Valuation of the four leading pharmaceutical companies listing on hochiminh stock exchange,masters thesis

Dissertation submitted in partial fulfillment of the Requirement for the MSc in Finance FINANCE DISSERTATION ON Valuation of the four leading pharmaceutical companies listing on Hochiminh Stock Exchange LE HUONG HAO ID No: 17970732 Intake Supervisor: Dr Tran Tat Thanh September 2018 ACKNOWLEGEMENT I would like to express my sincere thanks to Dr Tran Tat Thanh for his supervision and guidance His suggestions made my dissertation more profound and more perfect Finally, I wish to show an expression from my heartfelt gratitude to my parents for their encouragement, and their support TABLE OF CONTENT Title………………………………………………………………………………… Acknowledgement………………………………………………………………ii Table of contents……………………………………………………………… iii Chapter 1: Introduction…………………………………………………………1 Chapter 2: Macroeconomics Analysis………………………………………… Chapter 3: Industry Analysis………………………………………………… 21 Chapter 4: Competitive Analysis………………………………………………26 Chapter 5: Traphaco Joint Stock Company………………………………… 32 Chapter 6: DHG Pharmaceutical Joint Stock Company…………………….43 Chapter 7: Pymepharco Joint Stock Company……………………………….54 Chapter 8: Imexpharm CorporationJoint Stock Company…………………63 Chapter 9: Conclusion…………………………………………………………71 References………………………………………………………………………72 Appendices………………………………………………………………………73 iii CHAPTER 1: INTRODUCTION The Background of the Pharmaceutical Industry The pharmaceutical industry plays a crucial role in the worldwide healthcare systems It consists of different public and private companies which discover, develop as well as manufacture drugs and medications for both human and animal (Gennaro, 1990) The scientific research and development (R&D) of medicines which preclude or treat diseases is the main activity of the industry A variety of pharmacological activity and toxicological properties are displayed through drug substances (Hardman, Gilman and Limbird, 1996; Reynolds, 1989) Due to modern scientific and technological advances, the discovery and development of innovative pharmaceuticals are hastened in order to improve therapeutic activity and reduce side effects 1.1 An overview of the global pharmaceutical industry In recent years, the global pharmaceutical industry has received an uncommon accelerated growth Its market is considered to develop perpetually The amount of money for healthcare spending over the world in 2040 was forecasted to reach to $24.2 trillion (Dieleman and colleagues, 2017) In an article, Dixon-Fyle and Kowallik (2010) predicted that most member countries of Organisation for Economic Co-operation and Development would expend more than 20% of Gross Domestic Product (GDP) on healthcare by 2050 Besides, the global aging population increases in size and emerging countries have the better conditions to access to healthcare According to a report by The Business Research Company (2018), in 2017, the revenue of the world pharmaceutical market was recorded at $934.8 billion and a 5.8% rise from 2016 This figure showed a surge in comparison with 5.2% in the previous period However, the change was not as fast as those for other two larger segments including medical equipment and healthcare services In general, there is a more than 7% of the whole healthcare last year In the report, the growth momentum of