Tasman Resources Investment Analysis

This assignment requires an evaluation of Tasman Resources Limited as a potential investment. Students must analyze key financial metrics including debt ratio, profitability (loss history), beta value, and overall financial position. A letter recommendation is to be written advising investors on whether or not to include shares of Tasman Resources in their portfolio based on the analysis.

Running head: FINANCE FOR BUSINESS
Finance for Business
Name of the university
Name of the student
Authors note

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FINANCE FOR BUSINESS
Table of Contents
Description of company:..................................................................................................................2
Ownership and governance structure of company:.........................................................................2
Calculation of performance ratios:..................................................................................................3
Significant factors influencing the share price of Oz Minerals:......................................................6
Calculation of Beta values and expected rate of returns:................................................................7
Weighted average cost of capital:....................................................................................................7
Debt ratios for the past two years:...................................................................................................8
Dividend policy:..............................................................................................................................9
Letter recommendation:...................................................................................................................9
Description of company:

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Tasman resource Limited is an exploration company of Australia that is based in Perth.
Main objective of company is to focus on exploration project having potential of major deposits
in a range of base and precious metals including silver, gold, nickel, lead, zinc, copper and
uranium (Tasmanresources.com.au. 2018). It is multi commodity and diversified explorer with
projects having large tenements holdings in South Australia. Company is doing evaluation of
Parkinson Dam epithermal gold discovery and identification of further exploration is the new
target of company. Tasman holds 19% of interest in Conico Limited that helps in exploration of
cobalt, manganese oxide deposit in Western Australia and 46% interest in Eden Energy limited
that helps in marketing and development of key technology products (Tasmanresources.com.au.
2018).
Ownership and governance structure of company:
From the analysis of annual report of Tasman resources limited for the year ending 2017,
it is ascertained that there are no substantial shareholders holding more than 20% of
shareholdings.

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FINANCE FOR BUSINESS
However, there are four substantial shareholders having more than 5% shareholdings and
they are March Bells Pty having 13.08%, Arkenstone Pty Ltd having 13.735% of shareholdings,
March Bells Pty Ltd having 5.88% of shareholdings and Arkenstone Pty Ltd having 5.5090% of
shareholdings (Tasmanresources.com.au. 2018). Therefore, the company is classified as non-
family company.
Main people involved in governance of firm are board of directors of company. This
incorporates chief executive officers, chairman and non-executive directors. Gregory H Solomon
is the executive chairman, Douglas H Solomon and Guy T Le Page is non-executive chairman of
Tasman Resources limited (Tasmanresources.com.au. 2018).
Calculation of performance ratios:
$0.000 $0.000 $0.000 $0.000 Trend
Particulars` 2014 2015 2016 2017 2014 2015 2016 2017
Net Profit after Tax
(NPAT) A
-
20056
73
-
62881
76
-
41034
21
-
128603
28
-
100.0
%
-
313.5
%
-
204.6
%
-
641.2
%
Total Assets (TA) B
25187
568
22280
607
34340
214
406954
93
100.0
% 88.5%
136.3
%
161.6
%
Ordinary Equity
(OE) C
23987
848
20563
446
33347
685
371024
14
100.0
% 85.7%
139.0
%
154.7
%
Total Liabilities D
11997
20
17171
61
99252
9
359307
9
100.0
%
143.1
% 82.7%
299.5
%
Return on Assets
(ROA)
E=
A/B -7.96%
-
28.22
%
-
11.95
%
-
31.60%
-
100.0
%
-
354.4
2%
-
150.0
6%
-
396.8
5%
Return on Equity
(ROE)
F=A/
C -8.36%
-
30.58
%
-
12.30
%
-
34.66%
-
100.0
%
-
365.7
3%
-
147.1
7%
-
414.5
5%
Debt Ratio
G=D
/B 0.048 0.077 0.029 0.088
100.0
%
161.8
0%
60.68
%
185.3
6%

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$0.00
0
$0.00
0 $0.000 $0.000 Trend
Particulars` 2014 2015 2016 2017 2014 2015 2016 2017
EBIT A
-
19682
37
-
25518
52
-
421666
9
-
1290366
7
-
100.0
0%
-
129.6
5%
-
214.2
4%
-
655.6
0%
Total Assets B
25187
568
22280
607
343402
14
4069549
3
100.0
0%
88.46
%
136.3
4%
161.5
7%
Net Profit
after Tax C
-
20056
73
-
62881
76
-
410342
1
-
1286032
8
-
100.0
0%
-
313.5
2%
-
204.5
9%
-
641.2
0%
Owner's
Equity D
23987
848
20563
446
333476
85
3710241
4
100.0
0%
85.72
%
139.0
2%
154.6
7%
Return on
Equity
E=(A/
B)x(C/A)x
(B/D)
-
8.36%
-
30.58
%
-
12.3049
7%
-
34.6617
02%
-
100.0
0%
-
365.7
3%
-
147.1
7%
-
414.5
5%
The variable TA/OE represents total assets, ordinary equity, and the variable influences
the relationship between return on equity and return on assets. Value of return on assets will
increase resulting from increase in total profits and amount of total assets. However, this
increment depends upon the magnitude of increment. Increase in ordinary equity amount will
decrease return on equity if the profit is remains constant (Block et al. 2015).
ROA and ROE are negative in value resulting from net loss year on year. However, ROA
is less favorable compared to ROE because of value of total assets is more than value of ordinary
equity. Total assets are increasing at faster rate than ordinary equity.
Graph with the description of results:

