Finance for Business: Analysis of Emergent Resources Limited

Running head: FINANCE FOR BUSINESS
Finance for Business
Name of the Student
Name of the University
Authors Note
Course ID

1
Table of Contents
Introduction:...............................................................................................................................3
Description of Company:...........................................................................................................3
Ownership and structure of governance of the company:..........................................................4
Main Substantial Shareholders:..............................................................................................4
Main people involved in Company’s Governance:................................................................5
Computation of Fundamental Ratios:........................................................................................6
Short Term Solvency:............................................................................................................6
Long Term Solvency:.............................................................................................................7
Asset Utilization:....................................................................................................................7
Profitability Ratios:................................................................................................................7
Market Value Ratios:.............................................................................................................8
Graphical Descriptions of Results:.............................................................................................9
Movement in Monthly Share Price:.......................................................................................9
Comparative Analysis of Movement in Share Price Index to All Ords Index:..........................9
Identifications of factors that influences the share price of the company:...........................10
Calculations of Beta and the Expected Rate of Returns using CAPM:...................................11
Computed Beta of the Company:.........................................................................................11
Calculations of the required rate of Return using CAPM Model:.......................................11
Justification behind the “Conservative Investment”............................................................12
Explanation of WACC has on management evaluation of investment prospective:...............13
Debt Ratio:...............................................................................................................................14
Dividend policy:.......................................................................................................................14
Letter of Recommendations.....................................................................................................14
Conclusion:..............................................................................................................................15
References................................................................................................................................16

2
Introduction:
The important learnings from the study have analysed the financial perspectives of
Emergent Resources Limited and prepared a financial advisory report. Emergent resources
Ltd is identified as an iron ore exploration and mining company listed under ASX with the
code EMG.AX. The main depictions of financial performance have been taken into account
with stock market performance and depiction of other financial areas such as liquidity,
profitability and efficiency.
The competition of the common financial ratios is performed by considering the
excerpts from the financial reports published in 2017 and 2016. The analysis of the share
price movement is considered with the change in closing share price of the company in the
last two years and compared the same with changes with ^AORD index. The important
understanding of capital structure has been taken into account with “weighted average cost of
capital” which is conducive for suggesting the rationale for investment decision. In addition
to this the consideration of solvency ratios along with dividend policy structure is also
evaluated for investing in the shares of the company (Emergentresources.com.au 2018).
Description of Company:
Emergent Resources Limited was inaugurated in 2007 at Subiaco, Australia. The
company is depicted to engage in exploration activities related to “iron, base metal, and
precious metal properties” in various regions of Western Australia. The Company's
“Beyondie Iron Project is located adjacent to the Great Northern Highway and Goldfields
Gas Pipeline in the northern part of Western Australia's mid-west iron ore precinct”.
Emergent Resources Limited is also depicted to explore manganese and vanadium deposits. It
has been further discerned to comprise “E52/2215 iron-ore tenement” with more than 46
blocks covering an area of “142 km2 located in Western Australia”. The company is listed
under ASX with the code EMG.AX.

3
Emergent Resources Limited have shown continued efforts in developing “Beyondie
Iron Ore Projects” and able to rationalise the tenement portfolio to prove itself as effective
cost Explorer in the market. Moreover, the main strength of the asset base and technical
expertise is discerned with strong cash position of the company. Some of the other
considerations made by the board is depicted with looking forward to develop the existing
projects and contribute to the growth of the company through investment and acquisition
(Emergentresources.com.au 2018).
Since the introduction of “ASX Corporate Governance Council’s Principles of Good
Corporate Governance and Best Practice Recommendations (ASX Guidelines or the
Recommendations)”, the company has taken several initiatives to adopt such a system for CG
perspectives. However, based on the recommendations as per CG Council, the board has not
maintained a separate nomination committee with independent directors and do not comply
with recommendations as suggested in 2.1. The company is not seen to be taking any
proactive initiative for sustainability of the environment and providing a long-term
commitment for an efficient business performance (Emergentresources.com.au 2018).
Ownership and structure of governance of the company:
Main Substantial Shareholders:
Based on the list of substantial shareholders of the company “International Natural
Resources Inc” is depicted as the major shareholder. Edmond Yao is depicted as the largest
shareholder of EMG with 20% shareholding. This shows that the company is a non-family-
based business (Tricker and Tricker 2015). Some of the list of largest shareholders have been
depicted below as follows:
Shareholders Number of Ordinary Percentage of Issued