IC Companys: Assessment of IC Companys’ share price on 30th June, 2011 from the investor’s point of view

Abstrakt

This assignment is about value assessment for IC Companys (ICC), one of the Danish market leaders in fashion. The company’s share’s fluctuation during the last 5 years was the reason for the author’s interest of making “Assessment of one IC Company’s share price on the 30th June, 2012 from the investor’s point of view”. Being markets number two fashion producer in Denmark, ICC has experienced a turbulent market since 2008/2009. A look at external environment revealed that ICC’s performance during the last 5 years was not only a consequence of itself, but also the result of a chaotic market. ICC’s recovery during the 2010/2011 was admirable, despite heavy loss at starting of the finance crisis. ICC differentiates among competitors with multi-brands strategy in the middle-price segment. The company has entered the low segment of high-end market by purchasing two competitors: Tiger of Sweden and By Marlene Birger in 2003. The company’s vision is to be “one of the best developers of sport and fashion brands”, highlighted that ICC is not only a fashion producers, but also a sport clothing maker. ICC is selling through wholesale and retail shops, although business to business is the main part or 61 % of total revenue in year 2010/2011. ICC’s performance in the last 5 years against its competitors in the industry was examined thoroughly from available information such as released annual reports and diverse sources of information. In comparison with the middle-price segment, ICC was doing well with higher return from operating activities. Benchmarking with Esprit, ICC has lower cost of goods sold and other operation costs, despite of having high staff costs and paying higher corporate tax. ICC financial structure is solid at the rate 76/24 for equity and debt. The company aims to reduce debt further thus reduce cost of debt in the future. ICC’s future growth from 2012 to 2016 was estimated positive based on the company’s historical performance and forecast growth on major markets. Estimations and assumptions for ICC’s budget are the subjected of adjustment, as they can be changed with time. Budgeting future cash flow for ICC was to find the answer for ICC’s enterprise value and share value. By the Discounted Cash Flow method, ICC was evaluated at 3589,4 million DKK and share value at 217,3 DKK per share at 30th June, 2011. The assessments also tested ICC’s enterprise value at different scenarios, where ICC’s value was lowest when profit margin change and nearly unaffected at change of capital structure. Evaluated at a price that is slightly lower than the actual market price, ICC’s share is recommended “hold” status