HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

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FINANCIAL MANAGEMENT PROJECT

BIBICA AND HAIHACO FINANCIAL ANALYSIS

Lecturer: Mr.Nguyen Xuan Truong

Tutor: Mr.To Ha Minh
Tutorial: 08 – Saturday, 7h20 a.m
Submission date: 25/05/2020

Group’s member Class Student ID

Nguyễn Bảo Ngọc 2K-18 1804000074
Vũ Thị Thu Ngà 1K-18 1804000071
Thân Thị Thu Hiền 1K-18 1804000035
Lê Văn Linh 2K-18 1804000058
 TABLE OF CONTENTS
Executive summary..................................................................................................................1

1. Introduction.......................................................................................................................2

2. Performance appraisal.....................................................................................................4

2.1. Companies strengths and weaknesses.........................................................................4

2.2. Suggestions.....................................................................................................................7

2.3. Dupont model application.............................................................................................7

2.4. ROE changes prediction...............................................................................................8

3. Financial activities............................................................................................................8

4. Valuation..........................................................................................................................11

5. Recommendation................................................................................................................13

REFERENCES.......................................................................................................................15

APPENDICES........................................................................................................................16

APPENDIX A......................................................................................................................16

APPENDIX B.....................................................................................................................18
Executive summary

An analysis of financial statements for the ending year 2019 of two companies Bibica and
Haihaco is provided in this essay. The main purposes are to evaluate the strengths and
weaknesses in financial management of two firms and then compare financial situation of a
company with its competitor. Then, this research can come to clusion whether Bibica and
Haihaco have strong financial management capacity and development potential of the company
in the future. The assessment process includes 4 mains parts: introduction, performance
appraisal, financial activities,valuation and recommendation. The results indicate Haihaco’s
value is greater than Bibica; however, Bibica holds a more sustainable and stronger financial
resource and a lower investment risk than Haihaco.

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1. Introduction

Bibica was first established in 1993, the company started to produce confectionery with three
production lines: candy chains imported from Europe, Biscuits confectionery lines based on
British APV technology, and malt chains with enzyme hydrolysis technology and ion exchange
for the first time in Vietnam were imported from Taiwan. Confectionery products of the
company were quickly distributed to all provinces and cities across the country and have been
highly appreciated by consumers for quality. Meanwhile, Haihaco was instituted much earlier
than its competitor, founded in 1960, Haihaco has had almost 60 years of striving and growing.
The company has continuously grown and accumulated much experience in production and
business. Having an experienced leadership team, good business strategy, a team of highly
trained specialized engineers and a skilled workforce of Hai Ha Confectionery Joint Stock
Company has steadily stepped up and developed. Haihaco is on their way of development to
maintain the prestige and quality worthy of the trust of consumers.

In order to achieve enormous success in the past few years, both companies have their own
gifted chief executive officers. Mrs.Bui Thi Thanh Huong, CEO of Haihaco, the 48 years old
business woman has claimed lots of favorable outcomes in her career. In 2018, she officially
became the CEO of Haihaco and ended the power crisis of the company resulting from the
divestment earlier. Much ink has been spilled over papers for the presence of Haihaco’s CEO.
Mr.Truong Phu Chien, started his career with Bibica from the beginning of the company since
1999 and attained huge success becoming the Chairman of Bibica in 2003; however, he also took
the responsibility of a CEO for Bibica in 2008 resulted in the demotion of becoming Vice
Chairman then. After years of hard-work, he took over the seat of Chairman of the Board in 2018
and remained. Devoted for Bibica for nearly half of his life, his effort is somehow repaid with
the compensation of 120.000.000VND per year. Indeed, this is a worthy reward for his
dedication. However, the success of the company was built not only by the scope of its CEO but
also depends on many other talented brains in the Board of Directors. Bibica’s Board of
Directors is now running with 5 members which are Mr.Truong Phu Chien as the Chairman of

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the company, Mr. Kim Jun Yeon, Mr.Vo Ngoc Thanh, Mr.Nguyen Khac Hai, and Mr.Jung Woo
Lee. Meanwhile, Mr.Jung Woo Lee, once was the Chairman of Bibica from 2013 to 2018 until
being demoted by Mr.Chien later on in 2018 and working as a independent member of Bibica at
the present. Regarding the share percent, Mr.Jung Woo Lee, Mr. Nguyen Khac Hai, and Mr. Kim
Jun Yeon are holding 0 percent. Followed by 0,01% and 0,02% of Mr.Truong Phu Chien and
Mr.Vo Ngoc Thanh. For Haihaco, there are 4 incumbent members on the Board which are Mr.Le
Manh Linh, Ms.Bui Thi Thanh Huong, Ms.Vu Thi Thuy, and Mr.Nguyen Manh Tuan, while
other 4 members have been dismissed on April 29, 2019 including Mr. Tran Anh Thang, Ms.Luu
Thi Tuyet Mai, and Ms.Nguyen Thi Lan.

