Song hong garment joint stock company course name financial management

UNIVERSITY OF ECONOMICS AND LAW FACULTY OF FINANCE AND BANKING ********* SONG HONG GARMENT JOINT STOCK COMPANY Course name: FINANCIAL MANAGEMENT Lecturer: HỒ THỊ HỒNG MINH Group Full name Student ID Phan Anh Tuấn K204041284 Trần Tấn Duy K204041263 Nguyễn Hồng Ngân K204041272 Phạm Bảo Linh K204041271 Nguyễn Ngọc Tú Quyên K204041277 December 2022 TABLE OF CONTENTS PART I: COMPANY INTRODUCTION Overview .3 History 3 Product 4 Industry .5 Shareholders .5 Organizational model PART II: FINANCIAL ANALYSIS Assets and capital structure changes over the years Song Hong Garment’s competitive advantage Song Hong Garment’s operational performance during 2017 - 2021 .11 The firm maintained high liquidity position and financial strength in the last years 16 ROE was volatile due to decreasing financial leverage and fluctuating profit margins 20 PART III: RISK ANALYSIS .22 Beta coefficient 22 PART IV: CONCLUSION 23 References 24 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supply chain, Song Hong aspires to strive to be a significant and renowned supplier of clothing and textiles + Mission: In order to keep up with the global trend of fashion textile and apparel supply, Song Hong is constantly searching for strategic development orientations and implementing flexible investments to accomplish this History Development journey 1988: Garment Factory 1/7 was founded directly under the State with 100 workers 1993: Changing name as Song Hong Garment Company 2001: The company relocated headquarters to 105 Nguyen Duc Thuan, Nam Dinh, and expanded into three garment factories utilizing 1500 people 2004: + Company started growing into six garment factories, employing a total of 3,600 people + Equitization results in the formation of Song Hong Garment Joint Stock Company 2006: + Launched a branch office in Hong Kong 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37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 + Constructed clothing manufacturers in the Xuan Truong district, a sum of workers is up to 6000 2010: Constructed clothing manufacturers in the Hai Hau district, employing 8000 people altogether 2014: Increased the charter capital up to VND 108 billion 2015: + Developed garments workshops in Nghia Hung district, bringing the total number of staff to approximately 11,000 with 18 clothing companies + Increased the charter capital twice up to VND 226.8 billion 2017: Increased the charter capital up to VND 234.14 billion 2018: Increased the charter capital up to VND 476.28 billion November 28th, 2018: Officially traded on Ho Chi Minh Stock Exchange (HOSE) 2021: Commencement of construction of Song Hong 10 factory in Nghia Phong commune, district Nghia Hung, Nam Dinh province in early 2021 Song Hong 10 factory completed by the end of December 2021 Product Garment Export: Song Hong Garment is a garment manufacturing company that primarily exports to major clothing brands around the world The two main export methods the company is implementing are CMT (processed goods) and FOB (exports by shipboard delivery method) The FOB segment currently accounts for the majority of the company's revenue and profit structure Song Hong Garment has over 30 years of construction and development experience, producing a wide range of products from knitting to weaving, sports, fashion for men, women, and children, with rich categories such as skirts, pants, jackets, t-shirts, blue suits, sports clothes, felts, and so on The company is currently the production partner of fashion brands, manufacturers, and large retail chains such as Columbia Sportswear, Haddad Brands (with Nike, Converse, and Levi's), GIII (with Calvin Klein brands, Tommy Hilfiger, and DKNY), Walmart, Bugatti, SAE-A Trading, Target, and Express Domestic production: The main commodity of the domestic sector is the group of blankets - sheets - pillows and cushions and is mainly distributed in the domestic market 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Others 22.195.340 44,38% Domestic 17.133.670 34,26% Foreign 5.061.670 10,12% TOTAL 50.009.400 100,00% Individuals 38.045.880 76,08% Organizations 11.963.520 23,92% 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 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QA department Financial accounting department Others 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 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downward whereas the trend for inventory had been upward and by the end of 2021, their difference in proportion of total assets was nearly 15%, with 29.3% for inventory and only 15.6% for net fixed assets We believe this convergence is due to the fact that ever since the operation of Nghia Hung factory in 2016, the firm had not expanded its production capacity by investing in new factories, but instead purchase more inventory and exploit its existing production complex comprising 18 factories with 155 sewing lines as the main source for revenue growth The operation of Nghia Hung factory in 2016 also explains the high proportion of net fixed assets in the company’s balance sheet in 2017 As of 2021, Song Hong Garment’s assets are mainly funded using short-term liabilities (47.74%) and shareholder’s equity (46.7%), the rest is long-term liabilities