WESTERN SYDNEY UNIVERSITY VIETNAMKHANG DIEN FINANCIAL ANALYSIS Group 3 Topic: Khang Dien House Trading and Investment Joint Stock Company... Also in the year of 2019, Khang Dien was name
Trang 1WESTERN SYDNEY UNIVERSITY VIETNAM
KHANG DIEN FINANCIAL ANALYSIS
Group 3
Topic: Khang Dien House Trading and Investment Joint Stock Company
Trang 2Table of Contents
Introduction 5
Analysis of profit/loss and balance sheet 6
Balance sheet 6
Profit and loss statement 8
Ratio analysis 10
Short- term solvency/Liquidity ratios 10
Long-term solvency/Leverage ratios 11
Profitability ratios 12
Efficiency ratios 14
Conclusion 15
Appendix 17
References list 23
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Trang 3I Introduction
Established in December 2001 by Mr Ly Dien Son, Khang Dien Housing Trading and Investment Joint Stock Company (Stock code: KDH), formerly known as Khang Dien
Housing Trading and Investment Company Limited, is one of the top 50 excellent companies
in Vietnam with its main focuses are on investment, development and trading residential real estates Also, over the period of 20 years, Khang Dien House has grown exponentially and become one of the 30 largest companies in terms of market capital on the Ho Chi Minh StockExchange (HOSE)
Operating with the goals of providing comprehensive housing solutions and services,
creating a preeminent modern lifestyle, over its course of sustainable development, Khang Dien, with the growing experiences, has brought to the market 50 quality real estate projects including 20,000 products such as residential land lots, condos, townhouses, villas, industrial land lots etc with the absorption rates above 90% KDH’s real estate projects are attractive to the investors with the favored location, excellent infrastructure, and low population density
Moreover, Khang Dien has built an excellent trust, and reputation within its customers, as well as created solid relationships with its business partner Furthermore, by accompanying Earnst and Young as its main audit firm since 2007, KDH has proven its ambition to maintain the transparency within the corporation for its internal and external stakeholders Hence, it hasgained the trust, as received the investment from the organization shareholders such as
Dragon Capital, Vina Capital, whose cumulative shareholding maintained greater than 45%
At the moment, Khang Dien House is applying the governance model of a Joint Stock Company (Appendix 1) Beside complying with the regulations from the Vietnamese
authorities, the Company strictly complies with the provisions of the Company's charter of organization and operation approved by the General Meeting of Shareholders Annually, the general shareholders meeting (GSM) is organized with the purpose of approving the annual resolutions, development orientations, and business plan Also from the general shareholders meeting, every 5 years, the BOD would be elected in order to represent the shareholders to direct the company GSM also elects the member of Inspection Committee (IC) which is in charge of supervising the activities of BOD and the General Director Team during their course of managing the company KDH’s General Director Team, elected by the BOD, will
be responsible to the BOD for implementing rights and assigned duties
Thanks to KDH’s constant efforts, the company has won many Vietnamese, and
international awards For the 4 consecutive years, the Khang Dien House has been voted by Forbes Vietnam as one of the top 50 best-listed companies In 2019, during Vietnam Property Awards, Khang Dien Project honorably received: Best Housing Development (HCMC) and Best Housing Landscape Architectural Design – Winner Also in the year of 2019, Khang Dien was named as the Typical Real Estate Developer and chosen as Top 50 Best Enterprises
In 2020, Khang Dien Group was given the title of "Most Favorite Vietnamese Brand and Gold Brand" while maintaining its solid position in the Top 10 prestigious Vietnamese real estate investors
In this report, we choose Phat Dat corporation (PDR), as our subject of comparison, for
it shares many common characteristics, such as: market capital, owner’s equity’s size,location of operation
Trang 4II Analysis of profit/loss and balance sheet
The balance sheet is one in every of the three core financial statements that are
accustomed to evaluating a business It could be a tool that gives a snapshot of what an
