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Table of ContentsPart 1: Introduction 1Part 2: VINASUN’S Company Profile 3Part 3: Risk Profile 5Part 4: Cash Flow and Investment Analysis 8Part 5: Dividends and Valuation 12Part 6: Conclusion and Recommendation 17References 20List of TablesTable 3.1: Change in Taxi fees and fuel price from 2009 – 2012 6Table 4.1: Balance Sheet of VINASUN from 2009 – 2012 8Table 4.2: Cash Flow of VINASUN from 2009 – 2012 9Table 4.3: Business Result of VINASUN from 2009 – 2012 10Table 5.1: Financial Ratio of each indicator for VINASUN from 2009 – 2012 13Table 5.2: Summarize actual and forecasting VINASUN’s business performance 13Table 5.3: Peers comparison with VINASUN in the same industry 17Table 6.1: Forecasted Cash flow in the next 4 years 18Table 6.2: Business plan of VINASUN 19List of ChartsChart 1.1: Growth in Taxi number in HCM City from 2007 – 2012 2Chart 5.1: Revenue and profit after Tax of VINASUN6Chart 5.2: Growth in ROA and ROE of VINASUN from 2009 – 2014F 15List of FigureFigure 3.1: VINASUN’S Stock performance within 3 latest months 6Introduction:VINASUN is a Vietnam-based passenger transportation services provider. Predecessor of the company is the Trade Travel Services and Investment Consulting Vietnam Sun Co. Ltd., was established on 15/06/1995, with registered capital of VND300 million. On 17/7/2003, the Company renamed to Vietnam Sun Joint Stock Company with registered capital of VND8 billion. On 25/5/2006, the Company increased its chartered capital to VND 16 billion to invest in new vehicles for taxi services. On 2/2007, the Company issued VND 84 billion par values to increase charter capital to VND 100 billion to restructure debt and invest more cars in the year of 2007. To 10/2007, the Company issued VND 70 billion face value for big investors; increase the Company''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''s share capital to VND 170 billion.In addition, the company has its presence in development of commercial and residential buildings as supporting activities to tourism operation. On 29/7/2008, the company officially listed its shares on the stock exchange in Ho Chi Minh City. As of December 31, 2008, taxi operation contributed to 97% of total revenue. In 9/2009, the company issued additional shares to increase charter capital to VND 200 billion. The charter capital of the company increased to more than VND 299 billion on 7/2010.On 3/09/2013, Forbes Vietnam, the Vietnamese version of the leading business magazine in the world, announced the list of 50 best listed companies on the stock market in Vietnam. This is the first company ranked by Forbes Vietnam perform research. Vietnam Sun Joint Stock Company (Vinasun Corp.) was ranked at 34th on the list with a market capitalization of VND 1,701 billion; revenue in 2012 was VND 2,713 billion.However, the author still expect Vinasun sustain current growth while promoting activities in the nearby market access as Binh Duong, Dong Nai and Vung Tau.
MASTER OF BUSINESS ADMINISTRATION INTERNATIONAL PROGRAM ASSIGNMENT CORPORATE FINANCE Submitted to: Dr Cao Minh Man Submitted by: Huynh Thi My Dieu ID No.: CGSVN00014998 Class: MBAOUM0313 – K08A Ho Chi Minh City, March 2014 i Acknowledgement A completed report would not be done without any assistance First of all, I would like to express my endless thanks to lecturer Dr Cao Minh Man His kindly support and continuous advices went through the process of completion of my report Without his motivation and instructions, the report could not be done effectively My special thanks approve to my parents for their endless love, care and have most assistances and motivation me I also would like to explain my thanks to my siblings, brothers and sister for their support and care me all the time As last, my deeply thanks come to all colleagues Their kindly help, care, motivation gave me strength and lift me up all the trouble for the rest of my life With kindest regards, Huynh Thi My Dieu ii Table of Contents Part 1: Introduction Part 2: VINASUN’S Company Profile Part 3: Risk Profile Part 4: Cash Flow and Investment Analysis Part 5: Dividends and Valuation 12 Part 6: Conclusion and Recommendation 17 References 20 List of Tables Table 3.1: Change in Taxi fees and fuel price from 2009 – 2012 Table 4.1: Balance Sheet of VINASUN from 2009 – 2012 Table 4.2: Cash Flow of VINASUN from 2009 – 2012 Table 4.3: Business Result of VINASUN from 2009 – 2012 10 Table 5.1: Financial Ratio of each indicator for VINASUN from 2009 – 2012 13 