aaa report public

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Name No of share Percentage Tam Son Investment SJC 3,000,000 30.30% FC Limited 1,050,000 10.61% Pham Anh Duong 907,500 9.17% Nguyen Thi Tien 701,100 7.08% Thang Long FI JSC 540,000 5.45% Beira Limited 200,000 2.02% Domestic corporates 54% Domestic individuals 41% Foreigners 5%

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AAA An Phat report

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Page 1: Aaa report public

Name No of share Percentage

Tam Son Investment SJC 3,000,000 30.30%

FC Limited 1,050,000 10.61%

Pham Anh Duong 907,500 9.17%

Nguyen Thi Tien 701,100 7.08%

Thang Long FI JSC 540,000 5.45%

Beira Limited 200,000 2.02%

Domestic corporates

54%

Domestic individuals

41%

Foreigners5%

Page 2: Aaa report public

3/2007

4/2007

Chartered Capital (VND)

12/2007

5/2009

33 bn

60 bn

66 bn

99 bn

Products: Bags Pellet Machines Recycled line process

An Phat

Structure

Factory no. 1

Factory no. 2

Factory no. 3

Yen Bai Factory

Bags, pellets and machines Caco3

Page 3: Aaa report public

HIGHLIGHTS

• Plastic industry, especially plastic bags field is rich of potential due to the development of international and domestic retailing industry.

• Self-destroyed plastic products have great opportunity in the future when people are more aware of environment.

• AAA has high gross margin thanks to plastic recycling technology which helps to reduce COGS.

• AAA has successfully built up trade mark and faith with foreign customers in EU and US.

• An Phat has a clear and reasonable development strategy as well as being profitable and low valuation

• Competition from foreign and domestic

company due to attractive of margin.

• The plastic recycling technology of AAA

is not too complicated and it can be

copied by other competitors.

• AAA still does not pay much attention to

potential domestic industry.

RISK ASSESSMENT

RECOMENDATION

• Short-term investment

• Entry – Exit: VND 45,000 – 60,000

Page 4: Aaa report public

86% 80% 80%

8% 17% 17%6% 2% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 Q1 - 2010

Sales breakdown

Other

Pellets

Bags

93% 94% 94%

2% 4% 4%

5% 2% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 Q1 - 2010

NPAT breakdown

Other

Pellets

Bags

Since the beginning, bags and pellets

have been AAA’s main source of

revenue.

Bags occupied 80% revenue of AAA

but accounted for 94% of NPAT.

Other sources of revenue:

• Selling machines and transferring recycle

technology.

• Caco3 (since 2011)

Page 5: Aaa report public

Self – destroyed bags

Shopping bags

Garbage bags

Products are mostly exported to EU, US and

Asia countries (EU - 80%, Asia – 20%, US –

5%)

High margin in recycling >>> Self –

manufactured materials with cost lower than

imported materials. Cost of recycled material

is only half of imported material.

Self – destroyed bags have great potential in

the future when people show more awareness

of environment.

BAGS PELLETS

• Used to manufacture plastic products

• Unlike other plastic company, AAA can produce

pellets from recycles. This can provide about

20% of An Phat production, help to reduce cost.

• AAA pellets are mostly utilized to bags

production and partly sell out.

Recycled pellets

Page 6: Aaa report public

Material price is fixed at the time of signing contract. So, exchange rate and

commodity price fluctuation risk is eliminated

One of AAA’s advantage (as the Board said) is AAA can purchase at a price

discount 10% in compared with other Vietnamese companies due to long

relationship with suppliers and big quantity of invoices.

There three kinds of material:

• Recycled materials: are HDPE, LDPE, LLDPE collected at waste purchasing stores in

Northern Vietnam. Supply capacity of these stores is 700 ton/month (much more

higher than AAA need of less than 20 ton/month)

• Virgin pellets: are used to produce high quality bags like shopping bags, food bags

and medical bags… These pellets are imported directly from

Singapore, Thailand, Korea…

• Regenerated pellets: are import from Korean companies who have closed

relationship with AAA. Theses pellets are purchased at a price of 2/3 virgin pellets

10–15%

85-90%

Page 7: Aaa report public

COGS86.9%

Selling5.0%

Administration

4.5%

Interest3.6%

Total expenses structure

Material89.1%

Labour2.6%

Depreciation

4.4%

Other3.9%

COGS structure

Caco3 4.64%

Pellets 61.50%

Recycled pellets (self-produce) 15.46%

Recycled pellets (buy) 18.40%

Total 100.00%

Materials account for 90% COGS, proportion of materials is as followed:

Capacity of each factory

Factory1

Factory2

Factory3

Bags: 700 ton/m

Bags: 800 ton/m

Recycled Pellet: 400 ton/m

Bags: 700 ton/m

Page 8: Aaa report public

Export – 80% Domestic – 20%

EU71%

US4%

ASIA20%

Other5%

Export region 2009 Main export countries (value percentage)

1 Singapore 19.71%

2 Czech 15.39%

3 Germany 13.75%

4 Frank 11.22%

5 England 7.06%

6 UK 5.38%

7 Italy 4.44%

8 Greek 4.02%

9 US 3.55%

10 Gambia 3.49%

Export customers are used to be big distributors.