Looking at the individual shares of those who are in the BOD, Mr.Le Manh Linh sitting behind
the biggest desk as the Chairman of the Board holding 817,000 shares individually. In addition,
Mr.Nguyen Manh Tuan has been working as a member of BOD for 4 years and holds 141,800
shares. As the rest of the Board, 0 is the share of Ms Bui Thi Thanh Huong and Mrs.Vu Thi
Thuy.

In order to connect those talented brains within the organization, an efficient board structure is
vital. The Board of Haihaco starts from the General Meeting of Shareholders, which is the
highest authority of the company. Next, is the Administrative Council, responsible for deciding
all issues related to the purpose of the Company's interests, except those decided by the General
Meeting of Shareholders. In addition, it’s also known as the orientation of existing and
development policies. The lower level of the Board is Supervisory Board on behalf of
shareholders to control all business activities, management and administration of the company.
Board of Management, a function board which consists of one General Director, three Deputy
General Directors and one Chief Accountant. Lastly, Functional Departments have the
commission to perform professional functions and duties assigned by the Board of Management.
It can be seen that the structure of Haihaco was based on a standard business structure when
Bibica was quite similar with the top of the chain is the General Meeting of Shareholders.
Followed by the Administrative Council which is responsible for defining the vision and
leadership of the general strategy, plans, and goals of Bibica. The lowest level in the Board is
Supervisor Board, which is the board that works with the Board of Directors and the Board of
Management to make independent and impartial assessments.

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On purpose of getting to know more about the structure of these companies, the insiders and
outsiders will be put on the discussion. For Haihaco, its insiders includes Mr.Le Manh Linh and
Mrs.Bui Thi Thanh Huong, in the meantime, Mr.Truong Phu Chien, Mr.Kim Jun Yeon, and
Mr.Yung Woo Lee are the insiders of Bibica. Moving on to the outsiders of the company, Mr.Vo
Ngoc Thanh and Mr.Nguyen Khac Hai are 2 outsiders of Bibica. Besides, outsiders of Haihaco
are Ms.Vu Thi Thuy and Mr.Nguyen Manh Tuan.

Jumping into a new area of the company which is the status of shareholders, there are 3 main
types of shareholders: Block shareholders, Individual shareholders, and Institutional
shareholders. Firstly, for Haihaco, domestic individual shareholders occupied 91.59% with
15,043,564 shares, and there’s 0.08% of foreign individual shareholders with 13710 shares. The
domestic and foreign institutions holding 8.06% and 0.27% of the shares respectively. Since
2016, Vietnam National Tobacco holds 51% with 8,376,750 shares and became the biggest block
shareholders of Haihaco. For Bibica, its block shareholders are involved by 2 enterprises which
are Pan Food joint stock company with 7.720.577 shares equal 50,07% and Lotte Confectionery
Co.tld with 6.789.730 shares equal 44,03%. In contrast, the individual shares of Bibica is quite
low which is about 8% compared to more than 90% of Haihaco. However, the institutional
shareholders of Bibica captured 92% of the shares. Continue with the stock symbol and the
market price of these companies. It is declarable that the market price of Haihaco is
tremendously higher than Bibica with 101,000 VND and 43,750 VND respectively. The stock
symbols that were chosen by Haihaco and Bibica are HHC and BBC. The trading volume of the
2 companies also has a big difference when the volume of Haihaco nearly double than that of
Bibica with 2903 shares and 1500 shares. Viewing the media coverage of Haihaco and Bibica, a
conclusion can be made which is these 2 companies. The last will be discussed about in this part
is the market capitalization. The market capitalization of Haihaco indicates that Haihaco has a
way bigger scale than Bibica with 1658.93 billion VND while the market capitalization of Bibica
is just around 676.97 billion.

1. Performance appraisal

2.1. Companies strengths and weaknesses

To assess the companies’ performances, 5 categories of ratios which are liquidity, assets

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management, debt management, probability and market value will be calculated and analysed to
highlight the weaknesses and strengths of 2 companies.

Firstly, liquidity is computed to understand the firms’ abilities to pay off debt.

