Security analysis and portfolio management2 Introduction: Fundamental analysis: Fundamental analysis is a crucial process to evaluate the security of an organization in order to measure the intrinsic value of the stock on the basis of economic, qualitative, quantitative and financial factors of the organization. Fundamental analysis includes all the studies which affect the stock value of an organization. This process determines the health and the company’s performance on the basis of the financial health and performance of the company on the basis of the stock performance and the economical indicators (Schumaker and Chen, 2009). The process of fundamental analysis is way better than the technical analysis to predict the stock performance of an organization. As the fundamental analysis evaluates the economic, qualitative, quantitative and financial factors to evaluate the stock prices and it expands the study to all the factors which could affect the stock price of an organization in any way. Objectives: In the report, fundamental analysis study has been conducted on 10 stocks to measure the performance of the stocks and their performance in the market. The main objectives of this report are to understand the concept of fundamental analysis and evaluate that how could these factor affect the performance of the company. Muscat stock exchange: In Oman, there is only one security exchange, Muscat securities market. This stock exchange has been founded in Oman. The stock exchange has been established by the Royal Decree to control and regulate the Oman Securities market and for effectively participate with other companies to set up the infrastructure of sultanate’s financial sector. MSM 30 is the index of the stock exchange. MSM 30 is the capitalization weighted index of top 30 most highly capitalized, profitable and liquid companies which are listed on Muscat Securities market. Methodology: This report part explains about the research methodology part which has been used to carry the report part and evaluate the data of the company. The secondary research has been
Security analysis and portfolio management3 done to evaluate the data of the Muscat securities exchange. The secondary data has been used because the stock price of an organization could not be evaluated on the basis of primary data. The investigation over the security market exchange has been done in such a manner that the data of the top 10 stocks could be found. Data collection: Data collection is a systematic approach which is used by the researchers to gather and measure the information from various sources to accomplish the clear picture of interest area. Data collection process enables the organization to answer relevant questions, make predictions and evaluate outcomes about the future trend and probabilities. There are two methods on the basis of which, data of a research could be calculated. One is primary research data collection methods and other one is secondary research data collection methods. The data collection for the report has been done on the basis of secondary data. Secondary data explains the data which has been collected by someone already and used for the study other than the user. Secondary data analysis saves the time of the analyst. Secondary data could be published data or unpublished data. Before using the secondary data, an analyst is required to check the reliability, suitability, adequacy etc of the data so that the better report could be prepared. In the given report, secondary data of stock has been taken. The secondary data has been taken from the MSM website (MSM, 2018). The reliability, suitability, adequacy etc of the data has been evaluated and it has been found that the MSM, 2018 is the most reliable website for the stock price of an organization. The secondary data (stock price) of 10 Muscat companies have been identified which are AL BATINAH DEV INV HOLDING, AL MADINA TAKAFUL, FINANCIAL SERVICES, GULF STONES, VOLTAMP ENERGY, SALALAH MILLS, OMAN OIL MARKETING PREF SHARES, AL KAMIL POWER, SMN POWER HOLDING and SAHARA HOSPITALITY. In the report, the stock prices of the above companies have been identified and on the basis of that returns of each stock has been calculated. Further, the risk and the return of securities have also been calculated and compared with the index of the stock exchange to measure the performance of every company. The other data has been calculated from the annual reports of the company about the earnings and the economical data has been taken from the published newspapers. Period of study:
