financial research analysis habeco sabeco

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ĐẠ I HỌC

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FACULTY OF MANAGEMENT AND

TOURISM FMA —- WRITTEN PROJECT

FINANCIAL RESEARCH & ANALYSIS

HABECO & SABECO

Subject: Financial Management Lecturer: Nguyen Xuan Truong Tutor: Nguyen Xuan Truong

Date: May 25", 2020

Executive summary

This financial analysis report examines two high profile competitors, HABECO and SABECO, within the Beer - Alcohol - Beverage industry in order to evaluate company performance and financial health The reports introduction gives an overview to understand two firms and the relationship between their shareholders and managers and to explore the relationship between the firms and the financial market The financial analysis covers both companies’ income statements and balance sheets, and various financial statement ratios such as liquidity, capital structure and solvency, return on investment, operating performance, asset utilization and market measures from year 2017 to year 2019 The project will find the strengths and weaknesses of the firms and compare the two companies’ performance through financial information, simultaneously evaluate the intrinsic value Moreover, conclusions are drawn from the above stated financial analysis as well as areas for

improvement and investment recommendations.

TABLE OF CONTENTS

II) 1 0n 4

1.1 Saigon Beer - Alcohol - Beverage Joint Stock Corporation (Sabeco) 4

1.2 Hanoi Beer - Alcohol - Beverage Joint Stock Corporation (HABECO) 5

1 Introduction

The Food and Beverage (F&B) market in Vietnam is like a piece of cake with potential growth, and many people want to have a share With a population of over 96 million people, including over half of the population under the age of 30, Vietnam is considered as one of the most potential F&B markets in the region According to the Ministry of Industry and Trade, the annual consumption of Vietnam's F&B industry always accounts for approximately 15% of GDP and tends to increase soon (TTX VN, 2019)

With an estimated annual growth rate of 6% by 2020, the F&B industry is one of the fastest- growing consumer goods industries in Vietnam According to EVBN's report, consumption is expected to reach 109 billion liters by 2020 Alcoholic beverages (beer, wine) account for the largest proportion of total retail sales of F&B (AlMacademy, 2020) Among the leading companies in beer products are Saigon Beer and Hanoi Beer

1.1 Saigon Beer - Alcohol - Beverage Joint Stock Corporation (Sabeco)

Vietnamese consumers have long been familiar with the Saigon Beer brand of Saigon Beer - Alcohol - Beverage Joint Stock Corporation (Sabeco) In 2017, Saigon Beer went through 142 years of establishment, 40 years of building and developing brand Up to now, Saigon Beer has developed 8 product lines: Saigon Lager 450 bottle beer, Saigon Export bottle beer, Saigon Special bottle beer, Saigon Lager 355 bottle beer, 333 Premium bottle beer, 333 canned beer, Saigon Special canned beer, Saigon Lager canned beer, which are fully featured

in the market From a modest production of 21.5 million liters in 1977, after 39 years of

development, by 2016, Saigon Beer reached 1.59 billion liters of consumption, striving to reach 1,66 billion liters in 2017 (sabeco.com.vn)

The company’s mission is to develop Vietnam's beverage industry on a world-class level, to promote the culinary culture of Vietnamese people, to improve the quality of life, and bring

practical benefits to shareholders, customers, partners, workers, and society Although there

have been many famous beer brands in the world recently, Saigon Beer is still leading the Vietnamese beer market and is on its way to conquering fastidious markets such as Germany, the USA, Japan, Netherlands, etc (sabeco.com.vn)

Currently, the Chairman of the company is Mr Koh Poh Tiong, along with 6 members of the

Board of Directors are Mr Michael Chye Hin Fah, Ms Tran Kim Nga, Mr Pramoad

Phomprapha, Mr Nguyen Tien Dung, Mr Luong Thanh Hai, and Mr Nguyen Tien Vy Besides, the General Director is Mr Neo Gim Siong Bennett and 4 Vice General Directors are

Mr Lam Du An, Mr Teo Hong Keng, Mr Melvyn Ng Kuan Ngee, and Mr Hoang Dao Hiep (sabeco.com.vn)

