Financial Analysis of Perpetual Limited and Platinum Asset Limited

The report provides overall financial analysis of the two Australian companies named as Perpetual Limited and Platinum Asset limited. It measures the performance and position of both the companies from all the aspects covering the financial data presented in their annual reports for the past two years.

RUNNING HEAD: FINANCIAL ANALYSIS
Financial Analysis

Financial analysis 2
Contents
Introduction.................................................................................................................................................3
Description of the companies......................................................................................................................3
Perpetual Limited....................................................................................................................................3
Platinum Asset Limited...........................................................................................................................4
Calculation and analysis of performance ratios...........................................................................................4
Short term solvency.................................................................................................................................4
Long term solvency.................................................................................................................................6
Asset utilization.......................................................................................................................................8
Profitability ratios....................................................................................................................................9
Market value ratios................................................................................................................................11
Graphs and comparison of share price movements....................................................................................12
Share valuation..........................................................................................................................................14
Recommendation.......................................................................................................................................15
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17

Financial analysis 3
Introduction
The report provides overall financial analysis of the two Australian companies named as
Perpetual Limited and Platinum Asset limited. It measures the performance and position of both
the companies from all the aspects covering the financial data presented in their annual reports
for the past two years. The report commences with a brief introduction about the entities and
their core activities. It also reports about the competitive advantage of both the firms. Further, the
financial performance of both entities has been measured by calculating the performance ratios
including liquidity, solvency, efficiency, profitability and market based ratios. All these are
financial metrics which evaluates the position of the organizations over the past two years that
are 2016 and 2017.
Later on, the fluctuations in the share price movements of both the firms is analysed against the
fluctuations in the market indices. The variations are compared against the changes in ASX S&P
200 and it is observed that whether the stock is volatile or not and highly dependent on market or
not. The report also explains Constant Dividend Growth Rate model which is used to calculate
the future value of stock. The determined value is then compared with the current share price of
the company’s stock and conclusions are been made. In the last, a recommendation and
conclusion is provided suggesting that which company is financially healthy and is performing
better than the other.

Financial analysis 4
Description of the companies
Perpetual Limited
It is an Australian company that offers wide range of financial services and products across the
country. It provides services like portfolio management, financial planning, trustee, funds
management, investment administration and custodian services and others. In addition, the
company offers various investments across the range of asset classes that include cash and fixed
interest, mortgages, Australian and global equities and Australian listed property. Apart from
this, it also provides trust advices and fiduciary advices to its clients. The competitive advantage
of the business is that it has declared high profitability recently and its divisions have reported
high growth in revenue. The company does not pursue any sort of competitive advantage but has
enjoyed success and growth in the business as per the latest annual report (Bloomberg. 2018).
Platinum Asset Limited
Formerly the company is known as Platinum Investment Management Limited engaged in the
business of the funds management. Platinum manages approximately AUD 22 billion with over
7% of this from investors in Europe, America, New Zealand and Asia. It offers investment
management services to its party units named as Platinum Trust Funds and Platinum Global
Fund, its two Australian investment companies listed on ASX and Platinum World Portfolios
Plc. The product range offered by PTM is on global, regional and sector level for the purpose of
investment. The competitive advantage of PTM is that it has expertise in investing in the
international equities. The company deals with all the challenges and threats in a manner that it
can maintain its competitive advantage to a certain extent. It formulates its strategies in a way
that will safeguard its competitive edge (Reuters. 2018).

Financial analysis 5
Calculation and analysis of performance ratios
Short term solvency
 Current ratio: It is a financial metric which measures the financial health of the
company by comparing its current assets against the current liabilities. The ideal ratio is
2:1 which is required to be maintained by every company. it reflects that the firm has its
CAs double of its current liabilities (Godwin and Alderman, 2012).
PPT PTM
Current ratio 2016 2017 2016 2017
Current assets (A) 678209.0 716668.0 384695.0 351137.0
Current liabilities
(B) 411,798.0 402,397.0 21,918.0 17,382.0
CR (A/B) 1.65
1.7
8 17.55 20.20
The above table shows the CR of both Perpetual and Platinum Assets for the past two years 2016
and 2017. It can be observed that PPT has maintained the ratio of 1.65 in 2016 and 1.78 in 2017.
On the other side, PTM has the ratio of 17.55 and 20.20 in both the years respectively. The
reason for having such a high ratio was the low current liabilities of PTM. The company does not
report any sort of short term debt borrowings and its payables has also decreased in 2017 as
compare to the prior year. In case of Perpetual Limited, most part of the CLs is covered by firm’s
EMCF Liabilities which reduced from $299971 million to $276954 million which boosted up the
ratio.