Liquidity Bibica Haihaco Industry

ratio
2017 2018 2019 2017 2018 2019

Current 1.41 0.94 0.74 0.49 0.11 0.20 2.12

ratio

Quick 2.07 1.50 0.98 0.49 0.63 0.47 1.44

ratio

As we can see from the table above, Bibica’s datas were around 2 times higher than Haihaco’s
ones; however, the similarity between two corporations was that datas were expected to decrease
and be much lower than the industry average. This weak liquidity position indicated that 2 firms
may have weaknesses in struggling to pay short-term obligations.

Next, to evaluate the company's efficiency in using its assets, asset management ratio will be
examined.

Asset management Bibica Haihaco Industry

ratio Unit 2017 2018 2019 2017 2018 2019
Times 8.56 9.68 9.39 7.23 6.86 8.12
Inventory turnover 6.43

Times 5.62 6.01 7.28 6.39 4.64 4.93

Fixed asset 3.00
turnover

Times 1.19 1.20 1.06 1.70 1.29 0.97

Total asset 1.41

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 turnover

From an overall perspective, it can be seen that Bibica still received a greater figure in inventory
turnover than Haihaco did. In addition, the statistics from 2 firms were above industry average
which showed strong sales and good business performances overall. Similar to the previous
ratio, 2 corporations illustrated higher fixed asset turnover ratios (7.28 and 4.93) than the
industry average (3.00). With the increasing trend in this figure, Bibica presented that the
company had less money tied up in fixed assets for each unit of sales and the ability to generate
income was developing In contrast to Bibica, there was a gradual decline in datas of Haihaco that
may indicate an over investing in the property, plant or equipment. On the other hand, the table
also demonstrated the weaknesses of both firms in total asset turnover ratio which measures how
much revenue a company generates from every dollar of the total assets. The ratios of Bibica and
Haihaco dropped overtime by 0.13 and 0.73 respectively, and below that amount of industry
(4.41). A low total asset turnover can indicate many problems. The firm may have unsold
inventory and may be finding it difficult to sell it fast enough. There could be a problem with
receivables, as the firm may have a long collection period.

Thirdly, profitabilities ratios will be calculated to show how profitably the firm is operating and
utilizing its assets.

Ratio Bibica Haihaco Industry

2017 2018 2019 2017 2018 2019

Operatin 9.15% 8.92% 7.32% 4.87% 5.32% 4.67% 4.53%

g margin

ROE 11.88% 11.94% 9.51% 9.92% 9.50% 9.91% 11.93%

ROA 9.01% 9.23% 6.26% 6.66% 4.00% 3.78% 6.84%

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Operating margin indicates the operating profit per dollar of sales. Bibica and Haihaco both had
higher ratios than the industry average. In addition, Bibica almost doubled the figure of Haihaco
with 7.32% and 4.67% respectively. This demonstrated that 2 companies had great abilities to
control and limit operating costs to increase profits; however, 2 firms may face problems with
the decreasing trend in the ratios. Next elements are ROE and ROA. As we can see, there were
similarities between 2 companies that the statistics from 2017 to 2019 declined and were lower
than that of industry. It presented the weaknesses in producing revenue by assets and equity.
Moreover, it can be indicated that 2 firms were having too much debt, which may lead to high
interest costs and relatively low net income.

Lastly, market value will be estimated to determine which brings in the stock price and what
investors think about the firms and their prospects.

Ratio Bibica Haihaco Industry

2017 2018 2019 2017 2018 2019

P/E 14.84 10.33 9.4 24.86 46.38 51.87 13.60

P/CF 1.06 0.76 0.6 7.07 5.03 9.26 1.26

M/B 1.67 1.17 0.89 4.61 4.91 3.93 2.51

From the above table, 3 indicators related to valuation ratios of Haihaco were higher than that of
Bibica and industry. This illustrated that with strong financial, efficient operation, and effective
capital management, Haihaco attracted more investors and its shares were valued to be more
appreciated and had more potential. On the other hand, since Bibica did not have many projects
in 2019, the firm reduced its cash flow value and showed the weakness in gaining investment
interest. 2.2. Suggestions

After analyzing strengths and weaknesses of Bibica and Haihaco, some solutions are provided in
order to enhance the values of the firms. The first suggestion is using long-term debt to finance
businesses instead of short-term debt. Long-term debt benefits the smaller monthly installments

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and lower interest rates. The handling of short-term debt from the balance sheet allows for a
better current ratio and liquidity ratio. Next, the firms should know the life cycle of each asset,
from purchase to disposal to predict how long the company can use each asset. This will make it
easier to determine the best time to perform property maintenance. Moreover, the firms can
optimize idle capital to increase income. In addition, taking most of the credit capital of financial
institutions, accessing cheap capital are many other ways to increase the capital sources to meet
needs of the company. Lastly, if the companies want to improve the sales activities, they can
restructure sales strategies and models, combine with professional partners and take advantage of
available resources to deepen sales activities and product development.

