MANILA JOCKEY CLUB, INC
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999-2003
(In thousands)
2001
2000
2003
2002
286,907
228,099
56,326
262,545
162,342
5,101
39,811
597,246
44,469
29,673
39,032
343,233
469,799
869,814
216,991
216,431
171,842
44,537
40,289
10,104
5,775
5,347
4,878
4,119
148,295
48,776
14,549
15,549
5,795
1,589
8,447
3,401
94,296
32,485
18,708
31,199
5,691
3,136
6,104
9,611
115,010
27,787
20,927
68
3,964
113,183
26,325
25,039
160
2,210
3,792
3,160
2,649
2,571
1,828
2,198
2,189
1,927
1,421
927
294
204
0
0
0
12,857
2,122
4,164
1,927
2,741
0
17,960
523
68,884
4,683
0
8,897
2,017
4,879
1,927
3,191
2,626
164,925
27,738
0
0
22,221
7,429
1,644
688
573
2,667
1,664
3,761
338
969
14,383
311,557
360,873
31,676
108,926
OTHER CHARGES
Finance costs
34,905
26,494
39,906
37,900
39,808
INCOME (LOSS) BEFORE INCOME TAX
(3,229)
82,432
389,897
(26,328)
(16,280)
13,163
(23,050)
31,939
(31,939)
(40,543)
40,543
(11,806)
15,522
(8,706)
8,088
REVENUES
Club races
Recovery of doubtful accounts
Gain on disposal of land
Other revenues - net
COSTS AND EXPENSES
Racing day
Salaries and wages and employees' benefits
Depreciation and amortization
Taxes and licenses
Light and water
Gas, fuel and oil
Security services
Commission
Losses from nonrecoverable minimum
Corporate income tax
Supplies
Professional fees
Repairs and maintenance
Retirment benefits
Insurance
Decline in value of marketable equity securities
Doubtful accounts
Rent
Writedown of impaired assets
Losses on demolition of building
Loss on disposal of investment
Other operating expenses
INCOME FROM OPERATIONS
INCOME TAX EXPENSE (BENEFIT)
Deferred
Change in valuation allowance
NET INCOME
Earnings Per Share
187,318
1999
177,399
555
385
3,052
1,401
4,107
693
7,468
7,184
0
5,165
440,011
205,419
192,903
429,803
11,572
23,528
(9,887)
0
0
3,716
(618)
6,658
82,432
389,897
(30,044)
(15,662)
0.04
0.71
3.34
(0.60)
(0.30)
MANILA JOCKEY CLUB, INC
STATEMENTS OF INCOME - VERTICAL ANALYSIS
FOR THE YEARS ENDED DECEMBER 31, 1999-2003
2003
REVENUES
Club races
Recovery of doubtful accounts
Gain on disposal of land
Other revenues – net
COSTS AND EXPENSES
Racing day
Salaries and wages and employees' benefits
Depreciation and amortization
Taxes and licenses
Light and water
Gas, fuel and oil
Security services
Commission
Losses from nonrecoverable minimum
Corporate income tax
Supplies
Professional fees
Repairs and maintenance
Retirment benefits
Insurance
Decline in value of marketable equity securities
Doubtful accounts
Rent
Writedown of impaired assets
Losses on demolition of building
Loss on disposal of investment
Other operating expenses
INCOME FROM OPERATIONS
83.59%
Percentage of Sales
2002
2001
2000
26.22%
16.41%
55.88%
34.56%
1.09%
8.47%
68.66%
5.11%
13.67%
18.03%
100.00%
100.00%
100.00%
100.00%
100.00%
50.07%
12.98%
11.74%
2.94%