Financial analysis 6
 Quick ratio: it also measures the liquidity position of the firm by taking into account the
quick assets of the firm. The ideal ratio is 1:1 which means the most liquid assets of the
firm should be equal to its current liabilities (Saleem and Rehman, 2011).
PPT PTM
Quick ratio 2016 2017 2016 2017
Quick Assets (A) 678209.0 716668.0
384695.
0 351137.0
Current Liabilities
(B) 411,798.0 402,397.0 21918.0 17382.0
QR (A/B) 1.65 1.78 17.6 20.2
The QR of both the companies is same as their current ratio because they do not have any sort of
inventories due to the nature of business they undertake. Being a financial service provider
company, the annual reports of both the firms did not report any inventory amount in the last two
years.
Long term solvency
 Debt/Equity ratio: it is financial metric which measures the long term solvency position
of the company by comparing its debt and equity portion against each other. The ratio
reflected the amount of firm’s resources funded by debt against the portion of assets
which is funded by equity. A high D/E ratio is not favourable for the company as it shows
that the company relies more on outside borrowings and have high financial risk
(Higgins, 2012).
PPT PTM

Financial analysis 7
Debt to equity 2016 2017 2016 2017
Total debt (A) 87000.0 87000.0 23112.0 18892.0
Shareholder's equity (B) 605519.0 634381.0 364211.0 335074.0
D/E (A/B) 14.37% 13.71% 6.35% 5.64%
Perpetual Limited has reported a decreased D/E ratio but higher than PTM. Its ratio was 14.37%
in 2016 which declined to 13.71% in 2017. The reason for such reduction was that company’s
long term borrowing remain same in the both the years at $87000 million. In relation to that its
shareholder’s equity increases during the year which eventually brings down the ratio. In case of
PTM, the ratio reduces from 6.35% to 5.64% due to the overall reduction in its liabilities.
Moreover, the company does not have any sort of long term borrowings in past years. This
ultimately reduces the content of its financial leverage.
 Debt ratio: it is a solvency ratio which measures the total liabilities and total assets of the
firm against each other. It shows the degree of financial leverage taken by the company
during a particular financial year. In other words, it reflects the amount of firm’s assets
which are financed through debt (Jenter and Lewellen, 2015).
PPT PTM
Debt ratio 2016 2017 2016 2017
Total Liabilities
(A) 547790.0 537164.0 23112.0 18892.0
Total Assets (B) 1,153,309.0 1,171,545.0 387,323.0 353,966.0
DR (A/B) 47.5% 45.9% 5.97% 5.34%

Financial analysis 8
Similar trends have been noticed in the debt ratio of both the companies as they reported an
overall decline in the same. In case of PPT, the DR reduced from 47.5% to 45.9% due to the
proportionate decrease in company’s liabilities and increase in its total assets. Comparatively,
PTM’s Dr is less than that of PPT because of the low liabilities. The major part of company’s
total obligations is covered by its accounts payable and income tax payable which has been
significantly reduced in 2017 as compare to 2016.
Asset utilization
 Debtor turnover ratio: It is an efficiency ratio which shows determines the capability of
the company in collecting its debtors effectively and on time in order to generate high
turnover. A high DTR shows that company is converting its receivables into cash quickly
and is contributing ti high turnover (Kimmel, Weygandt and Kieso, 2010).
PPT PTM
Receivable turnover ratio 2016 2017 2016 2017
Total revenue (A) 507729.0 520881.0 337894.0 312468.0
Average receivables (B) 88,156.0 92,232.0 29,900.0 30,049.5
DTR (A/B) 5.76 5.65 11.30 10.40
The DTR of PPT has reduced from 5.76 times to 5.65 times which reflects that company is not
efficient enough to generate revenue from its receivables. Moreover, the increase in amount of its
debtors has reduced the ratio in last year. On the other hand, PTM has high DTR but it has also
been reduced in 2017 to 10.40 times from 11.30 times. Comparatively, fewer amounts of cash is
hold by PTM’s debtors.

Financial analysis 9
 Asset turnover ratio: It represents the portion of turnover earned by the firm by utilizing
its assets effectively and efficiently (Krantz and Johnson, 2014).
PPT PTM
Asset turnover ratio 2016 2017 2016 2017
Total revenue (A) 507729.0 520881.0 337894.0 312468.0
Average Total Assets
(B) 1,153,309.0 1,162,427.0 387,323.0 370,644.5
ATR (A/B) 0.44 0.45 0.87 0.84
The ATR of PPT reduced from 0.44 to 0.45 times in 2017 representing inefficient utilization of
company’s resources. This was due to the fact that PPT has high amount of total assets which
increased in 2017 but the revenue generated was low which make the ratio to fall. PTM has high
ratio comparatively due to the reduction in total assets.
Profitability ratios
 Net profit ratio: It is a profitability metrics which measure the amount of net profit
earned by the company from its total revenue. The ratio expressed the net profit figure as
a percentage of sales. Generally, investors prefer those companies which have high
margins as it reflects the high and increased profitability position of the company (Lee,
Lee and Lee, 2009).
PPT PTM