2.3. Dupont model application

To understand more about the ROE, this assignment has used Dupont model application for ROE
analysis.

Bibica Haihaco Industry

Unit 2017 2018 2019 2017 2018 2019

ROE % 12.4 12.6 9.51 10.0 11.0 9.91 11.93

Profit % 7.6 7.7 6.3 3.9 4.0 3.9

margin

Total Times 1.2 1.1 1.0 1.6 1.0 1.0 1.37

assets
turnover

Equity Times 1.4 1.4 1.6 1.4 2.5 2.6

multiplier

There was a contrast in ROE trend between two firms. While Bibica’s ROE was higher than

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average (11.93% - 2017-2018 period), lower than average (12.4,12.6,9.51) and tended to
decrease stably, that of Haihaco was not only at lower level than the average, but also had an
unstable growth. Although the profit margin of Bibica almost doubled than the figure of
Haihaco, 2 companies witnessed the same steady reduction trend. The decline in profit (2018-
2019) is mainly due to the decrease in revenue from financial activities due to payment of
investment projects. The firms may run at full capacity into existing factories, increase
depreciation costs as well as increase selling expenses due to focus on marketing activities for
new products. In the total assets turnover, similarity statistics were recorded between Bibica and
Haihaco. They both received a low down trend due to the exceed assets in 2017, 2018 and 2019.
The last factor is equity multiplier. From the table, it can be seen that the figures of 2 firms
improved regularly, and the data of Haihaco was approximately two thirds to that of Bibica.
Overall, we can conclude that Bibica uses capital inefficiently because ROE is low and
decreases. In addition, the company’s stock prices in the period of 2017-2019 declined, prices
were low and unpopular. Meanwhile, Haihaco's financial ratios do not change much compared to
2018, except for the solvency ratios. Because the Lunar New Year in 2020 was earlier than every
year so the company operated using the deferred sales policy to encourage sales to promote the
consumption of Tet products, so the company's debt collection was slower than in previous
years. ROE can also be affected when businesses buy treasury shares, reducing the number of
outstanding shares and reducing equity.

2.4. ROE changes prediction

In order to increase ROE, we need to reduce the rate of increase in cost and increase the rate of
revenue growth, as above, now we will not apply sales on credit anymore but pay off, profit will
promptly return to cover fixed cost. According to current policies, Haihaco is on the right track
for ROE growth, which is to improve techniques to reduce costs and increase product quality,
thereby increasing selling prices. then the profit will enhance. On the other hand, Bibica can
study the effects of price increases, contact distributors and agents to find ways to cut selling
costs. Introducing new product lines with higher profit margins will help to improve profit
margin. Moreover, the financial staff can analyze the effects of alternative debt policies, show
how changes in leverage would affect both the expected ROE and the risk of bankruptcy. By
doing this Bibica can keep the debt ratio stable, not too high and strengthen ROE.

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2. Financial activities

As for financial activities, in 2019, both Bibica and Haihaco did not have big projects and
continue to maintain production and business policies and strategies instead of investing in any
major projects.

Bibica performs four main activities: sales, manufacturing, product development, capital
exploitation. About sales activities, Bibica has flexibly cooperated with its distribution
companies, developed specific sales strategies for each distribution channel and promotion
programs for key product lines. The second activities are production activities, Mien Tay factory
was put into stable operation in April 2019 with high production capacity to save production
costs. Third, the company has developed two brands Lurich and Roppy; promote R&D (research
and development) and plan to build R&D centers in factories. The final activity of the company
is capital exploitation by optimizing idle capital sources to increase income.

Haihaco has also maintained four sales activities, manufacturing, product development that are
the same as Bibica and export activities. The company has expanded Haihabakery systems under
the affiliate sales program; continued to improve distribution channels, especially modern sales
channels; invested in high-tech confectionery production lines in order to increase production
efficiency; replaced the old products with top quality products and eye-catching packaging. In
addition to serving domestic demand, Haihaco also promotes commodity exports to make up for
the difficulties of the domestic market.

The activities of the two companies are for the common purpose of sustainable development,
focusing on diversifying and improving product quality, improving and overcoming obstacles.
By the end of 2019 and early 2020, due to negative effects of the Covid 19 epidemic, businesses
in general and two companies Bibica and Haihaco in particular have been facing difficulties and
suffered losses in the first quarter of 2020. Therefore, two companies first need to compensate
for the losses by continuously maintaining production and business policies and strategies
instead of investing in any major projects because of insufficient funds, high interest expenses,
and the translation has not yet completely ended, so investing in projects may encounter high
risks. In the future it is predicted that Bibica and Haihaco will not have big projects.