1.68%
1.56%
1.42%
1.20%
31.57%
10.38%
3.10%
3.31%
1.23%
0.34%
1.80%
0.72%
10.84%
3.73%
2.15%
3.59%
0.65%
0.36%
0.70%
1.10%
53.00%
12.81%
9.64%
0.03%
1.83%
52.30%
12.16%
11.57%
0.07%
1.02%
1.75%
1.46%
0.77%
0.55%
0.21%
0.64%
0.64%
0.56%
0.41%
0.27%
0.09%
0.06%
0.45%
0.89%
0.41%
0.58%
0.23%
0.56%
0.22%
0.37%
0.30%
18.96%
3.19%
0.76%
0.32%
0.26%
1.23%
0.77%
1.73%
0.16%
0.45%
6.63%
3.82%
0.11%
14.66%
1.00%
86.33%
1999
81.97%
0.26%
0.18%
1.41%
0.65%
1.90%
0.32%
3.45%
3.75%
1.89%
2.55%
0.85%
3.31%
2.39%
90.77%
76.81%
50.59%
94.67%
89.13%
9.23%
23.19%
49.41%
5.33%
10.87%
OTHER CHARGES
Finance costs
10.17%
5.64%
4.59%
17.47%
18.39%
INCOME (LOSS) BEFORE INCOME TAX
-0.94%
17.55%
44.83%
-12.13%
-7.52%
INCOME TAX EXPENSE (BENEFIT)
Deferred
Change in valuation allowance
3.84%
-6.72%
6.80%
-6.80%
-4.66%
4.66%
-5.44%
7.15%
-4.02%
3.74%
1.71%
-0.29%
17.55%
44.83%
-13.85%
-7.24%
-2.88%
NET INCOME
Earnings Per Share
1.94%
0.000012% 0.00015% 0.00038% -0.00028% -0.00014%
MANILA JOCKEY CLUB, INC
STATEMENTS OF INCOME - HORIZONTAL ANALYSIS
FOR THE YEARS ENDED DECEMBER 31, 2000-2003
% Growth from preceding year
2003
2002
2001
2000
REVENUES
Club races
Recovery of doubtful accounts
Gain on disposal of land
Other revenues – net
COSTS AND EXPENSES
Racing day
Salaries and wages and employees' benefits
Depreciation and amortization
Taxes and licenses
Light and water
Gas, fuel and oil
Security services
Commission
Losses from nonrecoverable minimum
Corporate income tax
Supplies
Professional fees
Repairs and maintenance
Retirment benefits
Insurance
Decline in value of marketable equity securities
Doubtful accounts
Rent
Writedown of impaired assets
Losses on demolition of building
Loss on disposal of investment
Other operating expenses
9.28%
-100.00%
-100.00%
41.48%
21.77%
5.59%
-99.15%
-10.47%
49.86%
-23.98%
-26.94%
-45.99%
300.85%
0.26%
15.88%
-8.69%
176.92%
-35.02%
-0.35%
236.50%
-42.25%
21.11%
57.27%
-18.01%
50.15%
16.91%
-22.23%
-10.60%
-50.16% 45780.88%
1.83%
43.57%
-49.33%
38.38%
60.97%
-64.61%
1.61%
5.55%
-16.42%
-57.50%
79.37%
3.03%
15.10%
40.65%
3.58%
-47.43%
0.00%
-48.16%
5.21%
-14.65%
0.00%
-14.10%
-100.00%
-98.36% -89.11%
-60.99% -98.11%
-100.00%
-100.00%
-100.00%
44.51%
19.76%
11.19%
-100.00%
252.01%
82.94%
15.81%
-15.16%
676.92%
16920.12%
92.85%
3.41%
20.00%
23.96%
48.83%
-12.61%
18.77%
-8.42%
39.83%
92.60%
39.09%
-13.67%
-17.99%
114.20%
6.49%
-70.92%
-74.66%
3614.16%
-50.82%
31.75%
-33.61%
5.29%
-4.79%
-103.92%
-78.86%
1380.92%
61.72%
INCOME TAX EXPENSE (BENEFIT)
Deferred
Change in valuation allowance
-58.79% -178.78%
-27.83% -178.78%
243.41%
161.20%
35.61%
91.91%
NET INCOME
-91.92%
-78.86%
1197.75%
91.83%
Earnings Per Share
-94.37%
-78.74%
-656.67%
100.00%
INCOME FROM OPERATIONS
OTHER CHARGES
Finance costs
INCOME (LOSS) BEFORE INCOME TAX
-100.00% -701.29%
MANILA JOCKEY CLUB, INC.
