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1 Financial Analysis
All figures used in calculations below are based on Protons official annual financial statements that have the closing date on March 31 of every year. 1.1.1 Profitability Ratios 1. Gross profit margin (2010) = Revenue Cost of sales Revenue = 8,226.9 7,382.7 8,226.9 = 0.1023 = 10.23% Gross profit margin (2011) = 8,969.9 7,980.7 8,969.9 = 0.1103 = 11.03% 2. Operating profit margin (2010)= (Profits before taxation and interest) Sales = 273.0 8,226.9 = 0.0332 = 3.32%

Operating profit margin (2011) = 228.1 8,969.9 = 0.0254 = 2.54%

3. Net profit margin (2010)= Profits after taxes Sales = 218.9 8,226.9 = 0.0266 = 2.66% Net profit margin (2011)= 155.6 8,969.9 = 0.0173 = 1.73%

4. Return on total assets (2010)

= Profit after taxes + Interest Total assets = 218.9 + 12.1 7,470.5 = 0.0309 = 3.09%

Return on total assets (2011) = 155.6 + 13.7 7,653.9 = 0.0221 = 2.21% 5. Return on stockholders equity (2010) = Profits after taxes Total stockholders equity = 218.9 5,333.0 = 0.0410 = 4.10%

Return on stockholders equity (2011) = 155.6 5,406.7 = 0.0288 = 2.88% 6. Earnings per share (2010) = Profits after taxes No. of outstanding ordinary shares = 218,932,000 549,213,002 = 0.400 = 40 cents Earnings per share (2011) = 155,612,000 549,213,002 = 0.283 = 28 cents
Profitability Ratios Gross profit margin Operating profit margin Net profit margin Return on total assets Return on stockholders equity Earnings per share 2010 10.23% 3.32% 2.66% 3.09% 4.10% 40 cents 2011 11.03% 2.54% 1.73% 2.21% 2.88% 28 cents

Figure 5: Profitability Ratios of Proton in year 2010 and year 2011 As can be seen from the summarized table above, all profitability ratios examined except the gross profit margin have shown decreasing trends, which means that the financial performance of Proton Holdings Sdn. Bhd. in terms of profitability in overall has become worse in 2011 compared to the previous year. After analyzing the financial statement, it is found out that despite the increase in revenues, its net profits still has decreased in 2011 mainly because of the increase in its operating expensive, particularly the most in its

administrative expenses (a rise of 36.4%) (Bloomberg L.P., 2011). The reason for this higher spending on operations is very likely to be the restructuring plan that Proton is implementing since the end of year 2010. On the good side, these 2 years the company did not experience any net loss and in comparison to other competitors of the same industry, the overall profitability aspect of Proton is still satisfactory (moderate) (Bloomberg L.P., 2011).

Source: Bloomberg L.P., 2011, as of 4:00 AM 11/18/11

1.1.2 Liquidity Ratios 1. Current ratio (2010) = Current assets Current liabilities = 3,846.0 2,038.2 = 1.89 = 3,834.2 2,201.0 = 1.74 2. Quick ratio (2010) = Current assets Inventory Current liabilities = 3,846.0 1,227.2 2,038.2 = 1.29 Quick ratio (2011) = 3,834.2 1,207.1 2,201.0 = 1.19 3. Working capital (2010) = Current assets Current liabilities = 3,845,999,000 2,038,158,000 = RM1,807,841 million

Current ratio (2011)

Working capital (2011) = 3,834,172,000 2,200,989,000 = RM1,633,183 million


Liquidity Ratios Current ratio Quick ratio Working capital 2010 1.89 1.29 RM1,807,841 million 2011 1.74 1.19 RM1,633,183 million

Although in comparison to the prior year, the liquidity aspect of Proton in 2011 is still very favorable. Having a current ratio that is near 2.0 means that this firm should have no problem in converting its current assets into cash in the near future when needed to pay its current liabilities, including accounts payable and short-term borrowings (Thompson, Strickland III, & Gamble, 2008). Its quick ratio is also healthy, displaying the fact that the company will not need to sell its inventory while paying for its current liabilities. Proton Holdings Sdn. Bhd. also seems to have ample funding to not only pay its current liabilities, but also to expand its finance inventory, get more accounts receivable, and increase its operations (Thompson, Strickland III, & Gamble, 2008). According to Bloomberg Business Weak (2011), the firms overall liquidity aspect is very good compared to its other competitors of the same industry.

