It gives me great pleasure to acknowledge the help and contribution of many individuals to make this theme a success. Nareerat Taechapiroontong for their valuable advice, ideas and feedback during the process of completing this thesis.
Business Description
Main products are e.g. external hard drive, media player, USB flash drive, flash card, digital camera and accessories such as earphones/headphones for computers and smartphones as well as input devices namely computer mouse and keyboard. CDG includes communication devices and other gadgets and accessories namely Smartphone and Tablet PC running on a variety of systems such as Android OS, Windows OS etc.
Business Strategies
Productivity: Utilizing the information technology system to achieve speed in the competition and to develop innovation to make the work process modern, fast, concise and efficient and to lower organizational costs in various aspects. M&A: To introduce mergers and acquisitions to create business opportunities in supporting business partners in a move towards the expansion of business clusters and to maintain the position of market leader in total technology solutions.
Business Goals
Overseas Investments: To invest in overseas countries to support the growth of the future ASEAN Economic Community focusing on nations in the Indochina region as priorities for a thorough business expansion covering both domestic and foreign investments to add to the company's portfolio and generate returns for shareholders.
Macro-Economic Analysis
Industry Analysis
IT & Telecoms
Although the overall market continued to see double-digit declines, and even the top sellers saw shipments decrease from a year ago, the top 4 sellers fared much better than the rest of the market. Collectively, the top 4 suppliers saw shipments fall -4.5% year-over-year, compared to a nearly -20% decline for the rest of the market.
Thailand ICT Market
This volume represented a year-over-year decline of -10.8% – slightly worse than forecasts for a -9.2% decline. Economies of scale, a focus on portable PCs, deeper penetration of distribution channels in developing regions, and smaller vendors exiting the market are all helping the larger vendors.
Smartphone Vendor Market Share, 2015 Q3
In the global market for brands in the personal computer product group, Lenovo was ranked number 1, followed by HP, Dell, ACER and Apple respectively.
Competition Analysis
The SYNNEX (Thailand) PCL (“The Company”) is the largest distribution point for various IT product manufacturers caused by the market capitalization in current position as Baht 3.71 billion. The Company is a distribution agency for computer hardware and software solutions, including complete IT services.
Investment Summary
For example, in Myanmar, the marketing plan currently emphasizes product distribution through a single dealer, with personnel from Thailand sent over to the station in the Rangoon office to support the dealer with marketing and to transfer management knowledge to the dealer in Myanmar. Meanwhile, for Cambodia, the company has started to penetrate the market since the fourth quarter of 2014 by selling network devices to a number of system integrators (SIs). For the year 2015, the company plans to enter the IT consumer products market and seek more business partners to be authorized representatives for marketing and distribution of products in Cambodia.
For Lao PDR, the company's most important customers are successful distributors of communication devices and smartphones in the country who have currently formed business partnership with the company. The market expansion plan in 2015 aims to increase sales of network devices and system products to partner system integrators, empowered by the business capacity of Synnex (Thailand) and take advantage of the geographical advantage that reduces transportation costs to win the market share from trading countries such as the Republic of Singapore or the Republic of Vietnam. The Company continues to focus on giving back to the society by continuously patronizing various projects to provide access for the youth of the nation to learning resources along with news and information such as "Library IT by Synnex"; delivered a series of computers installed with the learning software of electronic books to schools across the country, including Bangkok and 76 provinces abroad, and the second project “Chang Nork Krob” (Creative Technician Development) with the aim of improving skills of Promote IT equipment among local vocational training students nationwide to help them generate earnings with the Company's support of IT replacement parts and equipment.
MATERIALS AND METHODS
Valuation
- Relative Valuation
PE ratio is a ratio for valuing a company that measures stock price relative to earnings per share. Synnex's forward price was 9.83 times higher than the average of 8.73 times, so the price target was 3.70 baht. The price-to-book ratio is a ratio used to compare a stock's market value to its book value.
Synnex's trailing PBV was 1.44 while the average was 0.96, the share price should be 2.76 baht on the theory that the ratio narrowed the gap to the average ratio. The trailing SP of Synnex was 0.15 while the average was 0.19, the share price should be 5.20 baht on the theory that the ratio narrowed the gap to the average ratio.
