BCF 7044: CORPORATE FINANCE

CONSUMER PRODUCT : DRINKS

SPRITZER BHD

GUINNESS ANCHOR BHD

FRASER

&

NEAVE BHD

YEO HIAP SENG BHD

COMPARISONS
PART 1 : RISK PROFILE OF THE COMPANIES AND THEIR COST OF CAPITAL

vWeighted Average Cost of Capital tell us the return of both stakeholders which are equity owners and lender can expect. WACC represents the investor's opportunity cost of taking on the risk of putting money into a company. Thus, the formulation of WACC is formed by three components as following:

WACC = S / V ( Rs ) + B / V ( Rb ) * ( 1 - Tc ) + P / V ( Rp )

vThe cost of equity capital is derived from Capital Asset Pricing Model (CAPM). Thus, the formulation of CAPM is formed as following:

Ri = Rf + i [ Rm Rf ]

5 - YEARS

WACC COMPARISONS

5 - YEARS

CAPM COMPARISONS

COMPARISONS
PART 2 : CAPITAL STRUCTURE OF COMPANIES : UNDER LEVERAGED OR OVER LEVERAGED

Capital structure shows a company how much the company is financed by equity and debt. Besides, it also illustrates the long-term financing of the company. Therefore, debt to equity ratio indicates the extent to which the business relies on debt financing. Thus, the formulation is as follows:
Debt to Equity Ratio = Equity Long Term Debt Total Shareholders

Company financed with debt can save cost of taxation during its operation thats called leveraged; otherwise it will be an unleveraged company.

5 - YEARS

DEBT TO EQUITY RATIO COMPARISONS

5 - YEARS

DEBT TO EQUITY RATIO COMPARISONS

LEVERAGED / UNLEVERAGED COMPARISONS

COMPANIES SPRITZ GAB F&N YEOS LEVERAGED / UNLEVERAGED HIGHLY LEVERAGED UNLEVERAGED LEVERAGED HIGHLY LEVERAGED REASONS COST OF DEBT IS VERY HIGH 100 % EQUITY FINANCING COST OF DEBT IS HIGH FROM 2008 ONWARDS COST OF DEBT IS VERY HIGH

COMPARISONS
PART 3 : DIVIDEND POLICY : TYPES OF DIVIDEND POLICY AND ITS PAYOUT RATIO

Dividends are payments made by the company to its shareholders. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend. Thus, the formulation is as follows: Dividend Payout Ratio = Dividend Per Share (DPS) Earning Per Share (EPS)

5 - YEARS

DPS AND EPS COMPARISONS

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DPS AND EPS COMPARISONS

5 - YEARS

DIVIDEND PAYOUT RATIO COMPARISONS

COMPARISONS
PART 4 : WORKING CAPITAL MANAGEMENT : THE DAILY FINANCING NEEDS

Working capital actually shows the company's current position. It tells us what would be left if a company raised all of its short term resources, and used them to pay off its short term liabilities. Thus, the formulation is as following: Net Working Capital = Current Asset Current Liabilities The operating cycle is the number of days from cash to inventory to accounts receivable to cash. It reveals how long cash is tied up in receivables and inventory. Thus, the formulation is as following: Operating Cycle = Inventory Period + Receivable Period The cash cycle is the length of time between the purchase of raw materials and the collection of accounts receivable generated in the sale of the final product. It is also called cash conversion cycle. Thus, the formulation is as following: Cash Cycle = Operating Cycle Payable Period

5 - YEARS

NET WORKING CAPITAL COMPARISONS

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OPERATING CYCLE COMPARISONS

5 - YEARS

CASH CYCLE COMPARISONS

PART 1 SUMMARY : AVERAGE WACC COMPANIES SPRITZ GAB F&N YEOS 5 YEARS AVERAGE WACC 4.59% 2.62% 4.21% 11.73%

e average WACC comparisons, we would highly recommend investors to invest in GAB since the co

PART 2

SUMMARY : DEBT TO EQUITY RATIO

, based on the comparisons, we would highly recommend investors to invest in GAB since the comp

PART 3 SUMMARY :

TOTAL DIVIDEND DISTRIBUTION

AVERAGE SPRITZ GAB

F&N

YEOS

TOTAL 7,594,04 484,625,00 596,027,00 73,627,000 DIVIDEND 0 0 0 (RM)

tribution, F&N would be the best company to invest as it has the highest dividend distribution and a

PART 4 SUMMARY :
AV CA CL NET WC

AVERAGE NET WC & AVERAGE OC , PP & CC

GAB 338,378 152,244 186,135 F&N 1,242,075 662,381 579,695 YEOS 262,907 119,405 143,502

SPRTZ 60,593 26,169 34,424

sed on the analysis, we can conclude that the best company to invest would be F&N due to its large

COMPANIES SPRITZ GAB F&N YEOS

OPERATING CYCLE 261.80 65.54 143.60 166.01

PAYABLE PERIOD 24.74 38.23 98.59 123.56

CASH CYCLE 237.07 27.31 45.01 42.45

Therefore, GAB is highly recommended to investors as the company has the lowest operating c

CONCLUSIONS
COMPANIES WACC DIVIDEND NET OPERATING RANK POLICY WORKING CYCLE CAPITAL

SPRTZ GAB F&N YEOS

3 1 2 4

4 2 1 3

4 2 1 3

4 1 2 3

3 1 1 2

THANKS FOR YOUR ATTENTION

Q&A