Are we living in a world of fear?
... 1 Rural Press Limited Rural Press Limited (RUP) is an Australian owned and based media group, specializing in publishing community newspapers in all states of Australia as well as New Zealand and the USA. ... Land later becomes the heart of Rural Press. The Rural Press Chairman and major shareholder is John B Fairfax, the great, great grandson of the original John Fairfax founder of The Sydney Morning Herald. ... While it is beneficial for the company’s growth to have directors witch have an established relationship with Rural Press and an understanding of the Rural Community, it should be assured that every director brings an independent judgment, therefore majority of the board should be classified as independent directors. ... As a whole, the current board structure of Rural Press is not regarded as being optimal for independent business decisions. ... 3 Financial Market Concerns Below is the price and volume traded chart of stock of Rural Press Limited from January, 2003 to December, 2003. Chart 1: Volume of Trade RUP, Source ANZ Chart 2 Share Price of RUP, Source ANZ The share price for Rural Press (RUP) trended steeply upward from mid-1989 to March 1994. ... 4 Social Constraints Due to the impact of drought in Australia, Rural Press hopes to diversify its business by acquisition. ... Two years ago Rural Press Limited and two of its executives had been found to have contravened the Trade Practices Act in one South Australian market, though the Court finally rejected the appeal, it did caused lot of social pressure on RUP. ... 24% of total ordinary shares, thus is the controller of Rural Press Limited. ... To continue the principle of employees owning shares in their employer company, a grant of $1,000 In Rural Press ordinary shares was made in July, 2003 to 2,317 eligible participating employees under the Exempt Employee Share Scheme. ... Investment Return From June 30, 2002 to June 30, 2003, RUP invested a $25 million greenfield press facility in the City of Ballarat, spent about $20 million to purchase the daily Bendigo Advertiser and Horshams tri-weekly Wimmera Mail-Times from New Zealands Independent Newspapers (INL), and has acquired the 49. ... Or rather for strategic reasons to satisfy the company’s hunger for media dominance within Australia. ... 1 Rural Press Ltd Cost of Capital and Firm Value The firm value is maximized at 1,490 million at debt ratio of 50%. ... 2 Rural Press Cost of Equity and Leverage The estimation of the cost of equity at different debt ratios for the company is also illustrated in Table 1. ... 3 Rural Press Cost of Debt and Leverage Due to the difficulty of approaching the exact rate of debt of RUP, we try to estimate a “synthetic rating” for RUP, and we assumed that the synthetic ratings are determined solely by the interest coverage ratio. ... Comparing with the peers in the media sector, Rural Press Limited is underlevered (refer to appendix 8). Despite the small size of the company, Rural is unlikely to be involved in a hostile takeover. ... The following sections will explore the rationale of Rural Press existing capital structure in depth. ... 5 Cost of Debt Analysis The Operating Cash Flow of the company has increased to 86,289,000 in FY2003 , and the size of OCF relative to the size of interest payment and principal payment is 1. ... From the financial statements of Rural, we found that the intangible assets account for approximately 71 percent of the total assets . ... Rural announced dividend payout ratio of 130% in FY 2003. ... Therefore, Rural would value flexibility to take to future projects. ... 6 Debt Constraints Analysis As we can see from the construction of the capital structure, the company will get a “BB” class from rating agency if it tries to satisfy the optimal debt ratio. ... 8 Financing Type Based upon the sensitivity regression (refer to appendix 9), Rural should try to keep the duration of its debt to about 2. ... 1 Current Situation: • Currently Rural Press Dividend Policy is to firstly maintain a constant Dividend Per Share payment, increasing when profits allow. ... 2 Dividend History: Chart 7 Dividends in Cents Chart 7 contains dividend history of Rural Press, in cents terms.