About NOEL Group Gifts International
Founded in 1975, Noel Gifts International Ltd is a Singapore-based company engaging in activities which are grouped into two divisions namely, Gifts and Properties. The Gifts division involves the online sale of gift hampers and floral arrangements in Singapore and Southeast Asia, as well as the management of the franchise programme. This division encompasses a few subsidiaries; Humming Flowers & Gifts Pte Ltd, Noel Hampers & Gifts (Johore) Sdn. Bhd. and Noel Hampers & Gifts (Penang) Sdn. Bhd. In early 2012, the Company extended their operations to China when Noel Gifts (Chengdu) Co. Ltd (NGC) was incorporated into the group. The Properties division manages the investment and and development of properties, comprising a significant portion of the Company’s income. Growth Stagnation
The company has a good margin on sales, a very good liquidity position, along with almost negligible debts and servicing of interest. Such a situation is not ideal because this means the company is being too conservative and as a result, growth has been stagnating. High Liquidity
The current ratio measures a company’s ability to pay off its short-term liabilities with its current assets. From 2008 to 2012, the company has enjoyed a high current ratio, indicating that they possess a significant amount of current assets as compared to short-term liabilities. This also shows that they have high liquidity, and are able to readily turn their products into cash. In 2012, the current ratio for the gifts industry stood at 2.11, while the company’s stood at 5.56. The average current ratio for the gifts industry over the past 5 years currently stands at 1.73. As a leading entity in the gifts industry, Noel Gifts International has been consistently performing higher than the gifts industry. Their high current ratio puts them in good stead to continue paying off their short-term obligations with ease. The acid test ratio measures a company’s ability to convert their near-cash assets to cash to pay off their short-term liabilities. From 2008-2012, the company has enjoyed a high acid test ratio, indicating that they have significant cash reserves to pay off their short-term obligations immediately. In 2012, the acid test ratio for the gifts industry stood at 0.61, while the company’s stood at 3.21. The average acid test ratio for the gifts industry over the past 5 years currently stands at 0.90. Noel Gifts International has also been consistently performing high than the gifts industry in this respect, which shows that they can pay off their short-term obligations even under more stringent conditions.
Enjoys Low Debt
According to the Group’s Balance Sheets (‘08 to ‘12)*, the only Non-current Liabilities listed is Deferred Tax. We can interpret that the company has not taken any Bank Loans or issued any Bonds and does not need to service any Interest Expense. The Debt Ratio Graph clearly illustrates that the company has been enjoying a safe financial position (well below 0.5) and this condition has been improving over the years. However, they are failing to leverage on this favourable condition by taking loans to fund the expansion of the company. They also have an extremely high Time Interest Earned Ratio which implies their prowess to honour any debt payment. In 2011, the ratio is approximately 747 implying that they can cover tis interest charges 747 times over. Last year, the company had zero Interest Charges resulting in an Infinity value for this Ratio. This puts them in a prime position to acquire loans. Recommendations for Corporate Expansion
I propose that the company take measures to leverage its income and grow annually instead of retarding. The company should take a loan of about $27 million to leverage its income. Borrowing this amount would bring up the total debt ratio to the range of 0.5 which is a reasonable level. This suggestion is further backed by the fact that the company has...
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