Observing the total capital chart, we can see that there is also a convergence between the two main funding sources In 2017, 60.2% of the firm’s capital was short-term liabilities while shareholder’s equity only comprised 31.72% However, after years, this has changed to 47.74% for short-term liabilities and 46.7% for shareholder’s equity 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 The reduction in short-term liabilities proportion is due to the lowering level of short-term debt from 722.915 billion VND in 2017 to 552,060 billion VND (a 23.63% reduction) in 2021, while the increase in shareholder’s equity is due to the rise of share capital and retained earnings from 238,140 billion VND and 391,315 billion VND in 2017 to 500,094 billion VND (an 210% increase) and 736,020 billion VND (an 188% increase) in 2021, respectively This convergence shows that the company is relying less on short-term debt and makes use of its long-term funding source more It also improves Song Hong Garment’s liquidity since short-term debts are interest bearing and they mature within a year so having less of them will reduce short-term cash outflows In the past, the proportion of long-term liabilities in total capital was larger (in 2015, it was 17.75%) but it had decreased greatly over the years and by 2021 it accounted for only 5.57% of total capital This reduction is consistent with the strategy of exploiting existing factories and increasing inventory, which does not require much long-term funding instead of building new facilities during 2017 – 2021, which generally requires more long-term liabilities Song Hong Garment’s competitive advantage In Vietnam, the scale of the fiber industry and ancillary industry is not commensurate with the development of the textile industry, so the supply of raw materials cannot meet production needs of textile firms For that reason, most raw materials used in production are still imported, with the largest suppliers coming mainly from China The cost of goods sold of companies operating 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 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during its trade war with the US The price reduction persisted until Covid struck in 2020, causing strains in the global supply chain and increasing the price of many commodities, including cotton Therefore, Song Hong Garment’s cost of goods sold in 2020 – 2021 increased slightly to 80.31% and 80.4% 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 We can see that the company managed to keep a stable gross profit margin of 19.6% in the last years, this figure is higher than gross profit margin in 2017 which is 17.18% despite the increase in raw material cost This is due to the change in production strategy during the period focusing more on the FOB sector than the CMT sector The revenue from the FOB sector accounts for 71.43% of the firm’s total revenue in 2017 and in 2021, this figure is 83.55% Since the FOB sector has a higher profit margin (about 20% while the CMT sector only yields 16%), focusing more on it offers Song Hong Garment a higher gross profit margin over the long run and this is also one of the company’s competitive advantages 10 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 Song Hong Garment’s operational performance during 2017 - 2021 The company’s operating performance in the last years can be broken down into periods The first period is 2017 – 2019 and the second is 2020 – 2021 During the first period, the firm's main operating activities include purchasing raw materials, producing and selling finished goods without investing in fixed assets, which explains the convergence between inventory and net fixed assets Annualized revenue growth from 2017 – 2019 was +10.36% while annualized earnings growth was an impressive +30.94%, especially in 2018, when earnings growth was +84.56% YoY We believe the high growth in revenue and net profit was due to the 30% increase in inventory in 2017, the focus on the FOB sector with higher profit margin and the operation of Nghia Hung factory in the prior year, which allowed the firm to increase production and sell a greater quantity of finished goods It is also during this period that the main raw material for textile firms – cotton witnessed a decrease in price, which improved Song Hong Garment’s gross profit margin and thus contributed to the high growth in net profit The company’s operating cash flow during 2018 and 2019 were 373,941 billion VND and 619,957 billion VND, which represents two whopping 158.6% and 65.8% increase, respectively However, cash and cash equivalents underwent a fall in those years from 344,148 billion VND in 2017 to 237,680 billion VND in 2019, which means the excess cash had been used for other purposes As shown in chart 5, the cash and cash equivalent line goes down during 2017 – 2020 11 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 while the inventory and short-term financial investment lines go up At the same time in chart 6, the company’s short-term debt line goes down while the retained earnings line goes up The data suggests that Song Hong Garment had used the excess cash created in its successful years to replenish inventory and at the same time make short-term deposits in banks to earn interest It also used the cash to pay off some