Financial analysis 10
Net profit
margin 2016 2017 2016 2017
Net profit (A) 132005.0 137293.0 199870.0 192647.0
Total revenue (B) 507,729.0 520,881.0 337,894.0 312,468.0
NPR (A/B) 26.00% 26.36% 59.15% 61.65%
The above table shows that PPT has net margin of 26% in 2016 which slightly increased to
26.36% in 2017. Such upsurge was due to the slightest increase in the net profit of the company
as compare to the upsurge in its total revenue. On the other hand, PPT reported high and
increased NPR of 59.15% and 61.65% in last two years respectively. This was due to the
proportionate reduction in both the turnover and profit of PTM which eventually increased its
NPR.
 Return on Assets: It shows the amount of returns made by the company on its total
assets. a high ROA reflects that high amount of profit is generated by utilizing its assets
(Nikolai, Bazley and Jones, 2009)..
PPT PTM
Return on Assets 2016 2017 2016 2017
Net profit (A) 132005.0 137293.0 199870.0 192647.0
Total Assets (B) 1,153,309.0
1,171,545.
0 387,323.0 353,966.0
ROA (A/B) 11.45% 11.72% 51.60% 54.43%

Financial analysis 11
The ROA of PPT has increased from 11.45% to 11.72% due to the significant increase in
company’s profit. However, the ratio was less than the ROA of PTM as it is has low total assets
as compare to the PPT. Reduction in company’s assets boosted up the ratio from 51.60% to
54.43%. The proportionate decrease in PTM assets and profit eventually boosted up the ratio.
 Return on Equity: The ratio determines the amount of return offered by the company to
its investors on the portion of their share capital invested in the firm.
PPT PTM
Return on Equity 2016 2017 2016 2017
Net income available to shareholders (A) 132005.0 137293.0 199870.0 192647.0
Shareholder's equity (B) 605,519.0 634,381.0 364,211.0 335,074.0
ROE (A/B) 21.80% 21.64% 54.88% 57.49%
The ROE of PPT has reduced from 21.80% to 21.64% due to the increase in its equity and profits
at the same time. This reflects that company is not able to offer high returns to its investors as its
shareholders have also increased at the same time. On the other hand, the ROE of PTM was
54.88% to 57.49%. The reduction was due to the overall fall in company’s net income which
ultimately reduced its shareholders’ equity.
Market value ratios
 Earnings per share: It shows the amount of earnings earned by each outstanding share
of the company. It is an indicator of company’s profitability (Vogel, 2014).
PPT PTM
Earnings per share 2016 2017 2016 2017

Financial analysis 12
Net income available to shareholders
(A) 132005.0 137293.0 199870.0 192647.0
Number of outstanding shares (A) 46,431.0 46,706.0 58,610.0 58,712.0
EPS (A/B)
2.84
3
2.9
4
3.4
1
3.2
8
The EPS of PTM was higher than the EPS of PPT due to the high number of shares issued by the
company. This shows that the firm is focused on increasing its profitability and its stocks are
performing well in the market.
 Price earnings ratio: It is also known as price multiple and shows the willingness of the
investors in paying for each dollar of earnings.
PPT PTM
Price earning ratio 2016 2017 2016 2017
Market value per share (A) 41.12 55.87 17.4 24.2
Earnings per share (B) 2.843 2.9 3.41 3.28
P/E (A/B)
14.463
4 19.0065 5.10 7.37
The P/E ratio of PPT was more than the ratio of PTM which reflects that investors will
expect growth in company’s share in future and it will be considered as more desirable.

Financial analysis 13
Graphs and comparison of share price movements
Perpetual Limited
In case of PPT Company, the share price movement is also too highly volatile which reflects that
investors might face high risk in their investment in the short term. This company has also faced
high loss in its share price due to the sluggish market condition and negative business outcomes.
PPT has ups its share price in its share price in 2015 after that it is followed by the downfall in its
share price in the upcoming months. I the mid of the 2016, the share price of PPT company had
gone up due to its high profitability and turnover. If it is compared with the share price of all
ordinary stock exchange listed companies then it could be inferred that PPT Company has high
volatility and less value creation in its share price which may negatively impact the business of
PTM Company.
1/05/2015
1/07/2015
1/09/2015
1/11/2015
1/01/2016
1/03/2016
1/05/2016
1/07/2016
1/09/2016
1/11/2016
1/01/2017
1/03/2017
1/05/2017
-0.1500
-0.1000
-0.0500
-
0.0500
0.1000
0.1500
0.2000
0.2500
Share price movements
PPT S&P 200
(Source: Yahoo Finance. 2018).
Platinum Assets