organization owns and owes, as well as the amount of money invested by shareholders
Balance sheets are often used with the financial statement to conduct fundamental
analysis or to calculate financial ratios
2.1 Balance sheet
2.1.1 Total assets
Overall, the total assets of KDH had remained unchanged in the last three consecutiveyears with the current assets accounting for most of its total assets, at 93.45% From 2018 to
2019, there was a slight decrease in the total current asset, from 93.57% in 2018 to 93.12% in
2019 From 2019 to 2020, the growth rate went up a little bit to 93.45% (Figure 01)
There are slight changes in both the current assets and non-current assets, aimed to reachbalance in proportion where they are 93.45% and 6.66%, respectively (Table A)
2.1.2 Current asset
Over three years, the inventory made up the highest proportion in Khang Dien’s totalcurrent assets, from 56.88% in 2018 before slightly decreasing to 53.16% in 2019 andreaching 52.66% in 2020 (Table A) In the real estate industry, having high inventory accountsfor many reasons First, from the financial statement, we could see that the company land bankhad been acquired and became under-developed projects
Also, in 2018, Khang Dien completed its merger with Khang Phuc House and launchedtwo high-end condo projects Jamila and Safira in Thu Duc City, following this, it continued tolaunch other strategic projects such as Verosa Park - high-end townhouses and villas and LoveraVista condo Furthermore, due to the outbreak of the Covid-19, there had been many delays in theongoing projects, which contributed to the higher amount of inventory It is not to mention thatthere were completed projects but yet not sold to customers as they faced many financial problemsdue to Covid 19, which led to less money invested in real estate This was the common issue of thereal estate industry over the course of the pandemic
2.1.3 Non-current assets
The growth rate of non-current assets in the period 2018 was 6.43% but then increased
to 6.88% in 2019 due to the strong growth of investment properties and long-term assets inprogress and finally reached 6.55% in 2020 (Figure 01) There are not many fluctuations innon-current assets over the three-year period It could be indicated from the growth of long-term assets from 4.56% in 2018 to 4.98% in 2019 that Khang Dien increased charter capitaland launched a large number of huge projects, marking its milestone after the merger
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Trang 52.1.4 Total liabilities
Generally, the company’s liabilities showed a downward trend in both current and current liabilities Over this period, Khang Dien might have restructured its liabilities, whichcould be explained by alteration in current and non-current liabilities, it attempted to decreaseits liabilities, which could control its outflow efficiently (Figure 02)
non-2.1.5 Current liabilities
The largest changes belonged to short-term advances from customers, which achieved62.64% in total changes from 2018 to 2019 before experiencing a significant downturn to -296.05% between 2019 and 2020 (Table B) This decrease could be explained as in 2020,more projects had been finished which led to the decrease in advance from the customers andrecognition of revenue
It is clearly seen that Covid 19 had a profound impact on the industry It hindered theoperations of the company and slowed down the process Most notably, the short-term tradepayables showed a downward trend between 2018 and 2019 (18.32%, Table B) Therefore, in
2020, after the projects were finished, the payable amount will be less, as the company paysoff the debts to the contractor
In adverse, short-term loans showed an opposite trend The changes of 2018 and 2019were around -11% then climbed significantly to 201.38% (Table B) One significant factor inthe rise of short-term loans might come from the financing activities of the company Due tothe impact of the pandemic, the company needed money to finance its operating capital, which
is why short-term loans had a slope increase
2.1.6 Non-current liabilities
As mentioned above, it is easily noticeable that long-term loans gained 321.05% overthe total of changes from 2019 to 2020 since it borrowed more from the financial institutions
In addition, long-term advances from customers fell to -12.95% in the changes from 2019 to