the pharmaceutical market in the world is expected to develop continually and attain $1,170 billion in 2021 1.2 An overview of Vietnam pharmaceutical industry Vietnam pharmaceutical industry has the same trend as the global pharmaceutical industry The pharmaceutical market in Vietnam has had a dramatic increase in the last decades It is arranged one of 17 pharmerging markets which have the highest growth rates in the world (Bui, 2018) In 2017, Vietnam pharmaceutical market was estimated to worth $5.2 billion and it grew 10% from last year This rate was lower than the average rate from 2010 to 2015 (14.6%) The compound annual growth rate (CAGR) of pharmaceutical market in Vietnam between 2012 and 2017 was up to 19.7% This figure was higher than the average CAGR of countries in Asia-Pacific region (P.V, 2018) It is anticipated that the double-digit growth is maintained until 2025 (Quynh, 2018) Traphaco Joint Stock Company, DHG Pharmaceutical Joint Stock Company, Pymepharco Joint Stock Company, and Imexpharm Coporation is dominating Vietnam pharmaceutical industry The market share of most four prestigious pharmaceutical companies accounts for more than 50% of Vietnam market Area of the Study This study is proposing to analyse the performance as well as evaluate the intrinsic values of the four in five leading companies in Vietnam pharmaceutical market, namely Traphaco Joint Stock Company, DHG Pharmaceutical Joint Stock Company, Pymepharco Joint Stock Company and Imexpharm Corporation Except for the global market, the analysis refers to Vietnam market which is the main region From the above -mentioned analyses, the dissertation aims to gain a better understanding of the leaders in Vietnam pharmaceutical industry and provide investment recommendations for investors regarding these firms Study Objectives In the study, I will show the “whole picture” of the global pharmaceutical industry, Vietnam pharmaceutical industry and make investment recommendations Initially, I give the current overview of the global pharmaceutical industry and Vietnam pharmaceutical industry where is the products are consumed mainly After that, I evaluate the impacts of major macroeconomic factors as well as the pharmaceutical industry both on global and in Vietnam In the next, I will analyse the competition in Vietnam market and the financial ratios of the above companies Finally, after compute their intrinsic values, the investment recommendations is produced Methods of Study The study uses one of the most popular investment analysis approach namely top-down investing This method looks first at a broad view of the economy’s macro environment and then, summarises the general industrial situation After that, the four pharmaceutical companies are respectively analysed mainly based on their financial statements in order to assess their performances Macroeconomic analysis I use the PEST model (Political, Economic, Social, and Technological) in order to examine how main macroeconomic indicators influence the pharmaceutical industry in the world and in Vietnam Industry analysis The study supposes the key pharmaceutical activities as well as the major pharmaceutical issues over the world and in Vietnam Competition analysis In this part, the Michael Porter’s Five Forces is used to analyse the competition in Vietnam which is the domestic market of