ABR Holdings Limited
Question:
Discuss about the Dividend Policies Impact On The Share Value.
The report has been prepared to evaluate the financial position and performance of ABR Holdings Limited and BreadTalk Group Limited. Financial position and performance of an organization could be evaluated through analyzing the financial statement of the company. In the report, income statement, balance sheet, cash flow statement of the company has been analyzed with the help of trend analysis, vertical analysis, ratio analysis etc. Financial statement analysis makes it easy for the investors and the analyst to make decision about the company’s performance and investment in the company.
ABR holdings limited are a food and beverage company in Singapore. The company is listed on Singapore exchange, Sesdaq. Company has been established in 1978 and firstly, Swensen’s franchise has been held by company. The company holds the casual dining restaurant’s franchise in Oceania and Asia which has restaurant in Malaysia and Singapore. Basically, the company manufactures the ice-cream together with its subsidiaries. The company is involving into various functions such as managing, operating, franchising of food and beverage companies and various brands like Yogen Fruz, coffees, Pizza, the Cocoa trees etc. the main strength of the company is its reduced labour cost, domestic market, skilled workforce, high refutability and turnover, barriers of market entry etc. (Home, 2018). On the other hand, the weakness of the company is small business unit. Opportunities of the organization are new markets and growth rate of the industry and profitability. On the other hand, the main threats of the company are technology issues, competitor’s issues, increasing rate of interest etc.
BreadTalk group limited is an international food and beverage company in Singapore. The company is listed on Singapore exchange, Sesdaq. Company has been established in 2000 and headquarter of the company is at Paya Lebar in Singapore. The main USP of the company is its brand that inspires people to think differently. Basically, the company targets on people who experience food and follow the food trend. The company is involving into various functions such as managing, operating, and franchising of food and beverage companies and various brands (Home, 2018). The main strength of the company is its 40 retail stores in Singapore, wide range of cakes, buns, bread and pastries, presence in many countries, global strength of 7000 employees. On the other hand, the weakness of the company is invisibility of brand, low barriers, various retail brand in the same industry etc. Opportunities of the organization are new markets and growth rate of the industry and profitability. On the other hand, the main threats of the company are technology issues, competitor’s issues, increasing rate of interest etc.
Financial analysis is a procedure which evaluates the business, budgets, projects and various other projects related to finance of an organization to determine the sustainability and performance of the organization. Financial analysis is usually done to evaluate that whether an organization is liquid, solvent, stable, and profitable enough to manage its financial functions (Ackert and Deaves, 2009). Financial analyst mainly evaluates the financial statement of an organization to evaluate the performance. In the report, financial position and performance of ABR holdings and BreadTalk has been evaluated to reach over a conclusion about better company in relation to investment.
BreadTalk Group Limited
Vertical analysis is a process to evaluate the financial statement of an organization. In vertical analysis, each entry for three major categories of revenue, liabilities and assets are represented as a part of total account. Vertical analysis is also used to evaluate the financial statement as a % measure. The vertical analysis on income statement of ABR holdings limited and BreadTalk limited has been evaluated. It expresses about the changes in the income statement from last year as well as it compares the accounts and transaction from the comparative company (Baker and Weigand, 2015). The analysis expresses that the cost of revenue of ABR holdings have been enhanced from last year and due to it, the gross profit of the company has been reduced. Further, it explains about total operating expenses, operating income, net income etc of the company. Operating expenses of the company has become 39.30% from 38.07% and the operating income of the company has been lowered by 2.73% whereas the net profit of the company has been has also been lowered from last year (Morningstar, 2018).
Same study on BreadTalk explains that cost of revenue of company has been reduced from last year and due to it, the gross profit of the company has been enhanced in 2016. Further, it explains about total operating expenses which has been enhanced to 53.94%, operating income which have been lowered to 0.94% from 1.88% in 2016, net income has been enhanced to 1.86% from last year (Barman, 2008).
The comparative study on both the income statement explains that the gross profit of BreadTalk is quite higher than ABR holdings. But at the same time, operating expenses of BreadTalk is also higher, due to which, net profit of ABR holdings is higher than the net profit of BreadTalk. It explains that the ABR holding is performing better on the market.
