Post on 07-Nov-2014
description
transcript
VIETNAM NATIONAL UNIVERSITY – HO CHI MINH CITY
INTERNATIONAL UNIVERSITY
SCHOOL OF BUSINESS
A COMPANY ANALYSIS AND VALUATION
OF HAUGIANG PHARMA
A report submitted to
The School of Business Administration
in partial fulfillment of the requirement for the course in
“Business analysis and valuation”
Group members: Supervised by
Nguyễn Thị Ngọc Quỳnh Ms. Nguyen Canh Tien
Bùi Nữ Yến Ngọc Ho Chi Minh, Jan 12th, 2013
Nguyễn Trâm Anh
Nguyễn Hoàng Lâm
Table of ContentsI. INTRODUCTION...............................................................................................................................4
1. History.............................................................................................................................................4
2. Economy..........................................................................................................................................4
3. The Organization.............................................................................................................................5
3.1. Concentric diversification subsidiaries:...................................................................................5
3.2. Distribution subsidiaries:.........................................................................................................5
4. Products...........................................................................................................................................6
5. Markets............................................................................................................................................7
II. STRATEGIC ANALYSIS...................................................................................................................7
1. PEST analysis..................................................................................................................................8
1.2. Political factors.............................................................................................................................8
1.3. Economical factors.......................................................................................................................8
1.4. Social and cultural factors.............................................................................................................8
1.5. Technological factors....................................................................................................................9
2. Porter’s five forces...........................................................................................................................9
2.1. The threat of new entrants into the market – MEDIUM...............................................................9
2.2. The threat of increased competition from rivals within the industry - HIGH................................9
2.3. The bargain power of buyers - LOW.....................................................................................10
2.4. The bargain power of suppliers - HIGH......................................................................................10
2.5. The threat of substitute products - LOW.....................................................................................10
3. SWOT analysis..............................................................................................................................10
3.1. Strengths.....................................................................................................................................10
3.2 Weaknesses..................................................................................................................................11
3.3 Opportunities...............................................................................................................................11
3.4. Threats........................................................................................................................................11
4. Risks..............................................................................................................................................12
4.1. Economic risk:.......................................................................................................................12
4.2. Risks on the fluctuations of input price:.................................................................................12
4.3. Exchange rate risk:.................................................................................................................13
2
4.4. Industry risk:..........................................................................................................................13
5. Objectives – Strategies for 2012 - 2016.........................................................................................13
III. FINANCIAL ANALYSIS.............................................................................................................15
1. Key figure analysis........................................................................................................................15
1.1. Liquidity................................................................................................................................15
1.2. Solvency ratio........................................................................................................................16
1.3. Efficiency ratio......................................................................................................................16
1.4. Profitability ratio....................................................................................................................20
1.5. Cash flow analysis.................................................................................................................21
1.6. Sub conclusion...........................................................................................................................22
IV. FORECASTING............................................................................................................................22
1. Forecasting of future sales.............................................................................................................22
2. Costs..............................................................................................................................................24
3. Financial posts...............................................................................................................................25
4. Investment and depreciation..........................................................................................................26
5. Taxes.............................................................................................................................................26
6. Other assumption...........................................................................................................................26
7. The estimated future income statement and balance sheet.............................................................28
V. VALUATION....................................................................................................................................30
1. Weighted average cost of capital (WACC)....................................................................................30
2. Discounted cash flow (DCF).........................................................................................................31
3. Sensitivity analysis........................................................................................................................33
Sub conclusion......................................................................................................................................35
VI. CONCLUSION.............................................................................................................................35
VII. REFERENCES..............................................................................................................................37
VIII. APPENDIX...................................................................................................................................38
APPENDIX A: DHG Balance Sheet from 2007 to 2011.......................................................................38
APPENDIX B: DHG Pharma’s Income Statement from 2007 to 2011.................................................42
APPENDIX C: DHG Pharma’s Cash flow Statement from 2007 to 2011..................................................43
APPENDIX D: DHG Pharma’s Key figures from 2007 to 2011.................................................................46
APPENDIX E: Notes for estimation of Income statement and Balance sheet from 2012 to 2016..........47
3
4
I. INTRODUCTION
1. History
Precursor of Duoc HauGiang Pharma (DHG) was “2/9 Pharmaceutical Factory” and was
founded on September 2, 1974 at Ca Mau Province. In 1982, Hau Giang Pharmaceutical United
Factory was founded base on the consolidation of three units: “2/9 State-owned Pharmaceutical
Factory”, “Pharmaceutical Company Level 2” and “Herbal Medicine Station”. Twenty eight
years later, on 2 September 2004, the Company was changed into “Hau Giang Joint-stock
Company”.
At the end of 2007, DHG made their first investment in another company when investing in SH
Pharma, a company that distributes DHG products. SH Pharma is also first step to form DHG
Pharma Group. Today, DHG have thirteen subsidiary companies and two associated companies.
DHG was listed on HOSE on 21 December 2006, 8,000,000 shares of DHG Pharma posted on
Ho Chi Minh Stock Exchange (HOSE) under the securities code DHG at the price of VND
320,000 per share. The company issued shares to the public on July 2007, collecting nearly VND
399 billion, of which VND 379 billion is the share premiums.
At the very first time of the start-up, the company only had around 50 people. Number of staffs
at DHG Pharma increase year by year, today the total number of employees at the company is
2485 in which university level is 19%; colleges and secondary 43%; high schools 38%.
During its business, DHG has achieved several honored titles, such as; Labor Medal 1988, 1993
and 1998; Independence Medal 2004 and 2010, Hero of Labor 1996, etc.
2. Economy
The market value of DHG’s ordinary shares just exceeded VND 3,649 billion at the end of
December 2011, as the share closed at VND 56,000, significantly reduced from the all-time high
notation of VND 120,000 in December 2010.
At the end of 2011 the company had a net debt of 135,1billion. DHG’s shareholder equity, that is
the company’s total assets minus its total liabilities, is estimated to VND 1,393.4 billion at the
end of 2011, which makes of a shareholder equity ratio around 69.8%.
5
3. The Organization
Company Charter capital
(mill)
Percentage of
ownership
Subsidiaries DHG Nature 5000 100%
DHG PP 5000 100%
DHG Travel 3000 100%
DHG Pharma Ltd. 50000 100%
SH Pharma 5000 51%
CM Pharma 5000 100%
DT Pharma 5000 100%
HT Pharma 5000 100%
AG Pharma 5000 100%
ST Pharma 5000 100%
TG Pharma 5000 100%
TOT Pharma 5000 100%
BALI Pharma 5000 100%
Association SPIVIHA 12000 31%
VIPACO 50000 20%
Table 1. Subsidiaries and Associations
DHG controls over 13 subsidiaries and 2 association companies. DHG classifies its subsidiaries
into 2 categories:
3.1. Concentric diversification subsidiaries:
This category includes DHG Nature, DHG PP, DHG Travel, and DHG Pharma Ltd. All of these
companies are full consolidatedand focus on manufacturing pharmaceuticals and related
products.
6
3.2. Distribution subsidiaries:
The most significant companies in this category are CM Pharma, DT Pharma, HTPharma, AG
Pharma, ST Pharma,… these companies are also full consolidated (except SH Pharma) and
engage in distributing DHG product to 64/64 provinces. Over the last two decades, the
distribution network has been expanded with 09 sub-companies, 28 branches , and 67 drugstores
at hospitals.
Figure 1. Distribution system
7
4. Products
DHG specialize in development, making and sales of pharmaceutical products, cosmetic and
functional foods with over 11 brands.
DHG products are under constant development, within the industry having the fast technology
growth.
5. Markets
99%
1%
Sale value
Domestic Export
Figure 2. Sales markets
In 2011, 98.8 percent total sales of goods self-produced came from the domestic market; the last
1.2 percent is from exporting activities. Despite of that fact that foreign market contributes a
small amount into total sales, exporting revenue has increased in value in recent years. For
instant, the export revenue in 2011 gains 27 billion VND, increase 27% compared to 2010.In
many years, DHG have built a strong relationship with familiar exported markets like Moldova,
Ukraine, Myanmar, Russia, Mongolia, Cambodia, Nigeria, Laos, and Singapore. Lately, DHG
have also set their feet on many new trading markets, include: Jordan, Taiwan, Malaysia, Czech
Republic, Belarus, Kazakhstan, Hong Kong, Indonesia, Sri Lanka, Ghana, France, Pakistan.
8
II. STRATEGIC ANALYSIS
In this report, we use the PEST analysis with an aim to analyze the macro environment that
affects DHG’s activities. Besides, we also employ the Porter’s Five Forces which helps to
determine the competitiveness of the industry DHG is in.
To conclude the strategy analysis we construct the SWOT model which consists of internal
factors (strengths, weaknesses) and external factors (opportunities, threats) affecting to DHG
business.
1. PEST analysis
1.2. Political factorsThe pharmaceutical industry is one of the sectors affected strongly by the management of the
state. The government has issued many legal documents to manage the pharmaceutical industry
including documents related to the matter of state policy in the field of medicine, management of
state on drug prices, drug testing facility, management of the drug subjecting to special control.
Since 01/07/2008, producers not qualifying GMP standard as recommended by the World Health
Organization (WHO GMP) and business importing, exporting, trading pharmaceutical storage
system does not meet GSP standard would have to stop production. There are also regulations
such as "GDP" good practice on drug distribution, "GPP" good practice on the management of
the pharmacy ". Only the business meeting the new standards may exist and develop. These rules
will help create conditions for Vietnamese small pharmaceutical company merger or acquisition,
promote domestic enterprises to improve, focus in depth development to be able to compete with
multinational companies.