On December 6", 2016, SAB shares of Saigon Beer - Alcohol - Beverage Joint Stock Corporation were officially traded on the Ho Chi Minh Stock Exchange (HOSE) Sabeco's chartered capital reached nearly 6,413 billion VND, corresponding to the list of 641.28 million shares With a listing price of 110,000 VND per share, Sabeco's market capitalization

was estimated at 70,540 billion VND ($3.15 billion) Therefore, Sabeco ranked 5th in terms of market capitalization on HOSE, after Vinamilk, Vietcombank, PV Gas, and Vingroup (Diep,

2016)

At that time, Sabeco had 1,227 shareholders, in which the Ministry of Industry and Trade was the largest shareholder holding 574.52 million shares, equivalent to 89.59% The number of

foreign shareholders is 114, holding 60.23 million shares, equivalent to 9.39% Thus, the

number of freely circulating shares held by domestic investors is only about 6.53 million

With the above condensed shareholder structure, SAB shares are forecast to sell out in the

first trading session on the stock exchange (Diep, 2016)

On December 5, one day before SAB would officially be traded on HOSE, investors were ready to buy at the price of 168,000 VND per share, 50% higher than the reference price for the day of listing According to Ho Chi Minh City Securities Company (HSC), based on Sabeco's business results, the reasonable provision P/E (earnings ratio per share) was 21.5 times, so HSC intended to SAB share price is 156,000 VND per share (Diep, 2016) Besides, in 2017, ThaiBev acquired enough shares to dominate Sabeco for $4.8 billion In 2019, according to Bloomberg, Thai Beverage Pcl (ThaiBev) was considering an initial public offering (IPO) on the Singapore stock exchange, with the beer business in Thailand and Vietnam The largest beverage producer in Southeast Asia was negotiating with consultants with the expectation of valuation up to 10 billion USD If successful, this will be the largest IPO in Singapore (Son, 2019)

1.2 Hanoi Beer - Alcohol - Beverage Joint Stock Corporation (HABECO)

As you have known, in Vietnam, there aren't many huge corporations over one hundred years old, and Hanoi Beer - Alcohol - Beverage Joint Stock Corporation (HABECO) is one of these uncommon ones a hundred thirty years of history, with greater than 60 years of recovery, creation and development, HABECO - the leading home beer business inside the beverage

industry in Vietnam - has also placed its corporation inside the inevitable digitization with the professional operation of the overall ERP machine The system was implemented with the aid of FPT Information System Company (FPT IS) (Habeco.com.vn)

This is considered to be one of the important records technology tasks invested and implemented by way of the two main establishments in Vietnam, marking a virtual transformation step inside the control and operation of HABECO When the gadget comes into operation

HABECO will standardize and automate the noticeably and intergrated control and business processes, manipulate the statistics and product excellent accurately, expect the trend, market orientation, creating a uniform records flow for the decision-making of the Board of Directors, reducing cost, increasing productivity and labor efficiency (Habeco.com.vn)

On June 28, 2018, in Hanoi, Hanoi Beer - Alcohol - Beverage Joint Stock Corporation

(HABECO -BHN) conducted the Annual General Meeting of Shareholders in 2018 The meeting announced election consequences and introduced the contributors of the Board of Directors and the Supervisory Board Accordingly, Mr Tran Dinh Thanh changed into elected Chairman of the Board of Directors for the term of 2018 - 2023; Mr Ngo Que Lam become elected General Director of HABECO for the term of 2018-2023; Mr Stefano Clini - General Director of Carlsberg Vietnam Trading Co., Ltd changed into elected as a Member of the Board of Directors of HABECO The Supervisory Board includes: Ms Dinh Thi Thanh Hai - Head of the Supervisory Board; Ms Chu Thi Thu Trang - Member of Supervisory Board; Mr Bui Huu Quang - Member of the Supervisory Board (Khanh, 2018)

