Business Accounting And Finance Pearson – TPG Telecom Limited

Company description

Discuss about Business accounting and finance Pearson.

This report has been prepared on an Australian company which name is TPG Telecom limited. This company is working under the IT industry and the Australian telecommunication industry. The main services of the company are mobile telephone services and the internet services. According to a report, TPG telecom is the second largest comapny in Australian market in internet service provider companies. This company is mainly a merger between total peripherals group. This company has been founded in 1992 by Vickey Teoh and David. Basically, this company is performing well in terms of finance as well as in terms of finance (About us, 2018).

Ownership corporate governance of the TPG telecom expresses about the way good structure of the investors. 82.74% stock of the company own by the top 20 shareholders. The largest shareholder of the company is WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED. The company has held 25.15% stock of the company. Currently, there are 6 stockholders in the company who has more than 5% stock in the company’s shares and only 1 stockholder has more than 20% stock.

Figure 1: Top twenty shareholders

(Annual Report, 2018)

Further, the annual report describe the CEO, executive directors, non executive directors, CFO etc of the company has been evaluated and David Teoh is the executive chairman of the company, Denis Ladbury, Robert Millner, Joseph Pang and Shane Teoh is the non executive directors of the company. The report of top 20 shareholders of the company explains that no members of the company have more than 2% stock of the company (Annual Report, 2018).

Performance ratios of the company have been described below. Performance ratios explain about the positive changes, position and the performance of the company. Following are some of the performance ratios of TPG Telecom as follows:

Return on assets of the company explains that the performance of the company is quite better. It explains that how much profit is earned by the company in context with the total assets. Following is the calculations of return on assets of the company:

(Jiashu, 2009)

Return on equity of the company explains that the performance of the company is quite better. It explains that how much profit is earned by the company in context with the total equity. Following is the calculations of return on equity of the company:

Debt ratios of the company explain about the position and the capital structure of the company. The current capital structure of the company is way better. It explains that how much total liabilities are held by the company in context with the total liability. Following is the calculations of debt ratio of the company:

Ownership governance structure

Total assets and total equity determine the ROA and ROE of the company with the help of the Net profit after tax. If the total assets and the total equity of an organization changes than it directly makes an impact over the ROA and the ROE (Deegan, 2013). 

The above calculations on the TPG telecom’s ROE and ROA have been evaluated and it has been found that the ROA and ROE of the company is 10.59% and 28.57%. It explains that the return on equity is always greater than the return on assets due to the accounting principle which states that the assets are the total of liabilities and the equity.

The study of stock price has been evaluated further and it has been analyzed that the stock price of the company and the stock price of AORD, both are quite volatile in nature and explains about the good performance of the company (Yahoo finance, 2018). The following graph explains about the stock prices of both the stocks:

Figure 2: Changes in stock price

(Yahoo Finance, 2018)

Further, the graph epxlains that the correlation of the company is in negative as it explains about the negative relationship among both the stocks. It epxlains that the changes in the stock of TPG is quite higher than the volatility of AORD stocks. Further, it explains that currently the stock price of the company is way better (Brown, Beekes and Verhoeven, 2011). 

Further, the factors has been evalauted which have imapcted on the stock price and due to which the stock of the company has been changed. The main reason behind chnage is the competetion level of the company, current report about the company that is the second largest company in the industry, further, the analysts has  described in their report about a better position of the company in the market (Davies and Crawford, 2011). On the other hand, due to new technology and compatetion the stock price of the company has been lowered 2 to 3 times.

The calculation on the stock price of the company depicts that the beta of the company is 0.7415.

The required rate of return of the company is as follows:

(Morningstar, 2018)

The above calculations express that the company’s cost in terms of equity is 5.48%. If the company wants to raises the funds through equity than the company has to pay 5.48% of total profit as cost of equity to the stockholders of the company. The cost of equity of the company is moderate. 

Main people

According to the evaluation, it has been found that the risk of the company is lower and return of the company is quite higher and thus the company is a conservative investment.

Calculations of WACC are as follows:

(Morningstar, 2018)

The above calculations express that the company’s cost in terms of equity is 5.48% and in terms of debt is 4.2%. If the company wants to raises the funds through equity than the company has to pay 5.48% of total profit as cost of equity to the stockholders of the company. On the other hand, in terms of debt, company has to pay 4.2%. The cost of equity of the company is higher than the cost of debt of the company. The above calculations express that the cost of capital of the company is 4.07%.

Optimal capital structure of the company explains that the liabilities of the company have been reduced by the company to manage a better capital structure.

(Brown, Beekes and Verhoeven, 2011)

Gearing ratios of the company explains about the liabilities of the company which has been reduced and the borrowings of the company has been increased in current month and thus the gearing ratios of the company has been lowered.

The annual report of the company expresses that the company offers a great dividend to the company with a 1.25% growth rate each year. It depicts that the company is following relevant dividend policies (Annual report, 2018). Relevant dividend policies are a part of dividend policies. These policies explain to the company that they should announce and give a good amount of dividend to the stockholder so that the investment level of the company could be enhanced.

Recommendation and Conclusion:

To,

The Client.

Date: 29^th Jan 2017.

Subject: Recommendation about investment.

Dear Client,

It is recommended to you to invest into TPG telecom. The report of evaluation of TPG telecom briefs that the current position of the company is quite attractive. It presents that the huge profit is earned by the company and the great amount of dividend is given to the shareholders of the company. The market stock price of the company is also good. It explains that the investors should invest into the company. 

So, it is the best option for you to invest right now.

Faithfully,

Financial Analyst.

References:

About us. 2018. TPG Telecom Limited. viewed Jan 25, 2018, https://www.tpg.com.au/

Annual Report. 2018. TPG Telecom Limited. viewed Jan 25, 2018, https://www.tpg.com.au/about/pdfs/FY17%20Annual%20Report.pdf

Brown, P., Beekes, W., and Verhoeven, P. 2011. Corporate governance, accounting and finance: A review. Accounting & finance, 51(1), 96-172.

Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.

Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.

Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.

Jiashu, G. 2009. Study on Fair Value Accounting——on the essential characteristics of financial accounting [J]. Accounting Research, 5, 003.

Morningstar. 2018. TPG Telecom Limited. viewed Jan 25, 2018, https://financials.morningstar.com/cash-flow/cf.html?t=XBER:YST&region=deu&culture=en-US

Yahoo Finance. 2018. TPG Telecom Limited. viewed Jan 25, 2018, https://au.finance.yahoo.com/quote/TPM.AX/chart?p=TPM.AX

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