the four companies Moreover, the current market trends which impact on the companies’ growth are pointed out Company analysis and valuation I will summarise the main ratios of the four firms in order to consider their financial situation and their profitability prospects through their financial statements, a number of different financial databases (such as OSIRIS, Statista, EvaluatePharma and so on), and some financial website (such as the World Bank, the United Nations, DCAT Value Chain Insights and so on) Additionally, I build valuation models with the objective of calculating their intrinsic values Organisation of Study Based on the proposed analytical framework, this study includes nine chapters In the first chapter, I will give a brief introduction to the study area and its purposes The second chapter concentrate on the current global macroeconomic and Vietnam macroeconomic In the next chapter, I shows the major events or issues of the global and Vietnam pharmaceutical industries The forth chapter will analyse the existing forces driving the competition in the market From chapter five to chapter eight, the business description, performance, and prospects for the future on each of the top four companies are presented These chapters also evaluate companies’ intrinsic values and highlight succinct recommendations for investors in respect of investing in these firms Finally, the ninth chapter summarises the report CHAPTER 2: MACROECONOMIC ANALYSIS The macro environment affect every business and every industry To analyse and monitor its impacts, people often use a framework or a tool namely PEST model In this chapter, I will examine its influences on both the global and Vietnam pharmaceutical industry through political, economic, social, and technological The changes in these four elements leads the changes in the pharmaceutical market The Global Macroeconomic As I mentioned above, the value of the global pharmaceutical market has grown rapidly in recent decade and it is forecasted to continually have the upward trend in the next years According to a market research company namely EvaluatePharma, there were an annual CAGR of only 1.2% increase in the prescription drug sales between 2011 and 2017 This figure is expected to climb nearly six fold from 2018 to 2024 in comparison with that in the previous period and the prescription drug sales is projected to reach $1.2 trillion in 2024 (EvaluatePharma, 2018) 1.1 Political factor Corporate tax reform in the US In December of 2017, a new tax policy was issued in the US and the new corporate tax is 21% which was fall from 35% in the previous period This has been a first large US tax reform since 1986 In the 2017 tax law, there is a reduction in the orphan drug credits that are intended to encourage the development of this drug type in treating rare diseases A credit may be required equal to 25% of qualified clinical testing expenses for one year by the pharmaceutical manufacturers Hence, the credit is not repealed and only limited However, the partial loss of this credit will be compensated with other advantages of the tax act Consequently, the impact of corporate tax reform on the industry is not perfectly adverse (FitchSolution, 2017) Brexit impacts In 2017, the decision to withdraw the European Union (EU) of the UK was announced and it was an important event occurred