ACCT13017

Financial Statement Analysis

Term 2 - 2019

Assessment 1

Step 3 - 6

Student: Jackson Hutchins – 12069878

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Step 3

Boyuan Holdings Limited (BHL) is the company that has been allocated to me for this semester. I was unaware of this corporation prior to these studies, although I am eager to undertake this assessment, which will increase my knowledge of the company; it’s operations, industry and financial statements. Throughout this task I will strive to clarify aspects such as the products or services that Boyuan Holdings offers to consumers, analysis of posted financial statements, stock prices, apparent key challenges of the company, how successful it appears to be in meeting these challenges and their strategy for the future.

Before jumping onto the Internet to learn more about my company I firstly noticed on the ‘Find Your Company’ spread sheet, contrary to what the name would suggest that Boyuan Holdings is an Australian Company, and boy was I grateful! Throughout preceding units I was required to evaluate foreign companies, operating in currencies other than Australian. I have the preconception that the process of analysing the financial statements of an Australian company would be a simpler task than that of a foreign company similarly has been the reflections posted by my peers in previous units. I am very interested to ascertain whether the difficulty of this task differs by having knowledge of the Australian economic environment or whether the process of effective financial statement analysis is applicable and comparable for international companies.

Commencing exploration through the web page of BHL, it was undoubtedly evident that the goods or services offered by the company centres around property, with the particulars of their operating activity to be revealed upon further examination. The prominent home page slideshow of faultless architectural designed communities and urban structures is a clear indication that BHL partakes in property investment and development activity as their key business activity. Boyuan Holdings Limited is a Real Estate based company, with a focus on real estate property management and property development since it’s inception in 2015. Listed on the Australian Securities Exchange, BHL’s presence in Australia is exemplified by its range of residential and commercial developments. Targeting high-growth regions with strong housing demand, Boyuan Holdings Limited continually adds value through selective site acquisition, rezoning and development. In addition to the central service by BHL in property, the company has also been venturing into property advisory services, retirement projects and fund management services. It is surprising to discover that BHL is undertaking projects in retirement living, as Dr. Turners favoured company Ryman Healthcare also trades within a similar industry, it will be especially interesting to compare and contrast the two entities. I am interested to discover whether there was a significant financial impact incurred as a result of the supplementary service industries, particularly through the analysis of the financial statements.

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Boyuan Holdings Limited is making significant investments into one of the fastest growing areas in Australia, retirement living. The company outlines its objective to provide high quality, affordable house and community lifestyle for the ever-growing retiree population in order to generate sustainable long-term residential income for company investors. Their commitment to these future ventures is supported by their recent news announcement, whereby a general manager of seniors living division was appointed. Such is the nature of BHL’s Industry that without supplementary advertising, many people may not realise that they have been affected by the services of Boyuan Holdings Limited, whether it be through living or working in a community developed by the company. A recent company announcement in 2018 revealed that Boyuan Holding Ltd entered into two service agreements to manage and deliver land development projects throughout Australia on behalf of Asian-based entities. This agreement generates over 27 ongoing land development projects that will maintain a stable revenue stream, improving its market reputation and potential future viability. All of the project sites are situated throughout New South Wales, which reduces the requirement for exponential travel expenses, although I am curious whether this is a limiting factor of the company’s ability to generate revenue? I believe that these agreements are a very positive investment for Boyuan Holdings Limited as it promotes the potential for long-term financial growth and stability for the company, while also pleasing present and future stakeholders.

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Figure 1. BHL agreements with Cyan Stone Pty Ltd & Citron

Retirement / Lifestyle Living Projects

Master-Plan Residential and Commercial Developments

Property Advisory Services Projects

Outlined in Figure 1 above BHL has commenced a variety of projects throughout New South Wales. This is a positive indication for the future sustainability of Boyuan Holdings Limited as the company is still relatively young, with being formed in 2015 and procuring over 27 current and future projects. I foresee that BHL will be able to sustain its growth throughout New South Wales and potentially throughout Australia, which will encompass exponential increase of revenue into the future, I am very eager to learn whether an increase in operating revenue has occurred over the past three years by analysing the financial statements. Figure 2 and 3 below exemplifies that Boyuan Holdings Limited is investing in an ideal industry and location, with the market share of over 65 year old population penetrating the retirement village and living market in New South Wales being the most prominent throughout Australia.

