VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY

INTERNATIONAL UNIVERSITY
SCHOOL OF BUSINESS

A COMPANY ANALYSIS AND VALUATION

OF HAUGIANG PHARMA
A report submitted to
The School of Business Administration
in partial fulfillment of the requirement for the course in
Business analysis and valuation

Group members:

Supervised by

Nguyn Th Ngc Qunh

Ms. Nguyen Canh Tien

Bi N Yn Ngc

Ho Chi Minh, Jan 12th, 2013

Nguyn Trm Anh

Nguyn Hong Lm

Table of Contents
INTRODUCTION ................................................................................................................................ 4

I.
1.

History............................................................................................................................................... 4

2.

Economy ........................................................................................................................................... 4

3.

The Organization .............................................................................................................................. 5

3.1.

Concentric diversification subsidiaries: .................................................................................... 5

3.2.

Distribution subsidiaries: .......................................................................................................... 5

4.

Products............................................................................................................................................. 6

5.

Markets ............................................................................................................................................. 7
STRATEGIC ANALYSIS .................................................................................................................... 7

II.
1.

PEST analysis ................................................................................................................................... 8

1.2. Political factors .............................................................................................................................. 8
1.3. Economical factors......................................................................................................................... 8
1.4. Social and cultural factors .............................................................................................................. 8
1.5. Technological factors ..................................................................................................................... 9

2.

Porters five forces ............................................................................................................................ 9

2.1. The threat of new entrants into the market MEDIUM ................................................................ 9
2.2. The threat of increased competition from rivals within the industry - HIGH ................................ 9
2.3.

The bargain power of buyers - LOW ...................................................................................... 10

2.4. The bargain power of suppliers - HIGH ...................................................................................... 10

2.5. The threat of substitute products - LOW...................................................................................... 10
3.

SWOT analysis ............................................................................................................................... 10

3.1. Strengths ...................................................................................................................................... 10
3.2 Weaknesses ................................................................................................................................... 11
3.3 Opportunities................................................................................................................................. 11
3.4. Threats.......................................................................................................................................... 11

4.

5.

Risks................................................................................................................................................ 12
4.1.

Economic risk: ........................................................................................................................ 12

4.2.

Risks on the fluctuations of input price: ................................................................................. 12

4.3.

Exchange rate risk: .................................................................................................................. 13

4.4.

Industry risk: ........................................................................................................................... 13

Objectives Strategies for 2012 - 2016 .......................................................................................... 13

2

FINANCIAL ANALYSIS .............................................................................................................. 15

III.

Key figure analysis ......................................................................................................................... 15

1.

1.1.

Liquidity .................................................................................................................................. 15

1.2.

Solvency ratio ......................................................................................................................... 16

1.3.

Efficiency ratio........................................................................................................................ 16

1.4.

Profitability ratio ..................................................................................................................... 20

1.5.

Cash flow analysis .................................................................................................................. 21

1.6.
IV.

Sub conclusion ............................................................................................................................ 22

FORECASTING ............................................................................................................................. 22

1.

Forecasting of future sales .............................................................................................................. 22

2.

Costs................................................................................................................................................ 24

3.

Financial posts ................................................................................................................................ 25

4.

Investment and depreciation ........................................................................................................... 26

5.

Taxes ............................................................................................................................................... 26

6.

Other assumption ............................................................................................................................ 26

7.

The estimated future income statement and balance sheet ............................................................. 28

VALUATION ..................................................................................................................................... 30

V.
1.

Weighted average cost of capital (WACC)..................................................................................... 30

2.

Discounted cash flow (DCF)........................................................................................................... 31

3.

Sensitivity analysis.......................................................................................................................... 33

Sub conclusion ........................................................................................................................................ 35

VI.

CONCLUSION ............................................................................................................................... 35

VII.

REFERENCES ............................................................................................................................... 37

VIII.

APPENDIX ..................................................................................................................................... 38

APPENDIX A: DHG Balance Sheet from 2007 to 2011 ........................................................................ 38

APPENDIX B: DHG Pharmas Income Statement from 2007 to 2011 .................................................. 42
APPENDIX C: DHG Pharmas Cash flow Statement from 2007 to 2011 .................................................. 43
APPENDIX D: DHG Pharmas Key figures from 2007 to 2011 ................................................................. 46
APPENDIX E: Notes for estimation of Income statement and Balance sheet from 2012 to 2016 ......... 47

I.

INTRODUCTION

1. History
Precursor of Duoc HauGiang Pharma (DHG) was 2/9 Pharmaceutical Factory and was
founded on September 2, 1974 at Ca Mau Province. In 1982, Hau Giang Pharmaceutical United
Factory was founded base on the consolidation of three units: 2/9 State-owned Pharmaceutical
Factory, Pharmaceutical Company Level 2 and Herbal Medicine Station. Twenty eight
years later, on 2 September 2004, the Company was changed into Hau Giang Joint-stock
Company.
At the end of 2007, DHG made their first investment in another company when investing in SH
Pharma, a company that distributes DHG products. SH Pharma is also first step to form DHG
Pharma Group. Today, DHG have thirteen subsidiary companies and two associated companies.
DHG was listed on HOSE on 21 December 2006, 8,000,000 shares of DHG Pharma posted on
Ho Chi Minh Stock Exchange (HOSE) under the securities code DHG at the price of VND
320,000 per share. The company issued shares to the public on July 2007, collecting nearly VND
399 billion, of which VND 379 billion is the share premiums.
At the very first time of the start-up, the company only had around 50 people. Number of staffs
at DHG Pharma increase year by year, today the total number of employees at the company is
2485 in which university level is 19%; colleges and secondary 43%; high schools 38%.
During its business, DHG has achieved several honored titles, such as; Labor Medal 1988, 1993
and 1998; Independence Medal 2004 and 2010, Hero of Labor 1996, etc.

2. Economy
The market value of DHGs ordinary shares just exceeded VND 3,649 billion at the end of
December 2011, as the share closed at VND 56,000, significantly reduced from the all-time high
notation of VND 120,000 in December 2010.
At the end of 2011 the company had a net debt of 135,1billion. DHGs shareholder equity, that is
the companys total assets minus its total liabilities, is estimated to VND 1,393.4 billion at the
end of 2011, which makes of a shareholder equity ratio around 69.8%.

3. The Organization

Company

Subsidiaries

Association

Charter capital

Percentage of

(mill)

ownership

DHG Nature

5000

100%

DHG PP

5000

100%

DHG Travel

3000

100%

DHG Pharma Ltd.

50000

100%

SH Pharma

5000

51%

CM Pharma

5000

100%

DT Pharma

5000

100%

HT Pharma

5000

100%

AG Pharma

5000

100%

ST Pharma

5000

100%

TG Pharma

5000

100%

TOT Pharma

5000

100%

BALI Pharma

5000

100%

SPIVIHA

12000

31%

VIPACO

50000

20%

Table 1. Subsidiaries and Associations

DHG controls over 13 subsidiaries and 2 association companies. DHG classifies its subsidiaries
into 2 categories:

3.1.

Concentric diversification subsidiaries:

This category includes DHG Nature, DHG PP, DHG Travel, and DHG Pharma Ltd. All of these
companies are full consolidatedand focus on manufacturing pharmaceuticals and related
products.

3.2.

Distribution subsidiaries:

The most significant companies in this category are CM Pharma, DT Pharma, HTPharma, AG
Pharma, ST Pharma, these companies are also full consolidated (except SH Pharma) and
5

engage in distributing DHG product to 64/64 provinces. Over the last two decades, the
distribution network has been expanded with 09 sub-companies, 28 branches , and 67 drugstores
at hospitals.

Figure 1. Distribution system

4. Products
DHG specialize in development, making and sales of pharmaceutical products, cosmetic and
functional foods with over 11 brands.
6

DHG products are under constant development, within the industry having the fast technology
growth.

5. Markets

Sale value
Domestic

Export

1%

99%

Figure 2. Sales markets

In 2011, 98.8 percent total sales of goods self-produced came from the domestic market; the last
1.2 percent is from exporting activities. Despite of that fact that foreign market contributes a
small amount into total sales, exporting revenue has increased in value in recent years. For
instant, the export revenue in 2011 gains 27 billion VND, increase 27% compared to 2010.In
many years, DHG have built a strong relationship with familiar exported markets like Moldova,
Ukraine, Myanmar, Russia, Mongolia, Cambodia, Nigeria, Laos, and Singapore. Lately, DHG
have also set their feet on many new trading markets, include: Jordan, Taiwan, Malaysia, Czech
Republic, Belarus, Kazakhstan, Hong Kong, Indonesia, Sri Lanka, Ghana, France, Pakistan.

II.

STRATEGIC ANALYSIS

In this report, we use the PEST analysis with an aim to analyze the macro environment that
affects DHGs activities. Besides, we also employ the Porters Five Forces which helps to
determine the competitiveness of the industry DHG is in.
7

To conclude the strategy analysis we construct the SWOT model which consists of internal
factors (strengths, weaknesses) and external factors (opportunities, threats) affecting to DHG
business.

1. PEST analysis
1.2. Political factors
The pharmaceutical industry is one of the sectors affected strongly by the management of the
state. The government has issued many legal documents to manage the pharmaceutical industry
including documents related to the matter of state policy in the field of medicine, management of
state on drug prices, drug testing facility, management of the drug subjecting to special control.
Since 01/07/2008, producers not qualifying GMP standard as recommended by the World Health
Organization (WHO GMP) and business importing, exporting, trading pharmaceutical storage
system does not meet GSP standard would have to stop production. There are also regulations
such as "GDP" good practice on drug distribution, "GPP" good practice on the management of
the pharmacy ". Only the business meeting the new standards may exist and develop. These rules
will help create conditions for Vietnamese small pharmaceutical company merger or acquisition,
promote domestic enterprises to improve, focus in depth development to be able to compete with
multinational companies.