1.3. Economical factorsVietnam's economic growths over the years are stable, creating favorable conditions for
economic development. However, the global financial crisis had a strong impact on the
economy. High inflation causes people to be more cautious in their investment and consumption.
Nevertheless, in comparison with other industries, the pharmaceutical industry is one of the few
industries influenced least by the crisis, because this is one of the essential goods to the people.
9
1.4. Social and cultural factorsThe majority of Vietnamese people concentrate in rural areas with low living standards, high
demand for cheap drugs. This is favorable conditions for domestic pharmaceutical businesses
extend markets.
Moreover, Vietnamese consumers’ living standard has gradually improved; health status is
increasingly concerned resulting in a high demand for drugs in order to ensure health. Therefore,
this is also a favorable condition for the development of Vietnam pharmaceutical industry.
1.5. Technological factorsProduction technology is at low level. Most drug manufacturing enterprises only focus on simple
pharmacy leading to duplication of product line, not focus on the development of specific
remedy or special preparation. Therefore, domestic supply only meets 40% of market demand.
To compete with foreign companies, domestic pharmaceutical firms are now upgrading modern
production line according to international standards.
2. Porter’s five forces
2.1. The threat of new entrants into the market – MEDIUM
- The Pharmaceutical industry has experienced the average high growth rate of 16- 18%
- The pharmaceutical companies is tightly controlled by government polices
- The pharmaceutical companies need to meet the GSP standard provided by WHO (and
GDP, GLP, PPP standards) in order to stay in this industry.
- Capital requirement is low due to the fact that most of companies focus on simple
production, low technology, unspecialized.
2.2. The threat of increased competition from rivals within the industry -
HIGH
- The Pharmaceutical industry has experienced the average high growth rate of 16- 18%
- From 1/1/2007 foreign firms will be allowed to open branches in Vietnam in the form of
joint venture or 100% foreign capital. The number of foreign companies increased
rapidly from 300 in 2007 to nearly 500 enterprises in 2010. (Annual report 2010)
10
- Vietnamese companies mainly concentrate on ordinary products without much
differentiation; compete severely in a small segment market.
- Pharmaceutical corporations with big names such as Sanofi-Aventis (France), GSK (UK),
Servier (France), Pfizer (USA), … has appeared in Vietnam and dominated the domestic
market in specific remedy segment. (Annual report 2009)
- Although at current time, the foreign pharmaceutical firms cannot produce and distribute
in the domestic market, as of the time of protection expiring, the pharmaceutical industry
will have a fiercely competitive environment. At that time the domestic pharmaceutical
enterprises will have to cope with the multi-national corporations with modern
technology and high productivity.
- High switching costs when customer can freely switch from this product to another
2.3. The bargain power of buyers - LOW
- Low buyer concentration versus firm concentration
- Drug is an essential products that can not be replaced by any other product
2.4. The bargain power of suppliers - HIGH
- Manufacturing activities depend on more than 90% imported materials from India, China,
Holland…
- High concentration of suppliers
- Low differentiation in suppliers
- Low present of substitute input
2.5. The threat of substitute products - LOW
- Drug is an essential products that can not be replaced by any other product
- Demand for pharmaceuticals is a necessity so possible substitutes for this item is nearly
zero.
3. SWOT analysis
3.1. Strengths
- Having a largest and deepest distribution network in Vietnam pharmaceutical industry
11
- Professional and efficient Marketing
- Clear strategic orientation, modern and effective management methods
- Investment in key core competence and skilled professionals, concentric diversification
- Being leader in term of market share, production capability and business performance in
Vietnam pharmaceutical industry from the year 1996
3.2 Weaknesses
- Most products are under generic form, but no many specific drugs to replace the foreign
ones using in hospital system
- Must be import about 80% raw materials (in prior time: 90%)
- The production capacity does not meet the market demand due to the slow progress of
new factor construction
- The management ability does not keep pace with the development of the company
because of its excessive growth
- The data processing system is still simple, does not satisfy the demand, ERP is deploying,
so work stuff is increased double
3.3 Opportunities
- Significant potential of population, which will grow to almost 100 million by 2019.
Healthcare awareness of Vietnamese improved, leading to the increase in average per
capita consumption on medicines
- The growth rate of Vietnam pharmaceutical industry expects to be from 17%- 19% in
2010 – 2014. Domestically produced medicines only meet 50% Vietnamese demand
- Following the government policy, domestically produced medicines have to make up
70% Vietnamese market share in the year 2015
- In addition to the available competitive advantages, domestic pharmaceutical companies
hold the rights to distribute products directly
- The barrier to entry the industry is still high because of the requirement to meet GPs
standards
3.4. Threats
- Vietnam’s economy growth rate is lower than previous years
12
- Medical price strictly controlled by the Government while the price of input material
increased constantly
- full WTO membership creates a severe competition between the Company and other
domestic pharmaceutical enterprises as well as with the foreign ones
- Investor’s high expectations have put a heavy pressure on corporate management team in
term of making profits, increased corporate value and creating a balance of benefit among
shareholders, the company itself and employees.
- Lack of human resource for pharmacy field, particularly the pharmacists having ability to
use English language well creators a limitation on approaching advance technology from
developed countries.
4. Risks
4.1. Economic risk: IFM estimates Vietnam GDP growth rate will recover in the period 2012-2017 ( GDP growth
rate can reach 7.5% in 2017). The development of economy combined with the increased
awareness and demand of health care will have good effect on the overall pharmaceutical
industry as well as the business and producing activities of DHG.
Therefore, to DHG, economical risk may not be a considerable risk in the next period.
Legal risk: law and sub-law document are not totally completed. Policy and guidelines for tax are
changed constantly and asynchronous with other related regulations. Therefore, the corporation has to
update, collate and adjust its regulations frequently to be proper to current laws and practical context.
4.2. Risks on the fluctuations of input price:Electricity, petroleum and basic salary all have upward tendency following the state policy.
Imported pharmaceutical material prices are also predicted to increase. The input price increases
while output one is controlled strictly by the Government. Thus, the corporate profit may suffer
negative affect from these risks.
To deal with this problem, DHG must have good forecast of the input price from the beginning
of the year through supports from consultancy of friendly suppliers and its own experiences.
DHG has to be active in importing materials so as to bring best benefits in price, currency
13
exchange rate, opportunity cost and inventory cost. It is necessary for DHG to improve labor
productivity, renew production line, save fuel and diminish production loss.
Risks on the dependence of imported raw materials
Imported active pharmaceutical ingredients make up 80% of DHG’s production demand. This
long-term dependence will cause difficulties in making the products, which have outstanding
features. As a result, the competitive capacity compared with foreign enterprises has been
reduced a lot. So, the imported materials should be gradually replaced by self-producing ones or
those of home country.
4.3. Exchange rate risk: DHG’s material is mainly from import. Hence, the price of material can be influenced sharply
by the fluctuation of exchange rate. Unfavorably, the rate tends to be increased during the next
time. Because the exchange rate between USD/ VND is affected by several elements, it is
difficult to forecast due to the raise of abnormal fluctuations. Exchange rate risk is somewhat
significant to DHG Pharma.
4.4. Industry risk: The entry of new companies has increased competitive pressure on the domestic market. To
reduce this significant risk DHG should speed up investing in technology innovation and
increasing productivity and products’ quality.
5. Objectives – Strategies for 2012 - 2016
DHGI’s aim for 2012 – 2016 period is to increase employees’ income based on production and
business efficiency by rising productivity, saving costs. Aside from that, the company would like
to reduce cost prices, improve production system and company management; which ensured not
to affect benefit earnings; dividend policy for shareholders and customer policy.
In order to achieve these objectives, DHG has given some specific strategies. First of all, the
company will standardize the organizational structure of management according to product
categories; continuously implement the subject namely “improving production efficiency” and
“improving sales system efficiency”. Secondly, DHG will have a right policy to promote
education, training, control; select staffs to ensure fairness and maintain cultural implementation
14
in the company; arrange human resources for the new factory. Developing and applying
effectively ERP system with BFO solution in Company management administration system is
also one of its strategies to reach the objectives. Moreover, the firm starts the program “If I was
DHG Pharma’s CEO” for seeking inappropriate points potentially affecting to future business in
order to timely prevent and promptly overcome difficulties; apply modern management methods,
innovate production organization, continuously invest in more intensive scientific thesis for long-
term effects. The company will also invest in R&D and exploit key major of human resources,
exploit the relationship with institute, investors and suppliers. Finally, Board of Director and
Board of Leadership continue to actively seize opportunities, overcome challenges, conserve
strength and enhance the value of DHG brand.
They also provide groups of solution for some departments in the company:
For marketing and sales department: Creating a efficient plan base on values of potential growth of brands. Continue to
build 11 brands and new brand of NattoEnzym product. Exploiting the strong point of the distribution system by trading the other products
(imported and exclusive goods). Expand the sales system of functional food and cosmetic products.
Customer service is the most concentration. Improve the communication activities and emotional care to people as well.
Increasing the number of social activities and keep on building a stand of DHG as a company for community.
For research & development, production, quality management departments: Sorting products according to the segmentation of therapeutic group, treatment with
prescription, OTC; actively investing in researches of new products with high technology application, creating their own competitive advantage.
Predicting the market demands, creating the plan for supply savings, reducing the cost, lost and the production cost.
Investing to the new technology with high efficient, operating the system follows these several purposes: saving, productivity, effected and useful.
