Financial Analysis Of Citadel Group PLC

Company Overview

Australian market is enhancing rapidly. At the time of global financial crisis, the economy condition of the country has become very bad and right now the performance of the country is becoming better. The investors and the foreign direct investment of the comapny are enhancing. Investors are looking for the comapny and the industry in which they could invest their amount. In this report, CITADEL GROUP LTD has been analyzed. This comapny has been analyzed to evaluate the financial performance of the comapny and the position of the comapny in the industry.

 CIITADEL GROUP PLC is an American global comapny. This comapny has been established in 1990. The key founder of the comapny is Kenneth C., Griffin. Mainly, this comapny operates its business into the investment industry. The main operations of the company are asset management and the Citadel securities. This comapny has 1400 manpower to manage the business. Currently the annual turnover of the company is US $149 billion. The comapny has used various new techniques and technologies to manage the business and enhance the level of the business (Home, 2017). The financial performance of the comapny has been analyzed according to the debt valuation, share valuation, market analysis and the cost of capital. The further study over the company’s operations is as follows:

 The debt valuation study of CITADEL GROUP PLC has been analyzed to identify the worth of the debt and the financial position of the comapny. The comapny has raised the long term funds through the debt holders and shareholders whereas the short term debt has been raised through the short term debt and the creditors of the comapny (Ross, Westerfield & Jaffe, 2007). Further, the consistency of the company’s debt with industry’s debt has been analyzed. According to this report, the debt level is as follows of the comapny and the industry:

(Yahoo finance, 2017)

According to this level, the comapny has started to focus over both long term and short term debt to raise and manage the funds. The current situation of the comapny is better according to the level of the debt. Currently the level of the long term debt of the comapny is quite small than the short term debt and the comapny is required to manage this level through enhancing the debt amount more (Morningstar, 2017).

The short term debt of the industry and comapny is $ 32,14,000 and 33,74,000 respectively whereas the long term debt of the industry and the comapny is $1,20,00,000 and 45,32,000. According to this, the short term debt of the comapny is according to the industry’s level but the long term debt of the comapny is quite small and the comapny is required to manage this level through enhancing the debt amount more (Ross et al, 2008). The cost of debt of the comapny is as follows:

Debt Valuation Study

 The share valuation study of CITADEL GROUP PLC has been analyzed to identify the worth of the share and the financial position of the comapny. The cost of equity of the CITADEL GROUP PLC is as follows:

The financial performance of the company has been evaluated. The revenue of the comapny is as follows:

The revenue of the company has been enhanced from last year. The EPS of the comapny is as below:

The level of the EPS of the comapny has also been enhanced. Further, the dividend of the comapny is 0.019 and the growth rate of the comapny is 7%. This entire data depict that the performance of the comapny has become better than last year (Reilly & Brown, 2011).

The intrinsic value of the stock of the company is as follows:

According to the dividend discount model and PE multiple model, the share price of the CITADEL’s stock must be 0.059 and 2.07 respectively but the share price of the company is $ 2.44. According to these techniques, it has been found that both the methods take the help of financial figures of the comapny to analyze the intrinsic value (Morningstar, 2017).

According to the evaluation, the PE model depict that the intrinsic value of the stock of the company is 2.07, this method is more reliable as it takes the concern of reliable data only and offer a result on the basis of that.  

According to the analysis and investigation, a comapny always have various other factors such as the activity, investments, project, technology, competitors, and supply and demand of shares etc which directly affect the share price of the company. So while evaluating the intrinsic value of any organization, analyst must take the consideration of above described factors also (Moles Parrino & Kidwekk, 2011). It would offer a better result.

 The cost of capital study of CITADEL GROUP PLC has been analyzed to identify the worth of capital and the financial position of the comapny. The cost of capital of the CITADEL GROUP PLC is as follows:

The tax rate which has been concerned while evaluating the cost of capital is 30%, according to the tax slab of Australian economy. The cost of equity is bit higher than the cost of debt because of the higher dividend expectations and the ignorance of tax rate (Lumby & Jones, 2007).

Share Valuation Study

Current liabilities of a company are short term debt of a comapny. It should not be considered in WACC calculation as the outcome of the WACC would be manipulated and the cons of this is the much calculations and time of taking a better decision about capital structure of the comapny (AFR, 2017).