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Figure 2. State breakdown of retirement village dwelling and

Figure 3. Market share of the retirement village sector

The process of reading and analysing the annual report is definitely less daunting since being subjected to reviewing and working with annual reports and financial statements for over year since studying ACCT11081. Now that I have the knowledge of what information is relevant and valuable for fulfilling my requirements, the 100-page annual report is much less of an arduous task to extract material from. The notes to the financial statements comprise nearly half of the annual report of BHL, which allows the evaluation of the report to be much simpler. The initial standout characteristics of the annual report is the range of visual pictures and graphs contained within the first few pages, most of which show upward trends and growing numbers. Could this be a ploy be an entity to manipulate or offer the reader with a primary perception that the company is growing and profitable, by detracting from the substantial information written throughout the director’s reports and financial statements? A significant quote in the Chairman’s Letter is that for the 2018 financial year the profit after tax is $3.36 million, growing from $1.27 million in 2017. BHL contributes this growth primarily to the first full year of operations of their Lifestyle Living division, confirming my belief that the investment in retirement living projects would have a significant impact on their financial growth. I also discovered that the group revenue increased to $48.6 million in 2018 from $7.0 million in the prior year. This percentage growth of revenue is exponentially greater than that of the profit, which is a point that I am very interested to learn whether this is due to increased operating expenses or further financial assets? This is a question that will be answered upon closer analysis of the financial statements.

Analysing the financial statements of Boyuan Holdings Limited has revealed a number of differences to the Chinese Company BNN Technologies that I studied in ACCT11081, mostly resulting from the difference in operating industry. This entity provides only Consolidated Financial Statements as opposed to both consolidated and parent company statements in my previous studies, which makes to review process simpler in respect to the most effective statement to utilise. Initial reading of the Income Statement reveals that Boyuan Holdings Limited made a significant loss after income tax expense from continuing operations in 2017 of $4,541,000, whereas in 2018 this turned into a profit of $4,807,000. Their income statement also includes accounts for continuing operations, discontinued operation and comprehensive income, of which I have not dealt with significantly in the past, which begs the question how do I differentiate between all of these? I understand that companies will discontinue operations if they are not viable and profitable for the future of the company, which would be translated to that relevant account on the income statement, I did find further information of the discontinued operations of BHL in the relevant notes to the financial statements, which helped me to understand why it is effective to distinguish continuing activities and discontinued operations in the financial statements. Within the other comprehensive income account there was a significant cost of $6,529,000 for foreign currency translation, yet this account is nil in 2018, I am very eager to learn what activity could constitute such significant expenditure?

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Based on the improved figures displayed on the financial statements from 2016 through to 2018, it is important the Boyuan Holdings Limited maintains this financial trajectory, in order to be a sustainable and profitable for investors in the long-term. Boyuan Holding Limited is exploring further acquisitions in the future for the planning and development of communities for the over 55’s, I believe that this move is crucial for BHL, as the investment In this sector has proved the most beneficial to the company, exemplified by the exponential profit growth from 2017 to 2018. Further contributing verification is the suggestion that the New South Wales market for retirement living is expected to double over the next 20 years. By potentially achieving success in this sector, BHL would be in the position to achieve business development goals in its alternate service offerings, such as funds management and property investment & management industries. If Boyuan Holdings Limited can continue it’s current operating success and successfully implement its published business goals and plans, I am confident that this entity has the ability to be a dominant participant in a range of industries, while providing a strong and stable return to current and future investors.

Compared to ACCT11081 the process of analysing a company annual report and locating key information in this unit was a much simpler process, in relation to both time spent researching and brain strain endured! Honestly I did not encounter much difference of the financial statements between the Chinese company I was allocated in ACCT11081 and the Australian Boyuan Holdings Limited, the only difference being the familiarity to the operating localities of the Australian firm. I did not encounter any substantial challenges throughout this process; the main setback was most likely the lack of articles and news reports published separate to the releases from the company itself. I feel that it is always important to find further information regarding an entity from a source other than the company, as a company may publish information that is deeply biased in order to improved the public perception of the entity. I look forward to the next step of breaking down the financial statements of Boyuan Holdings Limited to discover the realities of the company that may not have been obvious from the face value of the annual reports.

