Policy Changes In An Emerging Stock Market -Myassignmenthelp.Com

Question: Discuss About The Policy Changes In An Emerging Stock Market? Answer: Introduction: Business Finance is a part of finance which covers great varieties of disciplines and activities which is revolving around the money management and valuation of assets. This accounting system makes it easy for the professionals to understand the position and worth of an organization in the industry, various tools are covered in this financial type. With the help of business finance, PRO PAC PACKAGING LIMITED Company has been evaluated. This report paper explains about the position, performance and the investment opportunity in the company. For evaluating the investment opportunity of the company, annual report of the company has been identified and the stock price of the company has been compared with the Australian ordinary stock prices (Travlos, Trigeorgis and Vafeas, 2015). Corporate governance, ratio analysis, changes in the stock price, factors through which the stock price of the company has been affected, cost of equity, cost of debt, cost of capital, risk, return etc has been evaluated. Further, a letter of recommendation has been prepared for the client of the company to recommend about the investment in the company. Brief Description of company: PRO PAC PACKAGING LIMITED is a manufacturing company which is working in the Australian market along with its various subsidiary companies. This company manufactures, delivers and serves the industrial, rigid and protective packaging to the products in Australian market as well as various foreign countries. The industrial packaging division of the company manufactures distributes and sources the industrial packaging material (Bloomberg, 2018). It also focuses on install, maintain and support the packaging tools systems and machineries. Currently, the revenue of the company is AUD 229244000. The diversification and strategic financial policies of the company has been changed in last 2 years. Ownership governance structure: The governance structure of the company has been evaluated through the annual report of the company and following data has been found: Main Substantial stakeholders: There is only 1 investor who has more than 20% stock of the company. 51.20% of total stock is held by the BENNAMON PTY LTD in the total stock of PRO PAC PACKAGING LIMITED. Further, it has been found that this company is not a family company and operating its business separately (Thanatawee, 2013). Further, it has been found that 2 investors are also there who is holding more than 5% stock of the company. Through the analysis, it has been found that the MR BRANDON ARI PENN is holding 9.21% of total stock of the company and on the other hand, 7.62% stock of the company has been held by AUST EXECUTOR TRUSTEES LTD. Following is the table of top 20 stockholders of the company: Main people of firm governance: Chairman of the company is Ahmed Fahour. He is serving the company from 25th Nov 2014. Elliott Kaplan is the main board of members of the company. Brandon Penn is the CEO of the company. According to the top 20 shareholders list of the company, no person with same surname is holding the stock of the company (AFR, 2018). Further, none of the shareholders of the company is holding more than 5% stock of the company. Performance Key ratios: Performance ratios are the key ratio of an organization. This makes it easy for the company and the professionals to evaluate the position of the company. Performance ratios include the profitability ratios and the capital structure ratios. Following is the calculations of the performance ratios: Return on assets: Return on assets is the profitability ratio which is measured through analyzing the net profit of the company in context with the total assets of the company. The calculations of return on assets explain that the company is earning 2.79% of profit according to the total assets of the company (Hillier, Grinblatt and Titman, 2011). Return on assets NPAT/ total Assets 5016/179939 2.79% Return on equity: Return on assets is the profitability ratio which is measured through analyzing the net profit of the company in context with the total equity of the company. The calculations of return on equity explain that the company is earning 4.41% of profit according to the total equity of the company. Return on Equity= Net profit after tax/ ordinary equity 5016/113683 4.41% Debt Ratios = Total Liabilities/ total assets 66256/179939 36.82% Phenomenon TA/OE: Total assets and total equity are the main elements to evaluate the profitability position and return on assets and return on equity of the company. TA/TE = (NPAT/ Total assets)/(NPAT/TE) TA/TE =Total assets/TE The above equation makes it simple to evaluate the impact of total assets and total equity on return on assets and return n equity of the company. The more the total assets and equity would be the lesser the profitability position of the company would be. ROA and ROE: Further, the above calculations makes it simple to evaluate that ROA is always lower than the ROE of the company due to higher assets in an organization in comparison with the total equity of the company (Ft, 2018). Accounting double equation system explains that the assets are the combination of equity and liabilities and thus the ROE is always higher. Changes in stock price: Further, for evaluating the changes in the stock performance of the company, stock price of the company has been compared with the AORD. Following graph explains about the changes: The below graph explains that the stock price of PPG is quite stable and the stock price of AORD is volatile in nature. The stock price of AORD is quite higher than the stock price f PPG. Further, it explains that the correlation among both the stock is 0.19 which explains that the stock price of both the stock are not at all correlated (Investing Business, 2018). Significant factors: Further, it has been found that the stock price of the company has faced various significant changes in last 2 years. These changes have occurred due to varioys significant factors such as internal and external factors. Through the study, it has been found that the stock price of the company has been enahnced on 30-09-2017 by 13.89% due to the annual report announcement (FT, 2018). On the other hand, on 30-11-2016, stock