CONSUMER PRODUCT : DRINKS
BCF 7044: CORPORATE FINANCE
SPRITZER BHD
LARGEST WATER BOTTLE PRODUCERS
CERTIFIED BY QUASI,LLC,USA & ISO 9001: 2008 BY SIRIM
MALAYSIA’S BEST SELLING NATURAL
WATER
NATURAL MINERAL WATER, DISTILLED WATER, CARBONATED&
NON CARBONATED FRUIT FLAVOURED DRINK
GUINNESS ANCHOR BHD
QUALITY BRANDED LEADER OF BEER &
STOUT
CERTIFIED BY MINISTRY OF HEALTH & ISO 9001: 2001
MALAYSIA’S BEST SELLING BEER & STOUT
TIGER, GUINNESS, HEINEKEN, ANCHOR SMOOTH, MALTA,
STRONGBOW & SOL
FRASER & NEAVE BHD
LARGEST ISOTONIC DRINK PRODUCERS
CERTIFIED HALAL PRODUCT & TRUSTED BRAND FOR
GENERATION
MALAYSIA’S BEST ISOTONIC DRINK (100
PLUS)
F&N FUN FLAVORS, 100 PLUS, SEASONS, SUNKIST,
MAGNOLIA , FARMHOUSE & FRUIT TEE
YEO HIAP SENG BHD
ONE OF LARGEST FOOD & BEVERAGE
PRODUCERS
CERTIFIED HALAL PRODUCT & PARTNERSHIP AGGREEMENT
1ST GLOBAL BRAND IN SOYBEAN PACKAGES
BOTTLED SOYA BEAN MILK, CHRYSANTHEMUM TEA, CANNED
CURRY CHICKEN, INSTANT NOODLES & YOGURT
COMPARISONS
PART 1:RISK PROFILE OF THE COMPANIES AND THEIR COST OF CAPITAL
Weighted Average Cost of Capital tell us the return of both
stakeholders which are equity owners and lender can expect.
WACC represents the investor's opportunity cost of taking on
the risk of putting money into a company. Thus, the formulation
of WACC is formed by three components as following:
The cost of equity capital is derived from Capital Asset
Pricing Model (CAPM). Thus, the formulation of CAPM is
formed as following:
Ri = Rf + βi [ Rm – Rf ]
WACC = S/V(Rs) + B/V (Rb) * (1-Tc) + P/V (Rp)
2005 2006 2007 2008 2009
SPRITZ
0.01220000000000
01
0.22290000000000
1
0.1337 -0.38300000000000
3
-0.38300000000000
3
GAB -0.00470000000000
005
0.1015 0.2501 -0.2346 0.01870000000000
02
F&N 0.0217 0.2022 0.08990000000000
02
-0.22000000000000
1
0.11660000000000
1
YEOS
0.01720000000000
01
0.1246 0.24840000000000
2
-0.37100000000000
1
0.5674
-50.00%
-30.00%
-10.00%
10.00%
30.00%
50.00%
70.00%W
AC
C %
5-YEARS WACC COMPARISONS
2005 2006 2007 2008 2009
SPRITZ
-0.0128 0.2256 0.1423 -0.4178000000000
01
0.3033000000000
01
GAB -0.0047000000000
0001
0.1015 0.2502 -0.2346 0.0188
F&N 0.0214 0.2042 0.0947000000000
001
-0.2889 0.1405
YEOS 0.0167 0.1253 0.2536 -0.3825000000000
01
0.5814
-50.00%
-10.00%
30.00%
70.00%
CA
PM
5-YEARS CAPM COMPARISONS
COMPARISONS
PART 2:CAPITAL STRUCTURE OF COMPANIES: UNDER LEVERAGED OR OVER LEVERAGED
Capital structure shows a company how much the
company is financed by equity and debt. Besides, it also
illustrates the long-term financing of the company.
Therefore, debt to equity ratio indicates the extent to
which the business relies on debt financing. Thus, the
formulation is as follows: Debt to Equity Ratio = Long Term Debt
Total Shareholder’s Equity
Company financed with debt can save cost of taxation
during its operation that’s called leveraged; otherwise it
will be an unleveraged company.