It led to a largest problem for the European pharmaceutical industry because the European Medicines Agency (EMA), which is the pharmaceutical regulatory authority of the EU, was located in the UK After a long consultative time, in November of 2017, the headquarters of EMA will be moved to Amsterdam in the Netherlands and it starts to operate in March of 2019 According to Arnum (2018), “nine associations representing the European and British pharmaceutical, biotechnology and over-the-counter medicines industries have stressed the importance of securing cooperation and a timely agreement between the UK and EU on medicines regulation as the parties negotiate trade policy post-Brexit” In 2018, the major issue is the negotiations of the UK related to the allaround exit plan, the next trade policy and their influences on the investment as well as the flows of products between the UK and the EU (Arnum, 2018) 1.2 Economic factor Gross Domestic Product (GDP) Depreciation/Amorti zation Other non Oper./Financial Items Profit Before Tax Income Tax Expense (24,086 (26,268 (28,646 (31,239 (34,066 (42,063 ,547.00 ,305.30 ,739.57 ,557.85 ,062.12 ,221) ) ) ) ) ) 1,011,0 1,102,0 42 36 1,201,2 19 1,309,3 29 1,427,1 68 1,555,6 13 322,64 377,64 8,686 2,676 414,40 1,009 454,49 2,125 498,16 7,844 535,01 8,525 (62,231 (75,528 (82,880 (90,898 (99,633 (107,00 ,317) ,535) ,202) ,425) ,569) 3,705) Profit after tax 260,41 302,11 7,369 4,141 331,52 0,807 363,59 3,700 398,53 4,275 428,01 4,820 Dividends 117,95 90,634, 7,731 242 99,456, 242 109,07 8,110 119,56 0,283 128,40 4,446 Retained earnings (for the year) 150,46 3,995 392,74 8,383 430,97 7,049 472,67 1,810 518,09 4,558 556,41 9,267 169,50 3,552 475,90 1,840 812,75 7,286 1,182,8 36,549 1,589,1 05,230 2,023,6 34,291 576,35 2,682 628,22 4,423 684,76 4,621 746,39 3,437 813,56 8,847 886,79 0,043 At cost 1,024,6 49,669 1,117,4 82,323 1,218,6 83,885 1,329,0 07,874 1,449,2 75,634 1,580,3 82,437 Depreciation (260,80 (284,89 (311,15 (339,80 (371,04 (405,11 4,036) 0,583) 8,888) 5,628) 5,186) 1,248) Statement of Financial Position Cash and marketable securities Other current assets (excl CMS) Non-current assets Non-current assets 763,84 5,633 832,59 1,740 907,52 4,997 989,20 2,246 1,078,2 30,448 1,175,2 71,189 Total assets 1,509,7 01,867 1,936,7 18,004 2,405,0 46,905 2,918,4 32,233 3,480,9 04,525 4,085,6 95,522 Current liabilities 380,75 2,818 415,02 0,572 452,37 2,423 493,08 5,941 537,46 3,676 585,83 5,407 Borrowings (debt) 78 10,101, 200 10,101, 200 10,101, 200 10,101, 200 10,101, 200 10,101, 200 962,16 8,321 962,16 8,321 962,16 8,321 962,16 8,321 962,16 8,321 962,16 8,321 156,67 9,528 549,42 7,911 980,40 4,960 1,453,0 76,771 1,971,1 71,328 2,527,5 90,595 1,509,7 01,867 1,936,7 18,004 2,405,0 46,905 2,918,4 32,233 3,480,9 04,525 4,085,6 95,522 377,64 2,676 414,40 1,009 454,49 2,125 498,16 7,844 535,01 8,525 Add back depreciation Subtract increase in current assets Add back increase in current liabilities Subtract increase in non-current assets at cost Add back after-tax finance costs Subtract aftertax finance income 24,086, 547 26,268, 305 28,646, 740 31,239, 558 34,066, 062 Free cash flow Shareholders' equity Accumulated retained earnings Total liabilities and equity Free cash flow calculation Profit after tax Valuing the firm Weighted average cost of capital Year (51,871 (56,540 (61,628 (67,175 (73,221 ,741) ,198) ,816) ,409) ,196) 34,267, 754 37,351, 851 40,713, 518 44,377, 735 48,371, 731 (92,832 (101,20 (110,32 (120,26 (131,10 ,654) 1,562) 3,989) 7,760) 6,802) 2,201,8 24 2,201,8 24 2,201,8 24 2,201,8 24 2,201,8 24 (4,425, 395) (6,853, 086) (9,519, 149) (12,406 (6,949, ,540) 380) 289,06 9,010 315,62 8,144 344,58 2,253 376,13 7,251 408,38 0,764 17.4 9% 79 289,06 9,010 FCF 315,62 8,144 344,58 2,253 376,13 7,251 Terminal value 5,243,0 51,032 289,06 9,010 Total NPV Add in year cash and mkt securities Enterprise value Subtract out value of firm's year debt (borrowings) Total equity value Number of shares Price 408,38 0,764 315,62 8,144 344,58 2,253 376,13 7,251 5,651,4 31,796 3,40 8,92 8,49 169, 503, 552 3,57 8,43 2,04 10,1 01,2 00 3,58 8,53 3,24 41,4 50,5 40 86.5 74 80 Appendix B DHG Pharmaceutical Joint Stock Company 1-YEAR PROJECTING MODEL Sales revenue growth Other current assets/Sales Current liabilities/Sales Non-current assets/Sales Cost of goods sold/Sales Depreciation rate Interest rate on debt (finance costs) Interest paid on CMS (finance income) Income (corporation) tax rate Dividend payout ratio Year Income Statement Sales revenue Costs of Goods Sold Financial Cost Finance income (interest earned on CMS) 10% 35.9% 31.1% 28.3% 53.6% 2.5% 147.2 % 5.5% 20% 30% 4,062,7 4,469,0 4,915,9 5,407,5 5,948,2 6,543,1 53,464 28,810 31,691 24,861 77,347 05,081 (2,179, 279,45 8) (2,397, 207,40 4) (2,636, 928,14 4) (2,900, 620,95 9) (3,190, 683,05 4) (3,509, 751,36 0) (93,411 (93,411 (93,411 (93,411 (93,411 (93,411 ,446) ,446) ,446) ,446) ,446) ,446) 81,400, 153,90 211,51 277,92 347,24 190,53 482 4,370.1 4,239.1 1,816.7 0,042.5 7,824.5 0 Other Operating Items (1,051, 677,24 1) (1,156, 844,96 5.10) (1,272, 529,46 1.61) (1,399, 782,40 7.77) (1,539, 760,64 8.55) (1,693, 736,71 3.40) Depreciation/Amorti (100,35 (44,981 (49,122 (53,668 (58,659 (64,140 81 zation 8,458) Other non Oper./Financial Items (178,22 (196,04 (215,65 (237,21 (260,93 (287,03 4) 6) 1) 6) 8) 2) Profit Before Tax 719,24 9,119 ,668.38 ,304.19 ,061.37 ,228.41 ,117.05 ) ) ) ) ) 930,29 1,651 1,075,2 1,237,7 1,412,7 1,372,3 38,924 26,587 42,074 16,238 Income Tax Expense (76,859 (186,05 (215,04 (247,54 (282,54 (274,46 ,807) 8,330) 7,785) 5,317) 8,415) 3,248) Profit after tax Dividends Retained earnings (for the year) 642,38 9,312 744,23 3,321 860,19 1,139 990,18 1,270 1,130,1 1,097,8 93,659 52,990 436,55 223,26 6,226 9,996 258,05 7,342 297,05 4,381 339,05 8,098 299,80 967,50 2,207 3,317 1,118,2 1,287,2 1,469,2 1,427,2 48,481 35,651 51,757 08,887 329,35 5,897 Statement of Financial Position Cash and marketable securities Other current assets (excl CMS) 1,480,3 2,313,6 3,284,2 4,409,1 5,699,7 6,930,4 92,360 80,597 92,489 27,893 39,378 43,967 1,458,7 1,604,6 1,765,1 1,941,6 2,135,8 2,349,4 92,579 71,837 39,021 52,923 18,215 00,036 Non-current assets At cost 1,741,0 1,900,8 2,076,3 2,268,9 2,480,4 2,712,6 61,302 72,476 07,235 18,998 16,298 78,294 Depreciation (592,76 (637,74 (686,87 (740,53 (799,19 (863,33 6,250) 7,918) 0,223) 8,284) 7,512) 7,629) Non-current assets Total assets Current liabilities Borrowings (debt) 1,148,2 1,263,1 1,389,4 1,528,3 1,681,2 1,849,3 95,052 24,557 37,013 80,714 18,786 40,664 4,087,4 11,129, 79,991 5,181,4 6,438,8 7,879,1 9,516,7 184,66 76,991 68,522 61,530 76,379 1,264,9 1,391,4 1,530,5 1,683,6 1,851,9 2,037,1 36,829 30,512 