Security analysis and portfolio management4 It has been evaluated that the sample size is quite crucial for a research. The better the sampling size and the period of time of a study would be, the better the outcome of the study would be. It has been found that an analyst must be very focused about the sample size and total period of time. Time of the study must be sufficient to evaluate and identify the data of the research. There is negative outcome of lesser time period as the analyst didn’t get the enough time to analyze and evaluate all the data of the research (Samaras, Matsatsinis and Zopounidis, 2008). The period of the study of this research is 1 month. This time has been used for collecting the data evaluating the data and reach over a conclusion about the Muscat stock exchange. While conducting this research, confidentiality has been managed and the data and the conclusion have not been shared with any other group. The research has been done in an ethical way and in a way that no body and no companies could be harmed on the basis of it. The help for the research has been taken from the various financial analysis articles, fundamental analysis books, syllabus and the tutor notes. Application of fundamental analysis: Fundamental analysis is crucial analysis study for the investors to evaluate the performance of a particular security. The stock price of AL BATINAH DEV INV HOLDING, AL MADINA TAKAFUL, FINANCIAL SERVICES, GULF STONES, VOLTAMP ENERGY, SALALAH MILLS, OMAN OIL MARKETING PREF SHARES, AL KAMIL POWER, SMN POWER HOLDING and SAHARA HOSPITALITY has been calculated and it has been compared with the stock exchange index MSM 30. Firstly, the macro economical factor of the company has been evaluated (AMSA, 2018). Further, the study has been done on the industry and lastly, the companies have been evaluated. The application of the macro economical factors and the stock prices are as follows: Country analysis: Country analysis is a process which involves the interpretation and examination over the economical, social and political environment of a business. Country analysis is useful for the investors of the financial market, companies which are intending to set up a subsidiary business, companies which are wishing to enter into the new market and people who are wishing for the country reside. In the research, the country analysis is useful to evaluate the
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Security analysis and portfolio management5 stock market of the country for the foreign investors. In the analysis, Oman’s interest rate, GDP and the exchange rates have been evaluated. Oman’s interest rate: Interest rate of Oman has been evaluates firstly to identify the performance of the country and the economical changes in the country. From 2008 to 2018, the average interest arte of the country is 1.52% (I Economics, 2018). Current interest rate of the country is 2.41. In last 3 years, the interest rate of the country has been enhanced by a great level (Trading economics, 2018). It evaluates that the performance of the country is quite good and the economical factors indicate that investment into the Muscat stock exchange would be beneficial for the foreign investors. Oman’s GDP: Gross domestic product rate of Oman has been analyzed further to identify the performance of the country and the economical changes in the country. Statista (2018) express that the GDP growth of the country is -0.1% in 2017. Current GDP rate of the country is 15.7. However, the future prediction explains about the better performance of the company (The economist, 2018). It evaluates that the performance of the country is quite good and the economical factors indicate that investment into the Muscat stock exchange would be beneficial for the foreign investors. Oman’s exchange rate: Lastly, the exchange rate of Oman has been evaluated to measure the performance of the country and the changes into the country. From last few years, the various changes have taken place into the exchange rate of the country. The current exchange rate of the Oman currency is 1 OMR = USD 2.600 (XE, 2018). It explains that the performance of the country is quite good and the economical factors indicate that investment into the Muscat stock exchange would be beneficial for the foreign investors. On the basis of the country analysis, it has been evaluated that the economical factors of the company are quite impressive and explains about the better performance of the country. In terms of investment, it has been evaluated that the country is a good option for the investment. The economical factors would not impact much on the stock of the country. Industry analysis:
Security analysis and portfolio management6 Industry analysis is a process which involves the interpretation and examination over the economical, social and political environment of a business. Industry analysis is useful for the investors of the financial market, companies which are wishing to enter into the new industry and people who are wishing for the industry reside. In the research, the industry analysis is useful to evaluate the stock market of the country for the foreign investors. In the analysis, current trends of the industry have been evaluated to analyze the performance of the company. The financial industry, power industry and the hospitality industry has been taken into the concern. Financial sector of Oman explains that incremental changes into the market. From last few years, the graph of financial sector of the country s continually enhancing and explains about the better position of the industry (CBFS, 2018). Currently, the financial analyst report explains that the investment into the financial sector of Oman would offer huge return to the investors as the economical position of the country is better as well as the industry is also growing rapidly (World finance bank. 2018). Further, the hospitality sector of Oman explains that the country has changed the tourism policies and due to which the tourism of the country has been enhanced. It has directly impacted on the hospitality industry of the country positively. The current growth rate of hospitality industry is around 5.3%. On the basis of times of Oman (2018), the hospitality market of the country is $ 1 billion in 2020. From last few years, the graph of hospitality sector of the country is continually enhancing and explains about the better position of the industry (Hotel news, 2018). Currently, analyst report of hospitality sector of Oman would offer huge return to the investors as the economical position of the country is better as well as the industry growth rate is also higher. Further, the power and energy sector of Oman explains that the country has made various changes into the energy sector from 1960 to 2018. The current demand of the oil and power sector of the country has been enhanced by 9%. The current growth rate of power and energy sector industry is around 13%. On the basis of times of Oman (2018), the power and energy of the country is $ 1 billion in 2020. From last few years, the graph of power and energy sector of the country is continually enhancing and explains about the better position of the industry (export.gov, 2018). Company analysis:
Security analysis and portfolio management7 Lastly, the company’s of Muscat stock exchange has been evaluated to identify the performance of the Muscat stock exchange. On the basis of the below table, it has been evaluated that the MSM index’s total return is -0.25 whereas the total risk of the index is 0.43. The other stock has been evaluated on the basis of the index and it has been recognized that the return ofAL BATINAH DEV. INV. HOLDING,GULF STONES, OMAN OIL MARKETING PREF SHARES,SMN POWER HOLDINGand SAHARA HOSPITALITY is lower than the market index. On the other hand, the risk of the stock has also been evaluated on the basis of risk of the stock and it has been found that the risk involved with all the stocks are higher than the risk of MSM index (Elleuch and Trabelsi, 2009). SNO.NAME OF THE COMPANYRETURNSRISK 1MSM INDEX-0.050.43 2AL BATINAH DEV. INV. HOLDING -0.08541.0893 3AL MADINA TAKAFUL0.028791.2689 4FINANCIAL SERVICES0.023541.3987 5GULF STONES-0.13621.9634 6VOLTAMP ENERGY-0.16870.9517 7SALALAH MILLS0.08641.7586 8OMAN OIL MARKETING PREF SHARES -0.15791.8964 9AL KAMIL POWER-0.058741.4348 10SMN POWER HOLDING-0.98672.0357 11SAHARA HOSPITALITY-0.01430.9621 Further, the EPS, DPS, PE ratio, Profitability ratios of each stock has been calculated to measure the stock performance. On the basis of the below table, it has been calculated that the EPS of Sahara hospitalityis higher in the below stocks, Further, the DPS and ROI evaluation has been done and it has been found that the highest DPS and ROI is of SAHARA HOSPITALITY. It further explains that the P/E ratio of VOLTAMP ENERGYis highest and NPR ofAL BATINAH DEV. INV. HOLDINGis highest. S.NONAME OF THE COMPANY EPSDPSROIP/ENPR 1AL BATINAH DEV. INV. HOLDING 0.0540.01310%7.111156% 2AL MADINA TAKAFUL0.0690.05611%2.681235% 3FINANCIAL SERVICES0.0120.0058%8.666734%
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Security analysis and portfolio management8 4GULF STONES0.0030.0039%38.666711% 5VOLTAMP ENERGY0.0560.0485%6.428622% 6SALALAH MILLS0.0030.0017%626% 7OMAN OIL MARKETING PREF SHARES 0.0190.00713%8.473720% 8AL KAMIL POWER0.0620.05714%7.741913% 9SMN POWER HOLDING0.030.0319%9.47% 10SAHARA HOSPITALITY0.0870.06815%9.655216% This evaluation as whole explains that the average of each company is better. However, the performance ofAL BATINAH DEV. INV. HOLDINGand SAHARA HOSPITALITY is better in the market. It leads to a conclusion that investment of each company is better (Cong et al, 2008). S.NONAME OF THE COMPANY RANKCOMMENT 1AL BATINAH DEV. INV. HOLDING 2Financial performance is quite good as well as the industry position is also better. 2AL MADINA TAKAFUL 4Financial performance is quite good as well as the industry position is also better. 3FINANCIAL SERVICES 6Financial performance is quite average. 4GULF STONES10Financial performance is quite average. 5VOLTAMP ENERGY3Financial performance is quite good as well as the industry position is also better. 6SALALAH MILLS7Financial performance is quite average.