of its existing short-term debt, as shown in chart 10 where cash outflow from borrowing increased 8.8% and 10.3% in 2018 and 2019, respectively We believe the increase in deposits and reduction in short-term debt is consistent with the firm strategy during the period, because the company did not plan to invest in fixed assets, so it would be better to put the excess cash in banks and pay off debt It also explains the convergence of short-term debt and retained earnings, since Song Hong Garment recorded high net profit, it would reinvest the earnings and use it as a long-term, sustainable fund and as a result rely less on short-term debt The reduction in short-term debt reduced financial expenses from 49,046 billion VND in 2017 to 18,187 billion VND in 2020 (chart 7) 12 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 We will now analyze the firm operating performance in the second period from 2020 – 2021 The year 2020 is when Covid first struck the world economy and caused disruptions to global supply chains As an exporter, therefore, Song Hong Garment was negatively affected by the reduction in sales and net profit, which were -13.55% YoY and -48.47% YoY, respectively due to lack of new orders and high transportation expenses The firm’s inventory had been relatively stable during 2018 – 2020 (chart 5) However, a closer look into the components of inventory actually revealed managers confidence and future outlook about the performance of the company In 2018, the company’s inventory increased 23.9%, this was mainly coming from the increase in raw materials (+43% YoY) and the increased in work in process (+37.4% YoY), finished goods only increased 12%, which means the company was expecting that it would receive more orders and produce more finished goods in the next operating year In 2020, the situation is quite different, and that is although inventory did not change much, we can see that raw materials had been declining and by the end of the year, its value was 163,800 billion VND, which was even lower than in 2017 At the same time, finished goods spiked 32.4% YoY because there was a lack of new orders, textile firms could not sell very well so finished goods piled up, and since there were excess finished goods, there was no need to increase production leading to the decline in raw materials 13 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 The prospect for Song Hong Garment quickly changed in 2021, specifically in the fourth quarter After the major lockdown in the third quarter and the suppressed demand from the market in almost years, the firm recorded an 54% increase in revenue and an 61.6% increase in net profit in the final quarter Vietnam’s export growth for textile products in that last quarter was +22.28% YoY, higher demands prompted even higher growth in inventory, which was +52.6% YoY at the end of the year During 2021, the company underwent many major changes in assets and capital One of them is the growth of long-term assets in process (+1013.61% YoY, chart 5) which represents the construction of Song Hong 10 factory, indicating the need to expand production even more, this is also expressed through the 154.7% YoY increase in capital expenditure (chart 9) The firm realized the potential of higher demands in 2022 after years of lockdown, so we can see inventory and long-term work in process going up, funding these major assets growth during the year were cash and debts (including both short-term and long-term debts) 14 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on more debts (chart 6, long-term debt increased significantly after declining for years to fund the construction of Song Hong 10) 15 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 The firm maintained high liquidity position and financial strength in the last years Song Hong Garment did not suffer from liquidity problems during 2017 – 2021 as its current ratios were all higher than in years This is due to the excess cash received from the two successful business years 2018 and 2019, and also due to the fact that the firm did not invest much in new factories, so most of the cash goes to short-term investment and pays off short-term debt, which increases current assets and at the same time reduces short-term liabilities As of 2021, the firm’s current ratio was 1.62, much higher than the industry average 1.34 Observing chart 11, we can see that the three liquidity ratios all increase from 2017 to 2021, indicating that the firm is sustaining enough liquid assets to cover short-term obligations In 2021, all three ratios fell as the firm took on more short-term liabilities and the amount was enough to offset the substantial increase in account receivable and inventory that year However, the cash ratio experienced a sharper decline than that of the current ratio and the quick ratio This is because both account receivable and inventory are not included in the calculation of the cash ratio As for the turnovers, both receivable turnover and payable turnover went up during 2017 – 2021 while the inventory turnover was relatively stable (chart 13) A stable inventory turnover shows that inventory was increasing at the same rate as cost of goods sold, which indicates that the firm’s products sold well, and demands were strong At the end of 2021, the firm’s