BALANCE SHEETS
DECEMBER 31, 1999-2003
2003
2002
(In thousands)
2001
2000
1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 3)
Marketable equity securities - net
Receivables - net
Prepayments and other current assets - net
68,427
3,818
189,089
18,197
34,191
28,870
224,153
9,503
147,223
13,220
206,773
1,689
3,917
3,535
8,671
1,013
15,249
3,873
11,287
1,712
Total Current Assets
279,531
296,717
368,905
17,136
32,121
NON - CURRENT ASSETS
Investments
Property and equipment - net
Other non-current Assets
5,354
2,882,950
191,370
4,984
2,522,507
225,920
2,067
730,710
181,569
1,567
222,025
185,411
122,865
234,271
47,984
Total Non-current Assets
3,079,674
2,753,411
914,346
409,003
405,120
TOTAL ASSETS
3,359,205
3,050,128
1,283,251
426,139
437,241
CURRENT LIABILITIES
Interest-bearing loans and borrowings
Income tax payable
Accounts payable and accrued expenses
150,000
2,615
400,809
190,333
2,517
250,537
40,333
1,777
226,334
126,311
543
58,078
241,629
0
56,949
Total Current Liabilities
553,424
443,387
268,444
184,932
298,578
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Other non-current liabilities
499,250
169,167
137,700
209,500
258,600
132,588
Total Non-current Liabilities
499,250
306,867
468,100
132,588
0
EQUITY
Capital stock
Revaluation increment in property
Retained earnings
149,999
1,677,010
479,522
149,999
1,677,010
472,865
100,000
6,275
440,432
51,810
8,516
48,293
51,810
8,516
78,337
Total Equity
2,306,531
2,299,874
546,707
108,619
138,663
TOTAL LIABILITIES AND EQUITY
3,359,205
3,050,128
1,283,251
426,139
437,241
LIABILITIES AND EQUITY
MANILA JOCKEY CLUB, INC.
BALANCE SHEETS - VERTICAL ANALYSIS
DECEMBER 31, 2003, 2002, 2001, 2000 AND 1999
2003
Percentage of Total Assets
2002
2001
2000
1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 3)
Marketable equity securities – net
Receivables – net
Prepayments and other current assets - net
2.04%
0.11%
5.63%
0.54%
1.12%
0.95%
7.35%
0.31%
11.47%
1.03%
16.11%
0.13%
0.92%
0.83%
2.03%
0.24%
3.49%
0.89%
2.58%
0.39%
Total Current Assets
8.32%
9.73%
28.75%
4.02%
7.35%
NON - CURRENT ASSETS
Investments
Property and equipment – net
Other non-current Assets
0.16%
85.82%
5.70%
0.16%
82.70%
7.41%
0.16%
56.94%
14.15%
0.37%
52.10%
43.51%
28.10%
53.58%
10.97%
Total Non-current Assets
91.68%
90.27%
71.25%
95.98%
92.65%
100.00%
100.00%
100.00%
100.00%
100.00%
CURRENT LIABILITIES
Interest-bearing loans and borrowings
Income tax payable
Accounts payable and accrued expenses
4.47%
0.08%
11.93%
6.24%
0.08%
8.21%
3.14%
0.14%
17.64%
29.64%
0.13%
13.63%
55.26%
Total Current Liabilities
16.47%
14.54%
20.92%
43.40%
68.29%
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Other non-current liabilities
0.00%
0.00%
14.86%
0.00%
0.00%
0.00%
5.55%
4.51%
0.00%
0.00%
16.33%
20.15%
0.00%
0.00%
31.11%
0.00%
Total Non-current Liabilities
14.86%
10.06%
36.48%
31.11%
0.00%
EQUITY
Capital stock
Revaluation increment in property
Retained earnings
4.47%
49.92%
14.27%
4.92%
54.98%
15.50%
7.79%
0.49%
34.32%
12.16%
2.00%
11.33%
11.85%
1.95%
17.92%
Total Equity
68.66%
75.40%
42.60%
25.49%
31.71%
100.00%
100.00%
100.00%
100.00%
100.00%
TOTAL ASSETS
LIABILITIES AND EQUITY
TOTAL LIABILITIES AND EQUITY
13.02%
MANILA JOCKEY CLUB, INC.
