MID-TERM

FINANCIAL MANAGEMENT

BY:

ARIQ WYNALDA (29118031)

YP 59 C

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT

INSTITUTE OF TECHOLOGY BANDUNG

2019
 COMPANY PROFILE

PT Pan Brothers Tbk is an Indonesia-based company engaged in the

manufacturing of garments. It is among the leading companies in Indonesia's apparel
industry. The company currently owns 23 factories in eight cities (including Tangerang,
Sukabumi, Bandung, Boyolali and Sragen). Its products are exported to the USA,
Europe, and Asia. Pan Brothers has ten subsidiaries, including one in Singapore and
Hong Kong.

PROFILE
Industry Sector Miscellaneous Industry
Industry Sub Sector Textile & Garment
Established 21 August 1980
Listed 16 August 1990
Listed Company Code PBRX
Listed Shares 6,478,295,611
Dividend Yes
Major Shareholders (>5%) Trisetijo Manunggal Utama (27.98%)
Ganda Sawit Utama (19.86%)
Key Subsidiaries Pancaprima Ekabrothers
Eco Smart Garment Indonesia
Continent 8 PTE, Ltd
Cosmic Gear, Ltd
Prima Sejati Sejahtera
STOCK QUOTE PAN BROTHERS - PBRX

BUSINESS SUMMARY

The company offers technical, functional and active wear jackets for snowboarding, ski
outer wear, active wear, jogging, hiking, as well as other sports and outdoor activities.
It also manufacturers woven garments such as padded and light weight jackets, pants,
shorts, casual pants, and dress shirts.

The company expanded to Vietnam by establishing a joint venture with a Vietnamese

firm. Contrary to Indonesia, Vietnam is member of the Trans-Pacific Partnership and
thus has to deal with lower trade barriers for exports to the EU, USA, Australia and
several Asian countries.

Per 2018 the company's annual production capacity stood at 90 million pieces. This
figure is bound to rise as Pan Brothers plan to develop a new manufacturing plant (with
a production capacity of 6 million pieces per year).

Strength & Opportunities

 The company has a strong footprint in the domestic apparel industry

 Has sufficient cash reserves to finance expansion plans
  Sells most of its products to high-end customers, hence avoiding competition in
the mass market

Weakness & Threats

 Highly dependent on imported raw materials

 Indonesia is not a member of Trans-Pacific Partnership hence higher trade tariffs
for export from Indonesia to US
 Higher minimum wages in Indonesia

VISION
TO BE AN INTEGRATED AND WORLDWIDE APPAREL SUPPLIER

 Indonesia’s largest listed garment manufacturer.

 Well-established business founded in 1980 and listed on the Indonesia Stock
Exchange since 1990.
 Intense focus on exports – markets include US, Europe, Asia, Canada, Australia
and New Zealand.
 Long-standing relationships with numerous top global fashion and apparel
brands, while maintaining strong work ethics and CSR.
 Plants located in Banten, West Java and Central Java with 26, 626 sewing
machines and a production capacity of 90 million pcs Garment annually in 2017.
 Selective expansion in both upstream and downstream segments.
GROUP STRUCTURE
CUSTOMERS

INDUSTRY OVERVIEW
Indonesia’s economy is consistently showing an improved performance. The GDP
growth in 2017 was 5.07% which is the highest in the last four years and better than
that of 2016 which was at 5.02%. The strong economic growth in 2017 was primarily
driven by improved commodity prices and strong domestic and external demand.
Investment growth rose to its highest level during this year as compared to past 4
years and foreign direct investment recorded the largest net inflow in more than seven
years. The huge spending of Government in the infrastructure projects sustained the
economic growth and will continue to be the driver of economic growth going forward.

