The main operation of Living Cell Technologies Ltd is to use biotechnology to improve wellbeing of people with serious diseases. The company aims in providing service to mankind by developing, discovering and commercializing regenerative treatments within humans. The company markets in Australia, which helps in generating required level of profits from operations. From the historical evaluation, Living Cell Technologies Ltd has been developing DIABECELL, as an effective treatment for unstable type 1 diabetes. The company has been developing treatment for neurological disorder since their establishment date of 1999 (Lctglobal.com 2018).
|
Main substantial shareholders |
Number of Share held |
% of issued share |
|
HSBC Custody Nominees (Australia) Ltd |
60,962,384 |
11% |
|
Milford Asset Management |
36,078,640 |
6% |
|
Position |
Name of the Persons |
|
The Chairman |
Roy Austin |
|
CEO |
Ken Taylor |
|
Director |
Robert Elliott |
|
Boards members |
Laurie Hunter |
|
Boards members |
Bernard Tuch |
|
Boards members |
Robert Willcocks |
|
Particulars |
2017 |
2016 |
2015 |
2014 |
|
Net Profit After Tax |
(4,085,466) |
(3,123,208) |
(7,412,349) |
(4,943,490) |
|
Total Assets |
8,694,360 |
6,312,459 |
5,464,515 |
9,664,604 |
|
Ordinary Equity |
74,339,770 |
68,406,383 |
64,751,709 |
60,685,600 |
|
Total Liabilities |
1,176,020 |
635,798 |
337,652 |
1,233,027 |
|
Return on Assets |
-46.99% |
-49.48% |
-135.65% |
-51.15% |
|
Return on Equity |
-5.50% |
-4.57% |
-11.45% |
-8.15% |
|
Debt Ratio |
13.53% |
10.07% |
6.18% |
12.76% |
|
Particulars |
2017 |
|
EBIT |
(4,125,977) |
|
TA |
8,694,360 |
|
NPAT |
(4,085,466) |
|
EBIT |
(4,125,977) |
|
TA |
8,694,360 |
|
OE |
74,339,770 |
|
NPAT/OE |
(EBIT/TA) * (NPAT/EBIT) * (TA/OE) |
|
NPAT/OE |
-5.50% |
|
Particulars |
2017 |
2016 |
2015 |
2014 |
|
TA/OE |
11.70% |
9.23% |
8.44% |
15.93% |
The calculation of TA/OE indicates the increment in asset, which is obtained by the company. this increment in asset in comparison with equity has allowed the organisation to obtain 11.70% in 2017 from 8.44% in 2015. This is directly increasing return on asset value, while decreasing return on equity.
The ROA is less than ROE, as the overall asset value is less than ordinary equity obtained by Living Cell Technologies Ltd. The asset value in comparison with equity is relatively low, which is indicating low value of ROA in comparison with ROE (Filipovic, Kremslehner and Muermann 2015).
The evaluation of above graph helps in identifying the volatility of Living Cell Technologies Ltd, which is calculated at the levels of -0.0851. This relevant correlation value indicates that share price is negatively correlated, where increment in value of All Ordinary Share would result in the decline of Living Cell Technologies Ltd share value.
|
Date |
Announcements |
Factors |
|
15-Nov-2017 |
Chairman Addressing 2017 annual report |
Financial performance |
|
16-Sep-2017 |
Sir Richard Faull on RNZ National discussing about Brain Research and finding a cure for Parkinson’s disease. |
Research and Development |
|
16-May-2017 |
Continuous halt in progression of Parkinson’s disease. |
Research and Development |
|
13-Jun-2017 |
Pig brain cells implanted into brains of people with Parkinson’s |
Research and Development |
|
1-Mar-2016 |
Parkinson’s Clinical trial |
Research and Development |
The beta identified from Reuters is mainly calculated at the levels of 0.17, which could help in depicting risk level of Living Cell Technologies Limited (Au.reuters.com 2018).
