Bai 7 phan tich tai chinh cong ty mia duong thanh thanh cong tay ninh

1. Purpose
Analyse the nancial situa on of the company in the long term.
Highlight
Our team belive long-term investment opportuni es in Thanh Thanh Cong JSC
(TTCs) with stable long-term growth prospects combined with con nuous im-
provement in margins.
 M & A poten al a er the merger with the family to increase the area of
sugarcane, then merged with BHS to increase the retail chain. This can be
seen as a very e ec ve cover value chain cover. Save the cost of increasing
pro ts
 Developing a variety of products such as RS, organic sugar, canals to meet all
the requirements of customers in the trend of social trends now people are
afraid to use more sugar, good new products. For health is a promising direc-
on.
Under compe ve pressure from domes c and foreign compe tors, but s ll
maintain high growth rate to maintain market share.
Gross margins are expected to con nue to improve in the coming me through
large-scale equipment investment projects that apply modern technologies to
sugarcane cul va on with the expecta on of lower produc on costs.
A er-tax pro t margins are expected to remain stable as most of the cost sav-
ings will be used to increase the cost of sales to maintain market share. The com-
pany's pro t quality is rated as good and sustainable.
FINANCIAL ANALYSIS REPORT OF THANH THANH CONG TAY NINH JSC

2. Company discrip on
Thanh Thanh Cong Tay Ninh Sugar Joint Stock Company (TTCS) o cially entered
the TOP 30 with the largest market capitaliza on on Hochiminh Stock Exchange
(HOSE).In addi on, the market con nues to record new milestones in the 21-
year history of its development with a total supply of over 245,000 tons. The
company has the largest sugar produc on in Vietnam with a market share of
over 17%.
The South of Vietnam is the biggest market and foreign business loca ons has
been increasing at 6.3%.TTCs has 3 subsidiaries and 5 associated companies. The
company's market share in the North occupies 5.6%, the Central region accounts
for 0.7%, the Southern region accounts for 87.3% and the export market ac-
counts for 6.3%.
The business lines include 3 main products: Sugar produc on, Produc on and
trading products made from sugar, by-products and scraps of sugar, Commercial
electricity produc on.
In 2015-2016, the company has developed RS. In par cular, the propor on of
revenue from sugar accounted for 93% of the revenue structure (RE accounted
for 76%, RS accounted for 17%). Beside sugar products, the company has also
implemented the project of Nam Chi inland wharf, produc on of non-sweet sug-
arcane juice of Miaqua, restructuring of Da Kai mineral water plant, investment
in raw material area in Cambodia.
In the context of increasingly narrow material areas, in order to ensure the op -
mum raw material of the plant, the company has ac vely expanded its area to
the raw materials of Cambodia and Long An. Total investment area for 2015-
2016 is 22,861ha. Oriented to 2020, the company built a total area of 30,000ha
of raw material area, annually supply 2.3 million tons of sugarcane to maximize
capacity of the plant.
In the future, TTCs has a tremendous amount of new projects. The company will
produce cans canned. In addi on, the company also has projects on solar ener-
gy, organic sugar, improves logis cs and con nues M&A.

