Financial Analysis And Comparison Of Azure Healthcare Limited And Brain Resource Ltd Essay.

Obtain copies of Financial Statements including Income Statements, Balance Sheets, and Statement of Changes in Equity, Cash Flows Statements and Notes for three (3) financial year 2014-2015, 2015-2016 and 2016-2017. Your group can download these documents from the suggested web site using the firm’s code (example, BHP- for BHP

Billiton Company, etc.). The assignment should cover the contents described in Part 1 to 7 bellows.

1.Description of operation and comparative advantages of the two chosen companies. 

2.Calculation and comparison of performance ratios of the two companies 

3.Analysis of monthly share prices movements of the two companies within 3 years  

4.Identify any significant factors which may have influenced the share price of your chosen companies during the time frame. 

5.Calculation of Beta values and expected Rates of Return using the CAPM of the two chosen companies

6.Identify and compare dividend policy of the two chosen companies 

Details of financial analysis tasks:

1.Description of operation and comparative advantages of the two chosen companies: Prepare a brief description of the chosen companies, outlining the core activities, the market(s) in which they operate within and any factors in the companies’ history which you consider help present the pictures of your companies. Identify and compare their comparative advantages.

2.Calculation and comparison of performance ratios: using financial data obtained from current financial statements of your selected companies for the past 3 years. Annual reports are accessible via company websites or ASX website. Your client is strongly interested in the three groups of ratios:
- Liquidity ratios;
- Profitability ratios
- Capital structure (leverage) ratios

You need to provide charts and/or tables for analysis and justification.

Description of Azure Healthcare Limited and Brain Resource Ltd

Evaluation on the financial position and the performance of the company is one of the important aspects while making the financial investment decision in the company. The financial analysis process makes a great base and helps the investors to reach over a conclusion along with some solid reasons. Finance analysis is a broad concept which offers various types of tools and techniques to the financial analyst and the investors to identify that whether the position of the company is attractive or the investment into the particular stock would lead the investment amount towards the loss (Gibson, 2011).

In the given report, the Azure health care limited (AZV) and Brain Resource Ltd (BRC) has been taken into the concern in order to evaluate the financial analysis and offer a recommendation to the investors that whether these stocks are good option for the purpose of the investment or not. The performance ratio analysis, stock price analysis, changes in the stock prices, beta, cost of equity, dividend policies etc of the stocks have been evaluated in order to identify that whether the investment into the stock of the company would offer return to the investors or not.

The description about the history, activities, market area etc of the business has been measured. The descriptions of Azure health care limited (AZV) and Brain Resource Ltd (BRC) are as follows: 

Azure Healthcare Ltd:

AZURE HEALTHCARE LIMITED is an Australian and New Zealand company which deals in offering the service related to the healthcare to its client. The company offers the clinical management solution in New Zealand and Australian market. The company offer various nurse call system such as Tecera (it is for healthcare professionals), Medicom (it is for hospitals and nursing home), CellGuard (it is for audio communication solutions) etc. the services of the business also includes the door intercom, discrete monitoring etc. the company has changed its name in the year of 2012 from YSV holdings limited and the company is mainly situated at South Australia (Bloomberg, 218). Currently, various changes have been done by the business in its internal process to improve the overall performance of the business.

Brain Resource Ltd:

Further, the BRAIN RESOURCE LTD is also an Australian company which offers the medical services and brain products in the Australian market and US market. The main area of service of the company is Australian and US market. The various subsidiaries are run by the business to manage the activities and operations (Home, 2018). The company has been founded in the year of 2005 and since then, performance of the company has been changed a lot. The total number of employees of the company according to the annual report (2017) is 185.

Performance Ratio Analysis

Both the companies are working in the same industry and thus the evaluation and comparison among the companies could offer better result about the market and the investment.

Performance ratio analysis is a financial tool which is applied by the companies, analyst and their investors to measure the performance and the investment level of the business. It is a board concept of the business which evaluates the liquidity, investment and profitability level of the business and compares it with the performance of the last year or with the competitors to identify that whether the investment into the company would offer long return to the investors of the company (Higgins, 2012). The below are the calculations and the analysis of performance ratios:

Liquidity ratios are the financial performance ratio which focuses on the balance sheet of the company to evaluate the liquidity risk of the company and measure that whether the company is able to pay all the current debt of the company on the basis of the available current assets and fund of the business (Higgins, 2012).

