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3 September, 2016
Beyond Standard of Financial Advantage
Module 3 CFO and Corporate Financial Management
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Thailand and Southeast Asia’s largest retailer of home improvement products which includes
home improvement product (hardware, plumbing, painting, tools, outdoor living & garden),
bathroom, kitchen, lighting, home appliances and household accessories, furniture and
decorative products with full service support under HomePro format.
With Mega Home business, there are more merchandise categories than above: construction
materials, daily use products, office supplies, leisure goods and more household products are
added.
What dose HomePro do?
HomePro is the leading home improvement retailer in Thailand.
Our product range covers 40,000-80,000 items.
We operate nationwide, providing complete services as
One Stop Shopping to attain highest customer satisfaction.
The HomePro’s stock is traded on the Stock Exchange of Thailand
(SET - hmpro, BB - hmpro:tb).
2
Major Shareholder
3
Management&Employee
3%
1. Land and Houses Plc. 30.2
2. Quality Houses Plc. 19.9
3. Mr. Niti Osathanuklor 4.7
4. Thai NVDR Co., Ltd. 2.6
5. Mr. Manit Udomkunnatum 2.6
6. Social Security Office 2.3
7. AIA Co., Ltd. 2.1
8. Sarasin Co., Ltd. 1.3
9. Chase Nominees Limited 1.3
10. State Street Bank Europe Limited 1.2
11. Others 31.8
Niti Osathanuklor4.7%
Land & House
30.2%
QualityHouse
19.9%
Others
39.6%
Top 10 Shareholders %Share
Manit Udomkunnatum2.6%
as at April 20, 2016
Market Capitalization : 144,663.18 MB (as at 18 August 2016)
Paid-up Capital : 13,151,198,025 shares
Background
1996 2001 2006 2010 2013 2014March
2016
Formation by
Land & House group
Listed
in SET
Selected
as one of
SET 100
Selected
as one of
SET 50
Introducing
“Mega Home”
Opened
the first store
In Malaysia
Operating
77 stores of HP,
7 stores of MH
and 1 store in
Malaysia
4
Corporate Group Structure
Holds 99.99% of total
shares
Objective to manage
rental space and
provide utilities
services to tenants.
Market Village Co., Ltd.
Holds 100% of total
shares
Objective to operate
a retail business in
Malaysia.
Home Product Center (Malaysia) Sdn. Bhd.
Holds 99.99% of total
shares
Objective to operate
retail business under
trade name “Mega
Home”.
Mega Home Center Co., Ltd.
DC Service Center Co., Ltd.
Holds 99.99% of total
shares
Objective to operate
the warehousing and
distribution.
Home Product Center Plc. : Operating HomePro in Thailand
5
Footprint in Thailand as at Aug 31, 2016
Greater Bangkok : 22 stores
Upcountry : 55 stores
Greater Bangkok : 2 stores
Upcountry : 7 stores
Malaysia : 1 store
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1,463 1,725 3,208 3,372 4,24410,943 9,509
5,956
16,964
38,306
64,204
88,722 89,662
101,717
89,428
142,032
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Market Cap.
(RO) Capital
Increase (RO) Capital
Increase
ESOP (W1)
ESOP (W2)
ESOP (W3)
ESOP (W4)
Stock Dividend 2009 – 2015
EJIP
Bond
Debt. Market
Bond
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bank Loan
Warrant 2:1 @ 3 Baht
Hmpro’s Market Capitalization Evolution VS Financing tools
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Company at initial stage’s fund raising
� Before IPO Equity + Conventional bank loan + supplier financing
� Oct 2001 IPO 375x3.6 Bht/ share MKT cap 1350
� May 2002
- First Right Offering at par 1 Bht 375 million Bht
- Warrant 2 existing shares to 1 Warrant /1 new share
- Exercise price 3 Bht / share during 2002-2005
Register cap up from 375 to 987.5 mBht
� Oct 2006 Second Right Offering at 1 :1 at par 1 Bht
- Registered cap up from 961 to 1938 MBht
- Rational Share liquidity issues and Future Gearing concern8
TRIS Rating History
2003 2005 2007 2009 2010 2011
BBB BBB+ A-
AStable
Outlook
APositive
Outlook
A+Stable
Outlook
MAR 2005First Bond Issuing
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Why stock dividend?