5-YEARS DEBT TO EQUITY RATIO COMPARISONS
2% 5%
27%
26%
40%
SPRITZ
2005200620072008
GAB
2005-2009
5-YEARS DEBT TO EQUITY RATIO COMPARISONS
5% 2% 10%
43%
40%
F&N
2005200620072008
17%
18%
19%21%
24%
YEOS
2005200620072008
COMPANI
ES
LEVERAGED /
UNLEVERAGEDREASONS
SPRITZHIGHLY
LEVERAGED
COST OF DEBT IS VERY
HIGH
GAB UNLEVERAGED100% EQUITY
FINANCING
F&N LEVERAGED COST OF DEBT IS HIGH
FROM 2008 ONWARDS
YEOSHIGHLY
LEVERAGED
COST OF DEBT IS VERY
HIGH
LEVERAGED / UNLEVERAGED COMPARISONS
COMPARISONS
PART 3:DIVIDEND POLICY: TYPES OF DIVIDEND POLICY AND ITS PAYOUT RATIO
Dividends are payments made by the company to its
shareholders. It is the portion of corporate profits paid out
to stockholders. When a corporation earns a profit or
surplus, that money can be put to two uses: it can either
be re-invested in the business (called retained earnings), or
it can be paid to the shareholders as a dividend. Many
corporations retain a portion of their earnings and pay the
remainder as a dividend. Thus, the formulation is as
follows:Dividend Payout Ratio = Dividend Per Share (DPS)
Earning Per Share (EPS)
2005 2006 2007 2008 20090
2
4
6
8
10
12
14
16
18
3 2.5 3 34
5.76.7
7.8
1616.6
DPS EPS
5-YEARS DPS AND EPS COMPARISONS
2005 2006 2007 2008 20090
5
10
15
20
25
30
35
40
45
50
30.1 30.232.8
36.4
41
35.74
42.44
37.26
41.66
47
DPS EPS
5-YEARS DPS AND EPS COMPARISONS
2005 2006 2007 2008 20090
10
20
30
40
50
60
70
3032.7 34.2
40.1 41.837
40.142.9
46.8
63
DPS EPS
2005 2006 2007 2008 20090
2
4
6
8
10
12
14
16
18
3 2.5 3 34
5.76.7
7.8
1616.6
DPS EPS
2005 2006 2007 2008 20090.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
SPRITZGABF&NYEOS
5-YEARS DIVIDEND PAYOUT RATIO COMPARISONS
COMPARISONS
PART 4:WORKING CAPITAL MANAGEMENT: THE DAILY FINANCING NEEDS
Working capital actually shows the company's current position. It tells us what would be left if a company raised all of its short term resources, and used them to pay off its short term liabilities. Thus, the formulation is as following:
Net Working Capital = Current Asset – Current Liabilities
The operating cycle is the number of days from cash to inventory to accounts receivable to cash. It reveals how long cash is tied up in receivables and inventory. Thus, the formulation is as following:
Operating Cycle = Inventory Period + Receivable Period
The cash cycle is the length of time between the purchase of raw materials and the collection of accounts receivable generated in the sale of the final product. It is also called cash conversion cycle. Thus, the formulation is as following:
Cash Cycle = Operating Cycle – Payable Period
5-YEARS NET WORKING CAPITAL COMPARISONS
2005 2006 2007 2008 2009
SPRITZ
31300 36361 30793 35597 38067
GAB 130104 164820 188742 209806 237201
F&N 383354 406792 443088 621172 465958
YEOS 157012 174068 121777 123414 141237
50,000
150,000
250,000
350,000
450,000
550,000
650,000
Million
s
5-YEARS OPERATING CYCLE COMPARISONS
2005 2006 2007 2008 2009
SPRTZ 293.02 297.9299999999
99
288.74 228.07 201.25
GAB 58.97 61.07 63.22 69.38 75.05
F&N 149.73 155.66 165 127.83 119.8
YEOS 161.63 184.41 168.3800000000
01
159.24 156.39
25
75
125
175
225
275
325
DA
YS
5-YEARS CASH CYCLE COMPARISONS
2005 2006 2007 2008 2009
SPRTZ 270.09 265.96 258.71 206.8 183.77
GAB 14.29 26.43 30.09 31.2 34.55
F&N 53.94 61.6 55.15 26.52 27.81
YEOS 54.74 63.5 10.72 41.16 42.13
25
75
125
175
225
275
DA
YS
PART 1 SUMMARY : AVERAGE WACC
COMPANIES 5 YEARS AVERAGE WACC
SPRITZ 4.59%
GAB 2.62%
F&N 4.21%
YEOS 11.73%
Therefore, based on the average WACC comparisons, we would highly recommend investors to invest in GAB since the company has the lowest WACC.
Therefore, based on the comparisons, we would highly recommend investors to invest in GAB since the company is debt free.
Therefore, we can conclude that based on the dividend distribution, F&N would be the best company to invest as it has the highest dividend distribution and also the highest dividend per share compared to other 3 companies.
PART 2 SUMMARY : DEBT TO EQUITY RATIO
PART 3 SUMMARY : TOTAL DIVIDEND DISTRIBUTION
AVERAGE SPRITZ GAB F&N YEOS
TOTAL DIVIDEND
(RM)
7,594,040
484,625,000
596,027,000
73,627,000
AV SPRTZ GAB F&N YEOS
CA 60,593 338,378 1,242,075 262,907
CL 26,169 152,244 662,381 119,405
NET WC 34,424 186,135 579,695 143,502
COMPANIES OPERATING CYCLE PAYABLE PERIOD CASH CYCLE
SPRITZ 261.80 24.74 237.07
GAB 65.54 38.23 27.31
F&N 143.60 98.59 45.01
YEOS 166.01 123.56 42.45
Therefore, GAB is highly recommended to investors as the company has the lowest operating cycle.
Based on the analysis, we can conclude that the best company to invest would be F&N due to its large capital base.
PART 4 SUMMARY : AVERAGE NET WC & AVERAGE OC, PP & CC
CONCLUSIONS
COMPANIES WACCDIVIDEND
POLICY
NET
WORKING
CAPITAL
OPERATING
CYCLERANK
SPRTZ 3 4 4 4 3
GAB 1 2 2 1 1
F&N 2 1 1 2 1
YEOS 4 3 3 3 2
THANKS FOR
YOUR
ATTENTION
Q&A
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