EQUITY ANALYSIS REPORT ON QANTAS AIRWAYS LIMITED AND BLACKMORES LIMITED

Return on equity (return on net worth) 7 Analysis of Variance 8 1. Current ratio 8 2. Debt/equity ratio 9 3. Return on equity 9 Description of The Business and its Strategic Position in The Industry 9 Qantas Airways Limited 9 Strengths 10 Weaknesses 11 Opportunities 11 Threats 12 Blackmores Limited 12 Strengths 12 Weaknesses 12 Opportunities 13 Threats 13 Trade war effect on equity analysis investment recommendations 13 Qantas Airways Limited 14 Blackmore Limited 15 Discussion on ethical behavior of professional fund leaders 16 Key principles required 16 Conclusion 17 References 18 Executive summary This is an equity analysis report that focuses on Qantas Airways Limited and Blackmores Limited. From the analysis done here, it is recommended that Qantas Airlines investors should sell their shares and investors in Blackmore Limitedshould buy more into the business. It makes use of this expertise to develop products that give people a more natural approach to their health.

Blackmores Limited has been consistent in providing high-quality products and services that has seen it receive the ‘Most Trusted Brand’ for vitamins and supplements award for the tenth straight year in 2018. Objectives There are several objectives for this financial analysis: • Profitability: the ability of the firm to earn enough income while at the same time sustaining itself in the short and long-term periods and growth. Profitability level is deduced from the income statement that has information on the firm's operating results. • Solvency: the ability of a company to pay its debts in the foreseeable future. Formula used: Current Ratio = Current ratios for the period2015, 2016 and 2017 Qantas Airways Limited Current Assets ($M) Current Liabilities ($M) Current Ratio 2015 5,166 7,642 0. 4 Blackmore Current Assets ($ ’000’) Current Liabilities ($ ‘000’) Current Ratio 2015 187,844 114,998 1.

Debt/Equity Ratio (risk/gearing ratio) This is a ratio used to show the financial leverage of a company, its solvency. It shows the amount of debt a firm uses to fund its assets and operations as compared to the value of shareholders’ equity. Qantas Airways Limited Total liabilities ($ m) Shareholders’ Equity ($ m) Debt to Equity Ratio 2015 14,083 3,442 4. It is, therefore, unable to pay off its obligations when they are due. It is not in good financial health. The current ratio for Blackmores Limited has been above one for the last three fiscal years 1. 5, and 1. 8 (2015,2016, and 2017). Return on equity Qantas Airways has achieved a return on investment of 16%, 26%, and 24% for the years 2015, 2016 and 2017 respectively. Blackmore Limited has gained 35%, 56%, and 33% for the years 2015, 2016 and 2017.

Blackmore Limited has a higher return on equity than Qantas. An investor would be advised to put his money in Blackmore Limited as his investment will pay off with a higher margin than in Qantas Airways. Description of The Business and its Strategic Position in The Industry Qantas Airways Limited Qantas Airways Limited is a leading aviation firm in Australia and its flag carrier. • Most number of destinations: with Qantas having the highest number of targets in the domestic and international market, it earns more revenues on these additional routes that are yet to be covered by its competitors. • Brand name: Qantas carries the Australian flag. This is a significant boost as it attracts passengers who want to identify with Australia.

It is more prone to be used by governments and parastatal staff on travel assignments for the fact that it carries the nation’s flag. • Superior service: Qantas Airlines has made a name on their top-quality services. ◦ Direct flights to Europe: Qantas Airline launched direct flights to the UK. This has come with challenges like matching demand and pricing for such a route to maintain profitability. ◦ Workers’ union problems: This is a common problem for many firms, and Qantas Airlines is not different. It has faced multiple disputes with unions, mostly during the 2011-2012 period. It is in constant negotiations to iron out the issues with the trade unions. • Costs: this cuts across fuel costs and maintenance of the fleet. The fuel costs are always fluctuating and maintain old fleet requires a good balancing act on ticket pricing to maintain profitability.

Blackmores Limited Blackmore was founded in 1930 by Maurice Blackmore, a naturopath. It specializes in the manufacture of mineral, vitamin, and herbal supplements. Its market is across the Asia-Pacific region in over 17 countries. Trade war effect on equity analysis investment recommendations Trade wars come about when nations impose restrictions and quotas on goods from other nations. This is usually for protectionist reasons, where a country wants to protect its domestic market from disruption by foreign products. Another reason is that governments use this war as weapons to arm-twist partner states into agreements that are not necessarily about that specific trade. There are also used to punish countries that are considered to have gone against globally accepted norms on different fronts (Amadeo 2018). Trade war effect implies that multinational firms have to direct their efforts back to the domestic markets.

Blackmore Limited Blackmore’s revenues increased exponentially with entry to the Chinese marketplace. This was due to several factors that propelled this new drive; more cash to spend by Chinese middles class, proper food safetystandards of the Australian company, China-Australia free trade agreement, e-commerce shopping channels in China (Pash, 2015). The figure below shows the forecast for Blackmore after entry into China. Figure 2: China's Grey Market in Comparison to the Australian Market In the event of a trade war, the numbers enjoyed by Blackmore would significantly reduce, by up to half. This means that the value of the company will decrease. This can also be said to be a trickle-down effect; when a manager ethically addresses a subordinate staff, the same will be extended to customers.

Identify potential ethical scenarios:managers are encouraged to make an effort to identify the possible ethical situations that may arise in their jurisdiction and address them early on. This is a pre-emptive measure that seeks to reduce potential damage to a firm’s reputation. A manager at Blackmores Limited should put effort to identify potential areas of ethical concerns and curb it before it reaches the outside world. This may be addressed through frequent meetings with front-office staff to identify the challenges faced during customer interaction. [online] Available at: https://centreforaviation. com/analysis/reports/australia-domestic-airline-market-outlook-qantas-group-reins-in-capacity-as-virgin-continues-growth-218946 [Accessed 2 Sep. Pash, C. Chart: The China grey market is driving around half of Blackmore's sales. [online] Business Insider Australia. Available at: https://blogs. cfainstitute. org/investor/2013/05/20/ethics-in-investment-management-how-to-get-it-right/ [Accessed 2 Sep.