1.3. Economical factors

Vietnam's economic growths over the years are stable, creating favorable conditions for
economic development. However, the global financial crisis had a strong impact on the
economy. High inflation causes people to be more cautious in their investment and consumption.
Nevertheless, in comparison with other industries, the pharmaceutical industry is one of the few
industries influenced least by the crisis, because this is one of the essential goods to the people.

1.4. Social and cultural factors

The majority of Vietnamese people concentrate in rural areas with low living standards, high
demand for cheap drugs. This is favorable conditions for domestic pharmaceutical businesses
extend markets.

Moreover, Vietnamese consumers living standard has gradually improved; health status is
increasingly concerned resulting in a high demand for drugs in order to ensure health. Therefore,
this is also a favorable condition for the development of Vietnam pharmaceutical industry.

1.5. Technological factors

Production technology is at low level. Most drug manufacturing enterprises only focus on simple
pharmacy leading to duplication of product line, not focus on the development of specific
remedy or special preparation. Therefore, domestic supply only meets 40% of market demand.
To compete with foreign companies, domestic pharmaceutical firms are now upgrading modern
production line according to international standards.

2. Porters five forces

2.1. The threat of new entrants into the market MEDIUM
-

The Pharmaceutical industry has experienced the average high growth rate of 16- 18%

The pharmaceutical companies is tightly controlled by government polices

The pharmaceutical companies need to meet the GSP standard provided by WHO (and
GDP, GLP, PPP standards) in order to stay in this industry.

Capital requirement is low due to the fact that most of companies focus on simple
production, low technology, unspecialized.

2.2. The threat of increased competition from rivals within the industry HIGH
-

The Pharmaceutical industry has experienced the average high growth rate of 16- 18%

From 1/1/2007 foreign firms will be allowed to open branches in Vietnam in the form of
joint venture or 100% foreign capital. The number of foreign companies increased
rapidly from 300 in 2007 to nearly 500 enterprises in 2010. (Annual report 2010)

Vietnamese companies mainly concentrate on ordinary products without much

differentiation; compete severely in a small segment market.

Pharmaceutical corporations with big names such as Sanofi-Aventis (France), GSK (UK),
Servier (France), Pfizer (USA), has appeared in Vietnam and dominated the domestic
market in specific remedy segment. (Annual report 2009)

Although at current time, the foreign pharmaceutical firms cannot produce and distribute
in the domestic market, as of the time of protection expiring, the pharmaceutical industry
will have a fiercely competitive environment. At that time the domestic pharmaceutical
enterprises will have to cope with the multi-national corporations with modern
technology and high productivity.

2.3.

High switching costs when customer can freely switch from this product to another

The bargain power of buyers - LOW

Low buyer concentration versus firm concentration

Drug is an essential products that can not be replaced by any other product

2.4. The bargain power of suppliers - HIGH

-

Manufacturing activities depend on more than 90% imported materials from India, China,
Holland

High concentration of suppliers

Low differentiation in suppliers

Low present of substitute input

2.5. The threat of substitute products - LOW

-

Drug is an essential products that can not be replaced by any other product

Demand for pharmaceuticals is a necessity so possible substitutes for this item is nearly
zero.

3. SWOT analysis
3.1. Strengths
-

Having a largest and deepest distribution network in Vietnam pharmaceutical industry

Professional and efficient Marketing

Clear strategic orientation, modern and effective management methods

10

Investment in key core competence and skilled professionals, concentric diversification

Being leader in term of market share, production capability and business performance in
Vietnam pharmaceutical industry from the year 1996

3.2 Weaknesses
-

Most products are under generic form, but no many specific drugs to replace the foreign
ones using in hospital system

Must be import about 80% raw materials (in prior time: 90%)

The production capacity does not meet the market demand due to the slow progress of
new factor construction

The management ability does not keep pace with the development of the company
because of its excessive growth

The data processing system is still simple, does not satisfy the demand, ERP is deploying,
so work stuff is increased double

3.3 Opportunities
-

Significant potential of population, which will grow to almost 100 million by 2019.
Healthcare awareness of Vietnamese improved, leading to the increase in average per
capita consumption on medicines

The growth rate of Vietnam pharmaceutical industry expects to be from 17%- 19% in
2010 2014. Domestically produced medicines only meet 50% Vietnamese demand

Following the government policy, domestically produced medicines have to make up

70% Vietnamese market share in the year 2015

In addition to the available competitive advantages, domestic pharmaceutical companies

hold the rights to distribute products directly

The barrier to entry the industry is still high because of the requirement to meet GPs
standards

3.4. Threats
-

Vietnams economy growth rate is lower than previous years

Medical price strictly controlled by the Government while the price of input material
increased constantly

11

full WTO membership creates a severe competition between the Company and other
domestic pharmaceutical enterprises as well as with the foreign ones

Investors high expectations have put a heavy pressure on corporate management team in
term of making profits, increased corporate value and creating a balance of benefit among
shareholders, the company itself and employees.

Lack of human resource for pharmacy field, particularly the pharmacists having ability to
use English language well creators a limitation on approaching advance technology from
developed countries.

4. Risks
4.1.

Economic risk:

IFM estimates Vietnam GDP growth rate will recover in the period 2012-2017 ( GDP growth
rate can reach 7.5% in 2017). The development of economy combined with the increased
awareness and demand of health care will have good effect on the overall pharmaceutical
industry as well as the business and producing activities of DHG.
Therefore, to DHG, economical risk may not be a considerable risk in the next period.
Legal risk: law and sub-law document are not totally completed. Policy and guidelines for tax are
changed constantly and asynchronous with other related regulations. Therefore, the corporation has to
update, collate and adjust its regulations frequently to be proper to current laws and practical context.

4.2.

Risks on the fluctuations of input price:

Electricity, petroleum and basic salary all have upward tendency following the state policy.
Imported pharmaceutical material prices are also predicted to increase. The input price increases
while output one is controlled strictly by the Government. Thus, the corporate profit may suffer
negative affect from these risks.
To deal with this problem, DHG must have good forecast of the input price from the beginning
of the year through supports from consultancy of friendly suppliers and its own experiences.
DHG has to be active in importing materials so as to bring best benefits in price, currency
exchange rate, opportunity cost and inventory cost. It is necessary for DHG to improve labor
productivity, renew production line, save fuel and diminish production loss.
Risks on the dependence of imported raw materials
12

Imported active pharmaceutical ingredients make up 80% of DHGs production demand. This
long-term dependence will cause difficulties in making the products, which have outstanding
features. As a result, the competitive capacity compared with foreign enterprises has been
reduced a lot. So, the imported materials should be gradually replaced by self-producing ones or
those of home country.

4.3.

Exchange rate risk:

DHGs material is mainly from import. Hence, the price of material can be influenced sharply
by the fluctuation of exchange rate. Unfavorably, the rate tends to be increased during the next
time. Because the exchange rate between USD/ VND is affected by several elements, it is
difficult to forecast due to the raise of abnormal fluctuations. Exchange rate risk is somewhat
significant to DHG Pharma.

4.4.

Industry risk:

The entry of new companies has increased competitive pressure on the domestic market. To
reduce this significant risk DHG should speed up investing in technology innovation and
increasing productivity and products quality.

5. Objectives Strategies for 2012 - 2016

DHGIs aim for 2012 2016 period is to increase employees income based on production and
business efficiency by rising productivity, saving costs. Aside from that, the company would like
to reduce cost prices, improve production system and company management; which ensured not
to affect benefit earnings; dividend policy for shareholders and customer policy.
In order to achieve these objectives, DHG has given some specific strategies. First of all, the
company will standardize the organizational structure of management according to product
categories; continuously implement the subject namely improving production efficiency and
improving sales system efficiency. Secondly, DHG will have a right policy to promote
education, training, control; select staffs to ensure fairness and maintain cultural implementation
in the company; arrange human resources for the new factory. Developing and applying
effectively ERP system with BFO solution in Company management administration system is
also one of its strategies to reach the objectives. Moreover, the firm starts the program If I was
DHG Pharmas CEO for seeking inappropriate points potentially affecting to future business in
13

order to timely prevent and promptly overcome difficulties; apply modern management methods,
innovate production organization, continuously invest in more intensive scientific thesis for longterm effects. The company will also invest in R&D and exploit key major of human resources,
exploit the relationship with institute, investors and suppliers. Finally, Board of Director and
Board of Leadership continue to actively seize opportunities, overcome challenges, conserve
strength and enhance the value of DHG brand.
They also provide groups of solution for some departments in the company:

For marketing and sales department:

Creating a efficient plan base on values of potential growth of brands. Continue to
build 11 brands and new brand of NattoEnzym product.
Exploiting the strong point of the distribution system by trading the other products
(imported and exclusive goods). Expand the sales system of functional food and
cosmetic products.
Customer service is the most concentration. Improve the communication activities
and emotional care to people as well.
Increasing the number of social activities and keep on building a stand of DHG as a
company for community.
For research & development, production, quality management departments:
Sorting products according to the segmentation of therapeutic group, treatment with
prescription, OTC; actively investing in researches of new products with high
technology application, creating their own competitive advantage.
Predicting the market demands, creating the plan for supply savings, reducing the
cost, lost and the production cost.
Investing to the new technology with high efficient, operating the system follows
these several purposes: saving, productivity, effected and useful.
Create the operation plan and preparing the human resources, equipment for the new
GMP WHO factory.
For administration and management system:
Implementing financial statements and consolidated reports clearly, transparently and
timely.
Planning the budget, properly and timely reflect the results of business in order to
support functional departments and consult the Board of Executive Directors in
overall strategy.
Checking and adjusting all charters, regulations, policies, etc. related to the
employees in order to create a friendly environment, enhance working spirit and
creation of employees.
14

 Training human resources at all level timely and appropriately to inherit alternative
requirements of any changes in positions.
Implementing the project of 4D salary adjustment according to 07 levels of
complexity of each position and reality.
Continuously researching and improving software in hospitals and pharmacies GPP
to satisfy the customers needs, create competitive advantages and contribute further
customer relationship.
Deploying the internal communication port system for ideas of innovation, working
process; ensuring centralized information storage and convenient access for all
departments to access, use and share data.