2020, compared to 1.18% in the changes from 2018 to 2019 since more projects had beencompleted (Table B) In short, Khang Dien’s liability structure changed according to thepandemic situation
Trang 6Some various reasons could be mentioned that during this period, the company
conducted a large number of projects, which required a large amount of capital As a result, the company decided to pay fewer dividends in cash and issued stocks for the shareholders Besides, the treasury shares showed a sharp increase as in 2020, Khang Dien bought twenty million treasury shares, this was because the market value its stocks fell sharply from the outbreak the market value of KDH’s stocks fell sharply from the outbreak of Covid-19 in Vietnam In addition, shares premium declined by -321.27% between 2018 and 2019 as the company paid its dividends by stocks to its shareholders
2.1.8 Comparison with competitor- PDR
According to the tables above, it is clearly seen that the total assets of Phat Dat (PDR)are slightly higher than that of KDH Conversely, Khang Dien’s owner equity is superior,which was around 1.5 times higher than the owner’s equity of PDR Moreover, there was asignificant difference between the liabilities of these two companies KDH used less leverage
in order to finance its projects, whilst PDR mainly used leverage for its operation
2.2 Income statement:
Income Statement is used to report the revenue, profit (or loss) of companies over a
period of time The profit or loss of the firm is calculated by combining revenues and
subtracting all expenses from both operating and non-operating activities
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202 0
CHANGE 2018&2019
CHANGE 2019&2020
Trang 72.2.1 Revenue
As a real estate developer, Khang Dien House creates and obtains profit and revenuefrom selling commercial real estate properties varying from high-end apartment complexes toluxurious villa compounds
During the stage of 2018, the firm’s revenue reached VND 2,920 billion, which was2.57% higher than the previous year In 2019, the company only accumulated VND 2,845billion in revenue, which was the lowest in the three years period from 2018 to 2020 Moving
on to 2020, the firm saw a drastic increase with a whopping VND 4,617 billion of revenue, or62.28% increase, triumphant all the obtained total revenue from the previous period
2.2.2 Cost of goods sold (COGS)
For a company of developing real estates, most of the costs for their goods sold(COGS) are mostly attributed to activities relating to land clearance, infrastructuredevelopment, fees/taxes for changing the usage of land
Throughout the three selected years, Khang Dien managed to keep all total costs ofgoods sold to be below 60% of the total revenue, during this, the year with the highest figure
of COGS was 2018, with the COGS were f VND 1,677 billion, which was 57.43 % of the totalrevenue Overall, the company has managed to keep the consistency in the COGS to generateexcessive profit for the shareholders and finance its growth
2.2.3 Earnings per share (EPS)
Khang Dien House’s annual earnings per share (EPS) had a stable and well-roundedperformance throughout the three years The firm’s EPS encountered a minor decline in 2019,and received a massive increase of EPS in 2020, in terms of value and growth rate
Despite its earnings per share seeing a sharp decrease of -16.33% growth in the secondyear, its overall net income and net revenue in 2019 still hold up to its previous year data In
2020, the firm’s EPS was able to obtain a recovery and increased by VND 350
2.2.4 Net Income
As of 2020, Khang Dien firm had amounted their total revenue around VND 4,617billion, reaching VND 1,498 billion in net operating profits Among the three years from 2018
to 2020, the company saw extensive growth in the net income
2.2.5 Comparison with competitors
Comparing Khang Dien House (KDH) financial position with its competitor, Phat Datcorporation (PDR) through the respective financial statements, it could be seen that both of thecompanies managed to achieve explosive and continuous growth In 2020, Khang Dien firm’soverall revenue was VND 4,616,848,443,000 which is 162.28% higher than the previous year,and Phat Dat corporation was able to accumulate VND 1,540,220,143,183 of total revenue,139.34% higher than the prior figures
Trang 8However, taking into account the overall scale, Khang Dien is superior to Phat Datregarding many aspects, such as organizational scale, revenue and profit, operating range, andmost importantly, experiences.
