commonly manipulated to portray firms in the most favorable light. It is the responsibility of the analyst to understand the underlying financial reality. Accordingly, a careful reading of the footnotes of a company’s financial disclosures is an essential part of any examination of earnings quality. Nonrecurring events, the use of off-balance-sheet financing, income and reserve recognition, and depreciation policies are all examples of items that can distort a firm’s financial results. Financial modeling of future financial results helps to measure the effects of changes in certain inputs on the various financial statements. Analysts should be especially careful, however, about extrapolating past trends into the future. This is especially important in the case of cyclical firms. Projecting forward from the top or bottom of a business cycle is a common mistake. Finally, it can be informative to use industry-specific financial ratios as part of the financial analysis. Examples include proven reserves/share for oil companies, revenue/subscriber for cable or wireless companies, and revenue/available rooms for the hotel industry. INVESTMENT RISKS This section should address potential negative industry and company developments that could pose a risk to the investment thesis. Risks can be operational or financial or related to regulatory issues or legal proceedings. Although companies are generally obligated to discuss risks in their regulatory disclosures, risks are often subjective and hard to quantify (e.g., the threat of a competing technology). It is the job of the analyst to make these determinations. Of course, disclosures of “qualified opinions” from auditors and “material weakness in internal control over financial reporting” should be automatic red flags for analysts. ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG) This section should include information on how the company manages the relationships related to Environmental, Social and Governance. Below are some examples within these three areas that can have a lasting impact on the company’s short and long term prospects. Environmental – how is the company working towards the conservation of the natural world? This can include climate change and carbon emissions, air and water pollution, energy efficiency, waste management and more. Social – how does the company consider people and relationships? This can include community relations, human rights, gender and diversity, labor standards, customer satisfaction and employee engagement. Governance – what are the standards for running the company? This can include board composition, audit committee structure, executive compensation, succession planning, leadership experience and bribery and corruption policies. CFA INSTITUTE RESOURCES The following CFA Institute resources codify the ethical standards and best practices that are the responsibility of all investment professionals. CFA Institute EQUITY RESEARCH REPORT ESSENTIALS SEPTEMBER 2020 CFA Institute Code of Ethics and Standards of Professional Conduct Best Practice Guidelines Governing Analyst/Corporate Issuer Relations http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2010.n14.1 http://www.cfapubs.org/doi/abs/10.2469/ccb.v2005.n7.4004 Coca Cola Financial Equity Statement University Canada West Financial Management Dr. Tara Immell Group Members Elahe Taheri Samaneh Khabiri Neda Poursotoudeh Milad Roshan Zanjani Kulwinder Singh Luis Carlos Fonseca angel Business Description Coca-Cola is working in the production of non-alcoholic beverages. Founded in 1892 by Asa Griggs Candler in Atlanta, USA. operating structure and scope of operations in the Middle East and Africa, North America, Latin America, Europe, as well as Asia and the Pacific. The main motto of this company is to refresh the world and make a difference. This company in 2020 had about 80.30K employees worldwide(Statista, 2021). The company also grew its revenue from about $31 million in 2009 to about $33 million in 2020. Revenue Figure Stock Can be mentioned that the company has been recognized as a public company since 1919. Identified with the symbol KO on the New York Stock Exchange. The price of each share of this company these days is about $58. The company has also paid dividends annually since 1920. Investment Summary Growth consumer Vol in 35\% of the market over year 2020 Revenue increased per each innovation: 1.5*2019 Distribution channel grow the market share both locally and internationally Strong operational bottling system MSCI & CDP ranking improvement Optimizing the brand portfolio from 400 to 200 master brand Effective marketing efficiency Data management empowerment in many areas Price & packing customization Targeted water resource allocation Cash flow convention maximization ESG Environmental 25\% devaluation in greenery gas emissions by 2030 achieve zero-carbon net emissions by 2050 Alternative energy ( 15\% of electricity supply in 2019 and 17\% in 2020 ) 100\% of our packaging recyclable globally by 2025. Use at least 50\% recycled material in our packaging by 2030 ESG Social The Coca-Cola Community Relations team is responsible for maintaining connections with the companys stakeholders. Respecting human rights 5by 20 Target One of our strengths is diversity and equality ESG: Governance The Public Policy Committee aids the Board of Directors to monitor the companys policies, plans, and risks. Review stakeholder proposals, public policy advocacy activities, political partnerships, and charitable contributions Supervise the talents and compensation of the board on human capital management policies and strategies Coca cola have business conduct codes and corporate governance guidelines Audit Committee structure Garry Watts (Chairman) John Bryant Dagmar Kollmann Dessi Temperley References Coke recognized by EPA as top green energy user | Press release. (n.d.). The Coca-Cola Company. https://www.coca-colacompany.com/press-releases/epa-recognizes-coca-cola-refreshments-among-nations-top-green-energy-users Coca-Cola community relations team executes stakeholder strategy in quorum. (2020, June 22). Quorum. https://www.quorum.us/case-studies/execute-stakeholder-strategy/ Committees. (n.d.). Coca-Cola Europacific Partners. https://www.cocacolaep.com/about-us/governance/committees/ (n.d.). Coca-Cola Europacific Partners. https://www.cocacolaep.com/assets/9fd4f850e9/2021_03_12_CCEP_IntegratedReport_WEB_Governance-and-Directors-Report.pdf (n.d.). The Coca-Cola Company: Refresh the World. Make a Difference. https://www.coca-colacompany.com/content/dam/journey/us/en/reports/coca-cola-business-environmental-social-governance-report-2020.pdf Coca-Cola Business Description. The Coca-Cola Company. (2021). https://investors.coca-colacompany.com/about/our-purpose. Coca-Cola Company. (February 25, 2021). Global revenue and financial results of The Coca-Cola Company from 2009 to 2020 (in million U.S. dollars) [Graph]. In Statista. Retrieved August 18, 2021, from https://www-statista-com.ezproxy.myucwest.ca/statistics/264423/revenue-and- financial-results-of-coca-cola/