FINANCE Contents Case Study 1....................................................................................................................................3 Part 1)...........................................................................................................................................3 Part 2)...........................................................................................................................................3 Part 2................................................................................................................................................5 References........................................................................................................................................6
FINANCE Case Study 1 Part 1) DescriptionANZ BankWestpac bank Total Assets (Book value)981137906626 Shareholder's Equity6079465507 Total liabilities (book value)920343841119 Number of shares (millions)26.4937.5 Market capitalization808420010300000 Net income59686784 Dividends paid160174 Calculations Market to book value ratioANZ BankWestpac bankANZ BankWestpac bank Market value of equity8084200103000008.2411.36 Book value of equity981137906626 Return on EquityANZ BankWestpac bankANZ BankWestpac bank Net income596867849.82%10.36% Shareholder Equity6079465507 Dividends per shareANZ BankWestpac bankANZ BankWestpac bank Annual dividend44716291168.78167.76 Number of outstanding shares26.4937.5 Sustainable growth rate per annumANZ BankWestpac bankANZ BankWestpac bank Return on equity * Retention rate9.82%9.82%2.46%0.71% (Net income - Dividend)/Net income25.1%7.3% Intrinsic value per shareANZ BankWestpac bankANZ BankWestpac bank Expected dividend per share1.741.612.437.48 (Cost of equity - dividend growth rate)14.00%21.40% Undervalue dUndervalued Part 2) As per the calculations in the part 1 of the case study, five calculations have been performed in order to identify which stock is feasible between the two stocks selected namely
FINANCE ANZ Banking and Westpac Banking respectively. The five categories that have been performed are market to book value ratio, return on equity, and dividend per share, sustainable growth rate and intrinsic value per share. The market to book value ratio is the ratio that indicates whether the stock is expensive or not. As per the current case study, the market to book value ratio is higher for Westpac and that of Anz Bank is lower at 11.36 times and 8.24 times respectively. From the point of view of an investor, the stock which is cheaper shall be selected and in that scenario ANZ bank is the feasible choice to make (Fatoki & Nasieku, 2017). Return on equity is the metric in that is used by the owners in order to find out how much share is to be received by the shareholders, for the money invested in the business. The return on equity for ANZ bank is 9.82% whereas that of Westpac bank is 10.36%. This implies that the return to the shareholders of Westpac Bank is higher than ANZ bank. This also indicates that the higher the returns, the higher are the level of satisfaction for investors. Clearly Westpac wins in this area (Batavia & Nelson, 2017). Dividend per sharemeans the total amount that is attributable to the shareholders which is outstanding for the company. Dividends are usually a cash payment paid to the investor in the company. Dividends are simply profit sharing methods which allow a company to distribute profits to its shareholders. The dividend per share of ANZ bank is 168 cents per share and 167 cents per share for Westpac Bank. This implies, that dividend per share of ANZ bank, is higher than Westpac Bank (Şahin & Ergün, 2018). Sustainable growth rate is the maximum increases in sales that business which can achieve without supporting the additional debt and equity financing. The sustainable rate helps in
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
FINANCE minimizing the leverage and bankruptcy. The sustainability rate of ANZ bank is 2.46% and that of Westpac Bank, 0.71% (Westpac Bank, 2019). The intrinsic value per share of ANZ bank is 12.43 whereas the current trading price is 15.68. On the other hand, the intrinsic value of Westpac Bank is 7.48 and this share is also undervalued, as the current share price is 16.87 times. Therefore, in terms of the share price, ANZ is still better and cope up with the market securities (ANZ Bank, 2019). Hence, from the overall analysis it can be stated that ANZ bank is more prudent choice than Westpac Bank. Part 2 From the overall calculations it can be stated that the trend lines of the stock are below S&P ASX200 and needs to vitalize it to be compete well. The average yearly return on stock of ANZ Bank is less than S&P ASX200 at 1.019 and 1.035 respectively. The risk factor of beta is also 0.34, which states that the company has the average risk, with an unsystematic risk of 0.058. Hence, from the overall analysis it can be stated that investors can invest in ANZ banks and shall hold the stock for some time to gather the returns effectively (Şahin & Ergün, 2018).
FINANCE References ANZBank,(2019).AnnualReport.Retrievedfrom https://www.anz.com/content/dam/anzcom/shareholder/ANZ-2019-Annual-Report.pdf Batavia, C., & Nelson, M. P. (2017). For goodness sake! What is intrinsic value and why should we care?.Biological Conservation,209, 366-376. Fatoki, O. I., & Nasieku, T. (2017). The influence of market to book value of equity on capital structure choice in Nigeria.Scientific Research Journal, 18-23. Şahin, A., & Ergün, B. (2018). Financial Sustainable Growth Rate and Financial Ratios: A Research on Borsa İstanbul Manufacturing Firms.Journal of Business Research Turk,10(1), 172-197. WestpacBank,(2019).AnnualReport.Retrievedfrom https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/ 2019_Westpac_Group_Annual_Report.pdf