Challenge... · Debt Portfolio and Maturity Analysis ... Grundig, Hitachi, Huawei, Philips,...
Transcript of Challenge... · Debt Portfolio and Maturity Analysis ... Grundig, Hitachi, Huawei, Philips,...
Singer Retailing Company DCF Model
FY10 FY11 FY12 FY13 FY14E FY15E FY16E
In LKRm unless otherwise stated
Revenue 15,177 20,944 23,850 23,717 25,881 27,224 28,603
Growth % nm 38.0% 13.9% -0.6% 9.1% 5.2% 5.1%
Operating expenses (13,529) (18,658) (21,491) (22,052) (23,660) (24,822) (25,912)
Growth % nm 37.9% 15.2% 2.6% 7.3% 4.9% 4.4%
As a % of revenue 89.1% 89.1% 90.1% 93.0% 91.4% 91.2% 90.6%
EBITDA 1,648 2,286 2,359 1,665 2,221 2,402 2,691
Growth % nm 38.7% 3.2% -29.4% 33.4% 8.2% 12.0%
Margin % 10.9% 10.9% 9.9% 7.0% 8.6% 8.8% 9.4%
Depreciation and amortization (183) (214) (239) (217) (237) (250) (262)
Growth % nm 17.0% 11.9% -9.0% 9.1% 5.2% 5.1%
As a % of revenue 1.2% 1.0% 1.0% 0.9% 0.9% 0.9% 0.9%
EBIT 1,465 2,073 2,120 1,448 1,984 2,152 2,429
Growth % nm 41.4% 2.3% -31.7% 37.0% 8.5% 12.8%
Margin % 9.7% 9.9% 8.9% 6.1% 7.7% 7.9% 8.5%
Historicals Explicit forecast
Debt Portfolio and Maturity Analysis…
YTD 2013 YTD 2012
LKR Millions
% LKR Millions %
Short Term
5,164 58.6%
5,970 73.7%
Long Term
3,651 41.4%
2,125 26.3%
Total 8,815 8,095
Debt Portfolio of Singer Sri Lanka PLC
Debt Maturity Profile (LKR Millions)
As at 31 December 2012 Total LKR Due in 2014 2015 2016 after 2016
Overdrafts 753.3 753.3 - - -
Short Term Loans 4,772.8 4,772.8 - - -
Long Term Loans - - - - -
Debentures 2,900.0 - 1,999.0 901.0 -
Promissory Notes - - - - -
Commercial Paper 450.0 200.0 250.0 - -
Total borrowings - as at 31/12/2013 8,876.1 5,726.1 2,249.0 901.0 -
Debt Maturity Profile (Rs.Mn)
TTM Operating Margin TTM EPS (LKR) Number of Retail Stores Value Per Share (LKR)
Cargils 3.8% 2.87 232 139.51
Singer 6.1% 3.69 406 131.28
Deal Multiple Cargils 48.6
International Finance Corporation Acquiring 8% of Cargils Retail for LKR 2.5bn
Comparable Deals
2015 Budget Proposals…
2015 Budget Proposals;
Reduce Electricity Tariff by 15% Reduce Water Tariff by10% Reduce VAT by 1% Reduce Price of Domestically Produced Milk Powder by Rs.100 Reduce Price of Domestically Produced Yogurt by Rs.3 Rs.25000 Minimum Salary for Government Servants
Target Economic Growth of 8% Channeling Funds for Rural Infrastructure Development Unemployment of Youth Aged 18-30 t Drop to 13.1% from 15% Per capita GDP to Increase up to USD7500 by 2020
Reduced Interest Rates…
Average Weighted Lending rates by Type of Security (%)
Movement of Money Market Rates Movement of secondary Market Yields for Gvt. Securities
Source: CBSL Annual Report 2013
Characteristics of Consumer Durables Industry…
Source: Team Estimates
Intense Competition
Higher Customer Bargaining Power
Relatively High Power of Up Stream Suppliers
High Entry and Exit Barriers
No.1 Consumer Durables Brand……
Source: SINS Annual Report
No.1 Brand in Sri Lanka for the 9th Consecutive Year Top 100 Listed Companies in Sri Lanka
2011/2012 – 26 2012/2013 - 24
No.1 in Customer Relations Ranked Among the Best 10 Corporate Citizens Recognized as Most Respected Entities in Sri Lanka
2012 -16 2013 -15
Singer Business Channels…
Source: SINS Annual Report
Retail Channels; Singer Plus Singer Mega Sisil World Singer Homes
B2B Channels; Apparel Solutions Institutional Sales Central Air Conditioning
Trade Channels; Traditional Consumer Durables Agro and Hardware Digital Media
Revenue From Rendering of Services…
Source: SINS Annual Report
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2009 2010 2011 2012 2013
Revenue from Rendering of Services (Rs.Mn)
By 2015 Approx. 32% of the Population are Estimated to Reside in Urban Areas
Social Responsibility…
Source: SINS Annual Report
Sports Sponsorships – Promote School Rugby Renovation of Hospital Wards Projects at Schools “Thirst for Life” – Donating Dialysis units
Branch Network and Customer Reach…
Competitor No.of Branches
Softlogic PLC 173
Abans 213
Household Users – Over 4.5 Million Online Users – Over 500,000
Source: SINS Annual Report
SWOT of Singer Sri Lanka PLC…
Strengths
One of the leading consumer durables
brands in Sri Lanka over the past decade
86.1% ownership is with parent company,
Singer Asia with strong financial support
from Singer Asia
Nation-wide distribution network (406
retail outlets and 747 independent retailers
at the end of FY2013)
Stable outlook A(lka) from Fitch Ratings
Lanka Ltd. for senior unsecured debt of
Singer Plc.
