Financial Analysis of Swire Pacific

Running Head: FINANCIAL ANALYSIS SWIRE 1
FINANCIAL ANALYSIS SWIRE

Running Head: FINANCIAL ANALYSIS SWIRE
Table of Contents
Financial Analysis...........................................................................................................................3
Evaluation of industry sector...........................................................................................................6
Financial Strength:...........................................................................................................................7
Financial Weaknesses......................................................................................................................7
Factors that may impact the valuation.............................................................................................8
Price range.......................................................................................................................................8
Evaluation of the financial techniques...........................................................................................10
Recommendations and Conclusion................................................................................................10
References......................................................................................................................................11

Running Head: FINANCIAL ANALYSIS SWIRE
Financial Analysis
It has been analyzed that the total revenue of Swire Pacific is HK$84.61M in the year
2018. The company earns the high revenue from the last five years. Below is the graph of the
profitability that can explain the position in a better manner. The net profit seems to jump up and
the gross profit is almost stagnant and this is due to the revenue of the company in the last five
years are HK$61.30, HK$60.89, HK$62.39, HK$80.29 and HK$84.61 in 2014, 2015, 2016,
2017, and 2018 respectively. The graph of the return on equity showcased a little bit of
fluctuation (Swire Pacific, 2018).
2014 2015 2016 2017 2018
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Profitability
Net Profit
Gross profit
Return on equity
High expenses mean less real income of the Swire Pacific which is not beneficial for it.
The net income of the company is HK$23.62 m in the year 2018. It is observed that the net
income of the company has been fluctuated in the last years. In 2018, it is HK$23.62 which has
been decreases from the last year 2017 such as it is HK$26.07 (Robinson, et al 2015). But in the
year 2017, the net income of the company has been increases from the last years such as it is
HK$96.44 in 2016. It depicts that the current financial situation of the company has been

Running Head: FINANCIAL ANALYSIS SWIRE
improved as its volume of sales has been increases and its capacity to generate the profit has
been increases. The overall profitability of the business is positive and has increased in
comparison to the previous year (Riyadi, 2017).
By analyzing the balance sheet of Swire Pacific, it has been seen that the total current
assets of the company has been increases from the previous years. It is observed that the current
assets of the company are HK$42.57 m which is increasing from the previous year such as it is
HK$31.89, HK$26.55 in the year 2017 and 2016 respectively. The current liability of the
company is also increasing which depicts that the liquidation situation of the company has been
improved as the current assets has high amount as compare to current liabilities. Improved
liquidity position states that the company has the ability to pay all the short term obligations
(Swire Pacific, 2018).
Solvency ratios 2014 2015 2016 2017 2018
Debt to Equity 0.248 0.266 0.277 0.263 0.223
Debt to total assets 0.123 0.117 0.167 0.164 0.138
Times interest coverage
ratio 3.569 3.978 4.014 4.500 4.081
The above table of the solvency ratios depicts how Swire Pacific is financing its funds
with the help of the debt and equity. The ratio of debt to equity increased from 0.248 to 0.266
however, the same saw a decline in the value in the financial year 2018. The long term liability
of the company has been decreases from the last year such as it is HK$82.51 in the year 2017
(Grant, 2016).

Running Head: FINANCIAL ANALYSIS SWIRE
2014 2015 2016 2017 2018
0
2
4
6
8
10
12
14
16
18
Efficiency Ratios
Receivables turnover ratio
Inventory turnover ratio
Fixed assets turnover ratio
Total Asset turnover
The decreasing liability of the company depicts that the company will achieve the high
success in business and the chances of insolvency has been reduces. The debt to total assets of
the company has seen significant increase from 0.123 to 0.138 over the period of the five years.
It depicts that the company issues the equity shares instead of borrowing the money from third
party which helps it to grow in the market. The ability of the company to settle the financial costs
have also been increased from 3.56 times in the year 2014 to 4.081 in the year 2018 (Gitman,
Juchau & Flanagan, 2015).
Efficiency ratios 2014 2015 2016 2017 2018
Receivables turnover ratio 16.21 8.9 6.38 7.8 8.09
Inventory turnover ratio 3.33 3.16 3.56 5.48 7.05
Fixed assets turnover ratio 1.44 1.37 1.45 1.8 1.92
Total Asset turnover 0.17 0.17 0.17 0.2 0.2
The efficiency of the company has been kept in control over the period of five years. The
company is performing smooth in these areas as the receivables turnover ratio depicts that the
company is realizing the cash in just half of the time in comparison to the year 2014. Side by side

