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ESM 644- Financial Management for


Engineers
Part I – Fundamental Analysis

Group X
ID Name
g00062047 Khawla Almaazmi
g00032008 Shamma Alqassim
g00071328 Amel Ibrahim
B00047097 Fayez Barakji
Content 2

Part I – Fundamental Analysis

• Economy, current and future outlook


• Sector analysis
• Companies within the sector
• Financial Ratios summary
• Market trends
• Other types Fundamentals analysis
Economy Current and Future Outlook 3

1 Global Economy
• Global economic growth to
edge up to 3.1% in 2018
3 UAE Economy
• Expo 2020
• VAT
• 4.5% growth in developing
economies in 2018 • Diversification Strategy (80%
in 2021).

2
Regional Economy • Growth in logistics, retail,
tourism, construction and
• The impact of the oil real estate.
production cuts by OPEC
• FDI yearly growth of 8.2%:
• Higher oil prices will boost
economic growth. - real estate, trade and
car repairs, finance and
insurance and
manufacturing.
Sector analysis 4

• Strategic vision:
• Reduce dependency on oil-related sectors.
• Diversify economic development.
• Rapid infrastructure and construction development.
• Future projects and initiatives (Example: EXPO 2020).
• Various sectors flourishing due to growth in foreign trade and investments.

Real Estate & Tourism Logistics Retail


Construction
Companies within the sector 5

Real Estate &


Tourism Logistics Retail
Construction
• Attractions • Emaar Malls
• Emaar • Emirates Logistics
(Ex: Ferrari World) • Al Futtaim Properties
• Arabtec • Jafza
• Accommodation
Aramex 6

1
Establishment
Founded in 1982 and is headquartered in Dubai, UAE.

2
Purpose
Background Aramex PJCS provides logistics and transportation
solutions.

3
Segments
• International Express
• Freight Forwarding
• Domestic Express
• Logistics
• Other Operations
Aramex 7

1
IPO
1997 - First Arab company to trade its shares on the
NASDAQ
2005 – Went Public on DFM and so far generated returns of
183%
Background

2
Total Shares
1.46 Billion

3
Initial Offer Share Value
1.00 AED
Sector 8

Transportation

Freight & Logistics Services

Industrials
Air Freight & Logistics

Integrated Logistics Operators


Competitor Companies 9
Aramex 10

Current Stock Price


4.50 AED

Last Financial Position


In 2017 Aramex revenues
increased 7% to AED3.4B

Aramex
Net income before extraordinary
items decreased 6% to AED270.4M

Aramex currently serves


in 54 countries and has
over 13,800 employees.
Aramex 11

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Current ratio 1.87 2.22 1.89 1.95 1.48 1.55 Higher
Liquidity
Quick ratio 1.63 2.01 1.65 1.75 1.30 0.92 Higher
Avg. Collection period 63.7 65.17 64.48 67.47 62.39 73.88 Lower
Inventory Turnover - - - - - - Unavailable Data
Asset
Management Fixed asset Turnover 6.12 5.98 6.81 6.22 5.63 4.02 Higher
Total Asset turnover 1.19 1.17 1.18 1.15 1.17 0.94 Higher
Debt Ratio 0.258 0.3 0.325 0.373 0.43 0.53 Lower
Financial Debt to Equity 0.01 0.06 0.04 0.11 0.16 0.401 Lower
leverage
Times interest Earned — — 55.32 50.36 19.59 25.351 Higher (Avg)
Management
Fixed Charge ratio 37.5 48.1 47.5 44 14.27 - High
Company A 12

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Gross Profit Margin 53.86 54.17 54.90 56.68 56.00 52.94% Higher

Net Profit Margin 7.86 8.36 8.72 8.11 9.82 11.83% Lower
Profitability
ratios
Return on investment 12.37 12.90 13.83 12.92 16.29 12.1% Higher

Return on Equity 12.59 13.55 14.97 14.39 19.27 12.31% Higher

Price to Earning 12.0 16.6 14.6 13.5 16.9 14.48 Same Range
Market based
Market price to BV 1.5 2.2 2.1 2.1 2.7 1.82 Higher

Payout ratio 29.9 54.5 110.2 59.7 62.5 56.34 Higher


Dividend
policy
Dividend Yield 0.05 0.10 0.23 0.14 0.15 0.041 Higher
Trend Analysis 13

Quick Ratio
Debt Ratio
2.5
0.7
Quick Ratio (Times)

2 2.01 0.6
1.75 0.5

Debt Ratio
1.63 1.65
1.5 0.4 0.43
1.3 0.373
Aramex Quick Ratio 0.3 0.3 0.325 Aramex Debt Ratio
1 0.258
0.68 0.78 Industry 0.2 Industry
0.5 0.62
0.43 0.34 0.1
0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Year Year
Trend Analysis 14

Average Collection Period


80 Total Asset Turnover
70 1.3
Avg Collection Period (Days)

67.47

Total Asset Turnover (Times)


