Spring2014

CourseTitle:CompetinginEmergingMarkets
Instructor: AshRoy
June 16, 2014 Financial Model
www.japanedge.com
Proprietary.PleasedonotdistributewithoutexplicitpermissionofjED&Daichi HongKongLimitedandKeioUniversity.
June 16, 2014 - Agenda
TodaysTopic
UnderstandingtheFinancialStatements
FinancialModel
CaseStudy
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Financial Statements
KEYISSUES
BusinessModel
REPORTS
Income Statement
FinancialStrength Balance Sheet
Return toInvestment CashFlow
Allthreecontributetobusinessvalue
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Reading Financial Statements
Three Main Components ThreeMainComponents
Operations
I t t
CashFlow
Revenue
(C t )
IncomeStatement
Assets
(Li bilit )
BalanceSheet
Investments
Financing
(Costs)
Profits
(Liability)
Equity
IncomeStatement
CashFlow
BalanceSheet
December31,2013
BalanceSheet
December31,2014
TIME TIME
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Income Statement
A Closer Look ACloserLook
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Financial Model
Assumptions Assumptions
REVENUE
Price 3% 0.050 0.052 0.053 0.055
U it S ld 100 400 600 780 UnitsSold 100 400 600 780
VolumeGrowth 300% 50% 30%
Revenue 5 21 32 43
COSTSOFGOODSSOLD
TotalLandedCost 0.035 0.031 0.029 0.027
C t % f S lli P i 70% 60% 55% 50% Costasa%ofSellingPrice 70% 60% 55% 50%
OutstandingDebt 5 10 15 20
InterestRate 5% 5% 5% 5%
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Income Statement
(AllFiguresinJPY100million)
Year Ending Mar 12 Mar 13 Mar 14 Mar 15 YearEnding Mar12 Mar13 Mar14 Mar15
Revenue 5 21 32 43
Costs of Goods (Services) 4 12 18 21 CostsofGoods(Services) 4 12 18 21
GrossProfit 2 8 14 21
30% 40% 45% 50%
O ti C t OperatingCosts
HumanResources 20% 1.0 4.1 6.4 8.5
Marketing 5% 0 3 1 0 1 6 2 1 Marketing 5% 0.3 1.0 1.6 2.1
Administration 10% 0.5 2.1 3.2 4.3
OperatingProfit (0) 1 3 6 p g ( )
5% 5% 10% 15%
InterestExpense 0.25 0.5 0.75 1
Pre tax Profit (0 5) 0 5 2 4 5 4 PretaxProfit (0.5) 0.5 2.4 5.4
Taxes 40% (0.20) 0.21 0.97 2.16
Net Profit (0.30) 0.32 1.46 3.24
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NetProfit (0.30) 0.32 1.46 3.24
6% 2% 5% 8%
Example CASE : Nippon Bistro
Leading Bistro Operator Expanding into Asia LeadingBistroOperator,ExpandingintoAsia
Valueformoneydining
Multiplefoodandambienceformats
Packagedealstoattractcustomers
Focusonnoveltyandcustomerexperience
Locatedclosetohightraffictrainstations
Perrestaurant typically70 90seatsin100m2area
Average150customersperdayperrestaurantwithabout
3000spendingpercustomer
Currently73locationsin5cities
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Business Model
Allows Sustained Growth & Profitability AllowsSustainedGrowth&Profitability
Nippon
Bistro
Competitor
Tightcontrolovercosts
Bulkpurchaseofmidqualityingredients
Single management team overseeing 73
Monthly
Revenue
13m 13m
8m 8m

Singlemanagementteamoverseeing73
restaurants
Strictdisciplineinacquiringnewlocationsand
initialinvestment
15% 15%
Management
15% 15%
4% 4%
10% 10%
Operating
Profit Margin

2500staff,butonly300employees
Advertisement
15% 15%
15% 15%
g
12% 12%
15% 15%

Focusontopline
Rent&
Utilities
15% 15%
30% 30%

Aggressiveadvertisement&customer
capturestrategy
Frequentreviewofmenuandambience
Labor
25% 25%
30% 30%
q
10separateoperatingteamdirectly
incentivizedtomaximizerevenueof5to10
restaurants
Food
20% 20%
25% 25%

Higher Revenue Per Restaurant
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HigherRevenuePerRestaurant.
HigherProfitMargin.
Top Line & Bottom Line Growth
3 Years: Revenue Doubled Profit 10 Fold 3Years:RevenueDoubled,Profit10Fold
BuildingShareholderValue
Averageinitialinvestmentinarestaurantof
30m
1
returned in 18 months 14%
16%
175
200
Revenue
OperProfit
In100m/1
30m
1
returnedin18months
Samerestaurantrevenue
2
hasincreasedby0
3%peryeardespitedeflationaryenvironment
in Japan
133
176
10%
12%
14%
125
150
175
p
Profit%
inJapan
Singlesupplychainacrossallrestaurants
Operatingprofitmarginhasincreasedalong
ith l
79
103
6%
8%
75
100
withscale
Potentialtodoublerevenueinnextthree
years
61
1.6
8.4
10.4
17.9
23.9
0%
2%
4%
0
25
50
0% 0
FY11 FY12 FY13 FY14 FY15
Restaurants 226378103138
YearendAugust 8
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10
JAPAN
Steady Growth SteadyGrowth
GrowthDrivers
Ab i d i i l lik l t lt i i th
110
Abenomics drivingyenlowerlikelytoresultineconomicgrowth
andhigheryenincomeforconsumers
Largenumberofownermanagedrestaurantsfailduetolackof
scale good acquisition targets with low initial investment
80
scale goodacquisitiontargetswithlowinitialinvestment
Integratingamorecouponbasedmodelthatwillreduce
advertisingcostsandexpandtopline
B k illi i b d
160m
150m
Banksarewillingtonegotiatebettertermsduetoour
performance
QuiteafewhightrafficstationlocationsinTokyoandothercities
are new target markets
150m
1112%
arenewtargetmarkets
10%
FY FY13 13 FY FY15 15
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Emerging Asia
Demographic Tailwind DemographicTailwind
GrowthDrivers
I i it i i i A i t i
10
IncreasingpercapitaincomeinemergingAsia,consumermaturing
fromstreetfoodtosophisticateddiningandentertainment
GreatappetiteforJapanesestylefoodandkaraoke establishseveral
Japan Village themed multi restaurant complexes customized to JapanVillage themedmultirestaurant complexes customizedto
culture
Firsttwoyeartarget:KualaLumpur,Hanoi,Jakarta,Delhi.Reasonable
real estate and food costs. Location identification already in process
2
400m
realestateandfoodcosts.Locationidentificationalreadyinprocess
Verylittlecompetitionwithlocalfood
Willlooktoacquirenonrestaurantnichefoodandbeverage
businesses; cross promotion in restaurants owned by group already
250m
5b
businesses;crosspromotioninrestaurantsownedbygroup already
severalconcreteideas
FY FY14 14 FY FY16 16
100m
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