Financial Statement Analysis and Valuation OfApex Foods Ltd

2. Prepared for…
Dr. Mahmood Osman Imam
Professor
Department of Finance
University Of Dhaka

3. Apex Foods Ltd.
Apex Foods Ltd. is the subsidiary of Apex Group Co. Ltd.
established in 1994.
Apex foods ltd. is a public limited company.
It’s authorized capital is 150,000,000 tk.
Issued, Subscribed & Paid up Capital: 57,024,000 tk.
The company mainly produce , Spicy Garlic Shrimp,
Shrimp Appetizer, Jumbo Shrimp Parmesan, Butterfly
Shrimp and Pasta, Chili Garlic Roasted Shrimp etc

4. Dividend Policy
Apex Foods Ltd. Provide cash dividend every year.
They don’t give stock dividend for the last five
years.Valuation.xlsx

5. Industry Analysis
The five competitive forces used to analyze the industry.
These are
1. Threat of new entrants: Low – Medium
The food industry is highly regulated and
administrated.
2. Threat of existing Competitor: High
 Low level of differentiation
 Switching cost for the consumers is low.

6. Industry Analysis
3. Threats of substitute products: Low
Consumers simply do not have any other options for
shrimp food substitutes.
4.Bargaining Power of Buyers: Moderate
 Majority of shrimp foods manufacturers have their own
wholesaling operations.
 The firms are able to successfully hedge themselves by
having greater control of downstream buyers.

7. Industry Analysis
5. Bargaining Power of suppliers: LOW
As there are many supplier in food industry so the
bargaining power of supplier is low in this industry.

8. Ratio Analysis(Liquidity Ratios)
 Valuation Apex.xlsx

9. Activity/efficiency ratio
Valuation Apex.xlsx

10. Activity/efficiency ratio
 Valuation Apex.xlsx

11. Leverage/solvency Ratio

12. Ratio analysis against Benchmark

13. Ratio analysis against Benchmark

14. Ratio analysis against
PeerValuation Apex.xlsx

15. Ratio analysis against Peer

16. Relative Valuation
Price with respect price earning multiple 59.85165546
Price with respect to sales 1395.080686
Price with respect to cash flow 601.24
Price with respect to Book value
Valuation Apex.xlsx 314.07

17. Dupont Analysis
From the year 2008 to 2012, the following CV’s have been
found-
O. Profit
Margin
Total Asset
Turnover
Interest Burden After tax
Retention rate
Financial
Leverage
CV 4155.01 490.62 230.81 -168.98 350.39
The higher the co-efficient of variation of a factor, the higher will be the
sensitivity of ROE. So, from this data it is apparent that the ROE of Apex Food
Limited is most sensitive to its operating profit margin.Valuation Apex.xlsx

18. Leverage Analysis

19. Leverage Analysis

20. Potential red flags of Apex Food
Ltd
1. Unusual increase in account receivable in relation to turnover Valuation
Apex.xlsx

21. Potential red flags of Apex Food
Ltd
2. Unusual increase in inventory in relation to sales
increase.Valuation Apex.xlsx

22. Potential red flags of Apex Food
Ltd
Reported income 23,672,984 -8,930,907 8,559,275 10,794,736 15,434,217
Cash flow from operating
activities 136611144 -72479592 46284431 -228925474 152091482
Gap between RI & OCF -112,938,160 63,548,685 -37,725,156 239,720,210
-
136,657,265
3. An increasing gap between a firm’s reported income and its cash flow
from operating activities.Valuation Apex.xlsx

23. Earnings Quality Evaluation
Comparative Earnings Quality Analysis
APEX BATBC
Accruals Ratio Cash Flow Basis 0.081911315 0.137791166
Accruals Ratio Balance Sheet Basis 0.113058645 0.333666151
Earnings quality is typically defined in terms of persistence and
sustainability. Valuation Apex.xlsx
From the table it is observed that Apex Foods Ltd has comparatively better
performance in maintaining the earnings or alternatively it has more
earnings manipulation than its Benchmark.

24. Analysis of cash flow Statement
Year OCF FCF Characteristics
2008 Positive Positive Cash Cow
2009 Negative Negative BMRE(Balancing, Modernization,
Rehabilitation and Expansion)
2010 Positive Positive Cash Cow
2011 Negative Positive Disinvest/Quit
2012 Positive Negative Growth CompanyValuation Apex.xlsx
Average OCF &FCF of the company is positive so the company is a cash cow co.

25. Analysis of cash flow Statement
Year OCF FCF Characteristics
2008 Positive Positive Cash Cow
2009 Negative Negative BMRE
2010 Positive Positive Cash Cow
2011 Negative Positive Disinvest/Quit
2012 Positive Negative Growth Company

26. Actual & Sustainable Growth Rate

27. Estimation of value addition
2012
NOPAT 224,285,567
Invested Capital 1,474,151,687
Cost of capital 0.098776412
Economic Value Added 78674152.38
The positive value of EVA tells us that generating BDT 224285566.5 in
after-tax net operating profits.

28. Recommendations
1. The company should reduce its debt from its capital
structure.
2. Apex foods need pay more attention in inventory
management.

29. Any
Queries?