I would like to express my gratitude to my advisor, Ajarn Piyapas Tharavanij, for his guidance, kindness and nice suggestions to complete this thesis. I would like to express my gratitude to Ajarn Vasan Siraprapasiri for his guidance on multiple assessment methodology. I would like to thank all the staff of Kasikornsecurites Company for their help in providing information from Bloomberg for my thematic paper.
I also want to give special thanks to Mr. Kijpon priprisankij for the suggestion and cooperation. And the last very special thanks to my relationship and my friends for their help and encouragement. The objective of this thematic project is to study how to find the valuation of the company through share price.
Because of the ratio of the company in SET are not reasonable so I use the ratio from the company in emerging markets which are in the furniture sector. The result of these ratios are different and EV/EBITDA seems to be the most reasonable among other multiple valuation methods as it gives the value that is closest to the market price.
VALUATIONS
- Highlight
- Business Description
- Furniture business
- Business strategies
- Subsidiaries
- The Business Structure of the Company Group
- Revenue structure
- Industry Overview and Competitive Positioning
- Macro-Economic Analysis
- Private Construction Growth (%)
- Industry Analysis
- Competition Analysis
- Modernform ranks high in overall performance
- Investment Summary
- Valuation
- Financial statement analysis
- Investment Risks and Downside Possibilities
In addition, Modernform joined “Versalink”, the company from Malaysia, the largest furniture manufacturer in the country. Modernform Tower Company Limited (MTC) was founded in 1991 by Modernform Group Public Company Limited, who invested 100 percent in the company. Modernform also has a higher operating profit margin, meaning the company is better at generating profits from operations than competitors.
The company can respond to the customer's needs and produce customized furniture for the customer's requirements. Modernform is always looking for an opportunity to expand their business and support the strong growth of the company in the future. In 2013, MODERN's ROE is higher than ROCK by about 18%, indicating that the company can generate more return to common shareholders than its competitors, although it is slightly down at 1% YOY, as a result of the decline of ROA.
An unstable economic risk is an important risk that we worry about the most because it has a direct impact on the company's sales growth. The company established a policy of consuming a high percentage of high-quality domestic raw materials.
DATA
Balance Sheet
Statement of Cash Flow
Common Size
Finally, Modernform plans to collaborate with ITOKI, the company from Japan, to support the company's market expansion. The company now has more than 700 dedicated employees and serves customers through a global network of authorized dealers in 22 countries. A high gross profit margin of 39% on average with an EBIT margin of around 15-16% would generate positive operating cash flow for the company.
Modernform receives income from several sources, which we have already mentioned in the section on revenue structure, which enables the company to pay high dividends over many years in the past. Due to very good corporate governance, the company runs the business in the right ways that support an ability to improve value and competitiveness leading to sustainable growth. Other reserves also fall, as the company is no longer required to maintain the reserve for its own shares.
The gross profit margin is on an upward trend and reached a new high of 41% in 2013, indicating that the company's ability to generate profit before SG&A costs has steadily improved in recent years. MODERN's ROA at 11% is significantly higher than ROCK, implying that the company's ability to run the business is better than its competitor despite a slight decline of almost 2% YOY. Earnings leverage shows that the company has a good handle on its finance costs, as the ratio is consistently very close to 1, meaning that NOPAT is very close to net income due to a small amount of finance costs.
Current ratio and quick ratio of MODERN imply that the company does not have a liquidity problem, as the company's current assets are still much higher than its current liabilities (Current ratio = 2.00 times; Quick ratio = 1.06 times in 2013), although both ratios is on a downward trend, which indicates that the company is less liquid than previously. However, out of 100% of total liabilities, the company only has 0.86% interest-bearing debt, which is considered a very low solvency risk. A very high interest coverage ratio on MODERN of 86.50x indicates that the company has no risk of meeting an interest expense when it comes due.
The company has established risk management measures, scope and practices that managers and employees must adhere to in order to minimize potential business risks. In 2014, the company assessed possible risks that could arise and may affect our operations as follows. In addition, with high volumes of raw materials used, the company has bargaining power in negotiations with the factories for the best terms.
As such, the large volumes of orders placed gave the company high bargaining power and obtaining discounts from foreign manufacturers. In addition, the company is aware of price changes several months in advance, which allows it enough time to adjust costs and prices. Currently, Modernform's machine capacity is about 90%, and the company has no plans to expand the factory or invest more in machinery, so it has outsourced production about 20% to maintain a profit margin of about 37-38%.
We assessed this risk as moderate, as the company can control the production volume by planning in advance the production volume that requires outsourcing.
Trend
Financial Ratio
Asia Wealth (2014), Modernform Group PCL (MODERN), retrieved from http://www.aws.co.th/uploads/researches/file_151751_zzkwq.pdf Bank of Thailand, Monetary Policy Report (September 2014). CBRE Research, Thailand (2014), Bangkok Office Market View Q2 2014, retrieved from http://www.cbre.co.th/en/ResearchCentre/Research/Bangkok-Office- MarketView-Q2-2014. EMIS, Furniture and Related Product Manufacturing Industry in Thailand EMIS, Furniture and Related Product Manufacturing Industry in Thailand, Quick.
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