III.

FINANCIAL ANALYSIS

1. Key figure analysis

1.1.

Liquidity

DHGs liquidity is highly secure, especial when comparing to other listing companies of the
same industry. Liquidity ratios are always over 1 (for quick ratio) and 2 (for current ratio) over
the period 2007 - 2011; such high ratio is resulted from the large cash amount, which made up a
high rate of the structure. The high level of cash is a signal for the expanse in the future. In 2011,
those ratios tended to decrease because DHG made efforts to enhance the debt collection
efficiency, which cause trade receivables growth to be slower than that of short-term debts.
With the need of cash for investment in the next few years, the cash liquidity tends to move
downward since 2011. However, in general, the ratios are still high and at highly secure level.
2007

2008

2009

2010

2011

2.32

2.13

2.52

3.06

2.74

1.53

1.29

1.88

2.32

1.79

0.63

0.58

1.25

1.36

0.86

Current ratio
Quick ratio
Cash liquidity

Table 2. Liquidity ratios from 2007 to 2011

15

1.2.

Solvency ratio

60
55
50

48.7
44.6
41.5

40
35
30

31

43.6
Debt-Equity Ratio (%)

33
29

30

Debt-Assets Ratio (%)

Leverage Ratio

20
10
0

1.45
2007

1.55
2008

1.5
2009

1.42
2010

1.44
2011

Figure 3. Solvency ratios from 2007-2011

DHG has the ratio of owners equity at around two times higher than its liabilities. Especially, its
long term liabilities make a low proportion in total assets. This reflects that the company has
never had to finance much by debts and the liabilities of company are so safe, especially in the
situation of high inflation and high interest rate.
However when the economy returned to be stable, this structure will not be suitable anymore. In
term of accounting aspect, the companys profit appears to be increased because it does not have
to spend for borrowings interest; however, if calculated the efficiency from financial activities,
DHG has missed benefit from financial leverage, it also bear the pressure on dividend and
profitability due to its high level of owners equity. Therefore, we can expect that in future the
capital structure will changes towards the increasing trend of liability per owners equity. In the
situation of decrease tendency of interest, launching to use financial leverage will support
significantly to the efficiency of business operation.

1.3.

Efficiency ratio

This section is intended to describe how efficiently a firm uses its assets to generate sales since
firm invest considerable resources, using them productively is critical to overall profitability. The
16

measures in this part are sometimes called asset utilization ratios, which can be interpreted as
measures of turnover.
2007

2008

2009

2010

2011

Receivables turnover

5.99

5.80

6.32

5.48

5.32

Days receivables outstanding

60.94

62.97

57.71

66.66

68.59

Inventory turnover

3.42

2.58

2.67

3.11

2.97

Days inventory outstanding

106.82

141.52

136.46

117.45

122.74

Payables turnover

16.21

11.26

11.83

12.89

12.22

Day payables outstanding

22.52

32.43

30.87

28.32

29.88

Fixed asset turnover

5.55

6.57

7.37

6.70

5.42

Table 3. DHGs efficiency ratios

1.3.1. Receivables Turnover
Receivables turnover ratio is the ratio of net credit sales to account receivables. This ratio
measures how soon sales will become cash. The lower the amount of uncollected cash from its
operations, the higher this ratio will be. In contrast, if a company has more of its revenues
awaiting receipt, the lower the ratio will be. However, if this ratio is too high, it will affect
consumption because it means that the maturity is short-term, which will not attract more
customers.
Receivables turnover =
As we can see in the table 3, DHGs receivables turnover ratios from 2007 to 2009 do not
fluctuated much. However, DHG recorded erosion in its receivable turnover, from 6.32 in 2009
to 5.48 in 2010; and this ratio continued to decline to 5.32 in 2011. It is because the account
receivables are increase faster than the rise of net sales, it means that the company may have
problem in collecting its receivables. Thus, on average, DHG collected on its credit sales in 69
days in 2011. In general, DHGs account receivables were managed at an effective level
compared to its peers; its ratio is only lower than OPC and MKPs ratio (table 4).

17

DHG

OPC

MKP

DMC

TRA

IMP

DCL

Receivables turnover

5.32

7.71

8.32

5.31

4.20

3.89

2.03

Days receivables outstanding

68.59

47.34

43.87

68.74

86.90

93.83

179.80

Table 4. Receivable turnover of pharmaceutical companies in 2011

1.3.2. Inventory Turnover
Inventory turnover is the ratio of cost of goods sold to inventory. This ratio indicates how many
times during the period that inventory can be sold out.
Inventory turnover =
The table of DHGs efficiency ratios shows that during 2007 2009, the companys inventory
turnover reduced from 3.42 to 2.67; it leads to the increase of days inventory outstanding from
107 days to 136 days. The rise in days inventory outstanding is usually due to raw materials
inventory and products inventory. The reasons for raw materials inventory are fluctuation in
price of raw materials, exchange rate or cheaper price for large volume of raw materials.
Products inventory increase is mainly because of the increase in distribution system of DHG; in
order to meets customer demands across the country; and to reduce costs. However, this ratio
was improved in 2010, which was 3.11 times. It shows that the company had a effective policy
to improve inventory. In 2011, this figure reduced slightly; as changes in production plan,
increase in prices of raw materials and the manufacture of new products.
Nevertheless, in overall, DHGs inventory turnover is at an average when compared to other
companies ratio (table 5).
DHG

OPC

MKP

DMC

TRA

IMP

DCL

Inventory turnover

2.97

1.44

3.65

3.91

2.58

1.97

2.17

Days inventory outstanding

122.74

253.47

100

93.35

141.47

185.28

168.20

Table 5. Inventory turnover of pharmaceutical companies in 2011

1.3.3. Payables Turnover

Payables turnover uses a liability in the equation rather than an asset, as well as an expense
rather than revenue. Account payables turnover is important because it measures how quickly a
company paying its own bills.
18

Payables turnover =
In 2007, DHGs payables turnover was 16.21; this is a high ratio, which leads to a short-term
payment, the days payable turnover outstanding is just 22 days.

High accounts payable

turnover may be a signal that a firm isn't receiving very favorable payment terms from its own
suppliers or the company buys raw materials based on the method of immediate or within seven
days payment to have favorable price. However, the payables turnover had decline sharply to
11.26 in 2008, this figure tended to increase from 11.83 in 2009 to 12.22 in 2011 which is an
acceptable ratio. Normally, DHG has the days payables outstanding around 30 days. To
compare with its peers, DHG is efficient in managing the payment to its suppliers (table 6).
DHG

OPC

MKP

DMC

TRA

IMP

DCL

Payables turnover

12.22

8.04

20.49

16.16

5.25

8.14

5.88

Days payables outstanding

29.88

45.39

17.81

22.59

69.52

44.84

62.07

Table 6. Payables turnover of pharmaceutical companies in 2011

1.3.4. Fixed Asset Turnover

Fixed asset turnover measures the relation between sales and investment in PPE. The higher this
ratio is, the more efficiently the firm uses its assets to generate sales. However, if the fixed asset
turnover ratio is too high, then the business firm is likely operating over capacity and needs to
either increase its asset base (plant, property, equipment) to support its sales or reduce its
capacity.
Fixed asset turnover =

From 2007 to 2009, the fixed asset turnover tended to increase, from 5.55 to 7.37, which means
that the company is more efficient in using its asset to generate sale during the time.
Nevertheless, this ratio started to fall from 7.37 in 2009 to 5.42 in 2007, which is a bad sign. The
company should have policies in managing and using its assets to increase the fixed asset
turnover. According to table 7, DHG has a good ratio when compared to other pharmaceutical
companies.
19

Fixed asset turnover

DHG

OPC

MKP

DMC

TRA

IMP

DCL

5.42

2.19

9.75

4.29

7.84

2.99

2.46

Table 7. Fixed asset turnover of pharmaceutical companies in 2011

Generally, based on analysis of those ratios, DHG is more efficient in using its assets to
generate sales than its peers.

1.4.

Profitability ratio

Return on equity (ROE) is a comprehensive indicator of a firms performance because it

provides an indicator of how well managers are employing the funds invested by the firms
shareholders to generate returns. It is defined as:
ROE = ROA x Financial Leverage
2007

2008

2009

2010

2011

Profit margin (%)

9.07%

8.75%

20.78%

18.84%

16.85%

Assets turnover

1.35

1.37

1.15

1.12

1.25

Return on assets (%)

12.22%

12.02%

23.84%

21.07%

21.03%

Financial leverage

1.45

1.55

1.50

1.42

1.44

Return on equity (%)

17.67%

18.68%

35.65%

29.94%

30.38%

Table 8. Profitability ratios from 2007 to 2011

The table shows that DHGs ROE experienced a slight growth of 1.01% in 2008, and it also got
double in 2009 before started to decrease from 2009 to 2011, from 35.65% to 30.38%. However,
in comparison with other listing companies of the same field, DHG still take the lead.