Table 5.2: Summarize actual and forecasting VINASUN’s business performance 13 Table 5.3: Peers comparison with VINASUN in the same industry 17 Table 6.1: Forecasted Cash flow in the next years 18 Table 6.2: Business plan of VINASUN 19 List of Charts Chart 1.1: Growth in Taxi number in HCM City from 2007 – 2012 Chart 5.1: Revenue and profit after Tax of VINASUN Chart 5.2: Growth in ROA and ROE of VINASUN from 2009 – 2014F 15 List of Figure Figure 3.1: VINASUN’S Stock performance within latest months iii ANALYSIS OF FINANCIAL SITUATION FOR VIETNAM SUN JOINT STOCK COMPANY - VNS (VINASUN CORP.) iv Part I: Introduction Nowadays, citizens prefer to start using public transportation more because of rising petrol prices, unavoidable traffic jams and growing environmental pollution In the long run, private car ownership will rise, although much of the current generation has calculated that this does not make sense In general, Vietnam’s roads are poor and complex Despite of concerning on construction new highway, only 13.5% of the road network is considered to be in good condition, 26% has two or more lanes and 29% is tarred (BMI report) Ruling of the Vietnam taxi industry varies from city to city While almost all cities have had no licensing requirements, larger urban areas had the strictest regulations Currently, HCM City, Hanoi and Danang have licensing regulations in force to regulate taxi numbers Over the last five years, Vietnam’s taxi transportation sector in Ho Chi Minh City has grown at a remarkable 16% CAGR in terms of cab numbers (from 6,000 in 2005 to 12,550 as of May 2010) The industry is expected to maintain an average growth rate of 10% annually over the 2010-2015 periods Rising living standards and high capita per cab (800 in HCMC versus 210 in Singapore) underpin growth In Ho Chi Minh City, taxis are considered as a second ways of passengers’ public transportation after bus transportation As of May 2010, there are 36 enterprises and cooperatives in the taxi service business with 12,550 registered taxis transporting 400,000 passengers per day, occupy 30% of the carried volume of public passenger transportation There are big market players in taxi sector such as Mai Linh, Vinasun, Savico, Future taxi, and Saigon Air; each of these companies has at least 100 taxis with the number rising every year In addition, there are 2,000-3,000 illegal taxis outside the authority’s control Chart 1.1: Growth in Taxi numbers in HCM City, 2007 - 2012 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Cab number (units) 2007 2008 2009 2010 2011 2012 8,000 9,395 10,710 11,500 12,550 13,000 Source: Ho Chi Minh Department of Transportation, Mekong Securities The growth rate of taxi at current is much faster than expected pace through each development phase For example, in the study proposed to the Prime Minister approved at Decision dated 22/1/2007 101/QD-TTg on the HCMC Transport Development Plan to 2020 and vision after 2020, the expected number of taxis for period 2010 - 2015 was 9,500 vehicles But at the present, the actual figure is exceeding 13,000 units (up to 26.9%) The service sector is one of the growth sectors likely positive Most of the macroeconomic situations in the country at present prove proofs to estimate the market taxi steady growth thanks to (1) increase per capita income, (2) the cost of buying a car individual are quite expensive, (3) the development of public transport plus not enough to meet the needs of the whole market However, the growth rate of taxi service in Vietnam may be leveling off in to time by the limitations of transport infrastructure as well as restrictions HCM City's taxi traffic Part 2: VINASUN’S Company Profile Stock Code: VNS, Stock Floor: HOSE Shareholders Structure: Industrials: Taxi Transportation Services - State Property: 0% Charter Capital: VND 300 billions - Management: 38% Add: 306 Dien Bien Phu, Ward 22, Binh Thanh - Foreign individual: 1% District, Ho Chi Minh City - Foreign institution: 26% Phone: +84 (8) 382-77178 - Domestic individual: 7% Fax: +84 (8) 395-26410 - Domestic institution: 28% E-mail: contact@vinasuncorp.com Big shareholders: Employees: 13,488 (2012) - Dang Phuoc Thanh (Chairman): 24% Branches: 11 - Dang Thanh Duy (Deputy CEO): 14% Website: http://www.vinasuncorp.com - Vietnam Investment Fund (VIF): 12% - Red River Holding: 13% - Sai Gon Trading Group (SATRA): 13% - Others: 28% Business sectors: - Operating in taxi transportation with the - Dang Phuoc Thanh: Chairman brand-name Taxi Vinasun; - Huynh Van Minh: Vice Chairman Operating in travel, air travel with the brand- - Dang Thi Lan Phuong: Member of BOM name Vinasun Travel; - Ta Long Hy: Member of BOM - Operating in restaurants, food and beverage; - Truong Dinh Quy: Member of BOM - Operating in real estate Currently, the Board of director: company invested constructing the Tan Da - Dang Thi Lan Phuong: CEO Retail Center with a total area of 1,200m - Ta Long Hy: Deputy General Director The residential project at 103 Truong Dinh - Truong Dinh Quy: Deputy General Director Hoi in District with an area of 2,659 m and - Ngo Thi Thuy Van: Deputy General Director land locates at 26-28-30-32 Thu Khoa Huan - Huynh Van Sy: Deputy General Director - Tran Anh Minh: Deputy General Director - Dang Phuoc Hoang Mai: Deputy General Director - 2 Board of manager: The memorable numbers of Vinasun Taxi in 2012: - Average revenue was VND1,828 million/ day/ car (increase of 11.13% compared to 2011); - 27,154 calls for services/ day, up 6.6% compared to 2011; - Above 90 million was the number of customers served in 2011; - VND7.2 million/ month is the average income of directly driving staff; - VND5 million/ month is the average income of indirect staff, directly operating and business support; - 13,488 personnel as of 31/12/2012; - 7,287 employees must pay income tax on individuals while 6,779 of them are directly driving employees; - 4,622 is the number of Vinasun taxi vehicles up to date 31/12/2012 Source: VNS prospectus, HOSE VINASUN is a Vietnam-based passenger transportation services provider Predecessor of the company is the Trade Travel Services and Investment Consulting Vietnam Sun Co Ltd., was established on 15/06/1995, with registered capital of VND300 million On 17/7/2003, the Company renamed to Vietnam Sun Joint Stock Company with registered capital of VND8 billion On 25/5/2006, the Company increased its chartered capital to VND 16 billion to invest in new vehicles for taxi services On 2/2007, the Company issued VND 84 billion par values to increase charter capital to VND 100 billion to restructure debt and invest more cars in the year of 2007 To 10/2007, the Company issued VND 70 billion face value for big investors; increase the Company's share capital to VND 170 billion In addition, the company has its presence in development of commercial and residential buildings as supporting activities to tourism operation On 29/7/2008, the company officially listed its shares on the stock exchange in Ho Chi Minh City As of December 31, 2008, taxi operation contributed to 97% of total revenue In 9/2009, the company issued additional shares to increase charter capital to VND 200 billion The charter capital of the company increased to more than VND 299 billion on 7/2010 On 3/09/2013, Forbes Vietnam, the Vietnamese version of the leading business magazine in the world, announced the list of 50 best listed companies on the stock market in Vietnam This is the first company ranked by Forbes Vietnam perform research Vietnam Sun Joint Stock Company (Vinasun Corp.) was ranked at 34th on the list with a market capitalization of VND 1,701 billion; revenue in 2012 was VND 2,713 billion However, the author still expect Vinasun sustain current growth while promoting activities in the nearby market access as Binh Duong, Dong Nai and Vung Tau Part 3: Risk Profile VINASUN is not a big company but is a leading organization among players in Taxi sector in Hochiminh City now Risk profile of VNS comes from many factors but in limited of this report, the author focus on two main factors represented for transportation business like VINASUN which are scales of taxi fleet and fuel price The taxi market is quite competitive, in which Ho Chi Minh City and Ha Noi are the two biggest markets In Ha Noi, there are more than 100 taxi companies with around 17,400 cabs while in Ho Chi Minh City, there are approximately 26 taxis with around 11,000 cabs Prominent players in the taxi market are Taxi Group (more than 2,000 cabs, present mostly in Hanoi and its neighboring provinces), Mai Linh Group (about 9,905 cabs, present in 50 cities), Vinasun (4,622 cabs; present in cities) … In the taxi market, fleet expansion greatly depends on the ability to obtain taxi licenses, therefore, in some cases, to obtain new licenses, taxi companies must dispose old cars in order to invest in new cabs At the end of 2012, VNS boasts 4,622 taxis If we were to assume that VNS’s private placement proves successful in 2013, it would help VNS to acquire an additional 900 vehicles in 2013 VNS