(TIỂU LUẬN) GROUP ASSIGNMENT FINANCIAL ANALYSIS SABECO

GROUP ASSIGNMENT FINANCIAL ANALYSIS SABECO Lecturers: Vo Hong Duc & Tu Thi Kim Thoa Group: Class: CF-T321WSB-4 Video presentation: https://youtu.be/cPMmv3by-Z0 TABLE OF CONTENTS A Introduction B Analysis of Profit/Loss and Balance Sheet Balance Sheet Income statement C Ratio Analysis 14 Liquidity ratios 14 Leverage ratios 15 Efficiency ratios 16 Profitability ratios 17 Market value ratios 18 D Conclusion .20 E References .21 F Appendices 22 Appendix #1 Shareholder structure 22 Appendix #2 Ten biggest subsidiaries of SABECO 23 A INTRODUCTION Food and beverage is a highly competitive industry in Vietnam with many domestic and foreign actors Both big brands and many smaller brands all try to compete for a larger market share Nonetheless, SABECO is a distinct brand from the rest, with a century-long history, a massive balance sheet, and some desirable financial ratios SABECO is a Vietnamese corporation, fully known as Saigon Beer – Alcohol – Beverage Corporation The company's head office is on the 5th Floor, Vincom Center, 72 Le Thanh Ton, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam While the postal address is fixed in one place, the internet address can be accessed everywhere via In 1875, SABECO was founded by a French businessman named Victor Larue in Saigon, Indochina With a history of 147 years, SABECO is the oldest Vietnamese brand of any industry Since the first day, the primary business line has been producing and selling beer, alcohol, and other beverages, though the product portfolio has expanded dramatically At VND156,500 per share on October 22nd, 2021, SABECO is the 15th largest corporation listed in Vietnam, with a market capitalization of VND97,475 trillion SABECO is the largest alcohol producer with over 40 percent market share (VietnamCredit, 2020) SABECO was listed on the Ho Chi Minh Stock Exchange (HOSE) with the ticker symbol SAB It first started trading on December 6th, 2016 As of December 31st, 2020, SABECO has 641,281,186 outstanding shares and charter capital of VND6,413 trillion SABECO has worked closely with KPMG as its independent audit firm since 2018 SABECO used to be a state-owned company with Vietnam's Ministry of Trade and Industry owning 89.59 percent as of September 2012 In 2018, Vietnam Beverage Company Limited, a subsidiary of ThaiBev, bought the majority of shares in SABECO Therefore, SABECO is now foreign-owned at 62.71 percent (Appendix 1) The board of directors has seven members, three of which are foreigners The chairman of the company is Koh Poh Tiong, a senior Singaporean businessman SABECO has 26 subsidiaries and 18 associates and joint ventures The three biggest subsidiaries are Sai Gon Beer Trading Company Limited, Sai Gon - Ha Tinh Beer One Member Company Limited and Sa Be Co Mechanical Company Limited (Appendix 2) B ANALYSIS OF PROFIT/LOSS AND BALANCE SHEET million VND BALANCE SHEET SABECO Current Assets HABECO YOY Growth Figure 1: Current assets comparison 1.04% 3.03% 7.42% 13.97% Cash and cash equivalents Short-term financial investments Short-term receivables Inventories Other short-term assets 74.56% Figure 2: SABECO current assets in 2020 As shown in Figure 1, SABECO had a vast number of total current assets, gradually growing from VND13.6 trillion to VND19.5 trillion between 2017 and 2020 This rising pattern was due to SABECO’s sustainable increase in short-term financial investments throughout the years Noticeably, current assets increased by a dramatic 30.46 percent in 2019 Meanwhile, there was a downward pattern in HABECO’s total short-term assets with its lowest number of VND4.1 million VND trillion in 2019 SABECO Long-term Assets HABECO YOY Growth Figure 3: Long-term assets comparison Unlike current assets, SABECO did not invest a lot in its long-term assets and there was a slight decrease throughout the years with its most noticeable decline of 7.82 percent Relatively, the value of long-term assets shrunk over the years from VND8.3 trillion to VND7.8 trillion The reason was that SABECO hardly built any new fixed assets while accumulated depreciation kept increasing Similarly, there was a downward trend in HABECO’s long-term assets, from VND4.2 trillion to VND3.2 trillion milliom VND SABECO Current Liabilities HABECO YOY Growth Figure 4: Current liabilities comparison SABECO’s current liabilities decreased throughout the years with its most significant decline of 19.94 percent from 2017 to 2018 Overall, the figure went down from VND7.4 trillion to VND5.1 trillion over the period The reason was due to the fall in short-term borrowings and financial leases and other short-term payables There was also a similar downward trend in