Final exam analysis of the financial situation of mobile world joint stock company

Current ratio = Current Assets / Current Liabilities The Quick Ratio, which is also referred to as the Acid-Test Ratio, is a financial ratio that evaluates a company's ability to fulfill

ANALYSIS OF THE FINANCIAL SITUATION OF

Mobile World Joint Stock Company

Ho Chi Minh City - 2023

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Tables of Content

1 InEfrOUCtON - - con mm HH HH SH HH B BH HS HH BH 1

- Introduction to the research artÏCl€ c- SH nn nh nhi 1

- The process of formation and development of Mobile World Joint Stock

2 RatiOS analÌVSÌS acc mm n HH HH HH H BH SE H HH BH 6 2.1 Results presentatÏOP ch nh nén nen HT kho hà 6 2.1.1 Liquidity ratios: 0 eerie eee 6 2.1.2 Capital Structure ratÏOS: nh nh nen Hs hen kh 7 2.1.3 Profitability rafÏOS: ee terre ko kh kh 8 2.1.4 Asset management ratOS: LH nh» nn Hà nhe nhe 9 2.1.5 Management effectiveness ratiOS: sành hie 10 2.1.6 Valuation PatiOS: eee eee terest tees a Hh Thy 12 2.2 MWG Time-trend analySÌS LH HT ườ 13

2.2.2 Capital StruCtUre (atiOS: 0 cee eee tenets ee eee een nh ky 14 2.2.3 Profitability ratioS: 0 nh HT nh HT nh nh khưy 15 2.2.4, Asset Management ratiOS: TH nén nhe ru 17 2.2.5.Management effectiveness rafiOS: cành nhe 18 2.2.6.ValuatiOn rAfÏOS: ST TH nh HH HT nh kh 19 2.3 MWG Peer Group analysis ( MWG - FRT ) sen ehne 21

2.3.2 Capital StruCtUre (atiOS: 0 teeter ne eee nhe nhe ky 22 2.3.3 Profitability rafÏOS: eee HT nh KT Kho ky 23 2.3.4 Asset Management ratiOS: Tnhh nhe ru 24 2.3.5 Management effectiveness ratiOS: sen Hie 25 2.3.6 Valuation rafÏOS: c cà nàn ng kh hy 26

3 BankruptCYy analÌVSÌS uc nen mm mm HH HH BH HH mm 27

4 Risk analVSÏS «cm nu nn mm nu n HH HH HH HH HH HH SH HH B BH SH mm 28

5 GrOWth analVSÏS- «sen nn mm HH HH BH HH HH HH BH HH HH 32

1 Introduction

- Introduction to the research article

Many economic experts consider Vietnam's retail market to be one of the most exciting

in the world thanks to the openness of its large economy, large population of over 96 million people, young population structure and the government is creating many conditions, loosening policies to attract external resources, promoting the private economy, towards a market economy

At the same time, Vietnamese businesses have the strength to capture the psychology of domestic customers thanks to the easily identifiable supply and demand characteristics Therefore, Mobile World Investment Joint Stock Company has been very successful and has a leading position in many fields, being the only retailer in Vietnam present throughout the country, with many mobile phones and top selling laptops in Vietnam The topic “ Analyzing the financial statements of Mobile World Joint Stock Company ” was selected for research to help investors assess the overall financial situation and business performance From there, the direction of improvement and development is reasonable and sustainable

- The process of formation and development of Mobile World Joint Stock Company

+ History:

- Mobile World Co., Ltd was founded in March 2004

- The first store opened officially in October 2004

Mekano Canital invested: hecame a carnaratian

- Thegioididong.com outlets have been steadily sprouting up across the nation

- Den May Xanh, a system that only operates in the retail of domestic equipment, was introduced at the end of 2010

- Listed on the Ho Chi Minh Stock Exchange (HOSE)

- Thegioididong.com grew by 60%, and the NPAT (Net Profit After Tax) increased by 160% between 2013 and 2014

- Implemented a new chain of retail stores called Bach Hoa Xanh mini-stores

- The business achieved remarkable financial results, with profit after tax nsing by 47% from 2015 to 2016

- At the end of 2016, enterprise value surpassed $1 billion USD

- Thegioididong.com is still the market leader with 1,000 stores, maintaining its dominant position in terms of market share

