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Coles

Part 1: Corporate Governance Analysis 1. Who run the company: Top management, owners. Board of directors (8): James Graham AM, the Chairman and Non-executive Director, age 70 Steven Cain, the Managing Director and Chief Executive Officer, around 42 Other Non-executive directors: David Cheesewright, around 58, Jacqueline Chow, age 47, Abi Cleland, age 46 , Richard Freudenstein, age 55, Paul O’Malley, age 54, and Wendy Stops, age 58. Executive leadership team: Steven Cain, the Chief Executive Officer, who has over 20 years of experience in Australian and international retail. Leah Weckert, the Chief Financial Officer, who has more than 20 years of finance, commercial and strategy experience, including a number of senior roles across Coles in merchandise, operations, human resources and strategy. Greg Davis, the Chief Executive - Commercial and Express Matthew Swindells, the Chief Operations Officer Thinus Keeve, the Chief Property, Export and Sustainability Officer Lisa Ronson, the Chief Marketing Officer Kris Webb, the Chief People Officer Roger Sniezek, the Chief Information Officer David Brewster, the Chief Legal Officer Darren Blackhurst, the Chief Executive Liquor Daniella Pereira, the Company Secretary

George Saoud, the Chief Executive Officer of Emerging Businesses

Ben Hassing, the Chief Executive, Ecommerce Sally Fielke, the General Manager Corporate Affairs

https://www.colesgroup.com.au/about-us/?page=board-of-directors

2. Who monitors: Board of directors, Regulatory Authorities, Government, Equity investors, Bondholders, Banks, Lenders. The Board of directors are responsible for monitoring the overall direction of the firm, and their power can be summarized as follows: Determining the core value and business plan of the firm; Setting the risk appetite, major capital changes; Overseeing the group accounting, remuneration policy,corporate reporting system; Guiding the ethical and socially responsible behavior; Determining the size, composition and structure of the Board, and the process for evaluating its performance; Appointing and removing the CEO and the Company Secretary, and so on. 3. Rules of the game: Is it rigged in favor of the incumbent managers? Stock holders have powers? No. The charter for the board listed that the board has the right to set the risk appetite within which the Board expects management to operate, and has determination on major capital expenditure and other changes on capital, and have the right to removing and challenge the CEO and the management team. So, the board owns the ultimate power of the firm, which prevent the firm can be rigged in favor of the incumbent managers. However, Steven Chain is the managing director and CEO of Coles. He owns both position in the board and the management team, which could add power to the incumbent manager in firm manipulation.

4. Board composition: Age and tenure, Background, Connection to company and CEO.

5. Board Operation: Chairman of the board, Meeting frequency, Attendance, Able to monitor top managers?

6. Investor Analyst Activity: Buy side: Biggest Stockholders, their history on corporate governance Sell side: Whom are the analysts that track the firm? What are their views? Activist: Are there any activist investors in the mix? How active are they? 7. Rule of the game: Voting structure, Multiple classes, Golden shares? Corporate Charter: Takeover clauses (anti takeover amendments), Voting rules (proxies, voting at meeting), Nominating rules.

Part 2: Risk and Return Analysis How risky is the company’s equity? What of is its cost of equity?

Cost of equity Using CAPM model

Outcome:

Cost of Equity = Risk-Free Rate of Return + Beta * (Market Rate of Return - Risk-Free Rate of Return)

0.8138

10 Year Treasury Rate is https://ycharts.com/indicators/10_year_treasury_rate at 0.93%

Rf

0.93

Beta

0.14

https://au.finance.yahoo.com/quote/COL.AX?p=COL.AX

Rm

10%

https://www.investopedia.com/terms/c/costofequity.asp

https://www.investopedia.com/terms/c/costofequity.asp

How risky is the company’s debt? What is its cost of debt? https://bench.co/blog/accounting/cost-of-debt/

Cost of debt Have little risk to default

Outcome:

(Financing costs/ total liability)*(1-tax rate)

0.019708911

Financing costs

443

Total liabilities

15,734

Tax rate

0.3

https://bench.co/blog/accounting/cost-of-debt/

What is company’s current cost of capital? https://www.investopedia.com/terms/c/costofcapital.asp

Cost of capital

Outcome:

Percentage of equity * Cost of equity + Percentage of debt * Cost of debt

0.132878467

Percentage of equity

0.142514578

Percentage of debt

0.857485422

Cost of equity

0.8138

Cost of debt

0.019708911

Part 3: Investment Current project:

an Australian supermarket, retail and consumer services chain,...