Vertical analysis study on balance sheet has also been conducted and it has been found that the total current assets of ABR holdings limited is 77.89% of total assets whereas tithe total current liabilities of company is 13.39% and total liabilities of the company are 14.97% of total liabilities and stock holder’s equity (Arnold, 2013). It explains about the financial structure of the company. Balance sheet of BreadTalk limited explains that the total current assets of ABR holdings limited is 39.62% of total assets whereas the total current liabilities of company is 40.43% and total liabilities of the company are 75.27% of total liabilities and stock holder’s equity. The comparative study on both the balance sheet explains that the capital structure of ABR holdings is better. The company has managed total current assets, liabilities, equity etc in competitive way.
Horizontal analysis is a process to evaluate the financial statement of an organization. In horizontal analysis, changes in the financial statement in a period are calculated. Horizontal analysis is also used to evaluate the financial statement as a % measure. The horizontal analysis on income statement of ABR holdings limited and BreadTalk limited has been evaluated (Baker and Nofsinger, 2010). It expresses about the changes in the income statement from last year as well as it compares the accounts and transaction from the comparative company. The analysis expresses that the revenue of ABR holdings have been enhanced from last year by 3.5% and gross profit of the company has been enhanced by 0.12%. Further, it explains about total operating expenses, operating income, net income etc of the company. Operating expenses of the company has been enhanced by 6.84% and the operating income of the company has been lowered by 32.69% whereas the net profit of the company has been has also been lowered from last year by 25.99% (Besley and Brigham, 2008).
Financial Statement Analysis
Further, the income statement of BreadTalk explains that the revenue of company has been lowered from last year by 1.47% and gross profit of the company has been enhanced by 2.20%. Further, it explains about total operating expenses, operating income, net income etc of the company. Operating income of the company has been lowered by 50.72% whereas the net profit of the company has been has been enhanced from last year by 50.43%. It explains that the financial performance and position of ABR holding is better (Deegan, 2013).
Further, the balance sheet of both the company has been evaluated and it has been found that the total current assets of ABR holding has been lower from last year but at the same time, total assets have been enhanced. Further, it explains that the total current liabilities, total liabilities and stock holder equity of the company has been enhanced from last year and explain about the strong position of the company (Brealey, Myers and Marcus, 2007).
Balance sheet of BreadTalk limited explains that the total current assets of the company have been enhanced by 17.96% and total assets have been lowered by 2.06% from last year. Total current liabilities, total liabilities of the company have also been lowered whereas the stockholder equity of the company has been enhanced. It explains that the financial performance and position of ABR holding is better.
Ratio analysis is a technique to analyze the financial statement and determine the financial position and performance of the company. Ratio analysis briefs about the liquid position, profitability ratio, debt management ratio, market value etc (Garrison et al, 2010). In the report, profitability, liquidity, efficiency and solvency ratio of the companies have been calculated.
Profitability ratio of ABR holdings limited expresses about the lower position of the company from last year. It explains that the net profit of the company has been reduced from 7.55% to 5.4% and the ROE has been reduced to 5.64% from 7.66% whereas the profitability ratio of BreadTalk limited express that the Net margin and ROE of the company has been enhanced from last year to 1.86% and 8.66% respectively. It explains that the position of BreadTalk is better in terms of increment but the rate of ABR is better (Higgins, 2012).
Further, liquidity ratio of both the company expresses that the ABR limited is not utilizing the resources at its maximum. Though, the short term debt obligation of the company is quite better. BreadTalk limited is managing the current assets and current liabilities according to the industry ratio and thus the position of BreadTalk limited is way better. Further, efficiency ratio has been calculated and it has been found that the working capital management of ABR holding limited is way better than BreadTalk limited as the debtor’s turnover and asset turnover of the company is higher than the BreadTalk limited.
Lastly, the solvency ratio has been calculated and it has been found that the capital structure of ABR holdings and BreadTalk both are not optimal (Hillier, Grinblatt and Titman, 2011). ABR holdings limited have lowered the debt in context of equity of the company whereas the BreadTalk limited’s equity is way higher than ABR holdings limited. Through the analysis, it has been observed that the ABR position is way better than BreadTalk limited.
Vertical Analysis
Cash flow analysis evaluated about the cash position of a company. It indicates about the different cash outflows and inflows of the company. Cash flow of ABR holdings limited has been analyzed firstly. Through the analysis, it has been found that the net cash of the company from operating activities has been lowered from last year due to less income. On the other hand, cash flow from investing activities has been lowered due to huge investments. Further, cash outflow is higher in financial activities. It explains that the cash inflow of the company is lower than the cash outflow.
