AN approach to exploration supported by a

AN

ASSIGNMENT

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(CASE STUDY)

ON

ALLIGATOR ENERGY LTD

ACN
140 575 604

HI5002:
Finance for business – Masters

DEEPANSHI

HOLMES INSTITUTE, AUSTRAILA

Author
note

 

TABLE OF CONTENTS

1

DESCRIPTION OF THE COMPANY

2

2

OWNERSHIP GOVERNANCE STRUCTURE

2

3

KEY RATIOS 2016

4

4

INFORMATION FROM ASX WEBSITES

6

5

RECENT ANNOUNCEMENTS

7

6

STOCK FIELD

7

7

WEIGHTED AVERAGE COST OF CAPITAL
(WACC)

9

8

DIVIDEND POLICY

10

9

RECOMMENDATION

10

10

REFERENCE

11

 

 

 

1.     
DESCRIPTION OF THE COMPANY

Alligator Energy
Ltd is focused on the discovery of world class high grade, uranium deposits in
the Alligator Rivers Uranium Province (ARUP) in the Northern Territory. The
company offers shareholders strategic exposure to a highly prospective uranium
exploration tenement package in one of the world’s premier uranium provinces
for large, high-grade resources with a pipeline of exciting prospects to test,
each with the potential to add to Alligator’s high-grade uranium resource base.

Alligator’s
Project areas are located in Western Arnhem Land, approximately 250km to the
east of the city of Darwin. The projects are within the Alligator Rivers
Province which has produced and exported in excess of 300Mlb U3O8 since 1980.

The company has
also established a strong strategic position in the ARUP with over 1000 sq km
of Exploration Licence applications. Alligator’s geologists and technical
advisors have substantial experience in the Alligator Rivers Province and have
continued to build on this technical and operational advantage through an
innovative approach to exploration supported by a strong commitment to
R&D.

2.     
Ownership governance structure

1)                 
Substantial ownership

v  Higher than 18.72% of the shareholdings of Macallum GRP LTD – there
are no shareholders in the company that is holding more than 18.72% of the
shareholdings

v  Higher than 553% of shareholdings – REEF INV P/L is holding. 4.00%
of the Share holding is BNP PARIBAS NOM PL HUB24 and OCCASIO HLDGS P/L holding
2.57%.

v  Less Share Holding is SOWERBY ROBERT DAVID & DARROCH FAM P/L is
077%.

 

2)                 
Name of the main people

Ø  Chairman of the Company – Mr. John Main

 

Board members – composition of the board are
as follows –

v  John Main – MSc (Hons), Executive Chairman

v  Paul Dickson – B.Ed. F Fin Grad Dip TA,
Non-executive Director

v  Andrew J. Vigar – BSc (App.Geology), FAusIMM,
MSEG, Non-executive Director

v  Peter McIntyre- BAppSc, MSc(Mgmt),
Non-executive Director

v  Gregory Hall – BE Min Eng, MAusIMM, MAICD,
Non-executive Director

 

Ø       CEO – Dr Bill Ketelbey

 

 

Note:
Any of the above mentioned people does not fall under the substantial shareholders
who hold more than 25% or 5% of the total share capital.

 

 

 

 

 

 

 

 

 

Consolidated statement of financial position of
Alligator Energy Ltd. shown as under:

3.     
Key ratios of the company (2016)

i.                   
Return on Assets (ROA) =         

 

Return on Assets (ROA) =         

                  =          -0.70527

Return on Equity (ROE)   =         

Return on equity (ROE) =                       

                =          -0.72558

 

Debt ratio              =         

Debt ratio              =         

                          =       0.27997

For calculate
the ratio of Net Profit after Tax to Ordinary Ratio using this formula

 =

 

=?

 =

    =       -0.72558

Therefore,

 =

 

ii.                 