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Regarding the IPO, BIBICA Corporation was listed on Ho Chi Minh Stock Exchange (HOSE)
under License No.10/GPPH issued by the State Security Commission of Vietnam on November
16th, 2001 with the transaction code of BBC. At the first day of Stock trade on December 19 th,
2001, the closing price for the first trading session was 27,000 VND and the first listed volume
was 5,600,000 shares which is approximately accounted for 1/3 of the company's current listed
shares with 15,420,782 shares. Turning to HAIHA Confectionery JSC, the company was
incorporated pursuant on Hanoi Stock Exchange (HNX) to License No.312/QD-TTG DHN on
November 8th, 2007 with the stock symbol of HHC. Twelve days later, the company's shares
were first traded on the HOSE with the first trading day price of 73,000 VND and the first listed
volume of 5,475,000 shares which is approximately the same as Bibica’s first listed volume of
shares.

Bibica’s source of capital is mainly from issuing common shares, not preference shares and
selling them on the stock market. In 2019, this company released 15,420,782 shares. In recent
years, it has a tendency to utilize equity rather than borrowing for investment, so the company
continuously issues shares to raise capital to meet its set targets. According to the Financial
report of Bibica in 2019, organizations and individuals that hold the most Bibica’s shares can be
exhibited on the table below:

Organizations/ Individuals Number of shares Percentage shareholding

PAN Food Manufacturing.Jsc 7,720,577 50.07%

Lotte Confectionary Co.Ltd 6,789,730 44.03%

Polunin Discovery Funds – Frontier 224,620 1.46%

Markets Fund

Haihaco has raised capital from three main sources including bank loans, bonds and stocks. The
company has short-term and long-term loans at Bank for Foreign Trade of Vietnam
(Vietcombank) – Thanh Cong Branch and Sai Gon Thuong Tin Commercial Joint Stock Bank
(Sacombank) – Thang Long Brand with the purpose of supplementing working capital, investing

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in building factories. Another capital source of Haihaco is bonds. The company issued bonds to
EVN Finance Joint Stock Company, the number of 200 bonds did not convert, face value of 1
billion dong / 5-year bond, maturity date was on October 16 th, 2023, in order to fund EVN to
invest in expanding the production line of equipment to serve production and business activities.
Collaterals are assets of EVN. Additionally, Haihaco issued common shares to raise capital. In
2019, the company issued 16,425,000 common shares, which is more than Bibica did.

Bibica Corporation is using little debt. It is clear evidence that the debt-to-equity ratio of the
company was about 50% in 2019, increased by 10% compared to 2018. The company has not
had a large investment demand for projects, so it maintains a considerable amount of cash. This
factor shows the strong financial structure of Bibica. Besides, it did not borrow from banks; the
company did not suffer from the fluctuation of interest rate. On the other hand, Haihaco uses a
lot of debt. It can be seen that the debt-to-equity ratio of the company is 107.37% in 2019, a
decrease compared to the figure in 2018 (112.40%) but still always greater than 100%.
Compared to Bibica, Haihaco's debt-to-equity ratio is twice as high as Bibica. The assets of the
business are mainly financed by debt.

4. Valuation

Bibica’s free cash flow in 2019 is 35,962,728,010 VND, which is positively good. This positive
FCF proves a high measurement of a company’s financial performance and health. Bibica has
had a large amount of cash generated after accounting for cash outflows to support operations
and maintain its capital assets.

On the contrary, Haihaco had a negative free cash flow (-121,545,206,549 VND). A negative
value indicates that the company did not generate enough revenue to cover costs and activities
like operation, manufacturing, sales,…

As for growth rate and sales growth rate, in 2019, Bibica reached 7.52% of growth rate and
12.8% sales growth rate while Haihaco had its growth rate and sales growth rate with 9.52% and
6.8% respectively.

Neither two companies will repeat their growth rate and sales growth rate because the
complicated situation of the Coronavirus disease has affected consumer purchases, resulting in a

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considerable drop in sales revenue that also directly influences to the profits of both companies
in the first quarter of 2020. According to the first quarter financial report of 2020 cited in Dau tu
Online, Bibica's profit after tax decreased by 90% compared to the same period last year. As a
consequence, ROE of the company in 2020 will probably continue to decline because of low
revenue, while the company still has to maintain operations, expenditure for operating costs and
management costs, etc…However, when the Vietnamese economy is gradually recovering from
the epidemic, Tet holiday will stimulate demand for confectionery products. Moreover, Bibica
has a policy of putting Mien Tay factory into stable operation with high wattage by 2020, which
helps Bibica to utilize raw materials to produce a huge quantity of products and minimize
production costs as well. In short, Bibica's revenue will plummet in the first half of 2020, and
only increase slightly at the end of the year when the shopping demand of people rises.

