Let's go back to the today topic, SAPIND (7811), Fundamental Analysis 2 - Financial Condition and Profitability.
Part 1 : Financial Condition
Based on the last seven years data (2005 to 2011), the current ratio maintained around one, the acidic or quick ratio also maintained around 0.8, and the cash ratio also maintained around 0.2. However, it is worth to highlight that although the working capital also maintained around 4.8million, the net income to working capital ratio increased from 88% (2008) to 432% (2011). That was the reason why SAPIND able to give 14sen + 13.8sen (proposed) in 2011 fiscal year.
Next, although both current and quick ratios did not improve, the Leverage value indicated that SAPIND only 13% (2011) of the profit was used to pay interest compared to 29% (2008). Receivables turnover was also healthy with average collection period of 72 days (2011).
Personally, the financial condition did not consider excellent. This was a tough decision. The SAPIND, on the one hand, want to take care the benefit of shareholders (dividend), on the other hand, want to maintain its business operation. Therefore, the current financial condition of SAPIND can be considered optimum to compromise both the benefit of shareholders and the group. Of course, SAPIND is capable to improve those ratio (current ratio, quick ratio etc) by using the 13.8 sen dividend per share. I believe the chairman is confident toward the group future to make such bonus for SAPIND's shareholders without affecting its business operation.
Maybe the current ratio did not very attractive. Historically data indicated that the company profitability did not be affected.
Part 2: Profitability
Obviously, the all the profitability indicators, such as Profit margin, ROE, and ROA, were improved after the lost in 2007. Example, ROE (Return of Equity) improved significantly from 8.53% (2008) to 26.53% (2011). Operation ratio is the ratio of operational expenses to total revenue. What we can see is without increase the fixed cost per sales, SAPIND is able to increase its profitability. This is in line with the company business's stratragies as stated in last post.
After investigating both the financial condition and profitability of SAPIND, I will continue the last fundamental analysis about the SAPIND in terms of its intrinsic value. That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage.
Written by: Xaivier Chia