Financial Statements Analysis and

Long-Term Planning

GROUP 1
Albarico| Aran| Erjas| Itum| Loredo| Sarmiento
 DISCUSSION POINTS
IV. The DuPont IDENTITY
I. COMPANY BACKGROUND
❑ 2GO Group Inc. (2GO) V. FINANCIAL MODELS
❑ Chelsea Holdings Logistics Inc. (CLC) ❑ Investment in new assets
❑ Harbor Star Shipping Services Inc. (TUGS ) ❑ Degree of financial leverage
❑ Cash paid to shareholders
II. FINANCIAL STATEMENTS ANALYSIS ❑ Liquidity requirements

III. RATIO ANALYSIS VI. EXTERNAL FINANCING AND GROWTH

❑ Short-term solvency or liquidity ratios ❑ Internal Growth Rate
❑ Long-term solvency or financial leverage ratios ❑ Sustainable Growth Rate
❑ Asset management or turnover ratios
❑ Profitability ratios
❑ Market value ratios VII. SOME CAVEATS REGARDING
FINANCIAL PLANNING MODELS

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 “
I. COMPANY BACKGROUND

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⊡ Started business in 1949 as
William Lines, Inc.
⊡ Consolidated with Carlos A.
Gothong Lines Inc., and Aboitiz
Shipping Corporation in 1959 to
form Willian, Gothong, & Aboitiz
Inc. (WG&A)
⊡ Changed name to Aboitiz
Transport System Corporation in
2004
⊡ Securities and Exchange
Commission approved name
change to 2GO Group Inc. in
2012
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⊡ 2GO is an integrated transport
solutions provider
⊡ flagship brand for three main
business units - 2GO Freight,
2GO Travel, and 2GO Supply
Chain
⊡ currently, 2GO has four direct
subsidiaries
⊡ total fleet of 26 passenger &
freight vessels, 22 port of calls,
and 18,135 containers
⊡ Holding company for shipping and
logistics business of the Udenna
Group of Companies
⊡ Established in August 2016 after the
acquisition of Chelsea Shipping
Corporation (CSC) from Phoenix
Petroleum Philippines
⊡ Acquired Davao Gulf Marine
Services Inc., in December 2016
⊡ Expanded business to acquire
Starlite Ferries Inc., and Worklink
Services Inc in 2017
⊡ debuted in the Philippine Stock
Exchange via an IPO in 2017,
raising approximately Php 5.8M
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⊡ regarded as the biggest shipping
and logistics company in the
Philippines, operating in major ports
across the country
⊡ services offered include Maritime
Transport Services, Maritime
Auxiliary Services, Port Services,
Logistics and Forwarding, and
Courier Services
⊡ total fleet of 88 vessels including 30
passenger vessels, 11 fast crafts,
16 cargo ships, 12 tankers, 14
tugboats, and 4 barges. They also
have a floating dock
⊡ Began in 1998 with only one tugboat
in the fleet
⊡ obtained an Integrated
Management System Certification
from Det Norske Veritas in 2009
⊡ the only domestic tugboat company
with a triple certification for ISO 9001
for quality; ISO 14001 for
environment; and OHSAS 18001 for
occupational health and safety
⊡ expanded services to include
lighterage to cater logistical needs for
the mining and cement industries
in 2012
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⊡ widest coverage of turboat services in
the country, exclusive harbor assist
provider of the Manila International
Container Terminal
⊡ internationally recognized as a ship
salvor in 2012 and has the largest
private inventory of salvage and oil
spill equipment deployed in Manila,
Batangas, Cagayan de Oro, Cebu,
Davao, and General Santos
⊡ common shares were listed in the
Philippine Stock Exchange in 2013
⊡ fleet size of 42 watercraft, comprising
of tugboats, barges, and specialized
vessels
 “
II. FINANCIAL STATEMENTS
ANALYSIS

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❑ Common Size Analysis is a tool used to analyze financial
statements, by expressing each line item as a percentage
of the base amount
❑ Allows investors to identify drastic changes in a company’s
financial statements over a two to three year period
❑ Also an excellent tool to compare companies of different
sizes within the same industry

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❑ Two types of commons size analysis - Balance Sheet
and Income Statement
❑ Balance Sheet Common Size Analysis uses a
company’s total assets as the base value. This shows how
a firm’s capital structure compares to its rivals.
❑ Income Statements Common Size Analysis uses a
company’s total sales and revenues as the base value. It
is used to show revenue health and make predictions for
future revenue

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 2017 - 2017 - 2016 - 2016 -
2018 2018 2017 2017

2018 2018 2017 2017 2016 2016 Amou % Amou %

perce perce perce nt nt
ntage ntage ntage

ASSETS

Current Assets

Cash and cash 9% 13% 9% -34% 48%

equivalents 1,387 2,095 1,412
,128 ,850 ,380 (708,7 683,4
22) 70

Trade and other 27% 27% 27% -7% 4%

receivables- net 4,097 4,428 4,240
,691 ,276 ,360 (330,5 187,9
85) 16

Inventories - net 4% 3% 4% 13% -18%

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⊡ Analysis/application to
companies

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⊡ Analysis/application to
companies

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 “
III. RATIO ANALYSIS

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❑ Financial Ratios are ways of comparing and
investigating the relationships between
different pieces of financial information.

