Project Report: Investment Analysis and Portfolio Management Analysis

This project report undertakes an investment analysis and portfolio management assessment of JB HI FI and A2 Milk Company. The introduction highlights the significance of investment analysis for stakeholders, emphasizing the evaluation of financial and non-financial performance. Ratio analysis is applied to evaluate the financial positions of both companies, examining profitability, efficiency, liquidity, gearing, and investment ratios. Strategic analysis, employing Porter's Five Forces, explores JB HI FI's market position, while the A2 Milk Company is examined within the Food, Beverage & Tobacco sector. The report also considers the impact of trade wars on the Australian retail and food industries and touches upon ethical considerations for fund managers. Ultimately, the project offers recommendations and a conclusion regarding the companies' stock performance and investment potential.

Running Head: Investment Analysis and Portfolio Management
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Project Report: Investment Analysis and Portfolio Management

Investment Analysis and Portfolio Management
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Contents
Introduction.......................................................................................................................3
Ratio analysis....................................................................................................................3
JB HI FI limited............................................................................................................3
A2 MILK COMPANY.................................................................................................6
Strategic analysis and business description......................................................................8
JB HI FI........................................................................................................................8
A2 Milk Company limited............................................................................................9
Trade war effect..............................................................................................................10
Retail industry of Australia.........................................................................................10
Food, Beverage & Tobacco of Australia....................................................................10
Ethical behavior of professional fund managers............................................................11
Recommendation and conclusion...................................................................................11
References.......................................................................................................................13
Appendix.........................................................................................................................15

Investment Analysis and Portfolio Management
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Introduction:
A shareholder and investors are the main stakeholders of the business. They invest
their amount in the business in order to get return from the business and the business uses
those funds to invest into new project to get higher return from the business. It is crucial for a
business to maintain a better investment level so that the investors could attracted towards the
business to invest the fund and get higher return from the business. Each investors evaluate
the financial and non financial performance of a business before invest their funds in the
business (Ackert and Deaves, 2009). If the overall performance of the business is attractive
and the returns are also higher than only an investors invest into the business.
Investment analysis is a process which measures all the financial and non financial
factors of the business in order to evaluate the overall performance of the business on the
perception of the investors. It takes the concern on various aspects of the business such as the
strategically performance, changes into the financial operations and performance, impact of
external; factors on the economical position etc.
The report has been prepared on the A2 Milk Company limited and JB HI FI. The
financial position of both the companies have been evaluated through applying the ratio
analysis approach and for evaluating the non financial performance of the business, strategic
analysis have been done on the business. As well as, the economical performance of the
industry has been measured after the trade war initiate and the ethical behaviour of
professional fund managers have also been measured to reach over a conclusion about the
stock performance and buy or sell option of the business.
Ratio analysis:
Ratio analysis is a financial approach which is used by the business and the investors
to identify the financial performance and forecast the future financial performance of the
business. Ratio analysis focuses on various important figures from the final financial
statements of the business to reach over a conclusion about the profitability, liquidity,
efficiency, gearing and investment level of the business (Bhimani, Horngren, Datar and
Foster, 2008). The ratio analysis study on A2 Milk Company limited and JB HI FI are as
follows:
JB HI FI limited:

Investment Analysis and Portfolio Management
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The ratio of JB HI FI limited has been studied firstly to identify the overall financial
position of the business. The ratio analysis study of the company is as follows:
Profitability ratio:
Profitability ratios are the financial equation which helps the investors to identify the
profit making ability of the business. The profitability analysis of JB HI FI limited is as
follows:
Return on assets:
Return on assets brief total profit against the available resources of the business. It
brief 9.36% return on assets in 2018 which has been improved from last year. The level is
quite competitive.
Return on equity:
Return on equity brief total profit against the available equity of the business. It brief
24.6% return on equity in 2018 which has been improved from last year. The level is quite
competitive and brief better position of the business (Yahoo finance, 2018).
Gross profit margin:
Gross profit margin briefs total profit after the cost of sales against the total turnover.
It brief 21.4% gross profit in 2018 which has been improved from last year.
The overall profitability level of the business is quite better.
Efficiency ratio:
Efficiency ratios are the financial equation which helps the investors to identify the
efficient power of business and the management of working capital and cash conversion
cycle. The efficiency analysis of JB HI FI limited is as follows:
Inventory turnover days:
Inventory turnover days brief total time which would be required to replace the old
inventory through new one. It brief 60.41 days in 2018 to replace the inventory which has
been reduced from last year. The level briefs better efficiency level of the business.
Receivable turnover days:

Investment Analysis and Portfolio Management
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Receivable turnover days brief total time in which the debtors would pay the debt
amount to the company. It brief 10.90 days in 2018 to replace the inventory which has been
reduced from last year.
The level briefs better efficiency level of the business and better cash conversion
cycle of the business.
Liquidity ratio:
Liquidity ratios are the financial equation which helps the investors to identify the
current debt level against the current assets and quick assets of the business (Hansen, Mowen
and Madison, 2010). The liquidity analysis of JB HI FI limited is as follows:
Current ratio:
Current ratio briefs the total debt payment capability against the total current assets of
the business. The liquidity level of the business has been reduced and brief better position of
the business.
Quick ratio:
Quick ratio briefs the total debt payment capability against the total quick assets of the
business. The quick level is lower and briefs the company to improve quick assets (Yahoo
finance, 2018).
The liquidity position of the business briefs average position of the business. Changes
into the quick assets would improve the overall position of the business.
Gearing ratio:
Gearing ratios are the financial equation which helps the investors to identify the
capital structure and gearing position of the business. The gearing analysis of JB HI FI
limited is as follows:
Debt to asset ratio:
Debt to asset ratio of the business explains total debt level against the total resources
of the business. The debt to asset level of JB HI FI has been reduced which lead to higher
cost of capital of the business.
Asset turnover ratio:

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Asset turnover ratio of the business explains total debts against the available resources
of the business. The asset turnover level of JB HI FI has been improved which brief better
position of the company.
Investment and market ratio:
Investment ratios are the financial equation which helps the investors to identify the
investment level of the business through measuring the market performance. The investment
analysis of JB HI FI limited is as follows:
Earnings per share:
Earnings per share of the company explain the total income of each shareholder of the
business. The EPS level has been improved in last 3 years to 2.031 in 2018 (Kinsky, 2011).
Price earnings ratio:
Price earnings ratio of the company explains the total price against the earnings of the
company. The PE level has been improved in last 3 years to 1.33 in 2018.
It explains that the investment level of the business is quite impressive and attracts the
investors to invest into the company for higher returns.
A2 MILK COMPANY:
The ratio of A2 MILK COMPANY limited has been studied further to identify the
overall financial position of the business. The ratio analysis study of the company is as
follows:
Profitability ratio:
The profitability analysis of A2 MILK COMPANY limited is as follows:
Return on assets:
It brief 27.08% return on assets in 2018 which has been improved from last year at
great level. The level is quite competitive.
Return on equity:
Return on equity brief 35.2% return on equity in 2018 which has been improved from
last 2 years (Yahoo Finance, 2018). The level is quite competitive and brief better position of
the business.

Investment Analysis and Portfolio Management
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Gross profit margin:
Gross profit margin briefs 50.3% gross profit in 2018 which has been improved from
last year.
The overall profitability level of the business is quite better and it briefs better
position than JBH.
Efficiency ratio:
The efficiency analysis of A2 MILK COMPANY limited is as follows:
Inventory turnover days:
Inventory turnover days brief 51.08 days in 2018 to replace the inventory which has
been improved from last year. The level briefs reduction in efficiency level of the business.
Receivable turnover days:
Receivable turnover days briefs 23.68 days in 2018 to get the debt amount which has
been reduced from last year.
The level briefs average efficiency level of the business and average cash conversion
cycle of the business.
Liquidity ratio:
The liquidity analysis of A2 MILK COMPANY limited is as follows:
Current ratio:
The current liquidity level of the business has been improved to 3.03 days and brief
higher working capital requirement of the business.
Quick ratio:
Quick ratio briefs the improved level and briefs the company could reduce the assets
level to manage the cost.
The liquidity position of the business briefs average position of the business. Changes
into the quick assets would improve the overall position of the business.
Gearing ratio:
The gearing analysis of A2 MILK COMPANY limited is as follows:

Investment Analysis and Portfolio Management
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Debt to asset ratio:
The debt to asset level of A2 MILK COMPANY has been reduced which lead to
higher cost of capital of the business (Kaplan and Atkinson, 2015).
Asset turnover ratio:
The asset turnover level of A2 MILK COMPANY has been lowered which brief
reduction in the overall gearing level of the company.
Investment and market ratio:
The investment analysis of A2 MILK COMPANY limited is as follows:
Earnings per share:
Earnings per share of the company explain the total income of each shareholder of the
business. The EPS level has been improved in last 3 years to 0.25 in 2018.
Price earnings ratio:
Price earnings ratio of the company explains the total price against the earnings of the
company. The PE level has been lowered in last 3 years to 46.87 in 2018.
It explains that the investment level of the business is quite impressive and attracts the
investors to invest into the company for higher returns.
Strategic analysis and business description:
JB HI FI:
JB HI FI is a retail sector’s firm in Australian market. The company has diversified its
market through introducing various new products and technologies in the market to improve
the overall performance of the business. The company is one of the leading firms in the
industry and the diversification and other strategies of the company explain about better
improvement in the overall performance of the business.
The strategic analysis on the JB HI FI limited in the industry through applying the
factors of porter’s 5 forces model which are as follows:
Threat from the substitute products:

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JB HI FI limited is offering the electronic and retail consumer products to the
Australian market. The various other firms in the industry are offering the same product.
Thus the threat from substitute product is higher in the market.
Threat from the new entry:
JB HI FI limited’s threat level is higher in terms of new entry as it is easier for new
firms to enter into the market. The business is required to set new policies to reduce the threat
level.
Competition with other firms:
JB HI FI limited is the leader in the consumer products retail sector in the Australian
market. However, there is huge competition in the industry (Horngren, 2009).
Bargaining power of suppliers:
JB HI FI limited’s bargaining power of suppliers is higher because the suppliers of the
company are offering quality product and the numbers are also less (Jiashu, 2009).
Bargaining power of buyers:
JB HI FI limited’s bargaining power of buyers is lower because the company is
offering quality product and the technology is also competitive.
A2 Milk Company limited:
A2 Milk Company is a Food, Beverage & Tobacco sector’s firm in Australian market.
The company has diversified its market through introducing new products and technologies
in the market to improve the overall performance of the business. The company is one of the
leading firms in the industry and the net revenue of the company explains about better
improvement in the overall performance of the business.
The strategic analysis on the A2 Milk Company limited in the industry through
applying the factors of porter’s 5 forces model which are as follows:
Threat from the substitute products:
A2 Milk Company limited is offering the dairy products to the Australian market. The
various other firms in the industry are offering the same product. Though, the protein factor
of the company is attractive which reduces the threat level.

Investment Analysis and Portfolio Management
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Threat from the new entry:
A2 Milk Company limited’s threat level is higher in terms of new entry as it is easier
for new firms to enter into the market. The business is required to set new technologies and
factors to reduce the threat level.
Competition with other firms:
A2 Milk Company limited is the leader in the Food, Beverage & Tobacco sector in
the Australian market. Thus the competition among the companies is lower and threat level is
also reduced (Garrison, Noreen, Brewer and McGowan, 2010).
Bargaining power of suppliers:
A2 Milk Company limited’s threat level in terms of supplier’s bargaining power is
higher because the suppliers are vary less in numbers.
Bargaining power of buyers:
A2 Milk Company limited’s threat level in terms of buyers are quite lower because
the products of the company are enough competitive and the brand loyalty is also higher in
the market.
The strategic analysis on both the companies lead to the discussion that the strategies
of both the companies are quite competitive. It helps the business from any sudden changes
into the industry.
Trade war effect:
The trade war of Australian market has been studied and it has been found that the
US new trade policies have impacted on the Australian trade market at huge level. Some of
the industries of Australian market have already started affecting because of the trade war
(CNBC, 2018). The main affected industries are retail Australian industry and banking
industry of Australia. The industry wise impact of trade war is as follows:
Retail industry of Australia:
The trade war has impacted at huge on retail industry, the Australian retailer depict
that they have started facing reduction in their total turnover. The export level has also been
affected and due to which the revenue of the companies have been lowered (Reuters, 2018).
The china market trade policies of trump have covered the Australian retail industry as well

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and it leads to the downward of the Australian economical position. However, if the
individual firms are taken into the concern than the few firms have overcome these issues
because of better strategically performance and good provisional system of the business.
Food, Beverage & Tobacco of Australia:
The trade war impact on Food, Beverage & Tobacco industry has been also been
studied. The Australian firms in the Food, Beverage & Tobacco depict that no huge impact
have been seen on the total turnover and the revenue of the business. The export level has
been affected a bit as the few ways of the country has been blocked. However, the industry is
mainly performing in the Australian market and New Zealand market (SMH, 2018). So, the
trump policies have failed to impact on the industry. However, if the individual firm, A2 milk
company limited is taken into the concern than the firm has overcome these issues because of
better strategically performance and good provisional system of the business.
Ethical behavior of professional fund managers:
Ethical behaviour and the professionalism are key terms which are required to be
followed by each of the professional while doing their job. The ethical approach is the factor
which helps the fund managers to maintain the dignity and the performance in the industry. In
recent times, it has been studied that the professionals are not focusing on their work ethically
and for their interest, they are getting involved into various unethical work which lead to the
business towards a huge financial scandal (Dent and Whitehead, 2013).
A manager is required to understand the fact that the ethical approaches have been
made to maintain the level of professionalism in the industry, If the policies would be
followed by the business at better level than it would help the professional as well as the
industry to maintain the trust level among the investors and the capital market, these type of
scandals impact at huge level on the capital markets which lead the investors towards the
divestment from the market and the financial position of the businesses led down (Dent and
Whitehead, 2013).
Though, the recent strictness of CFA and other new rules have motivated the
professionals to follow the ethical approach in the industry to maintain the overall
performance. A current research report brief that the 61% people started trusting in the
reports and statements of professional fund managers and they believe that the reports have
been prepared through following the ethical approaches (Fund Europe, 2018).

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Recommendation and conclusion:
To recommend the investors about the performance and the investment among both
the companies, various aspects of the business has been evaluated such as the strategically
performance, changes into the financial operations and performance, impact of external;
factors on the economical position etc.
The report on the A2 Milk Company limited and JB HI FI explains that the financial
position of both the companies is quite attractive. Both the companies would offer great
return to the shareholders. Further, the non financial performance of the business i.e. strategic
analysis leads to the conclusion that better strategies have been maintained by the companies
to reduce the threat level. As well as, the economical performance of the industry has been
measured after the trade war and found that the companies would not be affected at huge
level because of the trade war.
Thus, the investors are recommended to invest into both the companies and hold the
stock for short term and long term to get higher return.