Valuation of GlaxoSmithKline plc - Free Essay Example

Sample details Pages: 5 Words: 1572 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? As of our monthly review, we enclosed in our report based on our analysis of last report of 2009 with more details about our last valuation of our company GSK for making decision for investor purposes. In order to make a clear decision about what stocks to buy or to sell, investors need to know the value of those shares to make sure of the real value of it. In fact, there are many methods which we can use to evaluate the value (Vo) of the share of any public company and compared it to the price in the market (Po) the market and then see if it is over valuated (sell) or under valuated (buy) . Don’t waste time! Our writers will create an original "Valuation of GlaxoSmithKline plc" essay for you Create order For, the GSK shares valuation, we used five options available to do so: Discounted Dividend Model (DDC), Free Cash Flow to Firm (FCFF), Free Cash Flow to Equity (FCFE), Residual Income Approach (RI) and Economic Value Added (EVA). A brief introduction about GSK, will be discussed further with calculation details through the appendix related to them and also an analysis of the performance, cash flow and position of GSK. The company was very performing during the last 3 years and the share of GSK under five option of calculation was underpriced in the market which a good opportunity to buy in the market. While calculating the share price by DDM, the value of company is coming to be  £17.02 compared to price in the market which was  £ 11.485 (FTSE100) on 07/05/2010. GSK share is underpriced and as an investor we should buy instead of selling. The use of FCFF, the company is positive cash flow which means it is able to generate cash flow from its mean activity and i s a good reason for investor to buy. In 2009 the firm generated a positive cash flow as  £13361.6327 million compared to ( £16538.07 in 2008 and  £11203.47 in 2007) and based on the model, we expect  £14431.90 million for next year 2010. While using the FCFE, the value of the share was  £71.76 compared to  £11.485 in the market. Again, the share is underpriced in the market, and a good opportunity for investors to buy. On one hand, by using the RI, to compute the value, we found,  £16.47 compared to  £11.485 in the market. The GSK share is again under valuated in the market and should buy instead of selling it. On the other hand, the method of EVA, gives a value of  £4279.53 million as an add value to shareholders after paying whole debtors and investors. It is an economic profit of  £1389.47 million which means that the company is creating the wealth for investors and maximising their profit. It is a good opportunity for investor to buy GSK shares . We recommend that the company can buy back some of the outstanding shares, in the market with the positive cash flow if not used, and maximise the EPS (earning per share) in the mean time, reduce the cost of capital and improve its ratios like gearing and leverage. Or, current investors, can keep their shares and buy more shares, and hope in future to realize a good value while selling them, but it will decrease the EPS because of dilution effect. The company also can interest new investors because of under pricing shares in the market and wait for potential future gain on sales by improving more the management of the company, The company can make some synergies (horizontal or vertical) with others by paying them by issuing new shares at market price, which means a purchase at low cost and become leader in the market. XYZ, Introduction Before making an advance step into this, we will first put a light in the background of company. GSK is a public limited company and is the second largest pharmaceutical company in the world after Pfizer. It is basically a British based research and pharmaceutical company and its global headquarters of GSK House are in Brent ford, London, UK, while U.S GSK plc is listed on both London and New York stock exchanges. It was incorporated on 6th December 1999 under English law. On December, 2000 the company acquired Glaxo Wellcome plc and SmithKline Beecham plc by the scheme of merger of two companies. The major markets for the companys products are the USA, France, Japan, UK, Italy, Germany and Spain. Analysis of performance, profitability and financing of GSK_ Appendix VI As far as the performance of our company GSK, we can say that it has done a very good progress during the last 3 years even the market conditions and the crisis of 2008. If we look at the Return on Equity ROE compared to the market  [1]  , GSK realized a very important progress last years as of 2009, it was 59.49% (51.70% in 2008 and 54.30% in 2007), with slight decrease from 2007 to 2008 because of raising new debt and increase the financing cost of about 50% (843 in 2008 compared to 453 in 2007) . GSK, made in 2009, sales of  £28368 million ( £24352 million in 2008 and  £22716 million in 2007) and decrease from year to year. The company distributed each year dividend to shareholders respecting its commitment to them. The whole ratio as current