Valuation of listed company using the DCF model: A case study of Anglo American PLC select="/dri:document/dri:meta/dri:pageMeta/dri:metadata[@element='title']/node()"/>

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Show simple item record Kalimba, Mpingana Laimi 2020-08-23T15:34:25Z 2020-08-23T15:34:25Z 2019
dc.description A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration-Finance en_US
dc.description.abstract Anglo American Plc (“Anglo”) is one of the world’s largest mining companies. In addition to the London Stock Exchange, it is listed on the Johannesburg Stock Exchange with operations that span the globe. At the date of valuation, 30 September 2014, Anglo’s shares constituted a significant portion of the investment portfolio of the researcher’s employer and was one of the primary drivers of portfolio performance. Incorporated in 1917, Anglo’s maturity was further evidenced in decreased trading volumes of its shares despite price volatility due to its dependence on global commodity prices and GDP cycles. Its trading volumes declined, indicating that investors opted to hold onto the shares for longer thus exhibiting both equity and bonelike characteristics. As a case study, the research sets out to establish Anglo’s investment case and ascertain whether it warranted a buy/hold/sell recommendation. By employing the Discounted Cash Flow (DCF) method and limiting cash flow to potential dividends referred to as Free Cash Flow to Equity (FCFE), the study derived DCF model inputs using the company’s financial statements and market data to build an excel based model. Amongst others, model inputs include expected cash flows, expected growth in those cash flows, Terminal Values and discount rates or cost of financing. Using a five-year growth period, the expected cash flows inclusive of the terminal value were discounted using the cost of financing specifically the cost of equity to determine the total present value of those cash flows at valuation date and subsequently an estimate of the intrinsic value per share. It was found that Anglo’s market price per share was significantly higher than the estimated intrinsic value per share that resulted from the DCF model. Relative Valuation was also undertaken as a complement to DCF model and found that the share was overpriced albeit to a lesser extent than DCF model results. This lead to the conclusion that as at valuation date, the shares were overpriced with limited upside potential and warranted a sell recommendation. Limitations of the study include the fact that the analysis did not take account of qualitative factors of the company, no access to management to better inform model inputs, not fully exploring the impact of cyclicality of the company as it is influenced by commodity prices giving rise to the need to normalise cash flows, no undertaking of sensitivity analysis and controlling for differences in the comparables. It is thus recommended that additional research should take account of these limitations. en_US
dc.language.iso en en_US
dc.publisher University of Namibia en_US
dc.subject DCF model en_US
dc.title Valuation of listed company using the DCF model: A case study of Anglo American PLC en_US
dc.type Thesis en_US

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