million VND HABECO’s current liabilities but to a greater degree Figure 5: Long-term liabilities comparison Contrary to current liabilities, the long-term liabilities of SABECO grew fivefold over four years to approximately VND1 trillion due to long-term borrowings and financial leases Nonetheless, this amount of liabilities was much lower than its assets, which means SABECO could comfortably cover the debt and interest expenses In comparison, HABECO’s long-term million VND liabilities steadily declined from VND 0.5 trillion to VND0.2 trillion between 2017 and 2020 Figure 6: Owners' equity comparison As shown in Figure 6, SABECO’s stockholder increased from VND14.1 trillion to VND21.2 trillion, thanks to the accumulated retained earnings Similarly, there was an increase in HABECO’s stockholder’s equity but at a slower rate The reason behind this trend was also due to undistributed earnings after tax, making up for declines in other accounts Overall, looking at the horizontal common-size analysis of the two enterprises, it is evident that SABECO performed better than HABECO over the period surveyed In terms of assets and liabilities, SABECO’s total assets had a more gradual increase and it exceeded total liabilities with a greater extent than HABECO This means that SABECO had a more positive net worth and could be considered financially healthy with lower risk and more revenue Regarding stockholder's equity, SABECO also showed a more rapid growth, which indicated that the company might effectively sustain and grow profits Table 1: SABECO vertical common-size balance sheet Common size balance sheet Current assets Non-current assets 8,000 7,000 VND 6,000 5,000 4,000 3,000 2,000 1,000 Figure 13: Earnings per share/EPS comparison Both companies recorded fluctuating profits between 2017 and 2020 It is noteworthy that in 2020, even when SABECO recorded a 26 percent drop in revenue, its after-tax profit only fell 6.5 percent That shows the company was able to scale down its expenses to adapt to the difficult time More surprising is that HABACO recorded growth in profit at 21.5 percent in the same year The increase was due to the profitable non-operating business line of the company, which was not discussed thoroughly in its financial statements SABECO recorded higher EPS over HABECO two to three times A higher ratio suggests greater value because investors will pay more for its stock if they think the company has higher profits relative to its share price Nonetheless, SABECO's EPS remained around VND7,000 over four years, suggesting it did not improve its market position a lot 12 C RATIO ANALYSIS LIQUIDITY RATIOS 1.85 1.58 0.58 2017 Cash Ratio Figure 14: SABECO liquidity ratios 1.18 0.97 0.48 2017 Figure 15: HABECO liquidity ratios From 2017 to 2020, SABECO doubled its current ratio from 1.85 to 3.77, mainly due to an increase in short-term assets from VND13.6 trillion to VND19.5 trillion This ratio was more than enough to meet the company's current obligations since an ideal current ratio is between 1.5 and (Babalola & Abiola, 2013) Nonetheless, the cash ratio remained relatively stable, meaning a slight change in cash and cash equivalents The reason for a significant increase in short-term assets was the change in short-term financial investments, from VND6.5 trillion to VND14.5 trillion They are primarily short-term bank deposits of less than a year The liquidity ratios of SABECO are much higher than those of HABECO, except for the cash ratio Nonetheless, higher liquidity ratios not translate to better ratios Notably, a current ratio at 3.77 means SABECO may be overly focused on liquidity, which can be used for effective capital expenditure or business expansion instead 13 LEVERAGE RATIOS million VND 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 Figure 16: SABECO debt ratio The debt ratio of SABECO gradually fell over for years, reaching 22.50 percent in 2020 In other words, capital financing in the company comes mainly from equity financing The biggest contributor was retained earnings after tax, which rose from VND5.8 trillion to VND12.3 trillion over the period 250 200 150 100 50 SABECO Interest Coverage HABECO Cash Coverage Figure 17: Coverage ratios comparison between SABECO and HABECO Figure 17 compares the ability to cover interest expenses for both companies It shows that SABECO is in a much stronger position, with interest coverage and cash coverage above 100 multiples However, SABECO recorded a sharp decrease in interest coverage in 2020 The reason was due to a substantial fall in earnings rather than an increase in debt 14 EFFICIENCY RATIOS 50 45 40 35 30 Days 25 20 15 10 Figure 18: Efficiency ratios by period comparison between SABECO