BALANCE SHEETS - HORIZONTAL ANALYSIS
DECEMBER 31, 2003, 2002, 2001, 2000 AND 1999
2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 3)
Marketable equity securities – net
Receivables – net
Prepayments and other current assets - net
% Growth from preceding year
2002
2001
2000
100.13%
-86.78%
-15.64%
91.49%
-76.78%
118.38%
8.41%
462.64%
3658.57%
273.97%
2284.65%
66.73%
-74.31%
-8.73%
-23.18%
-40.83%
-5.79%
-19.57%
2052.81%
-46.65%
7.42%
14.29%
-15.29%
141.12%
245.21%
24.43%
31.91%
229.11%
-2.07%
-98.72%
-5.23%
286.40%
Total Non-current Assets
11.85%
201.13%
123.55%
0.96%
TOTAL ASSETS
10.13%
137.69%
201.13%
-2.54%
-21.19%
3.89%
59.98%
371.90%
41.64%
10.69%
-68.07%
227.26%
289.71%
-47.73%
24.82%
65.17%
45.16%
-38.06%
195.12%
-19.25%
-46.75%
58.01%
62.69%
-34.44%
253.05%
EQUITY
Capital stock
Revaluation increment in property
Retained earnings
0.00%
0.00%
1.41%
50.00%
26625.26%
7.36%
93.01%
-26.32%
812.00%
0.00%
0.00%
-38.35%
Total Equity
0.29%
320.68%
403.33%
-21.67%
10.13%
137.69%
201.13%
-2.54%
Total Current Assets
NON - CURRENT ASSETS
Investments
Property and equipment – net
Other non-current Assets
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Interest-bearing loans and borrowings
Income tax payable
Accounts payable and accrued expenses
Total Current Liabilities
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Other non-current liabilities
Total Non-current Liabilities
TOTAL LIABILITIES AND EQUITY
1.98%
Ratio Analysis
LIQUIDITY
CURRENT RATIO
QUICK RATIO
MJCI
PRC
.51 : 1
.47 : 1
1.5 : 1
1.46 : 1
Liquidity Ratio
1.5
MJCI
1
PRC
0.5
0
CURRENT RATIO
QUICK RATIO
Liquidity ratios help measure a firm’s ability to cover its short-term obligations. Most
firms generally pay their interest payments and short-term debts with current assets.
The composition and quality of current assets is a critical factor in the analysis of
your Company's liquidity
MJCI’s Liquidity is very low compared to PRC, this only means that the company’s
liquidity position is relatively weak. MJCI needs 480 million additional current assets
in order to equal PRC’s liquidity ratios.
ASSET MANAGEMENT
DAYS SALES OUTSTANDING
FIXED ASSET TURNOVER
TOTAL ASSET TURNOVER
MJCI
PRC
201 days
.12 times
.10 times
240 days
.62 times
.21 times
240
MJCI
220
PRC
200
180
DAYS SALES OUTSTANDING
Asset Management Ratios
0.8
MJCI
0.6
PRC
0.4
0.2
0
FIXED ASSET
TURNOVER
TOTAL ASSET
TURNOVER
These are accounting ratios that measure a firm’s ability to convert accounts
within their balance sheet into cash or sales. Companies will typically try to turn their
production into cash or sales as fast as possible because this will generally lead to
higher revenue. Such ratios are frequently used when performing fundamental
analysis on different companies.
MJCI’s fixed asset turnover and total asset turnover are very much lower than PRC,
this means that MJCI’s assets are not used as intensively as PRC. MJCI needs to
increase its net sales by 1.5 billion to utilize it assets and cope up with PRC.
DEBT MANAGEMENT
MJCI
PRC
31%
29%
TIMES INTEREST EARNED
0.91 times
4.93 times
EBITDA COVERAGE RATIO
2.06 times
4.30 times
DEBT RATIO
Debt Management Ratio
MJCI
33%
PRC
30%
27%
DEBT RATIO
Debt Management Ratios
5
4
MJCI
3
PRC
2
1
0
TIMES INTEREST EARNED
EBITDA COVERAGE RATIO
Measure the activity of the assets and the liability of the business to generate sales
trough the use of the assets.