ROE

DHG

TRA

MKP

IMP

OPC

DMC

DCL

30.38%

22.7%

18.9%

10.9%

16.5%

13.9%

-13.4%

Table 9. Return on equity of pharmaceutical companies in 2011

20

From the calculated ratios, it is suggested that substantial change in ROE of DHG is mainly
caused by ROA, rather than financial leverage. The ROA of DHG in 2011 remained at a high
extent as in 2009 and 2010, due to the efficiency of activities, which was proved by the
improvement of the net income over total assets ratio of the year 2011.

1.5.

Cash flow analysis

The objective of a statement of cash flows is to provide information about the cash receipts and
cash payments of a business entity during the accounting period. Cash flow analysis gives
analysts further insights into the firms operating, investing, and financing policies by examining
its cash flows. In also provides an indicator of the quality of the information in the firms income
statement and balance sheet (Appendix C).
As cash flows from operating activities is directly related from its core operating rather than
other activities and it shows the cash effects of revenue and expense transaction generated from
its core operation rather than other activities. DHG reported a small cash flow from operating
activities in 2007 by 51,317,300,703 VND; however, this figure was increase around four times
in 2008, which is 195,108,449,759 VND. This cash flow had doubled in 2009 and then started to
decrease by 25.5% from 2009 to 2011.
The cash flows from investing activities present the cash effects of transaction involving plant
assets, intangible assets, and investment. DHG recorded negative cash flow from investment in
the last five year. After decreasing dramatically 93% in 2008, DHGs cash flow from investing
activities started to increase during 2008-2011 period. Last year, the investing cash flow of the
company negatively increase to 188,292,295,008 VND, which increase by 154% from 2010, due
to the significant growth in payments for additions to fixed assets and other long-term assets.
Thus, DHG used much investment to expand its business.
The cash flow from financing activities during 2007 2011 was very volatile, which decreased
from 235,265,123,160 VND in 2007 to -250,587,007,649 VND in 2011, due to the decrease in
proceeds from equity issued and short-term borrowings.
In general, the company recorded a positive cash flow at the end of the year during the last five
year.

21

1.6.Sub conclusion
Besides many sound financial numbers, DHG till face with many issues like high inventories
value and low inventory turnover, which if not be noticed and control in the future will impact
severely on the revenue as well as the ability to raise cash. From 2012, the disbursement effect of
new investment results in the spending of large amount of cash, which leads to arises of short
term borrowings to aid working capital. Thus, the company in the next few years will experience
an in crease in total assets while the capital structure changes.

IV.

FORECASTING

In DHG valuation, the forecasts for the budget in the next five years are necessarily prepared by
employing findings from previous analysis as well as current information of the company. The
estimated period will be from 2012 to 2016. The forecasts will focus on some items in the
financial statement such as: net sales, total assets, total equity. Most of the assumption will be
based on these items proportionally. Besides, some other items will be supposed directly from
the policies of the company and the government.

1. Forecasting of future sales

After analyzing the economy, pharmaceutical industry and the strategy of the company, the
hypothesis that the net revenue of DHG should be affected by following factors can be
concluded: population, product spending per capita, manufacture and distribution system, and
market share. Thus, any change in these factors will take influence on the revenue of DHG. From
that point of view, a formula to forecast the revenue is constructed based on variables (change in
population, change in product spending per capita, development in manufacture and distribution,
expanse or shrink of market share):
Growth rate of sales

Effect of manufacture & distribution

x [1 + Growth rate of population]
x [1+ Growth rate of product spending per capita]
Effect of in market share

The forecast growths will take the estimated growth effected by the improvement and
development of manufacture and distribution system as the base rate. This factor indicates the
22

ability of the company to meet the need of the market. The rate for each year is different due to
the strategic plan of company and their efficiency in using assets. From DHGs annual report
2011, the plan of constructing plans, houses ... are clarified specifically. In this report, the
assumption that DHG investment in the above fixed assets will expand significantly in 2012 and
increase gradually in the following years. However, the fact is that DHG may not be able to get
100 percent of production capacity of the new assets that it invests in that year, but on the
followings. Another assumption is that the capacity can be achieve around 50% in the first year
and 100% in the next year. This assumption has to be made due to the lack of information from
the company. On the other hand, the company can not grow significantly forever, thus, it is
believed that the investment in assets will reduced from 2015.

Effect of manufacture &

2012

2013

2014

2015

2016

10%

14%

16%

11%

9%

distribution
Table 10. Investment activities growth contribution
Then, the growth of sales will be adjusted by the growth rate of population and product spending
which are constant over 5 years. The Vietnamese population growth rate is said to be stably
10.5% per year according to General Statistics Office (GSO). In addition, GSO also announced
that the pharmaceutical product spending per capita will be double in the next 5 years.
Statistically, the growth rate of product spending will be 14% per year.
Besides, DHG recently has captured a big part of the market pie and this hardly increases in the
next three years (2012-2014). However, the effect of market share contributes to the growth of
sales minus around 2-3% per year in 2015 and 2016 due to the shrink of market share. This
mentions about the threat of new entries which is believed to be increase since 2012 when the
government reduce the privilege on company and allow foreign entities to enter the industry.
That is the reason why in 2015 and 2016, the foreign companies with their advantages in capital,
technology will capture a part of market.
Growth rate of population (constant over 5 years)

10.50%

Growth rate of product spending per capita (constant over 5 14%

years)
23

3%

Effect of market share (-)

Sub conclusion

DHG will experience pretty high growth rates in the next five years, especially in 2013 and 2014
when most of its investment in factories and distribution start to operate with their full capacity.
In addition, the growth will be stable down in 2015 and 2016. However, the decrease in rate does
not mean the sales is low, in fact, the DHGs revenue will be at a high level in the future.
(Appendix E, Note 1)

Growth rate of sales

2012

2013

2014

2015

2016

12.4%

17.4%

19.9%

10.7%

8.2%

Table 11. Growth rate of sales from 2012 to 2016

2. Costs
2.1.

Cost of production

In the income statement, there are specific costs. This paper will focus on the production cost
which is affected by two factors: exchange rate and inflation.
Growth rate of COGS = Rate of sales
*[0.8*0.5( 1+ Exchange rate Inv) +0.6*(1+ Inflation rate Inv)]

As can be seen from previous financial statements, the cost of good sold (COGS) often equal
50% of net sales, however, the COGS will change a bit from 50% every year. The rate of COGS
will take the growth rate of sales as based rate due to the fact that the increase in sales
accompanied with the rise in COGS. Then, this rate is adjusted with the change in exchange rate
and inflation. In one unit cost of product, 50% of cost is raw material and the other fifty is come
from factory overhead expenses. The reason for this adjustment is more than 80% of raw
materials are imported from foreign countries in term of USD and the other expenses will be
influenced by the increase in consuming price embodied by inflation rate.

Exchange rate average (VND)

2011

2012

2013

2014

2015

2016

20587

20828

21926

22363

22838

23323

24

% change
Inflation rate average (%)

18.9

% change
Rate of COGS

1.2%

5.3%

2.0%

2.1%

2.1%

11.9

7.5

6.1

5.3

-37.0%

-32.8%

-6.3%

-18.7%

-13.1%

0.067

0.098

0.120

0.062

0.049

(source: Investor News published by Sacombank)

Finally, the COGS for each year will be calculated by take 50% of sales multiplied with the
growth rate of COGS. (Appendix E, Note 2)

2.2.

Selling, general and administrative expenses

With attempting to expand distribution system, DHG will experience a rise in SG&A expenses.
However, by implementing project improving sales system efficiency, DHG recently has
successfully in saving SG&A costs. Thus, the SG&A expenses should account for around 30%
of net sales in the next five year.

3. Financial posts
3.1. Financial income
The financial income, mainly comes from the interest gain, contributes around 10% to the EBT
of the company. However, in the next five year, when DHG need large amount of money to
invest in assets, the amount of cash keep by the company will reduce significantly. Thus, the
financial income will tend to be low in the future.

3.2. Financial expenses

As said above, DHG are using cash to invest in new assets which leads to the shortage of
working capital for the whole years. This is the reason why in the next few years, DHG begin to
employ short term debt to finance their business which results in the increase in future financial
expenses. The main loans issued by DHG are held by the employees of the company, and these
are unsecured loans. Thus, the cost of debt is about 13.8%, which is higher than the interest rate
announced by State bank.