The current assets and current liabilities head of the business has mainly been focused in order to measure the liquidity position of the business. Current ratio and quick ratio of the business has been calculated and compared with the other company. on the basis of the current ratio of Azure health care limited (AZV) and Brain Resource Ltd (BRC), it has been found that the current ratio level of Brain Resource Ltd limited is higher in the industry which is improving continuously and measure that the company has enough funds to repay the debt 8.01 times (Morningstar, 2018).

Further, in case of Azure health care limited, it has been found that the liquidity position of the company is also improved in order to manage the liquidity risk. Further, the quick ratio position of the business adds that the position of Azure health care limited is better and the position of BRAIN RESOURCE LTD could be reduced in order to manage the cost level of the business and the Brain Resource Ltd is also suggested to reduce to improve the performance (Yahoo Finance, 2018).

 

Figure 1: Liquidity ratio

(Morningstar, 2018)

Profitability ratios are the financial performance ratio which focuses on the balance sheet and the income statement of the company to evaluate the profit generation capabilities of the company and measure that whether the company has been succeed to ear the sufficient amount of profit on the basis of the available equity, funds, resources and the sales turnover of the business (Lord, 2007).

Liquidity Ratios

The sales, gross profit, operating profit, equity level, assets level etc of the business has mainly been focused in order to measure the profitability position of the business. Return on equity, operating profit margin %, gross profit margin % etc of the business has been calculated and compared with the other company. on the basis of the return on equity of Azure health care limited (AZV) and Brain Resource Ltd (BRC), it has been found that the ROE level of Azure health care limited is higher in the industry which is improving continuously and explains that the company is generating 12.5% net profit on the basis of the equity (Morningstar, 2018).

Further, in case of Brain Resource Ltd, it has been found that the ROE position of the company has been lowered from the last year and in the industry, the ROE level is also reduced. Further, the gross profit margin position of the business explains that the position of Azure health care limited has been improved and position of Brain Resource Ltd has been reduced from the last year and depict about different profit generation capabilities of the business. Lastly, the study has been conducted on the net profit margin of the business and it has been found that the performance of Azure health care limited has been improved from the last 2 years. However, the reduced profit margin % has been seen in the annual report (2017) of Brain Resource Ltd.

 

Figure 2: Profitability ratios

(Morningstar, 2018)

Capital structure ratios are the financial performance ratio which focuses on the balance sheet of the company to evaluate the capital management position and the financial risk of the company (Madura, 2014). This ratio measures that whether the company has raised the debt and equity in a proper way so that the cost and the risk of the business could be reduced.

The report mainly focuses on the debt, assets, profit, interest expenses, capital employed etc. debt to asset ratio, interest coverage ratio and gearing ratio of the business has been calculated and compared with the other company to evaluate the overall position of capital management structure. On the basis of the debt to assets ratio of Azure health care limited (AZV) and Brain Resource Ltd (BRC), it has been found that the Brain Resource Ltd has managed the better debt position in the market. The position of AZV explains that the cost level of the company is higher along with reduced risk. As well as, through the figures of BRC same result has been found (Morningstar, 2018).  

Profitability Ratios

Further, in case of interest coverage ratio, it has been found that the AZV have enough funds that 38.136 times of interest could be paid through the earnings of the company before the interest and tax. However, the position of BRC has been lowered from the last year (Yahoo Finance, 2018).  Lastly, the evaluation on the gearing position of the business explains that the BRC has managed better relation among the long term liabilities and the capital employed. The capital structure position of both the companies are similar.  

 

Figure 3: Capital structure ratios

(Morningstar, 2018)

On the basis of the profitability analysis on both the companies, it has been found that the performance of AZV has been improved from the last year and even the position of the company is better than BRC. Further, the liquidity position of the business adds that the risk level of BRC is lowest and the cost level of AZV is bit higher (Bloomberg, 2018). Both the companies are required to make the changes in the current assets of the business to manage the liquidity risk position. Lastly, the study has been performed on the capital structure level. The calculations and the analysis express the better capital structure position of AZV in the market.

The moment in the stock price of both the stocks has been compared with the stock price of AORD and has been presented in the below graph:

 

Figure 4: Stock price comparison

(Yahoo Finance, 2018)

Introduction:

The report has been prepared to identify the changes which have occurred into the stock price of AZV and BRC against the index stock price of Australia.

Analysis:

The study has been conducted on the return of both the stocks and it has been found that the position of both the stocks has been fluctuated at great level against the index stock price of Australia. In case of AZV, it has been found that the average return of AZV is 0.15%, the return from BRC is -3.92% and in case of AORD, it is .34% which explains that the return from both the stock is lower than the AORD stock prices (Yahoo Finance, 2018).