In 2003 the total debt of MJCI is only 31% percent of total asset not high compared
to PRC that has 29% debt ratio. MJCI has a TIE of .91 times which means that its
EBIT can’t even cover its interest payment, which is a good sign in terms of paying
its long-term debt.
MJCI’s earnings before interest, tax, depreciation and
amortization is only half of PRC’s EBITDA coverage ratio which means that MJCI
needs to increase its sales in able to be at par with its direct competitor.
PROFITABILITY
PROFIT MARGIN ON SALES
BASIC EARNING POWER
RETURN ON TOTAL ASSETS
RETURN ON COMMON EQUITY
MJCI
1.94%
0.94%
0.20%
1.06%
PRC
16.00%
4.88%
3.33%
4.69%
Profitability Ratios
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
MJCI
PRC
PROFIT
MARGIN ON
SALES
BASIC
EARNING
POWER
RETURN ON RETURN ON
TOTAL
COMMON
ASSETS
EQUITY
Profitability Ratios measures the company’s earning power and management
effectiveness in running operations, thus indicating the profitability of sales
operations and investments. It consists of the various elements that make up net
income: revenues, cost of goods sold and operating expense.
MJCI’s profit margin on sales is very low when we compare it to PRC, this is
because MJCI’s net income dropped by 76 million compared to last year. Its BEP is
also extremely low with only .94%, MJCI need 148 million additional in EBIT in able
to equal PRC’s 4.88% BEP. MJCI ROA is also low at .20% when we compare it to
PRC, the company needs additional 105 million to have the same ROA with PRC.
MJCI’s ROE is also 3.63% lower than PRC, which has a 4.69% ROA. The company
needs to increase its net income by 23 million. Based on our analysis this huge
decrease in net income is brought about by the newly build race track in Carmona,
Cavite, which not fully utilized as of now. Sales and net income will surely increase
on the next succeeding years when this new facility is utilized intensively.
MANILA JOCKEY CLUB INC. STRATEGIC
PROFIT MODEL
For the years ended December 31, 2003 and 2002
(Amounts in thousands)
Net
Income
6,658
82,432
Profit
Margin
0.019398 =
0.175462
Year
2003
2002
Return on
Financial
Equity
Leverage
1.06% =
5.34
13.23%
4.90
Return on
Assets
x 0.00198202 =
0.02702575
Total
Assets
3,359,205
3,050,128
÷
Shareholders'
Equity
629,521
622,864
Net
Sales
343,233
469,799
343,233
469,799
x
Asset
Turnover
0.102177 =
0.154026
=
÷
÷
Total Assets
3,359,205
3,050,128
The ROE of MJCI
dramatically
from
a
decreased,
high
of
13.23
percent in 2002 down to
1.06
percent
in
2003.
There are a lot of factors
that might have caused the
said
decline.
First,
its
financial leverage increased
slightly by .44, which means
that
MJCI
debt.
Assets
increased
its
MJCI Returns on
(ROA)
also
decreased from 2.7 percent to .20 percent, which means that its assets are not effectively utilized. Net sales also
declined by almost 127 million despite the increased in total assets that also concludes that the newly acquired asset are
not used as intensively to generate more revenues compared with its direct competitor. Moreover, MJCI net income
roughly decreased by 92 percent, which we think is the main reason of a huge disparity between the 2002 and 2003 ROE.
