BAO5734 - FINANCIAL ANALYSIS
Analysts’ report group project
Guidelines
Due: end of week 12
Weight: 25%
Submission: electronic
Length: 4 000 words (excluding bibliography, appendix, and cover page), absolute maximum is 5 000 words
On the basis of official company sources and external literature, evaluate and report on the most recent annual report of a company (a non-financial ASX listed company of your choice), as if you were security analysts making a recommendation on whether or not your clients should invest in it.
Your report should include the following:
1. Business and Strategic Analysis
Your report should include:
• an analysis of the economy (macroeconomic factors), the industry (e.g. Porter’s five forces), and the company’s place in the industry;
• the company’s competitive and corporate strategy;
• the company’s and the industry’s growth potential;
• and the implications of all of these for future profitability of the industry and your company
Excel: n/a
2. Accounting Analysis
Your report should include:
• analysis of key accounting elements in the financial statements that are likely to be affected as a result of industry (3 items) and your company’s business strategy (one way of doing this would be a comparison with a competitor)
• 3 areas of possible accounting distortions
Excel:
• import financial statements for your company and the competitor
• recast financial statements for your company and competitor. Since you have only two companies, it is easier to recast financial reports between them, rather than recast both reports to the universal format.
3. Financial Analysis
Your report should include:
• Cross-sectional analysis: analysis of ratios for operating management, investment management, and financial leverage ratios for the company and the competitor (not from the list of companies below). You will need to justify your choice of ratios for your company based on your analysis of key accounting elements identified in section 2.
• Time series analysis of the same ratios for both companies over the past three years
Note that this task is not intended as a mere exercise in ratio calculation. Your analysis should attempt to explain and interpret significant trends or changes that you uncover through your calculations. The emphasis of your analysis should not be on fluctuations in ratios (just presentation of figures is not enough), but on identification of trends/patterns and linking them to macroeconomic factors, industry and business strategy
• This section should conclude with an analysis of the company’s overall financial position.
Excel:
• Cross-sectional analysis: 4 ratios per each area (operating management, investment management, and financial leverage)
• a time series analysis of these for both companies over the past three years,
4. Prospective Analysis
Your report should include:
• Discussion of major items in your forecast and their justification (effect of macroeconomic factors, industry factors, business strategy)
• Analysis of your forecast
• Analysis of your valuation and comparison of the results of two valuation methods
Excel:
• forecasts for all financial statements (excluding the cash flow statement) for the company for one financial year (the next year for which the company has not published an annual report),
• and valuation of the company using the market multiple approach and the present value method.
Your statements should, where possible, incorporate the latest information about the company, its industry, and general economic conditions and should not be the result of naïve extrapolation of past trends.
5. Recommendation for the clients, drawing on the whole analysis of the company/company reporting.
Your report should include:
• Analysis of the comparison of the “ideal” share price and actual share price
• Recommendation for your clients as to sell/buy decision
Excel:
“ideal” share price and actual share price
Points to note:
• There is no one unique and correct solution to this task for a given company. Many approaches are valid and a variety of answers may be equally correct. The emphasis is on logical justification of your answer.
• Each company should be allocated to one group ONLY
• The report must be clearly divided into five sections, with one section devoted to each of the five tasks specified above.
• The mark awarded for the assignment will be determined based on an assessment of the report’s accuracy, comprehensiveness, cohesiveness, professionalism and overall quality.
• An overall group mark (out of 25%) will be awarded to each student but the course coordinator reserves the right to provide a reduced mark where a student has provided a sub-standard contribution to group activities.
• Commercial data services may be used to source annual report and other information, provided that they are correctly acknowledged. However, students should also consult the company’s annual report for complete and more accurate information as the information from commercial data services frequently reclassifies information in the financial statements. Note that plagiarism from commercial analysts’ reports can be easily identified and will result in zero marks for this assignment.
• All assumptions should be clearly stated and supported if possible. All references should be provided.
• This report is to meet the report style set out in Campbell G. “The Little Black Book”
• Penalty for late assignments: 1 mark per day.
• Your submission should include:
o Report itself in a .doc format
o Excel Files
o .doc file with Appendix (optional)
Possible list of Australian companies to use

Name ASX Code Industry
Woolworths Ltd WOW Food & Staples Retailing
Iress Limited IRE Software & Services
iiNET Limited IIN Telecommunication Services
Fairfax Media Ltd FXJ Media
Carsales.com Ltd CRZ Software & Services
Billabong Intl Ltd BBG Consumer Durables & Apparel
David Jones Ltd DJS Retailing
BHP Billiton Ltd BHP Materials
Breville Group Ltd BRG Retailing
Crown Limited CWN Consumer Services
Ten Network Hldgs TEN Media
Wotif.com Holdings WTF Retailing
Sonic Healthcare Ltd SHL Health Care Equipment & Services
Origin Energy Ltd ORG Energy