Further, the cash flow of BreadTalk has been evaluated and it has been found that the cash inflow from operational activities is quite higher than the cash outflow of the company. Further, the cash flow from investing activities explains that the company has lowered the cash outflow from last year (Horngren et al, 2005). More, the cash flow from financing activities explains that the outflow of the company has been lowered. It explains that total cash flow of the company has been better than last year.
Segment is a process to divide the organization on the basis of its operations, functions; division etc. segment analysis makes it easy for the analyst to evaluate that which segment offers higher revenue to the company. Segment analysis of ABR holdings limited explains that the higher revenue of the company is from restaurant segment. Other segment of the company offers lesser revenue. Further, the assets and liabilities of Restaurant are higher than any other segment (Madhura, 2011). It explains that the main segment of the company is Restaurant and company should focus on other elements as well to enhance the profitability.
Further, Segment analysis of BreadTalk limited explains that the higher revenue of the company is from Bakery operations, food restaurant and court operations. Other segment of the company offers lesser revenue (Annual report, 2016). The net profit of food restaurant is higher than other segments. Further, the assets and liabilities of all the segments are quite similar (Annual Report, 2016). It explains that the company has invested in all the segments but the profitable segment of the company is Bakery operations, food restaurant and court operations (Kaplan and Atkinson, 2015).
Recommendation and Conclusion:
The above analysis explains that the profitability level of BreadTalk is increasing but still, the level of ABR limited is higher than the BreadTalk limited. According to the above study and analysis, it is recommended to the inventors to invest into ABR holding limited as the company is more profitable than BreadTalk limited, trend analysis and vertical analysis briefs about the better position of the company. Cash flow analysis explains about the lower cash inflow of the comapny which has taken place due to huge investment. Further, the ratio analysis explains about higher financial position of ABR holdings. Thus, to conclude, investors must invest into ABR holdings for better revenue and returns.
References:
Ackert, L. and Deaves, R. 2009. Behavioral Finance: Psychology, Decision-Making, and Markets. Cengage Learning.
Annual Report. 2018. ADR Holdings limited. [online]. Available at: https://www.abr.com.sg/pdf/ABR_Annual_Report_2016.pdf [Accessed as on 9th Mar 2018].
Annual Report. 2018. BreadTalk Limited. [online]. Available at: https://breadtalk.listedcompany.com/misc/ar2016/index.html#16 [Accessed as on 9th Mar 2018].
Arnold, G., 2013. Corporate financial management. Pearson Higher Ed.
Baker, H.K. and Nofsinger, J.R. 2010. Behavioral Finance: Investors, Corporations, and Markets. John Wiley & Sons.
Baker, H.K. and Weigand, R., 2015. Corporate dividend policy revisited. Managerial Finance, 41(2), pp.126-144.
Barman, G.P., 2008. An evaluation of how dividend policies impact on the share value of selected companies.
Besley, S. and Brigham, E.F., 2008. Essentials of managerial finance. Thomson South-Western.
Brealey, R., Myers, S.C. and Marcus, A.J., 2007. FundamentalsofCorporate Finance. Mc Graw Hill, New York.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
Garrison, R.H., Noreen, E.W., Brewer, P.C. and McGowan, A., 2010. Managerial accounting. Issues in Accounting Education, 25(4), pp.792-793.
Higgins, R. C., 2012. Analysis for financial management. McGraw-Hill/Irwin.
Hillier, D., Grinblatt, M. and Titman, S., 2011. Financial markets and corporate strategy. McGraw Hill.
Home. 2018. ADR holdings limited. [Online]. Available at: https://www.abr.com.sg/ [Accessed as on 9th Mar 2018].
Home. 2018. BreadTalk Limited. [online]. Available at: https://www.breadtalk.com/en/ [Accessed as on 9th Mar 2018].
Horngren, C.T., Sundem, G.L., Stratton, W.O., Burgstahler, D. and Schatzberg, J., 2005. Introduction to management accounting. Upper Saddle River, New Jersey: Prentice Hall.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Madura, J., 2011. International financial management. Cengage Learning.
Morningstar. 2018. ADR Holdings limited. [online]. Available at: https://financials.morningstar.com/cash-flow/cf.html?t=5DA®ion=sgp&culture=en-US [Accessed as on 9th Mar 2018].
Morningstar. 2018. BreadTalk Limited. [online]. Available at: https://financials.morningstar.com/income-statement/is.html?t=533®ion=sgp [Accessed as on 9th Mar 2018].
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