Executive Summary

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<p>Financial Statement Analysis ... ()</p> <p> .. </p> <p> 5202110010 5202110051 5202110085</p> <p> 5202110184</p> <p>5202110168</p> <p> Financial Statement Analysis ... ()</p> <p> .. </p> <p> 5202110010</p> <p> 5202110051 5202110085 5202110168 5202110184</p> <p> .611 1 2553 </p> <p>Securities Analysis</p> <p>M.C.S. Steel Public Company LimitedExecutive SummaryMCS MCS 2552 2551 63% </p> <p>RECOMMENDATION: BUYMarket Price @ 30/12/09 (Bt): 4.30 Intrinsic Price (Bt) : 9.79</p> <p> Q 1 2553 1 2 3 (in millions Bt) Sales EBITDA Net Income EPS DPS 2553 4,301 845 583 1.17 0.58 2554 4,558 867 557 1.11 0.56 2555 4,824 889 570 1.14 0.57</p> <p>4 2556 5,098 910 582 1.16 0.58</p> <p>5</p> <p>6 2558 5,672 950 605 1.21 0.60 5.41 % 17.2 2%</p> <p>7 2559 5,972 969 615 1.23 0.62 5.28 % 16.1 2%</p> <p>8 2560 6,279 987 625 1.25 0.63 5.15 % 15.1 4%</p> <p>9 2561 6,594 1,004 634 1.27 0.63 5.02 % 14.2 8%</p> <p>10 2562 6,917 1,020 643 1.29 0.64 4.90 % 13.5 0%</p> <p>2557 5,381 931 594 1.19 0.59 5.55 8.99% 5.99% 5.84% 5.69% Sales Growth % 28.24 23.73 21.67 19.95 18.4 ROCE % % % % 8%</p> <p>Valuation</p> <p>Metho d DCF DDM RIM</p> <p>Intrinsic Price 8.00 Bt 6.54 Bt 9.79 Bt</p> <p>1 2552 ( 6.6%) 2553 2553 13.1% 1.272 2554 5.3% 13.1% 2553 8.2% 19.1% 26.5% </p> <p> 1.34 32.9% 18.9% </p> <p> 2554 1 Appendix A - 1</p> <p> MCS2 2552 63% 1 2553 86.47% 253.50 1,064 3 MCS 3.3 69%QoQ ( 3 4) 67%QoQ </p> <p> 4 3/53 4 4 </p> <p> MCS</p> <p>- - Economies of Scale - </p> <p> 2 Appendix A - 2</p> <p> MCS </p> <p>- - </p> <p> (Financial Ratio Analysis) Mill Consteel Industries3 Liquidity Ratio Current Ratio 1 MSC Mill 2552 MSC Current Ratio 6 2551 Account Receivable Turnover 2552 2552 Ratio Mill 2551 Ratio Inventory Turnover Mill MCS Mill MCS Work in Process Mill MCS MCS MCS Supplier Mill3 Appendix A - 3</p> <p>Efficiency Ratio Total Asset Turnover Mill MCS Inventory Turnover Mill MCS Solvency Ratio MCS (Interest-bearing Debt) Debt-to-Equity Ratio Interest coverage ratio MCS Mill MCS Mill</p> <p>Profitability Ratio</p> <p> MCS Mill Gross Profit Net Profit Mill ROCE 2552 2551 ROOA 2552 2551 23.62% 18.18% + (RNOA ROOA) + 14.28% + 10.72% + (ROCE RNOA) - 2.01% - 0.39% = ROCE = 35.89% = 28.52%</p> <p> ROCE 2552 2551 (Return with no leverage) (Effect of operating liability) 2552 2551 (Financial Liabilities) Financial Liabilities (Notes Payable) 2552 ROCE MCS Mill 2552 ROOA + (RNOA + (ROCE = ROCE ROOA) RNOA) MCS52 Mill52 23.62% 6.25% + 14.28% - 0.15% - 2.01% + 2.68% = 35.89% = 8.78%</p> <p> ROCE 2 ROCE MCS Mill MCS Mill </p> <p>Forecasting4 