Table 1 and Table 2 in appendix presented the horizontal common size analysis of APOLLO and LONBISC respectively. It express the income statements in each year as a percentage of given base year (year 2009). Horizontal analysis on income statement help us to identify the trend of revenue,
expenses and incomes from the previous year’s compared to the base
year of 2009.
We see that the APOLLO's revenue grew by 27% from 2009 to 2013 (CAGR of 6%). And, the cost of sale grew at slight lower rate (21%) resulting in higher growth in gross profit (45%). The more important operating profit
and net profit grew at a higher rate of 66% and 53% respectively. The profit growth is in tandem with revenue
growth and the quality of growth is hence considered good.
LONBISC's revenue growth in a faster rate of 57% (CAGR 12%). This revnue growth is much more better than APOLLO. Isn’t LONBISC an ideal growth company to invest in? Not until
after you have investigated the quality of its growth.
LONBISC's cost of sales increases at 72% and this is much higher than the revenue growth rate (57%) and this results a lower gross profit growth (18%). And, this further contribute to the lower growth of the operating profit and net profit. This prove that the
quality of its growth for LONBISC is very poor.
Table 3 and Table 4 in appendix presented the vertical common size analysis which let us see how the revenues and the
spending on different types of expenses change from one year to the next for
each company, and compare the two companies of different revenues.
The vertical analaysis on Income statement on APOLLO show us that the profit margin (gross, operating, and net) is on a steady up trend. And, the management’s ability to
contain the total operating expenses to about 10% each year. The growth in profit margin is in tandem with the revenue growth. On the latest financial year, the gross profit margin, operating profit margin and net profit margin is 28%, 19% and 14% respectively. The good result here give us more confident on APPOLO's growth quality.
In comparison, LONBISC has a much lower gross, operating and net profit margin of just 20%, 10% and 5% in
2013. The more
worrisome part is these margins was in down trend and have been deteriorating every year since 7
years ago. It is clear from the vertical analysis that the culprit is the
unabated increasing cost of sales which has increased from 64% of sales from
2006, to 79% in 2013, whereas operating costs have not improved much despite
the high growth in revenue as shown in Table 4 in the Appendix.
Comparison between APOLLO and LONBISC, the total operating costs as a percentage of sales of LONBISC is
generally 50% higher than that of APOLLO (15% vs 10%). The heavy financing cost of LONBISC (4%) worsens the
net profit margin compared to the debt free status of company APOLLO . These explain
the much better financial performance of company APOLLO in comparison with LONBISC.
Based on the analyst result, it clear show that chasing high growth is not necessary a good investing strategy, but
searching for quality growth is. High growth unaccompanied by profit
growth often could be a bogus growth.
Appendix:-
Year
|
2013
|
2012
|
2011
|
2010
|
2009
|
CAGR
|
|
Revenue
|
127.04%
|
114.38%
|
100.54%
|
90.99%
|
100.00%
|
6%
|
|
Cost of sales and
services
|
121.13%
|
117.60%
|
102.91%
|
86.26%
|
100.00%
|
5%
|
|
Gross profit
|
145.14%
|
104.52%
|
93.31%
|
105.45%
|
100.00%
|
10%
|
|
Other operating income
|
119.78%
|
129.03%
|
100.13%
|
283.82%
|
100.00%
|
5%
|
|
Administrative expenses
|
121.80%
|
109.87%
|
113.08%
|
107.91%
|
100.00%
|
5%
|
|
Selling and distribution
|
113.71%
|
103.85%
|
76.69%
|
82.66%
|
100.00%
|
3%
|
|
Other operating expenses
|
79.62%
|
0.00%
|
129.33%
|
112.83%
|
100.00%
|
-6%
|
|
Profit from operation,
EBIT
|
166.85%
|
112.39%
|
88.74%
|
126.75%
|
100.00%
|
14%
|
|
Finance costs
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Share of profit from
associate co.
|
-
|
-
|
-
|
-
|
-
|
-
|
|
EBT
|
166.85%
|
112.39%
|
88.74%
|
126.75%
|
100.00%
|
14%
|
|
Taxation
|
229.13%
|
151.46%
|
104.40%
|
167.35%
|
100.00%
|
23%
|
|
Net Income
|
153.38%
|
103.93%
|
85.36%
|
117.97%
|
100.00%
|
11%
|
|
Attributed to:
|
|||||||
Equity holders of the
company
|
153.38%
|
103.93%
|
85.36%
|
117.97%
|
100.00%
|
11%
|
|
Minority interest
|
-
|
-
|
-
|
-
|
-
|
-
|
Table 1: Horizontal Analysis of APOLLO
Year
|
2013
|
2012
|
2011
|
2010
|
2009
|
CAGR
|
|
Revenue
|
157.34%
|
137.56%
|
126.28%
|
121.23%
|
100.00%
|
12%
|
|
Cost of sales and
services
|
172.04%
|
146.04%
|
131.03%
|
126.55%
|
100.00%
|
15%
|
|
Gross profit
|
118.42%
|
115.11%
|
113.71%
|
107.16%
|
100.00%
|
4%
|
|
Other operating income
|
385.86%
|
202.20%
|
180.42%
|
89.53%
|
100.00%
|
40%
|
|
Administrative expenses
|
157.50%
|
96.42%
|
101.23%
|
100.29%
|
100.00%
|
12%
|
|
Selling and distribution
|
138.50%
|
147.39%
|
125.82%
|
129.15%
|
100.00%
|
8%
|
|
Other operating expenses
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Profit from operation,
EBIT
|
122.01%
|
112.73%
|
119.60%
|
93.06%
|
100.00%
|
5%
|
|
Finance costs
|
115.95%
|
136.95%
|
124.53%
|
77.77%
|
100.00%
|
4%
|
|
Share of profit from
associate co.
