Shares of Company Z Energy - Term Paper Example

Report Title: Investment plan Full Name: Student ID: Stream Number: Date: TABLE OF CONTENT Introduction Executive summary ................................................................................................. 1 Introduction………………………………………………………………………... 2 Investment in Z energy ............................................................................................. 3-4 Portfolio of securities.................................................................................................. 5 Conclusion and recommendation……………………………………………………..6 Executive summary Acquisition of a new company’s shares have some retard and it is considered practical for a corporation to have an appraisal on the company in which it’s shares is going to be purchased and its outer ecological aspects inhibiting the business prior to making an offer for buy the issues/ a number of factors like trend analysis and critique evaluation of the company productivity, liquidity and the financial stability as well as considering micro and macro economic factors affecting the operation of the company and making assessment as to whether the company is a going concern should be ascertained before making an intention to acquire shares of company Z energy. The result analyzed signifies that the Z energy company operation is faring well because of its steady growth. Cross-sectional analysis and industrial average was done and adequacy of data for comparison purposes depicts a positive trend because listing of share in security market for Z energy would make the company one of the leading companies in the fuel industry. REPORT ON THE POTENTIAL AQUISATION OF Z ENERGY SHARES subsequent are the detail examination of the just concluded statement on the depicted trend and prospect operation of the Z energy and analysis of its continued existence in the business ,external issues affecting its performance And whether Z limited should be acquired by Hermes investment group or not, Financial performance of Z Energy in the past, The company made a steady growth in the preceding years. This signifies that the Z energy limited can withstands the competition with other companies in the fuel industry in the country and thus it depicts a going concern. In this case, purchasing the shares in this company would be viable because the company do not pose any threat. Also steady growth depicts a positive trend of company shares in the market and thus purchase consideration of 3.5 $ per shares will be earned back from investment inform of profit within a given time consequently implying that Z energy limited has minimal rate of risk and high returns because it shares are not over-valued. (Taulli, 2012) Viable company should be able to portray a positive trend in its performance as well as the capital employed ought to give a returns as well as financing its operation. These are some of the key factors a potential investor will consider before investing in a company. Risk and returns determines the viability of a company and thus an optimal capital structure will reduce the level of leverage. Future growth opportunities Listing of share in NZX and ASX would boost the company performance in the fuel energy because the initial public offer of Z energy of 3.5 is not over-valued and hence their securities will sell well in the securities market while making the company more competitive in the stock market. Being in the top 20 performing companies in the fuel energy depict an investment opportunities for Z energy. This is due to the fact that a fresh competition will emerge and thus to remain smart in the competitive market, Z energy will be forced to promote its product in the market. Z energy will have its profit ratio increasing due to competitive strategy employed to guarantee strong stock market price and to get exonerate of competition. Improved profit would mean augment in the amount of dividend paid to shareholders consequently, Hermes investment group would benefit from this incremental profit distributed to shareholders by way of dividends to shareholders after the initial public offer if the company invest their $ 1 million reserved fund. The NZ capital market conditions The capital market condition for NZX security market depicts a profitable environ for investment. This is because the shares in NZX start trading on restricted arrangement basis at $ 3.74 which is at a higher value than the initial public offer of $3.5 per share. this imply that investor will start earning a profit of $ 0.24 per share in the stock market and thus Z energy shares are trading well in the stock market even before the initial public offer. This is an investment opportunity for Z energy as well as the investment opportunities for the potential stakeholders in the company because the company will be in a position to curb competition from the rivalry firms by ensuring that their stock price remains strong and selling in the securities market. This will make the company be a price leader and would thus benefit from customer lock-in strategy as well as market supremacy. Advantages of economies of scale and scope of work from venture appraisal Where Hermes investment group limited acquires shares of Z energy limited which is a company based in New Zealand., it will be an immense boost to Hermes investment group inform of aggressive gain in the far-off country meaning that investing in this companies would aid financial strength as well as the economies of scale and therefore the corporation would be able to bring in additional income and remains strong in the aggressive market. Further aspects such as political peril and broad economic circumstance ought to be evaluated in line with scope of work of the subsidiary relative to purchase of shares so to shun other external threat that will bring failure to the Hermes investment group. Driving force of a foreighn corporation will not simply encompass its most favorable capitall structure as well as with first-rate corporate gorvenance but also externall enviroment in which the company operate need to assesd before making a decision on whehter to invest on the company or not. sometimes the guiding principle in the overseas countries will not correspond with the local country,s rules and might bring in inconviniences subsequent to investing in which Hermes investment group will realise failure on venture and consequently comprehensive assessment whether internal or external issues affecting the Z energy need to be analysed in detail prior to making an intention to invest in the Z energy (Taulli, 2012) Managerial and promotion aptitude Investing in Z energy would afford auxiliary awareness and know-how in administration and advertising since Hermes investment group will be fortunate with varied understanding from overseas countries. This can be engaged in providing excellent administrative proficiency worldwide leading to superior corporate governance of the Hermes investment group As of the above background information regarding the internal and external trading situation of Z energy limited, it can be observed that purchase of its shares would yield a return to the Hermes investment group and aid growth of the Hermes investment group. This as a result means that Hermes investment group must buy the shares of Z energy at the initial public offer price of $3.5 per share and consequently Hermes investment group will have gain from industrial proficiency in the foreign state leading to growth of group internationally to bring in additional income and get better on their capital base leading to decline in liquidity predicament that might affect Hermes investment group. Portfolio securities Stock portfolio for, IAG limited, Contact energy limited, Trade me limited and Air New Zealand limited Each stock start trading in august 2013 Initial amount size: $1,000,000 Net profit: ($1,000,000*$0.24) = $ 240,000 1/8/2010 2/8/2010 3/8/2010 4/8/2010 5/8/2010 6/8/2010 Interest on bond Contact energy (8%) 8,000 16,000 32000 48,000 64,000 80,000 AIG (7.5%) 7,500 15000 30,000 45,000 60,000 75,000 Rabo pie (8.79%) 8,790 17,580 35,160 52,740 78,320 87,900 Air New Zea (6.9%) 690 13,800 27,600 41,400 55,200 69,000 Z energy (7.5%) 7,500 15000 30,000 45,000 60,000 75,000 100000 200000 400000 600000 800000 1000000 The above data analysis depicts six top competing companies in the stock market with strong securities market price. It can observe that as an venture, it is worth investing in Z Energy Company since its interest rate on bond is at a lower rate which attract investors into the company despite their stiff competition. Investment in Air new would be a profitable venture but the threat is that the management of that company made unsecured and unsubordinated offer into the public and thus it would be difficult to predict the future performance of the stock price and consequently could be a risky venture to Hermes investment group. Conclusion and Recommendation Hermes Investment Group should consider investing in Z energy shares worth $ 3,500,000 due to the fact that the group will earn a return from this venture. This is observed from the detailed examination of Z energy financial performance and predicting the future trend while considering external factors such as political risk and effect of inflation. The group will have an international recognition status because the company will increase its capital base inform of number of shares in Z energy and consequently controls the voting right of Z energy leading to exchange of technological expertise as well as the managerial decision. Shareholders of Hermes investment group will as well benefit from the venture capital because the investment will earn the company dividend worth of their investment implying that the existing group members will benefit from incremental investment by way of incremental dividend paid to them. And the retained earning will act as working capital in order to safeguard the company from. (Geddes, 2003) Reference Geddes, R. (2003). In IPOs and Equity Offerings (p. ppg 4). Taulli, T. (2012). In High-Profit IPO Strategies: Finding Breakout IPOs for . (p. ppg 117). Read More