73,563 30,919 94,011 93,412 63,448, 63,448, 63,448, 63,448, 63,448, 63,448, 82 748 Shareholders' equity Accumulated retained earnings 748 748 748 748 2,438,0 2,438,0 2,438,0 2,438,0 2,438,0 2,438,0 88,117 88,117 88,117 88,117 88,117 88,117 321,00 6,297 Total liabilities and equity 748 1,288,5 2,406,7 3,693,9 5,163,2 6,590,4 09,614 58,094 93,745 45,502 54,390 11,129, 4,087,4 5,181,4 6,438,8 7,879,1 9,516,7 184,66 79,991 76,991 68,522 61,530 76,379 3,726,5 97,731 Free cash flow calculation Profit after tax 930,29 1,651 Add back depreciation Subtract increase in current assets Add back increase in current liabilities Subtract increase in non-current assets at cost Add back after-tax finance costs Subtract aftertax finance income 44,981, 49,122, 53,668, 58,659, 64,140, 668 304 061 228 117 Free cash flow 747,68 2,231 Valuing the firm Weighted average cost of capital 1,075,2 1,237,7 1,412,7 1,372,3 38,924 26,587 42,074 16,238 (145,87 (160,46 (176,51 (194,16 (213,58 9,258) 7,184) 3,902) 5,292) 1,821) 126,49 3,683 139,14 3,051 153,05 7,356 168,36 3,092 185,19 9,401 (159,81 (175,43 (192,61 (211,49 (232,26 1,174) 4,760) 1,763) 7,300) 1,996) 74,729, 74,729, 74,729, 74,729, 74,729, 157 157 157 157 157 (123,12 (169,21 (222,33 (277,79 (152,43 3,496) 1,391) 7,453) 2,034) 0,260) 833,12 0,101 927,71 8,044 1,031,0 1,098,1 38,925 10,836 17.5 8% 83 Year FCF 747,68 2,231 833,12 0,101 927,71 8,044 747,68 2,231 Total Add in year cash and mkt securities Enterprise value Subtract out value of firm's year debt (borrowings) Total equity value Number of shares Price 1,031,0 1,098,1 38,925 10,836 15,935, 645,38 Terminal value NPV 833,12 0,101 927,71 8,044 17,033, 1,031,0 756,21 38,925 9,92 8,20 1,46 1,48 0,39 2,36 11,4 08,5 93,8 23 63,4 48,7 48 11,4 72,0 42,5 71 130, 746, 071 87.7 43 84 Appendix C Pymepharco Joint Stock Company 1-YEAR PROJECTING MODEL Sales revenue growth Other current assets/Sales Current liabilities/Sales Non-current assets/Sales Cost of goods sold/Sales Depreciation rate Interest rate on debt (finance costs) Interest paid on CMS (finance income) Income (corporation) tax rate Dividend payout ratio Year Income Statement Sales revenue Costs of Goods Sold Financial Cost Finance income (interest earned on CMS) Other Operating Items 9% 56.7% 18.8% 22.1% 49.2% 3.1% 17.2% 5.1% 20% 0% 1,622,3 1,768,3 53,239 65,031 1,927,5 17,883 2,100,9 94,493 2,290,0 83,997 2,496,1 91,557 (797,60 (1,032, 9,148) (869,39 (947,63 926,97 3,971) 9,429) 7) (1,125, 890,40 5) (1,227, 220,54 2) (7,230, 772) (7,230, 772) (7,230, 772) (7,230, 772) 90,797, 507.84 109,80 4,195.5 59,567, 835.08 34,726, 962 (7,230, 772) 56,106, 711.64 (7,230, 772) 72,466, 078.74 (444,73 (484,75 (528,38 (575,93 (627,77 (684,27 0,959) 6,745.3 4,852.3 9,489.1 4,043.1 3,707.0 1) 9) 0) 2) 0) 85 Depreciation/Amorti zation Other non Oper./Financial Items Profit Before Tax Income Tax Expense Profit after tax Dividends Retained earnings (for the year) (49,986 (21,448 (23,173 (25,047 (27,083 (29,295 ,970) ,565.96 ,671.62 ,613.31 ,585.28 ,962.94 ) ) ) ) ) 1,388,6 61 1,513,6 40 1,649,8 68 1,798,3 56 1,960,2 08 2,136,6 27 358,91 1,013 443,15 5,328 495,20 5,105 552,44 5,505 613,86 9,595 609,87 5,035 (72,480 (88,631 (99,041 (110,48 (122,77 (121,97 ,001) ,066) ,021) 9,101) 3,919) 5,007) 286,43 354,52 396,16 441,95 491,09 487,90 1,012 4,262 4,084 6,404 5,676 0,028 0 0 0 286,43 354,52 1,012 