financial management- company analysis

8/8/2019 Financial Management- Company Analysis

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Japan Airlines Corp Company OverviewProvide air transport services

Japan Airlines Corp.

Air transportation -

operation of passengers andcargo planes

Travel planning and

sales - planning andsale of travelpackages

Air transportation-related

Catering, development of equipment

etc

Card and leasing -

provision of financial, card andleasing services

Others - businessesrelated to

hotels, resorts, logistics, wholesale, retail, r

eal estate


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Overviewy Common Primary Shares (mil) 546 y Market Cap Consolidated (mil) 320 .23 y

Enterprise Value (mil) 1,0 65,598 .23 y EPS -2 5.47 y PE Ratio -7.85 y Last Dividend 0 .15 y Dividend Date 7/ 11/ 200 5 y Dividend Yield n/ ay Beta 0 .12y 5 year growth rate -30 9.97%


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JAL s story of Bank rup tc y .y D ebt-saddled Japan Airlines (JAL), Asia's

biggest air carrier by revenue, filed forban ruptcy on 19 th Jan 20 10 to seeprotection from creditors.

y Over 15000 employees lost their jobs.y JAL is now valued at $ 150 m USD the price of 1 new jumbo

jet...y By March 20 13 , the carrier is expected to cut 15,000 jobs -

one-third of its wor force - and shut down 53 of its 110 companies. It will also cut unprofitable routes and replaceageing planes to eep afloat and be able to post a profit of 115.7 billion yen ($ 1.2 7 billion) in the fiscal year ending inMarch 20 12 .


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Wh at we nt wr ong??y Founded in 1951, Japan's f lagship carrier came to

symbolise the country's rapid economicgrowth, leading to privatisation in 1987

y It also found itself with growing pension and payrollcosts, and running many unprofitable domesticroutes, which it was politically obliged to maintain

y More recently, it has seen falling passenger numbers inthe global downturn, and as a result of increasedcompetition from Japanese rival All Nippon Airways

y It lost 13 1bn yen ($ 1.4bn; 88 0 m) in the six months toSeptember


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Japan A irline s Financ ia ls

-100000

-50000

0

50000

200 1 2002 2003 200 4 200 5

Net Income

N et I c e


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Financ ia l Summ a ry of last 5 yrs

03/31/09 03/31/08 03/31/07 03/31/06 03/31/05 03/31/04

Sales 1,951,158.00 2 ,230 ,416.00 2 ,30 1,915.00 2 ,199 ,3 85.00 2 ,12 9,876 .00 1,93 1,742 .00

Operating Income After D epreciation -50 ,884 .00 90 ,0

13 .00 22 ,917.00 -2 6,83 4.00 56 ,149 .00 -67,645 .00

NetIncome - 63 ,194 .00 16,92 1.00 -16,2 67.00 -47,2 43 .00 30 ,0 96 .00 -88 ,619.00

Net Cash F lowF rom Operating Activities

3 1,755.00 157,33 1.00 12 7,748 .00 100 ,984 .00 145,2 75.00 76 ,345.00

Net Cash F lowF rom Investing Activities

10 5,653 .00 2 6,22 9.00 56,2 16.00 99 ,2 83 .00 2 1,456 .00 85,3 82 .00

Net Cash F lowF rom F inancing Activities

-116,767.00 3 6,896 .00 -53 ,00 7.00 -91,3 84 .00 -6,2 90 .00 7,615.00

TotalAssets 1,744 ,649 .00 2 ,117,191.00 2 ,0 83 ,48 2 .00 2 ,10 9,155.00 2 ,118,0 59.00 2 ,0 63 ,773 .00

Total

ia

ilities 1,547,878 .00 1,646 ,12 1.00 1,751,60 9.00 1,933 ,64 0 .00 1,897 ,539.00 1,88 0 ,361.00


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All Nippon Airways Company OverviewProvide air transport services

All Nippon Corp.

Air transportation

- operation of passengers andcargo planes

Travel planningand sales -planning and sale

of travel packages

Airtransportation-rel

ated Catering, development of

equipment etc

Maintenance of

aircrafts in thecountry andoverseas markets

Others - businessesrelated to

hotels, resorts, logistics, wholesale, retail,

real estate


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Overviewy Common Primary Shares (mil) 2 50 6 y Market Cap Consolidated (mil) 752 437.1 y PE Ratio 141.3 6y Dividend Yield 0 .3 4y Beta 0 .33y Enterprise Value : 1,500 ,30 6y 1Yr Sales Growth : -6.40


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All Nipp on F inanc ia ls

0 .00

200 ,000 .00

400 ,000 .00

600 ,000 .00

800 ,000 .00

1,000 ,000 .00

1,200 ,000 .00

1,400 ,000 .00

1,600 ,000 .00

Mar' 0 6 Mar'0 7 Mar' 0 8 Mar'0 9 Mar'10

Net Income


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P rof itab ility rat ios co mp a rison

