frm - group assignment i - mapi
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SekarPu)hDjarotIrvinNi)heZebua
ArisSuseno
BayuAgasthya
HendrySulivian
HobbyRajiman
XiaoBenyi
KEYFINANCIALRISKS
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CASHFLOWDRIVER(S)External Drivers Buying Power
Consumer Dispensable Income Disposable Income
The Growth of Mid ClassPopulation
Interest Rate (BI Rate) Rupiah Exchange Rate VAT Subsidize and Import Tax Tariff
Internal Drivers Sales Forecasting
Inventory Management Inventory Turnover, GMROI Gross Profit Margin and Net
Profit Margin Branding & Discounting
Promotion CAPEX for New Outlets Same Store Growth Rate
(SSG)
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PERFORMANCE
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2007 2008 2009 3Q2010
Sales COGS Gross Profit
Incline trend of Sales with sales growth in average is at 20% ; Meanwhile average COGS growth in 25%. Resulting in a declining trend of Gross Profit
FINANCIALPERFORMANCE
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Profitability RatiosNet revenue in the first nine months of 2010 was Rp 3.4 trillion ($377 million), up 12 percent comparedto the same period in 2009.Nevertheless, Gross Profit Margin shown a declining trend since Sales growth in average is only 20%while average COGS growth in average is higher by 5%.
Operating margin illustrates consistent high operating expenses with an average of only 8.5%OPMStop acquiring new brands & focus on rollng out existing brands. Tremendous scale advantage &operational leverage should expect to improve margin in years to come.
ROE is expected to lower with an increase of approximately 10% of share holders equity from 1288 in2009 to 1415 in 3Q2010.ROA is slightly lower due to higher total assets
FINANCIALPERFORMANCE
FINANCIALPERFORMANCE
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Liquidity RatiosCompanys relatively lack of liquidity. Current ratio significantly drop from 2.15x (2007) to anaverage of only 1.42x on the following years; 1.40x(2008), 1.45x(2009) & 1.42x(3Q2010)The quick ratio also shown low liquidity trend to cover immediate liabilities with an average of0.68x; 1.11x(2007), 0.58x(2008), 0.55x (2009) & 0.51 (3Q2010)
Concerning cash ratio to cover liabilities due within 1 year with an average of only 0.23x; 0.48x(2007), 0.20x(2008), 0.15x(2009) & 0.09x(0q2010)
Inventory to net working capital ratio shown an inclining trend with most of companys assetcomes seats in inventory. 0.90x(2007), 2.03x(2008), 2.01x(2009) & 2.16x(3Q2010).
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0.50
1.00
1.50
2.00
2.50
2007 2008 2009 3Q2010
Current Ratio Quick Ratio Inventory to net working capital Cash Ratio
FINANCIALPERFORMANCE
FINANCIAL PERFORMANCE
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Debt service capability / Solvency RatioCompany has reduced exposure to yen loan from 18.3bn Yen in 2009 to 4.8bn Yen on 2010.This will reduce volatility in earnings due to changes in fair value.Lower balance sheet risk: 3Q2010 debt level has been significantly lowerD/E ratio down from1.45x in 2009 to 1.08x in 2010Gearing improved from 18% (2009) to 14% (2010) due to loan repayment less vulnerable toeconomic downturn to continue servicing its debt. A greater proportion of equity provides acushion and perceived as a measure of improving financial strength Interest coverage is expected to improved by end of year with EBITDA is 12% higher by Q3compared to same period in 2009.
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1.00
2.00
3.00
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5.00
6.00
7.00
8.00
2007 2008 2009 3Q2010
D/E ratio Interest Coverage (x)
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PERFORMANCEFINANCIAL
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Inventory Turnover (days)
95
119
102
129
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20
40
60
80
100
120
140
2007 2008 2009 3Q2010
Inventory Turnover (days)
Activity RatioPoor inventory is a concern at 111days(avg) vs Ramayana at 50days (avg) & Aces Hardware at60days (avg).
Improvement in working capital should improve cash flow & support margin expansion
Total Asset turnover is still relatively low with an average of 1.01x but with an increasing trend;
PERFORMANCEFINANCIAL
KEY FINANCIAL RISKS
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Financial Risks on Liquidity Aspects"A company's ability to turn short-term assets into cash to cover
debts when creditors or suppliers are seeking payment.
MAP cond ition on Liquidity Aspects Has maintain in the same level current ratio; Firm try to
maintain their coverage ability. Slight shift on cash ratio; decline on cash is parallel towards
inventory level increase.
Firm tries to anticipates year-end shopping season byreaching the inventory level that is needed & at the same time
maintain their liquidity risk which is shown on their coverageability.
Firm need to notice bond interest payments & supplierspayment terms.
KEY FINANCIAL RISKS
KEY FINANCIAL RISKS
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Financial Risk on Activity Aspects "A company's ability to convert different accounts within their
balance sheets into cash or sales.
MAP cond itions on Activity Aspects Inventory turnover decreases; Firm has accumulate an higherinventory level at year end. Asset turnover lags behind; expenditures on acquiring new
floor space.
Firm rely on new outlets for their cash creation & face amarket risk of competing on new grounds.
Firm need to notice the payback on the new outlets; feasibilitystudy is highly emphasized.
KEY FINANCIAL RISKS
KEY FINANCIAL RISKS
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Financial Risk on Profitability Aspects"A company's ability to generate earnings as compared to itsexpenses and other relevant costs incurred during a specificperiod of time.
MAP conditions on Profitability Aspects Gross Profit levels hasn't pick up the pace; Sales growth not
enough to keep pace on COGS.
Has maintain the same level of Operating Margin; firm hasalmost reach the same operating income of last year-endlevels.
Firm will assume to generate a considerable returns if theirstrategy to unload inventory at year end works; Salesforecast, Product & Market line decisions has an affect onmitigating market risk.
KEY FINANCIAL RISKS
KEY FINANCIAL RISKS
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Financial Risk on Leverage Aspects"A companys ability to manage the methods of financing itsactivities and companys mix of operating costs.
MAP conditions on Leverage Aspects Debt to Equity Ratio shows a decrease; equity raise fromprevious corporate actions. Gearing Ratio shows parallel to Debt to Equity; firm try to shift
their source of debt from banks to bonds.
Firm try to anticipate increase on interest rate risk; fixedinterest from bond issuance give firm a better calculation offuture cost.
KEY FINANCIAL RISKS
RETAIL
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RETAIL HOW IS HANDLING THE COMPETITION?MAP 1. Always identify & manage their risk, such political & social
risk , terrorist and separatist movements, labor activism &unrest, economic downturn, changes in interest & exchange
rate, re-negotiated or nullification of existing concessionsand contract, Changes in taxation policies.
2. Keep focused on developing existing brand portfolio tomaximize revenue.
3. Always controls expenses and pursue operation efficienciesin all area to optimize margins.
4. Fully committed to investing in human resources by givingopportunities and training to optimize their fullest potential.
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HOW IS HANDLING THE COMPETITION?MAP 5. Always participate in many Corporate Social
Responsibility initiatives.
6. Keep innovative to maintain as well as enhance itsmarket share. Market research is an important also to
catch up customers awareness of brands, trends andlife style.
7. Reducing Long Term Liabilities, especially in foreigncurrency by using internal cash or loan in rupiah. By
using Foreign Long Term Liabilities, it will reduceexpense in hedging currency.
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