Thien long group, formerly known as thien long ballpoint pen establishment, was established in 1981

3 May 2020 TIEU LUAN MOI download : skknchat@gmail.com No TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis Contents Chapter I GENERAL INTRODUCTION Chapter II BUSINESS STRATEGY ANALYSIS INDUSTRY ANALYSIS 10 1.1 Rivalry among existing firm 10 1.2 Threat of new entrants 11 1.3 Threat of substitute products 11 1.4 Buyer’s Power 11 1.5 Supplier’s Power 12 COMPETITIVE STRATEGY ANALYSIS 12 CORPORATE STRATEGY ANALYSIS 13 SWOT ANALYSIS 15 PEST ANALYSIS 17 Chapter III 19 ACCOUNTING ANALYSIS 19 IDENTIFY KEY ACCOUNTING POLICIES 20 ASSESS ACCOUNTING FLEXIBILITY 21 EVALUATE ACCOUNTING STRATEGY 22 EVALUATE THE QUALITY OF DISCLOSURE 22 IDENTIFY POTENTIAL RED FLAGS 23 UNDO ACCOUNTING DISTORTIONS 25 Chapter IV 26 FINANCIAL STATEMENT ANALYSIS 26 ANALYSIS OF FINANCIAL STRUCTUE 27 ANALYSIS OF INCOME STATEMENT 29 ANALYSIS OF CASH FLOW 30 Chapter V 31 FINANCIAL ANALYSIS 31 ANALYSIS OF PROFITABILITY 32 1.1 Net profit margin and gross profit margin 32 1.2 Total asset turnover; Return on asset and Dupont analysis 32 TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis 1.3 Operating income margin, operating asset turnover, return on operating asset and Dupont analysis 33 1.4 Sale to fixed asset 34 1.5 Return on total equity, Return on investment 35 ANALYSIS OF LIQUIDITY OF SHORT-TERM ASSETS 36 2.1 Receivables Issues 36 2.2 Liquidity of inventory 37 2.3 Operating cycle 38 ANALYSIS OF DEBT-PAYING ABILITY 39 3.1 Current Debt ratio 39 3.2 Long-term debt ratio 41 3.3 Other long-term debt ratio 43 ANALYSIS OF STATEMENT OF CASH FLOW (RATIO ANALYSIS) 43 TIEU LUAN MOI download : skknchat@gmail.com Chapter I GENERAL INTRODUCTION TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis INTRODUCTION Thien Long Group, formerly known as Thien Long Ballpoint Pen Establishment, was established in 1981 In 2010 was officially listed on HSX with TLG code From 2013-2018, Thien Long has been named one of the 50 best listed companies in Vietnam, according to Fobers Vietnam Thien Long Group has a distribution network throughout 63 provinces, with more than 60,000 retail locations Beside that, Thien Long Group continues to invest and develop export markets, bringing the current branded products FlexOffice and Colokit to more than 60 countries on continents MISION-VISION-CORE VALUES - Mision: bring Thien Long’s products to all regions of Vietnam and the world - Vision: Thien Long commits to providing the best quality products, stationery products, and services serving the studing, working, and creative activities to conquer the peak of mankind knowledge - Core value: TLG’s key assets are its people and its culture Driven by these 05 core values: pioneer, dedication, fairness, integrity and humanism BUSINESS MODEL Available in ample designs, high quality, prestigious brands and reasonable prices, Thien Long’s products are ready to meet diverse needs of consumers, from kindergartens to elementary schools, high schools and colleges as well as employees and executives Thien Long’s writing instruments (TL brand name) includes product lines such as ballpoint pens, gel pens, rollerball pens, fineliners, etc This long-standing product category helped build up the Group’s reputation from early days of establishment and accounted for 41% of total revenue up to 2017; Premium Products category (Bizner brand name) includes typical products such as Premium ballpoint pen (BIZ-01, BIZ-rB01, TL-075, ), Premium pencil (BIZ-PC01, BIZ-PO1, BIZ -PO2, ), Premium notebook (BIZNer-MB-08, BIZNer-MB-09, ) Target customers of this premium product category are business people and high-income earners Official Supplies (FlexOffice brand name) contributed significantly to the Group’s business with 30% of total revenue In 2017, Thien Long repositioned Ten Marks brand and implemented the new logo design in accordance with modern trends, suitable for pupils With the slogan “ready to learn well”, Ten Marks plays the role of providing learning tools of high quality, diversification and usefulness to serve the learning Ten Marks category has many products such as chalk, ruler, compass, pencil, eraser, glue, scissors, notebook Colokit is the brand that represents Thien Long’s Art Supplies, including products serving the arts Colokit are