You are expected to prepare a Report based on the following case.
The Case Analysis requires students to apply their knowledge of key finance concepts such as corporate governance, financial statement analysis, risk and return and valuation of shares to an analysis of two companies that are listed on the Australian Securities Exchange (ASX). You are required to select two companies in two different sectors from the ASX100 list of 1 July 2019 (list of companies provided at the bottom). These are the top 100 Australian companies by market capitalization as of that date.
(a) Perform a comparative analysis of the corporate governance at the two companies using information on the composition of the board of directors, composition of executive management, executive remuneration and the value of the corporate governance index. Using information obtained plus academic literature, form an opinion on which company has better corporate governance.
(b) Using annual reports perform a comparative financial statement analysis of the two companies over the period 1 January 2014 to 31 December 2018. You are expected to determine two ratios from each ratio class.
(c) Determine the historical expected return, Beta and standard deviation of the companies’ shares using monthly data for the given 5-year period (i.e. 1 January 2014 to 31 December 2018).
(d) Using qualitative and quantitative information, some from previous calculations, and any other relevant information perform a valuation of the two companies’ shares using two approaches:
(i) Discounted cash flow approach – any one technique.
(ii) Relative valuation approach using the price earnings ratio.
(e) Assuming you inherited $800,000 from your late aunt, which of these two companies’ shares would you invest in? Justify your answer.
In addition to the above, you will also be assessed on the following: (see Learning Rubric at the end for more description of expectation).
(f) Content, Audience and Purpose.
(g) Critical reasoning, presentation and defense of an argument and/or position.
(h) Analysis and Application with synthesis of new knowledge.
(i) Use of academic conventions and sources of evidence.
(j) Effective communication.
a.Analyse financial information and evaluate financial performance of a business.
b.Apply time value of money to the valuation of a variety of cash flows, securities and projects leading to sound investment and financing decisions.
c. Analyse risk and return associated with investments.
d.Apply various capital budgeting techniques to investment decision making.
e.Analyse the cost of capital and explore its link to the capital structure of an organisation.
f.Analyse working capital and payout policies and their impact on the liquidity position of a business