4,262 396,16 4,084 441,95 6,404 491,09 5,676 487,90 0,028 Statement of Financial Position Cash and marketable securities 677,58 2,580 944,43 6,469 1,245,0 39,847 1,582,8 35,081 1,960,3 95,082 2,324,5 41,224 920,26 7,858 1,003,0 91,965 1,093,3 70,242 1,191,7 73,564 1,299,0 33,185 1,415,9 46,171 At cost 669,28 6,219 722,96 2,619 781,26 4,630 844,60 2,134 913,42 1,699 988,20 9,881 Depreciation (311,19 (332,64 (355,82 (380,86 (407,95 (437,24 9,170) 7,736) 1,408) 9,021) 2,606) 8,569) Other current assets (excl CMS) Non-current assets Non-current assets 358,08 7,049 390,31 4,883 425,44 3,223 463,73 3,113 505,46 9,093 550,96 1,312 Total assets 1,955,9 37,487 2,337,8 43,318 2,763,8 53,312 3,238,3 41,758 3,764,8 97,360 4,291,4 48,707 Current liabilities 304,23 9,652 331,62 1,221 361,46 7,131 393,99 9,172 429,45 9,098 468,11 0,417 Borrowings (debt) 42,090, 179 42,090, 179 42,090, 179 42,090, 179 42,090, 179 42,090, 179 86 Shareholders' equity 1,323,1 76,644 1,323,1 76,644 1,323,1 76,644 1,323,1 76,644 1,323,1 76,644 1,323,1 76,644 286,43 1,012 640,95 5,274 1,037,1 19,359 1,479,0 75,763 1,970,1 71,439 2,458,0 71,467 1,955,9 37,487 2,337,8 43,318 2,763,8 53,312 3,238,3 41,758 3,764,8 97,360 4,291,4 48,707 443,15 5,328 495,20 5,105 552,44 5,505 613,86 9,595 609,87 5,035 Add back depreciation Subtract increase in current assets Add back increase in current liabilities Subtract increase in non-current assets at cost Add back after-tax finance costs Subtract aftertax finance income 21,448, 566 23,173, 672 25,047, 613 27,083, 585 29,295, 963 Free cash flow 316,38 4,203 347,45 6,153 381,43 0,946 418,27 5,181 444,25 1,499 316,38 347,45 381,43 418,27 444,25 Accumulated retained earnings Total liabilities and equity Free cash flow calculation Profit after tax Valuing the firm Weighted average cost of capital Year FCF (82,824 (90,278 (98,403 (107,25 (116,91 ,107) ,277) ,322) 9,621) 2,987) 27,381, 569 29,845, 910 32,532, 042 35,459, 926 38,651, 319 (53,676 (58,302 (63,337 (68,819 (74,788 ,400) ,011) ,503) ,565) ,181) 5,784,6 18 5,784,6 18 5,784,6 18 5,784,6 18 5,784,6 18 (44,885 (57,972 (72,638 (87,843 (47,654 ,369) ,863) ,006) ,356) ,268) 17.3 2% 87 4,203 6,153 0,946 5,181 Terminal value 5,820,1 21,797 316,38 4,203 Total NPV Add in year cash and mkt securities Enterprise value Subtract out value of firm's year debt (borrowings) Total equity value Number of shares Price 1,499 347,45 6,153 381,43 0,946 418,27 5,181 6,264,3 73,296 3,79 7,60 8,53 677, 582, 580 4,47 5,19 1,11 42,0 90,1 79 4,51 7,28 1,29 75,0 11,6 25 60.2 21 88 Appendix D Imexpharm Corporation 1-YEAR PROJECTING MODEL Sales revenue growth Other current assets/Sales Current liabilities/Sales Non-current assets/Sales Cost of goods sold/Sales Depreciation rate Interest rate on debt (finance costs) Interest paid on CMS (finance income) Income (corporation) tax rate Dividend payout ratio Year Income Statement Sales revenue Costs of Goods Sold Financial Cost Finance income (interest earned on CMS) Other Operating Items 10% 59.0% % other operati ng % non operati ng 29.5% 68.3% 27% 0.30% 58.4% 2.7% 37.1% 5.0% 20% 30% 1,165,4 1,282,0 55,650 01,215 1,410,2 01,337 1,551,2 21,470 1,706,3 43,617 1,876,9 77,979 (1,096, (681,01 (749,11 (824,02 (906,42 (997,07 779,14 3,557) 4,913) 6,404) 9,044) 1,949) 4) (12,770 (12,770 (12,770 (12,770 (12,770 (12,770 ,522) ,522) ,522) ,522) ,522) ,522) 