Reference no: EM132788072

1. Company Perspective - Blackmores Group

https://www.blackmores.com.au/

Source 1: Blackmores Group Annual Report 2019 https://www.blackmores.com.au/about-us/investor-centre/annual-and-half-year-reports (Financial Year 2019 → Annual Report → View Online → Download)

Source 2: Blackmores Group Governance & Board of Directors

https://www.blackmores.com.au/about-us/investor-centre/corporate-governance

Source 3: Blackmores Limited (BKL.AX) Yahoo Finance https://au.finance.yahoo.com/quote/bkl.ax/

a) What is the Net Working Capital for Blackmores both in 2108 and 2019. What type of current asset management strategy is the company pursuing? Explain why and what are the pros and cons of this strategy.

b) Consider the Blackmores Group 2019 Annual Report. Identify three of the major risks discussed. Are these risks systematic or unsystematic? Why?

c) You are trying to value Blackmores share today (End of 2019). Assume the current price of the share in the stock market is $88.16 and that you would like to hold the investment for 5 years. Assume that the total dividend paid by Blackmores in the 2019 year were paid as a lump sum (at once) today. You also estimate that for the next two years dividends will grow respectively at 30%, 25% per year. After this (starting in time 3) you estimate dividends will grow at a constant rate of 6% forever. Assume that today the Australian treasury notes 2.5%, the market risk premium is 8% and the beta of Blackmores is 1.16. Based on this price would you purchase the share? Why or why not?

d) What was the market capitalization of Blackmores, on the 16 January 2020, assuming that the total number of share outstanding is the same as per the end of the 2019FY? (Use the closing price on that day).

e) Consider the Blackmores Group 2017 Annual Report. Based on the note to financial statements about "Financing", what type of source (non-current) is Blackmores primarily using to finance its long-term operations? Is Blackmores improving its financial position between 2018 and 2019?

f) Assume that the Blackmores Group would like to replace its bank loan facilities (2019) with a new issuing of bonds. Assume that the issue will have a coupon rate of 1.5% with a 10 year maturity. Assume this are semi-annual coupon bonds and each have a face value of $1.000 and the required rates of return for similar bonds in the market is 2.5%.What would be the issuing price of these bonds? How many bonds Blackmores will have to issue in order to replace its bank facilities?