III Ratio's analysis
3.1 Short-term solvency/Liquidity ratios
Liquidity ratios are considered as parameters in order to measure a company’s ability
to pay off its short-term debt and liabilities (Adam, 2021) For a company, the higher liquidityratios, the stronger it is, as it can repay its current liabilities without any further financialassistance
Liquidity ratios are also an important indicator of the going concern viability of acompany The company which has lower liquidity ratios may not be favored by the potentialinvestors Liquidity ratios often include: current ratio, quick ratio, and cash ratio
2019 vs 2018 2020 vs 2019
Ratio Unit 2018 2019 2020 Change % Change %
TimesCurrent Ratio 3,45 2,70 3,09 -0,75 78% 0,40 115%Quick Ratio 1,30 1,09 1,27 -0,21 84% 0,18 117%Cash Ratio 0,66 0,26 0,44 -0,40 39% 0,18 170%
3.1.1 Current ratio:
Current ratio is used as a tool to identify whether a company can pay off its short-termliabilities without needing any external assistance (Adam,2021) Current ratio is termedcurrent as it considers the current asset over the current liabilities
In 2018, the current ratio of KDH was 3,45, which means that the company held the current asset that could pay off three times its current liabilities, which was a strong ratio for a real estate company In 2019, this ratio declined by 0,75 to 2,7 This was the result of in the year
of 2019, the pace of increasing in current liabilities was higher than the pace of increasing in the current asset This considerable increase could be explained as in the year of 2019, the company received more money from the customers for purchasing their properties In 2020, this ratio was 3,09, which was 115% in comparison with the previous year Over this period, the current assets of the company, especially cash and cash equivalents, and inventory
increased
Trang 910
Trang 103.1.2 Quick Ratio
Quick ratio plays an essential role in analyzing a company’s ability to meet its term liabilities with its most liquid asset Liquid assets are the assets that can be converted into cash within 90 days whilst current liabilities are those debts that require the company to pay within a span of a year (Adam,2021)
short-In 2018, the ratio of KDH was 1,30 However, this ratio declined to 1,09 in 2019 as thecash and cash equivalents decreased whilst the increase in account receivable could not keep
up with the increase in current liability This ratio increased to 1,27 in 2020, as the currentliability of KDH decreased in terms of short-term trade payables and short-term advancesfrom customers
Quick ratios of KDH over 2018,2019,2020 were always above 1, which means thatKDH could meet its short-term liabilities with its most current asset These figures of KDHwere highly favored by the investors, as well as the creditors
3.1.3 Cash Ratio:
Cash ratio illustrates how a company can pay off its current liabilities using only itscash and cash equivalents (Will,2021) This ratio can be calculated by dividing cash and cashequivalents to current liabilities This ratio is most favored by creditors, when it shows themhow a company can maintain an adequate amount of cash in order to pay off all of their duedebt However, this ratio is not favored by the investors, when the cash ratio is too high, itshows that the company is not using its abundant amount of cash effectively
The cash ratio of 2019 witnessed a sharp decline by 0,4, this was of the result that inthis year, the company spent more money on inventory, as well as the current accountreceivable increased In 2020, this ratio pulled back to 0,44, as the cash of KDH increased
When compared with PDR, the current ratio of KDH was almost the same in 2019 and
2020 with the ratios varying around 2.0-3.0 However, there were huge differences among thequick ratios of KDH and PDR, while KDH maintained the above 1 quick ratio, PDR’s ratioswere below 1 in 2019 and 2020, which means that PDR will face difficulties paying off itsliabilities using its liquid assets KDH showed its superiority in maintaining the cash ratiosignificantly higher than PDR from 2018 to 2020 Especially, the cash ratio of PDR was only0,01 while KDH’s ratio was 44 times higher
3.2 Long-term solvency/Leverage ratios
Long-term Solvency refers to a firm’s ability to pay its long-term financial obligationsalong with the associated interest
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Trang 113.2.1. Total debt ratio:
Total debt ratio is calculated by dividing total liabilities related to total assets It reflectsthe financial leverage of a company This ratio might be varied depending on the industry(Adam, 2020)
In 2018, the ratio was 0,33, and it increased to 0,42 and 0,41 in 2019 and 2020,respectively, as KDH received more advance money from the customers to purchase theirproperty
3.2.2 Debt/ Equity Ratio (D/E):
This ratio is calculated by dividing the total liabilities to its owner’s equity
D/E plays a significant role in corporate finance, for it represents the ability to coverthe debts in case the business witnesses the decline using the owner's capital
As we can observe, in 2019 and 2020, the total debt, as well as the owner’s equity ofKDH increased concurrently As a result, the D/E ratio of KDH remained stable at around 0,7
3.2.3 Time interest earned (TIE):
This indicator can be calculated by dividing EBITDA to Interest expense Whenanalyzing KDH, The TIE ratio of KDH was outstanding in comparison with others In 2020,there was no interest expense for the company, and KDH could easily cover its interestexpenses without facing any difficulties
When comparing with PDR, one of KDH's competitors, it could be inferred that KDHused less leverage than its rivals, since the total debt ratio, as well as D/E ratio of KDH was 3-
5 times lesser than PDR As a result, during business downtime, KDH would pay off its debteasier than its rival Also, from this, we can see that KDH is healthier in terms of financialstability since it can cover most of its debt instantly