Essay: Financial Analysis Of ThaiBev.

Summary of ThaiBev

Discuss about the Financial Analysis of ThaiBev.

ThaiBev well known as the Thai Beverage is one of the Thailand’s largest as well as one of the Southeast Asia’ largest beverage forms, with distilleries across France, China, Scotland, Thailand and Ireland established in the year 2003 (ThaiBev 2017, pg 1). It has a market cap exceeding $4 billion. It was registered in Singapore Exchange market in 2016 with a market capitalization of around $18 billion. Subsequently, this company expanded its operations to food and non-alcoholic beverages sectors in order to diversify its product portfolio, mitigate business risks as well as enhance logistic efficiency. ThaiBev distributes and owns numerous significant brands across the globe including Mekhong, SangSom rum and Chang beer. In addition, this company has significant operations across Europe, producing mart Scotch whisky, liqueurs, gin and vodka with above twenty distilleries in Ireland, France, Scotland and Poland (ThaiBev 2017. Pg 1). Its assets comprises of around 18 distilleries in Thailand, 3 state-of-art breweries across Thailand as well as 5 Scotch whisky distilleries across Scotland. Currently, ThaiBev is viewed as not only the Thailand’s leading manufacturer of beverages, but it is viewed as Asia’s leading beverage manufacturer. It operations comprises of four key sections; that is, beer, food, spirits and non-alcoholic beverages. It has around 127 subsidiaries comprising of 11 non-alcohol beverage, 18 distilleries and around 3 breweries. Furthermore, ThaiBev has a widespread distribution network covering around 400,000 sales points in Thailand. The company also has an international presence in more than 90 nations and engages in numerous distillery operations in the international market; with around 5 production facilities across Scotland.

Attaining business sustainability from diversified revenue is core to ThaiBev (ThaiBev 2017, pg 1). This comprises of increasing income contribution from its non-alcohol beverage section and international sales. Its expansion in the non-alcohol beverage segment is a crucial portion of its business strategy in order to be a leading beverage distributor and producer across the region. Its extensive and robust distribution network is the key strengths and the main aspect that elevated the company to achieve its leadership position across Thailand’s beverage market. The company has over 7,000 delivery trucks that distribute their products to around 400,000 outlets within the region (ThaiBev 2017, pg 1). In addition, ThaiBev has established around 1,000 direct sales persons in providing their sales services as well as managing visibility of its products on the store shelves. In the year 2013, this company armour-plated its domestic delivery gird through creation of the Modern Trade Management Ltd in distribution its non-alcoholic and alcoholic beverages to the modern trade operators (ThaiBev 2017, pg 1). In addition, ThaiBev founded the HORECA Managemnt Ltd in the year 2014 to close gaps in its distribution channels in the luxury restaurants and hotels and in providing it with benefits of a complete coverage of segments and in introducing its international premium products to upmarket in Thailand (ThaiBev 2017, pg 1). With these considerations, this paper present financial ratio analysis of ThaiBev for the past two years.

Attaining business sustainability from diversified revenue

Financial ratio analysis is a crucial aspect in finance. It is usually a quantitative analysis of an organization’s financial data (El-Bassiouni 1991, pg 230). It is usually based on the line items in the organization’s financial statements (Agyei-Mensah, 2015, pg 2). In essence, ratio analysis is useful since it is used in evaluating numerous factors of an organization’s operating as well as financial performance like its liquidity, solvency, profitability as well as efficiency. Trend of such ratios over time is used in evaluating whether the company’s performance is deteriorating or improving over time (Nissim & Penman 2001, pg 110). In addition, ratios can also be compared across numerous firms operating in the same industry in order to evaluate how they stack up and to get a clear idea of the comparative valuations (Gadoiu 2014, pg 94). Generally, ratio analysis comprises of looking at the relationship in between individual’s values and then relating them to how an organization has performed over the last few years and how it may perform in future (Nissim & Penman 2003, pg 532). Based on these considerations, price earnings ratio, net asset value, earning per share as well as dividend yield for ThaiBev in the latest period would be evaluated in order to establish its weaknesses and strengths over the period.

