FNCE90065 FUNDAMENTALS OF FINANCE ASSIGNMENT 3
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FNCE90065 FUNDAMENTALS OF FINANCE
ASSIGNMENT 3
Question 1
Mini-Case Study: Kina Securities Limited
In June 2015 Kina Securities Ltd – a financial services provider based in Papua New Guinea – lodged a prospectus relating to the floating and then joint listing of its shares on the Australia Securities Exchange (ASX) and the Port Moresby Stock Exchange (POMSoX). The company listed on 30 July 2015.
In order to answer the following questions – you will also need to access the following information:
• An excerpt of the prospectus for the IPO which is available on LMS (The full prospectus is also
available at
https://www.morgans.com.au/~/media/PDFs/KINA%20Prospectus.ashx).
• Closing share price data which is readily available at the ASX website
(https://www.asx.com.au/asx/share-price-research/company/KSL).
Answer all of the following questions assuming an investment in the ASX listed security
(a) What is the subscription price of this offer?
(b) What is (are) the purpose(s) of the offer?
(c) Who or what is Fu Shan?
(d) What does it mean when a prospectus states that shares held by significant shareholders will be “subject to voluntary escrow arrangements”? Why might a potential subscriber to the Kina IPO be interested in this information?
(e) Looking at the share price information (accessible via the ASX website using the securities code
KSL) is there any evidence that this IPO was initially underpriced?
(f) What was the return on KSL shares in the 6 months after listing (i.e. from close of trade on 30
July 2015 to close on 29 January 2016)? Would you rate this as over-performance, underperformance or are you unable to say?
(g) How did the market perform over this same period (the code for the broad-based market index
the ASX 200 is XJO)? Does your answer to (f) now change?
(h) What does your approach in part (g) implicitly assume about the risk profile of Kina Securities?
Can you suggest an alternative benchmark?
Question 2
Why do companies raise capital? Describe the principal sources of capital and compare their advantages and disadvantages.
Question 3
(a) Per $100 of face value, what is the price of a five-year bond paying 5% coupons annually if the yield to maturity is 8%?
(b) BHP has 6.42% coupon bonds on the market with nine years to maturity. The bonds make semi-annual payments. If the bond currently sells for $121.34, what is its yield to maturity?
2022-11-09