Create the operation plan and preparing the human resources, equipment for the new GMP WHO factory.
For administration and management system: Implementing financial statements and consolidated reports clearly, transparently and
timely.
15
Planning the budget, properly and timely reflect the results of business in order to support functional departments and consult the Board of Executive Directors in overall strategy.
Checking and adjusting all charters, regulations, policies, etc. related to the employees in order to create a friendly environment, enhance working spirit and creation of employees.
Training human resources at all level timely and appropriately to inherit alternative requirements of any changes in positions.
Implementing the project of 4D salary adjustment according to 07 levels of complexity of each position and reality.
Continuously researching and improving software in hospitals and pharmacies GPP to satisfy the customers’ needs, create competitive advantages and contribute further customer relationship.
Deploying the internal communication port system for ideas of innovation, working process…; ensuring centralized information storage and convenient access for all departments to access, use and share data.
III. FINANCIAL ANALYSIS
1. Key figure analysis
1.1. Liquidity
DHG’s liquidity is highly secure, especial when comparing to other listing companies of the
same industry. Liquidity ratios are always over 1 (for quick ratio) and 2 (for current ratio) over
the period 2007 - 2011; such high ratio is resulted from the large cash amount, which made up a
high rate of the structure. The high level of cash is a signal for the expanse in the future. In 2011,
those ratios tended to decrease because DHG made efforts to enhance the debt collection
efficiency, which cause trade receivables’ growth to be slower than that of short-term debts.
With the need of cash for investment in the next few years, the cash liquidity tends to move
downward since 2011. However, in general, the ratios are still high and at highly secure level.
2007 2008 2009 2010 2011Current ratio
2.32 2.13
2.52
3.06
2.74
Quick ratio 1.53
1.29
1.88
2.32
1.79
Cash liquidity 0.63
0.58
1.25
1.36
0.86
16
1.2. Solvency ratio
2007 2008 2009 2010 20110
10
20
30
40
50
60
44.6
55
48.7
41.543.6
3135
3329 30
1.45 1.55 1.5 1.42 1.44
Debt-Equity Ratio (%)Debt-Assets Ratio (%)Leverage Ratio
Figure 3. Solvency ratios from 2007-2011
17
Table 2. Liquidity ratios from 2007 to 2011
DHG has the ratio of owner’s equity at around two times higher than its liabilities. Especially, its
long term liabilities make a low proportion in total assets. This reflects that the company has
never had to finance much by debts and the liabilities of company are so safe, especially in the
situation of high inflation and high interest rate.
However when the economy returned to be stable, this structure will not be suitable anymore. In
term of accounting aspect, the company’s profit appears to be increased because it does not have
to spend for borrowings interest; however, if calculated the efficiency from financial activities,
DHG has missed benefit from financial leverage, it also bear the pressure on dividend and
profitability due to its high level of owner’s equity. Therefore, we can expect that in future the
capital structure will changes towards the increasing trend of liability per owner’s equity. In the
situation of decrease tendency of interest, launching to use financial leverage will support
significantly to the efficiency of business operation.
1.3. Efficiency ratio
This section is intended to describe how efficiently a firm uses its assets to generate sales since
firm invest considerable resources, using them productively is critical to overall profitability. The
measures in this part are sometimes called asset utilization ratios, which can be interpreted as
measures of turnover.
2007 2008 2009 2010 2011
Receivables turnover 5.99 5.80 6.32 5.48 5.32
Days receivables outstanding 60.94 62.97 57.71 66.66 68.59
Inventory turnover 3.42 2.58 2.67 3.11 2.97
Days inventory outstanding 106.82 141.52 136.46 117.45 122.74
Payables turnover 16.21 11.26 11.83 12.89 12.22
Day payables outstanding 22.52 32.43 30.87 28.32 29.88
Fixed asset turnover 5.55 6.57 7.37 6.70 5.42
Table 3. DHG’s efficiency ratios
1.3.1. Receivables Turnover
Receivables turnover ratio is the ratio of net credit sales to account receivables. This ratio
measures how soon sales will become cash. The lower the amount of uncollected cash from its
18
operations, the higher this ratio will be. In contrast, if a company has more of its revenues
awaiting receipt, the lower the ratio will be. However, if this ratio is too high, it will affect
consumption because it means that the maturity is short-term, which will not attract more
customers.
Receivables turnover = Net sales
Average account Receivables
As we can see in the table 3, DHG’s receivables turnover ratios from 2007 to 2009 do not
fluctuated much. However, DHG recorded erosion in its receivable turnover, from 6.32 in 2009
to 5.48 in 2010; and this ratio continued to decline to 5.32 in 2011. It is because the account
receivables are increase faster than the rise of net sales, it means that the company may have
problem in collecting its receivables. Thus, on average, DHG collected on its credit sales in 69
days in 2011. In general, DHG’s account receivables were managed at an effective level
compared to its peers; its ratio is only lower than OPC and MKP’s ratio (table 4).
DHG OPC MKP DMC TRA IMP DCL
Receivables turnover 5.32 7.71 8.32 5.31 4.20 3.89 2.03
Days receivables outstanding 68.59 47.34 43.87 68.74 86.90 93.83 179.80
Table 4. Receivable turnover of pharmaceutical companies in 2011
1.3.2. Inventory Turnover
Inventory turnover is the ratio of cost of goods sold to inventory. This ratio indicates how many
times during the period that inventory can be sold out.
Inventory turnover = Cost of goods soldAverage Inventory
The table of DHG’s efficiency ratios shows that during 2007 – 2009, the company’s inventory
turnover reduced from 3.42 to 2.67; it leads to the increase of days inventory outstanding from
107 days to 136 days. The rise in days inventory outstanding is usually due to raw materials
inventory and products inventory. The reasons for raw materials inventory are fluctuation in
price of raw materials, exchange rate or cheaper price for large volume of raw materials.
Products inventory increase is mainly because of the increase in distribution system of DHG; in
19
order to meets customer demands across the country; and to reduce costs. However, this ratio
was improved in 2010, which was 3.11 times. It shows that the company had a effective policy
to improve inventory. In 2011, this figure reduced slightly; as changes in production plan,
increase in prices of raw materials and the manufacture of new products.
Nevertheless, in overall, DHG’s inventory turnover is at an average when compared to other
companies’ ratio (table 5).
DHG OPC MKP DMC TRA IMP DCL
Inventory turnover 2.97 1.44 3.65 3.91 2.58 1.97 2.17
Days inventory outstanding 122.74 253.47 100 93.35 141.47 185.28 168.20
Table 5. Inventory turnover of pharmaceutical companies in 2011
1.3.3. Payables Turnover
Payables turnover uses a liability in the equation rather than an asset, as well as an expense
rather than revenue. Account payables turnover is important because it measures how quickly a
company paying its own bills.
Payables turnover = Cost of goods sold
Average Account Payables
In 2007, DHG’s payables turnover was 16.21; this is a high ratio, which leads to a short-term
payment, the days payable turnover outstanding is just 22 days. High accounts payable
turnover may be a signal that a firm isn't receiving very favorable payment terms from its own
suppliers or the company buys raw materials based on the method of immediate or within seven
days payment to have favorable price. However, the payables turnover had decline sharply to
11.26 in 2008, this figure tended to increase from 11.83 in 2009 to 12.22 in 2011 which is an
acceptable ratio. Normally, DHG has the day’s payables outstanding around 30 days. To
compare with its peers, DHG is efficient in managing the payment to its suppliers (table 6).
DHG OPC MKP DMC TRA IMP DCL
Payables turnover 12.22 8.04 20.49 16.16 5.25 8.14 5.88
Days payables outstanding 29.88 45.39 17.81 22.59 69.52 44.84 62.07
Table 6. Payables turnover of pharmaceutical companies in 2011
20
1.3.4. Fixed Asset Turnover
Fixed asset turnover measures the relation between sales and investment in PPE. The higher this
ratio is, the more efficiently the firm uses its assets to generate sales. However, if the fixed asset
turnover ratio is too high, then the business firm is likely operating over capacity and needs to
either increase its asset base (plant, property, equipment) to support its sales or reduce its
capacity.
Fixed asset turnover = Sales
Average ¿assets¿
From 2007 to 2009, the fixed asset turnover tended to increase, from 5.55 to 7.37, which means
that the company is more efficient in using its asset to generate sale during the time.
Nevertheless, this ratio started to fall from 7.37 in 2009 to 5.42 in 2007, which is a bad sign. The
company should have policies in managing and using its assets to increase the fixed asset
turnover. According to table 7, DHG has a good ratio when compared to other pharmaceutical
companies.
DHG OPC MKP DMC TRA IMP DCL
Fixed asset turnover 5.42 2.19 9.75 4.29 7.84 2.99 2.46
Table 7. Fixed asset turnover of pharmaceutical companies in 2011
Generally, based on analysis of those ratios, DHG is more efficient in using its assets to
generate sales than its peers.
1.4. Profitability ratio
Return on equity (ROE) is a comprehensive indicator of a firm’s performance because it
provides an indicator of how well managers are employing the funds invested by the firm’s
shareholders to generate returns. It is defined as:
ROE = ROA x Financial Leverage
2007 2008 2009 2010 2011
21
Profit margin (%) 9.07% 8.75% 20.78% 18.84% 16.85%
Assets turnover 1.35 1.37 1.15 1.12 1.25
Return on assets (%) 12.22% 12.02% 23.84% 21.07% 21.03%
Financial leverage 1.45 1.55 1.50 1.42 1.44
Return on equity (%) 17.67% 18.68% 35.65% 29.94% 30.38%
Table 8. Profitability ratios from 2007 to 2011
The table shows that DHG’s ROE experienced a slight growth of 1.01% in 2008, and it also got
double in 2009 before started to decrease from 2009 to 2011, from 35.65% to 30.38%. However,
in comparison with other listing companies of the same field, DHG still take the lead.