EV/EBITDA
- Comparison relative approach
From the results, the earnings ratio (P/E, P/BV and EV/EBITDA) was higher than the average, while the revenue ratio (P/S) was lower than the average. Synnex stock was overvalued on an earnings basis, while it was undervalued on a revenue basis. The expected share price from price/sales seems reasonable among other valuation multiples.
Synnex's EPS ratio was lower than its peers' average, thus implying that the stock was "undervalued."
DISCUSSION
Financial Statement Analysis
- Summary figures from financial statements (Size analysis)
- Common Size analysis 1. Income statement
- Trend analysis
- Financial ratios: Return 1. Gross profit
Synnex's average ROA and ROE were higher than SIS's because Synnex's returns were higher than SIS's over the past five years. Synnex's average ROA was 9.4%, but in 2014 the company had only 5.4% as assets were growing at a steady rate of return, while SIS had an average ROA of just 5.2%. Synnex's total turnover was higher than that of SIS. This showed that Synnex used its total assets to generate revenue better than SIS.
The speed ratio of Synnex was higher than SIS, the average speed ratio of Synnex was 1.01 times, and the average speed ratio of SIS was 0.90. The average D/E ratio of Synnex was 1.57 times, while that of SIS was 2.66 times, which indicated that SIS had a higher risk than Synnex. Synnex's average interest coverage ratio (11.8 times) was higher than SIS's (4.1 times), indicating that Synnex's debt servicing capacity is better than SIS's.
Investment Risks and Downside Possibilities
- Risk Matrix
- Assumption for Investment Risks and Downside Possibilities In case there are investment risks and downside possibilities which may
In addition, the members of the company's management have accumulated long work experience in areas related to the company's activities. The company imports products from abroad, with bids and payments calculated primarily in the US. However, the company has a policy of avoiding the risk of fluctuating exchange rates by entering into forward contracts in the foreign exchange market.
In general, the extent to which a company takes measures to manage exchange rate risk varies from situation to situation. The company's working capital was financed using short-term loans from financial institutions for liquidity. Currently, the company has approved loans from several commercial banks, which are suitable for facilitating operations.
APPENDICES
Appendix A: The Business Structure of the Company Group
Appendix B: Major Shareholders and Free-Float
Appendix C: Corporate Governance (CG)
The English languages that have been uploaded for public information on the SET website are also uploaded on the IR website. The company is committed to doing business responsibly towards all stakeholders for sustainable and mutual benefits. The board of directors oversees the company's process to ensure the realization of stakeholders.
The Company recognizes the importance of information disclosure, which is accurate, transparent and completed in a timely manner, to benefit investment decision-making. The Company recognizes the importance of duties and responsibilities of the Company's Board of Directors to protect the interests of shareholders and stakeholders by developing a comprehensive internal control system over finances and business operations to comply with laws and regulations determined by the Stock Exchange of Thailand as as well as setting up an adequate risk management system with internal audit mechanism to ensure transparency and good management in business operations, as well as an adequate risk management system with effective risk management monitoring that suits the business of the Company. Therefore, the Company and its subsidiary including corporate staff and related persons to participate in the campaign against corruption.
Appendix D: SWOT analysis
Their dependence on suppliers and manufacturers only forces them to grow as the number of orders grows or as demand for certain products increases. This barrier actually affects Synnex's growth potential and can only be resolved internally. A problem with this project would be their margins and their inability to finance the development of business services.
Variance in demand: The method Synnex sells their products and services to resellers is through purchase orders. If Synnex cannot meet proper demand, their business could be extremely damaged by excess inventory or lack of inventory. Variation in market demand and variation in supply can drastically affect operations and finances of Synnex.
Appendix E: Porter's Five Forces
Their distribution services are their dominant business, accounting for the majority of revenue. Essentially, Synnex is at the will of suppliers, providing them with the ability to resell, allowing them to maintain profits and grow the business. Medium/Low: An option to replace Synnex, a supply chain based corporation, is simply to exclude them as intermediaries with retailers.
The big technology companies can make deals with wholesalers and retailers and take Synnex out of the supply chain strategy equation. However, competitors have their own contracted suppliers, and gaining leverage is simply creating more efficient supply chain models. However, if companies that are suppliers to Synnex are not satisfied with their supply chain service, replacing Synnex with a competitor is an easy change.
Appendix F: Statement
Appendix G: Stock and Price
