Companys Risks Profile And Hedging Finance Essay

F J Benjamin Holdings Ltd listed on the Singapore Exchange on 14 November 1996, founded in 1959 central offices in Singapore and it has offices in nine metropoliss with more than 2000 employees. This Company is one of the leaders in edifice and direction, and development system of retail and distribution webs for international luxury and lifestyle trade names across Asia. The company participates in importing, exporting, licensing, distribution and retailing of consumer manner wear and accoutrements household trappings, timekeepers, eyewear and multimedia storage merchandise and operation of coffeehouse and amusement mercantile establishments. Particularly, FJ Benjamin has four chief sections is Luxury and Lifestyle Fashion Retailing and Distribution such as: Banana Republic, Gap and Givenchy..Timepiece Distribution such as: Bell & A ; Ross, Chronotech and DeWitt. Creative and Design such as Raoul and Investing in Lifestyle Concepts.

Company ‘s information analysis

2.1 Scenario of FJ Benjamin

In FJ Benjamin Holdings Ltd ‘s wants to growing its portfolio by spread outing concern on Europe and the United States. In first of 2013, the company has some investing undertaking to opened shop located in Malaysia with needed sum of SGD $ 15 million initial capital. FJ Benjamin needs more capital to implement these undertakings by borrowing SGD $ 10 million from bank for long-run loan for 5 twelvemonth.

To running and staying new shop in Singapore, in first of February 2013 FJ Benjamin need to imports 10milion luxury manner wear of Celine trade name from Gallic with due day of the month at first of March. When order is accepted the company submit Trust Receipt to bank as a short term loan. At the due day of the month, Bank on behalf of FJ Benjamin payoff 10 million for exporter.

2.2 Fiscal information analysis

About general fiscal state of affairs of FJ Benjamin, based on one-year reported for 2011/2012, FJ Benjamin Holdings Ltd. reached $ 393,237,000 turnover in 2012. In 2011, turnover increased 22 % to $ 353.9 million from $ 289.4 million. In 2012, company ‘s operating net income was $ 22,046,000 and in 2011 reached $ 18,102,000 addition $ 3,944,000. Net income before revenue enhancement was $ 19,670,000 compared to $ 17,042,000 a twelvemonth ago. Net net income after revenue enhancement rose 55 % to $ 12.8 million from $ 8.3 million last twelvemonth. Operating net income strengthened to $ 18.3 million from $ 5.1 million in FY 2010. Gross borders rose to 43 % from 41 % in the old fiscal twelvemonth. Cost-to-revenue ratio improved to 39 % from 42 % . Based on all fiscal information reference above, it reflects that the quality of the concern has improved and become more stable in 3 old ages ago.

In Financial ratio analysis:

Tax return On Equity ( ROE ) ( % ) of FJ Benjamin in 2012 was 10.13 % addition 0.3 % compared 2011 was 9.71 % . The return on equity evaluated a FJ Benjamin ‘s profitableness by demoing how much net income it generates with the sum stockholders have invested.

Debt Ratio of this company in last 3 twelvemonth was about 80 % in 2012, 72 % in 2011 and 2010. Debt ratio increase 8 % from 2010 to 2012 mean that FJ Benjamin has really high debt ratio.

Current Ratio is used to mensurate the ability to pay short-run debts of the FJ Benjamin. Generally acceptable current ratio is from 1 to 2. During last 3 twelvemonth, FJ Benjamin ‘s current ratio was above 1.5. However, from 2010 to 2012 this ratio was decrease significantly.

Net net income Ratio

Company ‘s Risks Profile and Hedging

3.1 Internal hazard

In manner industry, concern hazard is a hazard wholly can happen with any group if they do non hold a hazard direction scheme right. Business hazard is a hazard that FJ Benjamin might hold to confront. The FJ Benjamin is belonging to manner industry. Therefore, Benjamin ‘s grosss are affected straight by consumer sentiment and buying power every bit good as altering on tendency of manner and lifestyle tendencies. Particularly, rivals besides is a hazard might impact to Benjamin because a batch of new trade names are opened and growing rapidly today. In the other words, client satisfaction is most importance to increase net income and ability to run into client ‘s demand is a first mission of this company to against with this hazard every bit good as increasing rival chances.

3.2 External hazard

The Company has to confront with a batch of hazards originating from its operations from that Fj Benjamin utilizations of fiscal instruments to against all these hazard. The chief External hazards include recognition hazard, currency exchange hazard, involvement rate hazard and liquidness hazard.

