HA1022 Principals of Financial Markets: Group Assignment Report

This report presents a financial analysis of Abacus Property Group Stapled (ABP) and Aveo Group Stapled (AOG), both listed on the ASX, within the real estate industry. It examines the impact of economic fundamentals, including interest rates, currency value, GDP, inflation, and exchange rates, on company performance and share prices through a top-down analysis. A bottom-up analysis delves into financial ratios for 2016 and 2017, comparing profitability, liquidity, efficiency, and solvency ratios against industry standards. The report concludes that economic factors significantly influence share prices and that Abacus generally outperforms Aveo. It provides recommendations for both companies, such as cost management for Aveo and equity over debentures for Abacus, as well as investment advice for investors. The analysis utilizes data from various financial periods and industry benchmarks to provide a comprehensive view of the companies' financial health and market performance.

PRINCIPLE OF
FINANCIAL
MARKETING

INTRODUCTION
 In the financial market, shares, bonds, securities, commodities, derivatives etc.
are trader among two parties for generating income. In the present project, real
estate industry is considered as a base of study.
 Further, Abacus Property Group Stapled (ABP) and Aveo Group Stapled
(AOG) companies are chosen which are listed in the ASX market. In the
current study, factors explained which affecting to the shares prices of the
cited firm.
 Along with this, it has been analysed that in which ways such economic
fundamentals create impact on overall business performance. Beside this,
financial ratios these both entities are performed in order to assess
performance in the real estate industry.
 At the end of report, recommendations are provided to the firms as well as
investors both for taking effective and fruitful decisions.

SECTION 1: TOP – DOWN
ANALYSIS
Impact of economic fundamental changes on chosen
business performance and its share prices
 Interest rate
 Value of currency
 Gross Domestic Product (GDP)
 Inflation rate
 Exchange rate

CONTD....
 When looking at the share price influencing from economic factors
then it can be said that, through such fundamentals they unable to
boost up profit and performance as well.
 Therefore, value of businesses in the market and relevant sector
affected highly in same direction. For instance: due to GDP if income
and performance of AOG and ABP declines then valuation will
obviously influence.
 Lower the business valuation is better for the listed firm for raising
share prices in ASX market. Hence, if value of companies reduces
then stock prices will also decline and vice-versa.

SECTION 2: BOTTOM – UP
ANALYSIS
Financial ratios of accounting period 2016
Profitability ratios:
Abacus Property Group Stapled Aveo Group Stapled
NP ratio
OP ratio
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
36.74% 35.28%
70.45%
26.07%
Profitablity ratios

Liquidity ratios
Abacus Property Group Stapled Aveo Group Stapled
Quick ratio
Current ratio
0
0.5
1
1.5
2
2.5 2.30
1.27
2.25
0.42
Liquidity ratios

Efficiency ratios
Abacus Property Group Stapled Aveo Group Stapled
Total assets turnover ratio
Stock turnover ratio
0
2
4
6
8
10
12
10.85
1.02
0.12 0.12
Efficiency ratios

Solvency and dividend payout ratio
Abacus Property Group Stapled Aveo Group Stapled
Dividend Payout Ratio
Debt to equity ratio
0
0.1
0.2
0.3
0.4
0.5
0.6
0.53
0.28
51.08%
37.93%

Financial ratios of accounting period
2017
Profitability ratios:
Abacus Property Group Stapled Aveo Group Stapled
NP ratio
OP ratio
0
0.2
0.4
0.6
0.8
1
1.2
56.35%
72.92%
113.10%
60.10%
Profitability ratios

Liquidity ratios
Abacus Property Group Stapled Aveo Group Stapled
Quick ratio
Current ratio
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5 4.12
0.71
3.92
0.32
Liquidity ratios

Efficiency ratios
Abacus Property Group Stapled Aveo Group Stapled
Total assets turnover ratio
Stock turnover ratio
0
1
2
3
4
5
6
7
8
9 8.52
0.98
0.10 0.08
Efficiency ratios

Solvency and dividend payout ratio
Abacus Property Group Stapled Aveo Group Stapled
Dividend Payout Ratio
Debt to equity ratio
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.31
0.29
35.44%
20.55%

Comparison with industry standards
Name of ratios Industry average Abacus Property
Group Stapled Aveo Group
Stapled
Operating profit ratio 70.12% 56.35% 72.92%
Net profit ratio 110.85% 113.10% 60.10%
Current ratio 1.44 4.12 0.71
Quick ratio 0.93 3.92 0.32
Stock turnover ratio 6.89 8.52 0.98
Total assets turnover ratio 0.07 0.10 0.08
Debt to equity ratio 0.39 0.31 0.29
Dividend Payout Ratio 33.16% 35.44% 20.55%

CONCLUSION
 From the above study it can be summarised that, to the share prices of a listed entity
various kinds of economic factors affect up to greater extent.
 When any of the aspect in Australian economy increases or declines then Abacus
Property and Aveo Group Stapled cannot generate higher profit and provide dividend to
the shareholders.
 Economic fundamentals influencing to listed entities include interest, exchange, GDP
rate, currency value etc.
 On the basis of second section it can be assessed that, Abacus group performs well in the
whole industry as compared to the Aveo company in both the accounting periods 2015-16
and 2016-17.
 When visualising to the industry comparison then also ABP enterprise has the higher
performance than another selected entity.
 However, as per the debt to equity ratio AOG organisation performs very well and for
fund raising generally prefer equity source.

RECOMMENDATIONS
 Aveo needs to apply cost management strategies.
 Aveo requires arranging training and development programmes
for employees to utilise assets and inventory in an optimum
direction.
 Abacus should consider equity shares instead of debentures for
raising capital.
 AOG should employ cash management techniques.
 Investor's need to consider Abacus property group for making
investment.

REFERENCES
Dias, A. and et.al., 2016. Signaling Tax Evasion by Using Financial
Ratios and Cluster Analysis. OBEGEF.
Ahmed, S., Coulibaly, B. and Zlate, A., 2017. International financial
spillovers to emerging market economies: How important are
economic fundamentals?. Journal of International Money and
Finance.
Atoom, R., Malkawi, E. and Al Share, B., 2017. Utilizing Australian
Shareholders' Association (ASA): Fifteen Top Financial Ratios to
Evaluate Jordanian Banks' Performance. Journal of Applied Finance
and Banking. 7(1). p. 119.