❑ Ratios also allow for better comparison

through time or between companies.

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 CATEGORIES OF FINANCIAL
RATIOS
❑ Short-term solvency or liquidity ratios
❑ Long-term solvency or financial leverage
ratios
❑ Asset management or turnover ratios
❑ Profitability ratios
❑ Market value ratios

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 Computing
Liquidity Ratios
Measures the firm’s ability to pay its bills
over the short run without undue stress

⊡ Current Ratio: Analysis:

Current Assets
● All 3 companies’ results not far from
Current Liabilities each other at 0.79, 0.64, and 0.78,
respectively

● There was a significant increase for

Company/Year
2018 2017 2016 CLC from its 2016 current ratio
compared to 2017, attributable to the
2GO 0.79 0.70 0.68 company’s listing of its shares in the
stock exchange
C 0.64 0.92 0.40
● TUGS had the most consistent
TUGS 0.78 0.85 0.75 current ratio

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 Computing
Liquidity Ratios

⊡ Quick (Acid-Test) Ratio: Analysis:

Current Assets- Inventory
Current Liabilities

Company/Year
2018 2017 2016

2GO 0.56 0.53 0.53

C 0.19 0.39 0.22

TUGS 0.65 0.69 0.66

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 Computing
Liquidity Ratios

⊡ Cash Ratio: Analysis:

Cash
Current Liabilities

Company/Year
2018 2017 2016

2GO 0.12 0.22 0.25

C 0.20 -0.36 -0.09

TUGS 0.24 0.51 0.34

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 Computing
Financial Leverage
Ratios
Measures the firm’s long-run ability to meet
its obligations

⊡ Total Debt Ratio:

Analysis:
Total Assets – Total Equity
Total Assets

Company/Year
2018 2017 2016

2GO 0.85 0.78 0.75

C 0.60 0.50 0.85

TUGS 0.56 0.44 0.45

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 Computing
Financial Leverage
Ratios
⊡ Times Interest Earned:
EBIT
Interest

Company/Year
2018 2017 2016

2GO -4.21 -0.62 1.12

C 0.21 1.17 1.80

TUGS 1.70 1.50 0.85

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 Computing
Financial Leverage
Ratios
⊡ Cash Coverage:
EBIT + (Depreciation and Amortization)
Interest

Company/Year
2018 2017 2016

2GO -3.85 -0.16 1.92

C -0.80 0.09 0.83

TUGS 3.22 4.44 2.89

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 Computing Asset
Management
Ratios or intensively, a
Measures how efficiently,
firm uses its assets to generate sales
⊡ Inventory Turnover:
Cost of Goods Sold
Inventory

Company/Year
2018 2017 2016

2GO

TUGS

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 Computing Asset
Management
Ratios
⊡ Day’s Sales in Inventory:
365 Days
Inventory Turnover

Company/Year
2018 2017 2016

2GO

TUGS

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 Computing Asset
Management
Ratios
⊡ Receivables Turnover:
Sales
Accounts Receivable

Company/Year
2018 2017 2016

2GO 5.37 4.87 4.49

C 3.62 4.46 1.73

TUGS 3.43 3.55 3.16

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 Computing Asset
Management
Ratios
⊡ Days’ Sales in Receivables: Analysis:
365 Days
Receivables Turnover ● C had the longest collection period
averaging 130 days over the 3-year
period
Company/Year
2018 2017 2016 ● sdsd
● 2GO and TUGS had the most
consistent average collection period
2GO 67.97 74.95 81.29
with the former averaging 75 days
and the latter 107 days
C 100.83 81.84 210.98

TUGS 106.41 102.82 115.51

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 Computing Asset
Management
Ratios
⊡ Total Assets Turnover: Analysis:
Sales
● 2GO had relatively the highest total
Total Assets asset turnover which is at least
$1.22 indicate that the Group is able
to generate sales effectively for
Company/Year
2018 2017 2016 every dollar ●
spentsdsd
in assets.

● C had the lowest sales generated at

2GO 1.46 1.31 1.22
$.15, $.15, and$.16 from 2016-2018,
respectively.
C .16 .15 .15

TUGS .36 .49 .40

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 Computing
Profitability Ratios

⊡ Profit Margin: Analysis:

Net Income ● 2GO’s gross profit margin is

relatively low since 2016, plunging to
Sales a negative value in 2018, due to high
cost of services and goods sold.
● C gross profit margin gradually
Company/Year
2018 2017 2016 decreased over● the
sdsd
3-year period
years due to increased cost of
2GO -4.35% 1.68% 5.70% services and recognition of income
from construction contracts
9.99% 13.23% 13.53% ● TUGS profit margin increased from
2016-2018 due to increased Sales
TUGS 14.06% 14.60% 13.19% and decreasing cost of services.

