Industry: Logistics

Muhammad Taha

Presented to
Mam Seeham Yousaf
Financial Statement Analysis
Spring 2020
Lahore School of Economics
Contents
Company History.............................................................................................................................2
Mission Statement.......................................................................................................................2
Vision Statement..........................................................................................................................2
Shareholding....................................................................................................................................2
Common Size Analysis....................................................................................................................3
Balance Sheet...............................................................................................................................3
Income Statement........................................................................................................................4
Cash Flow Statement...................................................................................................................4
Comparative Analysis......................................................................................................................4
Balance Sheet...............................................................................................................................4
Income Statement........................................................................................................................5
Cash Flow Statement...................................................................................................................5
Ratio Analysis..................................................................................................................................5
Liquidity Ratios...........................................................................................................................5
Profitability Ratios.......................................................................................................................6
Solvency Ratios...........................................................................................................................6
Asset Utilization and Efficiency Ratios.......................................................................................6
Market Value Ratios....................................................................................................................7
Percentage Change and Trend Percent............................................................................................7
Additional Data................................................................................................................................8
ROCE...........................................................................................................................................8
Industry Analysis.............................................................................................................................8
Competitor Analysis........................................................................................................................9
Liquidity......................................................................................................................................9
Solvency....................................................................................................................................10
Market Value.............................................................................................................................10
Discussion and Recommendations................................................................................................11
Conclusion.....................................................................................................................................11

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Company History
TPL Trakker Ltd has been operational in Pakistan with their core offering since 1999 since they
received their first vehicle tracking license. Ever since then, TPL Trakker has been a pioneer in
the GPS tracking industry in Pakistan. Trakker provides reliable end-to-end solutions for
individuals, commercial fleets, businesses and automotive industry suppliers. TPL Trakker is in
the business of providing superior quality GPS, GSM & Satellite Mobile Asset Tracking
Management and Information Solutions. Their portfolio includes Car Tracking Units, Software,
Operational and Project Management Expertise, Deployment, Data Evaluation, and Consultancy.
Over a short span of time, TPL has established itself as a true regional player, by securing
presence in Pakistan as well as internationally. They are the only vehicle tracking company to be
assigned a long-term financial status rating of A- by the Pakistan Credit Rating Agency Limited
(PACRA).

Mission Statement
Interestingly, the mission statement of the company has varied over the years. From 2017, when
their mission was “In continuation of the vision to be the best of the best in everything and
anything we do and setting benchmarks for outside.” They shifted to “To use disruptive
technology to maximize Stakeholder return and achieve sustainable growth for our portfolio
companies,” in 2019.

Vision Statement
The company vision is to “Creating value through digital transformation.” The company lays a
lot of emphasis on continuous innovation and moving in the direction of using the latest and
most advanced technologies available.

Shareholding
The data below shows the number of shares owned by different business categories and their
percentages. Most of the shareholding is done by associated companies which include TPL
Holdings (Pvt) Limited, which holds the most number of shares and Trustee TPL Direct
Insurance Limited – employees provident fund owns a few shares too which is basically set up to
get a return from the shares in the name of an employee and that return is given to them after
they retire. The second largest category of shareholders is the local general public, and the rest
just share a very small percentage of shares in the company.

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 Shareholder’s Category Number of shares Percentage of shareholding
Associated Companies 166,680,748 62%
Banks, DFI & NBFI 10,880,500 4%
Insurance Companies 35,000 0.01%
Mutual Funds 3,305,500 1%
General Public (Local) 77,767,627 29%
General Public (Foreign) 3,499,640 1%
Others 5,000,748 2%
Modarabas 128,000 0.05%
Total 267,297,763 100