unique and safe, non-toxic, and certified to meet US standards (ASTM D4236), European standards (eN71/3 and eN71/9) TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis OWERSHIP STRUCTURE AND ORGANIZATION STRUCTURE Realizing that Mr Co Gia Tho is the largest shareholder He is founder of Thien Long in 1981 and has been staying with the company since then Mr Co Gia Tho also holding the posion of Chairman cum CEO of Thien Long An Thinh Investment JSC Domestics shareholder account for a high proportion( 72,7%) Sourse: Annual Reporting in 2018 of TLG TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis TIEU LUAN MOI download : skknchat@gmail.com Chapter II BUSINESS STRATEGY ANALYSIS Financial Statement Analysis its scale, invest in procurement of machinery, equipment, factory construction, etc By 2019, the rate of investment in fixed assets decreased, so that the number of sale to fix assets increased 1.5 Return on total equity, Return on investment Return on Equity and Return on Investment 1,800,000,000,000 30.00% 1,600,000,000,000 1,400,000,000,000 1,200,000,000,000 1,000,000,000,000 800,000,000,000 600,000,000,000 400,000,000,000 200,000,000,000 Net income (ROE) Net income (ROI) Shareholder's equity Investment Return on Equity Return on Investment Both ROE and ROI ratio of TLG increased in years 2015-2016 but decreased gradually from 2016-2019 Because TLG's growth rate can be considered to be relatively good, that is the reason why many investors buy shares of the company, banks and creditors increase loans Although this ratio decreased but compared to the industry average of 21.96%, TLG is still higher, indicating that the company is still performing well and has more potential for further development in the future TIEU LUAN MOI download : skknchat@gmail.com 35 Financial Statement Analysis ANALYSIS OF LIQUIDITY OF SHORT-TERM ASSETS Receivables Issues Gross receivable Average receivable Net sales Day's sales in receivable Receivable turnover Receivable turnover in days Receivable issues 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2015 Day's sales in receivable Receivable turnover Day's sales in receivable: Time to recover receivables increases from year to year In particular, DSR in 2018,2019 over 30 days, showing that a company is selling most of its products to customers and taking more time to collect money This can lead to cash flow problems since the time between sales and the company receives long payments Receivable turnover: Inventory turnover over the years Inventory turnover in 2019 decreased by 32.59% compared to 2018, indicating that the company has a poor recovery process, bad credit policies or their customers are unable to pay The company should revise its credit policy to ensure time for money recovery Inventory turnover decreased because receivables increased Because Thien Long Group mortgaged its receivables to secure a bank loan (in Note 21, December 31, 1919), it was because the company wanted to borrow more that the receivables increased Receivable turnover in days and day's sales in receivable are big difference It shows that Thien Long Group has seasonal fluctuations For example, in August, September is a school-like season, the TIEU LUAN MOI download : skknchat@gmail.com 36 Financial Statement Analysis demand for stationery supplies is high, so, the ending number of recevable is higher than the average 2.2 Liquidity of inventory Days' Sales in inventory Inventory turnover in days Inventory turnover Days' Sales in inventory Days' Sales in inventory: increased unevenly with 2018 increased sharply, but this is not a bad signal because the company is promoting export of goods The availability of large inventories will create conditions to meet the rising demand of customers Inventory turnover in days Inventory turnover TIEU LUAN MOI download : skknchat@gmail.com 37 Financial Statement Analysis The inventory turnover: is good because the ratios increase in recent years, indicating that the company is performing well and managing inventory effectively without being stagnant In 2018, this ratio was decreased, as mentioned above due to an increase in the available inventory by boosting exports This is not a bad sign 2.3 Operating cycle Operating cycle Net operating cycle Operating cycle Operating cycle: is generally on the