DHG TRA MKP IMP OPC DMC DCL
ROE 30.38% 22.7% 18.9% 10.9% 16.5% 13.9% -13.4%
Table 9. Return on equity of pharmaceutical companies in 2011
From the calculated ratios, it is suggested that substantial change in ROE of DHG is mainly
caused by ROA, rather than financial leverage. The ROA of DHG in 2011 remained at a high
extent as in 2009 and 2010, due to the efficiency of activities, which was proved by the
improvement of the net income over total assets ratio of the year 2011.
1.5. Cash flow analysis
The objective of a statement of cash flows is to provide information about the cash receipts and
cash payments of a business entity during the accounting period. Cash flow analysis gives
analysts further insights into the firm’s operating, investing, and financing policies by examining
its cash flows. In also provides an indicator of the quality of the information in the firm’s income
statement and balance sheet (Appendix C).
As cash flows from operating activities is directly related from its core operating rather than
other activities and it shows the cash effects of revenue and expense transaction generated from
its core operation rather than other activities. DHG reported a small cash flow from operating
activities in 2007 by 51,317,300,703 VND; however, this figure was increase around four times
in 2008, which is 195,108,449,759 VND. This cash flow had doubled in 2009 and then started to
decrease by 25.5% from 2009 to 2011.
22
The cash flows from investing activities present the cash effects of transaction involving plant
assets, intangible assets, and investment. DHG recorded negative cash flow from investment in
the last five year. After decreasing dramatically 93% in 2008, DHG’s cash flow from investing
activities started to increase during 2008-2011 period. Last year, the investing cash flow of the
company negatively increase to 188,292,295,008 VND, which increase by 154% from 2010, due
to the significant growth in payments for additions to fixed assets and other long-term assets.
Thus, DHG used much investment to expand its business.
The cash flow from financing activities during 2007 – 2011 was very volatile, which decreased
from 235,265,123,160 VND in 2007 to -250,587,007,649 VND in 2011, due to the decrease in
proceeds from equity issued and short-term borrowings.
In general, the company recorded a positive cash flow at the end of the year during the last five year.
1.6. Sub conclusion
Besides many sound financial numbers, DHG till face with many issues like high inventories
value and low inventory turnover, which if not be noticed and control in the future will impact
severely on the revenue as well as the ability to raise cash. From 2012, the disbursement effect of
new investment results in the spending of large amount of cash, which leads to arises of short
term borrowings to aid working capital. Thus, the company in the next few years will experience
an in crease in total assets while the capital structure changes.
IV. FORECASTING
In DHG valuation, the forecasts for the budget in the next five years are necessarily prepared by
employing findings from previous analysis as well as current information of the company. The
estimated period will be from 2012 to 2016. The forecasts will focus on some items in the
financial statement such as: net sales, total assets, total equity. Most of the assumption will be
based on these items proportionally. Besides, some other items will be supposed directly from
the policies of the company and the government.
23
1. Forecasting of future sales
After analyzing the economy, pharmaceutical industry and the strategy of the company, the
hypothesis that the net revenue of DHG should be affected by following factors can be
concluded: population, product spending per capita, manufacture and distribution system, and
market share. Thus, any change in these factors will take influence on the revenue of DHG. From
that point of view, a formula to forecast the revenue is constructed based on variables (change in
population, change in product spending per capita, development in manufacture and distribution,
expanse or shrink of market share):
Growth rate of sales = Effect of manufacture & distribution
x [1 + Growth rate of population]
x [1+ Growth rate of product spending per capita]
± Effect of in market share
The forecast growths will take the estimated growth effected by the improvement and
development of manufacture and distribution system as the base rate. This factor indicates the
ability of the company to meet the need of the market. The rate for each year is different due to
the strategic plan of company and their efficiency in using assets. From DHG’s annual report
2011, the plan of constructing plans, houses ... are clarified specifically. In this report, the
assumption that DHG investment in the above fixed assets will expand significantly in 2012 and
increase gradually in the following years. However, the fact is that DHG may not be able to get
100 percent of production capacity of the new assets that it invests in that year, but on the
followings. Another assumption is that the capacity can be achieve around 50% in the first year
and 100% in the next year. This assumption has to be made due to the lack of information from
the company. On the other hand, the company can not grow significantly forever, thus, it is
believed that the investment in assets will reduced from 2015.
2012 2013 2014 2015 2016
Effect of manufacture &
distribution
10% 14% 16% 11% 9%
Table 10. Investment activities growth contribution
24
Then, the growth of sales will be adjusted by the growth rate of population and product spending
which are constant over 5 years. The Vietnamese population growth rate is said to be stably
10.5% per year according to General Statistics Office (GSO). In addition, GSO also announced
that the pharmaceutical product spending per capita will be double in the next 5 years.
Statistically, the growth rate of product spending will be 14% per year.
Besides, DHG recently has captured a big part of the market pie and this hardly increases in the
next three years (2012-2014). However, the effect of market share contributes to the growth of
sales minus around 2-3% per year in 2015 and 2016 due to the shrink of market share. This
mentions about the threat of new entries which is believed to be increase since 2012 when the
government reduce the privilege on company and allow foreign entities to enter the industry.
That is the reason why in 2015 and 2016, the foreign companies with their advantages in capital,
technology will capture a part of market.
Growth rate of population (constant over 5 years) 10.50
%
Growth rate of product spending per capita (constant over 5
years)
14%
Effect of market share (-) 3%
Sub conclusion
DHG will experience pretty high growth rates in the next five years, especially in 2013 and 2014
when most of its investment in factories and distribution start to operate with their full capacity.
In addition, the growth will be stable down in 2015 and 2016. However, the decrease in rate does
not mean the sales is low, in fact, the DHG’s revenue will be at a high level in the future.
(Appendix E, Note 1)
2012 2013 2014 2015 2016
Growth rate of sales 12.4% 17.4% 19.9% 10.7% 8.2%
Table 11. Growth rate of sales from 2012 to 2016
2. Costs
2.1. Cost of production
25
In the income statement, there are specific costs. This paper will focus on the production cost
which is affected by two factors: exchange rate and inflation.
Growth rate of COGS = Rate of sales
*[0.8*0.5( 1+ Exchange rate Inv) +0.6*(1+ Inflation rate Inv)]
As can be seen from previous financial statements, the cost of good sold (COGS) often equal
50% of net sales, however, the COGS will change a bit from 50% every year. The rate of COGS
will take the growth rate of sales as based rate due to the fact that the increase in sales
accompanied with the rise in COGS. Then, this rate is adjusted with the change in exchange rate
and inflation. In one unit cost of product, 50% of cost is raw material and the other fifty is come
from factory overhead expenses. The reason for this adjustment is more than 80% of raw
materials are imported from foreign countries in term of USD and the other expenses will be
influenced by the increase in consuming price embodied by inflation rate.
2011 2012 2013 2014 2015 2016
Exchange rate average (VND) 20587 20828 21926 22363 22838 23323
% change 1.2% 5.3% 2.0% 2.1% 2.1%
Inflation rate average (%) 18.9 11.9 8 7.5 6.1 5.3
% change -37.0% -32.8% -6.3% -18.7% -13.1%
Rate of COGS 0.067 0.098 0.120 0.062 0.049
(source: Investor News published by Sacombank)
Finally, the COGS for each year will be calculated by take 50% of sales multiplied with the
growth rate of COGS. (Appendix E, Note 2)
2.2. Selling, general and administrative expenses
With attempting to expand distribution system, DHG will experience a rise in SG&A expenses.
However, by implementing project “improving sales system efficiency”, DHG recently has
successfully in saving SG&A costs. Thus, the SG&A expenses should account for around 30%
of net sales in the next five year.
26
3. Financial posts
3.1. Financial income
The financial income, mainly comes from the interest gain, contributes around 10% to the EBT
of the company. However, in the next five year, when DHG need large amount of money to
invest in assets, the amount of cash keep by the company will reduce significantly. Thus, the
financial income will tend to be low in the future.
3.2. Financial expenses
As said above, DHG are using cash to invest in new assets which leads to the shortage of
working capital for the whole years. This is the reason why in the next few years, DHG begin to
employ short term debt to finance their business which results in the increase in future financial
expenses. The main loans issued by DHG are held by the employees of the company, and these
are unsecured loans. Thus, the cost of debt is about 13.8%, which is higher than the interest rate
announced by State bank.
Besides, the depreciation of VND compared to USD in the future also creates foreign exchange
losses which are considered as financial expenses. The researchers assume this loss account for
0.2% of net sales. (Appendix 4)
4. Investment and depreciation
In the next three years, investing in factories and storages continue being pushed up by the
company. In 2011, 70 billion VND had been used in distribution systems. In addition, many
items are completed in 2012, including three subsidiaries: B&T pharmacy, DHG Nature 1, DHG
Printing & Packing. The other incomplete items will be carried out in 2013 and 2014. However,
the company may not growth forever, thus, the researcher find it reasonable to the slow down of
investment in 2015 and 2016. The depreciation rate used in this calculation will take the previous
rate of 2011 which account for 11% of total fixed assets (Appendix 3)
5. Taxes
It is hard for the outsider to predict the future tax expenses for a company. However, based on
the historical rate as well as the taxing policy of the government on pharmaceutical company, the
27
prediction is getting more reliable. DHG has obligation to pay the income tax at rate of 20% of
taxable profit from 2005 to 2014, and 25% for the followings. Nonetheless, the investment in
new subsidiaries receive reduction of 50% of taxable profit, thus, the more DHG invests in new
subsidiaries, the more it exempt from tax. That is the reason why in the last five years, the tax
rate were ranged from 10-14.5%. From this point of view, the forecast of tax expenses for the
next five years will take the highest historical rate which is 14.5%
6. Other assumption
Inventories account for 20-25% of the total assets. This number is quite high due to the fact that
company need to keep high level of raw materials so as to meet the demand of production and
avoid the price increase in the future. In this report, the inventories will apply the rate of 25%.