Indonesia’s exports grew significantly to USD168.73 billion in 2017 as compared

to USD145.19 billion in the previous year registering a growth of 16.22% y-o-y and in
volume terms it recorded an increase of 6.09% y-o-y. The higher exports during the
year was primarily due to increased prices of key export commodities such as coal,
metal minerals, rubber, crude palm oil and partly by increased volume. The imports
during the year also increased to USD156.89 billion as compared to USD135.65 billion in
2016 registering a growth of 15.66%. The trade balance in 2017 recorded a surplus of
USD11.83 billion as compared to USD9.54 billion in 2016. The current account deficit
was maintained at USD17.3 billion or 1.7% of GDP ably supported by improvement in
goods and services trade performances. The crude prices remained relatively stable and
tended towards upward direction during 2017. The Crude prices recovered in Q1 2017
and continued to remain fairly stable. The price of Crude closed at USD58 per barrel by
end of the year as compared to USD50 per barrel in the previous year. The inflation in
2017 was quite moderate at 3.61% well below the BI targeted rate of 4% and as
compared to 3.02% in 2016. The controlled inflation in 2017 was possible on account of
lower inflation of food supported by improved supply management and strong fiscal
policy coordination between BI and Central & Regional Governments. Indonesia’s
economic growth is expected to be on solid footing, with Government’s commitment to
continuously strengthen the business environment and competitiveness. Bank Indonesia
estimates the GDP growth will be in the range of 5.2% to 5.5% going forward. The IDR
remained relatively stable and closed at Rp13,548/USD by end of 2017 as compared to
Rp13,436 in 2016.

The Global Polyester chain continued its recovery towards stability in 2017 after
the downtrend of its trade cycle in 2014/2015 caused by combination of excess
capacity, weaker demand growth in key markets, especially in China. The overall
growth of polyester fiber increased significantly by 6.73% during 2017 as compared to
1.9% in the previous year. The operating rate was at 71.22% in 2017 as compared to
70.7% in the previous year.

Indonesia’s textiles exports increased to USD12.4 billion as compared to USD11.88

billion in 2016. The textile imports in 2017 have also increased to USD8.62 billion as
compared to USD8.16 billion in 2016.
 FINANCIAL PERFORMANCE ANALYSIS
Liquidity Aspect
2013 2014 2015 2016 2017
Current Ratio 3.349 3.822 3.598 3.761 4.581
Quick Ratio 2.254 2.915 2.571 2.773 3.335
Cash Ratio 0.755 1.719 0.853 0.762 0.830
Activity Aspect
2013 2014 2015 2016 2017
Inventory Turnover 5.354 4.433 4.117 4.103 3.959
Average Collection
Period 48.62 55.93 57.26 60.91 63.74
Average Payment
Period 62.27 90.80 86.31 89.97 74.00
Total Asset Turnover 1.451 0.922 0.945 0.928 0.958
Average age of
inventory 68.18 82.33 88.66 88.97 92.20
Debt Aspect
2013 2014 2015 2016 2017
Debt Ratio 58% 45% 51% 56% 59%
Debt to Equity Rato 189% 107% 147% 188% 218%
Time Interst Eearned
Ratio 40.29 33.71 39.43 56.54 34.34
Fixed Payment
Coverage Ratio 40.29 33.71 39.43 56.54 34.34
Profitability Aspect
2013 2014 2015 2016 2017
Gross Profit Margin 12.31% 11.69% 12.81% 13.53% 13.95%
Operating Profit
Margin 5.53% 3.97% 4.09% 4.56% 5.10%
Net Profit Margin 3.08% 2.99% 2.06% 2.76% 1.42%
Earning per Share
(EPS) 41.97 19.88 21.24 30.24 19.2
Return on Total Assets
(ROA) 4.48% 2.75% 2.38% 2.45% 1.50%
Return on Equity
(ROE) 5.70% 3.45% 2.42% 3.19% 1.64%
Market Ratio
2013 2014 2015 2016 2017
Price/Earning Ratio 12.74720038 25.40241449 26.3653484 15.21164021 27.80665281
Market/Book Ratio 0.02297652979 0.02113056023 0.02343190837 0.01916746043 0.02229258984
Book value/share of
common stock 23285 23899 23899 23999 23999
LIQUIDITY ASPECT

Current Ratio = Current Assets / Current Liabilities

PT Current Ratio
5.000 Current Ratio Average Current Ratio
4.500
4.000
3.500
3.000
2.500
2.000
1.500
1.000
0.500
0.000
2017 2016 2015 2014 2013