already purchased 100 new cars in Q1/2013 and disposed 38 old vehicles, total vehicles count to 4,684 cabs Increase in the number of taxis depends on the ability to be granted new taxi licenses and it would affect to revenue of the company On the other side, there will be a high correlation between taxi fare and fuel price which correlates with international oil price According to an EIA forecast (Annual Energy outlook to 2013 with projection to 2040), the annual growth of WTI oil price 2011 – 2040 would be approximately 1.8% Therefore, we assume that taxi fares would also increase correspondingly by 1% per year from 2013 until 2017 as it is not easy to defer all increases in cost to customers The sensitivity shows that for every change of 1% of average taxi fee, revenue would be affected by 1% and Net Profit After Tax would be affected by 2% Table 3.1: Change in taxi fee and fuel price from 2009 to 2012 2009 2010 2011 2012 Average taxi fee (VND/km) 10,674 12,416 14,549 16,472 Fuel price (VND/liter) 15,950 16,400 20,130 23,150 [Source: Company data] To overcome these risks VNS’s has effectively formed a risk management team and an effective risk management team to minimize risks for investors as well as corporation The risk has been coming from the changes in the market, and the structural changes being undertaking by VNS The Stock Performance of VNS’s has been reasonably decent despite the large scale changes in operation being undertaken Figure 3.1: VINASUN’S Stock Performance within latest months (Source: Vietstock) Part 4: Cash Flow and Investment Analysis FINANCIAL SUMMARIZE: BALANCE SHEET Property Unit: VND Million 2009 2010 2011 2012 Assets Cash and cash equivalents 59,257 62,994 38,484 28,298 The short-term receivables 52,147 95,715 123,553 138,199 903 2,017 3,642 4,291 23,883 32,163 40,819 33,095 136,190 192,888 206,499 203,883 5,234 2,864 1,119 11 962,312 1,545,634 1,558,471 1,560,312 -236,454 -422,606 -614,825 -891,065 197,210 11,570 11,570 11,570 Long-term financial investments 2,400 1,660 1,140 540 Total other long-term assets 6,268 7,133 9,117 5,819 1,309,615 1,761,749 1,787,916 1,782,135 Short-term debt 48,772 183,999 170,879 177,607 Long-term debt 548,784 749,799 753,346 664,227 Total Debt 597,556 933,798 924,225 841,833 703,465 819,978 855,868 936,220 8,594 N/A N/A N/A 712,059 819,978 855,868 936,220 N/A 7,973 7,824 4,081 1,309,615 1,761,749 1,787,916 1,782,135 Inventory Other short-term assets TOTAL ASSETS The long-term receivables Fixed assets (Accumulated depreciation) Real Estate Investment TOTAL ASSETS Liabilities Sources of capital Equity Funds and other funds Total Sources of Funds The interests of minority shareholders TOTAL RESOURCES Table 4.1: Balance Sheet of VINASUN from 2009 – 2012 Cash Flow Indirect 2009 2010 2011 2012 Net profit before tax 143,821 239,875 177,993 204,000 Adjustments 117,872 173,258 340,445 393,899 - Depreciation and amortization 115,680 197,424 257,488 291,200 958 676 715 164 -35,267 -105,441 -42,494 -10,355 36,502 80,599 124,737 112,890 3.Operating profit before working capital changes 261,693 413,134 518,438 597,899 - Increase/decrease in receivables -21,493 -51,698 -25,899 -4,344 - Increase/decrease in inventories -625 -1,113 -1,626 -649 -12,041 40,652 -82,196 -4,448 1,821 -11,038 -6,290 -452 - Interest paid -36,502 -77,546 -123,788 -111,739 - Business income tax paid -29,058 -62,929 -41,005 -48,387 - Other payments from operating activities -16,598 -22,451 -26,348 -24,849 Net cash flow from operating activities 159,277 249,825 230,699 421,986 Purchases of fixed assets -456,415 -696,509 -264,087 -298,485 Net cash flow from investing activities -376,541 -408,481 -201,155 -283,686 Cash flow from operating activities - Provisions - Profit(Loss) from investing activities - Interest expense - Increase/decrease in payables - Increase/decrease in pre-paid expense Purchase issued shares from other entities -1,807 -4,000 Repayments of financial lease -27,575 -23,124 -46,882 -35,613 Dividends paid -30,698 -54,506 -30,688 -76,014 -24,510 -10,187 Minority equity in joint venture Net cash flow of the year 8,000 50,630 3,737 Table 4.2: Cash Flow of VINASUN from 2009 – 2012 Business Results Unit: VND Million 2009 Net sales 2010 2011 2012 1,068,603 1,643,696 2,274,328 2,713,311 Cost of goods sold 881,627 1,380,614 1,954,709 2,257,708 Gross Profit 186,975 263,082 319,619 455,603 Financial expenses 36,502 81,339 125,257 113,492 Of which: Interest expense 36,502 80,599 124,737 112,890 4,549 5,895 6,849 94,025 Enterprise cost management 