Common Size Analysis

Balance Sheet
The common size balance sheet was taken with total assets and sum of total liabilities and equity
which is essentially the same value as the denominator for this calculation. The aim is to find out
where the company is putting most of its money and what type of liabilities are mostly faced by
them.
67.45% of TPL’s assets are non-current assets. The number has decreased from 71.01% in 2014
and reached its peak to 79.89% in 2015. Out of that percentage, over 30% has been coming from
Investment property from 2015 till 2018. The property, plant and equipment has remained fairly
constant throughout the 5 years with very little fluctuations however there was no particular
trend of an increase or decrease in this case. Intangible assets saw a sharp decline from 2014 to
2015 but then the fluctuations were minimal.
Coming to the current assets, Trade Debts make up most of the portion of the current assets with
a 5-year average of 10.52. Short term investments spike up to 8.01% from 2.54% in 2018. The
company is looking towards making short term investments in the future too since the percentage
remains fairly similar in 2019 too.
With liabilities, the company has had a higher percentage of current liabilities as compared to the
non-current liabilities in 2018 only. For all the other years, the non-current liabilities were
higher. This happens due to a spike in the value for the current portion of the non-current
liabilities and underwriting provisions. Which means that a higher percentage of their non-
current liabilities were due in 2018.

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Income Statement
For the income statement, sales have been taken as a denominator to show what percentage of
the sales is going where.
A major chunk of the sales is in the Cost of Goods which consistently make up over 50% of the
total sales which leaves us with a gross profit as a percentage of sales of consistently about 43-
45%. The administrative expenses increased by 10% from 2016-2018 because the company was
hiring more employees during these years. Finance cost hiked in 2015 from 2014 and has stayed
fairly consistent with little fluctuation over the next 4 years with the highest value in 2016. The
net income after tax is 19.13% of the sales in 2018, constantly improving from 2016 when it had
experienced a decline from 2015. Their cost of goods sold however are very high, and lowering
those could lead to a higher net income.

Cash Flow Statement

In the common size cash flow statement, sales were taken as a denominator to see what
percentage of cash is from sales.
Operating activities generate 24% of the cash as percentage of sales in 2018. Before that, in the
previous two years, there was a cash deficit from operating activities.
Except for 2015, throughout the 5 years, there was an outflow of cash from Investing activities.
In 2015 they disposed off TDIL which led to an influx of cash in investing activities.
Cash flow from financing activities was highly positive in 2018, because long-term financing
went up from about 10% to above 40%. The borrowing had to be done to support the investing
activities that were taking place alongside, due to which the overall cash available for the
company was -11.1% in 2018. This number had only been positive in 2017.

Comparative Analysis
Balance Sheet
The comparative statements will help us figure out how certain components of the financial
statements, have changed compared to the previous years. It provides us with a comparison from
within the industry.
For TPL, the property, plant and equipment has fluctuated each year without any trend.
Intangible assets have increased however, consistently each year. The jump from 2017 to 2018
was a pretty huge one. Total non-current assets saw a sharp increase in 2015 of over a 100%
after which the percentage change was lower but still kept increasing each year. Total-current
assets have constantly been going up by over 40% each year.
Total Equity has also kept increasing each year seeing the largest increase in 2015, and then even
though the weight of the increase was not as high, it was still an increase nevertheless.

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Looking at liabilities, total non-current liabilities increased by a whopping 200% in 2015 after
which it experienced a decrease until 2017, but the decrease was not very huge in terms of
percentage, 7% at max. Total current liabilities have also increased each year and went up by
131% in 2018.

Income Statement
We see that except in 2016 when sales for the company declined, there was a general increasing
trend each year. But sales went up by 60% in 2018 because the company also bought in some
new offerings that started to sell, but with that, the Cost of Goods sold also went hand in hand.
But due to the administrative expenses increasing in 2017 and 2018, with over a 100% increase
in 2018, the operating profit decreased sharply. However, the overall Net Income after taxes
increased by 140% in 2018 because of the sharp increase in other income that year as well.