3 .0 93 .76

6.10

0 .86

-2 .96

-1.72

0 .20

2 .11

-3 .81

2006 2007 2008 2009 2010

Return On Invested Capital All Nippon Japan Airlines

2 .302 .78

4.40

0 .62

-2 .30

-1.20

0 .13

1.3 8

-2 .36

2006 2007 2008 2009 2010

Return on Assets All Nippon Japan Airlines


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P rof itab ility rat ios

69 .65 69 .71 66 .4673 .58 77.2 878.49 77.48 75.33 8

1.42

2006 2007 2008 2009 2010

Cost of Goods Sold To Sales All Nippon Japan Airlines

1.95 2 .19

4.3 1

-0 .3 1

-4.67

-2 .15

-0 .71

0 .76

-3 .2 4

2006 2007 2008 2009 2010

Net Margin All Nippon Japan

58.62 49 .2 5 43 .44 46 .36

2 44 .38

188 .20169 .52

2 78.75

198 .86

2006 2007 2008 2009 2010

Total Debt Pct Total Assets

Japan Airline All Nippon


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Lever ag e rat ios

2006 2007 2008 2009 2010

Total Debt Pct CommonEq uity

All Nippon Japan Airlines

32 .95

39.91 41.55

30 .49

38.13

11.73

2 6.532 4.44

2 .57

2006 2007 2008 2009 2010

Eq uity Pct Total Capital All Nippon Japan Airlines

58.62 49 .2 5 43 .44 46 .3 6

2 44 .3 8188 .20 169 .52

2 78 .75

198 .86

2006 2007 2008 2009 2010

Total Debt Pct Total Assets

Japan Airline All Nippon


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Liquidi ty Rat ios co mp a rison

0 .77

0 .63

0 .55

0 .46

0 .610 .640 .71

0 .91

0 .53

2006 2007 2008 2009 2010

Q uick Ratio All Nippon Japan Airlines

1.10

0 .89 0 .87 0 .89 0 .89

1.0 7 1.0 7

1.23

0 .75

2006 2007 2008 2009 2010

Current Ratio All Nippon Japan Airline


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Comp a rison b e twee n ANA an d JALy Japan Airlines (JAL) and All Nippon Airways

(ANA), illustrate crucial differences in theirfinancial condition and could signal change in the

nation s aviation hierarchy.y Both carriers rang up deficits, with ANA recording aclose to 30 billion yen (US$ 3 14.5 million) net loss and JAL with a staggering net loss of 99 billion yen (US$ 1.0 4 billion).

y In June, JAL sought and obtained 100 billion yen in a rescuepac age from a group of five Japanese lenders led by the JapanD evelopment Ban , 80 % government guaranteed, to coverhemorrhaging losses.

y a ing a self-styled standing on its own two feet approach, ANA wentto the mar et in July and raised 141.7 billion yen in a new shareissue, about 20 % less than intended, as the shares price fell after theplan was announced, but within their target.


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Comp a rison b e twee n ANA an d JAL

cont ..y ANA is procuring funds for capital investment in a growth strategy, JAL

is funding losses from its structural inefficienciesy Of the two airlines, ANA is in a much stronger position

financially, despite having madea loss last year of 4.3 billion yen, its first loss in six years.

y ANA has a strong balance sheet, with plenty of cash reserves andmar etable assets. On the other hand, JAL s balance sheet is not insuch good order, having made losses in four of the past six years

y ANA s better financial shape is attributable to the airline s careful andtimely restructuring. In the past seven years it has renewed andsimplified its fleet, fine-tuned its networ and has generally beenquic er to react to mar et changes than the less nimble JAL.

y Far-sighted ANA joined Star Alliance in October 1999 and hasbenefited tremendously from the synergies created with alliancepartners.


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Z- sco re va lue sy T he original Z-score formula is as follows : Z = 1.2 T 1 + 1.4T 2 + 3 .3 T 3 + .6T 4 + .999 T 5. where,

T 1 = Wor ing Capital / Total Assets. Measures liquid assets in relation to the size of thecompany.

T2

= Retained Earnings / Total Assets. Measures profitability that reflects the company's ageand earning power.

T3 = Earnings Before Interest and Taxes / Total Assets. Measures operating efficiency apart

from tax and leveraging factors. It recognizes operating earnings as being important tolong-term viability.

T 4 = Mar et Value of Equity / Boo Value of Total Liabilities. Adds mar et dimension thatcan show up security price fluctuation as a possible red f lag.

T 5 = Sales/ Total Assets. Standard measure for sales turnover (varies greatly from industry to

industry).Based on the above formulae , the calculated Z-score values are as follows,

All Nippon : 3 .2 Japan Airlines : 1.1


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Se ct ion 2, G roup 14

y Aadarsh ( FT11 2 48 )y Namit ( FT11 23 8)y Nidhi Garg ( FT11 2 40 )y Shalini ( FT11 2 62 )y Victor( FT11 2 72 )


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