Do the calculation based on the Sonic Healthcare annual report.

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Question

Sonic Healthcare Limited (SHL.AX) first listed in the ASX in 1987. Their business activities concentrate in laboratory pathology and radiology services. From its initial base in Sydney, Sonic has been seeking its growth by setting up operations in USA, United Kingdom. Germany and recently in Canada.

As a company analyst for DEBANAWAZA Stockbroker Ltd, you are expected to prepare an analysis on the company. Your report should be brief, but concise, and should be within the limit of 2000 word or no more than 8 pages. Your report should contain the following sections.

PART A – Quantitative Analysis (20 marks)

Estimate the value (per share) of the company using the Free-Cash-Flow-to Equity (FCFE) method. (15%)
Provide a brief comment on the dividend policy of the firm (5%)

Notes

Part A (i), you are only required to look up FCFE for the firm over the last two years. The biggest challenge is finding the appropriate “discount rate”.
Revise your FIN20006 on the relevant topics early (i.e. internal based models such as Weighted Cost of Capital, WACC or Risk based models such as Capital Asset Pricing/Market models are fine).

Part A (ii), you are only required to look up dividend paid by firm over the last 2 years. It is also a good exercise using the dividend discount model to investigate the multiples the market was over the last few years. Apply your knowledge from FIN20006 on dividend policy.