Cash Flow Statement

For the cash flow statement, we will look at only the three main components that totals the net
cash flows. Cash flows from operating, investing and financing activities.
Cash flows from operations was decreasing from 2015 till 2018, with the sharpest decrease
coming from 2016 by over 3900%. That is a very sharp decrease as compared to previous years.
Overall, although the cash from operations was generally a positive value, the trend across years
shows that it is significantly decreasing each year.
The net cash from investing activities has also seen a decrease each year and the percentage
decrease are increasing each month in magnitude with the largest decrease of 65% in 2018.
Cash flow from financing activities has increased each year. The largest increase came in 2016
by over 79%, but overall, the trend is that it has increased albeit with a fluctuating magnitude.

Ratio Analysis
Liquidity Ratios
The short-term liquidity of any company is very important. TPL has generally been doing okay
in terms of liquidity. Their current ratio as well as the quick ratio has on average remained
greater than which means they have enough assets to pay off their liabilities in the short run.
However, when we look at their turnover ratios for inventory, receivables and payables, there’s a
few caveats to be found in those ratios. The average inventory turnover has been 4.9 times per
year. Which means they sell their inventory almost 5 times each year and almost once in every
two months. This ratio on paper is pretty good and we’ll further see how it reflects compared to
their competitors.
Coming to their receivable’s turnover ratio, they have been getting back their receivables at an
average of 2.43 times each year. That means that they only receive their receivables almost twice
each year which is reflected in the receivable collection period which has been on average 151
days.

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The Accounts Payable Turnover has an average of about 1.9, which again seems very low. The
days purchases in accounts payable has an average of 223 days which means they are taking very
long to pay back their suppliers. So, if you are a supplier looking to go into business with this
company, this is something to be kept in mind.

Profitability Ratios
The company’s return on sales has been 14% on average which is pretty good. The company is
surely not incurring losses, and conducting healthy business activities to achieve this
profitability. Their gross profit margin has been 45% on average but a lower operating margin of
about 15-16% on average. We see that in current operations the company is not doing
particularly well, even in terms of cash flows. However, this is also because they are not staying
still but rather striving hard and constantly investing which has led them to profitability. They
also have a pretty decent ROA and ROE. Their total assets are giving them a return of 3.19% on
average despite the company having a lot of investment property in their assets. The return on
equity has been about 7% on average showing that the equity is translating to net income by that
amount. Their RNOA has an average of over 8% so with every 1 rupee increase in Net operating
assets, the NOPAT is going up 0.08 rupee.

Solvency Ratios
The company is pretty heavily reliant on its liabilities with a liability to equity ratio greater than
one. I also calculated the debt to equity ratio separately later on to find out the average was about
60% which is okay since the company approximately has a 60-40 debt to equity structure.
However, the company would have problems covering up their liabilities with their equity so
they need to bring in more equity by selling more shares to bring down that ratio. The total
leverage has also been about 72.6% on average which is pretty high, since the company is bound
by leverage and it could affect them adversely in the future in terms of the way they go about
their business. Their times interest earned, although decreasing, still has an overall average of
1.03 which means that on average, they are earning their interest at least once. However, in the
more recent years the ratio has dropped down to 0.38 which means their interest expense has
gone higher than their EBIT.

Asset Utilization and Efficiency Ratios

Their total sales to assets ratio have been 25% on average showing that their assets are
contributing to 25% of the total sales. The Sales to NWC ratio has been 19.66 on average which
shows that the sales have been way higher than the Net Working Capital available for the
company. The sales to fixed asset ratio has been pretty high with an average of 74% which is
because the company does not have a large number of fixed assets, resulting in a higher average.

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Market Value Ratios
The earnings per share has been consistently low for the company. Which in turn leads to a very
high price earning ratios. This shows us that the company shares are overvalued at an average of
79.14 rupees. If you are an investor, then it is very important to know whether you would be
getting any dividends in the company whose shares you are investing in. in the case of TPL, they
have not paid dividends in any year until 2018, and also paid in 2019. This could also be because
up until 2018, the company did not put a lot of focus on paying back the shareholders, and most
of the shares belonged to the subsidiary company of TPL Trakker Ltd. However, with a change
in the mission statement, the company is now also focusing on maximizing shareholder’s return,
which seems like a good sign for the future, but for this analysis, the company hasn’t been doing
very well in the recent past when it comes to dividends.

