Coe Decomposition

Convenor: Dr Jason West

Word Count: 4007

Executive Summary

This report was commissioned by Billabong International Limited to present a detailed and independent analysis to look for growth opportunities that maximize shareholder’s equity and wealth. Methods of analysis using include CAPM model, WACC, NPV, IRR as well as ratios such as Debt/Equity, Debt/Capital and Earning per share ratio, ect. The results of analyses show that Billabong has a competitive performance. The debt/ equity is 0.5138 and debt/ capital is 0.3388, which means a healthy equity cushion and a low level of debt and is a very positive sign of investment quality. The value of beta is equal to 1.24 and cost to equity is 15 percent and WACC is 12 percent. From all the result we calculated above indicate that Billabong's capital position remains strong and it is prudent to maintain a healthy balance sheet, to ensure that the company is in a good situation in the period of challenging operating conditions, unstable money market and uncertain capital market.

The report evaluates the analysis and concludes that Billabong has been in a good position in a more generally way even if it happened fluctuation in business during economic crisis. They choose to find a way to solve different problems, for instance, acquire with good performance company or expand their market to other with great developing prospect countries. Some recommendation for Billabong: Extend fields of water game facilities and then managing different levels sports competitions; improve and increasing inventory turnover; choose right company to acquire before doing a deep research; expand more into Asian countries because few Asian guys realized the brand Billabong.