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About Case Analysis

 Analyzing the case


 First reading of the case: brief and quick
Ask yourself: What broadly is the case about and what types of
information am I being given to analyze?

 Second reading of the case: careful and in detail


 Assume the position of the decision maker in the case
 Underline key facts

 Define the problem, analyze the case using all information


given, and make your specific recommendation.

About case analysis 1


About Case Analysis

 Writing a case report


 Cover page (on course wattle site)

 Executive summary (1 page)


The summary should be able to stand alone, and to provide a decision
maker with a complete briefing of the problem and recommendation of
actions.

 Analysis (3-4 pages)


 Key assumptions (reasonable but not arbitrary)
 Present results and solutions, discussion
 Conclusion/recommendation
 Exhibits in support of your analysis (next slide)

About case analysis 2


About Case Analysis

 Exhibits (up to 6 pages)


 Tables, charts or any other supporting materials.
 Use exhibit notes to provide necessary explanatory information.

 No more than 12 pages, including the cover page

 Typing requirement
 One-inch margins
 Double-line spacing
 11pt or 12pt font

About case analysis 3


About Case Analysis

 Submission and other matters


 Submission
 Case report & supporting spreadsheets
 Through the Turnitin link on the course Wattle site
 Case report on JetBlue IPO: Monday 23 September by 8am

 Study questions
 As a guidance for your understanding and analysis of the case
 To prepare a report, instead of providing a point-to-point answer to
each of the questions.

 Team work, learning by doing

 Supporting spreadsheet files (on course wattle site)

About case analysis 4


JetBlue IPO

 The case
In April 2002, the JetBlue Airways’ management was pricing the
initial public offering of JetBlue stock during one of the worst periods
in airline history. Is the $25-26 per share filing range appropriate?

 Learning objective
 Reasons for firms to go public, the listing process

 Valuation approaches to IPO pricing


 DCF model
 Multiples approach
 Terminal value estimation

Briefing on JetBlue IPO - 5


JetBlue IPO

 Issues regarding valuation


 Choosing comparable firms
 Whole industry, low-fair airlines, or any single firm
 Use comparable firm information whenever it applies.

 Choosing and using multiples


 Compare different multiples
 Compare “leading” multiples and “trailing” multiples
 Multiples can be used to estimate the current value or the terminal
value.

Briefing on JetBlue IPO - 6


JetBlue IPO

 Other issues

 Use the provided information (the financial forecast is given).


 MRP = 5.5%

 Disregard non-operating income/expense


 Focus on the value of JetBlue’s existing equity
 Focus on the firm’s intrinsic value

Briefing on JetBlue IPO - 7


JetBlue IPO

 Study questions
1. Discuss briefly the background of JetBlue’s decision to go IPO.

2. Is the financial forecast reasonable (e.g., based on information on


relevant comparable firms)?

3. What is your estimated value for JetBlue’s equity per share based
on your DCF analysis? Show your results and explain major
assumptions.

4. What is your estimated value for JetBlue’s equity per share based
on your multiples valuation? Show your results and explain how you
choose comparable firms and multiples.

5. At what price (or price range) would you recommend that JetBlue
offer its shares?

Briefing on JetBlue IPO - 8