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Summary Financial Statement of 3 Companies Unit: VND




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Summary Financial Statement of 3 Companies Unit: VND

Comment:

Hau Giang Pharmaceutical is a leading company in the pharmaceutical industry, with large capital and a nationwide distribution system, stretching from Lang Son to Ca Mau with diverse distribution channels, able to provide products to consumers in the most convenient way. This is the outstanding strength of Hau Giang Pharmaceutical compared to other companies in the same industry at the present time. With the same export capacity (2007 turnover of over 1 million USD), the company has a large market share (over 10%) and a competitive advantage in terms of scale in the industry. Therefore, Hau Giang Pharmaceutical's shares are also of particular interest to investors.

Table 12: Major shareholders of DHG include:


Full name

Ownership ratio

State

51%

Citigroup Global Market LTD & Citigroup Global Market Financial Products LTD.

7.13%

Citigroup Global Market LTD.

6.02%

VOF INVESTMENT LTD

3.87%

Source: VNDirect Securities Company

Furthermore, DHG's development potential is still very large with steady revenue and promising projects, DHG deserves to be the leading enterprise in the pharmaceutical industry.

Domesco, like DHG, was equitized in 2004, with a charter capital of 137 billion VND, and its products mainly focus on 3 groups of antibiotics. The distribution system is not as widespread as DHG, mainly through hospitals and medical facilities. However, DMC has large projects being implemented such as in Can Lo and Tan Tao industrial parks. These large projects promise to bring great development potential in the future.

IMP has a characteristic of being equitized very early, in 2001, and is a pioneer in manufacturing franchise (accounting for 25%). Moreover, IMP has a competitive advantage in antibiotic injection products, widely used in the treatment of serious diseases. This market has not been exploited much in Vietnam. Currently, the market share


92


IMP's is still low at 4.5% compared to 10% of DHG and 5% of DMC, however with the development direction of new products and human resources, surely in the future IMP will rise to new heights.

2.3.2 Financial indicators:

2.3.2.1 Comparative analysis of companies in 2007.

Table 13: Summary financial statements of 3 companies Unit: VND

SUMMARY FINANCIAL STATEMENTS 12/31/2007


DHG


DMC


IMP

Balance Sheet

Current assets

673,787,101,408

452,044,744,023

469,910,000,189

Long-term assets

268,421,463,379

150,820,905,918

98,515,519,099

Liabilities

290,631,417,938

140,858,311,071

70,873,654,857

Equity

635,748,308,139

461,316,766,140

494,960,731,305

Total capital

942,208,564,787

602,865,649,941

568,425,519,288

Business Performance Report 2007


Net revenue


1,269,279,925,381


811,126,494,750


451,602,312,557

Cost of goods sold

600,777,608,975

638,387,162,219

258,571,893,457

Gross profit

668,502,316,406

172,739,332,531

193,030,419,100

Net operating profit


127,858,296,038


63,798,041,067


62,346,579,059

Total accounting profit before tax


128,311,970,349


64,265,698,636


63,230,637,617

Profit after corporate income tax


128,311,970,349


64,182,009,436


54,518,395,798


Table 14: Ratios used to evaluate a company relative to its market price

they


FINANCIAL INDICATORS

Valuation Index

DHG

DMC

IMP

P/E Q2_2007 to Q3

I_2008


25.02


20.51


23.43

P/S Q2_2007 to Q3

I_2008


1.26


1.61


2.51

P/B

7.51

3.21

3.59

EPS Q2_2007 to Q3

I_2008


6,354.66


5,081.66


4,993.76




*P: price calculated as of March 31, 2008


BASIC INDICATORS

Scale (unit: VND)

Total assets

770,760,430,870.25

582,927,406,998.50

459,439,814,333.75

Equity

423,489,561,958.75

446,222,424,136.50

380,002,990,255.75

Net revenue

1,269,279,925,381

811,126,494,750

451,602,312,557

Market capitalization

3,180,000,000,000

1,432,080,000,000

1,364,214,150,000

Growth

EPS Growth (3 Years Ago)

0.77

0.4

0.25

Asset growth (%)

95.14

58.56

86.57

Revenue growth (%)

47.21

22.85

-16

Financial capacity

Financial leverage

1.45

1.3

1.14

Debt / Equity

0.8

0.3

0.2

Fixed assets / Equity

0.36

0.28

0.09

Profitability

ROA

16.49

11.98

12.67

ROE

30.01

15.65

15.32

Gross profit margin

0.53

0.21

0.43

Operating profit margin


0.1


0.08


0.14

Profit margin after tax

50.55

23

42.59

EBITDA

127,093,200,178

70,207,446,966

66,811,522,073

EBIT ( earnings before interest and taxes )

143,705,849,272

67,641,699,051

63,980,296,117

Business performance

Inventory Turnover

3.42

3.41

1.93

Total asset turnover

1.8

1.65

1.04

Source: VNDirect Securities Company

The business results of the 3 companies all had very high growth. In particular, DHG's revenue in 2007 was nearly 3 times higher than in 2004 (from 450.7 billion VND to 1,269 billion VND), 1.46 times higher than in 2006, while after-tax profit also increased from 23.9 (2004) billion VND to 127 (2007) billion VND.

IMEXPHARM also had a high increase in net revenue in 2006: up 54.8% (revenue of 339 billion VND in 2005 increased to 525 billion in 2006); however, next year


In 2007, revenue decreased by 16% to 451.6 billion VND; profit after tax increased by 29% with value increased by 12.24 billion VND.

Domesco also had good business results last year. Domesco's revenue in 2007 reached 811 billion VND, an increase of 23.06% compared to 2006, ranking 2nd in the industry in terms of production and business revenue; profit after tax reached 64.2 billion VND, an increase of 32% compared to 2006.