Due to the influence of policy on salary payment for sales based on received money, the
receivable turn-over tend to reduce in the last 5 years and slightly change in the future. Thus, the
account receivable in the next five years will be retained at the rate of account receivable turn-
over in 2011 which is 5.32.
As said above, from 2012, the company need to cash to invest in new assets, thus, the level of
cash and equivalent will be low in the next few years and recover in 2016 due to the slow down
of investment. The stable of level of accounts receivable and inventories in the future
accompanied with the significant decrease in cash and equivalent makes the total current asset
tighten to a lower level. However, this level needs to be limit at least 1.2. Besides, this rate is still
high compared to other companies in the same industries. Nevertheless, this rate will pop up in
2016 when the level of cash is recovered.
The capital structure of the company is quite stable at ratio 30:70 for debt and equity
respectively. Nonetheless, the high level of short term borrowings in the future will make this
ratio slightly change. The assumption for this ratio will be 34:66 from 2012 – 2015 and 32:68 in
2016.
28
7. The estimated future income statement and balance sheet
Based on the above discussion and estimation, the forecasting income statement and balance sheet are developed as followed
Table 12. Forcast income statement from 2012 to 2016
2012 2013 2014 2015 2016
Net sales Note 1 2,804,656,081,236 3,299,279,618,411 3,964,256,024,061 4,394,643,407,825 4,761,038,012,666
Cost of goods sold Note 2 1,535,503,469,978 1,899,095,502,161 2,369,833,494,050 2,411,186,806,541 2,565,058,561,086
Gross (profit)/loss 1,269,152,611,259 1,400,184,116,250 1,594,422,530,011 1,983,456,601,284 2,195,979,451,579
SG&A 30% of sales 841,396,824,371 989,783,885,523 1,189,276,807,218 1,318,393,022,347 1,428,311,403,800
Operating income 427,755,786,888 410,400,230,726 405,145,722,793 665,063,578,937 767,668,047,780
Financial income 10% of cash 28,987,983,070 35,332,444,285 43,861,995,948 59,545,332,518 63,239,251,089
Financial expenses0.2% of sales plus interest expenses
25,319,327,406 30,216,580,684 36,992,402,578 44,173,092,991 39,554,529,479
Results from other activities
(2,804,656,081) (3,299,279,618) (3,964,256,024) 4,394,643,408 4,761,038,013
Share of losses/gains in associates
(1,002,567,109) 329,927,962 1,585,702,410 1,757,857,363 1,904,415,205
Earnings before tax 427,617,219,362 412,546,742,670 409,636,762,548 686,588,319,234 798,018,222,607
Income tax 14.5% of EBT 62,004,496,807 59,819,277,687 59,397,330,570 99,555,306,289 115,712,642,278
Net income 365,612,722,554 352,727,464,983 350,239,431,979 587,033,012,945 682,305,580,329
From the estimation we can see that the net sales of the company rise steadily from 2012 to 2016. Especially, the sales soar significantly in 2013, 2014, and 2015 when most of the investment begins to generate returns efficiently. However, the net income tends to reduce slightly in 2013 and 2014 due to the increase greatly in financial expenses in these years.
29
Table 13. Forecast balance sheet from 2012 to 2016
2012 2013 2014 2015 2016TOTAL ASSETS Sales divided by
Asset turnover2,243,724,864,989 2,639,423,694,729 3,171,404,819,249 3,515,714,726,260 3,808,830,410,132
CURRENT ASSET Retain at quick ratio 1.2 - 1.35
1,400,439,288,314 1,659,739,945,286 2,008,346,119,268 2,335,599,944,951 2,517,620,374,790
Cash and cash equivalents
289,879,830,703 353,324,442,850 438,619,959,485 595,453,325,179 632,392,510,887
Accounts receivable Sales/ AR turnover (5.32)
527,190,992,714 620,165,341,807 745,160,906,778 826,060,790,945 894,931,957,268
Inventories 25% of total Assets 560,931,216,247 659,855,923,682 792,851,204,812 878,928,681,565 952,207,602,533Other current assets 1% of Total Assets 22,437,248,650 26,394,236,947 31,714,048,192 35,157,147,263 38,088,304,101NON-CURRENT ASSET
843,285,576,675 979,683,749,443 1,163,058,699,981 1,180,114,781,309 1,291,210,035,343
Fixed asset Increase 797,725,186,438 934,123,359,206 1,117,498,309,744 1,134,554,391,072 1,245,649,645,106Long-term financial investments
Constant 17,473,451,017 17,473,451,017 17,473,451,017 17,473,451,017 17,473,451,017
Other non-current assets Constant 28,086,939,220 28,086,939,220 28,086,939,220 28,086,939,220 28,086,939,220
LIABILITIES 757,814,358,374 891,460,982,988 1,071,136,727,031 1,187,426,828,075 1,217,789,314,804Current liabilities Note 4 699,590,060,056 833,236,684,670 1,012,912,428,713 1,129,202,529,757 1,159,565,016,486Long-term Liabilities Constant 58,224,298,318 58,224,298,318 58,224,298,318 58,224,298,318 58,224,298,318
OWNERS' EQUITY Total asset divided by leverage
1,485,910,506,615 1,747,962,711,741 2,100,268,092,218 2,328,287,898,185 2,591,041,095,328
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
2,243,724,864,989 2,639,423,694,729 3,171,404,819,249 3,515,714,726,260 3,808,830,410,132
30
V. VALUATION
1. Weighted average cost of capital (WACC)
1.1. Cost of equity (re)
Using CAPM approach to obtain re:
re = Rf + β(Rm-Rf)
First, we use Damodaran’s research on country default spread and risk premium to define market
risk premium.
As identified in his research, the starting point for estimate long-term country risk premium is the
country rating from Moody’s (www.Moodys.com) and then estimate the default spread for that
rating over a default free government bond rate. This becomes a measure of the added country
risk premium for that country. He then added this default spread to the historical risk premium
for a mature equity market (estimated from US historical data) to estimate the total risk premium.
In this period, he have used historical premium for matured market of about 6% to get the total
risk premium. In this report, the country risk premium is identified as 6%. Therefore, total
market risk premium is assumed to be 12%.
Second, we chose Vietnam government 10-year of maturity bond’s rate as risk free rate. Based
on Treasury bond news number 41 of Bao Viet Security Corporation (16/11/2012), this rate was
10.1%.
Last, we calculate beta from the following formula:
β = Cov(Rm ,Rf )
Var (Rm)
In which: Rf is the weekly return of DHG
Rm is the daily return of VN index
Thus, the beta for DHG is calculated as 0.45
Putting these inputs together, the cost of equity is estimated as:
Cost of equity = Risk-free rate + Beta × Market risk premium
31
= 10.1% + 0.45× 12%
= 15.51%
1.2. Cost of debt:
The cost of debt is the required return on company’s debt. As DHG has not planned to issue
bond, the cost of debt is calculated based on the deposit rate of the company. According to
annual report 2011, the company had loans from their employees with the rate of 9.5% to 10%.
Thus, the cost of debt is estimated at 10%, which remain constant for the next five years.
1.3. Weighted Average Cost of Capital (WACC):
WACC is an important component in DCF model. It is the require return on all the asset of the
company, based on the market’s perception of the risk of those assets.
WACC = D
D+ E x rd x (1-t) +
ED+ E
x re
In which: D is the market value of debt
E is the market value of equity
rd is the cost of debt
re is the cost of equity
t is tax rate
The company has stated in the annual report 2011 that, DHG’s equity is accounting for 70% of
the total capital. Thus, the deb – equity ratio is 30/70
Therefore, the WACC is calculated as following:
WACC = 30
100 x 0.1 x (1 – 0.11) +
70100
x 0.1551 = 13.53%
32
2. Discounted cash flow (DCF)
In this model, the free cash flow for firm will be discounted at weighted average cost of capital
(WACC) to come up with the present value of expected cash flow. WACC includes cost of
33
equity and cost of debt. Under the assumption of constant costs the general DCF model will be summed up as following formula:
V=∑t=0
∞FCFF
(1+WACC )t
2012 2013 2014 2015 2016NI Assumed
IS 365,612,722,554
352,727,464,983
350,239,431,979
587,033,012,945
682,305,580,329
Depreciation Note 3 87,749,770,508
102,753,569,513
122,924,814,072
124,800,983,018
137,021,460,962
Interest expenses *(1-T) Note 4 16,852,063,033
20,193,408,338
24,849,626,403
30,253,154,280
25,677,747,703
Capital expenditure 338,270,695,797
136,398,172,768
183,374,950,538
17,056,081,328
111,095,254,034
Change in working capital
Note 5 53,096,550,509
90,528,305,751
123,097,732,743
99,926,849,131
75,940,839,122
FCFF 78,847,309,790
248,747,964,315
191,541,189,173
625,104,219,785
657,968,695,838
Present value 69,521,059,639
193,383,110,331
131,295,755,951
377,807,384,423
350,632,966,554
In order to employ DCF model, the terminal value of the company need to be determined by using Gordon formula to calculate future
value based on estimated growth rate. In this calculation, the assumption of growth rate is 5.5% which is the GDP growth rate in the
future. This is the minimum rate the company has to achieve in the next few years.
