Hello everyone, we are the group of me Thạch, Hiển, Trung and anh Chương.

We are
going to present the case 26: Star River Electronics
First, we will briefly summarize the case. Star River is a large manufacturer and supplier
of CD-ROMS based in Singapore. It has enjoyed a great deal of success in the past, due
in large part to their excellent reputation for producing high-quality discs. But due to
recent emerge of Digital Video Disks (DVDs) Star River Electronics does need to face
some problems. The conditions got worsen with the recent resignation of their former
CEO.
Here is the summary of financial questions facing Koh:
 Historical performance of Star River Electronics Ltd. assessment and positive and
negative insights
 Financial forecast of Star River Electronics Ltd. ’s performance for next 2 years
(2002 and 2003)
 Estimate weighted average cost of capital (WACC)
 Assess the new packaging machine investment
For Historical performance of Star River. assessment and positive and negative insights,
after we assess historical ratio analysis in Exhibit 3 and financial statements during the
period, we highlight some insights of overall financial health of the company.
For the positives, there are some main things to highlight: the increase in ROA and ROE,
the continued high growth rate for sales and assets, and the high current and quick ratios.
 The ROE increased from 11.7% in 2000 to 15.2% in 2001.
 Additionally, the ROA increased from 3.0% to 3.9%.
 However, ROA is still below its 1999 and 1998 level.
 Sales continuously grew (11.4% in 1999, 15.6% in 2000, and 14.5% in 2001),
however earnings did not grow with sales.
 Company managed to stay profitable over the past five years.
 Company issued dividends to shareholders on a consistent basis.
For the negatives, we would highlight the increase in debt and interest expense. A
significant weakness of the company lies in the fact that it needs to borrow money for
current operations. In addition, the cash shortage problem could stem from the fact that
the company is having a hard time collecting payments from customers, which would
help lower interest expenses if collected more efficiently. These when combined with the
need for capital expenditure (new packaging equipment) may be too much for the
company to handle. Overall, the company’s financial position is precarious. They are
taking on too much debt while making large capital expenditures. Star River’s financial
health is relatively weak and can become weaker if it decides to borrow money to acquire
new equipment.