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SWEDISH MOTORS
SMC <Bt2.26>
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Recommendation
New : SELL
Previous : SELL
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Investment
losses and weak Volvo sales drive SMC into the red
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Swedish Motors Corp (SMC)
reported a huge 4Q02 loss of Bt270mn. This was mainly due to
an extraordinary loss of Bt250mn resulting from investment
losses in a listed associate Scandinavian Leasing (SCAN).
For FY02, SMC recorded a loss
of Bt243mn versus a net profit of Bt25.5mn the year earlier.
The company was also was hurt by weaker Volvo sales which
dipped 1% yoy amid fiercer competition in the vehicles
market, resulting in its gross margin narrowing to 8.8% in
4Q02 from 9.5% in 4Q01.
Volvo's performance is in
stark contrast with the overall auto market. Passenger car
sales rose 21% last year to 126,353 units while total car
sales jumped 38% to 409,362 units. We maintain our SELL
rating on SMC given that the stock is trading on a 2003 P/E
of 40x and EV/EBITDA of 13.6x. Our fair value estimate is
based on its book value of Bt1.7 per share.
SMC's income statement (Mn Bt)
| |
4Q02 |
3Q02 |
QoQ |
4Q01 |
YoY |
2002 |
2001 |
YoY |
|
Sales |
938.6 |
955.3 |
-1.7% |
1,036.9 |
-9.5% |
3,792.2 |
3,733.8 |
1.6% |
|
Other Income |
3.7 |
6.1 |
-39.6% |
3.7 |
-1.0% |
25.9 |
33.1 |
-21.8% |
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COGs |
843.1 |
845.3 |
-0.3% |
924.9 |
-8.8% |
3,362.9 |
3,276.1 |
2.7% |
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Depreciation&amortization |
12.8 |
12.5 |
1.8% |
13.0 |
-2.0% |
50.6 |
55.0 |
-7.9% |
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Gross profits |
82.8 |
97.4 |
-15.0% |
98.9 |
-16.3% |
378.7 |
402.8 |
-6.0% |
|
Gross margin (%) |
8.8% |
10.2% |
- |
9.5% |
- |
10.0% |
10.8% |
- |
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SG&A |
102.7 |
91.6 |
12.2% |
115.5 |
-11.0% |
383.2 |
413.3 |
-7.3% |
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SG&A / Sales |
10.9% |
9.6% |
- |
11.1% |
- |
10.1% |
11.1% |
- |
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EBITDA |
(3.5) |
24.5 |
N.A. |
0.2 |
N.A. |
72.1 |
77.6 |
-7.1% |
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EBITDA margin (%) |
-0.4% |
2.6% |
- |
0.0% |
- |
1.9% |
2.1% |
- |
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Interest expense |
6.7 |
6.9 |
-3.4% |
9.1 |
-27.2% |
29.5 |
42.5 |
-30.5% |
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Net profit before extra item |
(20.0) |
2.1 |
N.A. |
(18.8) |
N.A. |
4.7 |
10.9 |
-57.3% |
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Extra ordinary gain (loss) |
(250.2) |
(1.3) |
N.A. |
8.9 |
N.A. |
(247.8) |
14.6 |
NA |
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Net profit |
(270.1) |
0.8 |
N.A. |
(9.8) |
N.A. |
(243.1) |
25.5 |
NA |
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EPS (Bt) before extra item |
(0.08) |
0.01 |
N.A. |
(0.08) |
N.A. |
0.02 |
0.05 |
-57.5% |
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EPS (Bt) |
(1.15) |
0.00 |
N.A. |
(0.04) |
N.A. |
(1.03) |
0.11 |
NA |
Note: COGs does not include Depreciation and Amortization
- New car sales, which yield
margins of only 1.5%, accounted for 74% of SMC’s 4Q02
sales and service income. The rest came from parts (18%),
used cars (4%) and services (3%).
Sales and Service Income Breakdown
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2000 |
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2001 |
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4Q02 |
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2002 |
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BtMn |
Margin |
BtMn |
Margin |
BtMn |
Margin |
BtMn |
%share |
Margin |
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New Car |
2,031.1 |
1.4% |
2,803.1 |
2.1% |
696.3 |
1.3% |
2,806.4 |
74% |
1.5% |
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Used Car |
207.9 |
3.2% |
187.1 |
-2.4% |
34.9 |
-5.4% |
163.6 |
4% |
-4.6% |
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Parts |
635.9 |
26.0% |
602.7 |
22.4% |
170.0 |
16.1% |
676.6 |
18% |
19.1% |
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Services |
122.5 |
14.4% |
123.2 |
16.8% |
33.2 |
27.1% |
128.2 |
3% |
25.7% |
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Other |
- |
- |
13.5 |
10.7% |
3.1 |
-12.1% |
13.2 |
0% |
-20.2% |
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Total |
2,997.3 |
7.3% |
3,729.6 |
5.7% |
937.5 |
4.6% |
3,787.9 |
100% |
5.1% |
- 4Q02 sales totaled
Bt938.6mn, down 1.7% yoy and 9.5% qoq. For FY02 sales
edged up 1.6% to Bt3,792mn. Volvo sales, however, dipped
1% yoy to 1,613 units, driving its market share among
Western cars sold in Thailand to just 9% last year versus
14% in 2000.