Recognition Hazard: Recognition hazard is the hazard of loss that can happen on fiscal instruments should a spouses default or non-performance on its duties. Particularly, The Company ‘s recognition hazard arises straight from trade and other debitors. Based on one-year study, the trade and other receivables of FJ Benjamin shows that all its non past due, unimpaired and responsible debitors with really good payment record. By and large, sum of hard currency and fixed sedimentations are put in Bankss and fiscal establishments with good recognition evaluation. In add-on, FJ Benjamin use the ways to pull off its recognition hazard by application of recognition blessings, recognition bounds and monitoring processs. However high debt ratio is a disadvantage of FJ Benjamin, it reflects that this company has many debts and possible to non public presentation or default.

Foreign Exchange hazard: FJ Benjamin is an import and export company so that it has a batch of transactional utilizing foreign currency.The company import, export between Asia ‘s states, US and EU and most of the group ‘s abroad purchases by in Swiss Franc, US Dollar and the Euro. Therefore, FJ Benjamin possibly face with foreign exchange hazard when exchange rate motion. The FJ Benjamin ever find out the ways to keep a natural hedge by maintaining the balance of liabilities against assets in the same currency or against the entity ‘s functional currency. In order to cut down the company ‘s exposure to foreign currency fluctuations, FJ Benjamin used foreign currency frontward contracts based on purchase committednesss for periods runing from three to six months frontward to minimise this hazard.

Liquid Hazard: Liquid hazard is the hazard that the Company will non run into fiscal duties at adulthood day of the month because of non enough of financess. Although in 3 old ages ago the company has adequate current assets to run into the payment agenda of current liabilities with a border of safety. However, current ratio in 2012 autumn significance is sum of liabilities increase more than 2 old ages ago and current assets lessening in 2012 lead to degree of liquidness hazard may be addition in the close hereafter. But FJ Benjamin manages its liquidness hazard by keeping a healthy balance of hard currency and hard currency equivalents and an sufficient sum of committed recognition installations. Furthermore, follow one-year study of 2012, the Company assessed the degree of hazard with respects to refinancing its debt and concluded it to be low. Approaching to beginnings of support is adequate and available and debt maturing within 12 months can be rolled over with bing loaners.

Interest Rate Hazard

Interest rate hazard is the hazard that the value of hard currency flows of the company in the hereafter and all company ‘s fiscal instruments will travel up or travel down without predictable because of alterations in market involvement rates. With the FJ Benjamin besides may confront with this hazard and relates to amount of borrowing which is capable to drifting involvement rates and are re-priced at intervals of less than 1 twelvemonth.

Recommendation

FJ Benjamin ‘s net incomes remained resilient despite the European debt crisis ; this company still is leader by strong trade name portfolio and turning in the ASEAN economic systems. Looking at concern consequence in last 3 twelvemonth, about signal are good. However, FJ Benjamin ‘s fiscal still exists some jobs and hazard can be happening with this concern. With high ROE indicates that all investing undertaking of this company can retrieve capital and addition net income in the hereafter With debt ratio excessively high that reflects that the company has much debt and bank adoption than their equity. Bank has to see really carefully before loaning to this company and high involvement rate to cover recognition hazard. Then company needs to supply more collateral and border history to guarantee that can pay off the loans. However, .

Decision

In amount up, FJ Benjamin is a good company in Fashion Industry in around the universe. This Company is more and more developed with stable and solid concern. Company is assessed that which will go a most successful and has new chance in the hereafter. Although, looking at concern consequence in last 3 twelvemonth, about signal are good. Besides that, FJ Benjamin

Appendix

Current ratio: Current Assetss /A Current Liabilitiess

Year

2010

2011

2012

Current Assetss

192,846

212,857

209,940

Current Liabilitiess

95,264

121,998

127,998

Current ratio

2.024332

1.744758

1.640182

Tax return on Equity ( ROE ) : ( Net Income/Shareholder ‘s Equity ) x 100

Year

2010

2011

2012

Net Income

8,260

12,770

13,541

Shareholder ‘s Equity

137,209

131,458

133,607

Tax return on Equity ( ROE ) %

6.02 %

9.71 %

10.13 %

Debt Ratio: ( Entire Liabilities /A Shareholders Equity ) x 100

Year

2010

2011

2012

Entire Liabilitiess

76,385

80,752

85,907

Stockholders ‘ Equity

105,684

111,667

106,819

Debt Ratio ( % )

80 %

72.3 %

72.2 %

Net net income Ratio: ( Net Net income / Net SalesA ) x 100

Year

2010

2011

2012

Net Net income

8,260

12,770

13,541

Net SalesA

295,386

360,003

403,281

Net net income Margin

2.8 %

3.56 %

3.36 %