� High Capex needed during aggressive expansion
�Increase the share liquidity
�Save cash for CAPEX and working cap.
CON
�Share price dilution effect. ( Hence earning growth
outlook > dilution effect to sustain share price)
11
PRO
REIT as Hybrid Financing and Why REIT?
REIT can be utilized as a tool to monetize assets through capital markets while still presents an opportunity to the sponsor (as a REIT manager) to keep control over such assets
1 2 3Opportunity to monetize
tangible assets with stable income at high price
With modest cost of funding
and low financial obligation compared to debt
And present an opportunity
to the sponsor to invest in
high return assets and improve efficiency
Example of low-risk assets that investors are willing to get low return
REIT will be listed on
the Stock Exchange of Thailand
Key Observations:
- REIT investors usually require ~8%-10%
IRR and no principle repayment
obligation
- REIT sponsor’s undertaking is only
perceived as the commercial points to
comport investors
- Positive accounting impact due to non-
debt financing
After monetizing tangible assets
through REIT, sponsor could allocate
new capital to value added investment
i.e. branding, R&D
Finally, enhancing return and
company’s valuation
Asset Turnover
+
Profit Margin
Out Balance Sheet
Warehouse Office Building
Retail Hotel
10 Yr Gov’t
Bond
Corp
Bond
MLR REIT Cost of
Equity
~4% 4%-5%~ 5%-6%
8%-10%
10.5%-14.5%
Low Return High Return
ROE
12
14
หลักการ ESOP
บริษทั พนกังาน
จดัประชมุผู้ ถือหุ้น
ไม่มผีู้คดัค้าน 5-10% ของผู้ถือหุ้นที�เข้าประชุม
ใบสําคญัแสดงสิทธิWarrant
บันทกึค่าใช้จ่ายของบริษทัตามมาตรฐานบัญชีใหม่
หลกัทรัพย์HMPRO
ใช้สิทธิ ตามราคา และ อตัราใช้สิทธิ(ราคาตลาด
ณ. วนัออก Warrant)
พนักงานเสียภาษี จากผลต่าง ราคาตลาด
กบั ราคาใช้สิทธิNew
หลกัการ EJIP
บริษทั พนกังาน
กาํหนดรายละเอยีดโครงการ EJIP
บริษทัหลกัทรัพย์
เงนิสบทบส่วนบริษัท เงนิสบทบส่วนบริษัทเงนิสําหรับซืHอหลกัทรัพย์ตามโครงการ EJIP
หลกัทรัพย์HMPRO
บันทึกค่าใช้จ่ายของบริษัท
เงนิภาษี
หลกัทรัพย์HMPROหมด silent Period
15
HomePro’s Organization Chart
MerchandisingTeam 1
MerchandisingTeam 2
MerchandisingTeam3
MerchandisingTeam4
Direct Sourcing &
International Merchandising
Non-Trade Procurement,
Commercial Support and
Merchandising
Supply Chain Management
Operation
Business Development
International Business
DC
Marketing
ICT
HR & Loss Prevention
IR &Accounting & Finance
17
HomePro’s Financial Dept. Organization Chart
CFO
Financial Accounting Treasury Corporate Planning / IR
Legal / Compliance
-
18
Fro
nt-
en
d
Ba
ck-e
nd
Ma
na
ge
me
nt
POS
CRM(Customer Relation
Management)
VRM(Vendor Relation
Management)
HRM(Human Resource
Management)
SAP IS Retail(Module : FI/CO, SD,
MM, Etc.)
PM(Property
Management)
Delivery & Fleet Management
SAP Data Warehouse
Business Dashboard
BI Report(Business Intelligent
report)
SAP Report
19
Homepro’s system landscape and Information management
HOMEPRO ‘s Risk Management Process
State of ObjectiveState of Objective Identify RiskIdentify Risk Risk AssessmentRisk Assessment
Consider the
response of risk and
internal control
exists.
Consider the
response of risk and
internal control
exists.
MonitoringMonitoring
Key Business Risk
Analyze
Impact & Likehood
Address Risk ReponseRisk Management
ReviewVision & Strategy