A current ratio that is in line with the industry average or slightly higher is
generally considered acceptable. A current ratio that is lower than the industry average
may indicate a higher risk of distress or default. Similarly, if a company has a very high
current ratio compared to their peer group, it indicates that management may not be
using their assets efficiently. A higher current ratio means that the company has a
greater amount of liquidity.
 Quick Ratio = Liquid Assets / Current Liabilities

Quick Ratio
4.000 PBRX Average Quick Ratio

3.500

3.000

2.500

2.000

1.500

1.000

0.500

0.000
2017 2016 2015 2014 2013

The quick ratio is an indicator of a company’s short-term liquidity position, and

measures a company’s ability to meet its short-term obligations with its most liquid
assets. A company that has a quick ratio of less than 1 may not be able to fully pay off
its current liabilities in the short term, while a company having a quick ratio higher than
1 can instantly get rid of its current liabilities. For instance, a quick ratio of 1.5 indicates
that the company has $1.50 of liquid assets available to cover each $1 of its current
liabilities.
 Cash Ratio

Cash Ratio
2.000 PBRX Average Cash Ratio
1.800
1.600
1.400
1.200
1.000
0.800
0.600
0.400
0.200
0.000
2017 2016 2015 2014 2013

If a company's cash ratio is equal to 1, the company has exactly the same
amount of current liabilities as it does cash and cash equivalents to pay off those debts.

If a company's cash ratio is less than 1, there are more current liabilities than
cash and cash equivalents. In this situation, there is insufficient cash on hand to pay off
short-term debt.

If a company's cash ratio is greater than 1, the company has more cash and
cash equivalents than current liabilities. In this situation, the company has the ability to
cover all short-term debt and still have cash remaining. However, this may also indicate
that a company is not using its capital for its best use, since it could be invested in a
profitable project instead of earning the risk-free rate of interest.
ACTIVITY ASPECT

Inventory Turnover
6.000 PBRX Average Inventory Turnover

5.000

4.000

3.000

2.000

1.000

0.000
2017 2016 2015 2014 2013

Inventory turnover measures how fast a company sells inventory and how
analysts compare it to industry averages. Low turnover implies weak sales and possibly
excess inventory, also known as overstocking. It may indicate a problem with the goods
being offered for sale or be a result of too little marketing. A high ratio implies either
strong sales or insufficient inventory, which leads to lost business. Sometimes, a low
inventory turnover rate is a good thing, such as when prices are expected to rise
(inventory pre-positioned to meet fast-rising demand) or when shortages are
anticipated.

Average Age of Inventory

Days of inventory on hands

120.000 PBRX Average Days of inventory on hands

100.000

80.000

60.000

40.000

20.000

0.000
2017 2016 2015 2014 2013

The average age of inventory tells the analyst how fast inventory is turning over
at one company compared to another. The faster a company can sell inventory for a
profit, the more profitable it is. However, a company could employ a strategy of
maintaining higher levels of inventory for discounts or long-term planning efforts. While
the metric can be used as a measure of efficiency, it should be confirmed with other
measures of efficiency, such as gross profit margin, before making any conclusions.
 Average Collection Period

Collection Period
70.000 PBRX Average Collection Period

60.000

50.000

40.000

30.000

20.000

10.000

0.000
2017 2016 2015 2014 2013

The average collection period is the amount of time it takes for a business to
receive payments owed in terms of accounts receivable. The average collection period
is calculated by dividing the average balance of accounts receivable by total net credit
sales for the period and multiplying the quotient by the number of days in the period.
In general, a lower average collection period is more favorable than a higher average
collection period. A low average collection period indicates that the organization is
collecting payments faster. However, this may be an indication that its credit terms are
too strict, and customers may seek suppliers or service providers with more lenient
payment terms.
 Average Payment Period

Average Payment Period

8000.000 PBRX Average Payment Period

7000.000

6000.000

5000.000

4000.000

3000.000

2000.000

1000.000

0.000
2017 2016 2015 2014 2013

Smaller the number the better the condition of the company since Average
Payment Period show how long companies pay their debts.