and quick ratio are very good and more than the market. Here after, we will give a summary of the evaluation of the company described above, and the more detail calculation will be in the appendix indicated below. Valuation of GSK 1_Dividend Discount Model (DDM)_Appendix I GSK is operating in a very volatile industry and its dividend is not constant during time, so we choose a period as long as we can to better have a rate growth for our calculation (9 years). Using Gordon Model described below and by looking at Appendix I for more details, The value of the GSK share was  £17.02 far bigger than the market value which was on 7th of May 2010 date of our valuation, only  £11.485 in London Stock Exchange (LSE) which means that the company is under valuated in the market and it is time to buy shares instead of selling them. As investor, we recommend to buy as it was about 50% less than what it worth as a real value Vo ((17.02-11.485/11.485)*100= 48.19%). 2-Free Cash Flow to Firm (FCFF) _Appendix II This is a measurement  [2]  of a companys profitability after all expenses and reinvestments. Its one of the many benchmarks used to compare and analyze financial wealth. A positive value would indicate that the firm has cash left after expenses.  A negative value, on the other hand, would indicate that the firm has not generated enough revenue to cover its costs and investment activities. In that instance, an investor should dig deeper to assess why this is happening it could be a sign that the company may have some deeper  problems. FCFF = Net Income + Depreciation + Interest (1 Tax rate) Inv (FC) Inv(WC) Or FCFF = EBIT (1-Tax rate) + depreciation Cap. Expend. change in working capital change in other assets As of 2009, the firm generated a positive cash flow as  £13361.6327 million compared to ( £16538.07 in 2008 and  £11203.47 in 2007) even if that period covered the crisis of 2008 which hit all the market regardless of the type of activities. The company was solvent which means that it was able to generate enough surpluses after respecting all engagements from its mean activity. Based on our growth rate (g=8.01%), we expect that the company will be able to generate  £14431.90 million in 2010, which is a good motivation for potential investors. 3-Free Cash Flow to Equity (FCFE) _Appendix III This  [3]  is a measure of how much cash can be paid to the  equity shareholders of the  company after all expenses, reinvestment and debt repayment Is the cash flow available to the firms common equity holders after all operating expenses, interest and principal payments have been paid, and necessary investments in working and fixed capital have been made. FCFE is the cash flow from operations minus capital expenditures minus payments to (and plus receipts from) debt holders. FCFE = Net Income Net Capital Expenditure Change in Net Working Capital + New Debt Debt Repayment FCFEo 13,361.63 Kao(r) 11.88% G 8.01% Equity Value 372,889.49 nb moyen dactions 5,196.15 Vo  £71.76 Po  £1,148.50 the market value on 7th of May 2010 in FTSE100 4-Residual Income approach (RI) _Appendix IV Bo is the current book value of equity, Bt is the book value of equity at time t, RIt is the residual income in future periods, r is the required rate of return on equity, Et = net income during period t, RIt = Et rBt-1. After calculation (Appendix IV) =  £16.47 Po=  £1.148,5 on 7th, May 2010 FTSE100 5-Economic Value Added (EVA) _Appendix V Economic Value Added  [4]  , a measure of the superiority of the return a company is able to realize on invested capital above the baseline return expected by the investment community. The formula is EVA    =    NOPAT (C x Kc ) Where C is the amount of capital a company plans to invest in a project, and Kc is the cost of capital, i.e. the return rate expected by investors. Positive EVA means the project will add value for shareholders; negative EVA means they would be better off if management just gave them the money as a dividend. EVA is analogous to earnings; but where earnings expenses debt financing only, the C  x  Kc term in EVA is expensing the cost of all capital, equity as well as debt Our company is generating a positive value of EVA, which means there is a creation of an add value for shareholders and will be more interesting to buy instead of selling shares. ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² = 0.5057143643 ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² adjusted=1/3 + 2/3 * ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² adjusted= 0.670476243 Kao = Rf+ ( Rm- Rf ) * ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² adjust Kao = 11.88%

Should Aids Victims Be Ostracized - 1578 Words