price has been lowered due to less dividend amount (AFR, 2018). More, the stock price has been enhanced on 31-07-2016 due to internal changes in the company (Yahoo Finance, 2018). In addition, on 29-02-2016, stock price of the company has been enhanced due to macro economical factors and on 31-05-2017, the stock price of the company has been enhanced due to industry factors (Invetsing Business, 2018). Calculation of CAPM and beta values: The best calculations of the company explain that the systematic risk of the company is 0.076. Required rate of return: Return of the company is 4.15%. Calculation of cost of equity (CAPM) RF 4.00% RM 6.00% Beta 0.076 Required rate of return 4.15% (Morningstar, 2018) Conservative company: It explains that the risk and return of the company are respectively lower and higher and thus this company could be considered as a conservative company to make an investment. WACC calculations: Calculation of WACC Price Cost Weight WACC Debt 25,500 5.25% 0.20615 0.01082 Equity 98,194 4.15% 0.79385 0.03296 1,23,694 Kd 4.38% Calculation of cost of debt Outstanding debt 25,500 interest rate 7.50% Tax rate 0.3 Kd 5.25% Calculation of cost of equity (CAPM) RF 4.00% RM 6.00% Beta 7.58% Required rate of return 4.15% Implication on WACC: The current cost of capital of the company is 4.38% which explains that if the company wants to invest into a new project of machinery than the total return form that project must be more than 4.38% (Bodie, 2013). Only in that case, company would be able to earn profits. Debt ratios: Optimal capital structure: 2017 2016 Debt Ratios = Total Liabilities/ total assets Total Liabilities/ total assets 66256/179939 66897/178261 36.82% 37.53% Calculations of optimal capital structure of the company explain that the company is working towards an optimal capital structure through reducing the level of the debt ratios. The current optimal capital structure of the company is not stable (Brealey, Myers and Marcus, 2007). Gearing ratios: 2017 2016 Gearing ratios = Total Liabilities/ Capital employed Total Liabilities/ Capital employed 66256/(179939-37504) 66897/(178261-38110) 46.52% 47.73% Gearing ratios of the company explains that the borrowing of the company has been lowered and the liabilities have also been lowered by the company to maintain a good level of the funds of the company, risk and return of the company. Dividend policy: Dividend policy is a policy which is concerned about the policy of the company through which the dividend amount is announced and paid by the company to the stockholders of the company. The dividend policy of the company explains that the company is following the relevant dividend policy which briefs that an organization should offer a great amount of dividend to the stockholders of the company against their investment amount in the company; dividend amount motivates the investors to hold the money in the company and invest more in the company (Davies and Crawford, 2011). More to it, dividend amount also helps the company to improve the market and stock position of the company and attracts more investors towards the company. The annual report of the company explains that the company has announced 1 cent of ordinary stock for the stockholders of the company in current year. Further, it has also been analyzed that this company is continuously giving a good amount of dividend to its stockholders so that the position and the performance of the company could be managed by the company and management of the company in industry and market (Annual Report, 2018). Conclusion: It is required for every investors to evaluate the performance and the position of the company in which they are going to invest their savings as an investment. According to your request, PRO PAC PACKAGING LIMITED Company has been evaluated and the position, performance and the investment opportunity of the company has been identified. For evaluating the investment opportunity of the company, annual report of the company has been identified and the stock price of the company has been compared with the Australian ordinary stock prices. It explains that the stock price of the company is stable and no huge changes have occurred. Further, Corporate governance, ratio analysis etc study explains that the company is managing and earning good profit. At the same time, the investment risk of the company is lower and the return of the company is higher. It explains that this company is the best opportunity for the purpose of investment. So, an investor should invest into this company to enhance the return and the performance of the company. References: About us. 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://www.pro-pac.com.au/ AFR, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://www.afr.com/research-tools/PPG/share-prices/related-securities Annual report, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://www.pro-pac.com.au/docman/investor-relations/annual-reports/807-2017-annual-report/file Bloomberg, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=21766569 Bodie, Z., 2013.Investments. McGraw-Hill. Brealey, R., Myers, S.C. and Marcus, A.J., 2007.FundamentalsofCorporate Finance. Mc Graw Hill, New York. Davies, T. and Crawford, I., 2011.Business accounting and finance. Pearson. FT, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://markets.ft.com/data/equities/tearsheet/summary?s=PPG:ASX Hillier, D., Grinblatt, M. and Titman, S., 2011.Financial markets and corporate strategy. McGraw Hill. Investing Business, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://www.investing.businessweek.wallst.com/research/stocks/financials/ratios.asp?ticker=PPG:AU Morningstar, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://financials.morningstar.com/cash-flow/cf.html?t=PPGregion=ausculture=en-US Thanatawee, Y., 2013. Ownership structure and dividend policy: Evidence from Thailand. Travlos, N.G., Trigeorgis, L. and Vafeas, N., 2015. Shareholder wealth effects of dividend policy changes in an emerging stock market: The case of Cyprus. Yahoo Finance, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://finance.yahoo.com/quote/%5EAORD/history?period1=1451586600period2=1514658600interval=1mofilter=historyfrequency=1mo Yahoo Finance, 2018. PRO-PAC Packaging Ltd. viewed Jan 30, 2018, https://finance.yahoo.com/news/pro-pac-packaging-limited-asx-015034396.html