Compared to enterprises in other fields, EPS of pharmaceutical enterprises is always high (over 5,000 VND/share).

Table 15: EPS statistics of some large pharmaceutical companies

Source: VDSC Securities


The market decline has also brought the prices of these three pharmaceutical stocks to quite attractive levels. Considering the growth potential of the industry as well as the current economic situation, pharmaceutical stocks are a very good investment opportunity.

As of the end of the first quarter (March 31, 2008), the stock prices of the companies were:

DHG: 158,000/ 1 share (P/E: 25.02)

DMC: 112,000/ 1 share (P/E: 20.5)

IMP: 120,000/ 1 share (P/E: 23.4)

In the context of fierce competition, pharmaceutical companies have made in-depth investments in research and development (R&D), launched many new products, continuously popularized their brand image and developed distribution systems to almost all provinces and cities.

Earnings per share of pharmaceutical companies are quite high compared to the average. It can be seen that: P/E of pharmaceutical companies is at an average high level of about 22.6 times compared to the market average of 15-16, demonstrating a high level of expectation from investors.


The above companies have high EPS, especially DHG. This is due to the impressive business results of the company in 2006 and 2007. If in 2005, DHG's EPS was 6,990 VND/share, then in 2006 it was 10,880 VND/share, an increase of 84.4%; that means that the income per share of the company has increased by 84.4% in just 1 year, although at this time, EPS was only 6,354 VND (when the whole market was in crisis - the first quarter of 2008). ROE – DHG's return on equity ratio reached 51% in 2006, an increase of 21.4% compared to 2005, but by 2007 it was only 30.01%, plus profit increased by 100% of equity, guaranteed payment ability proves that the company's financial policy is highly effective, maximizing benefits for shareholders.

DMC and IMP have high dividend payout rates compared to other enterprises in Vietnam, but EPS is still modest and ROE is average. This is completely reasonable when in 2006 DMC and IMP increased their charter capital to invest in fixed assets, build more factories meeting GMP standards and develop new products. When these factories come into operation, it will increase the company's revenue and profit, thereby increasing the value and benefits for investors.

We see that the inventory turnover rate of DHG and DMC companies is almost the same: 3.42 and 3.41. But IMP's is only: 1.93, which proves that the speed of converting inventory into cash or receivables of DHG and DMC is 1.7 times higher than IMP's, which shows that the efficiency of enterprise management of DHG and DMC is much higher than IMP's. On the table, we also see that DHG's asset turnover rate is also the highest at 1.8 compared to DMC's 1.65 and IMP's 1.04, showing that DHG's ability to consume goods is higher than the other two companies.

However, IMP's profit margin (42.59) is only lower than DHG's (50.55) and almost double that of DMC's (23). It goes without saying that DHG is always in the lead, but IMP also has a profit margin worth considering, and this also shows IMP's great potential for future development.


In 2007, these companies all increased their charter capital, so the growth in assets of these companies was high. However, the noteworthy point here is that the growth rate of IMP's sales revenue was negative: -14.05% (net revenue decreased by 16%) and this is explained by the fact that: during the year, the prices of raw materials for some products increased, so the company reviewed and limited the production of some ineffective products. In addition, in 2006, IMP had 133.69 billion in revenue due to the Ministry of Health's bird flu prevention program. If this revenue were excluded, in 2007, IMP's revenue would actually increase by 15.23%.

2.3.2.2 Analysis of DHG company's financial ratios over the years

2.3.2.2.1 Business performance analysis

Table 16: DHG business performance analysis indicators

Unit: Million VND


Target

2004

2005

2006

2007

Net revenue

450,747

554,031

868,192

1,269,279

Financial revenue

333

406

514

5,789

Net profit

from business activities

32,505

54,500

86,911

127,858

Profit before

tax

32,689

55,379

87,060

128,312

Profit after tax

23,856

44,302

87,060

128,312

The company's business performance has improved over the years, especially in 2007, the company's financial revenue increased dramatically, 10 times higher than the financial revenue in 2006 due to the reduction in financial expenses thanks to the collection of money from selling additional issued shares and using this money to pay off bank loans. Profit after tax in 2006 increased by 96.51% compared to 2005 and in 2007 increased by 47.38% compared to 2006. In 2007, the company raised additional capital by issuing 2,000,000 shares to finance projects such as: Building a factory that meets standards


WHO – GMP, investing in distribution system, preparing site for new project

Grasping the increasingly strict demands of the domestic market as well as the fierce competitive pressure when Vietnam joined the WTO, Hau Giang Pharmaceutical has quickly completed its products, invested in machinery and equipment to improve product quality and design, reduce costs and at the same time increasingly affirm the company's position. The above are just the initial results, we can completely believe that when the projects are completed, the efficiency brought to the company will be much greater.

2.3.2.2.2 Some basic financial indicators

a) Capital structure coefficient

Table 17: Asset structure and capital structure indicators Unit : percentage (%)


Target

2004

2005

2006

2007

Asset structure





Long-term assets/Total assets

28.65

22.07

31.75

28.48

Current assets/Total assets

71.35

77.93

68.25

71.52

Capital structure





Liabilities/Total Capital

56.31

55.19

64.70

30.84

Equity/Total Capital

43.69

44.81

35.30

69.16

In late 2006 and early 2007, the company focused on a number of new projects (investing in buying land, building houses, offices for Hanoi, Quang Ngai, Ho Chi Minh City branches...) so the capital for equipping technical facilities increased compared to previous years, which is the company's long-term development strategy in the renovation period.

The ratio of profit after tax on equity as well as basic earnings per share in 2007 decreased compared to 2006 due to the impact of the increase in the Company's equity during the year with an increase rate of 150%.

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