(IN THOUSANDS)
NOWC 2003
NOWC 2002
TOC 2003
TOC 2002
(127,711.00)
14,793.00
2,755,239.00
2,537,300.00
NOPAT 2003
NOPAT 2002
21,539.68
74,069.68
OCF 2003
OCF 2002
61,828.68
88,618.68
FCF 2003
FCF 2002
MVA
EVA
(196,399.32)
(1,604,946.32)
1,170,467.00
(309,089.00)
Computation are as follows
(In Thousands)
Net Operating Working Capital
NOWC03 =
=
=
NOWC02 =
=
=
Operating current assets
$275,713
-127,711.00
Operating current assets
$267,847
14,793
Operating current
liabilities
$403,424
-
-
Operating current
liabilities
$253,054
Total Net Operating Capital
TOC03 =
=
=
NOWC
-$127,711
2,755,239
+
+
Fixed assets
$2,882,950
TOC02 =
=
=
NOWC
$14,793
2,537,300
+
+
Fixed assets
$2,522,507
Net Operating Profit After Taxes
NOPAT03 =
=
=
EBIT
$31,676
21,540
x
x
(1-T)
68%
NOPAT02 =
=
=
EBIT
$108,926
74,070
x
x
(1-T)
68%
Operating Cash Flow
OCF03 =
=
=
NOPAT
$21,540
61,829
+
+
Depreciation
$40,289
OCF02 =
=
=
NOPAT
$74,070
88,619
+
+
Depreciation
$14,549
Free Cash Flow
FCF03 =
=
=
OCF
$61,829
-$196,399
-
Gross investment in operating capital
$258,228
NOPAT
$21,540
-$196,399
-
Net investment in operating capital
$217,939
or
FCF03 =
=
=
FCF02 =
=
=
OCF
$88,619
-$1,604,946
-
Gross investment in operating capital
$1,693,565
NOPAT
$74,070
-$1,604,946
-
Net investment in operating capital
$1,679,016
or
FCF02 =
=
=
EVA AND MVA FOR 2003
Additional Input Data
Stock price
$6.00
# of shares (in thousands)
149,999
A-T cost of capital
12%
Market Value Added
MVA =
=
=
Stock price
$12.00
$1,170,467
x
x
Economic Value Added
EVA =
=
=
NOPAT
$21,540
-$309,089
-
# of shares
149,999
Operating Capital
$2,755,239
-
Total common equity
$629,521
x
After-tax cost of capital
12%
x
MVA
The firm’s market value exceeds its book value by P 1,170,467,000. This means
that the management has added this much to shareholder’s value over the
company’s history.
EVA
EVA shows how much value management has added during the latest year.
Since it has negative (–) 309,089,000 EVA. This means that the management
has decreased its value instead of adding on it in the current year. The most
probable cause of this decline is the large investment used in the newly build
international standard racetrack in Carmona, which we think is not fully utilized at
present.
Financial Analysis
For the Manila Jockey Club, 2003 had been an adversity in terms of
financial performance. The company’s net income went down from 82 million
pesos to 6 million pesos (92% drop), despite the increase in club races revenue
in 2003. This is because in 2002 the company had recovered doubtful accounts
worth 162 million pesos that resulted into a higher net income. Another possible
reason that might have cause the company’s poor financial performance was the
acquisition of parcel of land located in Carmona, Cavite in the year 2001. The
said property was acquired from KPPI Land Corporation valued at 523.6 million
pesos which is payable in 12 equal quarterly installments from 2001 to 2004.
Total payments made by the Company as of December 31, 2002 amounted to
265.9 million pesos. The company long-term debt also increased by 330 million
pesos in 2003 that also resulted into an increased on interest payments.
Moreover, MJCI’s depreciation and amortization also increased by 26 million
pesos, which adds to the company’s costs and expenses.
The company’s financial ratios are way below when compared to PRC.
There are many possible reason why MJCI’s ratios are poor. First, the move
from the old San Lazaro to Carmona, which cost millions of pesos. Moreover,
since this racing facility was just recently brought into operation, it might not be
fully utilize until such time the period of adjustment to the new location come to
an end.
Another reason would be the additional interest, depreciation and
amortization causing the net income to decrease.
ROE and ROA are also
relatively low if we compare it to PRC because of a low net income and also as
we have mentioned earlier the newly acquired assets are not fully utilized yet as
intensively as PRC. And lastly, after comparing the income statement of MJCI
and PRC, MJCI has smaller revenue and a higher operating expenses whereas
PRC has a higher revenue and at the same time, a smaller operating expenses.
This only means that MJCI needs to increase sales and decrease expenses
simultaneously in able to cope up with PRC in terms of financial performance.