25

Besides, the depreciation of VND compared to USD in the future also creates foreign exchange
losses which are considered as financial expenses. The researchers assume this loss account for
0.2% of net sales. (Appendix 4)

4. Investment and depreciation

In the next three years, investing in factories and storages continue being pushed up by the
company. In 2011, 70 billion VND had been used in distribution systems. In addition, many
items are completed in 2012, including three subsidiaries: B&T pharmacy, DHG Nature 1, DHG
Printing & Packing. The other incomplete items will be carried out in 2013 and 2014. However,
the company may not growth forever, thus, the researcher find it reasonable to the slow down of
investment in 2015 and 2016. The depreciation rate used in this calculation will take the previous
rate of 2011 which account for 11% of total fixed assets (Appendix 3)

5. Taxes
It is hard for the outsider to predict the future tax expenses for a company. However, based on
the historical rate as well as the taxing policy of the government on pharmaceutical company, the
prediction is getting more reliable. DHG has obligation to pay the income tax at rate of 20% of
taxable profit from 2005 to 2014, and 25% for the followings. Nonetheless, the investment in
new subsidiaries receive reduction of 50% of taxable profit, thus, the more DHG invests in new
subsidiaries, the more it exempt from tax. That is the reason why in the last five years, the tax
rate were ranged from 10-14.5%. From this point of view, the forecast of tax expenses for the
next five years will take the highest historical rate which is 14.5%

6. Other assumption
Inventories account for 20-25% of the total assets. This number is quite high due to the fact that
company need to keep high level of raw materials so as to meet the demand of production and
avoid the price increase in the future. In this report, the inventories will apply the rate of 25%.
Due to the influence of policy on salary payment for sales based on received money, the
receivable turn-over tend to reduce in the last 5 years and slightly change in the future. Thus, the
account receivable in the next five years will be retained at the rate of account receivable turnover in 2011 which is 5.32.

26

As said above, from 2012, the company need to cash to invest in new assets, thus, the level of
cash and equivalent will be low in the next few years and recover in 2016 due to the slow down
of investment. The stable of level of accounts receivable and inventories in the future
accompanied with the significant decrease in cash and equivalent makes the total current asset
tighten to a lower level. However, this level needs to be limit at least 1.2. Besides, this rate is still
high compared to other companies in the same industries. Nevertheless, this rate will pop up in
2016 when the level of cash is recovered.
The capital structure of the company is quite stable at ratio 30:70 for debt and equity
respectively. Nonetheless, the high level of short term borrowings in the future will make this
ratio slightly change. The assumption for this ratio will be 34:66 from 2012 2015 and 32:68 in
2016.

27

7. The estimated future income statement and balance sheet

Based on the above discussion and estimation, the forecasting income statement and balance sheet are developed as followed
Table 12. Forcast income statement from 2012 to 2016
2012

2013

2014

2015

2016

Net sales

Note 1

2,804,656,081,236

3,299,279,618,411

3,964,256,024,061 4,394,643,407,825 4,761,038,012,666

Cost of goods sold

Note 2

1,535,503,469,978

1,899,095,502,161

2,369,833,494,050 2,411,186,806,541 2,565,058,561,086

1,269,152,611,259

1,400,184,116,250

1,594,422,530,011 1,983,456,601,284 2,195,979,451,579

841,396,824,371

989,783,885,523

1,189,276,807,218 1,318,393,022,347 1,428,311,403,800

427,755,786,888

410,400,230,726

405,145,722,793

665,063,578,937

767,668,047,780

28,987,983,070

35,332,444,285

43,861,995,948

59,545,332,518

63,239,251,089

25,319,327,406

30,216,580,684

36,992,402,578

44,173,092,991

39,554,529,479

(2,804,656,081)

(3,299,279,618)

(3,964,256,024)

4,394,643,408

4,761,038,013

(1,002,567,109)

329,927,962

1,585,702,410

1,757,857,363

1,904,415,205

427,617,219,362

412,546,742,670

409,636,762,548

686,588,319,234

798,018,222,607

62,004,496,807

59,819,277,687

59,397,330,570

99,555,306,289

115,712,642,278

365,612,722,554

352,727,464,983

350,239,431,979

587,033,012,945

682,305,580,329

Gross (profit)/loss
SG&A

30% of sales

Operating income
Financial income
Financial expenses

10% of cash
0.2% of sales plus
interest expenses

Results from other

activities
Share of losses/gains in
associates
Earnings before tax
Income tax
Net income

14.5% of EBT

From the estimation we can see that the net sales of the company rise steadily from 2012 to 2016. Especially, the sales soar
significantly in 2013, 2014, and 2015 when most of the investment begins to generate returns efficiently. However, the net income
tends to reduce slightly in 2013 and 2014 due to the increase greatly in financial expenses in these years.

28

Table 13. Forecast balance sheet from 2012 to 2016

TOTAL ASSETS
CURRENT ASSET
Cash and cash
equivalents
Accounts receivable
Inventories
Other current assets
NON-CURRENT
ASSET
Fixed asset
Long-term financial
investments
Other non-current assets
LIABILITIES
Current liabilities
Long-term Liabilities
OWNERS' EQUITY

TOTAL LIABILITIES
AND
SHAREHOLDERS'
EQUITY

Sales divided by
Asset turnover
Retain at quick ratio
1.2 - 1.35

2012
2013
2,243,724,864,989 2,639,423,694,729

2014
2015
3,171,404,819,249 3,515,714,726,260

2016
3,808,830,410,132

1,400,439,288,314 1,659,739,945,286

2,008,346,119,268 2,335,599,944,951

2,517,620,374,790

289,879,830,703

353,324,442,850

438,619,959,485

595,453,325,179

632,392,510,887

Sales/ AR turnover
(5.32)
25% of total Assets
1% of Total Assets

527,190,992,714

620,165,341,807

745,160,906,778

826,060,790,945

894,931,957,268

560,931,216,247
22,437,248,650
843,285,576,675

659,855,923,682
26,394,236,947
979,683,749,443

792,851,204,812
878,928,681,565
31,714,048,192
35,157,147,263
1,163,058,699,981 1,180,114,781,309

952,207,602,533
38,088,304,101
1,291,210,035,343

Increase
Constant

797,725,186,438
17,473,451,017

934,123,359,206
17,473,451,017

1,117,498,309,744 1,134,554,391,072
17,473,451,017
17,473,451,017

1,245,649,645,106
17,473,451,017

Constant

28,086,939,220

28,086,939,220

Note 4
Constant

757,814,358,374
699,590,060,056
58,224,298,318

Total asset divided by

leverage

28,086,939,220

28,086,939,220

891,460,982,988
833,236,684,670
58,224,298,318

1,071,136,727,031 1,187,426,828,075
1,012,912,428,713 1,129,202,529,757
58,224,298,318
58,224,298,318

1,217,789,314,804
1,159,565,016,486
58,224,298,318

1,485,910,506,615 1,747,962,711,741

2,100,268,092,218 2,328,287,898,185

2,591,041,095,328

2,243,724,864,989 2,639,423,694,729

3,171,404,819,249 3,515,714,726,260

3,808,830,410,132

29

28,086,939,220

V.

VALUATION

1. Weighted average cost of capital (WACC)

1.1.Cost of equity (re)
Using CAPM approach to obtain re:
re = Rf + (Rm-Rf)
First, we use Damodarans research on country default spread and risk premium to define market
risk premium.
As identified in his research, the starting point for estimate long-term country risk premium is the
country rating from Moodys (www.Moodys.com) and then estimate the default spread for that
rating over a default free government bond rate. This becomes a measure of the added country
risk premium for that country. He then added this default spread to the historical risk premium
for a mature equity market (estimated from US historical data) to estimate the total risk premium.
In this period, he have used historical premium for matured market of about 6% to get the total
risk premium. In this report, the country risk premium is identified as 6%. Therefore, total
market risk premium is assumed to be 12%.
Second, we chose Vietnam government 10-year of maturity bonds rate as risk free rate. Based
on Treasury bond news number 41 of Bao Viet Security Corporation (16/11/2012), this rate was
10.1%.
Last, we calculate beta from the following formula:
=
In which: Rf is the weekly return of DHG
Rm is the daily return of VN index
Thus, the beta for DHG is calculated as 0.45
Putting these inputs together, the cost of equity is estimated as:
Cost of equity = Risk-free rate + Beta Market risk premium
30

= 10.1% + 0.45 12%

= 15.51%
1.2.Cost of debt:
The cost of debt is the required return on companys debt. As DHG has not planned to issue
bond, the cost of debt is calculated based on the deposit rate of the company. According to
annual report 2011, the company had loans from their employees with the rate of 9.5% to 10%.
Thus, the cost of debt is estimated at 10%, which remain constant for the next five years.
1.3.Weighted Average Cost of Capital (WACC):
WACC is an important component in DCF model. It is the require return on all the asset of the
company, based on the markets perception of the risk of those assets.
WACC =

x rd x (1-t) +

x re

In which: D is the market value of debt

E is the market value of equity
rd is the cost of debt
re is the cost of equity
t is tax rate
The company has stated in the annual report 2011 that, DHGs equity is accounting for 70% of
the total capital. Thus, the deb equity ratio is 30/70
Therefore, the WACC is calculated as following:
WACC =

x 0.1 x (1 0.11) +

x 0.1551 = 13.53%

2. Discounted cash flow (DCF)

In this model, the free cash flow for firm will be discounted at weighted average cost of capital
(WACC) to come up with the present value of expected cash flow. WACC includes cost of
31

equity and cost of debt. Under the assumption of constant costs the general DCF model will be summed up as following formula:

2012
NI
Depreciation
Interest expenses *(1-T)

Assumed
IS
Note 3

2013

2014

2015

2016

365,612,722,554

352,727,464,983

350,239,431,979 587,033,012,945 682,305,580,329

87,749,770,508

102,753,569,513

122,924,814,072 124,800,983,018 137,021,460,962

16,852,063,033

20,193,408,338

24,849,626,403

338,270,695,797

136,398,172,768

183,374,950,538 17,056,081,328

111,095,254,034

53,096,550,509

90,528,305,751

123,097,732,743 99,926,849,131

75,940,839,122

78,847,309,790

248,747,964,315

191,541,189,173 625,104,219,785 657,968,695,838

Note 4
30,253,154,280

25,677,747,703

Capital expenditure
Change in working
capital
FCFF

Note 5

Present value
69,521,059,639
193,383,110,331
131,295,755,951 377,807,384,423 350,632,966,554
In order to employ DCF model, the terminal value of the company need to be determined by using Gordon formula to calculate future
value based on estimated growth rate. In this calculation, the assumption of growth rate is 5.5% which is the GDP growth rate in the
future. This is the minimum rate the company has to achieve in the next few years.

