REPORT INSTRUCTIONS
You are required to evaluate and report on the most recent (FY2019) annual report of an Australian company listed on ASX, Decmil Group Ltd (DCG), as if you were investment analysts making a recommendation on whether your clients should invest in it.
The report includes the following sections:
1. Introduction, including a clear statement of objectives and an outline of the structure of the report.
2. Environment and Industry Analysis, including:
• Discussion of the environment: 1) identify the economic and other relevant factors, 2) discuss how these factors affect the company’s operating environment, and 3) explain how the trends in these factors affect the company in the future.
• Discussion of competitive forces within the industry using the five forces framework.
3. Strategy Analysis, including:
• Discussion of the company’s competitive and corporate strategy.
• Evaluation of the company’s strategy using SWOT analysis.
• Conclusion of the company’s prospects for profitability and growth based on your analyses on the environment, industry and strategy.
4. Accounting Analysis, need to:
• Identify ONE key accounting policy for this company.
• Discuss how this accounting policy relates to the company’s business operations and strategies. In other words, why it is considered as “key” based on your knowledge of the company.
• Identify areas that require the use of management judgment, and provide explanations. Conclude the level of accounting flexibility.
• Compare this accounting policy with a competitor’s, discuss the difference and what factors may cause the difference, and evaluate the quality of disclosure for both companies.
5. Financial Analysis, including the following:
• Presentation and interpretation of relevant ratios for the company over the past three years, including analysis of the underlying drivers of the change in the company’s ROE by decomposing ROE.
• Discussion of the company’s operating management. Provide common-sized income statement to decompose Net Profit Margin to evaluate operating management. Provide explanations of the possible cause of sales growth, change in margins and expense ratios. The explanations should be related to the company’s environment, business operation and strategy.
• Discussion of the company’s asset management. Provide explanations of the possible cause of change in operating working capital and long-term operating asset turnover ratios. The explanations should be related to the company’s environment, business operation and strategy.
• Discussion of the company’s financial management. Provide explanations of the possible cause of change in liquidity and solvency ratios. The explanations should be related to the company’s environment, business operation and strategy.
Conclusion Section is optional for the group report as the individual report requires a conclusion section.
The report should be word-processed and professionally presented. It is to be approximately 15 – 20 pages with 1.5-lines spacing, excluding references and appendices. Page limit rather than word limit is imposed for the report. All assumptions should be clearly stated and supported if possible. Both in-text references and bibliography should be provided. Commercial data services may be used to source annual reports and other information. Any commercial data sources used should be acknowledged and referenced in the written report.