38,119 46,561 57,254 63,938 Total Operating Expenses 79,170 133,795 189,360 271,455 2,193 5,264 3,109 1,118 109,998 134,551 133,369 185,265 33,822 105,324 44,624 18,735 143,821 239,875 177,993 204,000 Present corporate income tax expenses 36,354 60,448 45,113 52,514 The interests of minority shareholders N/A -27 -149 257 36,354 60,421 44,964 52,771 107,467 179,454 133,029 151,229 19,490,000 29,999,997 29,999,997 29,999,997 17.2 18.6 13.6 18.2 4,116.90 5,927 4,434 5,041 2.7 3.1 3.1 3.6 23.7 27.3 28.5 31.2 Operating expenses Cost of sales Total revenue financing activities Net profit from business activities Profit Profit before tax Cost profit Total Cost of profits Profit after tax corporate income Volume Close of Quarter EPS (*) (VND/share) PE (**) (times) Book Price (***) (Thousand VND) Table 4.3: Business Result of VINASUN from 2009 – 2012 Description of calculation (example for year 2012): (*) EPS (Earning per share) = Profit after tax corporate income/ average number of stocks being in the market (volume) = 151,229,000,000/ 29,999,997 = 5,041 VND/ share (**) P/E (Price per earning) = Current Price/ EPS = 18,148/ 5,041 = 3.6 times (***) Book Price = Total equity/ Volume = 936,220,000,000/ 29,999,997 = 31.207 (VND) 10 Given cash flow in negative sign (Table 4.3) but it brings back the positive trend of profit after tax (Table 4.4) VNS has start implementing plan for investment to access new markets to become a nationwide taxi company then subsequently maintain stable growth Three new markets that VNS designated to expand are Ha Noi, Nha Trang and Can Tho In term of capital raising plan, in a recent EGM held on August 2013, VNS planned to issue a maximum of million shares through private placement The issuance price will be no less than VND 44,000 with year lock-in period Its objective is to expand its operation to fulfill its ambition to become a nationwide taxi company by increasing the scale of its taxi fleet (initially expand to Hanoi and Nha Trang) If the private placement proves successful, VNS will invest in 400 new vehicles in 2013 (numbers of acquired car in 2013 would increase up to 900) and 900 new vehicles in 2014 In the near future, VNS intends to expand its operation to the Hanoi market Replicating the business strategy that has garnered them the number taxi company title in Ho Chi Minh City, VNS will focus on the high quality image and brand by investing in new Toyota Innova seats in the Hanoi market (it should be noted that most of the taxis in Hanoi are seat cars or mini cars) In the first phase, Vinasun plans to penetrate the corporate taxi market, which has used Vinasun taxis in Ho Chi Minh City However, it is easier said than done as the taxi market in Hanoi is highly competitive (currently, there are about 17,400 taxis in Hanoi) and taxi consumers’ habits and preferences differ from that in Ho Chi Minh (many people in Hanoi consider taxi as a necessity, not a luxury, and prefer low taxi fee/average quality to high taxi fee/high quality such as VNS taxi) The two biggest competitors of VNS are Mai Linh Group and Taxi Group, who are household names in the Hanoi taxi market While the plan to penetrate the Hanoi market remains unclear in our view, VNS remains persistent in its quest to invest in 300 cabs in Hanoi In the best case scenario, it would be a prerequisite steppingstone for VNS to become a nationwide household taxi brand VNS is optimistic about its expansion plan At a recent EGM, VNS announced a financial plan until 2015 in case of the success of the private placement, in which 2015 net income will reach VND 305 billion, implying a CAGR of 26% during the period 2012 -2015 11 Part 5: Dividends and Valuation From the Financial Statement for year 2009 – 2012 periods, we estimate the growth rate for each of the following indicators: Financial ratios: No 2009 2010 2011 2012 Assets / Total Assets 10% 11% 12% 11% Long-term assets / total assets 90% 89% 88% 89% Liabilities / Total assets 46% 53% 52% 47% Liabilities / Equity 84% 114% 108% 90% Equity / Total assets 54% 47% 48% 53% Current ratio 279% 105% 121% 115% Fast payment 277% 104% 119% 112% Payments of short-term debt 121% 34% 23% 16% Total Asset Turnover 95% 107% 128% 152% 10 Current Assets turnover 1,081% 999% 1,139% 1,322% 11 Equity Turnover 171% 215% 271% 303% 12 The Inventory Turnover 149,175% 94,563% 69,083% 56,919% 13 Profit before tax / Revenue 13% 15% 8% 8% 14 Profit after tax / Net sales 10% 11% 6% 6% 15 Profit before tax / total assets (ROA) 10% 12% 7% 8% 16 Profit after tax / Equity (ROE) 17% 23% 16% 17% The rate of financial growth Return on invested capital (ROIC) 12% 13% 7% 7% Revenue growth rate 29% 53.82% 38.36% 19.30% Profit per share (EPS) 121% 44% -25% 14% Equity 33% 15% 4% 9% Cash 587% 6% -39% -26% 22% 10% 15% 20% Income ratio Cash Dividends 12 Share price growth 165% 8% -27% 34% Table 5.1: Financial Ratio of each indicator for VINASUN from 2009 – 2012 As can be seen from the table 5.1, the Current Ratio (=Current Asset/ Current Liability) is bigger than (> 1) means that the Current Assets > Liabilities, while the available shortterm Assets is greater than the short-term needs, so the financial situation of the company is at least healthy in short-term Furthermore, due to the Current Assets > Liabilities means that Fixed Asset < Long-term Liabilities + Equity, therefore the Long-term Funs of the Company is not only enough but also left over available to finance fixed assets Fast Payment Ratio (= Current assets – Inventory)/ Current liabilities) is also greater than 0.5 as required dedicated the good trend with acceptable ratio of the company in term of its ability to repay the debt To have a better view of VINASUN’s business and its financial situation, we summarize some basic indicators as well as make forecasting for next year as the following: Basic Indicator Revenue (VND Billion) 2009 107.47 2013 2014F 38.36% 19.30% 11.48% 10.00% 179.45 133.03 151.23 200.00 240.00 -25.86% 13.68% 32.25% 20.00% 66.97% 1,309.62 1,761.75 1,787.92 1,782.13 1,960.35 2,156.38 Growth Rate (%) Equity (VND Billion) 2012 53.82% Growth Rate (%) Total Asset (VND Billion) 2011 1,068.60 1,643.70 2,274.33 2,713.31 3,024.74 3,327.21 Growth Rate (%) Profit after Tax (VND Billion) 2010 34.52% Growth Rate (%) -0.32% 10.00% 819.98 855.87 936.13 1,029.75 1,132.72 15.15% 712.06 1.49% 10.00% 4.37% 9.38% 10.00% 10.00% Liabilities/ Total assets 46% 53% 52.13% 47.47% 47.47% 47.47% Profit Before Tax Ratio 13% 15% 14.05% 16.79% 19.42% 21.19% Profit after Tax Ratio 10% 11% 5.84% 5.58% 19.42% 21.19% 4,395 5,006 4,598 5,517 EPS (VND) ROA 10% 12% 7.49% 8.49% 10.20% 11.13% ROE 17% 23% 15.85% 16.91% 19.42% 21.19% Table 5.2: Summarize actual and forecasting VINASUN’s business performance 13 VINASUN posted 2012 profit of VND 2,713.31 billion and profit after tax of VND 151.23 billion Accordingly, the company’s profit increased by 19.30% and profit increased by 13.68% compare to previous year Chart 5.1: Revenue and profit after Tax of VINASUN (Unit: Billion VND) 3,500.00 2,713.31 3,000.00 3,024.74 3,327.21 2,274.33 2,500.00 2,000.00 1,643.70 1,500.00 1,068.60 1,000.00 500.00 107.47 179.45 133.03 151.23 200 240 0.00 2009 2010 Revenue 2011 2012 2013 2014F Profits after Tax The fact trend is that profit increased faster than revenue growth because of the change in the depreciation accounting schedule together with the benefit from the Government’s loan subsidy On the other hand, VINASUN may get benefit from policy of Ho Chi Minh Transportation Department Constraints on registration for new taxi cars cause high barriers for new companies’ access to the market, thus protecting large incumbents like VINASUN According to information from VINASUN, at the end of 8/2013, parent company sales reached about VND 2,016 billion, completed 73% plans, profit after tax reached VND 144.5 billion, fulfilling 82.3% of parent company's business plan, the ability is that VNS will complete planned of profit after tax in September As a result, there will have increase the provision profits in 2013 and 2014 to VND 200 and VND 240 billion Take advantage from this positive trend, the author forecast the company's annual sales will be around 11.48% and 10% together with profit growth for 2013 - 2014 will be 32.25% and 20%, respectively The equity rose from VND 855.87 billion in 2011 to VND 936.13 billion in 2012 means rose by 9.38% and expected continuously increase in 2013 – 2014 period by 10% constantly While Liabilities/Total assets went up from 52.13% to 47.47% from 2011 to 2012, 14 respectively Since VNS’s property development at Tan Da Trading Centre – 7,005sqm GLA - started generating rental revenues from Q1/2011 VNS estimates this centre brought in annual net profit of VND10 billion Total development costs are VND48 billion Chart 5.2: Growth in ROA and ROE of VINASUN from 2009 – 2014F (Unit: %) 25 23 21.19 20 19.42 17 16.91 15.85 15 12 10 10 10.2 8.49 7.49 11.13 ROA ROE 2009 2010 2011 2012 2013 2014F Dramatically growth in profits make ROE and ROA improved significantly over the years, reflecting