MAA 763 Assignment 1 T1 2021

Submission

All assignments should be submitted online through cloud Deakin.

• There are two questions in this assignment and students have to attempt both questions.
• There is no need for a table of contents, an executive summary or an introductory
section.
• Include a plagiarism declaration signed by every group member.
• Late submissions will be penalised at the discretion of the unit chair.
• Mark allocation is explained in the marking rubric.

Due Date: 17th April 2021, 8:00pm

 MAA763
Assignment 1
(1) TFS Corporation (ASX Code TFS), renamed Quintis (ASX Code QIN) on March 22 2017, was
Australia’s largest grower, plantation manager and producer of Indian Sandalwood. On the 27
Febuary 2017 TFS announced half year results to the market and in a media release titles
“Exponential Growth in Indian Sandalwood Sales Driving Transformational Year”. The media
release presented half year revenue of $152.6 million, half year net profit after tax of $28.3
million and a strong cash balance at 31/12/2016 of $89.8 million. The media release made many
positive predictions about the future growth potential and the share market valued the
company at over $600 million. On March 22 2017 the rebranding of Quintis was celebrated in
Melbourne during the time of the Grand Prix at a gala event hosted by Adam Gilchrist and Daniel
Ricardo. The celebration had however been soured by the release that week of a report by the
US based short selling firm Glaucus (https://glaucusresearch.com). The report questioned the
value of TFS (Quintis) and pointed to a failure in corporate governance. The share price collapsed
and in May 2017 the company was suspended from trading on the ASX. In January 2018 Quintis
entered bankruptcy.

In October 2018 Quintis emerged from administration as a private company after a $145 million
cash injection from investment giant BlackRock. The cash injection gave Blackrock majority
ownership of the new private company. (https://www.abc.net.au/news/rural/2018-10-
31/quintis-recapitalises-with-$145-million-from-blackrock/10447738). All public shareholders of
Quintus lost 100% of the value of their investment, which only 18 months earlier had been
valued by the market at over $600 million.

(i) The corporate governance disclosures at TFS (Quintis) from 2015 to 2017 reveal that the
company adhered to most of the ASX principles of corporate governance. Yet the
spectacular demise of TFS (Quintis) suggest that corporate governance failed.

Discuss how failure of the board of directors (principles 1 & 2) and failure of the ethical
culture (principle 3) at TFS (Quintis) contributed to the demise of the company. Students
should review the corporate governance disclosures at TFS (Quintis) from 2015 to 2017.
(8 marks)

(ii) Immediately prior to the Glaucus report in 2017, the investment giant BlackRock purchased
a large number of shares in TFS Corporation (Quintus). Shares that were then worthless.
Give your opinion on the role of BlackRock in the demise of Quintus. (4 marks)

(8 + 4 = 12 marks)
(2) Australia Post chief executive Christine Holgate had resigned two weeks after the Prime Minister
called for an investigation into the postal service over the purchase of luxury watches for
executives. Christine Holgate said the investigation was impacting her health and the ability of
Australia Post to do its job. Her resignation came after Communications Minister Paul Fletcher
and Prime Minister Scott Morrison demanded an investigation into the purchase of four Cartier
watches worth $20,000 as gifts to senior executives in 2018.

https://www.abc.net.au/news/2020-11-02/australia-post-ceo-christine-holgate-
resigns/12839502

Discuss the possible governance failures behind the purchase of luxury watches and whether
Christine Holgate had breached any corporate governance principles. Students may want to
make reference to the ASX Corporate Governance Principles (4th edition, 2019) and discuss.
(8 marks)