The Figure 4 explains that the volatility in the stock price of BRC is higher than the AZV. Further, it has been found that the Correlation of AZV and BRC along with the AORD are -6.73% and 7.12% it brief that the fluctuations in the BRC and AORD are similar but the level of both the stocks prices is different (Yahoo Finance, 2018). Further, it has been found that the AZV brief about positive trend in the stock price and BRC lead to the negative trend. 

Capital Structure Ratios

Conclusion:

On the basis of the overall analysis, it has been found that the position of AZV is better than BRC stock price because of the lesser volatility and better return from BRC. It is recommended to the investors to go for AZV in order to get better return.

The stock price evaluation expresses huge difference and changes in the stock price of both the companies. In case of both the companies, following events have occurred die to which the huge fluctuations have seen in the stock price:

In case of AZURE HEALTHCARE LIMITED, it has been found that on the date of 31/05/2016, the stock price of the company has been improved by 9.58% because of the announcement of the dividend amount of the company (Yahoo finance, 2018). Further, on 30/11/2016, stock price of the company has been reduced by 18.96% because of the changes in the oil price and economical factors (AFR, 2018). The less growth in the AORD stock has also been identified on that day.

In case of BRAIN RESOURCE LTD, it has been found that on the date of 31/10/2016, the stock price of the company has been improved by 21.05% i.e. a great increment in the stock price because of the announcement of the changes into the board of directors of the company (AFR, 2018). Further, on 31/11/2017, stock price of the company has been reduced by 28.57% because of the announcement of the lower dividend amount of the company (Yahoo finance, 2018). 

It expresses that various changes have takes place in both the businesses which has affected the stock position of both the companies at great level.

The Reuters (2018) explains that the beta of AZV is 2.48 and the beta of BRC is 0.36. The beta of AZV explains about huge risk and the volatility in the stock price of the business. It expresses that the fluctuation in the stock of the business is very much higher in context with the AORD stock price.

On the basis of the beta from Reuters (2018) and the market risk premium 6% and the risk free rate of 5%, the CAPM calculations have been done on both the companies to measure the cost of equity of the business.

In case of AZURE HEALTHCARE LIMITED, it has been recognized that the required rate of return of the company us 19.88% that depicts huge cost of equity of the business. The reasons behind the higher cost of equity are the beta factor of the company. The calculations of cost of equity of the business on the basis of the CAPM model are as follows:

AZV
CAPM (Cost of equity)
Risk free rate	5.00%
RM	6.00%
Beta	2.480
Required rate of return	19.88%

Stock Price Comparison

Further, in case of BRAIN RESOURCE LTD, it has been recognized that the required rate of return of the company is 12.62% that depicts huge cost of equity of the business however, it is lesser than AZV. The cost of equity position of the business is still competitive in the market. The calculations of cost of equity of the business on the basis of the CAPM model are as follows:

BRC
CAPM (Cost of equity)
Risk free rate (Rf)	5.00%
RM (Rm)	6.00%
Beta	1.270
Required rate of return Rf* (Rm-RF)*Beta	12.62%

The dividend policies of each of the business are different. The managers of the company decide the dividend policies on the basis of the nature of the business and the market position. Basically the most common dividend theories are relevant dividend theory and irrelevant dividend theory. The relevant dividend theory of a business expresses that a business must offer a great amount of net profit to the shareholders of the company in order to retain them, attract new stockholders and manage the stock price of the company in the capital market (Madura, 2014). The more the dividend would be offered to the stockholders the more the rational shareholders would be attracted towards the business.

Further, the irrelevant theory of a business expresses that a business must offer a nominal amount of net profit to the shareholders or must not pay at all profit of the company in order to retain the amount for the future investment and internal funds of the business. The theory explains that the more profitability position of the business would increase, the more the stock price of the business would be increased (Lord, 2007). And thus the business is not required to pay the dividend to the shareholders in order to keep them.

In the case of AZURE HEALTHCARE LIMITED, it has been found that the dividend amount given to the shareholders of the company has been reducing from the last year. However, the dividend payout ratio of the company explains that the company is paying 400% profit as dividend to the shareholders. It expresses that the company is following the relevant dividend policies. And company should manage the same policy to attract more investors.

AZV
	2015-06	2016-06	2017-06
Dividends AUD	0.03	0.053	0.04
Payout Ratio % *	150.00%	176.67%	400.00%

(Morningstar, 2018)

Further, in the case of BRAIN RESOURCE LTD, it has been found that the dividend amount given to the shareholders of the company has been improved from the last year. However, the dividend payout ratio of the company explains reduction into the dividend payment. It expresses that the company is following the irrelevant dividend policies. And company should make the changes into the policy to attract the investors.  