Sales growth Forecast Fixed assets growth Gross profit margin Turnover 5 25 2010 Dividend payout ratio 50 </p> <p>Assumption</p> <p>Valuation Models Discounted Cash Flow 3,708,097 ,730 + Investment 290,635,1 03 3,998,732 ,833 500,00 0,000 8.00 4.30</p> <p>Risk-free Rate Market Risk Premium Leveraged Beta Corporate Tax after 2010 Tax Rate for 06-10 WACC = Cost of equity Long-term Growth Rate Dividend Payout ratio</p> <p>4.85% 6.90% 0.726 0 30.00 % 25.00 % 9.86% 1.00% 50%</p> <p>VF0</p> <p> Number of Outstanding Shares Recommended Share Price Actual Share Price DCF4 Appendix B - 1 5 Appendix B - 2</p> <p>Recommendation</p> <p>BUY</p> <p>Discounted Dividends (VF0) 3,267,678 Residual Income Model Model Forecasti Residual Income ,156 4,892,532,9 Number of 500,000,0 83 Outstanding Shares 00 Number of 500,000,00 Recommended Outstanding Shares 0 Share Price 6.54 Recommended Actual Share Price Share Price 9.79 DDM 4.30 Actual Share Recommendation BUY RIM Price 4.30 Recommendation BUY</p> <p> Forecast Accounting Principle6 Non-Recurring Forecast</p> <p>Forecasted Income Statement2010 Sales COGS Gross Profit SGA 2011 2012 2013 2014 2015 2016 2017 2018 2019 4,300,63 4,558,03 4,823,99 5,098,45 5,381,30 5,672,44 5,971,75 6,279,09 6,594,33 6,917,30 5,574 2,077 8,214 4,086 5,659 5,446 3,224 6,794 2,755 7,314 (3,040,5 (3,264,3 (3,497,7 (3,740,6 (3,993,0 (4,254,9 (4,526,2 (4,806,8 (5,096,6 (5,395,4 14,723) 44,044) 28,199) 53,618) 87,467) 78,216) 56,269) 34,684) 09,943) 62,790) 1,260,1 1,293,6 1,326,2 1,357,8 1,388,2 1,417,4 1,445,4 1,472,2 1,497,7 1,521,8 20,851 88,033 70,015 00,469 18,192 67,230 96,955 62,110 22,812 44,524 (415,153 (426,212 (436,947 (447,334 (457,356 (466,992 (476,227 (485,045 (493,433 (501,380 ,892) ,788) ,105) ,990) ,280) ,540) ,090) ,021) ,192) ,226)</p> <p>EBITD 844,966 867,475 889,322 910,465 930,861 950,474 969,269 987,217 1,004,2 1,020,4 A ,959 ,245 ,910 ,478 ,912 ,690 ,865 ,089 89,620 64,298 DEP&amp; AMO EBT (67,649, (71,206, (74,843, (78,558, (82,348, (86,207, (90,133, (94,121, (98,168, (102,269 255) 005) 700) 918) 086) 498) 334) 671) 505) ,765) 777,317 796,269 814,479 831,906 848,513 864,267 879,136 893,095 906,121 918,194</p> <p>6 Appendix B - 3</p> <p>,704 Tax</p> <p>,240</p> <p>,210</p> <p>,561</p> <p>,826</p> <p>,191</p> <p>,531</p> <p>,418</p> <p>,115</p> <p>,533</p> <p>(194,329 (238,880 (244,343 (249,571 (254,554 (259,280 (263,740 (267,928 (271,836 (275,458 ,426) ,772) ,763) ,968) ,148) ,157) ,959) ,625) ,334) ,360)</p> <p>Net 582,988 557,388 570,135 582,334 593,959 604,987 615,395 625,166 634,284 642,736 Income ,278 ,468 ,447 ,592 ,678 ,034 ,571 ,793 ,780 ,173 DIV Paid (291,494 (278,694 (285,067 (291,167 (296,979 (302,493 (307,697 (312,583 (317,142 (321,368 ,139) ,234) ,723) ,296) ,839) ,517) ,786) ,396) ,390) ,086)</p> <p>Acc. To 291,494, 278,694, 285,067, 291,167, 296,979, 302,493, 307,697, 312,583, 317,142, 321,368, R/E 139 234 723 296 839 517 786 396 390 086 EPS 1.17 1.11 1.14 1.16 1.19 1.21 1.23 1.25 1.27 1.29</p> <p>Sensitivity Analysis Assumption Sensitivity 1. Long-term growth rate base 1% 0%, 2%, 3% compound rate 10 Forecast</p> <p>2.</p> <p>3.</p> <p>Weighted Average Cost of Capital MCS Cost of Equity 9.8594% base -20%, -10%, +10% +20% 7.8875%, 8.8735%, 10.8453% 11.8313% Dividend payout ratio 50 50% base +10%, +20%, +30% +40% 55%, 60%, 65% 70% WACC= 7.8875% WACC= 8.8735% DPR= 50% DPR= 55% DPR= 60% DPR= 65% DPR= 70% DPR= 50% DPR= 55% DPR= 60% DPR= 65% DPR= 70% LTGR= comp $ 10.30 $ 11.15 $ 12.01 $ 12.87 $ 13.73 $ 9.03 $ 9.78 $ 10.53 $ 11.28 $ 12.03 LTGR= 0% $ 9.44 $ 10.23 $ 11.01 $ 11.80 $ 12.59 $ 8.42 $ 9.11 $ 9.81 $ 10.51 $ 11.20 LTGR= 1% $ 10.18 $ 11.03 $ 11.88 $ 12.73 $ 13.58 $ 8.95 $ 9.69 $ 10.44 $ 11.18 $ 11.92 LTGR= 2% $ 11.17 $ 12.10 $ 13.04 $ 13.98 $ 14.92 $ 9.64 $ 10.44 $ 11.25 $ 12.05 $ 12.85 LTGR= 3% $ 12.56 $ 13.62 $ 14.68 $ 15.74 $ 16.79 $ 10.56 $ 11.45 $ 12.33 $ 13.21 $ 14.10 LTGR= comp $ 7.48 $ 8.23 $ 8.98 $ 9.73 $ 10.48 $ 7.01 $ 7.71 $ 8.41 $ 9.11 $ 9.81 LTGR= 0% $ 7.07 $ 7.77 $ 8.48 $ 9.19 $ 9.90 $ 6.63 $ 7.29 $ 7.95 $ 8.61 $ 9.28 LTGR= 1% $ 7.45 $ 8.19 $ 8.94 $ 9.68 $ 10.42 $ 6.97 $ 7.67 $ 8.37 $ 9.06 $ 9.76 LTGR= 2% $ 7.92 $ 8.71 $ 9.51 $ 10.30 $ 11.09 $ 7.40 $ 8.14 $ 8.89 $ 9.63 $ 10.37 LTGR= 3% $ 8.53 $ 9.39 $ 10.24 $ 11.09 $ 11.95 $ 7.96 $ 8.76 $ 9.56 $ 10.35 $ 11.15 LTGR= comp $ 9.32 $ 9.64 $ 10.00 $ 10.39 $ 10.82 $ 9.09 $ 9.38 $ 9.71 $ 10.06 $ 10.45 LTGR= 0% $ 10.19 $ 10.54 $ 10.88 $ 11.22 $ 11.57 $ 9.88 $ 10.20 $ 10.51 $ 10.82 $ 11.13 LTGR= 1% $ 10.41 $ 10.79 $ 11.16 $ 11.54 $ 11.91 $ 10.09 $ 10.43 $ 10.77 $ 11.11 $ 11.45 LTGR= 2% $ 10.69 $ 11.11 $ 11.52 $ 11.93 $ 12.35 $ 10.34 $ 10.72 $ 11.09 $ 11.47 $ 11.85 LTGR= 3% $ 11.05 $ 11.52 $ 11.98 $ 12.45 $ 12.91 $ 10.67 $ 11.09 $ 11.52 $ 11.94 $ 12.36 DPR= 50% $ 8.06 $ 7.60 $ 8.00 $ 8.50 $ 9.14 $ 6.57 $ 6.22 $ 6.54 $ 6.93 $ 7.44 $ 8.87 $ 9.60 $ 9.79 $ 10.02 $ 10.32 WACC= 9.8594% DPR= 55% DPR= 60% DPR= 65% DPR= 70% $ 8.72 $ 9.39 $ 10.05 $ 10.71 $ 8.23 $ 8.85 $ 9.48 $ 10.10 $ 8.66 $ 9.32 $ 9.98 $ 10.64 $ 9.20 $ 9.90 $ 10.61 $ 11.31 $ 9.90 $ 10.66 $ 11.42 $ 12.18 $ 7.22 $ 7.88 $ 8.54 $ 9.19 $ 6.84 $ 7.46 $ 8.09 $ 8.71 $ 7.19 $ 7.84 $ 8.50 $ 9.15 $ 7.63 $ 8.32 $ 9.01 $ 9.70 $ 8.19 $ 8.93 $ 9.68 $ 10.42 $ 9.14 $ 9.43 $ 