- Dien May Xanh owns a total of 640 stores across the country

- The store chain of Dien May Xanh has expanded by 280 stores

- Opening the first Bigphone store in Cambodia

- Thegioididong.com and dienmayxanh.com have a significant presence in the Vietnamese market, holding a dominant position with 45% of the mobile phones market share and 35% of the

electronics market share

- Bach Hoa Xanh reached the breakeven EBITDA at store level

- Completed the purchase of Tran Anh retail stores

- Completed the investment in minority shares at An Khang Retail SJC - An Khang drugstore chain operator

-Dien May Xanh has 1018 outlets, whereas the Mobile World chain has 996

- A handful of businesses have introduced designer watches and computers in an

effort to increase market share

- With the addition of 600 new points of sale, the Bach Hoa Xanh network will now

- Dien May Xanh Supermini (SMS), a micro-store model, has been tested since the

middle of 2020 and has quickly grown to include 302 locations in 61/63 cities

- With 37 locations, Bluetronics rose to become the No | retailer of consumer

electronics and mobile phones in Cambodia

- With 1,719 shops, Bach Hoa Xanh ranked in the top three largest retail chains in the food and FMCG sectors

- Tested the 4KFarm concept, which supports farmers in growing safe veggies using the "4 No" principles of no pesticides, non-GMO seeds, no preservatives, and

The ecosystem of MWG is made up of a number of businesses that operate various retail chains, including An Khang pharmacies, Dien May Xanh, Bach Hoa Xanh, and thegioididong.com Additionally, additional companies offer similar services including warehousing, logistics, last-mile delivery, and the distribution of secure agricultural goods under the A4kKFarm brand Additionally, MWG has increased its market share in the area by establishing a joint venture in Indonesia and opening a network of consumer electronics stores in Cambodia

+ Organizational structure:

@ Organizational structure:

General meeting of Sharcholder Board of

—T† 7 Electronic &

Em = r> Ea ==ee « > Applicanes “ie

[eee] <-> [eee] [See] <> ee

e Subsidiaries and Associated company:

Bach Hoa Xanh Trading JSC Food trade

Tran Anh Digital World., JSC E-commerce products

MWG (Cambodia) CO., LTD Food trade

CIRM CO.,LTD Repair of machinery and equipment

to customers throughout the country

MWG has continuously received praise for its strong financial results and leadership in the industry The business was included in Forbes' list of the TOP 50 largest publicly traded firms in Asia, and it was the only Vietnamese retailer to make the Top 100 Asia-Pacific Retailers list, which was chosen by Retail Asia Magazine and Euromonitor

Since entering this market in 2015, MWG has grown to be a sizable player in the grocery and FMCG retailing sector, mostly as a result of the popularity of its Bach Hoa Xanh (BHX) chain The company's operations are split into three main segments: thegioididong.com (TGDD), Dien May Xanh (DMX), which includes the Tran Anh store chain, and Bach Hoa Xanh (BHX), which sells groceries and FMCGs The consumer electronics segment includes electronics, air conditioners, and home appliances Additionally, MWG is the owner of BigPhone.com, a chain of shops that sells mobile devices in foreign markets, with ten of its locations mostly in Phnom Penh, Cambodia

The Current Ratio is a financial ratio that assesses a company's capability to repay its short-term financial obligations that are due within a year

Current ratio = Current Assets / Current Liabilities

The Quick Ratio, which is also referred to as the Acid-Test Ratio, is a financial ratio that evaluates a company's ability to fulfill its short-term obligations using its most liquid assets, but excluding inventory

Quick Ratio = Current Assets - Inventory / Current Liabilities 2.1.2 Capital Structure ratios:

Debt ratio = Total liabilities/Total assets

Expressed as the dependence of total debt on capital and to be more objective this figure is often compared with rival firms and the same industry

TIE - ratio:

TIE-ratio = EBIT/I This index is also assessed as a strong or weak level of interest burden, which is also one of the indicators that banks often evaluate to consider lending to businesses

man profft | Ì2,63% | 1,64% | 0,10% | 2,43% | 1,57%

Profitability ratios are a class of financial indicators that are used to evaluate a company's capacity to create profits in relation to its revenue, operational costs, balance sheet assets, or shareholders' equity over time, utilizing data from a single moment in time They rank among the most often used measures in financial analysis

Profitability ratios can provide a glimpse into the health and performance of a company's finances The optimum use of ratios is as a comparison tool, not as a standalone metric Efficiency ratios, which take into account how effectively a company uses its assets internally to generate money (as opposed to after-cost earnings), can be used in conjunction with profitability ratios We must mention the following in relation to profitability ratios: net profit margin, gross profit margin, operating profit margin, and EBIT

