Your group is required to undertake several valuations of Temple and Webster Group Limited (ASX: TPW) and write a report on your valuations for a senior executive audience. TPW is Australia's leading online retailer of furniture and homewares. The business runs a drop-shipping model, whereby products are sent directly to customers by suppliers. The drop ship range is complemented by a private label range which is sourced directly by TPW from overseas suppliers. The Group operates two brands namely Temple & Webster and Milan Direct. 

Valuation 1

The first valuation should be a ‘base case valuation’, based on the current strategies of TPW as outlined in its recent annual reports and other communications to the market. In this you can determine from your own research whether you consider TPW to be under or over-valued relative to its current share price. Please clearly articulate and justify your assumptions.

Valuation 2

Here your group should identify what you would consider to be the top two risks faced by TPW, excluding economic disruption related to Covid-19. Then, starting with your base case valuation, your second valuation should assume that these risks materialise in 2024. Assess the financial outcomes for TPW and any actions that management might be able to take to preserve its financial position during this year. Assess if there are any initiatives that the management team of TPW could put in place now to mitigate the financial impact of this scenario.

Valuation 3

Here the CEO has engaged the services of your group – the CEO requests plausible recommendations on how the market value of equity for TPW might be increased by 30% over your base valuation. Articulate your recommendations, how they act to create value, and show their combined impact in the valuation model. Assume these recommendations are announced now, with implementation between now and 2023.

Valuation 4

Here you should construct the business model canvas for TPW and identify where in the canvas the company might be exposed to environmental, social or governance issues/risks. Provide recommendations that management can implement over the next 3 to 5 years to address these issues/risks. Incorporate these recommendations into your base case valuation to assess the potential impact on the valuation of TPW.

General

This assignment presents an opportunity for you to apply knowledge and skills gained in the unit to the valuation of an actual company. The assignment brings together most aspects of the unit, including cash flow analysis, capital structure issues, estimating the cost of capital, valuation techniques and sustainability issues. Most importantly, the assignment provides a vehicle for you to identify and analyse key drivers of value in a firm, and plausible threats to the firm, and incorporate them into a valuation framework.

Temple