inventory turnover was 4.91, a bit higher than the industry average, which was 4.75 Receivable turnover increased from 7.9 in 2018 to 9.48 in 2019 as revenue for Song Hong Garment that year rose 11.65% whereas account receivable declined 18.32% The decrease in account receivable mainly came from the collection of cash from Columbia Sportswear company 16 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 Further analysis into account receivable (chart 12) shows that Song Hong Garment recorded a significant amount of receivable up to 170.33 billion VND from EFM Commercial Offshore company in 2020 but the firm realized a collection risk from this increase so it recorded an allowance of 181.7 billion VND, leading to the decline of receivables that year, hence the high turnover was sustained at 9.36 In 2021, Song Hong Garment sold the receivables from EFM Commercial Offshore company and terminated the high allowance established in 2020, it was also during 2021 that the firm expanded its business with US biggest retailer – Walmart corporation, which was expressed through a 202 billion VND increase in account receivable This time Song Hong Garment did not record any allowance, which explained the high growth in receivable that year (+67.9%) However, receivable turnover in 2021 only fell a little to 8.95, still higher than the 8.54 industry average since revenue that year also recognized an 24.5% increase 17 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 The increase in payable turnover during 2017 – 2021 indicated that the firm was paying off suppliers at a faster rate than before, this is to be expected given the large amount of excess cash obtained from the two successful business years 2018 and 2019 From our prior analysis, we learned that most of the cash received was used to purchase inventory, deposit in banks as shortterm investment, pay off short-term debt and other current liabilities, including account payable Since Song Hong Garment actively paid off suppliers at a faster rate, account payable average annual growth rate in the last years was only 1.46%, which was a lot lower than the firm’s inventory purchase growth rate (+ 7.85%), explaining the big jump in payable turnover from 16.74 in 2017 to 22.72 in 2021, a lot higher than industry average of just 9.76 Having a higher payable turnover increases the company’s cash conversion cycle as of 2021 to 99 days, which is higher than industry average of just 83 days However, it is least likely to affect the firm short-term liquidity situation given the high amount of cash on hand accounting up to 12% of total assets In fact, the high payable turnover in this case even represents Song Hong Garment’s superior ability to settle debt quicker than its peers Observing chart 14, we can see that during 2017 – 2021, liability as a component of total capital has dropped from 70% to 60%, indicating that the company was using less financial leverage, which makes sense as Song Hong Garment actively paid off short-term debts while accumulating retained earnings as a long-term funding source It was also because the firm did not invest in any new factories that long-term liability fell from 191.93 billion VND in 2017 to in 2020 before rebounding back to 178.41 billion amid the construction of Song Hong 10 Most of the decline in liability proportion was due to the significant reduction in short-term liability proportion from 50.43% in 2017 to just 36.11% in 2021 and then again most of the decline in short-term liability proportion was due to the major reduction in short-term debt as a proportion of short-term liability from 58.56% in 2017 to just 46.56% in 2021 It seemed that not only did 18 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 Song Hong Garment have a strong liquidity base to deal with any short-term obligations but its financial strength had also improved over the years We will now analyze how this change affects the firm’s profitability Most of the company’s profitability ratios were increasing during 2017 – 2019 but they all then contracted in 2020 when Covid 19 struck before recovering in 2021 Song Hong Garment’s gross profit margins were always higher than 17% in the last years, and in the last years it was never lower than 19.5% As for net profit margin, given normal operating conditions it fluctuated between 9.3% and 10.2%, the company’s net profit margin in 2021 was 9.32% Comparing the firm’s gross profit margin and net profit margin with industry average of 13.24% and 4.6%, respectively, the data had reflected Song Hong Garment’s competitive advantage in focusing more on the FOB sector which yields higher than the CMT sector when most other peers still have relatively high proportion of revenue in the CMT sector Another competitive advantage is that the firm’s main exporting market is the US, which is more profitable than other markets, and while other companies in the industry also chose the US as their main exporting country, the proportion of revenue coming from the US for these companies is still a lot lower than that of Song Hong Garment 19 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 ROE was volatile due to decreasing financial leverage and fluctuating profit margins Both ROA and ROIC have increased during 2017 – 2021, this is to be expected since the company’s