Net profit margin is a financial metric that calculates the percentage

of revenue that a company retains as profit after subtracting all expenses, such as taxes and interest The following is the calculation and formula utilized for this process:

Net Profit Margin = (Net Profit / Total Revenue) x 100

The gross profit margin is a ratio used to determine the profitability

of a company by evaluating the percentage of revenue that remains after subtracting only the cost of goods sold (COGS) from the total revenue This ratio is an indication of how much money a company is making on its products or services after accounting for the cost of production The formula and calculation used for this process are as follows:

Gross Profit Margin = (Gross Profit / Total Revenue) x 100 Operating profit margin is a financial ratio that calculates the percentage of profit a company generates from its operations after deducting all the operating expenses from its total revenue It is an indicator of the company's profitability and efficiency in managing its costs It shows the percentage of revenue that is available to cover non- operating expenses like taxes and interest.The following formula and calculation are utilized in this process:

Operating Profit Margin = (Operating Profit / Total Revenue) x 100 2.1.4 Asset management ratios:

Total assets turnover 3,39 | 2,83 | 2,45 | 2,78 | 2,84

The ratio of a company's sales or earnings to the value of its assets is measured by asset turnover Asset turnover is a measure of how effectively a corporation generates revenue from its assets

A corporation can profit from its assets more effectively if its capital turnover ratio is higher A corporation with a low asset turnover, on the other hand, shows that its assets are not being used effectively to create revenue

Total Asset Turnover = Total Sales /( (Beginning Assets + Ending

Assets)/2) Inventory turns are a type of financial metric that shows how much stock a business sells in relation to their COGS over a given time period The average number of days it takes for a company to sell its inventory may then be calculated by dividing the number of days in a period (typically a fiscal year) by the inventory turnover ratio

Making better judgments about production, pricing, purchasing, and marketing can benefit businesses It is one of the metrics for measuring how efficiently a business uses its resources

Inventory Turnover = Cost of good sold / Average Value of

Inventory How frequently a business collects its typical balance of accounts receivable is measured by the accounts receivable turnover ratio It measures how well a company's procedures for maintaining customer credit lines and collecting unpaid sums from them work

A company's accounts receivable turnover ratio will be high for an effective business and low for an ineffective one This indicator is frequently used to evaluate how businesses within the same sector compare to their rivals

Accounts Receivable Turnover = Net Credit Sales / Average Accounts

Receivable The current asset turnover ratio shows how frequently sales of current assets occur over the course of a specific time period A higher percentage

of sales results from a higher capital turnover rate Hence, a company's potential to make money increases as the working capital turnover ratio rises

Current Assets Turnover = Liquid Sales / Liquid Liabilities = Net

Sales / Current Assets

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2.1.5 Management effectiveness ratios:

Ratios/ year 2017 | 2018 | 2019 | 2020 | 2021 | 2022 ROA - 11,3% | 11,0% | 8,9% | 9,0% | 6,9% ROE - 38,7% | 36,3% | 28,4% | 27,3% | 18,5%

Management effectiveness - FRT

Ratios/ year 2017 | 2018 | 2019 | 2020 | 2021 | 2022

ROA - 7,69% | 3,62% | 0,41% | 5,49% | 3,67% ROE - 35,57%|17,47%| 1,97% |30,56%|20,94% ROIC - 25,80%| 7,04% | 0,11% |-3,71% | 8,87%

Even with the finest products or services, businesses struggle to achieve significant long-term development unless their management ensures that everything runs smoothly Management performance is assessed using management effectiveness ratios, which compare financial indicators from firm financial statements The three most significant fundamental factors that long-term investors take into account are return

on equity (ROE), return on assets (ROA), and return on invested capital (ROIC)

Return on assets (ROA) is a financial measure that evaluates a company's profitability based on the total assets it employs It's a useful tool for assessing a company's ability to generate profits through efficient asset utilization, and can be applied by management, analysts, and investors Comparing ROA across companies in the same industry is recommended because they would typically have similar asset bases Unlike return on equity, ROA considers a company's debt The calculation for ROA involves a specific formula and methodology, which can be expressed as:

ROA = Net income / Average total assets

Return on equity (ROE) is a financial indicator that measures a company's profitability by dividing its net income by the amount of shareholder equity This metric is used to evaluate a corporation's ability

to generate profits using the equity financing it receives A higher ROE implies that the company is more efficient at converting equity into profits The calculation of ROE follows a specific formula and methodology, which can be expressed as:

ROE= Net income/ Average shareholders’ equity

Return on invested capital (ROIC) is a financial metric that measures the excess returns a company generates above the average cost of its debt and equity capital Comparing a company's ROIC with its weighted average cost of capital (WACC) helps determine whether the capital invested is being utilized efficiently The calculation of ROIC involves a specific formula and methodology, which can be expressed as:

ROIC = NOPAT / Invested capital

A valuation ratio calculates the correlation between the market value of an organization

or its shares and some basic financial statistic (such as earnings) The purpose of a valuation analysis is to demonstrate the price you are paying for a certain stream of earnings, revenue,

or cash flow (or other financial indicator), P/E, P/B, and P/S are three of the most crucial

valuation ratios that will be briefly mentioned in this post by our organization

The price-to-earnings ( P/E) ratio is a financial metric used to evaluate

a company's current stock price compared to its earnings per share It is also referred to as the price multiple or earnings multiple If the P/E ratio is high, it may indicate that the company's stock is overpriced or that investors anticipate significant growth in the future This calculation involves a specific formula and method for determining the ratio

P/E = MVS/ EPS

In which:

MVS: Market value per share EPS: Earnings per share The price-to-book (P/B) ratio measures the market's valuation of a company relative to its book value per share ( BVPS ) The book value of a company's stock is generally lower than its market value The P/B ratio is commonly used by value investors to locate potential investment opportunities This process involves using a specific formula and calculation method, which can be expressed as:

P/B = MVS / BVPS

In which:

MVS: Market value per share BVPS: Book value per share The price-to-sales (P/S) ratio shows how much investors are willing to pay per dollar of sales for a stock A low ratio could imply the stock is undervalued, while a ratio that is higher-than-average could indicate that the stock is overvalued The formula and calculation used for this process are as follows:

P/S = MVS/ SPS

In which :

MVS: Market value per share EPS: Sales per share 2.2 MWG Time-trend analysis

2.2.1 Liquidity ratios:

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0.40 0.80

0.30 0.60

Chart 1: Liquidity - Time-trend analysis 2018-2022 for

Mobile World Investment Corp

The trend in MWG's liquidity ratios in Vietnam from 2018 to 2021 was mostly stable, but there was a significant upward trend in both the current and quick ratios in 2022 MWG achieved its highest current ratio of 1.71 and its highest quick ratio of 0.73 in 2022

From 2018 to 2021, MWG's current ratio remained stable, oscillating around 1.2 to 1.3

This indicates that MWG had enough current assets to meet its short-term obligations without relying heavily on external financing or incurring significant debt However, in 2022, the current ratio surged by over 29% to stand at 1.71 It was clear that the company had a higher proportion of current assets relative to its current liabilities, suggesting that MWG improved its liquidity position and was better able to meet its short-term obligations

In 2018 and 2019, the quick ratio stayed unchanged at 0.33 In 2020, it rose to 0.61, indicating that the company had a higher proportion of quick assets to meet its short-term obligations However, the quick ratio plunged to 0.54 in 2021, suggesting that the company had a lower proportion of quick assets relative to its short-term obligations That decrease could be due to a decrease in the company's cash or cash equivalents, or an increase in its

short-term obligations Nevertheless, in 2022, the quick ratio of MWG showed a significant

upward trend again, reaching 0.73, indicating that MWG had a higher proportion of quick assets to meet its short-term obligations

From the analysis, in the aggregate, it is clear that MWG's liquidity ratios have experienced an upward trend since 2021, with the current and quick ratios reaching their highest values in 2022 This indicates that MWG has improved its ability to meet its short- term obligations and generate cash to pay off its debts, which is a positive sign for the company's financial health We expect this trend to continue in the future, indicating that MWG is likely to maintain a strong liquidity position

14

2.2.2 Capital Structure ratios:

LỘ BE TIE - Ratio —®-= Debt - to - equity ratio =@= Debt ratio J

Chart 2: Cappital Structure - Time-trend analysis 2018-2022 for

Mobile World Investment Corp in Excel

This chart evaluates the D/E, debt ratio, and TIE ratios related to the capital structure of MWG in the last 5 years (2018-2022) Overall, D/E, debt ratio TIE-ratio tended to change

differently; D/E fluctuated quite a lot over the period, but debt ratio stability was always created; it changed very little, specifically in 2022, and TIE-ratio was stable in the period