32

4,673,629,560,507

Terminal value
Enterprise value
Market value of debt
Market value of equity
Share outstanding
Estimate price

5,445,636,870,852
58,224,298,318
5,387,412,572,534
65,166,299
82,672

3. Sensitivity analysis
There is great uncertainty about the estimated input factors: sale over the next 5 years. This
figure affects many other figures such as: expense, cost of goods sold, and taxation in the
forecast. As a result net income, an important figure in calculating estimate stock price using
FCFF model, will be affected significantly.
We have therefore made a sensitivity analysis, focusing on how changes in sales will affect the
per share value of DHG in the FCFF model.
The sensitivity analysis is based on changes up to +/- 4 % and the results are illustrated in the
two tables below:
Net Income
sale

2012

2013

2014

2015

2016

436,499,272,240

469,211,876,042 525,712,986,098 701,883,271,469 786,067,869,390

-4%

419,052,468,996

450,515,151,596 504,781,960,624 673,945,269,866 754,796,340,914

-3%

423,414,169,807

455,189,332,708 510,014,716,992 680,929,770,267 762,614,223,033

-2%

427,775,870,618

459,863,513,819 515,247,473,361 687,914,270,667 770,432,105,152

-1%

432,137,571,429

464,537,694,931 520,480,229,730 694,898,771,068 778,249,987,271

436,499,272,240

469,211,876,042 525,712,986,098 701,883,271,469 786,067,869,390

1%

440,860,973,051

473,886,057,154 530,945,742,467 708,867,771,870 793,885,751,509

2%

445,222,673,862

478,560,238,265 536,178,498,836 715,852,272,270 801,703,633,628

3%

449,584,374,674

483,234,419,377 541,411,255,204 722,836,772,671 809,521,515,747

4%

453,946,075,485

487,908,600,489 546,644,011,573 729,821,273,072 817,339,397,866

33

2012

2013

2014

2015

2016

Present value (Sales 4%)

252,219,480,464

269,966,845,531

240,348,780,634

379,043,360,902

349,378,888,782

Estimate price

82,528

Present value (Sales 3%)

256,047,548,580

273,567,265,037

243,886,324,791

383,187,463,378

353,449,953,834

Estimate price

82,760

Present value (Sales 2%)

259,875,616,696

277,167,684,542

247,423,868,947

387,331,565,854

357,521,018,886

Estimate price

82,992

Present value (Sales 1%)

263,703,684,812

280,768,104,048

250,961,413,104

391,475,668,329

361,592,083,938

Estimate price

83,224

284,368,523,553

254,498,957,261

395,619,770,805

365,663,148,990

287,968,943,058

258,036,501,418

399,763,873,280

369,734,214,042

291,569,362,564

261,574,045,575

403,907,975,756

373,805,279,094

295,169,782,069

265,111,589,731

408,052,078,231

377,876,344,146

298,770,201,575

268,649,133,888

412,196,180,707

381,947,409,198

Present

value

(Sales

unchanged)

267,531,752,927

Estimate price

83,456

Present value (Sales 1%)

271,359,821,043

Estimate price

83,688

Present value (Sales 2%)

275,187,889,159

Estimate price

83,919

Present value (Sales 3%)

279,015,957,275

Estimate price

84,151

Present value (Sales 4%)

282,844,025,391

Estimate price

84,383

From the above tables, the estimate price does not fluctuate significantly (82528:84383), so the
forecast can be reliable.

34

Sub conclusion
The model results in the price of DHG Pharmas stock which is around 82,000 VND/share. This
is higher than the actual price of share today which equals 73,500 VND/share (posted on HOSE,
11/01/2012). In other words, the stock is undervalued, thus, it recommends to hold or to buy
more.

VI.

CONCLUSION

In this section, the findings from the different parts of this paper will be summarized.
DHG Pharma was founded in 1974 and when public on Ho Chi Minh Stock exchange in 2006.
The company is now the largest pharmaceutical companies in Vietnam and includes 15
subsidiaries and associations.
DHG have a distribution system scattered all over the Vietnam and some foreign countries like
France, Indonesia, Hong Kong, etc.
By using PEST analysis, DHG turn out to get benefit from political regulation and policies,
accompanied with the development of economy increases the living standard of Vietnamese. In
addition, DHG have good control and investment in R&D is likely to make it advantage in
production.
In the Five forces analysis, the risk of new entry is quite low in the last few years but potentially
turn out to be medium from 2012. This is based on the fact that the strict regulation for new
comer will have loosened since 2012. The threat from competition is high due to the fact that
pharmaceutical products are still generic and not isolated among firms. Bargaining power of
buyers is low because of the high concentration of firm versus buyer concentration. In addition,
the bargaining power of supplier is high due to the large contribution of raw material in product
value.
To sum up the strategy analysis, the SWOT analysis is employed. The company has several
advantages in reputation, good marketing and wide and deep distribution system. However, most
of DHG products are in generic form and depend significantly on the imported materials.
Besides, DHG will get the great opportunities from the growing of population, the development
of economic and technologies. Nevertheless, the biggest threat to DHG in the future is the
competition from the foreign companies.
In the financial analysis the accounting measurement and consolidation method are presented
since 2007 accompanied by the development of key figures, focusing on profitability, solvency
and liquidity. These figures were kept at satisfying level with low level of debts, high level of
liquidity, and the high growth in revenue. However, some other figures should be noted such as
the decrease in profit margin and the increase in inventories. Overall, theses number indicates the
company is in the upward growing trend.
35

The forecasts were base on the strategy analysis and financial analysis as well as other
assumption and findings. The results were illustrated in the forecast income statement and
balance sheet sections.
The result from employing DCF model accompanied with Sensitivity analysis makes it more
reliable. The stock price is calculated at 82,000 VND and considered to be undervalued. This is a
good new for investors who follow the fundamental strategies to outperform.

36

VII.

REFERENCES

General Statistic Office Website. (2012, 10 29). Retrieved 11 21, 2012, from
http://www.gso.gov.vn/default.aspx?tabid=403&idmid=2&ItemID=13397

Drake, P. P. (2010). Dividend valuation models. pp. 2-10.

Krishma G. Palepu, P. M. (2004). Business Analysis and Valuation.

MHB-securities. (2010). Analysis report of Pharmaceutical Industry.

Pharma, D. (2007). DHG Pharma Annual report.

Pharma, D. (2007-2011). DHG Pharma Annual report.

Pharma, D. (n.d.). DHG Pharma website. Retrieved 11 21, 2012, from

http://www.dhgpharma.com.vn

Sacombank. (2012). The exchange rate of VND/USD and future forecasts. Investor
News.

SME-securities. (2011). Analysis report of Pharmaceutical Industry.

Vietnam Pharmaceutical Companies Association. (n.d.). Retrieved 11 21, 2011, from

http://www.vnpca.org.vn

Vietstock. (n.d.). Vietstock Website. Retrieved 11 21, 2012, from

http://vietstock.vn/2012/06/trien-vong-cua-cong-nghiep-duoc-viet-nam-768-211500.htm

37

VIII.

APPENDIX

APPENDIX A: DHG Balance Sheet from 2007 to 2011

BALANCE SHEET

2007

2008

2009

2010

2011

673,787,101,408
129,951,448,720
129,951,448,720
51,955,112,420
51,955,112,420
-

783,527,449,374
211,742,360,663
207,156,022,223
4,586,338,440
2,263,289,093
3,740,843,513
(1,477,554,420)

1,212,468,335,434
584,128,534,956
162,206,364,906
421,922,170,050
16,037,166,667
16,037,166,667
-

1,442,034,118,769
642,519,118,992
286,505,741,815
356,013,377,177
-

1,490,691,786,181
467,084,218,098
343,614,925,745
123,469,292,353
-

257,381,961,730
235,438,777,884
2,562,339,891
19,380,843,955
230,278,977,520
230,278,977,520
-

255,126,101,647
216,770,420,198
28,788,144,725
28,270,272,234
(18,702,735,510)
308,236,380,352
308,236,380,352
-

296,978,172,666
250,454,852,730
26,407,748,971
23,553,146,919
(3,437,575,954)
306,731,856,718
311,576,681,540
(4,844,824,822)

446,197,923,622
306,719,736,511
28,193,510,841
117,510,052,422
(6,225,376,152)
347,099,608,749
350,125,465,504
(3,025,856,755)

489,939,062,124
340,585,766,770
79,032,748,156
73,173,069,305
(2,852,522,107)
515,191,425,774
519,861,087,569
(4,669,661,795)

4,219,601,018
980,030,489
-

6,159,317,619
769,600,676
150,917,973
55,887,090

8,592,604,427
533,511,176
130,507,156

6,217,467,406
1,283,164,897
408,648
439,785,275

18,477,080,185
1,431,601,904
4,301,209,672
4,108,142,811

ASSETS
CURRENT ASSET
Cash and cash equivalents
Cash
Cash equivalents
Short-term investments
Short-term investments
Provision for diminution in the value
of short-term investments
Accounts receivable
Accounts receivable - trade
Prepayment to suppliers
Other receivables
Provision for doublful debts
Inventories
Inventories
Provision for inventory decline in
value
Other current assets
Prepaid expenses
Deductible VAT amount
Taxes and other receivables from the
State Budget