annual profit growth for the last years was 17.16%, whereas average annual growth for total assets and invested capital were 6.11% and 16.68%, respectively On top of that, at the end of 2021, the firm’s ROA was at 15.18%, which is much higher than the 6.42% industry average, also the firm’s ROIC was at 21.24%, which is higher than the 15.84% industry average as well Song Hong Garment’s ROE in the last years has been relatively volatile In 2018 it rose significantly from 28.45% to 43.79%, this increase was due to the high improvement in net profit margin from 6.11% to 9.36% amid stronger demands after the operation of Nghia Hung factory 20 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 Asset turnover that year also grew from 1.43 to 1.61 but the decline in financial leverage from 3.24 to 2.9 most likely had offset that increase towards ROE From 2018 to 2020, ROE had been falling and by 2020 it was just about 17.31% This was because net profit margin decreased sharply from 10.2% to 6.08% as Covid 19 negatively affected the firm’s margins by incurring greater costs and asset turnover that year also dropped from 1.73 to 1.46 However, we believe the main contributing factor was the financial leverage as it had been shrinking from 2.9 in 2018 to just 1.93 in 2020 We learned from before that during 2017 – 2020, Song Hong Garment had been paying off debts and other payables while at the same time accumulating retained earnings for long-term use so it came as no surprise that financial leverage would decrease that much In 2021, ROE recovered back to 30.12% as net profit margin surged to 9.32% and asset turnover rebounded to 1.63 This figure is again higher than industry average, which is only 17.84% 21 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 PART III: RISK ANALYSIS Beta coefficient Historical data Year rM (VNINDEX) Market's closing priceend of the year Market's initial price of the year of rMSH 2018 -10,37% 892,54 995,77 -5,56% 51 54 2019 7,76% 960,99 891,75 8,05% 44,3 41 2020 14,19% 1103,87 966,67 -10,18% 39,7 44,2 2021 33,72% 1498,28 1120,47 31,40% 79,1 60,2 Beta MSH's closing MSH's initial price-end of the price of the year year 0,7711 (source: Cafef) A stock's tendency to move in lockstep with the market is determined by its beta coefficient, or b We frequently utilize historical data and expect that the stock's historical beta will provide us with a good prediction of how the stock will move relative to the market in the future because we are unable to see into the future (Brigham & Houston, 2022) In 2018, the rate of return of the market (VNINDEX) was negative 10,37 percent, plus, MSH just had its IPO at the end of November 2018 and its return dropped to negative 5,56% Both the market and MSH went up sharply to 7,76% and 8,05%, respectively, the two rates were almost the same in 2019 In 2020, the market continued to soar to 14,19%, however, MSH once again 22 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.99 37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.C.33.44.55.54.78.655.43.22.2.4.55.2237.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.55.77.77.99.44.45.67.22.55.77.C.37.99.44.45.67.22.66 went down to -10,18% And last year 2021, the market’s return increased significantly to 33,72%, while MSH jumped to 31,40% Those two incidents also led to the fact that MSH with beta, b=0,77, which was less than 1, so we had the conclusion that MSH was less risky than the average When the market fluctuated, MSH also varied but less dramatically From our point of view, MSh can be considered as a good option for the risk averse and risk neutral PART IV: CONCLUSION In 2021, Vietnam's textile and garment export value will reach $39 billion (up 11.2% compared to the previous year), recovering strongly after a decrease of 10.2% in 2020 In 2022, Vietnam's textile and garment industry set the export turnover target of 43.5 billion USD While many other textile and garment enterprises, the issue of labor resources and labor shortage were mentioned a lot, significantly affecting their production and business activities, at MSH this situation did not happen After more than seasons of the Covid-19 pandemic, Song Hong Garment always kept the factory and all nearly 15,000 employees safe, without interruption of production During the opeartion, the company's revenue from sales in 2021 reached VND 4,749 billion, up 24% over the same period Meanwhile, expenses reached VND 144 billion, up only 6%; More impressively, administrative expenses decreased by 21% to 298 billion VND As a result, the Company recorded 542 billion VND of pre-tax profit, up 92%; profit after tax reached 442 billion VND, up 91% over the previous year The increase in revenue and profit in 2021 compared to 2020 due to the company saving production costs, which reduces the cost of capital Company is doing great in operating, so that departments should keep up and develop more strategies to accomplish their target as soon as possible Even though Covid-19 had made a huge loss on the Vietnamese economy for the past few years With the results of 2021, the Company has regained the revenue growth rate as before the Covid19 pandemic Obtaining a number of stable customer, more orders from both domestic and oversea 23 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