Syrah Resources Limited
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Table of Contents
INDUSTRY DESCRIPTION 3
COMPANY DESCRIPTION 3
FINANCIAL INSTRUMENT ANALYSIS 4
FINANCIAL STRUCTURE ANALYSIS 4
FINANCIAL MARKET ANALYSIS 9
CONCLUSION 9
APPENDIX 1 11
Industry Description
The selected company “Syrah Resources Limited” has been covered under GCSIC “Material”. This sector consists of product or services of basic need which involved the development, discovery as well as processing of the raw materials. Other industries rely on them for fulfilling their needs of material which includes oil, gold, stone etc. in regard to the regulators of industry, there has been four entities which comprises the part of council of finances regulators at Australia:
ASIC i.e. Australian Securities & investment Commission- they are solely responsible in regard to supervision of real time trading for those operating under ASX
RBA i.e. reserve Bank of Australia- has been responsible to make assessment about the licensed clearing as well as settlement facilities to ensure compliance with the RBA; s FSS (Financial Stability Standards).
Treasury- this department has been engaged for developing economic policy
APRA-one of the prudential regulators of Australian financial service and also the member of the council of financial regulators (Higgins, R.C. 2019).
Company Description
The selected company “Syrah Resources Limited” has been listed with ASX with a code SYR. It is one of the leading mineral & technology industrial company. Recently the company was engaged in construction project of Balama Graphite at Mozambique. The project Balama has been high grade, life assets as well as has been the largest natural graphite mine spread globally.
The company has been the supplier of graphite products and as discussed the primary or principal activities involve
development & construction of balama Graphite at Mozambique,
battery anode material strategy,
development of marketing & sale arrangements with desired customers
assessment about the usage of quality graphite using though the balama graphite to be used as input for the production of battery anode material
development of downstream
The company has been operating through 2 segments which are Balama & corporate:
Segment Balama- this segment has been engaged in exploration, mining, evaluation as well as development activities that has been associated with the project in Mozambique
Segment Corporate- This segment has been engaged to provide corporate administration & investing activities that includes the development of battery anode material strategy of the company.
The selected company “Syrah resources Limited” have two institutional investors in adding to the shareholders which have filed 13 F or 13 D/G forms with SEC. both the institution in combination hold 200000 shares& the largest shareholders includes are prime cap management co/ca/. in regard to the management structure of the selected company, it consists of chairman (Mr. Jim Askew), managing director (Mr. Tolga Kumova), non-executive director (Mr. Sam Riggdi).
Financial Instrument Analysis
The selected company hold the following financial instrument based on the annuals report for the year ended 2018:
Cash & Cash equivalents
Trade & other receivables
Available for sale financial assets
The annual report of the selected company clearly provides there has not been any off balances business in which they are engaged in the financial year. OBS i.e. off-balance sheet items refers to those elements of assets & liabilities which does not appear in the balance sheet of the company. However, they are part of the assets & liabilities of the company. It mainly refers to those elements which are not covered by the company or the company does not have a direct obligation in regard to the same (Annual Report, 2018).
In the stated case of Syrah Resources limited, there has not been any OBS i.e. Off-balance sheet item as per the annual report of the company (Annual Report, 2018).
Off-balance sheet (OBS) items is a term for assets or liabilities that do not appear on a company’s balance sheet. Although not recorded on the balance sheet, they are still assets and liabilities of the company. Off-balance sheet items are typically those not owned by or are a direct obligation of the company.
Financial Structure Analysis
Below are the three financial ratios which are considered essential by the creditors
Current Ratio- this ratio reveals about the ability of the company to pay off their short-term liability.
Quick ratio- it ensures about the liquidity position of the company which resultant helps the creditor to depict the creditworthiness & ability to pay off their debt.
Inventory turnover ratio- this ratio depicts the number of times the investor has been replaced or sold during the year., it is considered as a tool to depict about the revenue of the company on the basis of demand (Bragg, S. and Bragg, S. (2019).