Sale of multiple brands under one roof
Despite slow economic growth Singer
reported revenue CAGR of 21% FY2009-13
Singer Plc. Has c. 36% overall market
share
Exclusive distributor or co-distributor in Sri
Lanka for Beko, Godrej, Grundig, Hitachi,
Huawei, Philips, Samsung, Skyworth, TCL
and Whirlpool
Credit sales backed by Singer Finance Plc.
via hire purchase agreements
Weaknesses
High gearing ratio of 226% FY2014E
Liquidity risk owing to high net debt to FCF
ratio of 70.1x FY2014E
Reducing margins owing to high
competition and concentration on low
margin earning product segments such as
mobile
Opportunities
High upper single digit growth of per capita
GDP expected over the next 5 years
93% of Sri Lanka’s population has access
to electricity to their place of residence
Threats
Reversal of current low interest
environment
Import tax rate hike
Slower-than-expected growth in private
credit availability
Risk Mitigating Factors…
Operational Risk
Significant decrease in profit margins
Renovation and transformation plan to improve showrooms, reduce cost structure across all channels, develop partnership with strong international brands.
Cyclical demand for Singer products
Diversified produce portfolio targeting different consumer groups, customer loyalty program
Rapidly changing consumer demand leading to obsolete inventory
Stock clearance activities on a regular basis (Quarterly), monthly operational meeting for inventory management, provisions for obsolete inventory, and warranty cost is insured
Credit risk
Risk of customers reneging on a hire-purchase agreement
Branch managers act as del credere agents, database for customer creditworthiness, risk-adjusted pricing
Further downgrade in credit ratings
Strong relationships and facilities with many banks
Risk Mitigating Factors…
Liquidity Risk
Increase in contractual cash outflows Strong supplier relationships
Market Risk
Risk of interest rates increasing
Majority of debentures are fixed rated , balancing short-and-long term borrowing, reputed brand name commands a favorable rate
Market Risk
Importing of 60% of total products leading to high currency risk exposure
Short period between the date of the purchase and the settlement of the related liability.
Product Risk
Risk of defective or inappropriate for the market in terms of price or functionality
Stringent quality control activities, product testing via sampling on all product lines
IT Risk
Significant failure in the IT processes Regular backups of all databases and off-site disaster-recovery system
Risk Management Process…
Steps Activities
Data Collection and Analysis
The management information system (MIS) to pick up relevant business-critical information.
Review and validation before it is submitted to senior management.
Assess Agree and implement measurement and reporting standards and methodologies.
Control Establish key control processes and practices, including limit structures, impairment allowance criteria and reporting requirements.
Monitor the operation of the controls and adherence to risk direction and limits.
Provide early warning of control or appetite breaches.
Ensure that risk management practices and conditions are appropriate for the business environment.
Risk Management Process…
Report Interpret and report on risk exposures, concentrations and risk-taking outcomes.
Interpret and report on sensitivities and Key Risk Indicators.
Communicate with relevant parties.
Manage Review aspects of the Company’s risk profile.
Assess new risk-return opportunities.
Advise on optimizing the Company’s risk profile.
Review and challenge risk management practices.
No. One Consumer Durable Retailer…
Trusted Excellence Through; Market Existence of over 100 Years Multi Channel – Multi Brand Business Model Unmatched After Sales Services
First Mover Advantage to Exploit Industry Opportunities and Increase Current Market Share of 36%
•Over 225 Island Wide Service Centers and 8 Regional Service Centers •24/7 Customer Call Centre
79%
18%
3%
Channel Mix of Revenue - 2013
Retail Channel
Trade Channel
B2B
Competitively Featured and Priced Brand Portfolio