AAA is highly appreciated for its “green”

technology as well as reasonable price and quality

of product.

Customers include

manufacturers and companies

like Proconco, Vinabran

(wrapping bags) and

Vietcombank, BIDV (gift bags)

Keen competition from

other plastic companies on

price.

Page 9: Aaa report public

Strong growth in the past due to increase in production.

Sale of machines and technology transferring, unusual activity

High gross margin in compared with other companies in plastic industry

Tax incentive

Higher NOP margin due to higher revenue growth than that of expenses

The second and the third factory operated

(in VND million) 2007A 2008A 2009A 2010E

Net Revenue 108,537 248,333 384,533 600,641

% y-o-y Growth N/A 129% 55% 56%

Cost of Good Sold 85,892 196,355 300,936 474,507

Gross Profit 22,645 51,978 83,598 126,135

Gross margin 21% 21% 22% 21%

Operating Expense 5,418 14,687 28,239 42,045

% of Revenue 7.10% 6.70% 6.50% 5.50%Selling expenses

3,549 8,194 15,549 24,026 Administration expenses

1,869 6,492 12,690 18,019

Net Operating Profit 17,227 37,292 55,359 84,090

% of Revenue 25% 29% 29% 31%

Financial Income 230 1,110 3,465 6,006

Financial Expense (49) (2,422) (3,866) (2,523)

Other Income 109 53 562 25,000

EBIT 17,516 36,033 55,521 112,574

EBIT margin 16% 15% 14% 19%

Interest Expense (1,109) (13,159) (17,141) (22,704)

EBT 16,407 22,875 38,380 89,869

Tax 0 0 657 7,190

Net Income 16,407 22,875 37,723 82,680

Net margin (%) 15.12% 9.21% 9.81% 13.77%

Page 10: Aaa report public

Remarkable increase in current assets due to high revenue growth

Decrease in 2010 year end as a result of lower investment demand when CaCo3 factory is completed

Interest incentive of 2% for mid-term loans, used to finance hotel project in Lao Cai province

Completion of the second factory

Issuance of VND 54 bn convertible bond

(in VND million) 2007A 2008A 2009A 2010E

Current Assets 100,277 143,554 182,826 306,851

Cash and cash equivalents 8,974 3,681 37,822 82,978

Account receivables 42,686 90,093 84,576 120,128

Inventory 35,276 39,978 48,690 85,411

Other Current Assets 13,342 9,802 11,738 18,334

Fixed Assets 53,233 127,778 253,025 246,325

TOTAL ASSETS 153,510 271,331 435,851 553,177

Current Liabilities 51,029 148,484 186,955 118,965

Short term debt and borrowings - 138,017 143,428 72,077

Account Payable 13,184 8,259 33,047 36,032

Other current liabilities 37,845 2,209 10,480 10,856

Long Term Liabilities 26,453 20,453 127,289 127,289

Long Term Debt 26,453 20,389 127,189 127,189

Unemployment reserve - 64 100 100

OWNER EQUITY 76,029 102,394 121,608 306,923

Charter Capital (Common Stock) 60,000 66,000 66,000 99,000

Additional Paid-in Capital - 18,000 18,000 107,100

Retained Earnings 16,146 19,091 37,723 92,334

Other resources and funds -117 -697 -115 8,488

TOTAL CAPITAL 153,510 271,331 435,851 553,177

Page 11: Aaa report public

(1)An Phat allies with an Japanese partner to set up a plastic recycling factory in which AnPhat will provide a package of technology transfer and human resource. Accordingly, thefactory’s plastic materials (after being recycled) will be sold to An Phat at discount price(20% lower than market price), which may enable An Phat to economize about USD 1million p.a. The factory will be likely put into operation in 2011.

(2)CaCo3 plant is expected to start operation in Oct 2010 and generate revenue from2011. The output of the plant will not only be partially sold but internally utilized asadditives as well. It is expected to generate turnover of VND 11 -13 billion.

(3)The hotel project in Yen Bai has a good location at the centre of Yen Bai town. Thisproject is appreciated for its potentials because there are no high-end hotel (3 stars andabove) in Yen Bai up to now. In addition, the implementation of this project will help AnPhat to build up good relation with provincial leaders. Estimated investment is VND 100bn in which VND 30 bn is AAA’s capital and the rest is loan from BIDV bank. The project isin designing stage and expected to start in 2012.

Page 12: Aaa report public

Plastic companies on 2009 performance

BMP TTP TPC MCP AAA

Total asset 824 537 363 202 436

Shareholder equity 677 459 327 123 122

Chartered capital 348 150 205 82 66

Net revenue 1,143 1,045 409 198 385

Gross profit 337 118 89 34 84

NPAT 249 83 63 12 38

ROA 30% 15% 17% 6% 9%

ROE 37% 18% 19% 10% 31%

Gross margin 29% 11% 22% 17% 22%

NPAT/Net revenue 22% 8% 15% 6% 10%

D/E 0.22 0.17 0.11 0.64 2.57

Plastic companies on 2010 valuation

High ROE but rather low ROA…

…due to high leverage

Good gross margin, especially in bags industry

Attractive earnings and quite low valuation

BMP TTP TPC MCP AAA

Price (20/08/2010) 50,000 33,900 12,000 13,000 50,300

EPS 2010 6,902 4,533 1,739 1663 8,350

P/E 2010 7.24 7.48 6.90 7.82 6.02

Page 13: Aaa report public

STRENGHTS WEEKNESSES

Trademark and prestige

High margin

Good financial health

Discounted material price

“Green” technology

Bright and reasonable development strategy

Not pay attention to domestic market.

