Business Analysis and Valuation企业分析和估价-brierley.docVIP

Brierley Investments Teaching Note Background Brierley Investment (BIL), a leading investment company in New Zealand, has had a history of spectacular financial and stock performance. Yet in the mid-1990s, the company (along with many other investment firms in the US and UK) faced financial turmoil and challenging stock valuations. This case requires students to use the strategy, accounting, financial ratio and valuation tools developed in the course to diagnose the reasons for BIL’s performance. Three possible factors can be discussed: BIL’s strategy no longer adds value, the execution of its strategy has been poor recently, and it has a problem communicating with investors. The evidence in the case indicates that all three factors may be at work. The case provides opportunity for students to make explicit recommendations to BIL’s management about how to resolve the company’s problems. Questions: What is the reason for BIL’s poor stock performance? Is the company’s strategy no longer creating value? Has it been executing its strategy poorly? Or, is there a problem communicating with investors? What changes in strategy, execution, financial reporting and investor communication, and/or governance would you recommend to management to address the problems facing the company? Should BIL sell Mount Charlotte? If not, what should it do? Should it change its strategy? Should it continue reporting under the “intrinsic value method? Why is the market down on BIL? As noted above there are three possibilities: Strategy Problems What is strategy? Why is it weak? Focus on acquiring undervalued and poorly managed companies and turning them around. Yet there is reason to question whether this strategy will continue to work. The emergence of professionally managed institutions as major players in the stock market is likely to reduce the opportunities for finding undervalued stocks. Further, the emergence of professional consulting practices to advise management of poor-performing