Western
Car Sales Comparison
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2000 |
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2001 |
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2002 |
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Units |
%share |
Units |
%Share |
Units |
%Chg |
%Share |
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Benz |
2,356 |
22% |
3,707 |
26% |
4,057 |
9% |
23% |
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B.M.W |
2,415 |
22% |
3,139 |
22% |
3,822 |
22% |
22% |
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Chevrolet |
1,463 |
13% |
2,316 |
16% |
3,846 |
66% |
22% |
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Volvo |
1,484 |
14% |
1,623 |
11% |
1,613 |
-1% |
9% |
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V.W. |
650 |
6% |
1,017 |
7% |
511 |
-50% |
3% |
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Ford |
958 |
9% |
695 |
5% |
1,419 |
104% |
8% |
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Peugeot |
550 |
5% |
555 |
4% |
426 |
-23% |
2% |
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Other Western |
986 |
9% |
1,441 |
10% |
1,917 |
33% |
11% |
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Total Western |
10,862 |
100% |
14,493 |
100% |
17,611 |
22% |
100% |
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Total |
83,106 |
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104,502 |
|
126,353 |
21% |
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SMC’s 4Q02 gross margins
narrowed to 8.8% from 10.2% in the previous quarter and 9.5%
in 4Q01. We believe SMC's efforts to compete in an
increasingly competitive market is resulting in further
deterioration in margins.
SMC booked an extraordinary
loss of Bt250mn in 4Q02. This comprised of a Bt218mn loss
for impairment of investment at an associated company,
Scandinavian Leasing (SCAN), and a loss on impairment of
other assets of Bt31.5mn
SMC has total debt of Bt812mn
– a debt to equity ratio of 2.13x. Last Tuesday the
company told the SET it would pay no more interest and
principal on its debt pending the outcome of debt
restructuring talks with major creditors.
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Income Statement |
1999 |
2000 |
2001 |
2002 |
2003F |
2004F |
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Sales |
1,837 |
3,004 |
3,734 |
3,792 |
4,171 |
4,504 |
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Other income |
134 |
56 |
33 |
26 |
27 |
28 |
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Total revenues |
1,971 |
3,060 |
3,767 |
3,818 |
4,198 |
4,532 |
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Cost of Goods sold |
1,160 |
2,567 |
3,276 |
3,363 |
3,699 |
3,995 |
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Depreciation and Amortization |
102 |
70 |
55 |
51 |
48 |
49 |
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SG&A and Others Expenses |
658 |
468 |
413 |
383 |
421 |
455 |
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EBIT |
50 |
(44) |
23 |
21 |
29 |
33 |
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Interest expenses |
188 |
53 |
42 |
30 |
25 |
25 |
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EBT |
(138) |
(98) |
(20) |
(8) |
4 |
8 |
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Equity Acc. + Extraordinary Gains |
80 |
(8) |
15 |
(248) |
- |
- |
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Net profit |
(198.4) |
(74.9) |
25.5 |
(243.1) |
13.3 |
18.9 |
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EPS |
(3.67) |
(0.32) |
0.11 |
(1.03) |
0.06 |
0.08 |
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EPS Growth |
N.A. |
N.A. |
N.A. |
1048.3% |
N.A. |
41.7% |
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PER |
N.A. |
N.A. |
20.85 |
N.A. |
40.00 |
28.22 |
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EV/EBITDA |
5.5 |
46.4 |
13.5 |
14.7 |
13.6 |
13.0 |
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P/BV |
0.18 |
0.89 |
0.85 |
1.40 |
1.35 |
1.29 |
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Debt / Equity |
1.68 |
1.66 |
1.42 |
2.13 |
1.92 |
1.84 |
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Analyst: Surachai P. (Ext. 1420)
Email: Surachai.p@kimeng.co.th
If you have
any questions or suggestions please feel free to email our Research
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Copyright © March 2000,
Kim Eng Securities (Thailand) PLC. All rights reserved.
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