Question

PART A: Company Research

Using Amalgamated Telecom Holdings Limited answer the following questions.

You have been selected as an Investment Consultant by company that you have selected and the Chief Investment Officer wants you to assist him in analyzing the company’s Investment portfolios.

1) Explain the nature of the company and identify stakeholders of this company.

2) Advise the Chief Investment Officer if the company is subject to any unsystematic risk.

3) Based on the current share price, do you think this company has performed well over the past three (3) years? Why?

4) Examine any investment projects the company has taken in the past and critically examine if that project increased the wealth of the shareholders.

5) What project evaluation methods did the company use? Is the company planning to undertake any further projects in the future?

6) Your company just recently purchased Fiji Government Bonds to raise finance. Surprisingly, the Earnings Per Share (EPS) had increased. The Chief Investment Officer is confused and wants your advice. Advise the Chief Investment Officer on why the EPS might have increased.

7) Calculate the Earnings Per Share (EPS) and the Market Capitalization of this company. Do you see any growth patterns in the company’s Dividends?

8) You have been approached by an investor and the investor wants advice whether or not to invest in your company. As the Investment Consultant, advise the investor on whether or not he should invest in your company.

Answer 1

1) Incorporated on 10^th March 1998, Amalgamated Telecom Holdings Limited (ATH) is Fiji’s main telecommunications holding company.. The company was formed as the vehicle through which the Fiji Government’s investments in the telecommunications sector were consolidated for the purpose of privatisation under its public sector reform programme. ATH commenced operations on 16^th December 1998 following the sale of a 49% strategic stake in the company to the Fiji National Provident Fund (FNPF).

Trhough strategic acquisitions and partnerships, the company has improved its presence in FIJI and abroad. The company currently has presence in Kiribati, Samoa, Amrican Samoa, cook islands, Vanuatu, Papua New Guinea, Singapore and Austrailia.

The principal activities of the ATH Group include the provision of:

• Voice, internet and data related services;

• Business communications solutions;

• ICT and surveillance products;

• Transaction management and prepaid services;

• Directory information services;

• Business Processing Outsourcing (BPO), including call centre services; and

• International telecommunications facilities.

The FIJI Government is currently ATH's second largest shareholder with 17.29% interest, while the FNPF is the largest shareholder with 72.25% while the rest 10.46 is held by other investors.

2) Unsystematic risk

Due to the impact of Coronavirus in 2020 FIJI is having a significant impact on its production and supply chains. In the coming period, the telecom companies are expected to experience a slowdown in mobile device production, while it may also be difficult for network operators to manage workflows while maintaining and upgrading existing infrastructure. Overall progress towards 5G may be postponed or slowed down due to the imapact.

On the consumer front, spending on telecoms services is expected to remain under pressure due to large-scale job losses and the restriction on disposable incomes. However, the crucial nature of telecom services, both for general communication as well as a tool for home-working, will offset such pressures. All in all, the impact of the pandemic is expected to lead to a slowdown in investments and lead to an impact on the company

3) Stock Performace

	31st December 2016	31st December 2019	% returns
SPX	3172.79	9607.67	202.8%
ATH	1.27	3.34	163.0%

While the company provided a 163% growth in stock price between 2016 to 2019, the stock underperformed the index.

4) Investments

Over the years the company had investment in Telecom Fiji Pte Limited, Vodafone Fiji Pte Limited, Fiji International Telecommunications Pte Limited, Fiji Directories Pte Limited, Datec (Fiji) Pte Limited and its subsidiary, Datec Australia Pty Limited, Amalgamated Telecom Holdings (Kiribati) Limited.

All these investments helped the company in improving its geographic reach and improve on its subscriber base and increase the company's market share at large.