3. Industry Overview
Sugar is one of the most protected industries in Vietnam. Tari quota for sugar
imports in 2015 is 81,000 tons and increased to 85,000 tons in the following
years. Excess quota rates on this item are very high, ranging from 80-100% de-
pending on the type of sugar. However, for sugar in quotas, tari rates have
been substan ally reduced in line with the commitments of free trade agree-
ments.
Consump on of domes c sugar faces with di cult issue due to pressure from
smuggled sugar with low price. Currently, the gap between domes c sugar pric-
es and smuggled sugar prices is being loosened. As of early May, the gap has
been loosened from 500-1,000 VND / kg to 800-1,500 VND / kg comparing to
Thailand sugar, and 2000-5000 VND /kg comparing to China sugar. On July 25,
2017, the na onal average price was at VND14,500 - VND16,000 / kg. The reason
is that the cost of sugar produc on in Vietnam is s ll high, so reducing the selling
price to compete with smuggled sugar is s ll di cult. (WARD, 2017)
In the rst ha year of 2017, the inventory of sugar increased sharply,
(Nguyên, 2017) up 46% from the beginning of the season. According to VSSA,
total Sugar produc on volume as of May 19 reached about 1.36 million tons,
sugar consump on is only about 1.09 million tons, while Vietnam is facing stock-
piles of over 750,000 tons of sugar, the biggest amount since 2014. The reasons
for the inventory increased sharply due to: (1) In uence of weather to the pro-
duc on season, (2) China reduced import quota to Vietnam sugar and switch to
import Thailand sugar, (3) smuggled sugar produc on increased sharply.
TTCS to acquire Bien Hoa to become Vietnam’s largest sugar producer. The
merger will combine good quali es of two sides, which include a strong retail
network and good reputa on for Bien Hoa Sugar and good produc on for
TTCS. The post-merger company will be able to create more added values and
reduce its total cost. The post-merger company will have 40,000 ha of total
plan ng area, equal to 16% of total sugarcane area across the country. The post-
merger company will have an average annual growth rate of 6.6%, while doubled
capital will help the new rm nego ate with suppliers to reduce input costs. In
addi on, TTCS will be able to share the retail network of Bien Hoa Sugar to slash
its selling cost and increase its pro t, resul ng in the rise of price of company's
shares and bene ng its shareholders. (Sugaronline, 2017)
Majority of land belongs to local farmers and mechaniza on of sugarcane cul -
va on is low, resul ng in higher sugarcane costs than that of the world. Total
sugarcane acreage in 25 provinces that have sugar mills across the country
reaches 288,000 ha and planted acreage under ownership of farmers that sugar
mills have signed contracts to invest is 265,100 ha. It can be seen that most of
sugarcane growing areas in Vietnam are cul vated on farmers’ land, leading to
individual and small-scale farming model in the form of household, high frag-
menta on of land, and lack of investment in infrastructure.There are too many
problems in the process of cul va on and harvest a ec ng to quality and yield
of sugarcane in Vietnam.

4. Competitive Positioning
According to AgroMonitor, TTCs is leading the industry with 17.2 per cent of
market share. The figure can move up to 27 per cent if one only considers the
southern market.
Merger plans to create VN’s largest sugar company. At the beginning of 2017,
the Company acquired the entire shares of Bien Hoa Sugar Company. Transition
from affiliate model to subsidiary. The company just completed the acquisition
of sugar factory of Hoang Anh Gia Lai ... The merger of Bien Hoa sugar into TTCs
to become the leading industry, competition in export. With this M&A poten-
tials, we expect TTCs to maintain its leadership of sugarcane industry in the fu-
ture.
TTCS captures modern technology. TTCS proudly pioneered the application and
introduction of the most modern agricultural production models in the world
and present effectively in the fields of sugarcane in Vietnam such as Center Pivot
watering technology, Drip irrigation technology Israel, to perform the entire
mechanization of the sugarcane cultivation and to develop the sugar value chain
in the model of developed countries such as Australia, Thailand and Brazil.
TTCs plans to list on Singapore stock market. Listing on the Singapore Stock Ex-
change must meet stringent standards such as capitalization, revenue, minimum
returns and international financial standards. Up to now, no Vietnamese enter-
prises have achieved this goal.
Concern
According to the ASEAN Free Trade Agreement (AFTA), in 2018, the sugar sector
of Vietnam will have to fully open the way for ASEAN countries. This means
that the import from ASEAN to Vietnam will be only 5% (compared to the cur-
rent 80% -100%) and not subject to tariff quotas. Then Thailand can officially en-
ter Vietnam in unrestricted quantities at low rates. It can be seen in the other
hand of the opportunities opened up by the integration of regional and world
economies such as attracting more capital, technology and management from
FTA investment countries. Vietnam sugarcane industry will face many challenges,
Vietnam enterprises must compete more fierce and fierce.
Source: CBRE
Figure 10: Porter’s Five forces