Total Asset Turnover

Total Asset Turnover

1.600 PBRX Average Total Asset Turnover

1.400

1.200

1.000

0.800

0.600

0.400

0.200

0.000
2017 2016 2015 2014 2013
 The higher the asset turnover ratio, the better the company is performing, since
higher ratios imply that the company is generating more revenue per dollar of assets.
The asset turnover ratio tends to be higher for companies in certain sectors than in
others. Retail and consumer staples, for example, have relatively small asset bases but
have high sales volume – thus, they have the highest average asset turnover ratio.
Conversely, firms in sectors such as utilities and real estate have large asset bases and
low asset turnover.

DEBT ASPECT

Debt Ratio

Debt Ratio
2.500 PBRX Average Debt Ratio

2.000

1.500

1.000

0.500

0.000
2017 2016 2015 2014 2013
 The higher the debt ratio, the more leveraged a company is, implying greater
financial risk. At the same time, leverage is an important tool that companies use to
grow, and many businesses find sustainable uses for debt.

Debt to Equity Ratio

Debt to Equity Ratio

2.500
PBRX Average Debt to equity Ratio
2.000

1.500

1.000

0.500

0.000
2017 2016 2015 2014 2013

The Debt/Equity (D/E) Ratio is calculated by dividing a company’s total liabilities

by its shareholder equity. These numbers are available on the balance sheet of a
company’s financial statements. The ratio is used to evaluate a company's financial
leverage. The debt/equity ratio is also referred to as a risk or gearing ratio.
 Time Interest Earning Ratio

Time interest earning ratio

70.000 PBRX Averaage Time Interest Earning Ratio

60.000

50.000

40.000

30.000

20.000

10.000

0.000
2017 2016 2015 2014 2013

A higher times interest earned ratio is favorable because it means that the
company presents less of a risk to investors and creditors in terms of solvency. From an
investor or creditor's perspective, an organization that has a times interest earned ratio
greater than 2.5 is considered an acceptable risk. Companies that have a times interest
earned ratio of less than 2.5 are considered a much higher risk for bankruptcy or
default and therefore, financial unstable.

Although a higher times interest earned ratio is favorable, it does not necessarily
mean that a company is managing its debt repayments or its financial leverage in the
most efficient way. Instead, a times interest earned ratio that is far above the industry
average points to misappropriation of earnings. This means the business is not utilizing
excess income for reinvestment in the company through expansion or new projects, but
rather paying down debt obligations too quickly. A company with a high times interest
earned ratio may lose favor with long-term investors.
 Fixed Payment Coverage Ratio

Fixed Payment Coverage Ratio

120.000 PBRX Average Fixed Payment Coverage Ratio

100.000

80.000

60.000

40.000

20.000

0.000
2017 2016 2015 2014 2013
-20.000

-40.000

Fixed Payment Coverage Ratio is a financial ratio that measures a firm's ability to
pay all of its fixed charges or expenses with its income before interest and income
taxes. The fixed charge coverage ratio is basically an expanded version of the times
interest earned ratio or the times interest coverage ratio.
PROFITABILITY ASPECT
Gross Profit Margin

Gross Profit Margin

0.160 PBRX Average GPM

0.140

0.120

0.100

0.080

0.060

0.040

0.020

0.000
2017 2016 2015 2014 2013

Gross profit margin is a financial metric used to assess a company's financial

health and business model by revealing the proportion of money left over from
revenues after accounting for the cost of goods sold. One can calculate gross profit
margin, also known as gross margin, by dividing gross profit by revenues.
 Operating Margin

Operating Margin
0.080 PBRX Operating Margin

0.070

0.060

0.050

0.040

0.030

0.020

0.010

0.000
2017 2016 2015 2014 2013

Operating margin measures how much profit a company makes on a dollar of

sales, after paying for variable costs of production, such as wages and raw materials,
but before paying interest or tax. It is calculated by dividing a company’s operating
profit by its net sales.
 Net Profit Margin

Net Profit Margin

0.035 PBRX Net Profit Margin
0.030
0.025
0.020
0.015
0.010
0.005
0.000
-0.005 2017 2016 2015 2014 2013

-0.010
-0.015
-0.020

The net profit margin is equal to how much net income or profit is generated as
a percentage of revenue. Net profit margin is the ratio of net profits to revenues for a
company or business segment. Net profit margin is typically expressed as a percentage
but can also be represented in decimal form. The net profit margin illustrates how much
of each dollar in revenue collected by a company translates into profit.