|
0.00%
|
0.00%
|
0.00%
|
78.21%
|
100.00%
|
-100%
|
|
EBT
|
106.68%
|
80.73%
|
98.08%
|
99.90%
|
100.00%
|
2%
|
|
Taxation
|
755.60%
|
92.67%
|
238.09%
|
-95.93%
|
100.00%
|
66%
|
|
Net Income
|
88.07%
|
80.39%
|
94.06%
|
105.52%
|
100.00%
|
-3%
|
|
Attributed to:
|
|||||||
Equity holders of the
company
|
77.14%
|
69.22%
|
76.88%
|
94.20%
|
100.00%
|
-6%
|
|
Minority interest
|
248.17%
|
244.06%
|
345.70%
|
271.39%
|
100.00%
|
26%
|
Year
|
2013
|
2012
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
Revenue
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
Cost of sales and
services
|
-71.89%
|
-77.52%
|
-77.17%
|
-71.48%
|
-75.39%
|
-76.20%
|
-70.41%
|
-69.95%
|
Gross profit
|
28.11%
|
22.48%
|
22.83%
|
28.52%
|
24.61%
|
23.80%
|
29.59%
|
30.05%
|
Other operating income
|
1.20%
|
1.43%
|
1.26%
|
3.96%
|
1.27%
|
1.82%
|
3.24%
|
2.10%
|
Administrative expenses
|
-5.48%
|
-5.49%
|
-6.43%
|
-6.78%
|
-5.72%
|
-5.73%
|
-6.86%
|
-7.11%
|
Selling and distribution
|
-4.11%
|
-4.17%
|
-3.50%
|
-4.17%
|
-4.59%
|
-4.61%
|
-4.94%
|
-5.04%
|
Other operating expenses
|
-0.66%
|
0.00%
|
-1.36%
|
-1.31%
|
-1.06%
|
-1.83%
|
-1.52%
|
-1.49%
|
Profit from operation,
EBIT
|
19.06%
|
14.26%
|
12.81%
|
20.21%
|
14.51%
|
13.45%
|
19.51%
|
18.52%
|
Finance costs
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
Share of profit from
associate co.
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
EBT
|
19.06%
|
14.26%
|
12.81%
|
20.21%
|
14.51%
|
13.45%
|
19.51%
|
18.52%
|
Taxation
|
-4.65%
|
-3.42%
|
-2.68%
|
-4.75%
|
-2.58%
|
-1.87%
|
-3.60%
|
-3.94%
|
Net Income
|
14.40%
|
10.84%
|
10.13%
|
15.47%
|
11.93%
|
11.58%
|
15.92%
|
14.58%
|
Attributed to:
|
||||||||
Equity holders of the
company
|
14.40%
|
10.84%
|
10.13%
|
15.47%
|
11.93%
|
11.58%
|
15.92%
|
14.58%
|
Minority interest
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
Table 3: Vertical Analysis of APOLLO
Year
|
2013
|
2012
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
Revenue
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
100.00%
|
Cost of sales and
services
|
-79.36%
|
-77.06%
|
-75.31%
|
-75.76%
|
-72.58%
|
-75.02%
|
-66.71%
|
-63.48%
|
Gross profit
|
20.64%
|
22.94%
|
24.69%
|
24.24%
|
27.42%
|
24.98%
|
33.29%
|
36.52%
|
Other operating income
|
4.35%
|
2.61%
|
2.53%
|
1.31%
|
1.77%
|
1.96%
|
4.56%
|
3.34%
|
Administrative expenses
|
-6.09%
|
-4.26%
|
-4.88%
|
-5.03%
|
-6.08%
|
-3.79%
|
-5.84%
|
-6.63%
|
Selling and distribution
|
-8.20%
|
-9.99%
|
-9.29%
|
-9.93%
|
-9.32%
|
-10.09%
|
-11.12%
|
-10.15%
|
Other operating expenses
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
0.00%
|
Profit from operation,
EBIT
|
10.69%
|
11.30%
|
13.06%
|
10.58%
|
13.79%
|
13.06%
|
20.89%
|
23.09%
|
Finance costs
|
-4.21%
|
-5.69%
|
-5.64%
|
-3.67%
|
-5.72%
|
-7.24%
|
-7.72%
|
-5.79%
|
Share of profit from
associate co.
|
0.00%
|
0.00%
|
0.00%
|
0.96%
|
1.48%
|
0.88%
|
-0.73%
|
0.01%
|
EBT
|
6.48%
|
5.61%
|
7.42%
|
7.87%
|
9.56%
|
6.70%
|
12.43%
|
17.30%
|
Taxation
|
-1.28%
|
-0.18%
|
-0.50%
|
0.21%
|
-0.27%
|
0.90%
|
-2.35%
|
-3.67%
|
Net Income
|
5.20%
|
5.43%
|
6.92%
|
8.09%
|
9.29%
|
7.60%
|
10.08%
|
13.63%
|
Attributed to:
|
||||||||
Equity holders of the
company
|
4.26%
|
4.38%
|
5.29%
|
6.76%
|
8.70%
|
7.60%
|
10.06%
|
13.18%
|
Minority interest
|
0.94%
|
1.05%
|
1.62%
|
1.33%
|
0.59%
|
0.00%
|
0.02%
|
0.45%
|
References:-
No comments:
Post a Comment