the improving capital efficiency, and make VNS’s stocks become more attractive Another factor supporting this results including: Firstly, the profit’s picture becomes brighter The adjustment to depreciation period helped somewhat reflect exactly performance of the business of VINASUN However, due to accounting depreciation faster than last year in the next five years, so VINASUN still get some surge profits from the liquidation of car due to the remaining value of the car equal to zero Secondly, the property does not serve business activities accounted for nearly 20% of total asset has been liquidated in 2010 Property investment accounts for nearly 200 billion is the use of land of 717.1 m2 in Thu Khoa Huan, District and 2.739 m2 of land in Truong Dinh Hoi, Ward 16, District This property has not really brought the good performance to the company over the years Thus, the liquidation of the land in 2010 Thu Khoa Huan brough a 15 profit surge for VINASUN and help the main business activity increase by 20% effect from re-investment Expected profits after-tax from the sale of the land were about VND 70-80 billion Third, promote the efficiency of financial leverage Characteristic of the taxi business is large fixed costs due to the initial investment system vehicles for main business operations Structure of equity capital of approximately 30% - 50% is considered successful in the use of financial leverage VINASUN’s debt/equity rate accounted for 70.44% and debt/ total capital was 38.3% did for the return on equity is significantly improved, from 15.85% in 2011 to 16.91% in 2009, and continuously expected increase to 19.24% and 21.19% in 2013 and 2014, respectively In term of peers comparison in the same industry within 10 most competitors, VNS stands at leading price among stocks with VND 50,000 at average volume of 8,000 stocks being in the market However, at currently, the most power in transportation industry goes to VIP account for 71.70% while VNS standing at 5th with 42.90% No Symbol +/- Volume EPS P/E ROE P/B Beta Power 991 6.5 10% 32% 56.80% 8,000 5,899 8.5 0% 166% 0.1 42.90% 3,040 2,007 5.1 16% 83% -0.2 54.70% 200 -334 -10.2 -4% 36% 1.8 33.10% 33,973 349 11.2 3% 37% 0.8 53.80% 6,610 2,545 5.8 15% 86% -0.3 57.60% 28,000 1,151 5.4 6% 36% -0.3 63.30% 6.4 HCT (0) 50 VNS (0) 10.3 TCO (0.1) 3.4 HHG (0.1) 3.9 PCT (0.1) 14.8 VNL (0.4) 6.2 DL1 (0.1) 16 10 8.7 VIP (-0.2) 795,250 2,466 3.5 15% 52% 1.7 71.70% 1,890 16.3 5% 78% 1.7 57.70% -27 -448.1 0% 117% 31.90% 30.9 GMD (-0.7) 551,660 12.1 GTT (0.1) 101,400 Table 5.3: Peers comparison with VINASUN in the same industry Industry Comparison +/- Transportation/ 178.9 Warehouse/Taxi (-1.2) VNS 50 (0) EPS 2,845 PE ROA ROE 5,899 8.5 Price Book AVG Value Total Beta Shares Capital Outstanding P/B Market (Billion) 6% 6% 25.5 24.2 99% 0.8 1,143,680,883 29.225 10% 0% 50 30.2 166% 0.1 40,500,000 2,025 [Source: Cophieu68.vn] As can be seen from the table above, VNS stand at high price compare to the whole industry VNS keep maintaining good performance in the stock market and consider prosperous stock to be invested in the future as well Part 6: Conclusion and recommendation From analysis with above explanations, the author recommend to investors should buy VNS stock at price of VND 51.000 – 51,900 Taxi transport has great potential in Vietnam due to increasing population size and life-style is increasingly improved VINASUN is the market leading taxi transport services in the Southern region, thanks to the powerful car with good competitive strategy Nevertheless, the liquidity and volatility of the VNS’s stock market is not too much, so the next major shareholders holding approximately 80% owned by the company and the nature of the activities VINASUN does not contain elements mutagenic The author raised profit forecasts in 2013 and 2014 to VND 200 and VND 240 billion which is lower than the estimate given in the Board Meeting 17 On 27/08/2013, an extraordinary of General Shareholders' Meeting year 2013 of the Vietnam Sun Corporation – VINASUN has been carried out successfully Accordingly, important content is the proposal to the General Shareholders' Meeting consulted about the issuance of 3,000,000 shares separately, the minimum issued price was VND 44,000/ stock to raise capital to finance further investment on vehicle plans business development in existing areas and new areas in 2013-2014 Specifically: - In 2013, VNS invested additional 400 vehicles besides the investment of 500 units has been approved by General Shareholders' Meeting in 4/2013 And in 2014, VNS will invest additional 900 new cars Markets to increase cars are Ho Chi Minh City, Binh Duong, Dong Nai, Vung Tau, Da Nang and expand to new markets - Separately issued shares this time will be limited to transfer within year from the date of completion of the offering Subjects offered are major investors (numbers are less than 10 investors) which not distinguish new shareholders or existing shareholders Accordingly, the cash flow in the coming year of VNS is adjusted as follows: Unit: VND Billion 2013 2014 2015 2016 2017 3,327.21 3,659.93 4,025.92 4,428.51 4,871.37 Profit after Tax 240.00 266.40 295.70 328.70 364.34 Interest (1-T) 103.14 113.46 124.8 137.28 151.01 Depreciation 106.47 117.12 128.83 141.71 155.01 Investment to fixed asset 163.03 179.34 197.27 217.00 238.70 Investment to liability 136.42 150.06 165.06 181.57 199.73 Free Cash Flow 150.17 167.58 187.00 208.66 232.81 Revenue Value of the firm after 2017 2,196.32 Value of the firm 2,888.36 Value of debt Number of shares Target Price/ share (VND) Table 6.1: Forecasted Cash flow in the next years 784.87 40,499,818 51,938 18 Applying Discounted Cash Flow (DCF) method with 19.4% WACC, the author valuate VNS’ share at VND 51,938 The author believes that the DCF model is most suitable to value the share because: - VNS is the only listed company in the taxi sector, which implies relative value methodology is infeasible - DCF model allows us to capture the effect of extraordinary income in the next one or two years from liquidation of asset without letting these earnings distort the overall valuation, - Calculate the investment in the vehicle fleet in detail over the coming years Expected number of vehicles was stable at 4,200 in the end of the project period and date is estimate based on project in year 2013 New fixed asset are sufficient to replace liquidated fixed asset Business plan of VINASUN: Items (Unit: VND Million) 2011 2012 2013 2014 2,178,500 2,589,800 3,358,700 3,853,000 - - - - Total profit before tax 215,020 165,170 325,000 391,000 Profit after tax 161,270 123,870 253,000 305,000 15 30 20 - - - - Total Revenue Net Revenue Dividend Rate (%) Earnings Per Share (EPS) Table 6.2: Business plan of VINASUN In year 2014, VINASUN’s plan revenue of VND 3,853 billion, up to 14.8%, profit before tax VND 391 billion, an increase of 20.2%, profit after tax reached VND 305 billion, up to 20.3% compared in 2013 Dividends plan expected 20.0% in 2014/ face value price From above analysis, the author has strong recommendation for investors pay attention to invest into VNS It will bring to them positive sign for their long-term benefit 19 References Baomoi.com (2012) Vinasun du kien loi nhuan nam 2013 o muc 179,5 ty dong, tang 18,5% so voi thu chien nam 2012 Retrieved from http://www.baomoi.com/Vinasundu-kien-loi-nhuan-nam-2013-o-muc-1795-ty-dong-tang-185-so-voi-thuc-hien-nam2012/127/10849765.epi Cophieu68 (2011) VIETNAM SUN CORPORATION Retrieved from http://www.cophieu68.vn/snapshot.php?id=vns&lang=en Dau tu chung khoan (2013) VNS – Co phieu dau nganh Taxi Retrieved from: http://tinnhanhchungkhoan.vn/GL/N/CHIFGE/vns-co-phieu-dau-nganh-taxi.html Stockbiz.vn (2009) Vietnam Sun Corporation (VNS: HOSE) Retrieved from: http://en.stockbiz.vn/Stocks/VNS/Overview.aspx Thu Vo (2010) Vinasun, Mekong Securities Trang, Vu Thi Thu (2013) Bao cao cap nhat cong ty co phan Anh Duong Viet Nam (VNS-HOSE) Vinasun Corp (2010 – 2011) Vinasun Corp top 50 cong ty niem yet tot nhat Retrived from http://vinasuncorp.com/home/thong-tin-vinasun-corp/467-vinasun- corp-top-50-cong-ty-niem-yet-tot-nhat- Vietcombank Security (2007) Thong tin doanh nghiep/ Cong ty Co phan Anh Duong Viet Nam Retrieved from: http://www.vcbs.com.vn/Research/Company.aspx?stock_symbol=VNS Viet Capital Securities (2010) Vietnam Sun Corporation (VINASUN) Consumer Service – VNS (HOSE) 20 ... from http://www.baomoi.com/Vinasundu-kien-loi-nhuan-nam-2013-o-muc-1795-ty-dong-tang-185-so-voi-thuc-hien-nam2012/127/10849765.epi Cophieu68 (2011) VIETNAM SUN CORPORATION Retrieved from http://www.cophieu68.vn/snapshot.php?id =vns& lang=en... (VNS- HOSE) Vinasun Corp (2010 – 2011) Vinasun Corp top 50 cong ty niem yet tot nhat Retrived from http://vinasuncorp.com/home/thong-tin-vinasun-corp/467-vinasun- corp-top-50-cong-ty-niem-yet-tot-nhat-... 597,899 - Increase/decrease in receivables -2 1,493 -5 1,698 -2 5,899 -4 ,344 - Increase/decrease in inventories -6 25 -1 ,113 -1 ,626 -6 49 -1 2,041 40,652 -8 2,196 -4 ,448 1,821 -1 1,038 -6 ,290 -4 52 - Interest