Undertaking additional research of Boyuan Holdings Limited allowed me to uncover articles concerning the company that are outlined below. The quantity of articles was limited, mostly relating to information surrounding share price movements. This Yahoo Finance article outlines a recent share price decline over the past year, falling by almost 65%. Discussed throughout the article is the fact that share prices have continued to fall even though Boyuan Holdings has managed to improve revenue by 675% over the last year. This is highly relevant to this unit, whereby analysing the financial statements of Boyuan will provide an indication of whether the fall in share price is justified or if there is a genuine discrepancy between the price of shares and the value in the marketplace.

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Boyuan Holdings Limited Website

Boyuan Holdings Limited - News & Company Updates

Annual Report - 2018

Annual Report - 2017

Annual Report - 2016

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Company Discussions with Peers

I am really looking forward to perusing my fellow classmates blogs to discover similarities and differences in our companies and experiences throughout this task. I have listed below comments provided to three of my favourite blog posts relating to the companies of other students within the unit.

Company Provided to: Kym Chisholm

The first blog that I found to be most interesting was that belonging to Kym Chisholm, of which the link and screenshot of my comment on her blog is included below. Among a variety of other positives, the main factor that made me appreciate this blog and company introduction is the inclusion of humour and clever articulation. It made me want to read more and by the end I had clearly learned of the products and services offered by Electro Optic Systems. By articulating and describing the company with modern references and with minimal company economical terminology it becomes much simpler to connect with the reflection and gain a genuine interest in the subject matter.

Kym effectively explains the industry in which EOS is positioned, including government spending and plans for future investment within the particular portfolio. It is also great how connections are outlined between the company and Kym’s life, whether it is past work experience, travel or personal investments. I look forward to checking back into the blog to learn more about Kym’s company EOS, particularly to view the company financials and ratios.

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

http://www.everydaymoola.com/?p=109#comment-1108

Company Provided to: Iris Onvlee

The next blog on my “favourites” list belongs to Iris Onvlee, who was allocated Chinese based company, China Outfitter Holdings Limited. Iris’ company shares many similarities to the company that I worked with throughout ACCT11081, which meant that I would easily be able to relate to Iris’ experiences throughout this assessment. I was very impressed with the layout that Iris utilised in describing her company. By utilising sub headings and bullet point formats, the information was much easier to comprehend as opposed to monotonous essay-like paragraphs. Looking back on my own work, I definitely could have improved the Step 3 of my assessment by utilising some of these techniques.

https://irisonvlee11091961.wordpress.com/my-company/

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Company Provided to: Georgia Thinee

Last but not least in my list of favourite blogs belongs to Georgia Thinee, who was allocated with Australian company the Brisbane Broncos. This blog was not only a pleasure to read because I am an avid Rugby League fan but also because Georgia provided an excellent insight into the relatively unknown business activity of the company.

https://accountingblogcqu.wordpress.com/2019/07/28/the-brisbane-broncos/comment-page-1/?unapproved=6&moderation-hash=ea3553bac8777823c77da2d2145269db#comment-6

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Step 4

Inputting Financial Statements

Step 5

Restating Financial Statements

Step 7

Ratio Analysis

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Step 8

Feedback To:

My Comments

Step 1

KCQs

Step 2

KCQs

Step 3

Background information on company

Comments/KCQs

Comments on other’s blogs

Step 4

Input company’s financial statements

Step 5

Restated Income statement

Restated Balance sheet

Commentary & discussion with others

Step 6

KCQs

Step 7

Calculation of ratios

Overall ASS#1

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Feedback To:

My Comments

Step 1

KCQs

Step 2

KCQs

Step 3

Background information on company

Comments/KCQs

Comments on other’s blogs

Step 4

Input company’s financial statements

Step 5

Restated Income statement

Restated Balance sheet

Commentary & discussion with others

Step 6

KCQs

Step 7

Calculation of ratios

Overall ASS#1

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2

Feedback To:

My Comments

Step 1

KCQs

Step 2

KCQs

Step 3

Background information on company

Comments/KCQs

Comments on other’s blogs

Step 4

Input company’s financial statements

Step 5

Restated Income statement

Restated Balance sheet

Commentary & discussion with others

Step 6

KCQs

Step 7

Calculation of ratios

Overall ASS#1

12069878 Jackson Hutchins ACCT13017 – 2019 Term 2