34
Terminal value 4,673,629,560,507
Enterprise value 5,445,636,870,852Market value of debt 58,224,298,318Market value of equity 5,387,412,572,534Share outstanding 65,166,299Estimate price 82,672
3. Sensitivity analysis
There is great uncertainty about the estimated input factors: sale over the next 5 years. This
figure affects many other figures such as: expense, cost of goods sold, and taxation in the
forecast. As a result net income, an important figure in calculating estimate stock price using
FCFF model, will be affected significantly.
We have therefore made a sensitivity analysis, focusing on how changes in sales will affect the
per share value of DHG in the FCFF model.
The sensitivity analysis is based on changes up to +/- 4 % and the results are illustrated in the
two tables below:
Net Income
sale 2012 2013 2014 2015 2016
436,499,272,240 469,211,876,042 525,712,986,098 701,883,271,469 786,067,869,390
-4% 419,052,468,996 450,515,151,596 504,781,960,624 673,945,269,866 754,796,340,914
-3% 423,414,169,807 455,189,332,708 510,014,716,992 680,929,770,267 762,614,223,033
-2% 427,775,870,618 459,863,513,819 515,247,473,361 687,914,270,667 770,432,105,152
-1% 432,137,571,429 464,537,694,931 520,480,229,730 694,898,771,068 778,249,987,271
% 436,499,272,240 469,211,876,042 525,712,986,098 701,883,271,469 786,067,869,390
1% 440,860,973,051 473,886,057,154 530,945,742,467 708,867,771,870 793,885,751,509
2% 445,222,673,862 478,560,238,265 536,178,498,836 715,852,272,270 801,703,633,628
3% 449,584,374,674 483,234,419,377 541,411,255,204 722,836,772,671 809,521,515,747
4% 453,946,075,485 487,908,600,489 546,644,011,573 729,821,273,072 817,339,397,866
35
2012 2013 2014 2015 2016
Present value (Sales ↓ 4%) 252,219,480,464 269,966,845,531 240,348,780,634 379,043,360,902 349,378,888,782
Estimate price 82,528
Present value (Sales ↓ 3%) 256,047,548,580 273,567,265,037 243,886,324,791 383,187,463,378 353,449,953,834
Estimate price 82,760
Present value (Sales ↓ 2%) 259,875,616,696 277,167,684,542 247,423,868,947 387,331,565,854 357,521,018,886
Estimate price 82,992
Present value (Sales ↓ 1%) 263,703,684,812 280,768,104,048 250,961,413,104 391,475,668,329 361,592,083,938
Estimate price 83,224
Present value (Sales
unchanged)267,531,752,927 284,368,523,553 254,498,957,261 395,619,770,805 365,663,148,990
Estimate price 83,456
Present value (Sales ↑ 1%) 271,359,821,043 287,968,943,058 258,036,501,418 399,763,873,280 369,734,214,042
Estimate price 83,688
Present value (Sales ↑ 2%) 275,187,889,159 291,569,362,564 261,574,045,575 403,907,975,756 373,805,279,094
Estimate price 83,919
Present value (Sales ↑ 3%) 279,015,957,275 295,169,782,069 265,111,589,731 408,052,078,231 377,876,344,146
Estimate price 84,151
Present value (Sales ↑ 4%) 282,844,025,391 298,770,201,575 268,649,133,888 412,196,180,707 381,947,409,198
Estimate price 84,383
From the above tables, the estimate price does not fluctuate significantly (82528:84383), so the
forecast can be reliable.
36
Sub conclusion
The model results in the price of DHG Pharma’s stock which is around 82,000 VND/share. This is higher than the actual price of share today which equals 73,500 VND/share (posted on HOSE, 11/01/2012). In other words, the stock is undervalued, thus, it recommends to hold or to buy more.
VI. CONCLUSION
In this section, the findings from the different parts of this paper will be summarized.
DHG Pharma was founded in 1974 and when public on Ho Chi Minh Stock exchange in 2006. The company is now the largest pharmaceutical companies in Vietnam and includes 15 subsidiaries and associations.
DHG have a distribution system scattered all over the Vietnam and some foreign countries like France, Indonesia, Hong Kong, etc.
By using PEST analysis, DHG turn out to get benefit from political regulation and policies, accompanied with the development of economy increases the living standard of Vietnamese. In addition, DHG have good control and investment in R&D is likely to make it advantage in production.
In the Five forces analysis, the risk of new entry is quite low in the last few years but potentially turn out to be medium from 2012. This is based on the fact that the strict regulation for new comer will have loosened since 2012. The threat from competition is high due to the fact that pharmaceutical products are still generic and not isolated among firms. Bargaining power of buyers is low because of the high concentration of firm versus buyer concentration. In addition, the bargaining power of supplier is high due to the large contribution of raw material in product value.
To sum up the strategy analysis, the SWOT analysis is employed. The company has several advantages in reputation, good marketing and wide and deep distribution system. However, most of DHG products are in generic form and depend significantly on the imported materials. Besides, DHG will get the great opportunities from the growing of population, the development of economic and technologies. Nevertheless, the biggest threat to DHG in the future is the competition from the foreign companies.
In the financial analysis the accounting measurement and consolidation method are presented since 2007 accompanied by the development of key figures, focusing on profitability, solvency and liquidity. These figures were kept at satisfying level with low level of debts, high level of liquidity, and the high growth in revenue. However, some other figures should be noted such as the decrease in profit margin and the increase in inventories. Overall, theses number indicates the company is in the upward growing trend.
37
The forecasts were base on the strategy analysis and financial analysis as well as other assumption and findings. The results were illustrated in the forecast income statement and balance sheet sections.
The result from employing DCF model accompanied with Sensitivity analysis makes it more reliable. The stock price is calculated at 82,000 VND and considered to be undervalued. This is a good new for investors who follow the fundamental strategies to outperform.
38
VII. REFERENCES
General Statistic Office Website. (2012, 10 29). Retrieved 11 21, 2012, from http://www.gso.gov.vn/default.aspx?tabid=403&idmid=2&ItemID=13397
Drake, P. P. (2010). Dividend valuation models. pp. 2-10.
Krishma G. Palepu, P. M. (2004). Business Analysis and Valuation.
MHB-securities. (2010). Analysis report of Pharmaceutical Industry.
Pharma, D. (2007). DHG Pharma Annual report.
Pharma, D. (2007-2011). DHG Pharma Annual report.
Pharma, D. (n.d.). DHG Pharma website. Retrieved 11 21, 2012, from http://www.dhgpharma.com.vn
Sacombank. (2012). The exchange rate of VND/USD and future forecasts. Investor News.
SME-securities. (2011). Analysis report of Pharmaceutical Industry.