and HABECO 45 Days 40 35 30 25 20 15 10 Payable Period Figure 19: SABECO operating cycle Figure 18 shows receivables and inventory periods for both companies SABECO posts a high level of efficiency due to strong sales and good inventory management Figure 19 shows the operating cycle of SABECO throughout 2018 and 2020 Even though the operating cycle became 15 longer, the cash cycle contracted from six days to one day This number is a prime ratio of efficiency Table 2: Comparison between SABECO and the F&B industry (Fusion Media Corp., 2021) Efficiency ratios (Trailing 12 months) Accounts receivable period Inventory period Total assets period Besides, as shown in Table 2, SABECO is slightly more efficient than the food and beverage industry SABECO has a high level of efficiency According to Bao (2021a), after the Thai investors bought SABECO, they implemented many comprehensive solutions to optimise inventory management and sales activities, improving business efficiency PROFITABILITY RATIOS 35% 30% 25% 20% 15% 10% 5% 0% SABECO Gross Profit HABECO Net Profit Figure 20: Profit margins comparison between SABECO and HABECO Both companies have had similar gross profit margin rates over the years, which remain between 25 and 30 percent This shows that the portion of the cost of goods sold in the beverage industry is high, whether for large or mid-sized companies However, when regarding net profit margin, SABECO seems significantly more profitable The reason is that SABECO has a significant amount of financial income, which was approximately VND1 trillion in 2020 and accounted for 3.45% of net revenue The financial income of SABECO is mainly from the interest income of bank deposits One surprising trend is that profit margins of both firms increased in 2020, which 16 was supposed to fall in the context of the Covid-19 pandemic According to Kim (2021), one reason was that alcohol ingredients such as barley, aluminium, and hops decreased in price in 2020, lowering the costs of goods sold 30% 25% 20% 15% 10% 5% 0% Figure 21: Return ratios comparison between SABECO and HABECO According to Rambe and Putry (2017), the return on assets (ROA) is a metric that assesses a company's ability to generate profits by utilising its assets A high ROA indicates that the firm can profit from relatively high-value assets Similarly, a high return on equity (ROE) demonstrates how well a firm manages its capital and measures the profitability of the investment made by company shareholders SABECO has ROA and ROE at around 20 and 25 percent, respectively These rates of return are considered highly attractive for a manufacturing firm like SABECO, according to Birken (2021), since they are asset-heavy companies MARKET VALUE RATIOS The P/E ratio reflects how much the market is willing to pay for a company now based on its previous or projected profits (Easton, 2004) In 2018, SABECO had a P/E ratio of 40, which means it traded 40 times its earnings The high multiple shows that investors expected the firm to grow much faster than the market However, the P/E ratio gradually decreased over time, as its market stock price dropped significantly As of September 2021, SABECO had a P/E of 20.02 (Bao, 2021b) Its stock was traded at a historically low price for two reasons (1) investors not have confidence in the hospitality industry and (2) the beer market had little room to grow 17 50 45 40 35 30 25 20 15 10 million VND Figure 22: Market ratios comparison between SABECO and HABECO Figure 23: Net worth comparison between SABECO and HABECO Figure 23 shows that SABECO had a market capitalisation of VND120 trillion, sixfold that of HABECO However, the net worth had gradually decreased over time, which was a negative sign for both The market capitalisation for SABECO contracted at a time when the Vietnamese stock market was booming For example, VN-Index grew 14.86 percent in 2020 thanks to the record number of new retail investors (Mai, 2020) However, during the same year, the stock price of SABECO fell 14.48 percent The EV multiples, which divide the enterprise value by its EBITDA, show the same pattern From the company perspective, a decreasing EV multiple means it is being valued less and less by the public 18 D CONCLUSION SABECO is a leading company in its industry, with a large balance sheet and high net profit margin However, SABECO is in its mature stage, in which growth is slow and steady The Covid-19 pandemic had a heavy toll on its financial performance in 2020 In terms of liquidity, SABECO has a high amount of current assets, more than enough to cover its current obligations The amount of liquidity may be too excessive and can be used for longterm investments Regarding leverage, SABECO