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 Computing
Profitability Ratios

⊡ EBITDA Margin: Analysis:

EBITDA
● All three companies have positive
Sales EBITDA margins which indicate
relatively healthy operations over the
3-year period.
Company/Year
2018 2017 2016 ● sdsd
● C and TUGS, though gradual
decrease in EBITDA margin is seen,
2GO 5.27% 10.25% 9.57%
appears to be more desirable than
2GO with only 5.27% in 2018.
C 28.46% 33.18% 46.15%

TUGS 31.03% 33.93% 33.78%

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 Computing
Profitability Ratios

⊡ Return on Assets: Analysis:

Net Income
● 2GO and C’s ROA plunged to
Total Assets -8.95% and -1.70 respectively. This
seems to suggest that both
companies are making minimal to no
Company/Year
2018 2017 2016 profit at all over
● the course of the
sdsd
period.
2GO -8.95% -1.88% 2.19% ● TUGS appears to have the most
neutral ROA compared to its peers.
C -1.70% 0.61% 1.22%

TUGS 3.06% 3.82% 2.39%

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 Computing
Profitability Ratios

⊡ Return on Equity: Analysis:

● 2GO had significant decreases in
Net Income ROE he business loses more money
Total Equity than it brings in and experiences a
net loss
● C had a decline in the return on
equity ratio when the Company
Company/Year
2018 2017 2016 infused additional capital but this did
● sdsd
not translate immediately yet into
2GO -59.98% -8.52% 8.76% revenue.
● TUGS showed positive values
across the years, with Return on
C -4.38% 1.23% 8.44%
Equity following an increasing trend
as the company is able to generate
TUGS 6.93% 6.80% 4.36% more earnings from its increasing
investment activities.

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 Computing Market
Value Ratios
Evaluates the current share price of publicly
traded companies
⊡ Price-Earnings Ratio:
Analysis:
Price Per Share
Earnings Per Share ● Price-Earnings ratio suggests that
investors see C to have significant
Company/Year
prospects for future growth hitting a
2018 2017 2016 P/E ratio mark of 73.33 times.
● sdsd
2GO -148.31 54.50 172.00 ● TUGS showed a stable increasing
trend over the years which shows
C 73.33 - - the investor’s trust on the company’s
ability to further grow as loosely
TUGS 39.91 22.25 14.75 speaking, it can carry a PE multiple
of 40 in 2018.

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 Computing Market
Value Ratios

⊡ Market-to-Book Ratio: Analysis:

Market Value Per Share
Book Value Per Share ● All firms had a relatively no to zero
market-to-book ratio which could
mean that they have not been
successful in●overall
sdsd creating a value
Company/Year
2018 2017 2016 for their stockholders with C hitting
the highest value in 2018 at .78
2GO - - - mark.

C .78 .76 6.22

TUGS .76 .76 .76

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 Computing Market
Value Ratios

⊡ Enterprise Value Multiple: Analysis:

Enterprise Value
● 2GO had the highest Enterprise
EBITDA Value Multiple thanC and TUGS at .
16, .03, and .06 times in 2018,
respectively. This shows a positive
Company/Year
2018 2017 2016 perspective ●whensdsd
estimating the
value of the firm’s total business
rather than just focusing on its
2GO .16 .36 1.5
equity, compared to its peers.
C .03 .24 .11

TUGS .06 .05 .05

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 “
IV. The DuPont IDENTITY

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❑ General Concepts of the topic

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⊡ Analysis/application to
companies

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 “
V. FINANCIAL MODELS

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General Concepts of the topic

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⊡ Analysis/application to
companies

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 “
VI. INTERNAL &
SUSTAINABLE FINANCING
AND GROWTH

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 Internal Growth Rate

❏ Maximum rate of growth in sales assets that a company can

achieve using retained earnings.

❏ It is an important parameter for companies since they can measure

their ability to grow their business without seeking external help
(debt or equity).

Internal Growth Rate = Retention Ratio x ROA

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 Internal Growth Rate in
2018

2GO has the highest IGR among the three companies. It can achieve a 6% increase in
sales and assets without obtaining any external funding. However, the company’s
investors might not be satisfied with just 2.02% growth and may look for external
financing.

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 Sustainable Growth Rate
❏ Maximum growth rate which a company can achieve keeping their
capital structure intact and can sustain it without any additional
debt requirement or equity infusion.

❏ This is the growth rate which a company can sustain without

putting additional money from its pocket or from taking a loan.

Internal Growth Rate = ROE x Retention Rate

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 Sustainable Growth Rate

2GO still has the highest SGR among the three companies. Since sustainable growth rate
allows for external financing but only in the proportion of its current capital mix, the
sustainable growth rate is higher than the internal growth rate.

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 “
VII. SOME CAVEATS
REGARDING FINANCIAL
PLANNING MODELS

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➔ Financial planning models do not
always ask the right questions.
They tend to rely on accounting
and not financial relationships.
➔ The three basic elements tends
to get left name
◆ cash flow size
◆ risk
◆ timing
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➔ Financial planning models
sometimes do not produce
output that gives the user
meaningful clues about what
strategies will lead to increase in
value
➔ In conclusion, financial planning
is an iterative process. Plans are
created, examined, and modified
continuously.
 THANKS
!

Any questions?

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