5. Financial Analysis
Revenues of TTCs rose at a CARG 22% rate in the past nine years. Sugar is the
key product of TTCs, during the period of 2016 - 2017, the revenue from sugar
products accounts for 90% of net revenue. TTCs's revenue has grown steadily
over the years from 2008 to 2017, with only a drop of revenue in 2014 due to
the overall business situa on changes, from 2015 to now, revenue con nue to
increase signi cantly.
Sales expenses were managed e ciently, which decreased by 22% compared
to 2016, the decrease in sales expenses would help the company to maximize
the pro t of their business.
Speci cally, TTCs's gross pro t margin in 2017 is 14%. The shortage of raw ma-
terials leading to high prices has a result of a signi cant increase in COGS. This
explains why sales have increased but gross margins for most sugar companies
have declined.
Overall, sales expenses and general and administra ve expenses remained
stable over the years, about 5% of total net revenue. However, the company
need to have a more e cient policy to manage its cost of borrowing or try to
generate pro t to o set the interest it will pay on bonds and short-term loans.
The ra o of return on assets of the company decreased over the years from
2012 to 2017, and in 2017, this rate of return is only 5%. This does not mean
that the company generated revenue ine ciently from the company's assets,
because the company is inves ng in building plants and produc on lines. There-
fore, the increase of pro t in a year can not keep up with the increase of xed
assets, so ROA tends to decrease. In the future, ROA is likely to increase as de-
mand for produc on, consump on and sales begin to increase and bene t from
investment in the produc on lines.
Figure 16: Pro itability ratio (%)
Investment and performance of projects
Investment cost
(VND billion)
Comple on
period
Renova on of the jaggery warehouse into a 24,000-ton storage 20.4 Oct-16
Renova on of Nam Chi Domes c Pier 4.4 Oct-16
Factory of unsweeted Miaqua Sugarcane juice 8.02 Nov-16
Organic sugar produc on 4.9 Dec-16
Renova on of the Thermoelectricity Center 186.8 Oct-17
Re-structure of the Da Kai Mineral Water Factory 24.3 Oct-17
Construc on of Tan Kim storage 355.9 Oct-18

6. Similarly, Asset turnover has also decreased since 2012 and shows signs of re-
covery. It shows that the e ec veness of using a company's long-term assets in
genera ng annual revenue. The e ciency of asset u liza on tends to recover,
showing that revenue growth rates are gradually increasing with the growth rate
of assets.
ROE also followed the down trend from 2012 but by 2016 ROE increased to
11.2%. This is due to the fact that by 2015, the company increased its equity
exposure to debt rather than equity, resul ng in a sharp increase in nancial
expenses. Plus, the company did not have much revenue in 2014 and only
regained its revenue in 2016, a er which it has to subtract the high cost of
interest, leading to a rather slow growth in return on equity. However, the ROE
has increased, proving that the pro tability of the company has progressed.
During 2015 – 2016, the inventory turnover ra o stood at 24% year-on-year. This
indicates that inventory is following the good trend. Inventory days is 70. Due to
the typical characteris cs of the sugarcane industry, produc on process takes
place only within 5 – 6 months every year. Another reason is that company must
keep inventory high to supply to customers throughout year. The inventory
turnover ra o around 2 -3 is appreciate.
Day sales outstanding is 60 days. This is because the company's sales policy has
changed, the company has loosened sales policies for its customers in recent
years, and increased the me customers have to pay to boost revenue and
quan ty. In addi on, because the customers of the company are primarily retail
supermarkets, other manufacturing companies buying raw materials, they
usually pay only once a year for all.
Since SBT's suppliers are mainly large sugarcane farmers, the company only pays
them a certain number of mes a year, and this payment is nego ated among
par es. Therefore, the company can take advantage of the delay in paying their
supplier to generate cash ow for other business opera ons. So, the account
payable turnover days is 16. This proves SBT's ability to nego ate with its
suppliers is e cient but has declined recently.
Business performance tends to be good but money crea on and investment
ac vity tends to decrease and receivables have increased indica ng the current
asset structure is uctua ng.
The quality of company pro ts is good when cash ows to net income are
greater than zero over all years and increase signi cantly in 2016-2017. The cash
ow from opera ons to net income ra o reveals the percentage of a company's
total net income that is available as cash for inves ng and nancing ongoing
opera ons. Moreover, due to the company's plan to manage working capital
well, opera ng cash ow has maintained a good rela onship with a er-tax pro t.
Source: Team calculations