Case Study
Due Date: 29th January 2018
Word limit: min 2000-3000 words.
Company Name: Kollakorn Corporation Limited. (KKL)
{Technology, Hardware and Equipment}
Description: The assignment should examine the main issues, including underlying theories,
implement performance measures used and explain the firm financial performance. You are strongly advised to reference professional websites, journal articles and text books in this assignment (case study).
Required:
This assessment task is a written report and analysis of the financial performance of a selected company in order to provide financial advice to a wealthy investor.
It will be based on financial reports of a listed company on the ASX (: Kollakorn Corporation Limited). This assignment requires students to undertake a comprehensive examination of a firm’s financial performance.
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 in Australia and around the world. The investor wishes to expand his/her portfolio and is considering your company’s share to add to the portfolio. (The investor has an extra $10 million that wishes to invest into your company).
The assignment is a written comprehensive report and analysis of the firms’ financial performance (including referencing).
You are required to do the following tasks:
1. Prepare a brief description of the company_ outli-ning the core activities, the market(s) in which it operates within and any factors in the companies' history which you consider help present a -picture' of your company_
4 marks
2. Specify ownership-governance structure of the company:
i) Name the main Substantial shareholders:
• With higher than 20.00% of shareholdings. Eased on this argument you should classify a firm as a family or non-family company, and
• With higher than 5.00% of shareholdings.
3 marks
ii) Name the main people invoked in the firm governance:
F.. The Chairman
F- Board members
F.- CEO.
o Whether any of these people have the same surname as any of substantial shareholders ( 20,b 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_
o Whether any of shareholders with more than 5% share capital are
involved in firm governance.
3 marks
3. Calculate the following key ratios for your selected company for the past 4 -years. Annual reports are accessible via company Nvebsites (show all working out):
i) Return on Assets (ROA) = (NPAT I Total Assets) Return on Equity (ROE) = (Net Profit Afler Tax i Ordinary Equity)
Debt Ratio = Total Liabilities Total Assets
EBIT x NPAT x TA = NPAT
TA EBIT OE OE
Be sure that you have 'proven- dm above equation.
12 marks
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 Oviners Equity.
4 marks
iii) Explain why the ROE (EBIT) is significantly greater than or less than the ROA
(EBIT).
4 marks
4. Using the infomiation from the ASX vebsite: www.asx.com.au you must complete the following tasks:
i) Prepare a i=aph chart for movements in the monthly share price over the last two years for the company that you are investigating_ Plot them against movements in the All Ordinaries Index_
6 marks
ii) Write a report which compares movements in the companies' share price index to the All Ords Index_ For instance: how closely correlated is the line with the All Ards Index_ Above or below? More or less volatile?
6 marks
5_ Research via the internee or financiaLibusiness ,publicarions7
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)_
10 marks
6_ Go online to http://w10,-w_reuters_comlfinanreistocks! 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 (13) for your company?
2 marks
ii) If the risk free rate is 4% and the market risk premium is 6%, use the Capital Asset Pricing Model (CAPM) to calculate the required rate of return for the companies' shares.
4 marks
iii) Is the company you have chosen a -conservative' in. vestment? Explain your
answer_
2 marks
7. Weighted Average Cost of Capital (WACC)
1) Using information from the latest company report for the company (i.e. interest rate on their major source of long-term loans) and the estimated cost of equity capital calculated (in part 6ii above), calculate the WACC for your company.
6 marks
ii) Explain the implications that a higher WACC has on management's evaluation on prospective investment project&
4 marks
S. Consider the debt ratio 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.
4 marks
ii) What have they done to adjustfamend their gearing ratio? Increase or repay borrovim- gs? Issue or buy back shares? Has the Director's Report given any information as to why they have made any adjustments?
4 marks
9. Dividend policy
Discuss what dividend policy of the management of the company appears to be
implemented. Explainany reason related to that particular dividend policy.
7 marks
10. 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 his her investment portfolio. Please refer to the ratio results calculated earlier and any other trends or factors that you believe to be important.
10 marks
11. Formal structure and referencing.
5 marks
Total = 100 Marks
GENERAL REQUIREMENTS
• The report must have an academic written structure including an introduction_ body and conclusion.
• This assignment must be completed INDIVIDUALLY.
• Use numbers in the body of the report (e.g., -5. Research via. the iaternee)_
• Provide an explanation on each of these issues (points) and explain how they
confirm the underlying theory, particularly related to the ownership, Emancial measures, risk-return, capital structure and dividend polic-y_
• You are required to submit the assignment on Blackboard
• You are required to submit this assignment to Turman. Please ensure the .;iruilarity score is under 15%.
Presentation of written work
• Please submit your assignment on time (Week 11).
• Please make sure that your name and surname (student ID), subject name, and code and lecture's name are written on the cover sheet of the submitted assignment.
• You are required to use Times New Roman font, size 12 with 1.5 line spacing.
• Please insert page numbers into your assignment
• Please use 3 cm margins_