Vietnam Pharmaceutical Companies Association. (n.d.). Retrieved 11 21, 2011, from http://www.vnpca.org.vn
Vietstock. (n.d.). Vietstock Website. Retrieved 11 21, 2012, from http://vietstock.vn/2012/06/trien-vong-cua-cong-nghiep-duoc-viet-nam-768-211500.htm
39
VIII. APPENDIX
APPENDIX A: DHG Balance Sheet from 2007 to 2011
BALANCE SHEET 2007 2008 2009 2010 2011ASSETSCURRENT ASSET 673,787,101,408 783,527,449,374 1,212,468,335,434 1,442,034,118,769 1,490,691,786,181Cash and cash equivalents 129,951,448,720 211,742,360,663 584,128,534,956 642,519,118,992 467,084,218,098
Cash 129,951,448,720 207,156,022,223 162,206,364,906 286,505,741,815 343,614,925,745 Cash equivalents 4,586,338,440 421,922,170,050 356,013,377,177 123,469,292,353Short-term investments 51,955,112,420 2,263,289,093 16,037,166,667 - - Short-term investments 51,955,112,420 3,740,843,513 16,037,166,667 - - Provision for diminution in the value of short-term investments
- (1,477,554,420) - - -
Accounts receivable 257,381,961,730 255,126,101,647 296,978,172,666 446,197,923,622 489,939,062,124
Accounts receivable - trade 235,438,777,884 216,770,420,198 250,454,852,730 306,719,736,511 340,585,766,770 Prepayment to suppliers 2,562,339,891 28,788,144,725 26,407,748,971 28,193,510,841 79,032,748,156 Other receivables 19,380,843,955 28,270,272,234 23,553,146,919 117,510,052,422 73,173,069,305 Provision for doublful debts - (18,702,735,510) (3,437,575,954) (6,225,376,152) (2,852,522,107)Inventories 230,278,977,520 308,236,380,352 306,731,856,718 347,099,608,749 515,191,425,774 Inventories 230,278,977,520 308,236,380,352 311,576,681,540 350,125,465,504 519,861,087,569 Provision for inventory decline in value
- - (4,844,824,822) (3,025,856,755) (4,669,661,795)
Other current assets 4,219,601,018 6,159,317,619 8,592,604,427 6,217,467,406 18,477,080,185
Prepaid expenses 980,030,489 769,600,676 533,511,176 1,283,164,897 1,431,601,904 Deductible VAT amount - 150,917,973 - 408,648 4,301,209,672 Taxes and other receivables from the State Budget
- 55,887,090 130,507,156 439,785,275 4,108,142,811
40
Other current assets 3,239,570,529 5,182,911,880 7,928,586,095 4,494,108,586 8,636,125,798
NON-CURRENT ASSET 268,421,463,379 298,254,793,437 309,504,424,142 377,700,975,901 505,014,880,878Non-current receivables 114,269,612 71,669,612 - - - Long-term account others receivables 114,269,612 71,669,612 - - - Provision for long-term doubful debts - - - - -Fixed asset 228,781,351,908 225,956,126,148 237,015,139,115 303,438,987,167 459,454,490,641
Tangible fixed assets - net 111,294,945,868 106,798,422,791 118,833,144,230 167,840,794,676 255,330,772,673 Tangible fixed assets - Cost 168,877,796,585 191,417,499,083 231,889,301,477 310,198,804,023 443,230,788,716 Accumulated depreciation (57,582,850,717) (84,619,076,292) (113,056,157,247) (142,358,009,347) (187,900,016,043) Intangible fixed assets - net 105,272,542,979 117,155,148,926 112,919,647,760 127,878,195,760 157,377,310,396 Intangible fixed assets - Cost 105,546,304,679 117,804,527,066 113,634,980,185 131,894,976,812 163,249,725,488 Accumulated amortisation (273,761,700) (649,378,140) (715,332,425) (4,016,781,052) (5,872,415,092) Construction in progress 12,213,863,061 2,002,554,431 5,262,347,125 7,719,996,731 46,746,407,572Investment property - net - - - 6,456,882,120 -
Investment property - Cost - - - 7,784,646,717 - Accumulated amortisation - - - (1,327,764,597) -Long-term financial investments 38,224,890,200 66,838,622,533 31,255,356,135 39,979,249,420 17,473,451,017 Investments in subsidiaries 2,550,000,000 - - 32,592,080,669 10,086,282,266 Investment in affiliates - 3,741,772,333 23,868,187,384 - - Other long-term investments 35,674,890,200 70,096,850,200 11,901,050,200 11,901,050,200 11,901,050,200 Provision for a decline in value of long-term investments
- (7,000,000,000) (4,513,881,449) (4,513,881,449) (4,513,881,449)
Other non-current assets 1,300,951,659 5,388,375,144 41,233,928,892 27,825,857,194 28,086,939,220
Long-term prepayments - 263,252,983 36,189,123,770 22,430,416,454 20,446,170,185 Defferred tax assets - 3,670,562,947 3,413,954,004 3,785,465,288 5,509,693,831 Other non-current assets 1,300,951,659 1,454,559,214 1,630,851,118 1,609,975,452 2,131,075,204
41
Goodwill - -TOTAL ASSET 942,208,564,787 1,081,782,242,811 1,521,972,759,576 1,819,735,094,670 1,995,706,667,059
LIABILITIES 290,631,417,938 382,657,609,230 496,158,280,749 530,696,724,099 602,248,423,265Current liabilities 289,817,842,651 367,464,442,596 481,915,971,070 471,555,878,347 544,024,124,947 Short-term borrowings 43,429,861,416 8,455,297,698 73,979,662,132 12,802,412,973 21,115,601,324 Accounts payable - trade 55,642,007,085 67,745,795,916 71,352,673,093 86,290,700,781 123,618,564,257 Advances from customers 293,206,185 529,770,010 1,094,516,164 1,413,080,380 720,929,252 Taxes and obligations to the State budget
2,354,571,301 18,862,882,369 35,634,035,125 40,019,223,841 28,297,625,312
Payables to employees 40,455,717,787 58,330,510,155 84,118,277,067 100,633,206,342 125,958,570,389 Accrued expenses 108,584,441,430 190,187,076,367 199,865,337,012 168,781,105,434 165,931,042,238 Other payables 39,058,037,447 23,353,110,081 15,871,470,477 32,127,453,214 33,834,092,563 Bonus and welfare funds - - - 29,488,695,382 44,547,699,612Long-term Liabilities 813,575,287 15,193,166,634 14,242,309,679 59,140,845,752 58,224,298,318 Other long-term payables 46,792,342 17,143,692 - - - Long-term borrowings - - - - - Deferred tax liabilites - 28,354,467 53,099,844 - - Provision for severance allowance 766,782,945 15,147,668,475 14,189,209,835 21,163,637,977 33,818,985,521 Accrued revenue - - - 119,417,273 - Funds for R&D - - - 37,857,790,502 24,405,312,797
OWNERS' EQUITY 651,577,146,849 695,939,887,206 1,018,033,631,792 1,280,322,125,140 1,381,546,863,475Capital Contribution 635,748,308,139 701,139,112,562 1,010,375,905,079 1,280,322,125,140 1,381,546,863,475
Share Capital 200,000,000,000 200,000,000,000 266,629,620,000 269,129,620,000 651,764,290,000 Capital surplus 378,761,392,824 378,761,392,824 378,761,392,824 378,761,392,824 - Treasury stocks - (292,500,000) (410,400,000) (455,850,000) (455,850,000)
42
Investment and development funds 33,805,735,625 38,460,772,279 4,658,004,486 204,329,442,743 286,384,048,884 Financial reserve funds 21,962,409,519 21,962,409,519 29,744,900,881 64,215,412,933 66,541,621,663Other funds - - - - -Retained profits (losses) 1,218,770,171 62,247,037,940 330,992,386,888 364,342,106,640 377,312,752,928Other sources and funds 15,828,838,710 (5,199,225,356) 7,657,726,713 - -
Bonus and welfare funds 15,828,838,710 (5,199,225,356) 7,657,726,713 - -
MINORITY INTEREST 3,184,746,375 7,780,847,035 8,716,245,431 11,911,380,319
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
942,208,564,787 1,081,782,242,811 1,521,972,759,576 1,819,735,094,670 1,995,706,667,059
43
APPENDIX B: DHG Pharma’s Income Statement from 2007 to 2011Income Statement 2007 2008 2009 2010 2011
Total revenue 1,285,209,755,529 1,518,436,877,452
1,770,344,687,033
2,052,247,764,0602,510,825,145,928
Sales deductions 15,929,830,148 32,973,054,953 24,322,485,821 17,722,522,132 19,945,210,196 Net sales 1,269,279,925,381 1,485,463,822,499 1,746,022,201,212 2,034,525,241,928 2,490,879,935,732 Cost of goods sold 600,777,608,975 694,444,594,610 822,445,899,741
1,015,992,884,3071,282,117,010,705
Gross (profit)/loss668,502,316,406 791,019,227,889 923,576,301,471
1,018,532,357,6211,208,762,925,027
Selling expenses 469,323,783,194 521,504,942,048 409,533,239,836 483,629,769,106 558,862,870,510 General and administration expenses
59,818,592,144 103,918,190,916 113,700,825,796 134,944,063,183 185,188,217,125
Operating Income 139,359,941,068 165,596,094,925 400,342,235,839 399,958,525,332 464,711,837,392 Financial income 5,789,057,861 22,329,305,076 31,294,906,087 40,566,222,890 48,895,136,206 Financial expenses 17,290,702,891 38,495,242,865 23,597,231,238 3,408,205,843 7,182,687,737
Interest expenses 15,393,878,923 5,216,001,248 3,389,443,987 2,010,709,744 2,038,850,925 Other financial
expenses1,896,823,968 33,279,241,617 20,207,787,251 1,397,496,099 5,143,836,812
Other income 1,351,104,741 1,530,843,862 14,224,585,302 9,233,695,237 9,934,185,563 Other expenses 897,430,430 6,077,378,067 12,571,248,709 8,223,688,183 15,391,090,405 Share of losses/gains in associates
- 141,772,333 (103,584,949) (3,981,996,715) (10,025,671,093)
Profit/loss before tax 128,311,970,349 145,025,395,264 409,589,662,332 434,144,552,718 490,941,709,926 Current Corporate Income Tax expenses
13,166,372,825 18,673,010,121 46,967,925,678 51,233,929,515 72,903,779,886
Deferred Corporate Income Tax expenses
- 3,642,208,480 281,354,320 424,611,128 1,724,228,543