38

Other current assets

NON-CURRENT ASSET
Non-current receivables
Long-term account others receivables
Provision for long-term doubful debts
Fixed asset
Tangible fixed assets - net
Tangible fixed assets - Cost
Accumulated depreciation
Intangible fixed assets - net
Intangible fixed assets - Cost
Accumulated amortisation
Construction in progress
Investment property - net
Investment property - Cost
Accumulated amortisation
Long-term financial investments
Investments in subsidiaries
Investment in affiliates
Other long-term investments
Provision for a decline in value of
long-term investments
Other non-current assets
Long-term prepayments
Defferred tax assets

3,239,570,529

5,182,911,880

7,928,586,095

4,494,108,586

8,636,125,798

268,421,463,379
114,269,612
114,269,612
228,781,351,908
111,294,945,868
168,877,796,585
(57,582,850,717)
105,272,542,979
105,546,304,679
(273,761,700)
12,213,863,061
38,224,890,200
2,550,000,000
35,674,890,200
-

298,254,793,437
71,669,612
71,669,612
225,956,126,148
106,798,422,791
191,417,499,083
(84,619,076,292)
117,155,148,926
117,804,527,066
(649,378,140)
2,002,554,431
66,838,622,533
3,741,772,333
70,096,850,200
(7,000,000,000)

309,504,424,142
237,015,139,115
118,833,144,230
231,889,301,477
(113,056,157,247)
112,919,647,760
113,634,980,185
(715,332,425)
5,262,347,125
31,255,356,135
23,868,187,384
11,901,050,200
(4,513,881,449)

377,700,975,901
303,438,987,167
167,840,794,676
310,198,804,023
(142,358,009,347)
127,878,195,760
131,894,976,812
(4,016,781,052)
7,719,996,731
6,456,882,120
7,784,646,717
(1,327,764,597)
39,979,249,420
32,592,080,669
11,901,050,200
(4,513,881,449)

505,014,880,878
459,454,490,641
255,330,772,673
443,230,788,716
(187,900,016,043)
157,377,310,396
163,249,725,488
(5,872,415,092)
46,746,407,572
17,473,451,017
10,086,282,266
11,901,050,200
(4,513,881,449)

1,300,951,659
-

5,388,375,144
263,252,983
3,670,562,947

41,233,928,892
36,189,123,770
3,413,954,004

27,825,857,194
22,430,416,454
3,785,465,288

28,086,939,220
20,446,170,185
5,509,693,831

39

Other non-current assets

Goodwill
TOTAL ASSET

1,300,951,659

1,630,851,118
1,521,972,759,576

1,609,975,452

2,131,075,204

942,208,564,787

1,454,559,214
1,081,782,242,811

1,819,735,094,670

1,995,706,667,059

LIABILITIES
Current liabilities
Short-term borrowings
Accounts payable - trade
Advances from customers
Taxes and obligations to the State
budget
Payables to employees
Accrued expenses
Other payables
Bonus and welfare funds
Long-term Liabilities
Other long-term payables
Long-term borrowings
Deferred tax liabilites
Provision for severance allowance
Accrued revenue
Funds for R&D

290,631,417,938
289,817,842,651
43,429,861,416
55,642,007,085
293,206,185
2,354,571,301

382,657,609,230
367,464,442,596
8,455,297,698
67,745,795,916
529,770,010
18,862,882,369

496,158,280,749
481,915,971,070
73,979,662,132
71,352,673,093
1,094,516,164
35,634,035,125

530,696,724,099
471,555,878,347
12,802,412,973
86,290,700,781
1,413,080,380
40,019,223,841

602,248,423,265
544,024,124,947
21,115,601,324
123,618,564,257
720,929,252
28,297,625,312

40,455,717,787
108,584,441,430
39,058,037,447
813,575,287
46,792,342
766,782,945
-

58,330,510,155
190,187,076,367
23,353,110,081
15,193,166,634
17,143,692
28,354,467
15,147,668,475
-

84,118,277,067
199,865,337,012
15,871,470,477
14,242,309,679
53,099,844
14,189,209,835
-

100,633,206,342
168,781,105,434
32,127,453,214
29,488,695,382
59,140,845,752
21,163,637,977
119,417,273
37,857,790,502

125,958,570,389
165,931,042,238
33,834,092,563
44,547,699,612
58,224,298,318
33,818,985,521
24,405,312,797

OWNERS' EQUITY
Capital Contribution
Share Capital

651,577,146,849
635,748,308,139
200,000,000,000

695,939,887,206
701,139,112,562
200,000,000,000

1,018,033,631,792
1,010,375,905,079
266,629,620,000

1,280,322,125,140
1,280,322,125,140
269,129,620,000

1,381,546,863,475
1,381,546,863,475
651,764,290,000

40

Capital surplus
Treasury stocks
Investment and development funds
Financial reserve funds
Other funds
Retained profits (losses)
Other sources and funds
Bonus and welfare funds

378,761,392,824
33,805,735,625
21,962,409,519
1,218,770,171
15,828,838,710
15,828,838,710

MINORITY INTEREST
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY

942,208,564,787

378,761,392,824
(292,500,000)
38,460,772,279
21,962,409,519
62,247,037,940
(5,199,225,356)
(5,199,225,356)

378,761,392,824
(410,400,000)
4,658,004,486
29,744,900,881
330,992,386,888
7,657,726,713
7,657,726,713

378,761,392,824
(455,850,000)
204,329,442,743
64,215,412,933
364,342,106,640
-

(455,850,000)
286,384,048,884
66,541,621,663
377,312,752,928
-

3,184,746,375

7,780,847,035

8,716,245,431

11,911,380,319

1,081,782,242,811

1,521,972,759,576

1,819,735,094,670

1,995,706,667,059

41

APPENDIX B: DHG Pharmas Income Statement from 2007 to 2011

Income Statement
Total revenue
Sales deductions
Net sales
Cost of goods sold
Gross (profit)/loss
Selling expenses
General and
administration expenses
Operating Income
Financial income
Financial expenses
Interest expenses
Other financial
expenses
Other income
Other expenses
Share of losses/gains in
associates
Profit/loss before tax
Current Corporate
Income Tax expenses
Deferred Corporate
Income Tax expenses
Net (profit)/loss after tax
Attributable to:
Minority interest
Equity holders of the Co

2007

2008

2009

2010

2011

1,285,209,755,529 1,518,436,877,452 1,770,344,687,033 2,052,247,764,060 2,510,825,145,928

15,929,830,148
32,973,054,953
24,322,485,821
17,722,522,132
19,945,210,196
1,269,279,925,381
1,485,463,822,499
1,746,022,201,212
2,034,525,241,928
2,490,879,935,732
694,444,594,610
822,445,899,741 1,015,992,884,307 1,282,117,010,705
600,777,608,975
668,502,316,406
791,019,227,889
923,576,301,471 1,018,532,357,621 1,208,762,925,027
521,504,942,048
409,533,239,836
469,323,783,194
483,629,769,106
558,862,870,510
59,818,592,144

103,918,190,916

113,700,825,796

134,944,063,183

185,188,217,125

139,359,941,068
5,789,057,861
17,290,702,891
15,393,878,923

165,596,094,925
22,329,305,076
38,495,242,865
5,216,001,248

400,342,235,839
31,294,906,087
23,597,231,238
3,389,443,987

399,958,525,332
40,566,222,890
3,408,205,843
2,010,709,744

464,711,837,392
48,895,136,206
7,182,687,737
2,038,850,925

1,896,823,968

33,279,241,617

20,207,787,251

1,397,496,099

5,143,836,812

1,351,104,741
897,430,430

1,530,843,862
6,077,378,067

14,224,585,302
12,571,248,709

9,233,695,237
8,223,688,183

9,934,185,563
15,391,090,405

141,772,333

(103,584,949)

(3,981,996,715)

(10,025,671,093)

128,311,970,349

145,025,395,264

409,589,662,332

434,144,552,718

490,941,709,926

13,166,372,825

18,673,010,121

46,967,925,678

51,233,929,515

72,903,779,886

3,642,208,480

281,354,320

424,611,128

1,724,228,543

115,145,597,524

129,994,593,623

362,903,090,974

383,335,234,331

419,762,158,583

115,145,597,524

1,132,234,375
128,862,359,248

5,269,591,254
357,633,499,720

2,172,986,662
381,162,247,669

4,235,578,682
415,526,579,901

42

APPENDIX C: DHG Pharmas Cash flow Statement from 2007 to 2011

STATEMENT OF CASHFLOW
CASHFLOW FROM OPERATING
ACTIVITIES
Profit before tax
Adjustments for
Depreciation and amotisation
Allowances and provisions
Gain on disposal of fixed assets
Gain on disposal of investments in
an associate
Dividends and interest income
Profit/Loss on unrealized foreign
exchange difference
Interest expense
Share of losses in associates
Operating profit before changes in
working capital
Change in receivables and other
current assets
Change in inventories
Change in payables and other
liabilities
Change in prepayments
Interest paid

2007

2008

2009

2010

2011

128,311,970,349

145,025,395,264

409,589,662,332

434,144,552,718

490,941,709,926

24,054,099,284
(1,000,000,000)
-

28,520,127,892
27,180,289,930
-

29,778,717,342
(14,384,007,705)

41,463,499,111
3,059,549,639
(1,279,976,595)
-

53,597,351,298
(1,012,042,080)
(1,759,732,840)
(1,546,692,690)

(16,361,965)