According to the Ho Chi Minh Stock Exchange (HOSE), 231.8 million BHN shares will be listed on the HOSE at the reference price on the first trading day of VND 127,600 VND/share on January 19, 2017 with the charter capital of 2.318 billion VND Comparing to the final

charge of VND 228,000 in 2019, SAB has decreased via 22% so the marketplace

capitalization of Sabeco has evaporated about 32,000 billion VND, equivalent to approximately 1.37 billion VND If compared to the fee of 320,000 VND/ share that ThaiBev Group of billionaire Charoen (Thailand) spent to shop for Sabeco in December 2017, the company's stock price has lost extra than 44% (Khanh, 2018)

Habeco has a charter capital of VND 2,318 billion, equivalent to 231.8 million shares In

particular, the State (through the Ministry of Industry and Trade) holds an 81.79% stake and Carlsberg holds a 17.23% stake Thus, the rate of free-float shares is only 0.98%, equivalent

to over 2.27 million shares But after 8 years of equitization with many delays, Habeco has just registered to trade on UpCOM (An, 2016),

Habeco stock price has increased the amplitude (40%) right in the first trading session to

54,600 VND / share And since then (November 7, 2016), BHN has had 7 consecutive

sessions to hit the ceiling price and traded at VND 125,900 / share, or 3.2 times the floor price BIDV Securities Joint Stock Company (BSC) in late October 2016 has updated the Vietnam Beer Industry In particular, the company has said that the two businesses Sabeco and Habeco will be listed as both new factors and important motivations for the stock market (An,

2016)

2 Performance appaisal

Financial management is an important a part of corporate governance All commercial

enterprise activities affect the financial role of the business, whether the good or bad

economic scenarios have impacts on promote or inhibit the commercial enterprise process Therefore, so as to correctly manage commercial enterprise activities managers need to often organize an analysis of the monetary state of affairs for the future Because through calculation economic analysis tells us the strengths and weaknesses of the manufacturing and enterprise activities of the enterprise in addition to the potentials to be promoted and the disadvantages to be overcome From there managers can perceive the reasons and recommend solutions to enhance the financial state of affairs as well as commercial enterprise scenario of their gadgets inside the future With a commercial enterprise or any commercial enterprise organization large or small while operating we want to make the only operation to make the maximum profit and reap the dreams set by way of the company To do that requires loads of constituent factors along with capital human resources technology etc One of the things to do is to analyze the financial statements of the commercial enterprise Realizing the significance of the issue my team decided to choose the topic "Financial analysis between SABECO and HABECO" to help make clear the economic troubles of SABECO and HABECO

2.1, SABECO

2.1.1 Overview

SABECO is Vietnam's leading beer producer It was under the authority of Vietnam's Ministry of Trade and Industry but is now a subsidiary of Thai Bev In 2011 SABECO produced 1.2

billion liters of beer, 51.4% of the national market Its main brands are Saigon Beer and 333 Beer

From a modest production of 21.5 million liters in 1977, after 39 years of development by means of2016 Saigon Beer reached 1.59 billion liters of consumption striving to reach 1.66 billion liters in 2017 Up to now even though there were many well-known beer brands within — the world Saigon Beercontinues to

beer marketplaceimn Vietnam and ¡1s on 1ts manner to markets including Germany, USA, Japan Netherlands, etc 2.1.2 Analysis of financial ratios: (financial statements)

SAB Financial Statement

be the main Vietnamese

conquering Fastidious

Unit: 1.000.000 VND

Net revenue (1) - (2) 34.193.391

35.948.553 37.899.060 Cost of goods sold 27.864.413

25.327.872 28.348.431 Gross profit (3) - (4) 8.865.518 8.084.139 9.550.629

Revenue from financial 630.350

Enterprise Cost | 935.975

912.705 1.047.842 Management

Net operating profit (5) + 5.351.023

6.062.219 6.674.606

(6) - (7) * (8) - 9) - (10)

Other income 106.139 81.738 74.504 Other cost 91.266 42.322 62.934

Other profits (12) - (13 39.416

income tax expense

Income tax expense (16) + 987.690

1.128.492 1.316.029

(17)