OPPOTUNITIES THREATS

Development of international and domestic

retailing industry.

Garbage recycling industry is encouraged in

many nations.

Competition from Vietnamese and foreign

companies (Chinese) for the fact that:

o AAA technology of recycling is not so

complicated and “can’t be copied”.

o Price discount can also be captured by other

Asian competitors.

Page 14: Aaa report public

In coming time, AAA will increase chartered capital to VND 120 bn through

stock dividend.

Mr. Pham Anh Duong announced to buy VND 50 bn convertible bonds from

Beira Limited and committed not convert; AAA will buy back these bonds

at expire date.

Page 15: Aaa report public

Forecasted Profit & Loss

Growth on price and enhancement of productivity

Average of historical margin

Expire of tax incentive

Income from Caco3 factory

(in VND million) 2010E 2011F 2012F 2013F 2014F

Net Revenue 600,641 720,770 864,9231,037,9081,245,490

% y-o-y Growth 56% 20% 20% 20% 20%

Cost of Good Sold 474,507 569,408 683,290 819,947 983,937

Gross Profit 126,135 151,362 181,634 217,961 261,553

Gross margin 21% 21% 21% 21% 21%

Operating Expense 42,045 50,454 60,545 72,654 87,184

% of Revenue 5.50% 5.50% 5.50% 5.50% 5.50%Selling expenses

24,026 28,831 34,597 41,516 49,820 Administration expenses

18,019 21,623 25,948 31,137 37,365

Net Operating Profit 84,090 100,908 121,089 145,307 174,369

% of Revenue 31% 31% 31% 31% 31%

Financial Income 6,006 7,208 8,649 10,379 12,455

Financial Expense (2,523) (3,027) (3,546) (4,152) (4,982)

Other Income 25,000 11,693 12,319 11,651 12,214

EBIT 112,574 116,781 138,511 163,185 194,055

EBIT margin 19% 16% 16% 16% 16%

Interest Expense (22,704) (27,245) (31,916) (37,365) (44,838)

EBT 89,869 89,536 106,596 125,820 149,218

Tax 7,190 7,784 11,313 17,125 27,401

Net Income 82,680 81,752 95,283 108,695 121,817

Net margin (%) 13.77% 11.34% 11.02% 10.47% 9.78%

Page 16: Aaa report public

Forecasted Balance Sheet

Long term growth rate

Perpetuity

5 years cash flow 229,325,913,420

WACC 18.0%

Long term growth rate 4.0%

Perpetuity 440,341,529,432

Company value 669,667,442,852

- Liabilities 199,365,495,280

+ Cash and cash equivalent 82,977,927,282

Net Liabilities 116,387,567,998

Equity value 553,279,874,854

Current shares 9,900,000

Share price 55,887

(in VND million) 2010E 2011F 2012F 2013F 2014F

Current Assets 306,851 402,337 523,706 639,328 779,598

Cash and cash equivalents 82,978 123,634 177,197 209,038 245,876

Account receivables 120,128 151,362 190,283 238,719 298,918

Inventory 85,411 105,340 129,825 159,890 196,787

Other Current Assets 18,334 22,001 26,401 31,681 38,018

Fixed Assets 246,325 226,876 207,426 187,976 168,527

TOTAL ASSETS 553,177 629,212 731,132 827,304 948,125

Current Liabilities 118,965 130,505 154,348 163,928 184,983

Short term debt and borrowings 72,077 74,239 76,466 78,760 81,123

Account Payable 36,032 43,239 59,603 65,350 79,655

Other current liabilities 10,856 13,027 18,279 19,818 24,205

Long Term Liabilities 127,289 129,832 132,427 135,074 137,773

Long Term Debt 127,189 129,733 132,327 134,974 137,673

Unemployment reserve 100 100 100 100 100

OWNER EQUITY 306,923 368,875 444,357 528,302 625,369

Charter Capital (Common Stock) 99,000 99,000 99,000 99,000 99,000

Additional Paid-in Capital 107,100 107,100 107,100 107,100 107,100

Retained Earnings 92,334 146,111 212,066 285,141 370,026

Other resources and funds 8,488 16,663 26,192 37,061 49,243

TOTAL CAPITAL 553,177 629,212 731,132 827,304 948,125

3.00% 4.00% 5.00%

16.00% 64,821 69,168 74,307

17.00% 58,427 61,997 66,163

18.00% 52,922 55,887 59,308

18.50% 50,447 53,160 56,275

19.00% 48,135 50,623 53,465

20.00% 43,940 46,045 48,430