Below are the three financial ratios which are considered essential by the shareholders
Interest Coverage Ratio- this ratio depicts the picture about the inserts liability that company needs to pay off to their debt on regular intervals.
Debt equity ratio- This ratio provides clear picture about capital employed by the company in the form equity financing & debt financing It is always preferable to have low debt financing in any organization.
Return on assets ratio- this ratio provides how the company has been using therefore order to operate the business activities.
As desired, financial ratio calculations are as follows (Also refer Appendix- 1):
Syrah Resources Limited
Based on the ratio calculation on the basis of annual report of the company, the financial health of the company is in declining scenario. The financial position of the company is not sound to attract the users for investment. This can be revealed from the following events of the annual report of the company:
Revenue during the financial year 2018 has been decreased as compare to the previous year.
Loss during the financial year 2018 has been increased as compare to the previous year.
Accumulated loss has been increased over the year.
There is increase in the accounts receivable over the years
Assets turnover ratio depicts the utilization of resources for production which is one found sound in the stated case.
There are some positive items that may also been considered by the users while making investment decision which re as follows;
Current ratio of the company is very attractive which ensure that the company has been able to pay off their debt within the period of 12 months. In the state’s case of Syrah resources limited, the current ratio of the company has been decreased over the year but is more than the ideal ratio 2:1 & hence depicting the source performance in respect of payment to their creditors.
Debt equity ratio clearly provides that the company has almost nil debt in regard to running of business separation of the company. It provides that Syrah resources limited is equity financing company which is always found preferable for the users while miming investment decision.
Increase in non-current assets of the company which provides that the company has been engaged in expansion of their business which resultant requires them to invest in the fixed assets.
On the basis of analysis of the various ratios calculated based on the annual report of the company, it can be ascertaining that it is beneficial for the company to issue 10 million new shares instead of borrowing (Robinson, T.R., 2019). This is so because there will be regular or fixed term of interest payable on the amount so borrowed by the company. In current situation the company is in loss & interest expense which needs to be shown in the income statement will led to increase the loss. It has been recommended to issue shares since the dividend paid by the company is not a fixed or regular liability. The dividend is paid by the company out of the profits earned during the year. On other hand company is liable for repayment of principle with interest expenses in fixed time.
In nutshell, it is recommended to issues AUD 10 million of shares instead of borrowing.
Financial Market Analysis
In the present case, financial players interact with each other through the annual report of the company. On the basis of research, it can be said that players are in a beneficial relationship.
In my opinion, there is no requirement of government intervention. Currently, the selected company “Syrah resources Limited” have two institutional investors in adding to the shareholders which have filed 13 F or 13 D/G forms with SEC. both the institution in combination hold 200000 shares& the largest shareholders includes are prime cap management co/ca/. in regard to the management structure of the selected company, it consists of chairman (Mr. Jim Askew), managing director (Mr. Tolga Kumova), non-executive director.
On the basis of research made for the past few years, it has been found that the company has not been involved in unethical behaviour. The annual report of the selected company clearly provides there has not been any off balances business in which they are engaged in the financial year. OBS i.e. off-balance sheet items refers to those elements of assets & liabilities which does not appear in the balance sheet of the company. However, they are part of the assets & liabilities of the company. It mainly refers to those elements, which are not covered by the company, or the company does not have a direct obligation in regard to the same (Annual Report, 2017).
Conclusion
Based on the discussion made above. It can be concluded that the financial position of the company has both positive & negative side and hence it is recommended to the users to deeply understand both the sider while making investment decision. In regard to the financial health of the company, it can be said that Syrah resources needs to take preventive measures in regard to revenue & expenses so as to reduce the loss over the year with a motive to get the surplus. Syrah Resources Ltd. (OTC: SRHYY) ownership structure shows current positions in the company by institutions and funds, as well as latest changes in position size (Robinson, T.R., 2019). Major shareholders can include individual investors, mutual funds, hedge funds, or institutions. The Schedule 13D indicates that the investor holds (or held) more than 5% of the company and intends (or intended) to actively pursue a change in business strategy. Schedule 13G indicates a passive investment of over 5%.