63.7 65.17 64.48 62.39
60 1.2 1.19 1.17 1.18 1.17
50 1.15
Avg Collection 1.1
40 Period
1
30 Industry Total Asset
0.9 Turnover (Times)
20
Industry
10 0.8

0 0.7
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Year Year
Trend Analysis 15

Return on Investment Return on Equity


18 30
28
16 16.29
26
Return on Investment (%)

Return on Equity (%)


24
14 13.83 22
12.9 12.92 20
12 12.37 19.27 ROE
ROI 18
Industry
Industry 16
10 14.97
14 14.39
13.55
12 12.59
8
10
6 2012 2013 2014 2015 2016
2012 2013 2014 2015 2016 Year
Year
Stock Price Comparison 16
Dubai Refreshments 17

1
Establishment
• Started in 1962
• it is the only distributor for Pepsi Co. It produces
and distributes a wide range of products including
Pepsi, Mountain Dew, and Aquafina water.

2 Sector
Background • Bottle and soft drink distributor in the UAE.

3 Financial Position
• 90000000 Total Shares
• Current Stock price: 14.5
AED
Dubai Refreshments 18

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Current ratio 3.09 2.04 2.05 2.02 1.86 1.53 Higher, good
Liquidity
Quick ratio 2.79 1.31 1.49 1.37 1.45 1.11 Higher, good
Avg. Collection period 25.63 25.63 36.46 36.46 40.19 47.52 Lower, good
Asset Inventory Turnover 11.84 8.67 8.62 7.82 7.24 7.59 Neutral
Management Fixed asset Turnover 5.18 2.63 2.00 1.60 1.34 - N/A
Total Asset turnover 1.23 0.87 0.86 0.81 0.74 0.83 Neutral
Financial Debt Ratio 0.29 0.20 0.16 0.15 0.14 0.17 Lower, good
leverage
Management Debt to Equity 0.09 0.16 0.18 0.16 0.11 0.18 N/A
Dubai Refreshments 19

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Gross Profit Margin 31.3 33.9 36.1 37.4 36.9 33.31% Higher, good

Profitability
Net Profit Margin 16.06 13.79 14.25 15.27 12.37 13.74% Neutral
ratios
Return on investment 26.59 14.75 14.69 14.33 10.62 17.35% Much lower
Return on Equity 28.00 17.49 18.06 17.57 12.57 19.98% Much lower
Price to Earning 6.29 9.135 13.4 12.73 18.26 12.8 Higher
Market based
Market price to BV 3.16 1.64 2.35 2.12 2.29 - NA

Dividend
Payout ratio 22.6 36.5 39.7 40.3 50.7 40.01 Higher
policy
Dividend Yield 3.3% 4.11% 2.9% 2.8% 3.01% 3.33% Aligned
Trend Analysis 20
Trend Analysis 21
NCC Company 22

1
Establishment
• Founded in 1968 in Dubai.

2
Purpose
• Deals with, Cement Manufacturers, Cement
Background Stockiest.
• Servers the UAE and GCC markets with an array
of branded cement products.

3 Sector Segments
• Industrial
• Construction Raw Material
• Capital Goods.
NCC Company 23

1
IPO
2005 – Went Public on DFM and so far generated returns of
183%

2
Total Shares
Background 358.8 M
IPO: 1.00 AED

3
Initial Offer Share Value

35.1% - Al Gurair Private company


29.1% - Al Gurair Inv Company
35.8% - Others
NCC Company 24

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Current ratio 3.54 3.40 2.48 2.64 2.31 2.42 Within
Liquidity
Quick ratio 2.11 2.02 1.98 2.20 1.94 1.91 Within
Avg. Collection period 219 138 153 224 196 169 Lower

Asset Inventory Turnover 2.28 2.9 3.57 3.93 3.86 2.29 Higher
Management Fixed asset Turnover 0.98 1.19 1.17 1.41 1.36 1.37 Within

Total Asset turnover 0.09 0.11 0.1 0.12 0.12 0.17 Lower

Debt Ratio 0.20 0.17 0.14 0.16 0.16 0.20 Within


Financial
leverage Debt to Equity 0.33 0.26 0.22 0.26 0.21 0.26 Within
Management
Times interest Earned 11.33 4.21 5.09 3.24 5.93 5.68 Within
NCC Company 25

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Gross Profit Margin 0.14 0.15 0.10 0.15 0.16 0.11 Within

Net Profit Margin 0.36 0.42 0.49 0.36 0.35 0.34 Within
Profitability
ratios
Return on investment 0.03 0.04 0.05 0.04 0.04 0.05 Within

Return on Equity 0.04 0.06 0.06 0.06 0.05 0.06 Within

Price to Earning 0.15 0.14 0.14 0.13 0.16 0.27 Lower


Market based
Market price to BV 0.67 0.75 0.82 0.74 0.67 0.70 Within

Payout ratio 1.05 1.05 1.05 0.74 1.19 0.33 Lower


Dividend
policy
Dividend Yield 0.07 0.05 0.06 0.07 0.09 0.06 Within
Trend Analysis 26
Trend Analysis 27
Trend Analysis 28
Comparison 29
Emaar Properties 30

1 Establishment
• 1997 | Founder: HE/Mohamed Alabbar

Sector
2 • Operates internationally providing
property development and management
services.
Background • Over 60 active companies, with presence
in 36 markets (Asia, North Africa, Europe

3 and NA).