Financial analysis 14
The share price movement of PTM Company is way too highly volatile. It is analyzed that due to
the sluggish market condition and negative business outcomes, PTM has faced high downfall in
its share price in 2015 after that it is followed by the same downfall in its share price.
Nonetheless, in the mid of the 2016, the share price of PTM company surged up due to its high
amount of quarterly turnover. If it is compared with the share price of all ordinary stock
exchange listed companies then it could be inferred that PTM Company has high volatility in its
share price which may negatively impact the business of PTM Company.
1/05/2015
1/07/2015
1/09/2015
1/11/2015
1/01/2016
1/03/2016
1/05/2016
1/07/2016
1/09/2016
1/11/2016
1/01/2017
1/03/2017
1/05/2017
-0.2500
-0.2000
-0.1500
-0.1000
-0.0500
-
0.0500
0.1000
0.1500
Share price movements
PMT S&P 200
(Source: Yahoo Finance. 2018).
Share valuation
The dividend growth model is used to value the share price of company. The share price
movement of PPT Company is determined AUD $ 42.35 which is $ 6 higher since last one year.
The main reason of increase in its share price is based on the high growth rate and low required
rate of return.

Financial analysis 15
PPT
Dividend per share 2.7
Dividend growth rate 4%
Required rate of return 9%
Value of stock
$
54.00
Current market price per
share $42.57
The dividend growth model is analysis the growth rate, dividend per share and required rate of
return to value the share price of company. The share price movement of PTM Company is
determined AUD $ 42.35 which is $ .44 points lower since last one year. Company has kept low
financial leverage and high growth rate while offering dividend to shareholders
PTM
Dividend per share 0.31
Dividend growth rate 4%
Required rate of return 9%
Value of stock
$
6.20
Current market price per
share
$
5.36
After analyzing the share price of both companies, PPT Company is having high share price
value AUD $ 42.35 which is $ 6 higher since last one year. The main reason of increase in its

Financial analysis 16
share price shows this company has growth rate and low required rate of return which will
strengthen the overall share value of company.
Recommendation
After conducting the analysis, it will be recommended that investors should invest their money in
Platinum Asset Management Ltd due to it high profitability, efficiency, liquidity position.
Moreover, company has low financial risk as its debt component is low and has reduced as
compare to Perpetual Limited in the past two years.
Conclusion
From the above report it will be concluded that PTM Company is more beneficial for the
shareholders in terms of investment purpose. It will be easy for the investors to create value on
their investment if they will invest their capital in PTM Company.

Financial analysis 17
References
Bloomberg (2018). Company Overview of Perpetual Limited. [Online]. Available at:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=875239 [Accessed
29 September 2018].
Godwin, N., and Alderman, C. (2012). Financial ACCT2. USA: Cengage Learning.
Higgins, R. C. (2012). Analysis for financial management. New York: McGraw-Hill/Irwin.
Jenter, D. andLewellen, K. (2015). CEO preferences and acquisitions. The Journal of
Finance, 70(6), pp.2813-2852.
Kimmel, P. D., Weygandt, J. J., andKieso, D. E. (2010). Financial accounting: tools for business
decision making. New Jersy: John Wiley and Sons.
Krantz, M., and Johnson, R. R. (2014). Investment Banking for Dummies. New Jersy: John Wiley
and Sons.
Lee, A. C., Lee, J. C., and Lee, C. F. (2009). Financial analysis, planning and forecasting:
Theory and application. Singapore: World Scientific Publishing Co Inc.

Financial analysis 18
Nikolai, L. A., Bazley, J. D., and Jones, J. P. (2009). Intermediate Accounting. USA: Cengage
Learning.
Reuters (2018). Platinum Investment Management Ltd (PTM.AX). [Online]. Available at:
https://in.reuters.com/finance/stocks/company-profile/PTM.AX [Accessed 29 September 2018].
Saleem, Q. andRehman, R.U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary
Journal of Research in Business, 1(7), pp.95-98.
Vogel, H.L. (2014). Entertainment industry economics: A guide for financial analysis. New
York: Cambridge University Press.
Yahoo Finance (2018). Perpetual Limited (PPT.AX). [Online]. Available at:
https://finance.yahoo.com/quote/PPT.AX/history?
period1=1435689000&period2=1498761000&interval=1mo&filter=history&frequency=1mo
Yahoo Finance (2018). Platinum Asset Management (PTM.AX). [Online]. Available at:
https://finance.yahoo.com/quote/PTM.AX/history?
period1=1435689000&period2=1498761000&interval=1mo&filter=history&frequency=1mo