Should Aids Victims Be Ostracized I strongly disagree with the moot. AIDS, or the Acquired Immune Deficiency Syndrome has been one of the most threatening diseases of the 20th century. Ever since it has been discovered in 1981, it has been constantly infecting men, women, adults, newly born children, homosexuals and heterosexuals. In definition AIDS is an extremely serious disorder that results from severe damage to the body s defense against disease. Even though AIDS was born in an era of sophisticated medical and surgical developments, it still remains incurable. The ways through which the HIV, Human Immunodeficiency Virus, can be transmitted are: blood transfusion, contaminated needles used in drug addiction, from an infected husband†¦show more content†¦As soon as she found out about her condition, she was divorced and forced to leave her work. It s difficult being a women with AIDS, she says, we don t have networking. We are ostracized and isolated ( AIDS the next ten years 27). Andrea Walton was oblige d to uphold social isolation in addition to her physical pain. It is not her only, for she is one of many examples of the constant discrimination suffered by the AIDS patients. Another example was a reported incident concerning infected children in New York, where some people set fire to a foster home dedicated to unfortunate infants with AIDS (Gostin 81). It is obvious that shame and discrimination are the two feelings that HIV patients unwillingly will have to face within their society. As Andrew Baket stated in the film Philadelphia, AIDS enforces on its victims social death which proceeds the actual physical death. These inhumane social attitudes are always justified as normal attitudes towards a fatal disease, especially when not enough when not enough is known about this disease or its method of transmission among the public. 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Alchemist Doubt and Perfect Disciple Free Essays

Fatima Meeting Santiago- When I first met Santiago, there was something about him. I could not explain it then, and I doubt I ever will be able to. His eyes entrapped me, and he looked so gentle and sincere I could not help but smile! The way he looked at me was unlike anything else, it was almost as if he looked into my soul. We will write a custom essay sample on Alchemist: Doubt and Perfect Disciple or any similar topic only for you Order Now We understood what the other was thinking without speaking any words. It was what the strange old man, the Alchemist was always talking about, the language of the world. Santiago Professing His Love- When he told me, I was shocked. So shocked I dropped the water vessel I was carrying. Stupidly, I thought how angry mother would be when she found out I got dirt on our water vase. Even though I knew I loved him from the first day we met, how could he be brave enough to say it aloud? This strange boy who believed in alchemy and Rim and Thumb, and who told me he loved me out of the blue, was everything I had been waiting for. I knew he had to find his treasure, and so I told him I would wait for him, with hope and love. The Day He Left- The day Santiago left, was possibly the saddest day of my life. While I had told him I would look with hope, and that was true, I also looked with longing and desire. I missed him terribly, and it tortured me not knowing whether he missed me too. I put on a brave face for him, but inside I was reeling from the realization he may not come back. It was awful, and so I did not even bid him farewell on the day of his departure. I was worried I would drop the mask of bravery and independence and beg him to stay, and even worse he probably would. The Day He Returned- The day Santiago returned is one of the happiest days of my life. I looked to the desert as per usual, but I did not really expect him to be there. A few caravans had passed through before, but each one more disappointing than the last, because none of them came with Santiago. I was beginning to lose hope, and doubting if he would even come back at all. Perhaps he had not found his treasure, or met a girl who had more to offer than me, a poor desert flower. The thought that tortured me the most, kept me from sleep, and made me pray even more than ever, was the possibility he had been caught in the middle of the tribal wars and died. But the day he returned I cried out with Joy, and ran into his welcoming arms. We were both finally at peace. The Alchemist My first impression of Santiago was bravery. He was young, but age is Just a number after all. So, when he read the sign of the hawks I thought maybe he could accompany me to the desert tomorrow. There, his training would begin. He could be the perfect disciple, after all. Santiago Finding Life in the Desert- Perhaps I was wrong. Finding life is usually one of the easiest tests I have in store for my students. Oh well, people are all different. Maybe he will fail the easy tests, but ace the difficult ones. If that even makes sense. The boy is different though. He seems to understand things that others are so blind to. As with the hawks, he can see what others cannot. Patience will have to be a virtue for me here. He said he does not even want to leave the oasis. I have never felt love for a woman, but I doubted it could be so strong you do not want to discover your Personal Legend Just so you are close to your significant other. This boy is definitely different from my other students, UT the perfect disciple? We shall see. Santiago Turning to Wind- I laughed. I laughed and laughed and laughed. Inside of course, I could not let the tribesmen know how overjoyed