 Represents the ratio of total assets with
regard to the ordinary equity of the company. It reveals the insolvency risk
and measures the exposures of the shareholders against the total assets of the
company.  If the total assets of the
company increase it will reduce the return on assets and vice versa. On the
other hand, if the ordinary equity increases, it will reduce the return on
ordinary equity and vice versa.

iii.               
ROE is greater than ROA as the
amount of total assets is more than the amount of ordinary equity.

 

4.     
Information from ASX websites

i.                   
Movements of monthly share price

ii.                 
Comparison share price index
movements

This is clear from
the above graphs that the share price index of Alligator Energy Limited is more
fluctuating as compared to the Share price of APA, MEZ & AST Companies. Further,
as the share price of Alligator Energy Limited is more fluctuated it is
considered to be more volatile (AGL 2017).

5.     
Recent announcements

Ø  The MAO tends to receive higher volumes of documents for release to
the market just before the market opens.

Ø  In December 2017, total capital raised was $12.3 billion, up 89% on
the previous corresponding period.

Ø  As per the Listing Rule 17.1 of AGL, the company was requested to
place its securities into immediate trading halt owing to the pending
announcement related to capital rising.

Ø  205,882 zero strike priced options issued under the Long Term
Incentive Plan on 26 November 2014, with a life of three years, have lapsed
without the vesting conditions having been met. By Mike Meintjes.

Ø  Alligator currently holds a 55.31% interest in this group of mineral
titles by JOHN MAIN, CHAIRMAN.

6.     
Stock field

i.                   
Calculated beta for the company
is 0.63

ii.                 
Risk free rate = Rf
= 4%, market risk premium = Rm = 6%

Therefore,
required rate of return for the company’s share =

R = Rf  + ? ( Rm – Rf )

R = 4% + 0.63*
(6% – 4%) = 5.26%

iii.               
Conservative investment

Alligator Energy
Limited is a conservative investment as the required return from the share of
the company is quite high at 5.26% and the company provide any fixed income
like dividend.

7.     
Weighted average cost of
capital (WACC)

As per the
annual report of Alligator Energy Limited for the year ended 30th
June 2017, the company has interest rate on their major source of long term
debt from outsiders. And cost of equity capital has 5.26%. Therefore, the
weighted average cost of capital (WACC) is 7.02% be calculated.

Implications

·        
The Australian RET has complex
yet important distributional impacts on different energy users.

·        
Likely wealth
transfers from residential and small business consumers to large
energy-intensive industry.

·        
Need for distributional impact
assessments when designing and implementing clean energy policy.

Debt ratio

i.                   
Optimal capital structure

Ratio

Formula

2017

2016

Debt ratio

Total
Liabilities/Total assets

0.032

0.279

Generally, the ratio of -0.247% is considered as not healthy and
optimal capital structure. It can be seen from the above table that the company
has the debt ratio of 0.279% for 2016 and 0.032% for 2017 that is -0.247%.
Therefore, the company is not capable to maintain its optimal capital structure
in future.

ii.                 
To maintain the capital
structure the company has to borrowed any long-term debt and increase the
amount of trade and other payables through paying the trade and other payables.

8.     
Dividend policy

The company did
not pay or declare any dividend to members during the financial year. Further,
the directors suggested that no final dividend will be paid. The company may
not declare any dividends to invest more amounts for further growth through
reinvestment of earnings.

9.     
Recommendation

Information in the report included is based on current and
historic Exploration Looking into the analysis, the
company is suggested to borrow further amounts through long-term loan, The
company needs to develop itself as compare to 2017. There is a big diff. As
compare to previous year. If going like that the goes down. However, it is
recommended to include the company in the investment portfolio of the client as
the company is maintaining optimal capital structure which in turn exposes it
to lower risk of leverage. The beta rate of the company is lower 0.63% as to
previous year.

 

 

Reference

v  AGL., 2017. Home – Alligatoronline Available at: http://www.alligatorenergy.com.au/
Accessed 02 Jan. 2018.

v  ASX Website www.asx.com.au for the monthly share price index data

v  ASX
website http://www.reuters.com/finance/stocks


Joanne McNamara E [email protected]