Financial Analysis Report: Macquarie Telecom Group Limited Performance

This report provides a detailed financial analysis of Macquarie Telecom Group Limited, examining its performance from June 2012 to January 2018. It calculates holding period returns, analyzes share price data against the all ordinaries market index, and determines beta values for two distinct periods. The analysis includes calculations of mean, standard deviation, variance, and correlation coefficients to assess the company's volatility and risk profile. Furthermore, the report provides a summary of the company's business segments, financial position, and key performance indicators, including gross profit and cash balance trends, offering a comprehensive view of Macquarie Telecom Group Limited's financial health and market position. The report uses figures and tables to present the data and analysis, and concludes with a discussion on the importance of beta in assessing systematic risk.

Running head: MACQUARIE TELECOM GROUP LIMITED
Macquarie Telecom Group Limited
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Answer to Question 1(a):...........................................................................................................3
Answer to Question 1(b):...........................................................................................................4
Answer to Question 1(c):...........................................................................................................8
Answer to Question 1(d):.........................................................................................................10
Answer to Question 1(e):.........................................................................................................11
Answer to Question 1(f):..........................................................................................................11
Answer to Question 1(g):.........................................................................................................12
Bibliography:............................................................................................................................13

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Answer to Question 1(a):
The share price data of Macquarie Telecom Group Limited for the period from June
2012 to July 2014 is given along with the monthly price of all ordinaries market index.
Figure 1: Period 1 Share Price and the Index Level
Source: By the Author
The monthly share price data of Macquarie Telecom Group Limited from the period
of February 2016 to January 2018 is given in the table below along with the monthly price of
the all ordinaries market index.

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Figure 2: Period 2 Share Price and the Index Level
Source: By the Author
Answer to Question 1(b):
The monthly share price is taken as Rj for both the periods and the holding period
return for each month is calculated. Rm is the return for the market price is taken and the
holding period return is calculated. The difference between (Rj-Rf) and (Rm-Rf) is also
calculated for each month and tabulated. The table for both the periods is given below,

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Figure 3: Rj-Rf for period 1
Source: By the Author

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Figure 4: Rm-Rf for period 1
Source: By the Author

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Figure 5: Rj-Rf for Period 2
Source: By the Author

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Figure 6: Rm-Rf for period 2
Source: By the Author
Answer to Question 1(c):
The mean, variance, standard deviation, correlation coefficient and beta for period 1
for the company Macquarie Telecom Group Limited are calculated for the period 2012-2014.
Figure 7: Period 1 share price
Source: By the Author

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The mean for the share price of the company is negative at 0.0145, during the period
2012-2014. The standard deviation is at 0.0733 and variance at 0.00538 and has a correlation
coefficient at 0.216.
Figure 8: Period 1 Index Level
Source: By the Author
The market index mean is positive at 0.0076 and the standard deviation at 0.028662
with a variance of 0.000822 for the period 2012-2014.
The analysis of the data calculated for the period indicates that the company had a
very volatile share price with the high standard deviation compared to the market index, this
led to the mean to become negative. The company was slightly positive correlated with the
market index.
The correlation coefficient, standard deviation, variance, beta for period 2 and mean,
for the company Macquarie Telecom Group Limited is calculated for the period 2016-2018.
Figure 9: Period 2 Share Price
Source: By the Author

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The mean of the company is negative at 0.0273 and the standard deviation at
0.076782 and variance at 0.005895. The correlation coefficient are at 0.585.
Figure 10: Period 2 Index Level
Source: By the Author
The mean of the market is negative at 0.04734 and the standard deviation at 0.042392
and the variance at 0.001797.
The analysis of the data from the period 2016-2018 between the company and the
market index shows a higher positive correlation which has increased from the previous
period 2012-2014. This is proved by the negative mean between the company and the market
and also the company still is more volatile compared to the index but the volatility of the
index has also increased from the previous period 2012-2014.
Answer to Question 1(d):
The beta of a company indicates how much a company is risky and the investor can
demand a premium over the return.
The Beta for the company for the period 2012-2014 is given below,
Figure 11: Beta for Period 1
Source: By the Author

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The Beta is calculated using the formula.
Beta=correlation coefficient∗( S . D of Company divided by S . D of Market )
The Beta of the company for the period 2012-2014 is at 0.553512
The Beta for the Company Macquarie Telecom Group Limited for the period 2016-
2018 is given below,
Figure 12: Beta for Period 2
Source: By the Author
The Beta of the company for the period 2016-2018 is at 1.0598.
Answer to Question 1(e):
The Beta of the company in the period 2012-2014 is at 0.553512, this means that the
stock price of the company is less volatile than the market. Thus, the company is less risky
and it is not so much volatile. The Beta is a useful measure to estimate the stock volatility.
The Beta of the company in the period 2016-2018 was more than 1 at 1.0598
indicating that the stock price of the company has become more volatile than the market.
Thus overtime the company has become riskier to invest.
Answer to Question 1(f):
The company Macquarie Telecom Group Limited is a company located in Australia
catering to the telecommunication sector. The company was formed after the deregulation of
telecommunication in Australia in July 1992. It became a listed company in the year 1999
when it was listed on the Australia stock exchange. The company in 2016 distributed its

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business into three different segments which are- Macquarie Government, Macquarie
Telecom and Macquarie Cloud Services.
The company reported a sharp fall in its gross profit for the current financial year in
comparison to previous years. The gross profit reported around AUD 23480000 while in the
previous year it was AUD 84630000. However even due to the sharp fall in the gross profit
did not affect the net profit of the company and it was around AUD 16479000 which was less
than the previous year AUD 17013000. The cash balance of the company is being falling
from the past four year and the accounts receivable rising along with a sharp rise in other
current assets. The company has been investing in fixed assets and intangible assets which
has been on the increasing trend for the past four years. The liabilities of the company are on
the increasing trend from the past four years.
Answer to Question 1(g):
Beta is the most important component which shows the systematic risk of a stock or a
company. The Beta for our company during Period 1 was around 0.55 which shows it was
less volatile than the Market Index level. This beta was estimated using a two year period and
one of the drawbacks of Beta is it has to be estimated.
The Beta of the company became 1.05 in our period 2 calculation, this is a sharp rise
in beta indicating a volatility in the company. The reason for this increase in volatility can be
attributed on the segmentation of the business by the company in three different parts. Thus
increasing the volatility in the stock.