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HA1022 Principals of Financial Markets Group | Assignment

   

Added on  2020-02-24

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Running head: Financial market and Institutions 1Running head: Financial market and Institutions1Financial market and institutions Financial market and institutions

Financial market and Institutions 2ContentsIntroduction.......................................................................................................................3Industry overview.............................................................................................................3Company overview...........................................................................................................3Company Overview..........................................................................................................3Top down analysis............................................................................................................4Future projection on Australian stock market..............................................................6Industry Viewpoint.......................................................................................................6Industry data.............................................................................................................6Future Outlook..............................................................................................................7Current intrinsic value of the companies......................................................................7Wesfarmers:..............................................................................................................7Woolworths...............................................................................................................8P/E model......................................................................................................................8Wesfarmers:...............................................................................................................................8Woolworths...............................................................................................................9Bottom up analysis...........................................................................................................9Financial data:.............................................................................................................10Wesfarmers.............................................................................................................10Woolworth..............................................................................................................11Ratio Analysis.............................................................................................................12Wesfarmers.............................................................................................................12Woolworth..............................................................................................................13

Financial market and Institutions 3DU Pont analysis........................................................................................................14Wesfarmers.............................................................................................................14Woolworth..............................................................................................................15Findings..........................................................................................................................16Recommendation and Conclusion..................................................................................17References.......................................................................................................................18

Financial market and Institutions 4Introduction:Fundamental analysis is quite required for every investor to done before investing the amount for a longer period in the industry. For performing the fundamental analysis over a company, an investor is required to manage all related aspect and conduct the study accordingly. For this study, retail industry has been taken into consideration and Wesfarmers and Woolworths limited have also been analyzed to perform this study (trading economy, 2017). Industry overview:Australian retail industry falls into one of the top industry in the market. The Australian retail industry has been studied and it has been found that the several changes havetaken place into the Australian industry from last few years. The industry had to face few issues due to economical breakdown and few internal changes into the industry. Further, it has been observed that Wesfarmers and Woolworths limited are biggest retailing companies in the Australian retail industry. So these companies have been taken into consideration to perform this study. Company overview:Woolworth’s limited company is one of biggest retailing companies in Australia. Thiscompany has operated its functions into many segments which are Woolworths logistic segment in which transportation is handled, Woolworths clothing segment in which home ware, beauty sector, clothing etc. is handled and Woolworth food, Woolworths financial services, , witchery group, Country road group, David Jones etc are also handled by the company. The head office of the company is in South Africa. This company has registered itself in 1997 in Australian market. Currently, 43000 employees are working in this company and the company has operated its business in 14 countries all the way through 1300 outlets. Ithas also been observed that approximately 40% revenue is earned by the company from Australian market itself (Morningstar, 2017). Company has registered itself in the Australianstock exchange to trade its shares.Company Overview:

Financial market and Institutions 5Wesfarmers limited company is one of biggest retailing companies in Australia. This company has operated its functions into many segments which are retail industry, production industry, gas processing, coal mining industry and distribution industry and many safety product distribution industry, fertilizers manufacturing industry, chemical industry and investment businesses in many states such as Australia, UK, new Zealand and worldwide. Presently, the company is performing very well into the retail industry and the main mission of the company is to be the top firm in the industry. For meeting with the mission, this company has diversified its business into many markets (Nelson et al, 2012). Wesfarmers came into subsistence in 1914 and at present, its main operations are operating in Perth, Australia. Company has registered itself in the Australian stock exchange to trade its shares. Top down analysis:Top down analysis is a part of fundamental analysis where the external factor of a company is analyzed to identify the positioning and performance of the company. Top down analysis shows its concern about the market and economical factor of the company. Basically, top down analysis is performed over the entire Top down analysis has been performed over the retail industry of the Australia to analyze the macro economical factor of the industry (Krnatz, 2016). It has been observed that it is the basic issue which is faced by every investor while choosing the best stock in the market. For conducting the top down analysis over the retail industry of Australia, inflation rate, GDP, interest rate of Australia have been analyzed. It has also been observed that there are many factors to make an influence over the retail industry of Australia. For this analysis, many micro and macro factor of Australian retail industry have beenanalyzed to found the potential of retail industry of the company. GDP is the main indicator which helps the investor in measuring the health of economy and conditions of the state. It has been observed that currently the world economy is facing great recession and thus the offered return to the investors over their investment is quite less (Morote, García-Ybarra & Castillo, 2013). Though, it has been analyzed that the retail industry of Australia is still performing well. And the return provided by this industry is also good.

Financial market and Institutions 6(Yahoo finance, 2017)It has been observed that the GDP per capital of Australia is 1.205 trillion which is quite lesser than the GDP of India and Canada but it has been found that this is rapidly enhancing from last years. Further, it has also been found that the exchange rate risk and political sustainability of Australian market is quite certain in comparison of other countries such as UK and thus it becomes easy for the investors to invest into this country and the retailindustry of the company to manage the return (Zaki et al, 2014). (Analysis – Total retail, 2017)Through the research over the retail industry of the Australia, it has been found that the retail industry of the Australia is growing up rapidly from last 4 years. The growth rate of

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