has a low debt-to-asset ratio Most of the capital financing stems from shareholders’ equity Between 2017 and 2020, SABECO has improved its efficiency ratios, thanks to the Thai owners' overhaul in operation and inventory management SABECO is now a few points more efficient than its industry average Regarding profitability ratios, SABECO has similar gross profit margins to its competitors but a significantly higher net profit margin The reason is that SABECO has a high amount of financial income from interest deposits at banks Last, all market value ratios of SABECO have gradually decreased over the period examined It suggests that the market has lower confidence in the company’s prospects for growth The video presentation of this report can be found at: https://youtu.be/cPMmv3by-Z0 19 E REFERENCES Babalola, Y A., & Abiola, F R (2013) Financial Ratio Analysis of Firms: A Tool for Decision Making International Journal of Management Sciences, 1(4), 132–137 Bao, A (2021a, July 29) Sabeco (SAB): Nỗ lực tiết giảm chi phí, lợi nhuận sau thuế nửa đầu nă m tăng nhẹ lên 2.057 tỷ đồng bất chấp Covid-19 [Sabeco (SAB): Efforts to reduce costs, profit after the first half of the year still increased slightly to VND 2,057 billion despite Covid-19] Retrieved November 19, 2021, from cafef.vn website: https://cafef.vn/ sabeco-sab-no-luc-tiet-giam-chi-phi-loi-nhuan-sau-thue-nua-dau-nam-van-tang-nhe-len-2 057-ty-dong-bat-chap-covid-19-20210729204840221.chn Bao, A (2021b, September 4) Cổ phiếu Sabeco giảm sâu xuống 150.000 đồng/cp, khoản đ ầu tư tỷ USD để nắm quyền chi phối tỷ phú Thái “bốc hơi” phân nửa giá trị sau gần năm [Sabeco shares plummeted to less than 150,000 VND/share, the Thai billionaire's US$5 billion investment to take control has "evaporated" half of its value after nearly years] Retrieved November 19, 2021, from cafef.vn website: https://cafef.v n/co-phieu-sabeco-giam-sau-xuong-duoi-150000-dong-cp-khoan-dau-tu-5ty-usd-de-na m-quyen-chi-phoi-cua-ty-phu-thai-da-boc-hoi-phan-nua-gia-tri-sau-gan-4nam-20210831 095709415.chn Birken, E G (2021, April 5) Understanding Return On Assets (ROA) Retrieved from Forbes A dvisor website: https://www.forbes.com/advisor/investing/roa-return-on-assets/ Easton, P D (2004) PE Ratios, PEG Ratios, and Estimating the Implied Expected Rate of Retur n on Equity Capital The Accounting Review, 79(1), 73–95 https://doi.org/10.2308/accr.2 004.79.1.73 Fusion Media Corp (2021, November 21) Saigon Beer Alcohol Beverage Corp (SAB) Các Tỷ S ố Tài Chính Retrieved November 21, 2021, from Investing.com website: https://vn.inves ting.com/equities/saigon-beer-alcohol-beverage-corp-ratios Kim, G (2021, July 27) Cổ phiếu bia hồi sức? [When will beer industry stocks recover?] Retrieved November 19, 2021, from Báo Sài Gịn Đầu Tư Tài Chính website: https://www.saigondautu.com.vn/chung-khoan/co-phieu-sabeco-can-2-nam-de-hoi-suc-9 4058.html 20 Mai, P (2020, December 31) VN-Index chốt năm 2020 tăng 15% [VN-Index closes in 2020 increase 15%] Retrieved November 21, 2021, from Báo Thanh Niên website: https://than hnien.vn/vn-index-chot-nam-2020-tang-15-post1025114.html Rambe, M F., & Putry, Y (2017) The Influence of Return on Assets, Return on Equity, Current Ratio, Firm Size and Assets Structure on Capital Structure of Mining Companies That are Registered in Indonesia Stock Exchange The International Journal of Social Sciences an d Humanities Invention, 4(9) https://doi.org/10.18535/ijsshi/v4i9.04 VietnamCredit (2020) Vietnam Beverage Industry Report VietnamCredit F APPENDICES APPENDIX #1 SHAREHOLDER STRUCTURE Major Shareholders State Capital Investment Corporation Vietnam Beverage Company Limited Other shareholders Domestic Institutional Individual Foreign Institutional Individual TOTAL 21 APPENDIX #2 TEN BIGGEST SUBSIDIARIES OF SABECO No Name Sai Company Limited Sai Gon - Ha Tinh Beer One Member Company Limited Sa Co., Ltd Saigon Limited Saigon Company Limited Sai Trung Bo Trading Joint Stock Company Saigon Trading Company Binh Tay Stock Company Saigon Trung Stock Company 10 22 Sai Trading Company Gon Beer Be Beer Gon Beer Beer Joint Liquor Beer Trading Gon Beer Joint ... accessed everywhere via In 1875, SABECO was founded by a French businessman named Victor Larue in Saigon, Indochina With a history of 147 years, SABECO is the oldest Vietnamese... gains for SABECO between 2017 and 2020 Financial income increased over time and reached percent in 2020 Financial income mainly was interest income from term deposits at banks In 2020, SABECO received... equivalents Short-term financial investments Short-term receivables Inventories Other short-term assets 74.56% Figure 2: SABECO current assets in 2020 As shown in Figure 1, SABECO had a vast number