R.T. BRISCOE STILL UNDERPRICED - SWOT Analysis
RTB is principally engaged in the sales and service of motor vehicles as well as technical equipment, including forklifts, industrial compressors, mining and drilling equipment and generating sets. Its products and services are currently delivered through three divisions:
Briscoe Motors, marketing a wide range of Toyota and Ford commercial 'and passenger vehicles, offering spare parts and accessories, as well as after sales service;
Briscoe Solutions Plus encompassing the traditional technical businesses like the Atlas Copco agency, which deals in industrial air compressors and generators, mining and drilling .equipment as well as forklifts and pallet trucks. This division also recently diversified into the infrastructure services sector through a division known as
BRISCOE SOLUTIONS PLUS and this line of activity has its main focus in the telecommunications industry.
Briscoe Properties, principally engaged in Facilities and Project Management including property development. The division is currently the manager of a number of, residential private estates within Ikoyi and Apapa including Fara Park, comprising 304 units of apartments, townhouses, patio homes and detached houses. The division is also working on the proposed development of medium income housing with a view to developing a housing product, which will be affordable to a large section of the society.
2006 Operations
At the beginning of the 2006 operating year, RTB's management expressed expectations
for a strong performance during the year, predicated on:
. Expanding sales per month of Toyota vehicles to 200 per month;
. Opening a Toyota sales and service center on Sanusi Fafunwa road (Victoria Island) as the majority of its sales of Toyota products are from customers based on Victoria Island and surrounding areas;
. Commencing an official product launch for Ford motors and increasing supply sufficiently;
. Beginning sales of non-premium fast-moving generators, such as the Pramac brand in reaction to Atlas Copco's decision to renege on its sole distributorship contract with RTB.
We subsequently expressed our view that whilst these targets were achievable, we had concerns for the company's ability to speedily build up customer acceptance and patronage of its new line of cars, generators and compressors.'
This reflected our feeling that whilst the implementation of plans to venture into higher margin businesses remained underway, the lag time required - to sufficiently market new products to potential customers - and promotional expenses to be incurred during the launch, would keep margins from new sales under pressure even as margins from Toyota sales continued to shrink. We were of the view that the positive effects of the company's product diversification initiatives would only begin to reflect significantly in its bottom line from the 2007 operating year. Our SWOT analysis of the company is shown below.
Strengths:
. Strong balance sheet from the, reduction of high interest bearing short-term borrowings using proceeds of public and rights issues
. Greater diversification of revenue base through introduction of business lines in property and infrastructure.
. Increased product portfolio in its motor and service businesses.
Weaknesses:
. Low margin product mix.
Opportunities:
. Appreciation of dollar versus yen
. Significant increase in demand for Toyotas
. Reduction in marketing costs for high-margin AtlasCopco compressors
. Sale of non-premium generators
. Sale of Ford motors as substitutes for Toyotas
. More favourable exchange rate between the Naira and the Dollar
Threats:
. Impact of higher energy prices on shipping and distribution costs
. Price inelasticity due to stiff competition resulting in inability to pass higher costs on to customers
. Increase in effective tax rate. Supply constraints from Toyota Japan
. Higher cost of importation, which were up slightly as a result of the commission charge of 1% on foreign exchange sales
-BUSINESSDAY, Score Card Monday September 25, 2006
Other News Headline
BRISCOE OPENS TOYOTA SERVICE CENTRE IN VICTORIA ISLAND LAGOS
OUR VISION IS TO BE MARKET LEADERS...
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