The strategic analysis of the group indicates that with continued development of new initiatives and business products, the group is likely to expand its client base by entering new markets. The company’s salary packing business continues to provide an annuity stream of income that further allows cross-selling of company’s other products such as leasing services. The company has a very strong balance sheet and cash flow position that gives it opportunity to choose inorganic expansion route. The company’s revenues from core activities experienced 12.6% to $161.50 million at the end of December 2012, with net profits rising over 19.3%. The company announced the gain in gross revenue and profit for the year June 2013 but a proposal from the Labour government shook company’s future earnings capacity causing the company’s share price to plunge by over 55% in the middle of July 2013. Background of Share Price Crash McMillan Shakespeare’s Finance group share price almost halved since the government flagged changes to current laws of fringe benefit tax (FBT) that has created uncertainty in the markets. The company’s trading was suspended for a week and when it resumed trading the share prices crashed by over 48% to $7.99 wiping away almost $549 m of shareholders’ wealth from the markets (Australian Associated Press, 2013). Due to this reason the company’s management requested for an extension to halt trading which is viewed by many analyst as a desperate move by the management to avoid such huge amount of losses and save shareholders’ wealth from volatile and uncertain markets. The Australian Securities and Investment Commission have however rejected the company’s plea of halting trading. (Source: ASX, 2013) The company has criticised the government’s recent decision to tightening FBT guidelines especially on salary package and car leasing for the share price crash and uncertainty in markets. The panic among the investors was evident since the proposed changes to FBT guidelines tighten fringe benefit taxes on salary packaging and car leasing. The investors in the market expected the revenues of the company to be adversely affected from the government’s decision since the company’s primary source of revenues is generated from car leasing and salary packages. This negative outlook on the company’ future earning capacity from the tightening of FBT created panic in the broader markets that led to overselling of company’s stocks in Australian Stock Exchange. Thus, it can be said from the above discussion that a chain of events starting from the government’s decision to tighten FBT guidelines, the same decision to adversely affect profitability of the company, negative sentiments among the investors in the market regarding company’s future, and huge sell of the Finance Group’s MMS stocks after a week’s inactive trading, ultimately caused the company’s share prices to plummet by over 55% in the mid of July 2013. Reasons behind Dramatic Price Change The company under observation derives almost 50% of its revenues from two major segments namely Asset Management and Group Remuneration Services. But from the analysis of financial statements of the company it is apparent that over 70% of its total earnings are generated from the revenues of group remuneration, which is almost three
EQUITIES AND INVESTMENT ANALYSIS Table of Contents Introduction 3 Background of Share Price Crash 3 Reasons behind Dramatic Price Change 5 Conclusion and Recommendation 6 References 8 Introduction McMillan Shakespeare Limited (MMS) is an Australian company that provides vehicle leasing, fleet management services and salary packaging to major employers across New Zealand and Australia…
In identifying the returns, generally there are some theories which assist investors in picking up a relevant stock as per the investor’s preferences. Fama and French (1993) provided a Three Factor Model (3FM) to analyze the excess stock returns with respect to EMR, SMB and HML, where; EMR = Excess Market Return (Market Returns – Risk-free Returns) SMB = Small Company Returns minus Big Company Returns HML = High Book-to-Market Company Returns minus Low Book-to-Market Company Returns This article analyzes the excess stock returns of 6 companies of S&P/ASX300 which are Gain Corp.
When it comes to product innovation, no business is far behind. Even the financial markets have been a domain of product innovations in the recent past. One such innovation in the highly lucrative financial markets is The Hedge Funds. Hedge Fund refers to “an aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).” (Investopedia, 2011) The nature of Hedge Fund is different from many other investment setups.
The ability to obtain liquidity is further complicated by the fact that the banks that offer short-term financing are at the same time struggling with reduced capital structure, reduced levels of risk they are willing to undertake, and are reluctant to lend more money.
In fact, market prices are frequently nonsensical” (Hagstrom 1999. p. 65). The above statement justifies that market movements are frequently nonsensical and prices of stocks are influenced by the ‘herd’, which implies to a group that acts upon emotions.
In the short term, the 1 year return of FLCSX was 19.74% compared to 17.72% returns in the international index of S&P 500. The following table summarizes the performance in percentage returns of international index S&P 500 and FLCSX for different time horizons: Performance Review Period (Yrs) S&P 500 (%) FLCSX (%) 1 17.72 19.74 3 11.42 12.87 5 4.91 6.27 10 7.82 8.72 YTD 14.55 15.62 From the above summary of YTD returns of FLCSX and S&P 500 it can be said that in the long run as well as in the short run, the YTD returns of FLCSX were greater than that of S&P 500.
Treynor ratio refers to a measure of excess returns that can be obtained from a given investment operating under a risk free rate. Treynor ratio utilizes beta rather than standard deviation when determining portfolio returns. Therefore, Treynor ratio assumes that relevant risk is systematic whereby; the inherent risk can not be diversified through portfolio management (Anric, 2013).
Then, key assumptions and author’s analysis method are presented. The latter part of the paper will explain and critique the financial position of the two companies and also the strategy and structure of the organisation. For this purpose different financial
prime property is also linked to the upwards only rent review provisions, since a tenant may not always have recourse to a downward review of rent due to the wording of the rent review clauses. The rent review clause provides the investor in the property with a steady income
The overall objective of this investment analysis is to long the asset at cheap (by identifying when the stock is undervalued) and then it short it when it reaches target price with the objective of making profit. Markets are made of people and