The financial statements of Old Chang Kee Pte Ltd are given below: Old Chang Kee Profit & Loss for Year ending 31 March ($'000) 2019 2018 2017 89,789 85,487 78,345 (32.251) (33,249) (28,721) 57,538 52,238 49,624 Revenue less Cost of goods sold Gross Profit less Expenses Selling and distribution Administrative Other expenses Operating Profit (38,039) (35,291) (32,333) (12,892) (11,782) (11,614) (1,774) (1,791) (4,504) 4,833 3,374 1,173 Interest income Other income Profit before interest & tax 64 1,145 6,042 49 1,680 5,103 81 1,351 2,605 Share of results of joint venture less Interest expense Profit before tax (301) (329) 5,412 (76) ) (291) 4,736 (175) 2,430 less Tax Profit after tax (1,074) 4,338 (952) 3,784 685 1,745 Other comprehensive income Net profit 76 4,414 (19) (1,703) 3,765 42 Old Chang Kee Balance Sheet as at March 31 ($'000) 2019 2018 2017 Fixed Assets Property, plant Intangible assets Other investment Long term deposits Total Fixed Assets 28,453 228 394 2,568 31,643 31,560 289 525 2,434 34,808 27,571 352 273 2.024 30,220 Current assets Inventories Trade and other receivables Deposits Prepayments Other debtors Cash Total Current Assets 1,097 336 756 1,013 625 15,447 19,274 1,192 277 1,015 1,192 705 253 1,040 2.939 12,787 16,463 15,555 20,492 Total Assets 50,917 51,271 50,712 Current Liabilities Trade and other payables Other liabilities Provisions Bank loans Finance lease liabilities Provisions Total Current Liabilities 7,491 176 2390 1,430 146 1,321 12,954 7,891 170 2,398 1,430 166 697 12,752 8,252 170 2.285 4.230 117 1,129 16,183 Long Term Liabilities Bank term loans Finance lease liabilities Deferred Tax Liabilities Total Liabilities 7,748 502 1,256 22,460 9.179 506 1,336 23,773 6,032 160 963 23,338 Shareholders' Equity Retained earnings Other reserves Total Shareholders' Equity 13,964 14,398 95 28,457 13,964 13,515 19 27,498 13,964 13,372 38 27,374 Total Liabilities and SE 50,917 51,271 50,712 Other Statistics Net assets value (cents) Earnings per share (cents) Share price (cents) 27.43 4.35 78.5 28.52 4.1 75 22.55 1.44 85 (a) Based on the financial statements above compute the ratios as given in the answer template below. Use a 360-day year. Answers for all ratios to be given to two (2) decimal places, except for the profitability ratios which are to be shown as percentages to one (1) decimal place. Old Chang Kee Financial Ratios for 2017 - 2019 2019 2018 2017 Liquidity Current Ratio Quick Ratio Asset Management Inventory Turnover Average Collection Period ini Total Asset Turnover Debt Management Debt Ratio Times Interest Earned Profitability Gross Profit Margin Operating Profit Margin ini Net Profit Margin Market Value Ratios PE Market to Book (b) Answer the following questions regarding the analysis of Old Chang Kee's financial statements: (i) Interpret Old Chang Kee's liquidity and discuss whether it has any difficulty paying its creditors. (ii) Which ratios computed in part (a) suggest that the inventory level is relatively low. Briefly discuss why this is so. (iii) An analyst computed the expected earnings of the company to be $0.05. Based only on the PE ratios you have computed and the financial data given in the question, what would be a reasonable value of each share? Examine and explain. (iv) Discuss why Old Chang Kee's stock price is very much higher than its net asset value. (24 marks)