BRC
	2015-06	2016-06	2017-06
Dividends AUD	0.2	0.21	0.21
Payout Ratio % *	-2.14%	-0.97%	-0.97%

Conclusion

(Morningstar, 2018)

To,

Name of the Client,

Address of client.

Subject: To recommend about the investment

Dear Client,

Your query about the investment into BRAIN RESOURCE LTD and AZURE HEALTHCARE LIMITED has been taken into the context of analysts. The stock price, financial statement, cost of equity, dividend payout ratio, dividend theories etc of both the companies have been calculated and analyzed in the report in order to offer you a better investment base. 

Firstly, the company’s core activities, market of area etc has been evaluated and it has been measured that the products and services of both the companies are similar. Further, the ratio analysis study has been done on the company. The profitability analysis explains that the performance of AZV has been improved from the last year and even the position of the company is better than BRC. Further, the liquidity position of the business adds that the risk level of BRC is lower and the cost level of AZV is lower. Both the companies are required to make the changes in the current assets of the business to manage the liquidity risk position.

Lastly, the study has been performed on the capital structure level. The calculations and the analysis express the better capital structure position of AZV in the market. On the basis of the ratio analysis, it has been concluded and suggested that the investment into AZV is better option. Further, the stock price fluctuation explains that the position of AZV is better than BRC stock price because of the lesser volatility and better return from BRC. It is recommended to the investors to go for AZV in order to get better return.

Further, the various events have been studied in both the companies which has influenced the stock price of the company, and it has been found that the position of both the stocks are almost same and non big events has taken place in the business. The CAPM position explains that the risk and return from AZV is higher whereas the BRC’s return is lower along with the less associated risk. On the basis of all of this evaluation, it has been concluded that the investment must be done in the BRC, if the risk factor is second preference and in case of safe investment, please invest your money in the AZV stock. 

References:

AFR, AZURE HEALTHCARE LIMITED, Viewed Sept 22, 2018, https://www.afr.com/research-tools/AZV/company-profile/operational-history

AFR, BRAIN RESOURCE LTD, Viewed Sept 22, 2018, https://www.afr.com/research-tools/BRC/share-prices 

Annual report, AZURE HEALTHCARE LIMITED, Viewed Sept 22, 2018, https://azurehealthcare.com.au/investor-relations/annual-reports/ 

Annual report, BRAIN RESOURCE LTD, Viewed Sept 22, 2018, https://www.brainresource.com/files/2017_AnnualReport.pdf   

Bloomberg, AZURE HEALTHCARE LIMITED, Viewed Sept 22, 2018, https://www.bloomberg.com/research//stocks/snapshot/snapshot_article.asp?ticker=AZV:AU

Gibson, C.H., 2011. Financial reporting and analysis. South-Western Cengage Learning.

Higgins, R.C., 2012. Analysis for financial management. McGraw-Hill/Irwin.

Home, BRAIN RESOURCE LTD, Viewed Sept 22, 2018, https://www.brainresource.com/ 

Lord, B.R., 2007. Strategic management accounting. Issues in Management Accounting, 3.

Madura, J. 2014. Financial Markets and Institutions. Cengage Learning.

Morningstar, AZURE HEALTHCARE LIMITED, Viewed Sept 22, 2018, https://financials.morningstar.com/cash-flow/cf.html?t=AZV&region=aus&culture=en-US 

Morningstar, BRAIN RESOURCE LTD, Viewed Sept 22, 2018, https://financials.morningstar.com/balance-sheet/bs.html?t=BRRZY&region=usa&culture=en-US 

Reuters, AZURE HEALTHCARE LIMITED, Viewed Sept 22, 2018, https://www.reuters.com/finance/stocks/overview/AZV.AX

Reuters, BRAIN RESOURCE LTD, Viewed Sept 22, 2018, https://www.reuters.com/finance/stocks/overview/BRC.AX 

Yahoo Finance, AZURE HEALTHCARE LIMITED, Viewed Sept 22, 2018, https://finance.yahoo.com/quote/AZV.AX/

Yahoo Finance, BRAIN RESOURCE LTD, Viewed Sept 22, 2018, https://finance.yahoo.com/quote/BRC.AX/history?period1=1435689000&period2=1530297000&interval=div%7Csplit&filter=div&frequency=1mo