Currently, this comapny has started its new subsidiary business and diversified tha target market to grab more opportunity from the market. For both the new projects, comapny required funds and for it, comapny analyze the capital structure and enhance the level of the equity rather than the debt to reduce the level of the risk. Currently the equity of the comapny is quite higher than the cost of debt.

Current capital structure of the comapny is as follows:

While the industry’s capital structure is as follows:

According to both the capital structure, the level of debt of the comapny must be enhanced by the managers to make the capital structure consistent.

Optimal capital structure is the one where the debt and equity of the company must be according to the economy of the country and the nature and activity of the business. According to this report, the optimal capital structure of the comapny would be at the level when the debt and equity would be at the ratio of the 2:3. This is the optimal capital structure of the comapny, at this level, the risk and return aspect of the comapny would be average and the firm will enjoy the profits (Bloomberg, 2017).

 Lastly, the financial performance of the comapny has been evaluated on the basis of the economy and the industry position. Through this report, it has been analyzed that the performance and the position of the comapny makes the comapny in the top list of the industry. The comapny is required to have a look over the capital position to make it better.

The Hillier, Grinblatt and Titman (2011) depict that the performance and the position of the comapny makes the comapny in the top list of the industry. Google finance (2017) depicted in an article that the comapny is required to have a look over the capital position to make it better. Further, the Morningstar (2017) depicted that the position and performance of the comapny is increasing rapidly. Comapny is required to look into the new market to grab the new opportunity and enhance the market share and the revenue of the comapny. AFR (2017) depicted that the new opportunities are there for the comapny in the market, comapny is just required to have a look over it and grab it.

Conclusion:

For concluded, the comapny, CIITADEL GROUP PLC is performing very well in the Australian market. The position of the comapny became better in last 2 years in the industry. The investment into this comapny would offer higher return to the comapny. The comapny is required to look over the capital structure only. It would help the comapny to reduce the level of the equity and debt to manage the performance of the comapny.

References:

AFR. 2017. CITADEL GROUP PLC. Retrieved from https://www.afr.com/research-tools/CGL/share-prices/shares-news available on 14th Oct 2017.

Bloomberg. 2017. CITADEL GROUP PLC. Retrieved from https://www.bloomberg.com/quote/CGL:AU available on 14^th Oct 2017.

Dixon, A.D. and Monk, A.H., 2009. The power of finance: accounting harmonization’s effect on pension provision. Journal of Economic Geography, 9(5), pp.619-639.

Glajnaric, M., 2016. The importance of dividend paying stocks. Equity, 30(2), p.6.

Google finance. 2017. CITADEL GROUP PLC. Retrieved from https://finance.google.com/finance?q=ASX:CGL available on 14^th Oct 2017.

Hillier, D., Grinblatt, M. and Titman, S., 2011. Financial markets and corporate strategy. McGraw Hill.

Home. 2017. CITADEL GROUP PLC. Retrieved from https://www.citadelgroup.com.au/ available on 14^th Oct 2017.

Lumby,S & Jones,C,.2007, Corporate finance theory & practice, 7th edition, Thomson, London

Moles, P. Parrino, R & Kidwekk, D,.2011, Corporate finance, European edition, John Wiley &sons, United Kingdom

Morningstar. 2017. CITADEL GROUP PLC. Reterived from https://financials.morningstar.com/company-profile/c.action?t=CGL&region=usa&culture=en-US available on 14^th Oct 2017.

Reilly.F.K & Brown.K.C,.2011,Investment analysis & portfolio management,10th edition, South western Cengage learning, India

Ross, A,. Westerfield, R,W,. Jaffe,J,.& Kakani,R,K,.2008, Corporate Finance, 8th edition, Tata McGraw hill education private limited, New Delhi, India

Ross, S, A,. Westerfield, R, W,. & Jaffe, J,.2007, Corporate Finance, the McGraw-hill, India

Yahoo finance. 2017. CITADEL GROUP PLC. Retrieved from https://finance.yahoo.com/quote/cgl.ax?ltr=1 available on 14^th Oct 2017.

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