Percentage Change and Trend Percent

The percentage change analysis was conducted to check by how much the account changed from
the 2014 to 2018. Starting from Total Assets, it increased by 255.97% from 2014 which shows a
good sign for TPL that they are increasing their size of operations by such a huge amount while
Trade Debt increased by 112%. The Property, Plant and Equipment of TPL increased by 227.84%
over the five years which has increased the capacity of TPL over the years. The Long-Term
Investments made by TPL decreased by 100%. Short-term investments increased by 59448.33%.
The Total Liabilities of TPL increased by 360.57% because they had started rely a lot on debt.
And the similar analysis can be done for the short-term borrowing as we observe, it goes up by
1097.66%. Equity has increased by 173% from 2014 figure which is proof how they are changing
their capital structure. Sales have gone up by 66.52%. Their operating expenses have steeply
risen by 2033% which shows their administrative efficiency has worsened but their net income
has also increased by 400%. This is because they kept expanding business each year along with
which the Net income kept increasing.
This particular analysis was conducted to check by how much the respective account increased
or decreased compare to its value in 2014. Starting with total assets, they increased for all the
years with the sharpest increase coming in 2015. The trade debts also increased consistently. The
Property, Plant and Equipment is continuously increasing over the years and becomes only
decreases in 2016. Next is Short-Term Investment which again shows a positive trend in 2015,
but in 2016 it decreased after a steep increase in 2015. The Long-Term investments were
increasing in the first 4 years and went to zero in 2018. The Total Liabilities were only negative
in 2016 and for the rest of the years an increasing trend was observed. Short term and long term
financing both went up except for in 2017 when they decreased. In case of Equity, it shows a
positive trend and is increasing over the years consistently. Sales also kept increasing except for
2016. The cost of sales along with sales also kept increasing each year except for 2016 since both
Sales and Cost of Sales go hand in hand. The total operating expenses increased the highest in
2018 and that was primarily because the operating expenses in the income statement was highest
only in that very year. Net Income also kept increasing each year except for 2016 where it saw a
slight decrease.

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Additional Data
The company’s Free cash flows were negative from 2015-2017 and the cash measure ratios have
been consistently around 0.2. Which means that the company does not keep a lot of cash to
themselves but rather invest in assets that would bring a return which is a good thing.

ROCE
The company’s ROCE is positive in all years except for 2018 when the NFR was greater than
RNOA since the RNOA declined so sharply for that year. The return on common equity average
however has been close to the industry average.

Industry Analysis
Now we’ll be looking at the industry analysis of the most important ratios that will help in the
decision making of whether it is viable to invest in this company or not.

Profitability TPL Industry Liquidity TPL Industry

Trakker Average and Trakker Average
Solvency

Return on 14% -24.23% Current 1.17 8.70

Sales Ratio

Operating 15.95% -25.75% Quick Ratio 1.03 8.57

Profit
Margin

ROA 3.11% -3.12% Operating 4.93 33.14

Cycle

ROE 7.53% 20.53% L/E(capital 1.03 0.18

structure)

RNOA 8.43% -1.34% Times 1.04 1.94

Interest
earned

We can see that the company is doing pretty well with most of the ratios when we look at the
industry average for profitability with the exception of ROE which was lower than the industry
average. When it comes to short term liquidity, the company does not seem to be on par with the
industry average albeit, still pretty decent in performance. The solvency ratio is way higher than

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the industry average. The company has to include more equity in their financing to come on par
and avoid becoming insolvent.

