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Corporate Finance: Supply Network Limited

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Question:

Discuss about the Corporate Finance for Supply Network Limited.

 

Answer:

Introduction:

The assignment mainly helps in depicting the overall dividend decaled by Supply Network Limited from 2010 to 2016. In addition, the novice effectively evaluates the return on dividend, which is been provided by the company for the seven year period. The novice also uses the announcements date to depict the return, which could be provided from Supply Network Limited and ASX. In addition, the novice effectively depicts relevant dividend policy, signalling theories and information support with the findings obtained from excess return.    

Step 1:

1. Portraying the Dividend History of Supply Network Limited for Seven Years:

Balance Date

Dividend Type

Cent Per Share

dollar per share

percentage change

30/06/2016

Final

5.00

0.05

0.00%

30/06/2015

Final

5.00

0.05

0.00%

30/06/2014

Final

5.00

0.05

0.50%

30/06/2013

Final

4.50

0.045

0.50%

30/06/2012

Final

4.00

0.04

1.00%

30/06/2011

Final

3.00

0.03

1.00%

30/06/2010

Final

2.00

0.02

0.00%

30/06/2009

Final

2.00

0.02

0.00%

30/06/2008

Final

2.00

0.02

 

Step 2:

2. Stating the Announcement Date of Supply Network Limited for Seven Years:

Announcement date

26-Aug-16

19-Aug-15

20-Aug-14

28-Aug-13

24-Aug-12

24-Aug-11

25-Aug-10

26-Aug-09

 Step 3:

Stating the Return Generated by Supply Network Limited for Seven Years:

Supply Network Limited

Date

Closing price

Return

24-Aug-16

2.01

 

25-Aug-16

2.05

0.0199

26-Aug-16

2.01

-0.0195

29-Aug-16

2.06

0.0249

Date

Closing price

Return

17-Aug-15

2.06

 

18-Aug-15

2.06

0.0000

19-Aug-15

2.05

-0.0049

20-Aug-15

2.12

0.0341

Date

Closing price

Return

18-Aug-14

2.5

 

19-Aug-14

2.58

0.0320

20-Aug-14

2.58

0.0000

21-Aug-14

2.44

-0.0543

Date

Closing price

Return

26-Aug-13

1.7

 

27-Aug-13

1.7

0.0000

28-Aug-13

1.76

0.0353

29-Aug-13

1.74

-0.0114

Date

Closing price

Return

22-Aug-12

1.26

 

23-Aug-12

1.26

0.0000

24-Aug-12

1.26

0.0000

27-Aug-12

1.18

-0.0635

Date

Closing price

Return

22-Aug-11

0.6

 

23-Aug-11

0.6

0.0000

24-Aug-11

0.61

0.0167

25-Aug-11

0.64

0.0492

Date

Closing price

Return

23-Aug-10

0.42

 

24-Aug-10

0.4

-0.048

25-Aug-10

0.42

0.05

26-Aug-10

0.41

-0.0238

Date

Closing price

Return

24-Aug-09

0.36

 

25-Aug-09

0.38

0.0556

26-Aug-09

0.36

-0.0526

27-Aug-09

0.38

0.0556

Stating the Return Generated by ASX for Seven Years:

ASX Market

Date

Closing price

Return

24-Aug-16

5561.7

 

25-Aug-16

5541.9

-0.0036

26-Aug-16

5515.5

-0.0048

29-Aug-16

5469.2

-0.0084

Date

Closing price

Return

17-Aug-15

5367.7

 

18-Aug-15

5303.7

-0.0119

19-Aug-15

5380.2

0.01442

20-Aug-15

5288.6

-0.017

Date

Closing price

Return

18-Aug-14

5587.1

 

19-Aug-14

5623.8

0.00657

20-Aug-14

5634.6

0.00192

21-Aug-14

5638.9

0.00076

Date

Closing price

Return

26-Aug-13

5135.4

 

27-Aug-13

5141.2

0.00113

28-Aug-13

5087.2

-0.0105

29-Aug-13

5092.4

0.00102

Date

Closing price

Return

22-Aug-12

4376

 

23-Aug-12

4383.7

0.00176

24-Aug-12

4349

-0.0079

27-Aug-12

4343.7

-0.0012

Date

Closing price

Return

22-Aug-11

4082.3

 

23-Aug-11

4173.4

0.02232

24-Aug-11

4167.6

-0.0014

25-Aug-11

4212.8

0.01085

Date

Closing price

Return

23-Aug-10

4429

 

24-Aug-10

4381.3

-0.0108

25-Aug-10

4320.1

-0.014

26-Aug-10

4356

0.00831

Date

Closing price

Return

24-Aug-09

4426.1

 

25-Aug-09

4405.8

-0.0046

26-Aug-09

4454.5

0.01105

27-Aug-09

4450.8

-0.0008

Stating the Excess Return Generated by Supply Network Limited for Seven Years in Comparison with ASX:

Excess return

 

