A192 (FEB) SECOND SEMESTER SESSION 2019/2020

BWFN3013 INVESTMENT ANALYSIS (GROUP B)

TITLE OF ASSIGNMENT:

CASE STUDY 2: FIXED INCOME ANALYSIS & VALUATION

SUBMITTED TO:

AFIRUDDIN BIN TAPA

PREPARED BY:

BIL. NAME NO.MATRIC

1 SITI NABILAH BINTI NASIP 254446

DATE OF SUBMISSION:

20 JULY 2020

1. Using the debt ratios provided, write a few bullet points analyzing the relative
creditworthiness of Disney and its peers.
 Debt/Assets
 Disney and its peers has a debt ratio that less than 100%. This indicates that Disney
and its peers has more assets than debt.
 Disney has a lowest debt ratio of 21.2 compared to its peers. A company with a
low debt ratio relative to its peers would probably find it not expensive to borrow.
 Six Flags has the highest debt ratio value of 83.7. A company with a high debt
ratio relative to its peers would probably find it expensive to borrow and could find
itself in a crunch if circumstances change.

Coverage Ratio
 Disney has the highest coverage ratio which is 18.4 while the value of the
Charter’s coverage ratio is the lowest which is 1.5. This indicates that Disney can
make interest payments on its debt or pay dividends easily.
 Disney is more profitable and efficient because it can cover the coverage charge at
the faster rate than its peers.

Debt/EBITDA
 Disney, Broadcasting (Charter, Comcast, CBS), Facilities (Six Flags, Cedar Fair,
Merlin) and Scripps have an acceptable debt/EBITDA ratio that indicated elevated
risk.
 Netflix, Discovery and Lions Gate have significant financial difficulties and the
strong likelihood that will be unable to borrow additional funds.

2. Write a few bullet points justifying why credit rating agencies rate Disney's debt
higher than its peers.
  Disney has a good past history of borrowing and paying off debts rather than its
peers.
 Disney has a most positive economic outlook.
 Disney has a lowest debt ratio that considered a good debt ratio.
 Disney can generate enough cash flow to service its debt.
 Disney has a lowest risk of turning into a defaulter.

3. Calculate the yield-to-maturity on a Disney bond that matures in 13 years, pays 7.0%
coupon, semi-annually, with a current price of $148.026. Bond has a par value of
$1,000.

Coupon payment = Coupon rate*Face Value

= 7%*1000
= $70

Yield to maturity = $70 + [($1000-$148.026) /13]

($1000+$148.026)/2
= $135.54
$574.013
= 0.2361 or 23.61%