Financial evaluation is a procedure to measure various financial projects, businesses, budgets etc to evaluate the financial position of the organization. This process calculates the viability of the project and helps the stakeholders of the company to reach over an improved conclusion. Basically, this procedure is conducted by the professionals to examine that whether the performance of the company is stable, profitable, solvent, liquid, adequate etc. Financial evaluation could be done through various methods and theories to measure the position of the company such as governance structure of the company, changes in the board of directors of the company, performance ratios, stock price evaluation, correlation, beta, debt ratios, dividend policies etc.
This report has been prepared to evaluate the financial performance and the changes into financial structure of the Manhattan Corporation Limited in past few years. For the report, various aspects related to internal and external financial position of the company has been evaluated such as governance structure of the company, changes in the board of directors of the company, performance ratios, stock price evaluation, correlation, beta, debt ratios and dividend policies.
MANHATTAN CORPORATION LIMITED explores, develops and evaluates the mineral projects and the mines of Australia. Mainly the company performs its operations in exploring the Uranium. The flagship project of the company is Ponton project which approximately covers 520 square kilometres of exploration tenements. These mines are situated in Gunbarrel Basin, Western Australia. The main office of the company is in Perth, Australia. The financial position and the market position of the company is enhancing due to its projects and the performance in the market (Bloomberg, 2018).
For evaluating the financial position of MANHATTAN CORPORATION LIMITED, study has been conducted over corporate governance policies of the company. In this report, the main stakeholders of the company who has more than 20% of stock of the company have been evaluated and at the same time, main members of the company such as chairman, CEO, board members etc of the company has been evaluated.
The main stakeholders of the company has been evaluated and it has been found that Minvest Securities (NZ) limited is the main stakeholder of the company which held around 170.5% of total stock of the company (Reports, 2018). The given table holds the name of top 20 shareholders of the company who has invested their amount for the operations of the company:
More to it, chief people of the company have been found. The chief of the company is Alan J Eggers who administers the entire operations of the company and he is the executive chairman of the company. Marcello Cardaci and John A G Seton is the non executive director of the company. Out of all the board of members and the chief members of the company does not have equal to or more than 20% share on the stock of the company? More, it has been found that the Alan J Eggers has 6.69% holdings in the company. The above evaluation express that most of the abetment of the company is from other companies and the individuals.
Performance ratios are the part of financial evaluation of an organization. These ratios take the concern of main financial figures of the company and evaluate the financial position of the company on the basis of that figures. It helps the comany to compare the operations and the profitability with other competitive company to evaluate the market position of the company. Following is the performance ratios of the company:
Return on assets (ROA) is a performance measurement ratio which explain about the total profit of the company which has been earn by the company in comparison with the total asset of the company (Sherman, 2005). Below given table express about the return on assets of MANHATTAN CORPORATION LIMITED:
|
A. |
Return on assets= |
NPAT/ total Assets |
|
(2800)/3198 |
||
|
-87.555% |
The above table depict that the ROA of the company is -87.55% which is expressing about a bad position and the performance of the company. It explains that the company is suffering from loss and the company should make changes into its policies to reach over a profitability level.
Return on equity (ROE) is a performance measurement ratio which explain about the total profit of the company which has been earn by the company in comparison with the total equity of the company. Below given table express about the return on equity of MANHATTAN CORPORATION LIMITED:
|
B. |
Return on Equity= |
Net profit after tax/ ordinary equity |
|
(2800)/17629 |
||
|
-15.88% |
(Morningstar, 2018)
The above table depict that the ROE of the company is -15.88% which is expressing about a bad position and the performance of the company. It explains that the company is suffering from loss and the company should make changes into its policies to reach over a profitability level.
Debt ratio is a performance measurement ratio which explains about the total liabilities of the company which has been maintained by the company in comparison with the total assets of the company (Tucker, 2011). Below given table express about the debt ratios of MANHATTAN CORPORATION LIMITED:
|
C. |
Debt Ratios = |
Total Liabilities/ total assets |
|
77/3198 |
||
|
2.41% |
The above table depict that the debt ratios of the company is 2.41% which is expressing about a bad capital structure position of the company. It explains that the company should enhance the level of the liabilities and should raise the funds through short term and long term debt funds.
TA/ TE also expresses about the performance ratios and the profitability position of the company. This ratio expresses that the better the level of the resources of the company would be the better the profitability position of the company would be as most of the part of profits are spent by the companies to manage the resources (Tucker, 2011). It explains that if the total assets and the total equity could not be managed by the company properly than it would directly make an impact over the ROA and ROE of the company.
Here, the ROE of the company is -15.88% and the ROA of the company is -87.55% which explains that the ROE is lesser than the ROA of the company. The ROA is always greater than ROE due to the reason that assets are always greater in an organization as the asset is the combination of the liabilities and the equity of the company (Bromwich and Bhimani, 2005).
More, the stock price of the company has been evaluated to identify the alternations in the stock price of MANHATTAN CORPORATION LIMITED and all ordinary shares of the ASX. The alternations have been presented in both the stock price as follows:
The above graph epxlains that the stock price of MANHATTAN CORPORATION LIMITED has been quite stable in last 2 years whereas the stock price of AORD has changed various time but the level and the price of the stock has not been altered much. The correlation factor of both the stock is 0.54636 which explains that the AORD was quite volatile in nature and the stock of MANHATTAN CORPORATION LIMITED is stable in nature (Damodaran, 2011). Further, it has been evaluated that the beta of the stocks are 2.22 which explains about the systematic risk of the company.
|
Calculation of Correlation and Beta |
|
|
Correlation |
0.54636 |
|
Beta |
2.22236 |
Further, teh study has been done over the exchange stock market and the financial position of the company to evaluate that what are the reasons due to which the stock price of an organization could affected and the alternations take place in the performance of the company. It has been found that the stock price of an organization could be affected through any internal and external position of the company such as the annual report, changes in the board members, new project and significant deal, merger and acquisition etc make an impact over the stock price of the company. At the same time, changes in the industry, currency changes government changes, fiscal policy change etc also make an impact over the stock price of a company (Bromwich and Bhimani, 2005). According to the analysis over the company, annual report, dividend announcement, changes in the government policy, industry factors and the environmental factors have affected the stock price of the company.
