• Internal Code :
  • Subject Code : FIN510
  • University :
  • Subject Name : Accounting and Finance

Financial Statement Analysis - Problem 1

Company Name

Collins Foods Limited

Stock Ticker Symbol

CKF

Stock information

Ordinary fully paid

Most recent price

$10.680

Market capitalization

$1.23 Billion

Daily volume

208862

Number of ordinary securities published on ASX

116581244

Most recent dividend

$0.11

Annual dividend yield

1.9%

P/E ratio

39.300

EPS

$0.268

Company description

Collins Foods is a KFC franchisee in Europe and Australia, a franchisee of Taco Bell in Australia and also the franchisor of Sizzler in Asia and owner of Sizzler restaurants in Australia. It carries out its operations from Brisbane. It laid emphasis on continuous improvement in various fields of operations and works to achieve the objective to establish this corporation as one of the leading restaurants holding companies.

Financial Statement Analysis - Problem 2

Announcement date and Headline

18/09/2020 and Headline – Appoints Hans Miete as CEO Europe

Interpret the announcement: Good or bad news

Good news as Hans will ensure the effective accomplishments from European operations of company that covers 24 KFC restaurants in Netherlands and 18 KFC restaurants in Germany.

Is the announcement related to systematic risk or unsystematic risk? Explain

This will be regarded as unsystematic risk as it will only affect the operations of Collins Foods and the operations of other companies will be affected due to appoint of CEO of one company.

Did the share price move up on good news and down on bad news or was the pattern mixed? (Check the share price the dates just before and after the announcement date and check the pattern). Why price movement might occur?

There was a mixed pattern analysed in the share price of Collins Foods.

On 18/09/2020, the price of the share was $10.210, on 21/09/2020, it moved down to $10.010, then increased to $10.700 on 23/09/2020 and finally its recent price is $10.680. Price movement might occur owing to the demand patterns for the company’s shares.

Financial Statement Analysis - Problem 3

Dividends

Dividend

Growth rates {(D1-D0)/D0}

Annual rate of return using Gordon Model (P0 = D1/r-g)

2020 (D4)

0.11

-0.45

0.1864

2019 (D3)

0.2

0.1111

6.9231

2018 (D2)

0.18

0.0588

2.2174

2017 (D1)

0.17

0.0625

2.1935

2016 (D0)

0.16

   

Financial Statement Analysis - Problem 4

 

CKF

ASX200

Return (most recent period)

0.13631

-0.00105

Mean (Average returns)

0.00569

0.00079

Variance

0.00250

0.00045

Standard Deviation

0.05004

0.02125

Slope (Beta)

1.33559

Analysis - There is a mixed pattern analysed in the movement of share prices of the company during the last four years starting from July 2016 to June 2020. At the end of 2016, the price of the share was $5.93 that declined to $5.105 at the end of 2017. The share restored its position back to $5.94 at the end of period 2018 and increased significantly to $8.85 at the end of 2019. The last price computed at the end of June 2020 is $9.31 which indicates that the price of the share has increased significantly in 2020 in comparison to the last 4 years. 

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.567162566

R Square

0.321673376

Adjusted R Square

0.318396436

Standard Error

0.04131222

Observations

209

ANOVA

 

Df

SS

MS

F

Significance F

Regression

1

0.167534274

0.167534

98.16272

3.46232E-19

Residual

207

0.353286803

0.001707

Total

208

0.520821077

     
 

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept

0.004630382

0.002859621

1.619229

0.10692

-0.001007333

0.010268

-0.001007333

0.0102681

X Variable 1

1.335588556

0.134802948

9.90771

3.46E-19

1.069825839

1.601351

1.069825839

1.60135127

Financial Statement Analysis - Problem 5

 

CKF

ASX200

Return (most recent period)

0.14459

-0.00949

Mean (Average returns)

0.01093

-0.00475

Variance

0.01514

0.00218

Standard Deviation

0.12304

0.04674

Slope (Beta)

1.66743

Due to COVID 19 outbreak, the share price of the company has declined from $8.84 in January 2020 to $4.72 in March 2020. However, in May 2020, the share price of the company again increased to $8 and then to $9.31 in June 2020. The net profit of the company has declined from $59333000 in 2019 to $31263000 in 2020 owing to the rise in expenses and decline in the sales revenue (Annual Report, 2020). The company has large amount of interest expenses on the amount of borrowings irrespective of the amount of profits earned by it. Beta is considered as the significant factor that helps in determining the cost of equity. The share valuation of the corporation gets affected by the value of beta. it has been analysed that if the beta value of the specific period is high then it infers that the cost of capital is also high. The beta for four years has been computed as 1.34 whereas the beta for the last 6 months has been computed as 1.67. This shows that beta value is lower for four years period which indicates that cost of capital was lower in that period and now it has increased and thus, infers that the risk level was lower earlier and now it has also increased. It has been found that there are various macroeconomic factors like treasury bills, GDP, exchange rates, interest rates, etc. that may influence the weakness and strength of the particular economy. In the last four years, the stock market is considered to be less volatile in comparison to last 6 months period as the beta value Is higher in earlier period. High volatility infers serious influence on the economy that might make it difficult for any company to achieve smoothness in the business operations.

References for Collins Foods Limited Analysis

Annual report. (2020). Collins Foods Limited. Retrieved from https://www.collinsfoods.com/wp-content/uploads/2020/07/COL-3069_Annual-Report-2020_FINAL_WEB3.pdf

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