2018-2021 and decreased sharply in 2022 The peaks of D/E, debt ratio, and TIE ratio were

2.43 and 0.71.10.6, respectively, but in different years

The increase and decrease of D/E are always shown, from 2018-22019 it increased slightly from 2.13 to 2.43 but decreased from 2.43 to 1.97 in 2019-22020 showing that this period was difficult for MWG in terms of debt utilization and equity decreases 2.09 was the number that showed the good return on debt and equity for MWG In 2022, this index dropped sharply to only 1.33; this plummeted by up to 63% in the D/E index, partly showing that the use of capital to expand its operations was not as effective as the theory presented The debt-ratio had been stable near 0.7 during 2018-2021, which shows that MWG had managed this metric very well during this time If this ratio is too high, the company may face many difficulties in finance In 2022, the debt ratio decreased slightly to 0.57; this is probably the difference between pre-made stabilizations

The TIE-ratio was probably moving close to the debt ratio, stable for a period of time (2018-2021) near 10 during which MWG's ability to pay interest was very good The outstanding point was probably 5.45 in 2022, a sharp drop of nearly 50% compared to 2021 where the peak of this index was made An increase in interest rates but a decrease in EBIT was probably the reason for this sharp decline

15

From the above trend analysis, we can see that 2022 is the meeting point of changes in

D/E, debt ratio, and TIE ratio We can see that the problem of debt is high, EBIT is

decreasing, and equity is decreasing, creating financial danger for MWG this year In the future, these indicators may increase or decrease, but the magnitude of change will not

4.60%

4.40%

2018 2019 2020 2021 2022

IMWNEGross profit margin == Net profit margin

—@®— Operating profit margin —®— EBIT margin

Chart 3: Profitability - Time-trend analysis 2018-2022 for Mobile World Investment Corp in Excel in Excel

The supplied diagram compares profitability ratios over a five-year period, starting in 2018 and ending in 2022, including net profit margin, operating profit margin, and EBIT margin Overall, it is clear that from

2018 to 2021, all of the profitability ratios had a constant trend, and in

2022, they started to slightly fall Additionally, as seen in 2021, at 5.81%, 5.26%, and 3.98%, respectively, the EBIT margin, operating profit margin, and net profit margin held the highest proportions

As can be seen, over the time displayed, MWG's EBIT margin improved progressively from 4.88% in 2018 to 5.81% in 2021, demonstrating an improvement in operating profit for the company The operating profit of the corporation could not be increasing as much as it did the year before, as the EBIT margin in 2022 marginally declined to 5.56% The company has produced profit before interest and taxes relative

to revenue and has well managed costs, according to MWG's EBIT margin, which has generally been relatively constant This might be a message of hope for stakeholders and investors, showing the possibility for sustained profit growth

16

Over the previous five years, MWG's operating profit margin has changed somewhat, rising from 3.33% in 2018 to 3.75% in 2019, then falling to 3.61% in 2020 The operating profit margin improved to 3.98% in

2021, suggesting an improvement in the business's operating profit However, the operating profit margin suddenly fell to 3.07% in 2022, indicating that the company's operational costs may have gone up and reduced earnings The operating profit margin trend for MWG from 2018 to

2022 is not as encouraging as the EBIT margin trend because it does not demonstrate a steady improvement

MWG's net profit margin has marginally grown over the last five years, rising from 4.36% in 2018 to 5.26% in 2021, showing an improvement in the company's profitability The net profit margin, however, dropped to 4.93% in 2022, potentially as a result of factors like greater competition or higher operating costs The upward trend in MWG's net profit margin demonstrates that the business has been able to turn a profit even after deducting all costs, such as taxes and interest payments

To preserve long-term profitability, the company may need to concentrate

on cost management and maintaining its competitive position in the market, as indicated by the minor decline in 2022

Overall, the investigation led us to the conclusion that MWG's profit margin had marginally declined from 2021 to 2022 There may be a chance for MWG's profit margin to keep increasing in the future if the company keeps managing operating costs successfully and keeps its competitive position in the industry

We can observe from the trend analysis above that the convergence

of changes in D/E, debt ratio, and TIE ratio occurs in 2022 We can see that MWG is in financial jeopardy this year due to a significant debt problem, declining EBIT, and declining equity These indices may rise or fall in the future, but the change won't be very significant

2.2.4, Asset management ratios: