Financial Analysis of Bahrain Mari. & Mer. Inter.Co - Assignment Example

Security Analysis   Bahrain Mari. & Mer. Inter.Co Company Profile: Bahrain Mari & Mer Inter co. is also known as BMMI in Bahrain stock market. BMMI principal activities are whole selling and retailing of food, beverages and other consumable items. Company also provides services in shipping. BMMI's headquarter is located in the Kingdom of Bahrain, and with international operations spanning three continents, BMMI is a diversified retail and distribution, and contract services and supply group, supported by a world class integrated logistics capability. BMMI is one of the fastest growing companies in the list of the companies which are listed on the Bahrain Stock Exchange. BMMI has an annual turnover in excess of US$ 230 million. Company adopts a costumer focus business approach and follows the international standards and global best practices. BMMI Group now has a presence in seven countries across three continents of the world, and has staff comprising people of 30 different nationalities. BMMI operates core business area. The group has owns and operates a chain of Supermarkets in Bahrain, which enjoy a reputation for delivering fast and offering fresh, quality products. BMMI also provide the some other services like remote site and facilities management, contract supply, packed meals and beverage distribution. Financial Analysis of Bahrain Mari. & Mer. Inter.Co. Note: All Accounts' figures have been form BMMI financial statements of three years. Profitability Ratios Liquidity and leverage Ratios: Year 2011 2009 2008 Equity attributable to shareholders' to total assets (%) 78.02 77.27 64.59 Total liabilities to total Equity attributable to shareholders' (times) 0.28 0.29 0.54 Current ratio (times) 3.03 2.80 1.72 Quick ratio (time) 2.32 2.04 1.03 Financial performance: Note: All Accounts' figures have been form BMMI financial statements of three years. It is clear that the recent financial performance of BMMI Co has been good. Total sales revenues are strong at BD 84.8 million despite a slight decrease compared to BD 87.2 million in 2009. However, According to financial statements of the company the net profit of BD 9.2 million was the fourth highest in the Group’s history, while shareholders’ funds increased to BD 48 million, up seven per cent over 2009. There are also several positive signs. BMMI Co. has not made losses in any of the last three years. There is an impressive increase in liquidity position, with cash and short-term deposits increasing to BD 12.9 million from BD 12 million in 2009. On the side the value of total assets also increased 5.9%. Financial Position: According to the financial statements of the company total operating profit is increased to BD 8.9 million from BD 8.7 million which is the indication of lower selling and distribution expenses. Total assets also increased from BD 57.8 million in 2009 to BD 61.2 million in 2010, due to increases in property, plant and equipment and trade receivables. Earning per share has also increase .079 to .080. On the other side he underlying net profit and revenue strength of businesses must be highlighted, but this factor can not effect on the company's performance because company strongly capitalized, highly liquid, unleveraged and conservative towards investments. It is clear that with the presence of recessionary pressures from suppliers and customers BMMI has successfully increased its Gross profit margin to 26 per cent. It is the symbol that the company is focusing on primary functions in efficient manner. Investment portfolio can be seen in healthy position but on the other side some devaluation of investments and provision against losses can be seen in BMMI statements. According to BMMI's chairman this is due to the impairments against some losses and further improvement is expected in 2011 as markets continue to recover. Shareholder wealth: Shareholders’ funds increased to BD 48 million, up seven per cent over 2009. This clearly states that BMMI Co has been increasing the shareholder wealth. In the difficult economic circumstances with which it has been doing battle, the BMMI is performing so well and focusing on the share holders' wealth. Dividend payout ratio in 2010 increased to 13.74% in relation with the ratio of 2009. Dividend History and linkage to stock price: Dividend data of the last five years. Year 2010 2009 2008 2007 2006 Dividend per share(BD) 0.050 0.050 0.050 0.050 0.050 Dividend payout ratio % 66.55 57.40 69.74 46.85 47.39 Dividend yield % 7.75 7.58 7.14 6.17 5.78 Stock data for the last five years. Year 2010 2009 2008 2007 2006 Par value 0.100 0.100 0.100 0.100 0.100 Book value 0.417 0.438 0.388 0.422 0.401 Closing price 0.645 0.660 0.700 0.810 0.865 BMMI Group is maintaining the divined per share on .050 from last 5 years. But changing behavior can be seen in the dividend payout ratio in recent years of the BMMI group. A change of 15% is occurred in the payout ratio of 2010 comparing with 2009. But the dividend yield is increasing constantly due to the constant decrease in stock price. As Divined yield = Dividend per share / Share value Share price is almost decreased to 34% in five years but company maintains the dividend per share at constant level and increase the payout ratio to cancel the adverse effect, and trying to minimize the risk for shareholders. Risk –Return Profile of the company: Stock price for last five years Year 2010 2009 2008 2007 2006 Stock price 0.645 0.660 0.700 0.810 0.865 There is a decline in share price of BMMI from last five years. The decline in share price is possible due to increase in long terms liabilities form five years. But minimization of the risk company is still maintaining the dividend price at content level and increasing payout ratio constantly form recent five years. Company has stated clearly in its financial records that their team developed an aggressive approach for risk management for next years. BMMI also stated in their recent financial statement the despite recessionary pressures the group is performing well and focusing on shareholders wealth. General conclusions regarding the investment worth of company stock: After analyzing the financial statements of BMMI group it is clear that the company is profitable form past five years. All figures are acts in positive way excluding share price that is constantly decreasing. As mentioned above that BMMI is also increasing the dividend payout ratio and retain the dividend per share at constant level. This indicates that the company is focusing on the shareholders wealth. This factor is favorable for the short term investor because BMMI is focusing on dividends. This situation is not favorable for some long term investors because they always want increase in the share price as well because it is directly related to their wealth. Excluding the share price factor BMMI Co. is performing in efficient manner. In 2010 they make the fourth record of highest profits in their history. It is also stated clearly in the financial statements of the company that they have made the strategy for next five years. BMMI Co. also cleared the way of managing future risks includes market, economic, currency risks. These all strategies indicate that BMMI is in the stage of recovery after economic recessions. And it might be possible to increase in company's share price in future years. References: Bahrain Stock Exchange: http://www.bahrainbourse.com.bh/bb/index.asp Financial Statements of Bahrain Mari. & Mer. Inter.Co Graham, Benjamin, David L. Dodd, Warren Buffett, and Seth A. Klarman. Security Analysis: Part V. New York: McGraw-Hill, 2009. Internet resource. Read More