Financial Statement Analysis and Valuation Of

Apex Foods Ltd

Prepared for…Dr. Mahmood Osman ImamProfessorDepartment of FinanceUniversity Of Dhaka

Apex Foods Ltd.Apex Foods Ltd. is the subsidiary of Apex Group Co. Ltd.

established in 1994.Apex foods ltd. is a public limited company.It’s authorized capital is 150,000,000 tk.Issued, Subscribed & Paid up Capital: 57,024,000 tk.The company mainly produce , Spicy Garlic Shrimp,

Shrimp Appetizer, Jumbo Shrimp Parmesan, Butterfly Shrimp and Pasta, Chili Garlic Roasted Shrimp etc

Dividend Policy

Apex Foods Ltd. Provide cash dividend every year.

They don’t give stock dividend for the last five years.Valuation.xlsx

Industry Analysis

The five competitive forces used to analyze the industry. These are

1. Threat of new entrants: Low – MediumThe food industry is highly regulated and administrated.

2. Threat of existing Competitor: High Low level of differentiation Switching cost for the consumers is low.

Industry Analysis

3. Threats of substitute products: Low Consumers simply do not have any other options for

shrimp food substitutes.4.Bargaining Power of Buyers: Moderate Majority of shrimp foods manufacturers have their own

wholesaling operations. The firms are able to successfully hedge themselves by

having greater control of downstream buyers.

Industry Analysis

5. Bargaining Power of suppliers: LOW As there are many supplier in food industry so the

bargaining power of supplier is low in this industry.

Ratio Analysis(Liquidity Ratios)

Valuation Apex.xlsx

Activity/efficiency ratio

Valuation Apex.xlsx

Activity/efficiency ratioValuation Apex.xlsx

Leverage/solvency Ratio

Ratio analysis against Benchmark

Ratio analysis against Benchmark

Ratio analysis against PeerValuation Apex.xlsx

Ratio analysis against Peer

Relative Valuation

Price with respect price earning multiple 59.85165546

Price with respect to sales 1395.080686

Price with respect to cash flow 601.24

Price with respect to Book value Valuation Apex.xlsx 314.07

Dupont Analysis

From the year 2008 to 2012, the following CV’s have been found-

O. Profit Margin

Total Asset Turnover

Interest Burden After tax Retention rate

Financial Leverage

CV 4155.01 490.62 230.81 -168.98 350.39

The higher the co-efficient of variation of a factor, the higher will be the sensitivity of ROE. So, from this data it is apparent that the ROE of Apex Food Limited is most sensitive to its operating profit margin.Valuation Apex.xlsx

Leverage Analysis

Leverage Analysis

Potential red flags of Apex Food Ltd1. Unusual increase in account receivable in relation to turnover Valuation Apex.xlsx

Potential red flags of Apex Food Ltd2. Unusual increase in inventory in relation to sales increase.Valuation Apex.xlsx

Potential red flags of Apex Food Ltd

Reported income 23,672,984 -8,930,907 8,559,275 10,794,736 15,434,217

Cash flow from operating activities 136611144 -72479592 46284431 -228925474 152091482

Gap between RI & OCF -112,938,160 63,548,685 -37,725,156 239,720,210-

136,657,265

3. An increasing gap between a firm’s reported income and its cash flow from operating activities.Valuation Apex.xlsx

Earnings Quality EvaluationComparative Earnings Quality Analysis

APEX BATBC

Accruals Ratio Cash Flow Basis 0.081911315 0.137791166

Accruals Ratio Balance Sheet Basis 0.113058645 0.333666151

Earnings quality is typically defined in terms of persistence and sustainability. Valuation Apex.xlsxFrom the table it is observed that Apex Foods Ltd has comparatively better performance in maintaining the earnings or alternatively it has more earnings manipulation than its Benchmark.

Analysis of cash flow Statement

Year OCF FCF Characteristics

2008 Positive Positive Cash Cow

2009 Negative Negative BMRE(Balancing, Modernization, Rehabilitation and Expansion)

2010 Positive Positive Cash Cow

2011 Negative Positive Disinvest/Quit

2012 Positive Negative Growth CompanyValuation Apex.xlsx

Average OCF &FCF of the company is positive so the company is a cash cow co.

Analysis of cash flow Statement

Year OCF FCF Characteristics

2008 Positive Positive Cash Cow

2009 Negative Negative BMRE

2010 Positive Positive Cash Cow

2011 Negative Positive Disinvest/Quit

2012 Positive Negative Growth Company

Actual & Sustainable Growth Rate

Estimation of value addition2012

NOPAT 224,285,567

Invested Capital 1,474,151,687

Cost of capital 0.098776412

Economic Value Added 78674152.38

The positive value of EVA tells us that generating BDT 224285566.5 in after-tax net operating profits.

Recommendations1. The company should reduce its debt from its capital

structure.2. Apex foods need pay more attention in inventory

management. 

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