SECTION A: JSE INVESTMENT COMPARISON (35 MARKS)

You are appointed as a junior investment advisor at a prominent firm, your first client has entrusted you with R600 000 to invest in the stock market. Your client is keen to understand the performance of two companies within the same industry/sector and is particularly interested in tracking the share price performance over five weeks for both.
You need to help her make an informed decision by selecting two companies from the same industry, tracking their performance over five weeks, and then analyzing and comparing the results.
Required:

1. Selection of Companies (5)
● Choose two companies from the same sector listed on the
Johannesburg Stock Exchange (JSE). Examples of sectors include:
➢ Retail (e.g., Woolworths, Shoprite)
➢ Financial Services (e.g., Standard Bank, FirstRand)
➢ Telecommunications (e.g., MTN, Vodacom)
➢ Mining (e.g., Anglo American, Sibanye Stillwater)
● Explain why you chose these two companies (e.g., market position, financial stability, growth potential).
2. Investment Strategy and Allocation of Funds (8)
● Allocate the R600 000 between the two companies, i.e how much of the investment are you using to buy each company? Will it be a 50/50, 70/30 or 60/40 split?
● For the purpose of this assignment, the number of shares can only be bought in bundles of 10`s,100`s or 1000`s.
● Specify how many shares you will buy for each company and explain why you have chosen this allocation. (For example, based on growth potential, market performance, etc.)
3. Tracking Share Prices (8)
● Shares will be bought in week one.
● Track the weekly share prices of both companies for five consecutive weeks.
● Use the structure of the table below to track your shares. Complete a table for each company:

Name of Company 1:
Share price per share Number of shares bought Total value of shares Cash value on hand Total value of the investment

Week 1
Week 2
Week 3
Week 4
Week 5

4. Graphical Representation (5)
● Plot the 5-week share price data of both companies on a graph.
● The x-axis should represent the weeks (Week 1 to Week 5).
● The y-axis should represent the share prices.
● Use distinct lines or markers to represent the two companies.
● Label the graph with the company names and include a legend.
5. Investment Analysis and Decision Making (5)
● Explain any trends you observed over the 5 weeks (e.g., price increase/decrease, volatility).
● Analyze the performance of both companies and decide which one offers the better investment opportunity.
● Explain your reasoning based on the share price trends and any additional market factors.
6. Overall layout and presentation of report

SECTION B: Share Value and Buyback (15 Marks)

After observing the performance of your two selected companies, your client is interested in understanding how a potential share buyback could affect her investment portfolio. She has provided you with the information she obtained from the company which she is a shareholder and asked you analyse the impact of a buyback strategy on the company’s finances.
Company information:

Techhub.sa has been in operation for the past two years. At registration, the company had 100 000 authorised shares and 40 000 shares in issue at R35 per share on 1 March 2024. On 30 November 2024, the company issued an additional 10,000 shares at R40 per share. The financial year end of this company is 28 February 2025.
Your client was approached on 1 December 2024 by the directors of Techhub.sa to purchase back 6,500 shares. They offered to pay R38 per share.

Required: (Show all calculations where applicable)

1. Calculate the amount your client will receive if she accepts their offer. (1)

2. Calculate the average share price of Techhub.sa. (4)

3. Calculate the value per share of the buyback that will be reflected in the Retained Income note of Techhub.sa.

(1)

4. Discuss ONE potential benefit and ONE potential risk of the buyback strategy for the company.

(4)

5. Should the company reinvest in growth or return capital to shareholders through the buyback? Provide a short, balanced argument for both options and conclude with an overall comment. 5)

Answers to Above Accounting Questions

Answer 1: 

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