Security analysis and portfolio management9 7OMAN OIL MARKETING PREF SHARES 8Financial performance is quite average. 8AL KAMIL POWER5Financial performance is quite average. 9SMN POWER HOLDING 9 10SAHARA HOSPITALITY 1Financial performance is quite good as well as the industry position is also better. Conclusion: To conclude, theeconomical factor9s of the company explain about the better performance of the country. In terms of investment, it has been evaluated that the OMAN is a good option. Further, the industry analysis (hospitality sector, financial sector and power sector) of Oman would offer huge return to the investors as the economical position of the country is better as well as the all the industries are enjoying higher growth. Lastly, the companies have been evaluated and on the basis of the entire study, it has been concluded that the,AL BATINAH DEV. INV. HOLDING,AL KAMIL POWERandSAHARA HOSPITALITYare the better option for the purpose of investment as their profitability position is higher in the market and the risk and return are also balanced.
Security analysis and portfolio management10 References: AMSA. 2018. List of companies. (Online). Available at: http://www.asmainfo.com/Muscat/En/list/CompanyList.aspx(Accessed 11/5/18). CBFS. 2018. Banking and financial sector. (Online). Available at: http://cbfs.edu.om/UploadsAll/Annexure%2013%20Edited%20Book%20on%20Banking %20Sector%20in%20Oman%20-%202017.pdf (Accessed 11/5/18). Cong, R.G., Wei, Y.M., Jiao, J.L. and Fan, Y., 2008. Relationships between oil price shocks and stock market: An empirical analysis from China.Energy Policy,36(9), pp.3544-3553. Elleuch, J. and Trabelsi, L., 2009. Fundamental analysis strategy and the prediction of stock returns.International Research Journal of Finance and Economics,30(1), pp.95-107. Export. 2018. Oma power and energy. (Online). Available at: https://www.export.gov/article? id=Oman-Power-and-Energy (Accessed 11/5/18). Hotel news. 2018. Hospitality sector of Oman. (Online). Available at: http://www.hotelnewsme.com/interviews-features/focus-new-era-omani-hospitality/ (Accessed 11/5/18). I Economics. 2018. Interest rate of Oman. (Online). Available at: https://ieconomics.com/oman-interest-rate(Accessed 11/5/18). MSM. 2018. Muscat security market. (Online). Available at:https://www.msm2.gov.om/ (Accessed 11/5/18). Samaras, G.D., Matsatsinis, N.F. and Zopounidis, C., 2008. A multicriteria DSS for stock evaluation using fundamental analysis.European Journal of Operational Research,187(3), pp.1380-1401. Schumaker, R.P. and Chen, H., 2009. Textual analysis of stock market prediction using breaking financial news: The AZFin text system.ACM Transactions on Information Systems (TOIS),27(2), p.12. Statista. 2018. Gross domestic product of Oman. (Online). Available at: https://www.statista.com/statistics/455576/gross-domestic-product-gdp-growth-rate-in-oman/ (Accessed 11/5/18). The economist. 2018. GDP. (Online). Available at: http://country.eiu.com/oman(Accessed 11/5/18).
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Security analysis and portfolio management11 Times of Oman. 2018. Business. (Online). Available at: http://timesofoman.com/article/90866(Accessed 11/5/18). Trading economics. 2018. Interest rate of Oman. (Online). Available at: https://tradingeconomics.com/oman/interest-rate(Accessed 11/5/18). World Finance bank. 2018. Banking and finance sector. (Online). Available at: https://www.worldfinance.com/banking/investment/growing-opportunities-in-omans- financial-sector(Accessed 11/5/18). XE. 2018. Exchange rates. (Online). Available at:https://www.xe.com/currency/omr-omani- rial(Accessed 11/5/18).