Trent PLC Board of Director brief notes Investment region: Singapore 1. Outline of Investment Study Trent Plc is a listed company in London Stock Exchange that focuses on manufacturing. This company is based in the United Kingdom and plans to expand its business to the South East Asia region, especially in Singapore. Some of the information related to this company which is the basis for calculating this business analysis can be seen in the appendix. These brief notes are used to provide information to the BOD for company business expansion needs and provide a preview of the company's valuation, several factors were analyzed: equity valuation, international project expansion calculation (including NPV, IRR, and DPP of the project), dividend policy, and capital structure of the company. For further detail about the company and investment data in Singapore can be seen in the appendix. 2. Equity Valuation 2.1 Method and Result Calculation To estimate the company's valuation, the calculation of investment ratio is used which consists of dividend yield (DY) and price-to-earning ratio (P/E ratio). DY is a ratio that measures investor expectation to gain in exchange for buying a given share with ignoring any capital gains that may rise. The P/E ratio shows how much the investor should prepare to pay for the company's shares, based on current earnings per share (EPS). Thus, using two types of investor ratios can estimate ratio values as in Tabel X. Tabel X. Equity Valuation using P/E Ratio and Dividend Yield Ratios 2021 (Actual) 2022 (Forecast) Valuation FTSE Index 2021 (Actual) 2022 (Forecast) Price to Earning (P/E) 20,8 20,0 Dividend yield (DY) 3,4% 3,6% Overall Valuation 18,0 Overvalued Overvalued 3,0% Undervalued Undervalued Fairly valued Description Company PER > Index PER +10% Company DY > Index DY +10% 2.2 Opinion/Recommendation According to table X, the P/E ratio this year forecast (2022) is 20,0 x which is more than 10% than the P/E ratio from FTSE Index (18,0 x). According to P/E Ratio, Trent Plc shares appear overvalued with a profit growth of more than 4% yearly. Meanwhile, DY 2022 forecast is 3,6% higher more than DY from FTSE Index (3,0%) then shares appear undervalued which justifies the dividend growth experienced a slight decline in growth each year (from 5,0 % in 2021 become 4,8% in 2022 forecast). Overall, according to
justified by the growth of EPS and DPS from the P/E ratio and DY, Trent Plc share appears to be fairly valued by the equity market. 3 International Expansion Project for Singapore Investment Region 3.1 Trent Plc WACC and Investment Appraisal Method Weighted average cost of capital (WACC) basically to calculate or estimate the cost of each type of capital (either debt or equity) by the ratio of its market value to total market value of the company. In short, to get the WACC, it is necessary to calculate the cost of equity and debt. To calculate the cost of equity, the Dividend Valuation Model (DVM) was chosen because Trent Plc is a company that has