Analysis and Valuation of Frontline Plc

Abstract

In this master thesis, we have performed an analysis and valuation of Frontline Plc.

The problem statement in the thesis is defined as: “What is the fundamental value of a share in Frontline Plc, traded at the New York Stock Exchange as of 31.12.2022?” With a sub-problem statement: “Should the fictive investor buy or sell the Frontline Plc stock when his objective is financial gain?”

The valuation comprises numerous analyses that form its foundation. Initially, we scrutinized the financial statement of the company, comparing historical key figures of Frontline Plc with an industry benchmark. This step aimed to enhance our comprehension of the company´s present financial standing. Subsequently, we conducted an extensive strategic analysis encompassing both internal and external facets of the company. A comprehensive examination of macro-economic factors and potential competitive advantages is crucial to grasp the company´s capacity and opportunities for future growth.

Drawing upon the insights gained from the financial statement analysis and strategic analysis, we embarked on forecasting the company´s performance for the next five years. We deliberately selected a period of five years since it becomes impractical and unrealistic to forecast cash flows over significantly longer periods. The business and economic landscape can undergo substantial transformations over extended periods, making it challenging to make precise predictions regarding future trend. In this thesis, the primary approach to valuation is the discounted cash flow (DCF) analysis and economic value added (EVA), wherein the projected variables are utilized as inputs in our models. Recognizing the inherent uncertainty associated with the value estimate from these models, we also employed an asset-based valuation together with relative valuation as control methods.

Addressing the problem statement, our conclusion asserts that the stock is presently undervalued in the market. Consequently, we recommend a buy recommendation to the fictive investor, highlighting the potential for favorable returns.