TABLE 1: DuPont Analysis of DiGi

Item / Ratio


2010

2011

2012

Evaluation


Net Income
(RM000)


1,178,004

1,254,384

1,205,705

Slightly drop in
2012

Revenue
(RM000)


5,406,457

5,963,954

6,360,913

Increase over
time

Assets
(RM000)


5,136,633

4,863,346

4,013,918

Decrease over
time

Equity
(RM000)


1,346,622

1,411,431

261,321

Sharp Declines
in 2012

Profit Margin
(%)


21.79

21.04

18.96

Decline in
profitability
over time


Assets Turnover
(Times)


1.05

1.23

1.58

Increase in
efficiency over
time


Return on
Assets (%)


22.88

25.88

30.04

Increase in
ROA in 2012

Equity
Multiplier


3.81

3.45

15.36

Sharp increase
in 2012

Return on
Equity (%)


87.17

89.29

461.39

Sharp Increase
in 2012


Based on Table 1, Digis profit margin has decline over time. This shows that Digi is
operated with low efficiency. However, its assets turnover has increased over time. This
tells us that Digi has generated their assets into sales or cash efficiently. In terms of
leverage factor, it has been increase over time as well and has sharp increased during 2012.
During 2012, Digi has used well their debt to produce incremental return that shows ROE
are also increased sharply during 2012.
Return on Equity (ROE) is one of the strongest indicators a financially successfully
company. Based on Table 1, Digis ROE has increased from 2010 to 2011 and sharp
increased during 2012. The increasing of ROE in Digi Company is because of the debt ratio
increased. Indeed, by increasing debt amount will give smaller value for equity. Therefore,
the smaller equity, the higher ROE could be. Hence, Digi is using leverage to produce
growth. In other words, Digi is using large amount of debt (rely on dept) to produce high
return (strong ROE). It is, indeed good but they can also make the company less stable in
down market.