decline, proving that the company is operating effectively The inventories are managed well without stagnation Reasonable credit policy which can help minimizes the risk of not earning money Net operating cycle 60 50 40 30 20 10 2014 2015 2016 2017 2018 2019 2020 Net operating cycle: has generally decreased with the lowest rate in 2019 Over the years showing that TLG has increased the efficiency of obtaining significant cash on the investments it made TIEU LUAN MOI download : skknchat@gmail.com 38 Financial Statement Analysis ANALYSIS OF DEBT-PAYING ABILITY Current Debt ratio Working capital Working capital turnover We can see that the company's working capital has increased over the years Especially in 2019 nearly doubled the previous year The increase in working capital shows that the business has increased its current assets by making profit, selling the company's long-term assets, increasing owner's equity, reducing inventories, The increase in working capital can help businesses pay off debt and invest more in business operations more easily Working capital turnover of 2018 is 4.4, and in 2019 is 3.32 Compared to the previous two years, we can see the decrease in working capital turnover in 2019 The decline in working capital turnover comes from many reasons And one of the main reasons that can be clearly seen from the TIEU LUAN MOI download : skknchat@gmail.com 39 Financial Statement Analysis company's trade receivables is that the company is having difficulty with customer receivables resulting in decreased working capital turnover Current ratio Acid ratio Cash ratio Current ratios of 2017, 2018, 2019 are 2.3 , 2.37 , 3.3 Looking at the ratio, we can see that the company can afford to pay Having sufficient shortterm assets to pay for short-term debts In short, the company has high solvency In 2018, the company's acid ratio was 0.99 less than But it was also in 2018, for the company's current ratio was 2.37 These two ratios are different because the current ratio does not include inventories It can be seen that the number of inventories in 2018 that is higher than every year affects the quick ratio However, in 2019, the company has a better way of managing inventories, reducing inventory, increasing quick solvency TIEU LUAN MOI download : skknchat@gmail.com 40 Financial Statement Analysis 41 It can be seen that in 2017, cash ratio is higher than 2018,2019 However, very few businesses have enough cash and cash equivalents to meet short-term debts For Thien Long is the same Cash ratio is less than Because the company uses these cash and cash equivalents to invest in business activities that generate higher revenue 3.2 Long-term debt ratio DEBT RATIO DEBT/EQUITY RATIO DEBT TO TANGIBLE NET WORTH TIME INTEREST EARNED DEBT RATIO 0 0 In 2019, Thien Long's debt to assets ratio is the lowest in years This shows that Thien Long increasingly has high financial autonomy, and also shows a lower level of corporate risk TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis DEBT/EQUITY RATIO 1.8 1.6 1.4 1.2 0.8 0.6 0.4 0.2 2014 2015 2016 2017 2018 2019 2020 As we can see, Thiên Long's D/E increases over the years, with the sharp rise in 2019 The reason came from the increase in long-term and short-term debt for the business invesment Thiên Long's Debt to tangible net worth in 2019 reached the highest peak in years It can make their lenders unsafe because the higher this ratio is, the higher it reduces the margin of safety in their loans TIME INTEREST EARNED 45 40 35 30 25 20 15 10 2014 2015 2016 2017 2018 2019 2020 TIEU LUAN MOI download : skknchat@gmail.com 42 Financial Statement Analysis The TIE of the company in recent years is very high.The production and business activities also create good cash flows This proves that Thiên Long has the ability to pay off interest quite positively 3.3 Other long-term debt ratio Current debt net worth ratio fixed assets equity ratio current debt/ net worth ratio fixed assets/ equity ratio Other Long-term Debt Ratio 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% current debt/ net worth ratio fixed assets/ equity ratio 2015 2016 2017 2018 2019 49.24% 44.70% 13.94% 39.09% 30.69% 24.06% 31.37% 33.92% 32.88% 25.69% current debt/ net worth ratio fixed assets/ equity ratio The current debt/ net worth ratio increased in 2017 and