QUESTIONS -
You are an investment adviser, working to build a foundation of wealth for your clients. One of your wealthiest clients already has a diversified portfolio, which includes managed funds, property, cash/fixed interest and a few direct share investments. They wish to expand their portfolio and are considering one of two companies' shares to add to their portfolio. (They have an extra $1 million that they wish to invest into company shares.)
Companies are Singapore and Qantas Airlines for financial report on 2016 and 2017.
You are required to do the following:
1. Prepare a brief description of the companies, outlining the core activities, the markets they operate within and any factors in the companies' history which you consider help present a "picture" of your company.
2. Specify ownership-governance structure of the company:
Name the main substantial shareholders:
- With higher than 20.00% of shareholdings. Based on this argument you should classify a firm as a family or non-family company, and
- With higher than 5.00% of shareholdings.
Name the main people involved in the firm governance:
A Chairman
Board members
CEO.
- Whether any of these people has the same surname as any of substantial shareholders (>20% share capital). If yes- you could use this as an argument for the presence of an owner or family member(s) in the firm's governance.
- Whether any of shareholders with more than 5% share capital is involved in firm governance. (Please do this question for Singapore and Qantas Airlines)
3. Calculate the following key ratios for BOTH of your selected companies for the past 4 years. Annual reports are accessible via company websites (show all working out):
i) Return on Assets (EBIT) = (NPAT / Total Assets)
Return on Owners Equity = (Net Profit After Tax / Owners Equity)
Gearing Ratio = Total Liabilities / Total Assets
Be sure that you have "proven" the above equation.
ii) Explain what phenomenon is being "captured" by the variable TA/OE, and how it is impacting on the relationship between Return on Assets and Return on Owners Equity.
Be sure to explain why the ROE (EBIT) is significantly greater than or less than the ROA (EBIT).
4. Research via the internet or financial/business publications
i) From research via the internet (using credible sources) or financial/business publications, note any significant announcements which may have influenced the share price of your company. These factors could include merger activities, divestitures, changes in management's earnings forecasts, changes in analysts' forecasts, unusual write-offs or abnormal items, macroeconomic factors, industry wide factors, significant management changes, changes in the focus of the company, impact of competitors or law suits etc. (Restrict the number of announcements to 5).
5. Go to reuters (website) finance stocks and type in the code for your company into the Search Stocks field and click on the magnifying glass button.
i) What is their calculated beta for your company?
ii) If the risk free rate is 4% and the market Risk Premium is 6%, use the Capital Asset Pricing Model to calculate the required rate of return for the companies' shares.
iii) Is the company you and your partner have chosen a "conservative" investment? Explain your answer. (please complete this part of the question only from the Singapore and Qantas airlines)
6. Consider the gearing ratios for your company over the past two years:
i) Does it appear to be working towards the maintenance of a preferred optimal capital structure? (i.e., does it appear to be "stable"?) Explain your answer.
ii) What have they done to adjust / amend their gearing ratio? Increase or repay borrowings? Issue or buy back shares? Has the Director's Report given any information as to why they have made any adjustments?
7. Dividend policy
i) Discuss what the dividend policy of the management of the company appears to be. Explain fully.
8. Based on your analysis above, write a letter of recommendation to your client, providing an explanation as why you would like to include this company in their investment portfolio. Please refer to the ratio results calculated earlier and any other trends or factors that you believe to be important.
9. Formal structure and referencing APA Style.
Need to complete the questions 2, 4 and 5.
Attachment:- Assignment File.rar