Date

SNL return

ASX return

Excess  Return

Percentage change in dividend

25-Aug-16

1.990050%

-0.356006%

1.634043%

0.00%

26-Aug-16

-1.951220%

-0.476371%

-1.474849%

29-Aug-16

2.487562%

-0.839452%

1.648110%

18-Aug-15

0.000000%

-1.192317%

-1.192317%

0.00%

19-Aug-15

-0.485437%

1.442389%

0.956952%

20-Aug-15

3.414634%

-1.702539%

1.712095%

19-Aug-14

3.200000%

0.656870%

-3.856870%

0.50%

20-Aug-14

0.000000%

0.192041%

-0.192041%

21-Aug-14

-5.426357%

0.076314%

5.350042%

27-Aug-13

0.000000%

0.112942%

0.112942%

0.50%

28-Aug-13

3.529412%

-1.050338%

2.479073%

29-Aug-13

-1.136364%

0.102217%

-1.034146%

23-Aug-12

0.000000%

0.175960%

-0.175960%

1.00%

24-Aug-12

0.000000%

-0.791569%

-0.791569%

27-Aug-12

-6.349206%

-0.121867%

-6.227339%

23-Aug-11

0.000000%

2.231585%

-2.231585%

1.00%

24-Aug-11

1.666667%

-0.138975%

1.527691%

25-Aug-11

4.918033%

1.084557%

3.833476%

24-Aug-10

-4.761905%

-1.076993%

-3.684912%

0.00%

25-Aug-10

5.000000%

-1.396846%

3.603154%

26-Aug-10

-2.380952%

0.830999%

-1.549953%

25-Aug-09

5.555556%

-0.458643%

5.096913%

0.00%

26-Aug-09

-5.263158%

1.105361%

-4.157797%

27-Aug-09

5.555556%

-0.083062%

5.472493%

Step 4:

Stating the Findings with the Help of Relevant Theory from Dividend Policy, Signalling Elements and Information Content:

The overall excess return that is been generated from Supply Network Limited in relatively to ASX is effectively depicted in the above tables. In addition, the return of Supply Network Limited is mainly high after the annual report date of the company as compared to the return generated by ASX. Three day return is been effectively used to detect the impact of final report on the share price movement of the company. The following theories could be effectively used to depict to return that is been generated by Supply Network Limited.   

 

Signalling Theory:

Companies to increase its share price before the actual declaration of the annual report mainly use the signalling theory. According to Bhattarai, Eggertsson and Gafarov (2015), the signalling theory, a company is mainly needed to provide high dividends each year, which in turn help in increasing the number of investors to grasp the opportunity to receive dividends. In addition, the company has effectively increased dividends from 2011 to 2015 and its share price has also drastically increased from 0.64 to 2.06. This only depicts the high dividend that is been paid by the company, which has improved its overall share price   

Dividend Policy Theory:

The dividend policy mainly uses the dividend that is been provide by the company to depict the future price movement and valuation. In addition, the annual report mainly holds the dividend declared by the company, which could be used by investors to depict the overall change in its share valuation. Kajola, Adewumi and Oworu (2015) stated that the investors with the use Gordon dividend model, investors are able to depict the exact value of companies share, which in turn help in making adequate investments. The share price movement of the company is mainly seen to rise on the next day of the results declaration. In addition, at the closing hour the company mainly provides the result, which affects the share price of the company in the next day.  

Information Content:

The company to promote its share price before the actual announcement of the news mainly uses the information content system. Wang and Yu (2015) mentioned that this system allows the company to promote its high revenue before the actual news is been announced. In addition, from the revenue of SNL it could be seen that the companies return before the announcement date is relatively higher than the actual revenue generated on the announcement date. This action could effectively depict the use of information content conducted by SNL before the actual release of its annual report. 

Conclusion:

The assignment is mainly helpful in identifying the spike in SNL share price during the three-day period of its announcement date. In addition, the spike is effectively compared with ASX return, which is been generated on those specific days. In addition, the excess return, which is been generated are effectively evaluated with the help of dividend policy relevance, information content and signalling elements.

 

Reference:

Au.finance.yahoo.com. (2016). ^AXJO Historical Prices | S&P/ASX 200 Stock - Yahoo!7 Finance. [online] Available at: https://au.finance.yahoo.com/q/hp?s=%5EAXJO&a=07&b=24&c=2009&d=07&e=27&f=2009&g=d [Accessed 21 Oct. 2016].

Bhattarai, S., Eggertsson, G.B. and Gafarov, B., 2015. Time consistency and the duration of government debt: A signalling theory of quantitative easing (No. w21336). National Bureau of Economic Research.

datanalysis.morningstar.com.au, (2016). [online] Available at: https://datanalysis.morningstar.com.au.ez.library.latrobe.edu.au/af/company/fullcompanyreport?ASXCode=SNL&licensee=datpremium&xsl-printfriendly=yes&xsl-printfullreport=yes [Accessed 21 Oct. 2016].

Google.com. (2016). Supply Network Limited: ASX:SNL historical prices - Google Finance. [online] Available at: https://www.google.com/finance/historical?cid=689372&startdate=Aug+1%2C+2009&enddate=Aug+31%2C+2009&num=30&ei=yOEJWLHONJCpuASB3aCADQ [Accessed 21 Oct. 2016].

Kajola, S.O., Adewumi, A.A. and Oworu, O.O., 2015. Dividend pay-out policy and firm financial performance: evidence from Nigerian listed non-financial firms. International Journal of Economics, Commerce and Management, pp.1-12.

 Wang, J.W. and Yu, W.W., 2015. The information content of stock prices, legal environments, and accounting standards: international evidence.European Accounting Review, 24(3), pp.471-493.

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