(36,691,910,145)
-

(42,396,733,860)
-

15,393,878,923
(1,631,854,735)
165,128,093,821

5,216,001,248
(2,484,341,832)
203,457,472,502

3,389,443,987
(14,804,882,568)
413,552,571,423

2,010,709,744
3,981,996,715
446,688,421,187

2,038,850,925
10,025,671,093
509,888,381,772

(90,459,115,058)

(18,626,421,841)

(44,624,486,304) (135,931,407,222)

(4,747,452,261)

(108,425,593,484)
107,292,255,117

(77,957,402,832)
138,189,481,332

(3,340,301,188)
48,088,931,657

5,299,961,168
78,835,601,564
(15,977,165,302)

(52,823,170)
245,010,305,991
(4,653,771,048)

(19,218,178,770)
394,458,536,818
(3,628,334,868)

43

(38,548,783,964) (169,735,622,065)
74,342,048,312
71,282,343,851
(749,653,721)
345,800,624,592
(2,182,859,688)

(148,437,007)
406,539,214,290
(1,967,602,123)

Corporate income tax paid

Other receivements from operating
activities
Other payments for operating
activities
Net cash generated from operating
activities

1,406,343,924

(24,404,149,782)
3,464,074,611

(30,681,344,976)
2,987,628,237

(57,225,908,675)

(86,291,647,569)

(12,947,479,483)

(24,308,010,013)

(9,241,078,958)

(28,167,068,454)

(54,835,562,835)

51,317,300,703

195,108,449,759

353,895,406,253

258,224,787,775

263,444,401,763

(26,118,453,207)

(57,436,448,175) (124,759,054,121) (256,260,211,277)

CASHFLOW FROM INVESTING

ACTIVITIES
Payments for additions to fixed
(105,302,355,943)
assets and other long-term assets
Proceeds from adjustment of
purchase price of land use rights
Proceeds from disposal of fixed
792,417,144
assets and other long-term assets
Loans given to other entities
(50,000,000,000)
Loans collected from other entities
Term deposit received
(48,103,898,757)
Payments for investments in other
entities
Proceeds from disposal of associates
9,532,696,137
Receipts of interest and dividends
1,448,040,137
Net cash used in investing activities
(191,633,101,282)
CASHFLOW FROM FINANCING
ACTIVITIES
Proceeds from equity issued

5,491,223,499

306,671,431

122,895,970

6,110,475,532

5,487,880,667

(42,812,720,503)
56,677,029,410
(3,600,000,000)

(26,377,492,867)
41,100,115,293
(230,000,000)

(5,095,308,180)
16,037,166,667
(13,615,000,000)

(1,035,537,465)
5,999,720,820
-

2,459,449,143
(13,088,023,726)

26,070,547,994
(16,750,381,785)

157,550,000
13,500,000,000
41,441,782,023
44,015,852,247
(74,231,164,580) (188,292,295,008)

398,761,392,824
44

2,591,350,000

2,500,000,000

Payments for shares repurchases

Proceeds from short-term
borrowings
Payments to settle debts
Payments of dividend
Net cash used in financing activities
Net cashflow during the year
Cash and cash equivalents at the
beginning of the year
Effects of Changes in Foreign
Exchange Rates
Cash and cash equivalents at the end
of the year

674,327,196,404

(292,500,000)
177,133,581,082

(117,900,000)
203,434,614,489

(136,800,000)
39,476,967,542

48,180,001,906

(798,767,466,068) (212,108,144,800) (137,910,250,055) (100,654,216,701) (39,866,813,555)

(39,056,000,000) (69,962,450,372) (30,018,344,628) (66,880,340,000) (261,400,196,000)
235,265,123,160 (105,229,514,090)
35,388,119,806 (125,603,039,159) (250,587,007,649)
94,949,322,581
35,002,126,139

76,790,911,943
134,951,448,720

372,533,144,274
211,742,360,663

(146,969,981)

129,951,448,720

211,742,360,663

584,128,534,956

642,519,118,992

467,084,218,098

380,134,670,000

13,848,944,240

NON-CASH INVESTING ACTIVITIES

Bonus shares issued by capital
surplus and investment and
development funds
Receivable from cancellation of land
lease contract

45

58,390,584,036 (175,434,900,894)
584,128,534,956
642,519,118,992

APPENDIX D: DHG Pharmas Key figures from 2007 to 2011

2007

2008

2009

2010

2011

2.32
1.53
0.63

2.13
1.29
0.58

2.52
1.88
1.25

3.06
2.32
1.36

2.74
1.79
0.86

0.001
0.31
0.18
0.27
4.21

0.022
0.35
0.53
14.91

0.014
0.33
0.73
21.13

0.046
0.29
0.55
3.48

0.042
0.30
0.48
1.40

48.17

106.99

145.51

178.75

5.99
3.42

5.80
2.58

6.32
2.67

5.48
3.11

5.32
2.97

16.21
5.55

11.26
6.57

11.83
7.37

12.89
6.70

12.22
5.42

60.94
106.82

62.97
141.52

57.71
136.46

66.66
117.45

68.59
122.74

22.52

32.43

30.87

28.32

29.88

Net days financing

required

145.24

172.06

163.30

155.79

161.45

Profitability ratio
Profit margin (%)
Assets turnover
Return on assets (%)
Financial leverage
Return on equity (%)

9.07%
1.35
12.22%
1.45
17.67%

8.75%
1.37
12.02%
1.55
18.68%

20.78%
1.15
23.84%
1.50
35.65%

18.84%
1.12
21.07%
1.42
29.94%

16.85%
1.25
21.03%
1.44
30.38%

Liquidity
Current ratio
Quick ratio
Cash liquidity
Solvency ratio
Long term debt to equity
Liabilities to assets
CFO to current liabilities
CFO to CAPEX
Interest to coverage (CF
basis)
Efficiency ratios
Receivables turnover
Inventory turnover
Payables turnover
Fixed asset turnover
Days receivables
outstanding
Days inventory
outstanding
Day payables outstanding

46

APPENDIX E: Notes for estimation of Income statement and Balance sheet from 2012 to 2016
Note 1
Formulas
Growth rate of sales = Effect of manufacture & distribution
x [1 + Growth rate of population]
x [1+ Growth rate of product spending per capita]
Effect of in market share (%)

10.5
%
14%
3%

Growth rate of population (constant over 5 years)

Growth rate of product spending per capita (constant over 5 years)
Effect of in market share (+/-)

2012
12.6%

Rate of sales

47

2013 2014 2015

17.6% 20.2% 10.9%

2016
8.3%

Note 2
Formula
Growth rate of
costs = Rate of
sales
*[0.8*0.5*( 1+ Exchange rate Inv) +0
.6*(1+ Inflation rate Inv)]
Exchange rate
average (VND)
Inflation rate
average (%)

2011

2012

2013

2014

2015

2016

20587

20828
1.2%

21926
5.3%

22363
2.0%

22838
2.1%

23323
2.1%

18.9

11
-41.8%
0.095

8
-27.3%
0.151

7.5
-6.3%
0.196

6.1
-18.7%
0.097

5.3
-13.1%
0.078

Rate of COGS

Note 3
Depreciation

2012
11% of Fixed assets

87,749,770,508

2013
102,753,569,513

48

2014
122,924,814,072

2015
124,800,983,018

2016
137,021,460,962

Note 4

2012

Short-term borrowings

2013

2014

2015

2016

142,826,197,414 171,145,082,953

210,607,902,392

256,404,392,577

217,626,474,299

118,115,651,537 146,084,269,397

182,294,884,158

185,475,908,195

197,312,197,007

Accounts payable - trade

Cogs/11.5

Advances from customers

Taxes and obligations to
the State budget

0.05%*Total assets

1,121,862,432

1,319,711,847

1,585,702,410

1,757,857,363

1,904,415,205

1.5%* Total assets

33,655,872,975

39,591,355,421

47,571,072,289

52,735,720,894

57,132,456,152

Payables to employees

6%*Total assets

134,623,491,899 158,365,421,684

190,284,289,155

210,942,883,576

228,529,824,608

Accrued expenses

8%*Total assets

179,497,989,199 211,153,895,578

253,712,385,540

281,257,178,101

304,706,432,811

Other payables

2%*Total assets

44,874,497,300

52,788,473,895

63,428,096,385

70,314,294,525

76,176,608,203

Bonus and welfare funds

2%* Total assets

44,874,497,300

52,788,473,895

63,428,096,385

70,314,294,525

76,176,608,203

Total current liabilities

Interest expenses*

699,590,060,056 833,236,684,670 1,012,912,428,713 1,129,202,529,757 1,159,565,016,486

13.8%*ST borrowings

19,710,015,243

23,618,021,448

49

29,063,890,530

35,383,806,176

30,032,453,453

Note 5

2012
(CA- Cash & Equivalents) (CL - ST debts)

Working capital

2013

2014

2015

2016

553,795,594,969 644,323,900,720 767,421,633,462 867,348,482,593 943,289,321,715

Change in working capital

53,096,550,509

90,528,305,751 123,097,732,743

99,926,849,131

75,940,839,122

Note 6
Dividend

2012
20%

2013
20%

2015
30%

2016
35%

% of Nominal value

2014
20%

Nominal value

651,662,990,000

651,662,990,000 651,662,990,000 651,662,990,000 651,662,990,000

Dividend paid out

130,332,598,000

130,332,598,000 130,332,598,000 195,498,897,000 228,082,046,500

Note 7
Risk- free rate
Beta ()
Market risk premium
Cost of equity (CAPM)

0.101
0.45
0.12
0.155

Total debts
Cost of debt
Total equity
Cost of equity
Tax rate
WACC

30
0.1
70
0.155
0.145
0.13415

50