As the finance manager of the Heineken Malaysia company, you are required to provide a report of

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Question:

As the finance manager of the Heineken Malaysia company, you are required to provide a report of the following:

Part 1: Industry overview (10%)

a) An evaluation of the company’s brief recent history and financial performance.

You may include the following:

- Net profit / (loss) over 5 years.

- Share price history over 5 years.

- Corporate strategy

- Industry analysis and comparison with its peer groups

b) An analysis of the current issues / risks that the company is facing, and explain the impact of these issues on the company’s future earnings.

Part 2: Estimate valuation models (15%)

Briefly explain different valuation models (asset based and income based) and the most suitable model to reflect the firm’s worth. Estimate the value of company’s share using:

DIVIDEND VALUATION MODEL (DVM)

Capital Asset Pricing Model (CAPM) is needed to estimate the required rate of return or discount rate. CAPM requires the estimation of three components; beta, risk free rate and risk premium. Hence, you are required to calculate the following:

1. Beta: Attach the Beta's calculation as an appendix (you must not pick a beta value estimated elsewhere and use it in your report).

2. Risk-Free Rate: You may use 10 year’s government bond yield as a proxy for the risk-free rate. Indicate any advantages or disadvantages if there are any.

3. Market Risk Premium: You must explain how you derive the estimation and any assumption that is done.

Note: You may subtract the risk free rate from the expected market return and arrive at your market risk premium.

Important points to be covered in Part 2:

• Explain any assumptions made in implementing the estimations.

• Explain how you arrived at the variables that is used (e.g. provide justification/motivation of how you arrive at n % growth rate).

Part 3: Discuss the value or price of the company (15%)

Comment on your valuations from part 2, including a discussion of possible explanations of why your valuations differ from the recent share price. If appropriate, discuss why other models may be unsuitable for valuing the company.