Financial Position
• IPO: 6.03AED
• Total shares: 7.16 Billion
• Current Stock price: 6.23
AED
• In 2017, total revenue
increased by 21% (Dh18.812
billion).
Emaar Properties 31

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Current ratio 0.44 0.65 0.79 1.05 0.97 1.48 Lower
Liquidity Quick ratio
0.44 0.5 0.66 0.85 0.7 1.92 Lower
Avg. Collection period 76.4 69.1 78.5 92.1 180 281 Lower
Inventory Turnover - - - 59.9 66.4 60.6 Same Range
Asset
Management Fixed asset Turnover 1 1.27 1.22 1.55 1.67 1.3 Higher
Total Asset turnover 0.14 0.16 0.14 0.18 0.18 0.12 Same Range
Debt Ratio 46.8% 46.8% 55.5% 52.1% 57.4% 30% Higher
Financial Debt to Equity 19% 23% 37% 35% 41% 32.0% Higher
leverage
Times interest Earned - - - - - - -
Management
Fixed Charge ratio 2.45 2.29 2.62 2.58 2.55 - -
Emaar Properties 32

Financial Ratios

2012 2013 2014 2015 2016 Industry Notes


Gross Profit Margin 50.7% 49.9% 59.8% 53.2% 52.1% 51.6% Same Range

Profitability
Net Profit Margin 25.7% 24.9% 33.3% 29.9% 33.7% 42.25% Lower
ratios
Return on investment 21.2% 25.7% 32.9% 40.8% 52.3% 9.45% Higher
Return on Equity 6.6% 7.7% 9.8% 11.5% 13.2% 11.73% Higher
Price to Earning 10.7 19.6 16.5 10.4 11.0 15.39 Lower
Market based
Market price to BV 4.9 5.0 5.8 5.2 5.8 4.37 Higher

Dividend
Payout ratio 28.6 25.6 34 255.8 23.1 - -
policy
Dividend Yield 9% 9% 141% 15% 15% 2.93% Very High
Trend Analysis 33

Debt Ratio
Quick Ratio
0.70
2
0.60 0.57
0.56 0.52
1.5 0.50
0.47 0.47
0.40
1 0.30
0.85
0.66 0.7 0.20
0.5 0.44 0.5
0.10
0 0.00
2012 2013 2014 2015 2016
1 2 3 4 5
Emaar Properties PJSC Standards
Emaar Properties PJSC Standards
Trend Analysis 34

Avg. Collection Days Total Asset Turnover


350 0.4
300 0.35
0.3
250
0.25
200
180 0.2
150 0.18 0.18
0.15 0.16
0.14 0.14
100 92.1 0.1
76.4 69.1 78.5
50 0.05
0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Emaar Properties PJSC Standards Emaar Properties PJSC Standards
Trend Analysis 35

ROI ROE
60.0% 14%
13%
50.0% 52.3% 12% 12%
40.0% 40.8% 10% 10%
32.9% 8% 8%
30.0% 7%
25.7% 6%
20.0% 21.2%
4%
10.0% 2%
0.0% 0%
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Emaar Properties PJSC Standards Emaar Properties PJSC Standards
Trend Analysis 36
SWOT Analysis 37

STRENGTHS WEAKNESSES
Resources and
Internal financial

Study undertaken by
an organization to
capabilities for
competitive advantage
• Products and services
• Human capital
• Intangibles
S W
elements:
• Debt
• Lack of income
• Cash deficiencies
• Features exclusive to
identify its internal your market
strengths and
weaknesses, as well as
its external External factors that
opportunities and threaten business:

O
• Income
threats. • Investments
• Debt reduction
• Interest reduction T • What competitors
do better, lower
prices, better
range of services,
etc.

OPPORTUNITIES THREATS
Conclusion about NCC Company 38

Positive

Areas for
Improvement • Liquidity
• ROI
• Debt Ratios
• net profit
margin
Conclusion about NCC Company 39

Positive

Areas for • Current Ratio


Improvement • Quick Ratio

• ROI
• ROE
Conclusion about NCC Company 40

Positive

Areas for
Improvement • ROI

• Liquidity Ratios • Gross Margin


Conclusion about NCC Company 41

Positive

Areas for
Improvement • liquidity to pay its short and long term
• Avg Collection period to be improved to obligations
stabilize the cash flow and reduce liabilities • Lower P/E is a good investment especially
• Assets performance to generate revenues with booming in construction industry
• Low payout ratio however will not effect if
there is increase in stock price
Thank you
Any Questions ?

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