EPS is usually viewed as portfolio of an organization’s profit which is allocated to every outstanding shares of the common stock, serving as a signal of an organization’s profitability. It is usually computed by dividing an organization net profit or income by the outstanding shares. In this case, ThaiBev EPS for the latest period would be as follows;

2015 = 26,463/25,110 = 1.05 (Trading Economics 2017)

2016 = 18,832.5/25,110 = 0.75

This is the financial ratio used in evaluating an organization’s current share price in relation with per-share earnings (Fama & French 2000, pg 163). Basically P/E ratio is a useful financial metrics for assessing relative attractiveness of an organization’s stock price relative to current earnings. It is usually computed by dividing net income by the market capitalization. In this case, ThaiBev P/E ratio for the latest period would be as follows;

2015 =0.68/1.05 = 0.648 (Yahoo finance, 2017)

2016 = 0.71/0.75 = 0.95

This is the financial ratio that is used in indicating how much an organization pays out in terms of dividend every year relative to the share price (Agyei-Mensah, 2015, pg 5). It is usually represented as the percentage and could be computed by dividing dividends paid per share by price per each share. In essence, dividend yield is usually a mean of measuring how much cash inflow an organization would be getting for every dollar invested in the equity position. In this case, ThaiBev dividend yield for the latest period would be as follows;

Ratio Analysis

2015 = 0.61/0.68= 0.897

2016 = 0.66/0.71= 0.93

This is the financial value of an organization’s assets minus value of total liabilities. It might also be similar to book value or equity value of an organization. In essence, net asset value could be used to represent value of total equity in an organization (Gadoiu 2014, pg 87). It is usually computed by subtracting total liabilities from total assets and then dividing the outcomes by share outstanding.  This financial aspect is crucial since it help at looking up an organization’s stock price as it is a signal of how much a share is worth. In addition, NAV can assist investors in comparing performance of a sole fund to the other industry benchmarks. It usually assists in evaluating whether an investment is worth being pursued or not. In this case, ThaiBev NAVfor the latest period would be as follows;

2015 = (179,464-67,457)/25,110 = 4.46

2016 = (187,653-63941)/25,110 =4.93

Based on the above computations, it is evident that ThaiBev is financial stronger. This is mainly based on the fact that, the company’s P/E experienced an increasing trend over the past two years which was mainly attributed by an increase in its share prices over this period. In addition, ThaiBeve is financially stronger in that it has experienced an increasing trend in its net asset value which is as a result of increasing trend in its total assets and a decrease in its total liabilities over the years. The company also reported an increasing trend in its dividend yield over the last two years. This is another main strength for ThaiBev financial performance over the period.

Furthermore, it is evident that ThaiBev is financially stable over the last two years since the company reported an increase in its net profit margin from 13.68% in 2015 to around 16.89% in the year 2016. In addition, given that ThaiBev return on equity increased as from 15.67% to 18.89%, it is evident that it is financially stronger. Furthermore, it is evident that ThaiBev is financially healthy over the last two years despite the decrease in its EPS over time. This is based on the fact that the company reported an increasing trend in its EBITDA margin and EBIT margin over the past two years. In addition, the company reported an increase in its ROA and its return on fixed assets over this period. This is also a clear sign that ThaiBev is financially healthy.

Conclusion

In conclusion, it is evident that ThaiBev is financially healthy and stable over the last two years. This is evident by increasing trend in its P/E ratio, net asset value as well as dividend yield, which is a clear indicator of how profitable an organization has been for the past two years. With these considerations, it is recommendable for potential investors to invest in ThaiBev due to its promising financial performance over the last two years. In essence, investing in ThaiBev would be a better investment option for potential investors as they are likely to enjoy relatively higher returns in future.

References

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Fama, EF & French, KR 2000, ‘Forecasting profitability and earnings,’ The Journal of Business, 73(2), 161-175; Viewed at 23^rd April 2017 from; https://manitobapork.com/wp-content/uploads/REF_7-_Fama01.pdf

Gadoiu, M 2014, ‘Advantages and limitations of the financial ratios used in the financial diagnosis of the enterprise,’ Scientific Bulletin-Economic Sciences, 13(2), 87-95. Viewed at 23^rd April 2017 from; https://economic.upit.ro/repec/pdf/2014_2_9.pdf

Nissim, D & Penman, SH 2001, ‘Ratio analysis and equity valuation: From research to practice,’ Review of accounting studies, 6(1), 109-154. Viewed at 23^rd April 2017 from; https://www.columbia.edu/~dn75/Ratio_analysis_and_equity_valuation_From_research_to_practice.pdf

Nissim, D & Penman, SH 2003, ‘Financial statement analysis of leverage and how it informs about profitability and price-to-book ratios,’ Review of Accounting Studies, 8(4), 531-560. Viewed at 23^rd April 2017 from; https://www.columbia.edu/~dn75/financial.pdf

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Yahoo finance. 2017. Thai Beverage Public Company Limited (Y92.SI) historic prices; https://sg.finance.yahoo.com/quote/Y92.SI/history?period1=1394571600&period2=1452546000&interval=1mo&filter=history&frequency=1mo