Westpac Financial Analysis

Topic

Westpac Financial Analysis

Instructions

The assignment is designed to assess your understanding of business finance theories and
explores a number of areas within the course by applying your learning to a real company.You should make good use of models and techniques and justify your choice with assumptions, reasons and limitations clearly. Demonstrate critical and analytical skills in academic writing, various research synthesising skills and be able to communicate clearly and effectively. Please note this is a
finance assignment for real business, so make sure you have the appropriate combination of
quantitative and qualitative analysis.

Format & Guideline:
Report format
Use 11 or 12 front, with 1.5 line spacing

Comprise no more than 3,000 words (excluding tables, formulae, reference list and
appendices)
Analyse a company which is listed on ASX (detail see below Company Selection)
Use APA referencing style

Required:
Suppose you are a financial analyst and you have been asked to analyse an ASX listed company.
Your task is to make a recommendation as to whether or not this company is an attractive
investment opportunity. Before you draw a conclusion, you are required to:
1) Discuss how successful the company has been at maximizing stakeholders value over
analysing period. The discussion should be based on appropriate metrics and benchmarks.
2) Analyse the company’s share price history and traded volumes over the analysing period, it
can be over the past 12 months, 2 years, or 5 years.
3) Calculate the return for investing in the company both short term and long term and identify the main causes of its volatility in return over the corresponding holding period. The discussion of volatility should consider economic-wide and firm-specific factors.
4) Apply the valuation technique(s) taught in this course and undertake a current valuation of the equity for your company. Based on your calculation, would you recommend a prospective investor to buy, hold or sell this security and why.
5) Evaluate the company’s investment projects. Is there a typical project for the company during the analysing period? If so, apply analytical skills relating to the topic taught in this course
and evaluate the profitability of the project, the investment horizon whether is a long term or
short term project, the cash flow pattern and how the company has financed the project.
6) Analyse the company’s dividend policy. Should the company follow a progressive dividend
policy? Critically evaluate factors that are affecting corporate dividend policy and how
your company’s dividend policy may have influenced its capital structure and share price.
7) Estimate the overall cost of capital and analyse the current capital structure. How would you
describe the current capital structure for your company and justify with reasons that should
potential investors view this company as a favourable investment choice?
8) Based on the attempt to all of above questions conclude whether your company is an
attractive investment opportunity. You should clearly explain all of your assumptions used in
the valuations and estimations; for the technique(s) and model(s) adopted state why you
think they are appropriate for your company; attempt to reconcile any differences in
results/outcomes that you obtain by using different technique(s) and model(s); finally,
critical discuss the weaknesses of your analysis and any other risks that may affect investors’
decision making.
The company must be currently listed on the ASX, not the suspended or delisted ones.
Sufficient data for the company can be accessed (including financials for the last 12 months, 2
years, or 5 years).

Answer preview

Westpac adopts a management philosophy that involves maximization of stakeholders (including employees, customers, shareholders and the community) value. The objective of this strategy is to develop policies that ensure minimal costs, reduced waste and high quality products. In addition, value maximization involves enhancement of skills and job satisfaction for employees, as well as contributing to the greater good of the community.

Open engagement with stakeholders between 2012 and 2016 for Westpac resulted to important understanding of issues and trends in meeting the expectations of stakeholders. The basis of Westpac’s approach has been the implication on stakeholders concerns identified through the strtegegy process.

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