Running Head: FINANCIAL ANALYSIS SWIRE
the company is losing out on the collection of the inventory. The days are increased from 3.33to
7.05 days in the year 2018 and kept on increasing in the middle years. The use of the fixed assets
to generate the sales is quite fast and that of the total assets have also increased thereby
increasing the profitable factors for the company (Friederich & Payne, 2015).
Market value ratios 2014 2015 2016 2017 2018
EPS 8.7 9.3 9.38 6.37 4.52
Dividend per share 3.33 3.92 3.78 2.10 2.33
Dividend payout ratio 3.99% 4.50% 5.10% 2.90% 2.78%
The market position of the company is determined by EPS, dividend per share and
dividend payout ratio. The earnings per share grabbed a greater share from 8.7 times to 9.3 times
and again fell down to an unacceptably low level at 4.52 times. Further, the dividend per share
has also increase due to the declined in the payment policy of the dividends. The dividend payout
ratio decreased to 2.78% from 3.99%. This implies that the extra net profit is not distributed as
dividends; rather it is kept for potential investments (Detzel & Strauss, 2017).
Evaluation of industry sector
It has been seen that there are many companies operates the business in supermarket
industry. The large number of companies increases the competition among companies. Sansiri
Public Company Limited, Agile group holdings, Hang Lung properties Limited are the main
competitors of the company that offers the similar services to consumers (Hang lung properties,
2018).
Profitability ratios
Sansiri Public Agile Private
Limited
Hang Lung
Group
Limited

Running Head: FINANCIAL ANALYSIS SWIRE
Net Profit 22.40% 14.89% 9.29%
Gross profit 32.41% 43.95% 70.60%
Return on equity 10.08% 15.20% 6.17%
The inter firm comparisons stated that net profit margin in case of the Hang lung
Properties, the net profit is lowest at 9.29% whereas in case of Sansiri Public Company is
22.40% and that of Agile Group Limited is 14.89%. Comparing with Swire financial analysis, it
can be stated that Swire is ahead of all with 27.93%.
By comparing all companies, it has been seen that net income of Hang Lung properties
Limited is HK$690500, Agile group holdings is HK$801913, and Sansiri Public Company
Limited is HK$2045477. It has been determined that Agile generate the high revenue as compare
to these three companies in the year 2018. The net income of Swire Pacific is HK$23629000
which is less as compare to the Agile.
Liquidity ratios Sansiri Public Agile Private
Limited
Hang Lung
Group
Limited
Current Ratio 2.43 1.387 0.41
Quick Ratio 1.74 1.156 1.27
The liquidity position of the Sansiri is sound above all while comparing Agile Private
Limited and Hang lung Group Limited as well. Agile Private limited is needs improvement in
current ratio and hence, the obsolete assets shall be sold off.
It can be said that the company stands at the third position among the four as the net
income of Agile group holdings, Sansiri Public Company Limited are high such as HK$7801913
and HK$690500 respectively. Apart from net income statement, it has been evaluated that total

Running Head: FINANCIAL ANALYSIS SWIRE
assets of Swire Pacific is HK$436,405, 000, Hang Lung properties Limited is HK$186453000,
Agile group holdings is HK$230445787 and Sansiri Public Company Limited is
HK$95,356,736. It has been seen that Sansiri Public Company Limited have large amount of
assets as compare to the other companies. It is observed that Swire Pacific stands at the second
position in terms of assets among these four companies (Sansiri Public Company Limited, 2018).
Efficiency ratios Sansiri Public Agile Private
Limited
Hang Lung
Group
Limited
Receivables turnover ratio 1.91 8.9 6.38
Inventory turnover ratio 0.29 3.16 3.56
Fixed assets turnover ratio 13.6 1.37 1.45
Total Asset turnover 2.33 0.17 0.17
The efficiency ratios are the ratios that display the ability of the companies to recover the
cash. The inventory turnover ratio of Sansiri Public Company is lowest and the fixed assets are
also utilized in the best manner in Sansiri Public Company. Total Asset turnover ratio is also
2.33 times in case of Sansiri Public.
Solvency ratios Sansiri Public Agile Private
Limited
Hang Lung
Group
Limited
Debt to Equity 0.33 0.25 0.277
Debt to total assets 0.147 0.185 0.167
Times interest coverage ratio 0.96 2.35 4.014
The amount of total assets depicts that the company has the ability to pay all the liabilities
and survive for long time in the market. Although, it stands at the second position as compare to
the competitors but its liquidity position is good as its amount of current assets is high as
compare to current liabilities. The amount of current assets is also high as compare to fixed

Running Head: FINANCIAL ANALYSIS SWIRE
assets which depicts that it invests in current assets in order to operate smoothly in day to day
activities. Total liabilities of the company are HK$111290000 which is also less as compare to
the total assets. It states that the company has the high capacity to pay all the long term
obligations (Swire Pacific, 2018).
Debt to Equity Debt to total
assets Times interest
coverage ratio
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Solvency ratios
Sansiri Public
Agile Private Limited
Hang Lung Group Limited
Financial Strength:
As per the above discussion, it has been found that Swire Pacific has high amount of total
assets due to which it can pay all its obligations weather it is short term or long term. It has been
seen that it stand at the second position as per the amount of total assets among the competitors
which is also a strength as the investors can gain the competitive advantage in the market.
It has been seen that other strength of Swire Pacific is its sales. As per the above analysis,
it has been seen that the company has the large amount of sales which has been increases on
continuous basis. The amount of revenue of the company helps to generate the brand image and
also to earn the high net income which is the main motive of the company while establishing the
business (Liang, Lu, Tsai & Shih, 2016).