|
Particulars |
Values |
|
Beta |
0.17 |
|
Risk free rate |
4% |
|
Market risk premium |
6% |
|
CAPM |
4.34% |
From the evaluation of overall beta and CAPM returns the investment scope of the organisation is determined. In addition, the overall beta indicates that the company comes under conservative investment section, where bet is less than 0.50.
|
Particulars |
Values |
|
Total Equity |
74,339,770.00 |
|
Total Debt |
0.00 |
|
Total Capital |
74,339,770.00 |
|
Cost of debt |
0.00 |
|
Cost of equity |
4.34% |
|
Tax |
30.00% |
|
WACC |
4.34% |
WACC valuation is mainly conducted to understand the cost of capital, which is required by the company to support its activities. In addition, high WACC mainly forces the management to select projects, which has higher return than their current WACC. This could eventually help in improving the return that is needed by the company to raise their profitability. Therefore, the management needs to be select projects in future, which could provide higher return than WACC or else it would not generate adequate return and increase their loss. Loughran and McDonald (2016) mentioned that with the use of WACC investors are able to understand minimum requirement that is needed by organisation to support their profitability.
|
Particulars |
2017 |
2016 |
|
Total Assets |
8,694,360 |
6,312,459 |
|
Total Liabilities |
1,176,020 |
635,798 |
|
Debt Ratio |
13.53% |
10.07% |
From the evaluation of above table debt ratio of the organisation could be identified, which is increasing at an alarming rate. This directly indicates that the company is acquiring debt to conduct its operations, which is portraying the chances of the company being insolvent in future.
The company has mainly utilised share issue option to adjust its gearing ratio and improve their financial position. The directors have also acknowledged share issue, which was conducted to increase their cash reserves and raise their net assets.
From the evaluation of annual report, the company is not paying any kind of dividend, which portrays non-payment dividend policy adopted by the company. The management has not paid any kind of dividend to its shareholders after its incorporation.
After evaluating annual report and share price performance of the company, it could be understood that adding the stock in the portfolio could directly result in loss. The company is losing share value and is incurring loss for more than 2 fiscal years. No progress can be seen from its annual report, which is highlighting a red flag for the investors. Therefore, discarding the stock could allow investor in improving its return and safeguard their investments.
Reference:
Au.finance.yahoo.com. (2018). LCT.AX: Summary for LIV CELL FPO – Yahoo Finance. [online] Available at: https://au.finance.yahoo.com/quote/LCT.AX?p=LCT.AX [Accessed 22 Jan. 2018].
Au.reuters.com. (2018). ${Instrument_CompanyName} Latest Company News. [online] IN. Available at: https://Au.reuters.com/finance/stocks/company-news/LCT.AX?date=01212018 [Accessed 22 Jan. 2018].
Filipovi?, D., Kremslehner, R. and Muermann, A., 2015. Optimal investment and premium policies under risk shifting and solvency regulation. Journal of Risk and Insurance, 82(2), pp.261-288.
Floyd, E. and List, J.A., 2016. Using field experiments in accounting and finance. Journal of Accounting Research, 54(2), pp.437-475.
Fourie, M.L., Opperman, L., Scott, D. and Kumar, K., 2015. Municipal finance and accounting. Van Schaik Publishers.
Gippel, J., Smith, T. and Zhu, Y., 2015. Endogeneity in Accounting and Finance Research: Natural Experiments as a State?of?the?Art Solution. Abacus, 51(2), pp.143-168.
Gippel, J., Smith, T. and Zhu, Y., 2015. Endogeneity in Accounting and Finance Research: Natural Experiments as a State?of?the?Art Solution. Abacus, 51(2), pp.143-168.
Lctglobal.com. (2018). Living Cell Technologies | History. [online] Available at: https://www.lctglobal.com/about-lct/history [Accessed 22 Jan. 2018].
Loughran, T. and McDonald, B., 2016. Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), pp.1187-1230.
Ramírez, R.R., 2017. Teaching ethics through court judgments in Finance, Accounting, Economics and Business. Etikk i praksis-Nordic Journal of Applied Ethics, 11(1), pp.61-87.
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