I was. You see, we alchemists have a reputation for being cool and calculating. But Oh how my heart soared! The perfect disciple, at last. He understood the Soul of the World! I was amazed and so proud. What a wonderful experience, listening in on their conversation. The desert and I are good friends, but when the Father himself Joined in it was absolutely delightful. Finally, the perfect disciple. Santiago Reaction to Turning Lead to Gold- His expression was quite amusing. I think he doubted I could actually do it. Of course, I could turn myself into the wind, but I could not make gold. He asked if he could do that, but unfortunately for him, that is my Personal Legend. He understood, and I could see the excitement, the fireworks Just waiting to go off when I spoke of Personal Legends. I knew he was waiting for the Pyramids, so it was time for me to say goodbye to the one perfect disciple. What a sad day it was. How to cite Alchemist: Doubt and Perfect Disciple, Papers

Capital Maintenance and Solvency Requirements

Question: Discuss about the Capital Maintenance and Solvency Requirements. Answer: Introduction: Maintenance of capital doctrine is a compilation of legal rules. These rules ensure that a company gets hold the capital, which is purported to rise the security of investors. According to these doctrines, this capital is maintained in subject to requirements of the business for the protection and benefits of companys creditors. The general principles related to doctrine of capital maintenance were developedby courts.These doctrines have originated to protect the interest of creditors and to ensure the legitimate debauchery of assets of a company. However, the doctrine of capital maintenance has been developed through a series of different judicial analysis of company cases in England. In this way, the case of Jessel, indirectly stated two different aspects of doctrine of capital maintenance firstly, the creditors have the authority to observe that the capital is not dissipating unlawfully and secondly, the member must not have the capital returned to them surreptitiously. The different company case laws have been the basis of these doctrines of capital maintenance but UK has customized these doctrines into a relaxed way due to the inevitability of the modern business demand in various aspects. These doctrines of capital maintenance were first developed in United Kingdom in 19th century.In 1980, the rules governing the doctrine of capital maintenance were reformed and replaced in UK through a statutory procedure. According to these reforms, shares can either be classed as bought back or as redeemable under the companies Act 2006 sections 684-723. Further, in Australia buyback of share are allowed under sections 257A-257J of the Corporation Act 2001. These doctrines of capital maintenance were developed due to the restricted liability of shareholders in concern of flow of capital in a business. Therefore, the main objectives of these doctrines are established to prevent fraudulence and to ensure the liabilities of the shareholders in a business. Furthermore, the doctrines of capital maintenance are attempted to compromise the interest of creditors with complete satisfaction of their claims and managerial freedom in corporations.In addition, for the purpose of creditors protection the doctrines restrict payment out capital to the shareholders in different ways which are discussed as below: The dividend in a business can only paid out of distributable profits. For the reduction of capital court approval is generally required. Buy back of own shares from a company may generally made out through distributable profits or may be proceed by a new issue of shares. The financial assistance of an individuals shares by a company is generally prohibited and saves in certain exceptions. The doctrine of capital maintenance is still a part of Australian Corporation law because both of these are related with the concept of shares and provides protection to the shareholders of the company. According to corporation law, a company is liable to pay the dividend to its shareholder in proportion of the amount of shares and the shareholders have authority to see the financial flow in the company. As well as, the doctrine of capital maintenance also provides protection to the shareholders from fraudulence and makes clear rules for the distribution of dividends to the shareholders. References: Dequest, J. (2013) Capital Maintenance and Solvency Requirements. [Online]. Available at: https://www.deguest.asia/en/blog/item/53-capital-maintenance-and-solvency-requirements (Accessed: 18 January 2016). Federal Register of legislation (2013) Corporation Act 2001. [Online]. Available: https://www.legislation.gov.au/Details/C2013C00003 (Accessed: 18 January 2017). Hannigan, B. (2012) The doctrine of capital maintenance. [Online]. Available at: https://www.oxfordlawtrove.com/view/10.1093/he/9780199608027.001.0001/he-9780199608027-chapter-20 (Accessed: 18 January 2017). Islam, S. (2013) The Doctrine of Capital Maintenance and its Statutory Developments: An Analysis, The Northern University Journal of Law, 4, pp. 47-55.