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FINANCE FOR BUSINESS
12/1/2015
1/1/2016
2/1/2016
3/1/2016
4/1/2016
5/1/2016
6/1/2016
7/1/2016
8/1/2016
9/1/2016
10/1/2016
11/1/2016
12/1/2016
1/1/2017
2/1/2017
3/1/2017
4/1/2017
5/1/2017
6/1/2017
7/1/2017
8/1/2017
9/1/2017
10/1/2017
11/1/2017
-150.00%
-100.00%
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
Stock Price Movement
Tasman Resources limited All Ordinaries Index
The above chart depicts the movement in monthly share price and ordinary index for two
year from 2015 to 2017. It can be seen that share price of Tasman Resources limited is not
volatile; however, it fluctuated with sudden jump and decline in beginning of year 2015. The
share price line in the beginning of year 2016 is more or less closely with index line. For some
month, share price is above index and for other month, share price is below index line.
Significant factors influencing the share price of Tasman Resources Limited:
Share price of Tasman resources limited is influenced by the recent announcements made
by company at the board. The announcement of securing an adjoining property and entering into
contract has positively influenced price of shares. There have been development of new products
and new version of Edencrete for use in large market. In current year, share price is picking up
because of certification of new products and increased sales target.

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FINANCE FOR BUSINESS
Calculation of Beta values and expected rate of returns:
The calculated beta value of Tasman resources is -1.12 and the required rate of return to
company shares is computed by CAPM. Required rate of return for Tasman Resources is 1.76%.
It is depicted by value of beta that company has employed conservative strategy of investment,
as there is not much volatility in share price.
Particulars Amount
Beta of the company A -1.12
Risk Free Rate B 4%
Market Risk Premium C 6%
Required Rate of
Return
D=B+[Ax(C-
B)] 1.76%
Weighted average cost of capital:
Calculated WACC of company is 1.74%. Management makes use of WACC for
evaluating the investment project and it is perceived that higher weighted average cost of capital
is related with higher risks. Company investing in riskier projects associates higher weighted
average cost of capital and investors seeks higher return for additional level of risk undertaken
by them (Irimia et al. 2015). On other hand, lower risks are also not preferred and therefore,
there should be appropriate figure of WACC.
Particulars Amount
Weight
age Cost
Return
Rate
Tax
Rate WACC
Total Long Term Debt 1154260 3.02% 19941 1.73% 30.00% 0.04%
Total Equity 37102414 96.98% 1.76% 1.71%
TOTAL 38256674 100% 1.74%

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Debt ratios for the past two years:
Looking at debt ratio figure for the past two years, it can be seen that figures have
increased from 0.029% in year 2016 to 0.088% in year 2017 respectively. Since cost of equity is
more than cost of debt, it would be suitable for organization to increase their debt or borrowings
for attaining optimum capital structure. Capital structure of organization does not appear to be
stable, as management is not making effort to improve their advantage (Mazzarol et al. 2015).
There has not been any improvement to gearing ratio; however, amendment has been made in
terms of increasing interest-bearing liabilities.
Dividend policy:
Tasman resources limited has not paid dividend for three consecutive years because of
generation of loss year on year. In proceeds of winding up of company, ordinary shares
participate in dividends (Bekaert and Hodrick 2017). There has been no disclosure of dividend
policy of company in the annual report.
Letter recommendation:
To,
ABC limited
Respected Sir,
For the evaluation of investment of stocks of Tasman Resources limited in the portfolio,
analysis of profitability, solvency and efficiency position is done. Debt ratio indicates increased
leverage of company and on other hand, there is loss incurred by company year on year. Beta
value depicts that company is not volatile (Dudin et al. 2015). Nonetheless, the overall financial
position of company is not suitable for investors to include their shares in their investment

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portfolio. It would be better for investor seeking investment in this company to hold on to see
their performance in upcoming years. Therefore, currently, investors should be recommended to
not include shares of this company in their investment portfolio.
Thanking you,
Investment Company
(J & P Limited)

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Reference and Bibliography list:
Bekaert, G. and Hodrick, R., 2017. International financial management. Cambridge University
Press.
Block, S.B., Hirt, G.A., Short, J.D., Danielsen, B.R. and Perretta, M., 2015. Foundations of
financial management. McGraw-Hill Ryerson.
Brigham, E.F. and Daves, P.R., 2014. Intermediate financial management. Cengage Learning.
Brooks, R., 2015. Financial management: core concepts. Pearson.
Dudin, M., Lyasnikov, N., Yahyaev, M. and Kuznecov, A., 2014. The organization approaches
peculiarities of an industrial enterprises financial management.
Friedl, G., 2016. Corporate Governance and Financial Management: Computational
Optimisation Modelling and Accounting Perspectives.
Götze, U., Northcott, D. and Schuster, P., 2015. Capital Budgeting and Investment Decisions.
In Investment Appraisal(pp. 3-26). Springer, Berlin, Heidelberg.
Irimia-Dieguez, A.I., Medina-Lopez, C. and Alfalla-Luque, R., 2015. Financial Management of
large projects: A research gap. Procedia Economics and finance, 23, pp.652-657.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A
strategic management approach. Emerging Markets Journal, 5(1), p.26.
Mazzarol, T., Reboud, S. and Clark, D., 2015, July. The financial management practices of small
to medium enterprises. In Small Enterprise Association of Australia and New Zealand 28 th
Annual SEAANZ Conference Proceedings (pp. 1-3).

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Tasmanresources.com.au. (2018). Tasman Resources - Successful Diversified Mineral Explorer.
[online] Available at: http://www.tasmanresources.com.au/ [Accessed 1 Feb. 2018].
Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and
applications. Pearson.