9.76 $ 10.11 $ 9.88 $ 10.17 $ 10.45 $ 10.74 $ 10.10 $ 10.41 $ 10.72 $ 11.03 $ 10.36 $ 10.70 $ 11.05 $ 11.39 $ 10.70 $ 11.09 $ 11.47 $ 11.86</p> <p>DCF</p> <p>DDM</p> <p>RIM</p> <p>DCF</p> <p>DDM</p> <p>RIM</p> <p>WACC= 9.8594% WACC= 10.8453% DPR= 50% DPR= 55% DPR= 60% DPR= 65% DPR= 70% DPR= 50% DPR= 55% DPR= 60% DPR= 65% DPR= 70% LTGR= comp $ 8.06 $ 8.72 $ 9.39 $ 10.05 $ 10.71 $ 7.28 $ 7.88 $ 8.47 $ 9.07 $ 9.66 LTGR= 0% $ 7.60 $ 8.23 $ 8.85 $ 9.48 $ 10.10 $ 6.93 $ 7.50 $ 8.07 $ 8.63 $ 9.20 LTGR= 1% $ 8.00 $ 8.66 $ 9.32 $ 9.98 $ 10.64 $ 7.24 $ 7.83 $ 8.42 $ 9.02 $ 9.61 LTGR= 2% $ 8.50 $ 9.20 $ 9.90 $ 10.61 $ 11.31 $ 7.61 $ 8.23 $ 8.86 $ 9.48 $ 10.11 LTGR= 3% $ 9.14 $ 9.90 $ 10.66 $ 11.42 $ 12.18 $ 8.07 $ 8.74 $ 9.40 $ 10.07 $ 10.74 LTGR= comp $ 6.57 $ 7.22 $ 7.88 $ 8.54 $ 9.19 $ 6.97 $ 6.78 $ 7.40 $ 8.02 $ 8.63 LTGR= 0% $ 6.22 $ 6.84 $ 7.46 $ 8.09 $ 8.71 $ 5.85 $ 6.43 $ 7.02 $ 7.60 $ 8.19 LTGR= 1% $ 6.54 $ 7.19 $ 7.84 $ 8.50 $ 9.15 $ 6.14 $ 6.75 $ 7.36 $ 7.98 $ 8.59 LTGR= 2% $ 6.93 $ 7.63 $ 8.32 $ 9.01 $ 9.70 $ 6.17 $ 7.15 $ 7.80 $ 8.45 $ 9.10 LTGR= 3% $ 7.44 $ 8.19 $ 8.93 $ 9.68 $ 10.42 $ 6.50 $ 7.66 $ 8.36 $ 9.06 $ 9.75 LTGR= comp $ 8.87 $ 9.14 $ 9.43 $ 9.76 $ 10.11 $ 8.67 $ 8.92 $ 9.18 $ 9.48 $ 9.80 LTGR= 0% $ 9.60 $ 9.88 $ 10.17 $ 10.45 $ 10.74 $ 9.34 $ 9.60 $ 9.85 $ 10.11 $ 10.37 LTGR= 1% $ 9.79 $ 10.10 $ 10.41 $ 10.72 $ 11.03 $ 9.51 $ 9.79 $ 10.07 $ 10.35 $ 10.64 LTGR= 2% $ 10.02 $ 10.36 $ 10.70 $ 11.05 $ 11.39 $ 9.72 $ 10.03 $ 10.34 $ 10.66 $ 10.97 LTGR= 3% $ 10.32 $ 10.70 $ 11.09 $ 11.47 $ 11.86 $ 10.00 $ 10.35 $ 10.70 $ 11.05 $ 11.40</p> <p>DPR= 50% $ 6.65 $ 6.38 $ 6.62 $ 6.90 $ 7.24 $ 5.80 $ 5.51 $ 5.77 $ 6.10 $ 6.53 $ 8.49 $ 9.10 $ 9.25 $ 9.45 $ 9.70</p> <p>WACC= 11.8313% DPR= 55% DPR= 60% DPR= 65% DPR= 70% $ 7.19 $ 7.73 $ 8.27 $ 8.81 $ 6.90 $ 7.42 $ 7.93 $ 8.45 $ 7.15 $ 7.69 $ 8.23 $ 8.77 $ 7.46 $ 8.02 $ 8.59 $ 9.15 $ 7.84 $ 8.43 $ 9.02 $ 9.62 $ 6.38 $ 6.96 $ 7.54 $ 8.12 $ 6.06 $ 6.61 $ 7.16 $ 7.71 $ 6.35 $ 6.92 $ 7.50 $ 8.08 $ 6.71 $ 7.32 $ 7.93 $ 8.54 $ 7.18 $ 7.84 $ 8.49 $ 9.14 $ 8.71 $ 8.95 $ 9.22 $ 9.51 $ 9.33 $ 9.56 $ 9.80 $ 10.03 $ 9.51 $ 9.76 $ 10.02 $ 10.28 $ 9.73 $ 10.01 $ 10.30 $ 10.58 $ 10.02 $ 10.34 $ 10.65 $ 10.97</p> <p> best case Long-term growth rate 3%, Weighted Average Cost of Capital -20% Dividend payout ratio +40% Long-term growth rate terminal value Weighted Average Cost of Capital Dividend payout ratio Change in Net Working Capital Discounted Cash Flow Model Dividend Discounted Model Residual Income Model DDM Dividend discount RIM Capital charge abnormal return Worst case Long-term growth rate 0% DCF DDM RIM compound rate </p>