Through the calculations over the stock price, it has been evaluated that the beta of the stocks are 2.22 which explains about the systematic risk of the company.
CAPM calculations of the company expresses that the required rate of return of the company is 8.44%. Calculations are as follows:
|
Calculation of cost of equity (CAPM) |
|
|
RF |
4.00% |
|
RM |
6.00% |
|
Beta |
2.222 |
|
Required rate of return |
8.44% |
The above evaluation over MANHATTAN CORPORATION LIMITED explains that the position and the level of the profits of the company are good and the various opportunities are there in the market for the company. Thus, this company is a good option for the purpose of investment (Davies and Crawford, 2011).
More to it, WACC of the company has been evaluated which is as follows:
|
Calculation of WACC |
||||
|
Price |
Cost |
Weight |
WACC |
|
|
Debt |
77 |
4.90% |
0.00435 |
0.00021 |
|
Equity |
17,629 |
8.44% |
0.99565 |
0.08408 |
|
17,706 |
Kd |
8.43% |
||
|
Calculation of cost of debt |
||||
|
Outstanding debt |
77 |
|||
|
interest rate |
7% |
|||
|
Tax rate |
0.3 |
|||
|
Kd |
4.90% |
|||
|
Calculation of cost of equity (CAPM) |
||||
|
RF |
4.00% |
|||
|
RM |
6.00% |
|||
|
Beta |
222.24% |
|||
|
Required rate of return |
8.44% |
It expresses that the total cost of the company is 8.43% out of which total cost of equity is 8.44% and the total cost of debt is 4.90%. It is suggested to the company to enhance the level of debt to manage the cost and the risk of the company.
Optimal capital structure explains that an organization should set the limit of debt and equity in such a way that the return and the risk of the company could be balanced. The evaluation over the company explains that the debt level is quite lower and company should enhance the level of the liabilities and should raise the funds through short term and long term debt funds (Glajnaric, 2016).
|
Price |
||
|
Debt |
77 |
|
|
Equity |
17,629 |
|
|
17,706 |
||
|
2017 |
2016 |
|
|
Debt Ratios = |
Total Liabilities/ total assets |
Total Liabilities/ total assets |
|
77/3198 |
34/5815 |
|
|
2.41% |
0.58% |
Gearing ratios explain about the level of the company to manage the debt and the capital of the company. It expresses that the borrowing has been enhanced by the company a bit. But it is suggested to the company to enhance it to a great level. Annual report express that directors are looking forward to enhance the level of liabilities.
|
2015 |
2016 |
|
|
Gearing ratios = |
Total Liabilities/ Capital employed |
Total Liabilities/ Capital employed |
|
77/(3198-77) |
34/(5815-34) |
|
|
46.23% |
0.59% |
Further, the dividend policies of the company have been evaluated and it has been found that this company is following the relevant dividend policies. Few % of the total profit is given by the company to its shareholders as dividend amount. This policy enhances the level of belief and attractiveness in the total stock of the company (Hillier, Grinblatt and Titman, 2011).
Recommendation and Conclusion:
Thus, through the above analysis, it has been evaluated that the market and financial position of MANHATTAN CORPORATION LIMITED is quite better. The new projects and changes in the policies have helped the company to manage the better performance in the market. Governance structure of the company explains that the BOD and the chief members are performing better function, performance ratios express that the profitability position of the company have been worst and company should make few changes into its financial position to make a better level and position, Further, the stock price evaluation express about better changes in the stock price and its stability. The correlation and beta of the company is also competitive. It depicts that the current investment must not be done in the organization, it could offer huge losses to the investor.
References:
Annual report. 2017. MANHATTAN CORPORATION LIMITED, viewed Jan 16, 2018, https://manhattancorp.com.au/upload/documents/investor/annual/20170925_Manhattan2017AnnualReportandFinancialStatements.pdf
Bloomberg. 2018. MANHATTAN CORPORATION LIMITED, viewed Jan 16, 2018, https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=59530355
Bromwich, M. and Bhimani, A., 2005. Management accounting: Pathways to progress. Cima publishing.
Damodaran, A, 2011, Applied corporate finance,3rd edition, John Wiley & sons, USA
Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.
Glajnaric, M., 2016. The importance of dividend paying stocks. Equity, 30(2), p.6.
Hillier, D., Grinblatt, M. and Titman, S., 2011. Financial markets and corporate strategy. McGraw Hill.
https://financials.morningstar.com/income-statement/is.html?t=XBER:32U®ion=deu&culture=en-US
Morningstar. 2018. MANHATTAN CORPORATION LIMITED, viewed Jan 16, 2018,
Reports. 2018. MANHATTAN CORPORATION LIMITED, viewed Jan 16, 2018, https://manhattancorp.com.au/investor-relations/annual-reports
Sherman, S., 2005. Finance and fictionality in the early eighteenth century: Accounting for Defoe. Cambridge University Press.
Tucker, J.W., 2011. Selection bias and econometric remedies in accounting and finance research.
Yahoo finance. 2018. MANHATTAN CORPORATION LIMITED, viewed Jan 16, 2018, https://finance.yahoo.com/quote/%5EAORD/history?period1=1452882600&period2=1516041000&interval=1d&filter=history&frequency=1d
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