As regards Haihaco, in the first quarter of 2020, the company had net sales of 179 billion VND,
reduced by 18% in the same period last year. Gross profit was 11.7 billion VND, less than 1/3 of
39.7 billion VND recorded in the first quarter of 2019.As a result, in the first quarter of 2020,
Haihaco suffered a loss of VND 9.6 billion VND. In 2020, Ha Ha Confectionery targets to reach
revenue of 1,070 billion VND and profit before tax of 55.45 billion VND. With the results
achieved in the first quarter, it is far away from the profit target assigned to the whole year (Dau
tu Viet Nam, 2020).

About capital structure, a large amount of cash and abundant cash flow for business activities
help the company have a strong financial structure. Bibica has no debt, all liabilities are capital
tie-up, welfare bonus funds and tax obligations to the State. The company issue more equity.
Therefore, when there is a new project, for example the construction of Mien Tay factory,
investing 200 billion VND in a subsidiary of Bibica Mien Dong Co.,Limited; investing 125
billion VND in a subsidiary of Bibica Mien Tay Co. Ltd. Bibica has increased its debt to its
largest shareholder - PAN Food. Compared to Bibica, Haihaco has employed more debt, no
issued more equity. It can be seen that the debt to equity ratio of the company increased to
114.07% in the first quarter of 2020.

Bibica did not have loans from bank; by contrast, Haihaco borrowed from two banks –
Vietcombank and Sacombank with the average interest rate around 3%. Moreover, Bibica did

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not issue bonds while Hai Ha company did with 56.95% of yield to maturity

Alongside, about book value, we have the results: Bibica has value on the book equals 65,170,
and Haihaco one equals 25,680 (both in 2020). It can be easily seen that the book value of Bibica
in 2020 is larger than Haihaco. It is the number of firm's assets that will turn to common equity
in case of liquidation. So higher book value (Bibica) means the shares have more liquidation
value. Strictly speaking, high book value leads to more worth shares, so Bibica's stock is more
valuable than Haihaco. The reason may be that Bibica has a large amount of money and
abundant cash flow of business activities, helping the company to have a strong financial
structure. Bibica has no debt. In contrast, Haihaco has quite a large amount of loans.

Additionally, to value equity value, we calculate market capitalization of Bibica and Haihaco in
2020. This is a quick method for estimating a company's value by extrapolating what the market
thinks it is worth for publicly traded companies. From that, we can see the size of a company as
the firm size is a basic determinant of various characteristics in which investors are interested,
including risk. Haihaco has market capitalization which is 1,658.93 billion VND, Bibica’s one is
676.97 billion VND. Although Haihaco's market capitalization is bigger than Bibica's one, both
two companies have small market capitalization. Bibica and Haihaco are considered to have
higher risk investments due to the age, the markets they serve, and the amount. Fewer sources of
a smaller firm are more receptive to the recession of economics. Consequently, the small market
capitalization is not as liquid as more developed and bigger companies. At the same time, the
small firm often provides better growth opportunities than large-caps.

Turning to the value of the firm, Bibica has the value of the firm lower than Haihaco
(319,953,096,174 VND < 2,259,204,582,695 VND). The reason is the growth rate of Haihaco is
9.52%, higher than Bibica with 7.52%. A high value of firm likes Haihaco will attract investors,
from which the company has more opportunities to expand production and business. Moreover,
if businesses want to borrow capital from banks or other credit institutions, the collateral for a
loan is one of the mandatory work. Therefore, Haihaco's company value will be used to provide
banks with loans, especially when most of Haihaco’s debts come from bank loans.

The intrinsic value of a stock value a company on its own merits. Internal factors like a firm's
products, its management, and the strength of its brands in the marketplace determine intrinsic

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value. The intrinsic value of stock of Bibica is 28,358 VND while The intrinsic value of stock of
Haihaco is lower, with 26,267 VND respectively. The reason is Bibica's confectionery products
are more popular than Haihaco's. The prime example is Bibica's "Choco Pie", which is very
popular with almost any age group. Besides, as of 2019, Bibica's age since its inception is much
shorter than Haihaco, but Bibica has exported to more than 20 countries around the world while
Haihaco only exports to more than 10 countries.

5. Recommendation

On Bibica's side, at present, as a financial manager, the company needs to strive to maximize
return on equity. First of all, because the company has more assets than it needs, it is important
to determine how many assets to use and should follow a reasonable structure. Besides,
production capacity should be increased, such as upgrading and expanding existing infrastructure
at factories, equipping new modern machinery and equipment, and integrating a self-production
management system. Another thing is to contact dealers, distributors to reduce selling costs to
increase profit margins.