Return on Assets

Return on Assets
0.040
PBRX ROA Average
0.030
0.020
0.010
0.000
-0.010 2017 2016 2015 2014 2013
-0.020
-0.030
-0.040
-0.050
-0.060
-0.070
 Return on assets (ROA) is an indicator of how profitable a company is relative to
its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate earnings. Return on assets is
displayed as a percentage.

Return on Equity

Return on Equity
12% PBRX ROE Average

10%

8%

6%

4%

2%

0%
2017 2016 2015 2014 2013

Return on equity (ROE) is a measure of financial performance calculated by

dividing net income by shareholders' equity. Because shareholders' equity is equal to a
company’s assets minus its debt, ROE could be thought of as the return on net assets.
ROE is considered a measure of how effectively management is using a company’s
assets to create profits. ROE is expressed as a percentage and can be calculated for any
company if net income and equity are both positive numbers. Net income is calculated
before dividends paid to common shareholders and after dividends to preferred
shareholders and interest to lenders.
 Earning per share

Earning Per Share

20.000 PBRX EPS Average

0.000
2017 2016 2015 2014 2013
-20.000

-40.000

-60.000

-80.000

-100.000

-120.000

-140.000

Earnings per share (EPS) is the portion of a company's profit allocated to each
share of common stock. Earnings per share serve as an indicator of a company's
profitability. It is common for a company to report EPS that is adjusted for
extraordinary items and potential share dilution.

MARKET ASPECT

P/E ratios are used by investors and analysts to determine the relative value of a
company's shares in an apples-to-apples comparison. It can also be used to compare a
company against its own historical record or to compare aggregate markets against one
another or over time.

Book Value Per Share of Common Stock is a method to calculate the per-share
value of a company based on common shareholders' equity in the company. Should the
company dissolve, the book value per common share indicates the dollar value
remaining for common shareholders after all assets are liquidated and all debtors are
paid.

The book-to-market ratio is used to find the value of a company by comparing

the book value of a firm to its market value. Book value is calculated by looking at the
firm's historical cost, or accounting value. Market value is determined in the stock
market through its market capitalization.

PROFIT PLANNING

Income Statement 5 Years Projection

Balance Sheet Projection
Free Cash Flow

Judging from the information that I got from IDX of the past growth of PBRX, my
gut telling me that even though in 2015 PBRX sales jumped instantly upto 45%, the
next year industry-rivalry condition has become stable, and even though there are
official reports from government which states the declining of textile production last
year it seems like the market itself still growing positive by 4%. Therefore I put 10% as
the Sales growth along with the interest rate because I believe that PBRX (compared to
the other companies) will have a slight better chance on owning the growing market. It
was proven by these data from recent years that was recorded by idx.
STOCK VALUATION
 RECOMMENDATION
Tempo.CO, BANDUNG (15 Sep 2018) – Textile industry now in Indonesia is growing
rapidly. The needs of textile products are rising both in domestic and export sector. As
for now the manufacturer in Indonesia could not provide the demands.

Kompas.com, JAKARTA (17 Sep 2018) – Kemenperin projected the numbers of textile
industry exports and domestic demands would rise rapidly. Therefore the government
will try their best to focus on making people invest to this industry by publishing
obligations which can satisfy and simplify the business actors in the industry for
example, facilitating them with fiscal incentives like tax allowance and tax holiday. The
government is also trying to settle an agreement with United States and Europian Union
in order to broaden the link to Indonesia’s textile exports. The government also wants
to help the textile industry with digitalization so that the industry can expand, be more
productive and be efficient on doing their job. This could be the key to make the
Indonesia’s textile market to be more successful with innovation, variety, and new
business model and strategies.

According the information I got about textile industry, I believe that this is a golden
chance for PBRX to keep providing kinds of textile to these consumers and perhaps to
the new consumers from EU or USA. In he past years they did show us the domination
on the market (compared to other companies) and successfully boosted their sales
revenue in 2015. This is really a good time to invest more in the industry.