14,552, 20,955, 322 835.68 25,907, 901.76 31,498, 078.67 37,162, 445.32 19,933, 917.84 (311,64 (342,80 (377,08 (414,79 (456,27 (501,90 89 0,730) 4,803.0 0) Depreciation/Amorti zation Other non Oper./Financial Items Profit Before Tax Income Tax Expense 5,283.3 0) 3,811.6 3) 3,192.7 9) 0,512.0 7) (14,409 (17,099 (20,091 (23,419 (27,115 (31,552 ,667.98 ,202.36 ,956.54 ,192.93 ,325.97 ,422) ) ) ) ) ) 3,527,8 3,880,6 40 24 4,268,6 86 4,695,5 55 5,165,1 11 5,681,6 22 146,55 187,73 8,581 7,769 209,39 6,513 233,32 9,769 259,13 6,317 264,02 8,015 (29,198 (37,547 (41,879 (46,665 (51,827 (52,805 ,540) ,554) ,303) ,954) ,263) ,603) Profit after tax 117,36 150,19 0,041 0,215 167,51 7,210 186,66 3,815 207,30 9,053 211,22 2,412 Dividends 52,728, 45,057, 887 065 50,255, 163 55,999, 145 62,192, 716 63,366, 724 95,880, 865 195,24 7,280 217,77 2,374 242,66 2,960 269,50 1,769 274,58 9,135 289,50 3,347 370,72 3,397 463,06 5,818 567,75 5,830 685,48 7,357 793,12 9,225 688,03 9,690 756,84 3,659 832,52 8,025 915,78 0,827 1,007,3 58,910 1,108,0 94,801 At cost 485,24 2,433 579,26 0,885 683,92 9,750 800,34 8,336 929,72 6,821 1,073,3 97,368 Depreciation 310,84 5,410 296,43 5,742 279,33 6,540 259,24 4,583 235,82 5,390 208,71 0,064 796,08 7,843 875,69 6,627 963,26 6,290 1,059,5 92,919 1,165,5 52,211 1,282,1 07,432 1,773,6 30,880 2,003,2 63,683 2,258,8 60,133 2,543,1 29,577 2,858,3 98,478 3,183,3 31,458 343,85 378,24 416,06 457,67 503,43 553,78 Retained earnings (for the year) Statement of Financial Position Cash and marketable securities Other current assets (excl CMS) Non-current assets Non-current assets Total assets Current liabilities 90 5,236 0,760 4,836 1,319 8,451 2,296 Borrowings (debt) 34,461, 386 34,461, 386 34,461, 386 34,461, 386 34,461, 386 34,461, 386 Shareholders' equity 1,299,0 32,911 1,299,0 32,911 1,299,0 32,911 1,299,0 32,911 1,299,0 32,911 1,299,0 32,911 96,281, 347 291,52 8,627 509,30 1,000 751,96 3,960 1,021,4 65,730 1,296,0 54,865 1,773,6 30,880 2,003,2 63,683 2,258,8 60,133 2,543,1 29,577 2,858,3 98,478 3,183,3 31,458 187,73 7,769 209,39 6,513 233,32 9,769 259,13 6,317 264,02 8,015 Add back depreciation Subtract increase in current assets Add back increase in current liabilities Subtract increase in non-current assets at cost Add back after-tax finance costs Subtract aftertax finance income 14,409, 668 17,099, 202 20,091, 957 23,419, 193 27,115, 326 Free cash flow 67,162, 288 Accumulated retained earnings Total liabilities and equity Free cash flow calculation Profit after tax Valuing the firm Weighted average cost of capital (68,803 (75,684 (83,252 (91,578 (100,73 ,969) ,366) ,802) ,083) 5,891) 34,385, 524 37,824, 076 41,606, 484 45,767, 132 50,343, 845 (94,018 (104,66 (116,41 (129,37 (143,67 ,452) 8,865) 8,586) 8,485) 0,547) 10,216, 418 10,216, 418 10,216, 418 10,216, 418 10,216, 418 (16,764 (20,726 (25,198 (29,729 (15,947 ,669) ,321) ,463) ,956) ,134) 73,456, 657 80,374, 776 87,852, 535 91,350, 031 17.4 9% 91 Year FCF 67,162, 288 73,456, 657 80,374, 776 87,852, 535 91,350, 031 Terminal value 1,341,5 89,239 67,162, 288 Total NPV Add in year cash and mkt securities Enterprise value Subtract out value of firm's year debt (borrowings) Total equity value Number of shares Price 73,456, 657 80,374, 776 87,852, 535 1,432,9 39,270 846, 106, 140 289, 503, 347 1,13 5,60 9,48 34,4 61,3 86 1,17 0,07 0,87 49,4 01,3 59 23.6 85 92