On the side of Haihaco, as its financial manager, the company needs to reduce the rate of
increase in cost and increase the rate of revenue, as above, Haihaco will not apply sales on credit
anymore, but instead pay off, the profit will be promptly paid to cover fixed cost. Furthermore,
technical improvements to reduce costs while increasing product quality, thereby increasing the
price, the profit will increase.

For investors related to Bibica, they should not buy stocks because the company's stock is
overvalued: the market value (~ 43,750) is greater than the intrinsic value (~ 28,358). Besides,
the stock market is highly valued, so the company's potential is highly appreciated. Therefore, if
investors are holding company stock, they should sell it for a profit.

Concerning Haihaco, for the time being, investors should sell shares. Recently, Haiha has been
continuously losing money and until the fourth quarter of 2019, the profit is positive but has not
yet achieved the profit target set for 2019. Also, early in 2020, the impact of COVID 19 made
enterprises stagnant, expense increased, revenue decreased. Indeed, in the second quarter of
2019, net sales of goods and services decreased by VND 3.7 billion compared to the same period
in 2018. Besides, in the first 6 months of 2019, Hai Ha confectionery reported a loss of 16.9

15
billion dongs, a double loss compared to the same period last year along with some other losses.
However, Haihaco was established long ago and has a large capitalization. The higher the
capitalization, the lower the risks, and vice versa. Investors will devise measures to diversify the
portfolio to optimize to be profitable in the risk.

The confectionery industry is highly competitive. On the other hand, confectionery is not an
essential human need, so the consumption of confectionery products is highly dependent on
people's income situation. Also, consumers are increasingly concerned with health, always
avoiding confectionery that is high in sugar. Understanding customers' psychology, these 2
companies always try to focus, develop innovative products, and improve quality at the same
time.

16
REFERENCES

1. http://www.haihaco.com.vn/upload/file/bctc-2019-tsc.pdf
2. https://finance.vietstock.vn/hhc/transaction-statistics.htm?
grid=market&tab=chart&languageid=2
3. http://s.cafef.vn/hastc/HHC-cong-ty-co-phan-banh-keo-hai-ha.chn
4. https://laodong.vn/doanh-nghiep-doanh-nhan/vinataba-thoai-von-banh-keo-hai-ha-tut-
doc-lo-169-ti-trong-6-thang-746539.ldo
5. https://courses.lumenlearning.com/boundless-business/chapter/ratio-analysis-and-
statement-evaluation/
6. https://dautuvietnam.com.vn/kinh-doanh/doanh-nghiep-doanh-nhan/banh-keo-hai-ha-
hhc-tiep-tuc-dat-loi-nhuan-tang-truong-am-96-ty-dong-quy-i2020-a7330.html
7. https://baodautu.vn/bibica-loi-nhuan-sau-thue-quy-i2020-giam-hon-90-d120534.html
8. https://static2.vietstock.vn/data/HNX/2019/BCTN/VN/HHC_Baocaothuongnien_2019.pd
f
9. http://www.haihaco.com.vn/co-cau-to-chuc-cua-cong-ty-8894.html
10. https://www.stockbiz.vn/Stocks/HHC/Ratios.aspx
11. https://static2.vietstock.vn/data/HNX/2018/BCTN/VN/HHC_Baocaothuongnien_2018.pd
f
12. https://finance.vietstock.vn/HHC/financials.htm?tab=BCTT
13. https://www.bachhoaxanh.com/kinh-nghiem-hay/gioi-thieu-cong-ty-bibica-991368
14. http://nguoihanoi.com.vn/cong-ty-banh-keo-hai-ha_249736.html

17
APPENDICES

APPENDIX A

Bibica Haihaco

Weights on Debt and Equity

Number of shares outstanding = 15,420,782 16,425,000 (in number)

Market Value of Debt = 65,170 25,680 ( in currency)

Debt to capital ratio to be used = 36% 40.29% (in percent)

Costs of Components

Beta of the stock = -0.15 0.0189

Risk-free rate = 3.01% 2.88% (in percent)

Risk Premium = 9.59% 15.48% (in percent)

Enter the cost of equity = 2.99% 5.10% (in percent)

Enter the cost of debt = 4.50% 4.50% ( in percent)

Cost of Capital Computation

Tax Rate on Income = 21% 20.59% (in percent)

Cost of Equity = 2.99% 5.10% (in percent)

Cost of Debt = 4.50% 4.50% (in percent)

Debt Ratio = 36.08% 62.48% (in percent)

