MAF307 EQUITIES AND INVESTMENT ANALYSIS Essay Example | Topics and Well Written Essays - 1000 words

MAF307 EQUITIES AND INVESTMENT ANALYSIS - Essay ExampleThe strategic abstract 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 guilds salary packing business continues to provide an annuity stream of income that further allows cross-selling of companys other products such as leasing services. The company has a real strong balance sheet and cash flow position that gives it opportunity to choose inorganic expansion route. The companys 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 course of instruction June 2013 but a proposal from the Labour government shook companys future earnings capacity causing the companys distribute price to plunge by over 55% in the middle of July 2013. Background of Share Price Crash McMillan Shakespeares Finance group sell price almost halved since the government flagged changes to current laws of fringe benefit tax (FBT) that has created uncertainty in the markets. The companys trading was suspended for a week and when it resumed trading the share prices chisel ined 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 companys management pass on for an extension to halt trading which is viewed by many analyst as a desperate move by the management to avoid such gigantic amount of losses and save shareholders wealth from volatile and uncertain markets. The Australian Securities and Investment Commission have however rejected the companys confession of halting trading. (Source ASX, 2013) The company has criticised the governments recent decision to tightening FBT guidelines especially on salary package and car leasing for the share price crash and uncertainty in m arkets. 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 governments decision since the companys primary source of revenues is generated from car leasing and salary packages. This interdict outlook on the company future earning capacity from the tightening of FBT created panic in the broader markets that led to overselling of companys stocks in Australian Stock Exchange. Thus, it can be express from the above discussion that a chain of events starting from the governments decision to tighten FBT guidelines, the same decision to adversely affect profitability of the company, negative sentiments among the investors in the market regarding companys future, and huge sell of the Finance Groups MMS stocks after a weeks inactive trading, in the long run caused the companys share prices t o plummet by over 55% in the mid of July 2013. Reasons behind Dramatic Price Change The company infra 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 plain that over 70% of its total earnings are generated from the revenues of group remuneration, which is almost three