Investment Opportunity in Australian Market: Telstra Corporation Limited and TPG Telecom Limited

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

1FINANCE FOR BUSINESS
Executive Summary:
From the perspective of an overseas institutional investor, the report would analyse the
investment opportunity in the market of Australia. The two companies selected in order to fit the
purpose of the report are Telstra Corporation Limited and TPG Telecom Limited. It has been
found that the share price of Telstra Corporation has complemented the increase in share price of
the All Ordinaries Index despite the fact negative correlation could be found between the stock
price of the concerned organisation and the index. The considerable evaluation of the overall
financial performance, capital structure, share price performance and WACC positions of Telstra
Corporation Limited and TPG Telecom Limited, Telstra is more suitable for the client in terms
of investment purpose. Based on all these aspects, the investor is advised to invest in the shares
of Telstra Corporation Limited so that its overall return could be maximised in future.

2FINANCE FOR BUSINESS
Table of Contents
Introduction:....................................................................................................................................3
1. Description of the chosen companies:.........................................................................................3
2. Calculation and comparison of selected performance ratios:......................................................4
3. Share price movement analysis:..................................................................................................8
4. Calculation and analysis of WACC:..........................................................................................10
5. Capital structure policy:.............................................................................................................12
6. Recommendation letter:.............................................................................................................13
Conclusion:....................................................................................................................................14
References:....................................................................................................................................16

3FINANCE FOR BUSINESS
Introduction:
From the perspective of an overseas institutional investor, the report would analyse the
investment opportunity in the market of Australia. The two companies selected in order to fit the
purpose of the report are Telstra Corporation Limited and TPG Telecom Limited. Initially, a
discussion would be conducted on analysing the business operations of these organisations by
identifying their comparative benefits. After this, the profitability and liquidity positions of these
two companies would be assessed based on certain ratios for the previous three years by
extracting necessary information from their annual reports. The next segment would focus on the
evaluation of the share price movements of these companies in order to determine their
volatilities in stock prices by distinguishing them with the All Ordinaries Index for the three-year
period. Along with this, the weighted average cost of capital (WACC) of the chosen companies
has been computed so that their capital structure could be evaluated appropriately. Lastly, the
concerned investor would be recommended regarding the future investment prospects in the two
organisations in the form of a letter of recommendation.
1. Description of the chosen companies:
TPG Telecom Limited:
TPG Telecom Limited is involved in providing telecommunication services to both
medium and small organisations, big corporate entities, residential users, wholesale customers
and government in Australia and other international countries. Along with this, the other
offerings of the organisation include Ethernet broadband and fibre optic, ADSL2+, NBM,
telephony services, mobile plans for SIM only, internet protocol television and various solutions
pertaining to business networking. Furthermore, the various bundle plans comprising of internet
products, internet messages and POP3 across the protocol mail accounts have definitely added to
its advantage in the market. In August 2018, an expected merger has been announced, in which
Vodafone Hutchison Australia and TPG Telecom Limited would function as a single company.
The latter would have 49.90% of the total stake and this is definitely a comparative advantage for
the organisation (Tpg.com.au 2019).
Telstra Corporation Limited: