CONSUMER PRODUCT : DRINKS

BCF 7044: CORPORATE FINANCE

SPRITZER BHD

LARGEST WATER BOTTLE PRODUCERS

CERTIFIED BY QUASI,LLC,USA & ISO 9001: 2008 BY SIRIM

MALAYSIA’S BEST SELLING NATURAL

WATER

NATURAL MINERAL WATER, DISTILLED WATER, CARBONATED&

NON CARBONATED FRUIT FLAVOURED DRINK

GUINNESS ANCHOR BHD

QUALITY BRANDED LEADER OF BEER &

STOUT

CERTIFIED BY MINISTRY OF HEALTH & ISO 9001: 2001

MALAYSIA’S BEST SELLING BEER & STOUT

TIGER, GUINNESS, HEINEKEN, ANCHOR SMOOTH, MALTA,

STRONGBOW & SOL

FRASER & NEAVE BHD

LARGEST ISOTONIC DRINK PRODUCERS

CERTIFIED HALAL PRODUCT & TRUSTED BRAND FOR

GENERATION

MALAYSIA’S BEST ISOTONIC DRINK (100

PLUS)

F&N FUN FLAVORS, 100 PLUS, SEASONS, SUNKIST,

MAGNOLIA , FARMHOUSE & FRUIT TEE

YEO HIAP SENG BHD

ONE OF LARGEST FOOD & BEVERAGE

PRODUCERS

CERTIFIED HALAL PRODUCT & PARTNERSHIP AGGREEMENT

1ST GLOBAL BRAND IN SOYBEAN PACKAGES

BOTTLED SOYA BEAN MILK, CHRYSANTHEMUM TEA, CANNED

CURRY CHICKEN, INSTANT NOODLES & YOGURT

COMPARISONS

PART 1:RISK PROFILE OF THE COMPANIES AND THEIR COST OF CAPITAL

Weighted Average Cost of Capital tell us the return of both

stakeholders which are equity owners and lender can expect.

WACC represents the investor's opportunity cost of taking on

the risk of putting money into a company. Thus, the formulation

of WACC is formed by three components as following:

The cost of equity capital is derived from Capital Asset

Pricing Model (CAPM). Thus, the formulation of CAPM is

formed as following:

Ri = Rf + βi [ Rm – Rf ]

WACC = S/V(Rs) + B/V (Rb) * (1-Tc) + P/V (Rp)

2005 2006 2007 2008 2009

SPRITZ

0.01220000000000

01

0.22290000000000

1

0.1337 -0.38300000000000

3

-0.38300000000000

3

GAB -0.00470000000000

005

0.1015 0.2501 -0.2346 0.01870000000000

02

F&N 0.0217 0.2022 0.08990000000000

02

-0.22000000000000

1

0.11660000000000

1

YEOS

0.01720000000000

01

0.1246 0.24840000000000

2

-0.37100000000000

1

0.5674

-50.00%

-30.00%

-10.00%

10.00%

30.00%

50.00%

70.00%W

AC

C %

5-YEARS WACC COMPARISONS

2005 2006 2007 2008 2009

SPRITZ

-0.0128 0.2256 0.1423 -0.4178000000000

01

0.3033000000000

01

GAB -0.0047000000000

0001

0.1015 0.2502 -0.2346 0.0188

F&N 0.0214 0.2042 0.0947000000000

001

-0.2889 0.1405

YEOS 0.0167 0.1253 0.2536 -0.3825000000000

01

0.5814

-50.00%

-10.00%

30.00%

70.00%

CA

PM

5-YEARS CAPM COMPARISONS

COMPARISONS

PART 2:CAPITAL STRUCTURE OF COMPANIES: UNDER LEVERAGED OR OVER LEVERAGED

Capital structure shows a company how much the

company is financed by equity and debt. Besides, it also

illustrates the long-term financing of the company.

Therefore, debt to equity ratio indicates the extent to

which the business relies on debt financing. Thus, the

formulation is as follows: Debt to Equity Ratio = Long Term Debt

Total Shareholder’s Equity

Company financed with debt can save cost of taxation

during its operation that’s called leveraged; otherwise it

will be an unleveraged company.

5-YEARS DEBT TO EQUITY RATIO COMPARISONS

2% 5%

27%

26%

40%

SPRITZ

2005200620072008

GAB

2005-2009

5-YEARS DEBT TO EQUITY RATIO COMPARISONS

5% 2% 10%

43%

40%

F&N

2005200620072008

17%

18%

19%21%

24%

YEOS

2005200620072008

COMPANI

ES

LEVERAGED /

UNLEVERAGEDREASONS

SPRITZHIGHLY

LEVERAGED

COST OF DEBT IS VERY

HIGH

GAB UNLEVERAGED100% EQUITY

FINANCING

F&N LEVERAGED COST OF DEBT IS HIGH

FROM 2008 ONWARDS

YEOSHIGHLY

LEVERAGED

COST OF DEBT IS VERY

HIGH

LEVERAGED / UNLEVERAGED COMPARISONS

COMPARISONS

PART 3:DIVIDEND POLICY: TYPES OF DIVIDEND POLICY AND ITS PAYOUT RATIO

Dividends are payments made by the company to its

shareholders. It is the portion of corporate profits paid out

to stockholders. When a corporation earns a profit or

surplus, that money can be put to two uses: it can either

be re-invested in the business (called retained earnings), or

it can be paid to the shareholders as a dividend. Many

corporations retain a portion of their earnings and pay the

remainder as a dividend. Thus, the formulation is as

follows:Dividend Payout Ratio = Dividend Per Share (DPS)

Earning Per Share (EPS)

2005 2006 2007 2008 20090

2

4

6

8

10

12

14

16

18

3 2.5 3 34

5.76.7

7.8

1616.6

DPS EPS

5-YEARS DPS AND EPS COMPARISONS

2005 2006 2007 2008 20090

5

10

15

20

25

30

35

40

45

50

30.1 30.232.8

36.4

41

35.74

42.44

37.26

41.66

47

DPS EPS

5-YEARS DPS AND EPS COMPARISONS

2005 2006 2007 2008 20090

10

20

30

40

50

60

70

3032.7 34.2

40.1 41.837

40.142.9

46.8

63

DPS EPS

2005 2006 2007 2008 20090

2

4

6

8

10

12

14

16

18

3 2.5 3 34

5.76.7

7.8

1616.6

DPS EPS

2005 2006 2007 2008 20090.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

SPRITZGABF&NYEOS

5-YEARS DIVIDEND PAYOUT RATIO COMPARISONS

COMPARISONS

PART 4:WORKING CAPITAL MANAGEMENT: THE DAILY FINANCING NEEDS

Working capital actually shows the company's current position. It tells us what would be left if a company raised all of its short term resources, and used them to pay off its short term liabilities. Thus, the formulation is as following:

Net Working Capital = Current Asset – Current Liabilities

The operating cycle is the number of days from cash to inventory to accounts receivable to cash. It reveals how long cash is tied up in receivables and inventory. Thus, the formulation is as following:

Operating Cycle = Inventory Period + Receivable Period

The cash cycle is the length of time between the purchase of raw materials and the collection of accounts receivable generated in the sale of the final product. It is also called cash conversion cycle. Thus, the formulation is as following:

Cash Cycle = Operating Cycle – Payable Period

5-YEARS NET WORKING CAPITAL COMPARISONS

2005 2006 2007 2008 2009

SPRITZ

31300 36361 30793 35597 38067

GAB 130104 164820 188742 209806 237201

F&N 383354 406792 443088 621172 465958

YEOS 157012 174068 121777 123414 141237

50,000

150,000

250,000

350,000

450,000

550,000

650,000

Million

s

5-YEARS OPERATING CYCLE COMPARISONS

2005 2006 2007 2008 2009

SPRTZ 293.02 297.9299999999

99

288.74 228.07 201.25

GAB 58.97 61.07 63.22 69.38 75.05

F&N 149.73 155.66 165 127.83 119.8

YEOS 161.63 184.41 168.3800000000

01

159.24 156.39

25

75

125

175

225

275

325

DA

YS

5-YEARS CASH CYCLE COMPARISONS

2005 2006 2007 2008 2009

SPRTZ 270.09 265.96 258.71 206.8 183.77

GAB 14.29 26.43 30.09 31.2 34.55

F&N 53.94 61.6 55.15 26.52 27.81

YEOS 54.74 63.5 10.72 41.16 42.13

25

75

125

175

225

275

DA

YS

PART 1 SUMMARY : AVERAGE WACC

COMPANIES 5 YEARS AVERAGE WACC

SPRITZ 4.59%

GAB 2.62%

F&N 4.21%

YEOS 11.73%

Therefore, based on the average WACC comparisons, we would highly recommend investors to invest in GAB since the company has the lowest WACC.

Therefore, based on the comparisons, we would highly recommend investors to invest in GAB since the company is debt free.

Therefore, we can conclude that based on the dividend distribution, F&N would be the best company to invest as it has the highest dividend distribution and also the highest dividend per share compared to other 3 companies.

PART 2 SUMMARY : DEBT TO EQUITY RATIO

PART 3 SUMMARY : TOTAL DIVIDEND DISTRIBUTION

AVERAGE SPRITZ GAB F&N YEOS

TOTAL DIVIDEND

(RM)

7,594,040

484,625,000

596,027,000

73,627,000

AV SPRTZ GAB F&N YEOS

CA 60,593 338,378 1,242,075 262,907

CL 26,169 152,244 662,381 119,405

NET WC 34,424 186,135 579,695 143,502

COMPANIES OPERATING CYCLE PAYABLE PERIOD CASH CYCLE

SPRITZ 261.80 24.74 237.07

GAB 65.54 38.23 27.31

F&N 143.60 98.59 45.01

YEOS 166.01 123.56 42.45

Therefore, GAB is highly recommended to investors as the company has the lowest operating cycle.

Based on the analysis, we can conclude that the best company to invest would be F&N due to its large capital base.

PART 4 SUMMARY : AVERAGE NET WC & AVERAGE OC, PP & CC

CONCLUSIONS

COMPANIES WACCDIVIDEND

POLICY

NET

WORKING

CAPITAL

OPERATING

CYCLERANK

SPRTZ 3 4 4 4 3

GAB 1 2 2 1 1

F&N 2 1 1 2 1

YEOS 4 3 3 3 2

THANKS FOR

YOUR

ATTENTION

Q&A