Source: Bloomberg L.P., 2011, as of 4:00 AM 11/18/11

1.1.3 Leverage Ratios 1. Debt-to-assets ratio (2011) = Total debt Total assets = 373.8 7,470.5 = 0.050

2. Debt-to-equity ratio (2011)

= Total debt Total stockholders equity = 373.8 5,406.7 = 0.069

3. Times-interest-earned ratio (2011)

= Profits before interest and taxes Total interest charges = 205.2 13.7 = 15.0

Generally, Proton Holdings Sdn. Bhd. has very low debt-to-assets and debt-to-equity ratios, which is very good news for its investors. This is because this company does not use too much short and long term debts to fund its firms operations. Besides, its coverage ratio is also very high (15.0), much higher than the preferred 3.0 ratio, signaling that Proton has no problem in paying its annual interest charges (Thompson, Strickland III, & Gamble, 2008). From these figures, it can be concluded that Proton is a business firm that has high creditworthiness. In Protons case, such a strong leverage aspect is possibly because most of its funding comes from Khazanah National Berhad that has significant shares in Proton, thus greatly reduces Protons capital management risks. 1.1.4 Activity ratios 1. Days of inventory (2010) = Inventory Cost of goods sold / 365 = 1,227.2 7,382.7 / 365 = 60.67 days = 1,207.1

Days of inventory (2011)

7,980.7 / 365 = 55.21 days

2. Inventory turnover (2010)

= Cost of goods sold Inventory = 7,382.7 1,227.2 = 6.02

Inventory turnover (2011)

= 7,980.7 1,207.1 = 6.61

3. Average collection period (2010)

= Accounts receivable Total sales / 365 = 920.4 8,226.9 / 365 = 36.41 = 1,310.2

Average collection period (2011)

8,969.9 / 365 = 53.31


Activity Ratios Days of inventory Inventory turnover Average collection period 2010 60.61 6.02 36.41 2011 55.21 6.61 53.31

Figure 6: Activity Ratios of Proton in year 2010 and year 2011 In between the years of 2010 and 2011, it can be said that Protons inventory and supply chain management have improved noticeably, because the days of inventory have lowered by 5 days and its inventory turnover has increased too. However, the efficiency of collecting payments after closing sales has decreased significantly too as the average collection period increases from 36 to 53 within this one year. In comparison to other players of the same industry, Protons efficiency in its operation is rated as slightly below average, indicating that the company should look into improving its operational activities so that lower operating costs can be achieved too (Bloomberg L.P., 2011).

Source: Bloomberg L.P., 2011, as of 4:00 AM 11/18/11

1.1.5 Other Financial Performance Measures 1. Dividend payout ratio (2010) = Annual dividends per share Earnings per share = 20 40 = 0.5 = 50% Dividend payout ratio (2011) = 10 28 = 0.357 = 35.7% 2. Internal cash flow (2010) = After tax profits + Depreciation = 218,932,000 + 432,612,000 = RM651,544,000 Internal cash flow (2011) = 155,612,000 + 425,568,000 = RM581,180,000

Source: Bloomberg L.P., 2011, as of 4:00 AM 11/18/11

Both dividend payout ratio and internal cash flow of Proton in 2011 are lesser than those of 2010s, which generally mean that Proton has a lesser amount of profit or cash to pay its shareholders as dividends in 2011. However, Protons most current price/earnings ratio does show a positive sign- 23.0, which indicates that its investors have strong confidence with Protons future earning potential (Thompson, Strickland III, & Gamble, 2008). 1.1.6 Summary of Protons financial performance In 2011, Proton only performs moderately in its profitability, divident payout, and also activity aspects, but compared to other close competitors, the company has very good liquidity and leverage ratios, thus increasing the number of its potential investors because they have confidence that Proton still has future earning growth and has no problem in paying its debts and liabilities. Consequently, it is speculated that Proton should have no problem in obtaining funds for its upcoming projects, especially if the company requests for loans from banks due to its high price/earnings ratio. The implications of this analysis is that Proton should be more aware of its operating and administrative expenses especially which has increased pretty significantly from 2010 to 2011 in order to rise its profitability ratios in future. Also, Proton has to escalate its speed in getting its accounts receivable settled to increase the overall companys cash flows and decrease the likelihood of bad debts.