Asset TPL Industry Market TPL Industry

Utilization / Trakker Average Value Trakker Average
Efficiency

Total Asset 0.25 0.60 Earnings per 0.32 2.41

turnover share

Net Working 19.70 5.68 Dividend 0.00055 13.09

Capital yield
turnover

Fixed Asset 0.74 0.92

turnover

Coming to the efficiency ratios, NWC Turnover is very high as compared to the industry, other
than that, the company is pretty lower than the industry average.

Competitor Analysis
Liquidity

TPL Trakker
PNSC Ltd PIBTL PICT PIA

Current Ratio 2.52 1.17 37.63 2.01 0.16

Quick ratio 2.36 1.03 37.62 1.67 0.14

Inventory
Turnover
Cycle (days) 3.90 4.93 97.77 23.04 36.04

Current Ratio and quick ratio are highest for PIBTL. They became operational in 2018 which
meant they had fewer liabilities. Inventory Turnover cycle is lowest for PNSC but very
closely followed by TPL Trakker and is highest for PIBTL but that could also be due to the
fact that they have lesser amount of inventory. Current ratios greater than 1 indicate the

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 company is able to meet its short-term obligations even though it is lesser than most
competitors.

Solvency

TPL
Trakker
PNSC Ltd PIBTL PICT PIA

Capital
Structure
(L/E) 0.33 1.03 0.56 1.04 -2.07

Total
Leverage 2.09 0.73 -0.07 2.61

Times
Interest
Earned 6.80 1.04 -0.31 0.20 1.98

Debt to Equity ratio is very high for TPL Trakker, since they are heavily reliant on debt. PNSC is
doing best in this regard. Interest Earned is lower than industry most companies as well.

Market Value

TPL Trakker
PNSC Ltd PIBTL PICT PIA

Earnings per
Share (EPS) 16.21 0.32 -0.33 0.11 -4.25

Price Earning
Ratio 6.21 79.15 488.85 216.66 -2.65

Dividend
yield 66.00 0.0005 0.00 0.00 -0.54

EPS has been consistently low throughout the 5 years. Price to Earnings ratio, although not the
highest still shows that the company is being overvalued since stock prices are significantly
larger than the EPS. Dividend yield is very low, the company gave no dividends until 2018.

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Discussion and Recommendations
A few points need to be taken into consideration. The company is heavily financed through its
debt and the debt to equity exceeds the normal range. The company’s debt as well as finance cost
are both increasing. Short term liquidity however, even though not as high as industry average,
which was disrupted by a relatively newer company with fewer liabilities, is still good enough
and greater than 1. No dividends had been paid until 2018, but the company’s mission shifted in
2018 and catering to their shareholders became part of their core mission 2018 onwards. Return
on Sales, Operating Profit Margin, ROA, RNOA considerably higher than the industry average
which could prove to be a good sign for stakeholders in future especially since the change in
mission and direction. RNOA takes a dip in 2018 because NOPAT reduced significantly for that
year due to an increase in Administrative Expenses. They hired more during the year. The ratio is
expected to increase because they are further diversifying their product portfolio and constantly
innovating. ROCE also higher than industry average due to a good RNOA. The company needs
to use more of equity financing however to balance the capital structure.

Conclusion
Every company envisions growth, but not all of them are able to pull it off. TPL Trakker’s best
attribute in this case is that they are not afraid to experiment with new technology. It has paid off
for them in different ways since they became the number one tracker providers in Pakistan after
signing contracts with banks and car companies to use their tracker by default. So, every car sale
meant the installation of TPL Trakker’s core offering. The overall economy has been bad over
the years for Pakistan and this sector as a whole is not the best one to invest in, generally since
there are other sectors that could yield a higher return for your investment. But if you as an
investor believe in the future of this industry, TPL is the best option to invest in for the future.
PNSC even though it has better ratios for the short run, they have constantly been shrinking in
size since their Property Plant and equipment was decreasing each year, whereas TPL is
constantly investing and getting a positive net income which yields the dividends. So, I feel it
would be fruitful to invest in this company overall with comparison to this industry, since it has a
reputable past and a good promising future.

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