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Cost of Capital = 3.72% 4.73% (in percent)

Free Cash flow Computation

Current EBIT = 120,541,811,073 51,441,348,258 (in currency)

Tax Rate on Income = 25.58% 20.59% (in percent)

Current Depreciation = 499,594,079,357 253,933,395,743 (in currency)

Current Capital Spending = 192,505,155,285 43,825,585,854 (in currency)

Current Working Capital = 841,532,625,962 133,684,537,027 (in currency)

Chg. Working Capital = 293,369,201,091 372,503,959,892 (in currency)

Free Cashflow (FCF) = 35,962,728,010 -121,545,206,549 (in currency)

ROE = 9.51% 9.91% (in percent)

Retention ratio = 79.14% 96.10% (in percent)

Growth Rate in Stable Phase = 7.52% 9.52% (in percent)

Value of the firm = 319,953,096,174 2,259,204,582,695 (in currency)

Market Value of Debt = 566,570,957,632 718,352,139,106 (in currency)

Market Value of Equity = 1,003,877,376,699 676.97 billion (in currency)

Value of Equity per Share = 28,358 26,267 (in currency)

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APPENDIX B

1. FCF= [ EBIT(1-T) + Depr and Amor] - [ Capital Exp + NOWC]

Bibica= [120,541,811,073 ( 1- 25,583,425,425/120,541,811,073 ) + 499,594,079,357 +

7,337,606,180] - [ 192,505,155,285- 220,584,605,034 + 841,532,625,962 – 548,163,424,871 ] =
35,962,728,010 VND

Haihaco= [51,441,348,258 (1- 10,590,404,804/51,441,348,258)+

(253,737,195,743+196,200,000)] - [297,758,981,597 - (253,737,195,743+196,200,000) +
(852,036,676,133 – 479,532,716,241)] = -121,545,206,549

2. Growth rate (g = ROE x b)

Bibica: g= 9.51% x [1-(19,908,894,171/95,434,359,560) ]= 7.52%

Haihaco: g= 9.91% x (1 -( 40,850,943,454 / 1,048,622,573,815)) = 9.52%

3. Sales growth rate

Haihaco: = (1,048,622,573,815- 982,292,925,318 )/ 982,292,925,318 = 6.8%

Bibica= (95,434,359,560 -109,523,136,818)/ 109,523,136,818 *100%= -12.8%

4. Average interest rate= ( interest expense - account payable)/ liabilities

Haihaco:=(23,777,176,583- 45,432,236,122 )/718,352,139,106 = - 0.03

5. Yield to maturity

Haihaco: n=5, face value= 200,000,000,000, current price= 21,000,000,000

200,000,000,000
=> YTM=
√
5

21,000,000,000
-1 = 0.5695 = 56.95%

6. The cost of equity (ri = rf + beta (rm-rf))

Bibica: - rf: 3.01%

-rm: 9.59%

- rm-rf:12.60%

ri= 3.01% + -0.15x 12.60%= 0.029911

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Haihaco: - rf: 2.876%

- rm: 15.476%

- rm-rf: 12.60%

ri= 2.876% + 0.18(12.6%)=0.02876+0.02268=0.05144

7. Value of the firm using discounted cash flow model

Vf= FCF 2021/WACC-G

- Bibica: :

wd = 566,570,957,632 / 1,570,448,334,331 = 0.360

we = 1,003,877,376,699 /1,570,448,334,331 = 0.639

tax rate = (120,541,000- 95,029,000) : 120,541,000 = 0.2116

→WACC = cost of debt*wd*(1-tax rate) + cost of equity*we

= 0.029911*0.360*(1-0.2116)+ 0.045*0.639 = 0.0372 = 3.72%

→Vf = 35,962,728,010/ (3.72% - (-7.52%)) = 319,953,096,174 VND

- Haiha:

wd: 718,348,000,000/1,149,779,000,000= 0.625

we: 431,431,000,000/1,149,779,000,000= 0.375

tax rate: (51,441,348,258-40,850,943,454)/51,441,348,258=0.205

→ WACC = cost of debt*wd*(1-tax rate) + cost of equity*we= 0.045*0.625*(1-0.205

) + 0.051*0.375= 0.0414590625 = 4.14%

→ Vf=-121,545,206,549/WACC - 9,52% = -121,545,206,549/(4.14% - 9.52%)=

2,259,204,582,695 VND

8. Intrinsic value of stock

Bibica: intrinsic value = ( 1,003,877,376,699 - 566,570,957,632 )/15,420,782 = 28,358 VND

Haiha: intrinsic value = (1,149,795,657,730-718,352,139,106)/16,425,000= 26,267 VND

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