decreased in 2017,2019 In 2019 the low ratio indicates that the business has a low debt burden, which means it can easily cover or meet its debt obligation without having to sell a lot of assets The fixed assets/ equity ratio decrease from 2017 to 2019 The ratio is less than 1, it means that stockholders’ equity is more than the fixed assets and the stockholders’ equity is financing not only the fixed assets but also a part of the working capital ANALYSIS OF STATEMENT OF CASH FLOW (RATIO ANALYSIS) Operating cash flow/ Current Maturities of Long - term Debt and Current Notes Payable Operating cash flow to the Total Debt Operating cash flow per Share Operating cash flow to Cash Dividends 43 TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis Operating cash flow/ Current Maturities of Long - term Debt and Current Notes Payable 1.031121048 Since 2016, Thien Long has promoted and optimized the modern distribution system, by 2018, continues to promote the problem of expanding warehousing, meeting the demand for increased production and timely delivery to the country, the company actively strengthen longterm and short-term loans to meet the demand , which leads to an active cash flow rate on low-term and short-term debts However, in 2019, the structure of the company's operation is relatively stable and the company has transferred the whole land to 58.9 billion, so the proportion is increasing in the positive trend 0.7 0.6 0.5 0.4 0.3 0.2 0.1 From the end of 2016 to 2018, Thien Long borrowed long-term and short-term debts to serve the purpose of expanding manufacturing processes, warehousing, improving production process quality and investing for fixed assets, so the total debt increased dramatically resulting in the proportion of cash flow operations on gross debt tends to lag very rapidly , and bottom 2018 But in 2019, the proportion of cash flows doing business on the total amount of debt skyrocketed, the principal cause of Thien Long's cash activity in this year was increasing in previous years, this demonstrates the company is profitable and is on the momentum of good growth 44 TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis Operating cash flow per Share 9000 8000 7000 6000 5000 4000 3000 2000 1000 During the period from 2015 to 2019, in 2016, Thien Long group reached the rate of cash flow operating on the highest number of circulating stocks, partly caused by shares in the year reached the highest level within the last years Moreover, due to its main business, the positive and well-working capital management has helped to achieve this indicator However, in 2017 and 2018, the score is remarkly downtrend because capital has largely invested in fixed assets to improve the quantity and quality of products Operating cash flow to Cash Dividends 1.404006584 1.5 0.430257589 0.5 2019 2018 2017 2016 2015 The active cash flow on dividends is payable to shareholders descending from 2015 to 2018, and significantly increased from 2018 to 2019 This trend shows that within years from 2015 – 2018, the number of dividends paid to shareholders in this period is declining because the company is spending money on investing in FIXED assets and scaling production In 2019, however, because the economic situation is steadily being returned, the cash flows of business activities spike so the proportion of the trend is positive 45 TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis REFERENCES https://www.reuters.com/companies/603899.SS/financials/balance-sheet-annual Palepu, Healy Business analysis & valuation Charles H.Gibson.Financial Reporting & Analysis Charles W.L.Hill, Gareth R.Jones, Mellisa A Schilling Strategic manangement TIEU LUAN MOI download : skknchat@gmail.com 46 ... GENERAL INTRODUCTION TIEU LUAN MOI download : skknchat@gmail.com Financial Statement Analysis INTRODUCTION Thien Long Group, formerly known as Thien Long Ballpoint Pen Establishment, was established. .. year The increase in working capital shows that the business has increased its current assets by making profit, selling the company's long- term assets, increasing owner's equity, reducing inventories,... 2018 But in 2019, the proportion of cash flows doing business on the total amount of debt skyrocketed, the principal cause of Thien Long' s cash activity in this year was increasing in previous