Profit after tax (15) - (18) 4.402.750

4.948.599 5.370.148 After-tax profit of | 237.114 225.318

316.784 unregulated shareholders

Profit after tax of

By the end at 2018, SABECO's total belongings reached 22.366 billion VND, a boom of 353 billion VND, equal to 1.6% in comparison to 2017 In particular short-time period financial investments increased by using 985 billion VND respectively at 15%, inventories and stuck property reduced as compared to 9.47% and 8.81% as compared to the previous year Equity increased via VND 1.691 billion (11.73%), achieving VND 16.111 billion; short-term debt reduced significantly, down 19.94%, equivalent to VND 1.475 billion; Long-time period debt increased through 71% but nonetheless accounted for a small proportion

Thus, with extra than VND 4, two hundred billion of early stability and further equity the organization is specifically used to pay short-time period debt and short-term financial

investments.

Because income in 2018 reduced SABECO's profit margin also decreased significantly ROA

turned into most effective 19.84%, ROE became 28.84%, lower than the previous two years

However, the charge of return reduced but remained at an attractive stage for buyers and become better than the enterprise average (ROA: 8.01%; ROE: 14.64%)

Though, in 2018, gross earnings margin reached 22.49%, lower than that of 2017 of 25.93% Therefore, this revenue growth is not appreciated

2.2 HABECO

2.2.1 Overview

Forerunner of Hanoi Beer - Alcohol - Beverage Joint Stock Corporation Hommel Brewery, built by using the French in 1890, changed into the start of a small flow in conjunction with the ups and downs of Thang Long - Hanoi On August 15, 1958, in the ecosystem of the entire USA boiling to have a good time the thirteenth anniversary of the a success August Revolution giving start to the Democratic Republic of Vietnam the four years while the Capital changed into absolutely liberated; The first Vietnamese beer bottle with the brand of Truc Bach changed into born within the excellent emotion and joy of the factory's employees HABECO is a beverage company headquartered in Hanoi, Vietnam It is the third largest beer company in Vietnam and owner of the brands Hanoi Beer and Truc Bach Beer It is under the ownership and authority of the Ministry of Industry and Trade Vietnam and has a strategic partnership with Carlsberg Group which owns more than 10% of the company's shares as of

November 2012 HABECO produced 422.4 million liters of beer and sold 413.5 million liters

in 2011 an increase of 4% and 2.3% from 2010

2.2.2 Analysis of financial ratios: (financial statements)

BHN Financial Statement Unit: 1.000.000 VND

2016 2017 2018 2019 Net sales of | 9.995.967 9.801.760 9.100.267 9335.205 goods and

Revenue from | 145.514 134.982 140.195 149.853

financial activities

Financial 74.578 69.948 46.399 31.272 expenses

Selling 1.188.085 1.262.191 1.344.299 1.439.147 expenses

Enterprise Cost | 508.777 471.586 429927 503.118 Management

Net profit from | 1.185.237 902.291 611.305 650.534

business activities

Other profits -135.430 -32.824 15.147 18.990 Accounting 1.049.807 869.467 626.452 669 523 profit before

tax

Profit after tax | 796.697 658.051 484.333 523.128

corporate income

Profit after tax | 784.862 657.059 498.994 540.139

of the parent company

In general, in 2019, HABECO's business results increased slightly compared to 2018 Net

revenue reached VND 9,335 billion, up 2.58% and profit after tax reached VND 540 billion,

=———— Net revenue growth =——— Net profit growth

In the three years from 2017 to 2019, except revenue declining, HABECO's net profit isn't always stable, plummeting from 4.4% to -26.6% (31%) (2017-2018) then increase to -16.28% (2019)

2.3 SABECO in comparison with HABECO

According to the economic report, in the first quarter, SABECO reached 9,337 billion VND

net sales, 1,221 billion VND EAT, up by using 20% and 10% YoY respectively The growth in

product selling fees has caused sales growth

The sales expanded however the price of goods offered also improved sharply, inflicting SABECO's gross earnings margin to decline slightly from 24.9% to 23.5%

If in the first quarter 2019 SABECO reported strong profits, HABECO recorded another quarter of negative growth By the end of the primary quarter, HABECO reached 1,564