Executive Summary
Blackmores Ltd is an Australian listed (BKL) international supplier of a wide range of vitamins
and supplementary dietary products. The company employs over 1000 workers and their
products reach cons
...
Executive Summary
Blackmores Ltd is an Australian listed (BKL) international supplier of a wide range of vitamins
and supplementary dietary products. The company employs over 1000 workers and their
products reach consumers in 17 different countries. Blackmores Ltd is currently operating
with a share price of $93.70 (ASX, 2017) and continues to be profitable in an industry with a
medium level of market concentration. This report intends to examine Blackmore’s financial
statements in order to complete a future valuation of the company via forecasted results.
An examination of the share price, using 4 models will determine Blackmore’s value as an
investment and whether or not there is glaring sensitivities for PM, Sales Growth or WACC
when a pessimistic or optimistic outlook is implemented. Areas of improvement will
eventually be identified along with potential thats to strong financial performance for
Blackmores. These challenges can be overcome if they can successfully be remedied.
(Part 2) Prospective Analysis
The following prospective analysis of Blackmores Ltd will rely on 4 different valuation
techniques. The models implemented for this report were the Abnormal Earnings Model
(AEM), Abnormal Operating Earning Model (AOE), Discount Dividend Model (DDM) and the
Discounted cash flow model (DCF). These valuations are established from Blackmores 2016
Annual report as well as 2013, 14 and 15 reports. In the process of determining a share price
using the aforementioned models, certain economic assumptions and industry averages are
implemented.
Sales growth
Sales growth for Blackmores Ltd will be dependent on many variables, including Gross
Domestic Product (GDP), threat of new entrants and the exchange rate. The exchange rate
factor is notoriously difficult to forecast and is therefore a relative unknown for Blackmores
moving forward. The forecasting of Blackmores financial performance in future periods
required certain assumptions relating to revenue growth. The % used in the sales growth
from year to year took into account the average growth rates between 2012-2016, but
mainly considered the industry growth for vitamins and supplements. The figures between
2012-2016, are displayed in table 2.1 below.
Reference list
ASX, ‘Blackmores share price as at 5 Jun, 12:18 pm AEST
Australian Financial Review, 2017 ‘Blackmores Fined in China for Misleading advertising’,
viewed at 2/6/17 http://www.afr.com/business/retail/fmcg/blackmores-fined-in-china-formisleading-advertising-20170316-guzk0s
Business Insider, David Scutt,7 December 2016,
BlackmoresAnnual Report, 2013, ASX_BKL_2013.PDF, viewed 2/6/17
(http://www.annualreports.com/HostedData/AnnualReportArchive/B/ASX_BKL_2013.pdf)
Blackmore’s Limited "Blackmores Wins Australia’S Most Trusted Vitamin & Supplement Brand 7
Years Running". Blackmores.com.au. N.p., 2015. Viewed 1 Jun. 2017.
Demand Metric, 2017, ‘Entering European Market Successfully’ viewed at 06/08/17
https://www.demandmetric.com/content/entering-european-market-successfully
Euromonitor, (2016). ‘Vitamins and Dietary Supplements in Australia’
http://www.euromonitor.com/vitamins-and-dietary-supplements-in-australia/report
Fitness Australia, 2016, ‘Industry Report 2016’ https://fitnessaustralia-
International Monetary Fund, 2017, Global economic outlook. Viewed at 06/06/17
http://www.imf.org/en/Publications/WEO/Issues/2017/04/04/world-economic-outlookapril-2017
Investopedia, 2016, ‘Economic factors that most affect demand of consumer goods’ viewed
01/06/17 http://www.investopedia.com/ask/answers/042815/which-economic-factorsmost-affect-demand-consumer-goods.asp
ReadySetGo, 2016 China ‘Blackmores Success Hiccups with China, the real reason’ viewed
3/06/17 http://readysetgochina.com.au/blackmores-success-hiccups-with-china-the-realreason/
SMH, ‘Blackmores Shares slump as growth fades’, Brian Robbins Oct 2016 viewed at 3/06/17
http://www.smh.com.au/business/retail/blackmores-shares-slump-as-growth-fades20161026-gsbofj.html
14
Scott, 2016 Mens Health ‘Is Australia’s latest fitness trend the real deal?’
https://www.menshealth.com.au/article/fitness/is-australias-latest-fitness-trend-the-realdeal
Trading Economics, 2017, ‘Forecasts for GDP’ Viewed at 3/06/17
https://tradingeconomics.com/australia/forecast