Running Head: FINANCIAL ANALYSIS SWIRE
Financial Weaknesses
It is observed that financial weakness of the company is the real income. The real income
of the company is less as compare to the revenue. It has been seen that the company pays the
large amount as expenditure due to which its financial position has been affected. Large amount
of expenditure increases the revenue but decreases the real income of the company. Its total
revenue amount is high as compare to net income which is nit beneficial for the company. The
other weakness of the company is that it has high amount of liabilities which incur the chances of
insolvency in the coming future (Muritala, 2018).
Factors that may impact the valuation
One of the factors is the nature of the board in the organization. On the off chance that
the administration is sufficiently inspired to direct the organization toward its summit, the
organization would be an immense power and it would consistently discover a path even in the
midst of the best financial turndowns. So before the shareholders put any efforts in the
organization it is necessary to have the quality administration. Having the best plan of action
won't serve except if the administration nature of the organization is at standard. Hence this also
becomes one of the complexes (Omar, et al 2014).
Geographical exposure is also one of the closest factors that could help in deciding which
company is suitable from the point of view of IPO. The potential growth of the company is
judged by its diversity and this again depicts that how the shares of the company must be valued.
Currently in case Of Swire Properties, profound into its side project process, is one of a few
arrangements over the most recent couple of days to be yanked or scaled back, as nearby stock
and security markets experience the ill effects of a blend of Chinese government fixing measures
to fears of further budgetary difficulties in Greece and the remainder of Europe.

Running Head: FINANCIAL ANALYSIS SWIRE
Price range
P/E ratio of Swire Pacific comes at 6.6 which is way below in comparison to Hong kong
market which is 10.8. This also implies that there is a lack of growth in earnings per share of the
company.
2/1/2019
2/26/2019
3/23/2019
4/17/2019
5/12/2019
6/6/2019
7/1/2019
7/26/2019
8/20/2019
9/14/2019
10/9/2019
11/3/2019
11/28/2019
12/23/2019
0.000
20.000
40.000
60.000
80.000
100.000
120.000
Share price movement
Adjusted close
The graph also displays that there is a minimal fluctuation is can be observed and apart
from that it has improved over the years but started to decline since August. Swire Pacific, the
property unit's parent, is a combination with organizations in aeronautics, property, delivery and
seaward administrations ventures. Swire Pacific additionally claims Cathay Pacific Airways
(0293.HK), Hong Kong's predominant carrier and Asia's No.5 by showcase esteem. Swire
Pacific offers were suspended on Thursday evening. The stock fell 2.8 percent to end the
morning session at HK$81.05 before exchanging was ended. The organization didn't react to
calls looking for input of the commands (Swire Pacific, 2018).
Valuation method 2018 Market capitalization
P/E ratio 6.01 8.66
Earnings yield method 22.13% 13..21%

Running Head: FINANCIAL ANALYSIS SWIRE
Cash flow valuation 9.48 9.36
Price Forward Earnings 12.89 8.52
Multiple of EBITDA 5.64 7.13
From the table above it can be stated that the P/E ratio of the company is low in comparison to
the industry standard and further the earnings are higher. This is due to the decline in the value of
the equity shares outstanding. The cash flow valuation is almost in alignment with the industry
benchmark. This implies the market performance of the company is sound and can improve more.
Evaluation of the financial techniques
There are numerous financial techniques which can be applied to analyze the financial
performance of the business. In this particular section the financial techniques that can be used to
provide the information of the business are horizontal analysis, vertical analysis and share price
analysis. Under the horizontal analysis the comparative results are drawn on the basis of the
comparison with previous year, whereas in vertical analysis the process starts with taking
revenue as 100% and the rest of the items as the % of sales.
Recommendations and Conclusion
From the overall analysis it can be stated that while comparing on the basis of the past
five years the company performed well in almost every area however certain glitch can be
solved. Further, the position in the market is also sound and this has a little assistance from the
profitability section. Over all the major focus of the company shall be in collection of the cash
from the inventory by implementing the just in time inventory concept. The collection of cash
defines how well the cash in moving in and out of the organization. From the point of view of the
investor, SWIRE PACIFIC is a good choice for making the investment of long term nature.

Running Head: FINANCIAL ANALYSIS SWIRE

Running Head: FINANCIAL ANALYSIS SWIRE
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Running Head: FINANCIAL ANALYSIS SWIRE
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