AFIN353 Assignment Instruction S2 2019
1. Due date
The due date of this assignment is 23:59 Friday 18 October 2019.
The assignment must be submitted via Turnitin and the submission instruction will be available on iLearn in Week 9.
No extensions will be granted. There will be a deduction of 10% of the total available marks made from the total awarded mark for each 24-hour period or part thereof that the submission is late (for example, 25 hours late in submission – 20% penalty). This penalty does not apply for cases in which an application for special consideration is made and approved. No submission will be accepted after solutions have been posted.
2. Assignment tasks
In topic 6, we introduced the process of raising equity through an Initial Public Offering (IPO), the associated challenge of determining the offer price, the role of the underwriters, the costs of the IPO and performance after the IPO is completed.
You are required to obtain the prospectus for one Australian IPO (listing on ASX) completed between January 2016 and December 2018 to evaluate the IPO objectives, pricing and outcomes. You can choose any IPO but don’t use companies from the mining sector or listed funds. It is always a good idea to study on a large cap IPO because of the higher availability of information.
Your report must address the following for the IPO:
a) Describe the motivations for the IPO, the price-setting process and underwriting arrangements. (limit this to 300 words maximum)
b) Analyse and critique the capital structure (before and immediately after the IPO) and the appropriateness to a firm in this industry.
c) Analyse the offer price and provide your opinion of the reasonableness of the offer price (with regard to the prospectus information and your estimate of the firm’s value). Note that your analysis in this section should be ex-ante, which means your analysis must be based on the available information at the time of IPO and you should avoid using any post-IPO information to assess the reasonableness of the IPO offer price. For example, you can’t conclude that the offer price of Dick Smith is not reasonable because the company collapsed two year after its IPO.
d) Measure the performance of the IPO and critique the IPO success with regard to the original objectives and the costs to the pre-IPO shareholders with regard to any under-pricing.
You should conclude as to the relationship between value creation in an IPO, a firm’s growth, optimal capital structure and accounting profitability with regard to IPO strategy.
3. Report requirement
a) Word limit: 1500 to 1800 including charts and tables and excluding title page, table of contents and reference list. Marks will be deducted if the report exceeds 2000 words or is shorter than 1400 words. The penalty will be 1 mark (out of 25) for each 200 words or part thereof.
b) Your report will comprise:
• Title Page (including Title, your name, student ID number and total word count)
• Table of Contents/Index
• [Body of Report] You must determine your own headings and subheadings. Ensure that any tables or figures are labelled and are referred to within your analysis.
• Conclusion – this should capture the key outcomes of your analysis.
• References – ensure you use correct and consistent citation and referencing. Seek credible information sources. Data resources must be appropriately acknowledged (in-text or in footnotes). Citations and the reference list must be prepared following Harvard style referencing.
• Do not include Appendices. The report should stand-alone.
c) Make sure to edit your report before submitting. The font, size, alignment, line space must be consistent throughout. Do not fill the report with pages of past financials. You may select the key components of historical financial data and forecasts to include in the report. Avoid re-writing great slabs of information from the source documents. You should analyse the information from your research.
4. Marking criteria
This assignment will be marked out of 100 marks and scaled to be out of 25 marks of course total. The marking rubric is posted on iLearn as a separate document.
5. Data resources
Recent IPO list
You can find a list of IPOs on ASX by years on IPOwatch.com.au. Choose SCORCARDS and select a year from the dropdown list. The following link directs you to the list of 2017 floats.
Share prices and company financials
• Morningstar DataAnalysis Premium is accessible through the Macquarie Uni Library website or through the link http://datanalysis.morningstar.com.au/af/dathome?xtmlicensee=datpremium
• Yahoo Finance - https://au.finance.yahoo.com/?p=finance.yahoo.com
• ASX Company Information – (including announcements) http://www.asx.com.au/prices/company-information.htm
You are expected to use published references so you will find Google Scholar or ProQuest Central very helpful. Search them in MQ library multi-search for subscribed accesses.
Other useful information (not an exhaustive list)
• KPMG valuation practices surveys (KPMG Australia). These annual survey reports show the valuation assumptions (i.e. risk free interest rate, market risk premium and other important assumptions) used in Australian company valuation. Search “KPMG Australia valuation practices surveys” in Google for the access to the full size reports.
• International Monetary Fund – country outlook http://www.imf.org/external/country/aus/
• Reserve Bank of Australia (RBA) publications re: economy http://www.rba.gov.au/publications/index.html
• IBISWorld Industry Reports http://clients1.ibisworld.com.au.simsrad.net.ocs.mq.edu.au/reports/au/industry/home.aspx • RBA Interest rate statistics http://www.rba.gov.au/statistics/index.html