Net (profit)/loss after tax 115,145,597,524 129,994,593,623 362,903,090,974 383,335,234,331 419,762,158,583 Attributable to:
44
Minority interest - 1,132,234,375 5,269,591,254 2,172,986,662 4,235,578,682 Equity holders of the Co 115,145,597,524 128,862,359,248 357,633,499,720 381,162,247,669 415,526,579,901
APPENDIX C: DHG Pharma’s Cash flow Statement from 2007 to 2011
STATEMENT OF CASHFLOW 2007 2008 2009 2010 2011
CASHFLOW FROM OPERATING ACTIVITIESProfit before tax 128,311,970,349 145,025,395,264 409,589,662,332 434,144,552,718 490,941,709,926Adjustments for Depreciation and amotisation 24,054,099,284 28,520,127,892 29,778,717,342 41,463,499,111 53,597,351,298 Allowances and provisions (1,000,000,000) 27,180,289,930 (14,384,007,705) 3,059,549,639 (1,012,042,080) Gain on disposal of fixed assets - - - (1,279,976,595) (1,759,732,840) Gain on disposal of investments in an associate
- - - - (1,546,692,690)
Dividends and interest income - - - (36,691,910,145) (42,396,733,860) Profit/Loss on unrealized foreign exchange difference
- - (16,361,965) - -
Interest expense 15,393,878,923 5,216,001,248 3,389,443,987 2,010,709,744 2,038,850,925 Share of losses in associates (1,631,854,735) (2,484,341,832) (14,804,882,568) 3,981,996,715 10,025,671,093Operating profit before changes in working capital
165,128,093,821 203,457,472,502 413,552,571,423 446,688,421,187 509,888,381,772
Change in receivables and other current assets
(90,459,115,058) (18,626,421,841) (44,624,486,304) (135,931,407,222) (4,747,452,261)
Change in inventories (108,425,593,484) (77,957,402,832) (3,340,301,188) (38,548,783,964) (169,735,622,065) Change in payables and other liabilities
107,292,255,117 138,189,481,332 48,088,931,657 74,342,048,312 71,282,343,851
45
Change in prepayments 5,299,961,168 (52,823,170) (19,218,178,770) (749,653,721) (148,437,007)78,835,601,564 245,010,305,991 394,458,536,818 345,800,624,592 406,539,214,290
Interest paid (15,977,165,302) (4,653,771,048) (3,628,334,868) (2,182,859,688) (1,967,602,123) Corporate income tax paid - (24,404,149,782) (30,681,344,976) (57,225,908,675) (86,291,647,569) Other receivements from operating activities
1,406,343,924 3,464,074,611 2,987,628,237
Other payments for operating activities
(12,947,479,483) (24,308,010,013) (9,241,078,958) (28,167,068,454) (54,835,562,835)
Net cash generated from operating activities
51,317,300,703 195,108,449,759 353,895,406,253 258,224,787,775 263,444,401,763
CASHFLOW FROM INVESTING ACTIVITIES Payments for additions to fixed assets and other long-term assets
(105,302,355,943) (26,118,453,207) (57,436,448,175) (124,759,054,121) (256,260,211,277)
Proceeds from adjustment of purchase price of land use rights
- - - 5,491,223,499 -
Proceeds from disposal of fixed assets and other long-term assets
792,417,144 306,671,431 122,895,970 6,110,475,532 5,487,880,667
Loans given to other entities (50,000,000,000) (42,812,720,503) (26,377,492,867) (5,095,308,180) (1,035,537,465) Loans collected from other entities - 56,677,029,410 41,100,115,293 - 5,999,720,820 Term deposit received - - - 16,037,166,667 - Payments for investments in other entities
(48,103,898,757) (3,600,000,000) (230,000,000) (13,615,000,000) -
Proceeds from disposal of associates 9,532,696,137 - - 157,550,000 13,500,000,000 Receipts of interest and dividends 1,448,040,137 2,459,449,143 26,070,547,994 41,441,782,023 44,015,852,247
46
Net cash used in investing activities (191,633,101,282) (13,088,023,726) (16,750,381,785) (74,231,164,580) (188,292,295,008)
CASHFLOW FROM FINANCING ACTIVITIES Proceeds from equity issued 398,761,392,824 - - 2,591,350,000 2,500,000,000 Payments for shares repurchases - (292,500,000) (117,900,000) (136,800,000) - Proceeds from short-term borrowings
674,327,196,404 177,133,581,082 203,434,614,489 39,476,967,542 48,180,001,906
Payments to settle debts (798,767,466,068) (212,108,144,800) (137,910,250,055)
(100,654,216,701) (39,866,813,555)
Payments of dividend (39,056,000,000) (69,962,450,372) (30,018,344,628) (66,880,340,000) (261,400,196,000)Net cash used in financing activities 235,265,123,160 (105,229,514,090) 35,388,119,806 (125,603,039,159) (250,587,007,649)
Net cashflow during the year 94,949,322,581 76,790,911,943 372,533,144,274 58,390,584,036 (175,434,900,894)Cash and cash equivalents at the beginning of the year
35,002,126,139 134,951,448,720 211,742,360,663 584,128,534,956 642,519,118,992
Effects of Changes in Foreign Exchange Rates
- - (146,969,981) - -
Cash and cash equivalents at the end of the year
129,951,448,720 211,742,360,663 584,128,534,956 642,519,118,992 467,084,218,098
NON-CASH INVESTING ACTIVITIESBonus shares issued by capital surplus and investment and development funds
- - - 380,134,670,000
Receivable from cancellation of land - - 13,848,944,240 -
47
lease contract
48
APPENDIX D: DHG Pharma’s Key figures from 2007 to 20112007 2008 2009 2010 2011
LiquidityCurrent ratio 2.32 2.13 2.52 3.06 2.74Quick ratio 1.53 1.29 1.88 2.32 1.79Cash liquidity 0.63 0.58 1.25 1.36 0.86
Solvency ratioLong term debt to equity 0.001 0.022 0.014 0.046 0.042Liabilities to assets 0.31 0.35 0.33 0.29 0.30CFO to current liabilities 0.18 0.53 0.73 0.55 0.48CFO to CAPEX 0.27 14.91 21.13 3.48 1.40Interest to coverage (CF
basis) 4.21 48.1
7 106.9
9 145.5
1 178.7
5
Efficiency ratiosReceivables turnover 5.99 5.80 6.32 5.48 5.32Inventory turnover 3.42 2.58 2.67 3.11 2.97Payables turnover 16.2
1 11.2
6 11.8
3 12.8
9 12.2
2Fixed asset turnover 5.55 6.57 7.37 6.70 5.42Days receivables
outstanding 60.9
4 62.9
7 57.7
1 66.6
6 68.5
9Days inventory
outstanding106.82 141.52 136.46 117.45 122.74
Day payables outstanding 22.52
32.43
30.87
28.32
29.88
Net days financing required
145.24
172.06
163.30
155.79
161.45
Profitability ratioProfit margin (%) 9.07% 8.75% 20.78% 18.84% 16.85%Assets turnover 1.35 1.37 1.15 1.12 1.25Return on assets (%) 12.22% 12.02% 23.84% 21.07% 21.03%Financial leverage 1.45 1.55 1.50 1.42 1.44Return on equity (%) 17.67% 18.68% 35.65% 29.94% 30.38%
49
APPENDIX E: Notes for estimation of Income statement and Balance sheet from 2012 to 2016
Note 1FormulasGrowth rate of sales = Effect of manufacture & distribution
x [1 + Growth rate of population]x [1+ Growth rate of product spending per capita]± Effect of in market share (%)
Growth rate of population (constant over 5 years) 10.5%Growth rate of product spending per capita (constant over 5 years) 14%Effect of in market share (+/-) 3%
2012 2013 2014 2015 2016Rate of sales 12.6% 17.6% 20.2% 10.9% 8.3%
50
Note 2FormulaGrowth rate of costs = Rate of sales*[0.8*0.5*( 1+ Exchange rate Inv) +0 .6*(1+ Inflation rate Inv)]
2011 2012Exchange rate average (VND) 20587 20828
1.2%Inflation rate average (%) 18.9 11
-41.8%Rate of COGS 0.095
Note 3 2012 2013 2014 2015 2016
Depreciation 11% of Fixed assets 87,749,770,508
102,753,569,513
122,924,814,072
124,800,983,018
137,021,460,962
51
Note 4 2012 2013 2014 2015 2016
Short-term borrowings 142,826,197,4
14 171,145,082,9
53 210,607,902,39
2 256,404,392,5
77 217,626,474,29
9
Accounts payable - trade Cogs/11.5 118,115,651,5
37 146,084,269,3
97 182,294,884,15
8 185,475,908,1
95 197,312,197,00
7
Advances from customers 0.05%*Total assets 1,121,862,4
32 1,319,711,8
47 1,585,702,41
0 1,757,857,3
63 1,904,415,20
5Taxes and obligations to the State budget 1.5%* Total assets
33,655,872,975
39,591,355,421
47,571,072,289
52,735,720,894
57,132,456,152
Payables to employees 6%*Total assets 134,623,491,8
99 158,365,421,6
84 190,284,289,15
5 210,942,883,5
76 228,529,824,60
8
Accrued expenses 8%*Total assets 179,497,989,1
99 211,153,895,5
78 253,712,385,54
0 281,257,178,1
01 304,706,432,81
1
Other payables 2%*Total assets 44,874,497,3
00 52,788,473,8
95 63,428,096,38
5 70,314,294,5
25 76,176,608,20
3
Bonus and welfare funds 2%* Total assets 44,874,497,3
00 52,788,473,8
95 63,428,096,38
5 70,314,294,5
25 76,176,608,20
3
Total current liabilities 699,590,060,0
56 833,236,684,6
70 1,012,912,428,71
3 1,129,202,529,7
57 1,159,565,016,48
6
Interest expenses* 13.8%*ST borrowings 19,710,015,2
43 23,618,021,4
48 29,063,890,53
0 35,383,806,1
76 30,032,453,45
3
52
Note 5 2012 2013 2014 2015 2016
Working capital(CA- Cash & Equivalents) - (CL - ST debts)
553,795,594,969
644,323,900,720
767,421,633,462
867,348,482,593
943,289,321,715
Change in working capital 53,096,550,5
09 90,528,305,7
51 123,097,732,
743 99,926,849
,131 75,940,839,
122
Note 6 2012 2013 2014 2015 2016Dividend % of Nominal value 20% 20% 20% 30% 35%
Nominal value 651,662,990,000
651,662,990,000
651,662,990,000
651,662,990,000
651,662,990,000
Dividend paid out 130,332,598,000
130,332,598,000
130,332,598,000
195,498,897,000
228,082,046,500
Note 7
53
Risk- free rate 0.101 Beta (β) 0.45Market risk premium 0.12Cost of equity (CAPM) 0.155
Total debts 30Cost of debt 0.1Total equity 70Cost of equity 0.155Tax rate 0.145WACC 0.13415