1.

INTRODUCTION
An asset or item that is purchased with the hope that it will generate income or appreciate
in the future. In an economic sense, an investment is the purchase of goods that are not
consumed today but are used in the future to create wealth. In finance, an investment is a
monetary asset purchased with the idea that the asset will provide income in the future or
appreciate and be sold at a higher price.
Bursa Malaysia is holding company transactions approved under Section 15 of the capital
market and Servis Act 2007. It operates a fully integrate transaction, offered a range of
services related to exchange of service, including trade, clearing and storage. It has
always been Bursa Malaysias priority to demonstrate the highest standard of integrity to
our shareholders and the investment community. They are committed to building longterm relationship based on fair and timely disclosure, transparency, openness and
constructive communication. Through this, we will recommend to IZAARA Public
Limited Company the potential company to invest with Malaysian companies listed in
KLSE bourse. Here we suggest Kawan Food Berhad that one of the companies
recommended to BOD IZAARA PLC.

2.0

COMPANY BACKGROUND
2.1

Background of the company

Kawan Food Berhad

The company started as a sole proprietorship by two brothers, Mr. Gan Thiam Chai and Mr. Gan
Thiam Hock in the late 1970s where they supplied Spring Rolls Pastries (Popiah skin) and
Chinese New Year Cake (Kuih Bakul) in the Klang Valley. The company today has three
subsidiaries, Kawan Food Manufacturing Sdn Bhd (KFM), KG Pastry Marketing Sdn Bhd
(KGPM) and Kawan Food (Nantong) Co. Ltd (KFN). Aside from its recognition as one of
Malaysias leading food manufacturer and exporter of frozen ready-to-serve products. Its
subsidiaries has won numerous awards for their outstanding performance in the small and
medium industry. One of the accolades is the 1st Place Winner of Enterprise 50 Award
Programme awarded by SMIDEC and Deloitte Consulting Malaysia Sdn Bhd in year 2004.
Kawan Food Berhad is principally engaged in investment holding company. Its two
wholly-owned subsidiaries in Malaysia, KFM and KGPM are principally involve in
manufacturing, trading, distributing and exporting of frozen food products. The new subsidiary
in China, KFN which is currently dormant will be involved in the manufacturing, trading,
distributing and exporting of frozen food products.

Kawan Food Berhad was founded in 2004 by Thiam Chai Gan. Based in Shah Alam,
Selangor, the KFB Group of Companies is Malaysias leading exporter and largest manufacturer

of frozen Asian food delicacies. We are all about providing our consumers with authentic, safe
and highest-quality products at affordable price, while making a difference in the lives of our
shareholders, consumers, business partners, employees and the community. What has enabled
Kawan Food Berhad to achieve market leadership is an unwavering commitment to the values of
excellence, innovation, reliability, growth, fairness and good citizenship.

Company Name

Kawan Food Berhad

Core Business

Food, General

Address

Unit 07-02, Level 7, Persoft Tower,6b Persiaran

Tropicana, Petaling Jaya; Shah Alam; Selangor Darul
Ehsan

Telephone

03-78045929

2.2 Mission
Kawan Food Berhad want to be the best in supplying high quality, affordable and
convenient food.

2.3 Vision
Kawan Food Berhad aspire to be a renowned and significant player in the food and
baverage industry globally.

2.4 Objective
Aim to be constantly ahead in innovation, technology and R & D. This company also
wants to deliver excellent customer service to attain customer loyalty and satisfaction.
Kawan Food Company aim to be a caring and sharing employer as well as socially
responsible organization to our shareholders.
2.5 Authorized Capital
RM 200, 000, 000 ordinary shares of RM0.50 each
Issued and fully paid
RM 120, 294, 390 ordinary shares of RM0.50 each

2.6 Board of Director Eupe Corporation Berhad

THIAM CHAI GAN

Chairman

NEE CHOONG

JON FANG

Chief Executive Officer

Chief Executive Officer

NARESHCHANDRA

JAYENDRA JANARDAN VED

GORDHANDAS NAGRECHA

Board of Director

Board of Director

YIM KONG NG
Secretary

3.0 GENERAL ENVIROMENT ANALYSIS

PESTEL analysis focuses on the factors at the macro level of the environment outside the
control of the political, economic, socio-cultural, technological, ecological and legal.
Basically the company takes good macro environment such as political stability, growing
economy, social and cultural well-received products offered, the technology is capable of
supporting the growth of industry, ecology or environmental issues that support the

development of industry and industry-friendly legislation. In other words, one of the

important steps to create a competitive strategy is to apply PESTEL analysis.

3.1 Political
Political factors are basically to what degree the government intervenes in the
economy. Specifically, political factors include areas such as tax policy, labor law,
environmental law, trade restrictions, tariffs, and political stability. Political factors
may also include goods and services which the government wants to provide or be
provided (merit goods) and those that the government does not want to be provided
(demerit goods or merit beds). Furthermore, governments have great influence on
the health, education, and infrastructure of a nation.
The political factor would affect Kawan Food business is the legalization to
establish more branches in Malaysia. Besides that, if the policies do not protect the
legal rights then it will have lesser branches. This will then limit the amount of
branches that can be established by Kawan Food and will affect their business

3.2 Economic
Economic factors include economic growth, interest rates, exchange rates and the
inflation rate. These factors have major impacts on how businesses operate and make
decisions. For example, interest rates affect a firm's cost of capital and therefore to
what extent a business grows and expands. Exchange rates affect the costs of
exporting goods and the supply and price of imported goods in an economy. In
Kawan Food Berhad, the business and revenue growth may be affected when there

are changes in economic condition. As announced in Budget 2014, GST will be

effective on April 2015. GST will have an impact on consumer spending pattern.

3.2 Socio-cultural
Social factors include the cultural aspects and include health consciousness,
population growth rate, age distribution, career attitudes and emphasis on safety.
Trends in social factors affect the demand for a company's products and how that
company operates. Cultural and social environment is another factor affecting the
company's Kawan Food. Cultural environment refers to institutional and other
forces on the basic values, perceptions, preferences and behaviors of society. All
of these things will certainly affect the Kawan Food as a factor in the cultural
influence prospective customers Kawan Food. Diversity that exists in Malaysia
will play a key role as people of different races have different cultures and their
culture will influence the choice of food consumed. For example, if the food of
Kawan Food Company is to serve pork in their dishes, then the Malays would
choose not to eat there because it is against their culture to eat pork. In addition,
the influence of one person to another person also influence their decision
whether to eat or not.
3.3 Technology
Technological factors include technological aspects such as R&D activity,
automation, technology incentives and the rate of technological change. They can
determine barriers to entry, minimum efficient production level and influence

outsourcing decisions Nowadays people are looking for more fast, easy, and
convenient way to do something. It is designed to serve people better. Today,
everyone around the world are talking about online shopping, purchase thing and
order thing through online because it is very convenient and the customer dont
need to go out. In the past elderly will say that online shopping does not make
sense but technology is a thing that no one can control. In addition to that, it will
make everything simple and easy and have the opportunities to get more profits in
an organization.
Besides that, technology doesnt mean only on internet but phone calls or other
electronics thing. For example, Kawan Food has provided order via using online
or by the phone call and the delivery service. Besides that, any new promotions
will be found on the internet. Other than that, Kawan Food in Malaysia always
comes out with more variety of pastries and frozen foods to attract customer
whereas other competitors are doing promotions only. They can use the social
media for advertising their new products.

3.4 Ecology
Environmental factors include ecological and environmental aspects such as
weather, climate, and climate change, which may especially affect industries such
as tourism, farming, and insurance. Furthermore, growing awareness of the
potential impacts of climate change is affecting how companies operate and the

products they offer, both creating new markets and diminishing or destroying
existing ones.
3.5 Legal
Legal factors include discrimination law, consumer law, antitrust law,
employment law, and health and safety law. These factors can affect how a
company operates, its costs, and the demand for its product.

4.0 TASK ENVIRONMENT ANALYSIS

HIGH

MEDIUM

THREAT OF NEW ENTRANCE

THEAT OF SUBSTITUTION

SUPPLIER BARGAINING POWER

CONSUMER BARGAINING POWER
INTENSITY OF RIVARY

4.1

LOW

THREAT OF NEW ENTRANCE : MEDIUM

This factor refers to the entry of new companies into the industry. This
phenomenon is common, especially when a country's economy is growing briskly
or when a company or investor saw the potential that is created in a market or
industry.

Kawan Food Company was not too involved threats of new arrivals into
the industry. This is because Kawan Food industry is one of the great food and
famous. It has also expanded into overseas such as in China. The threat of a new
arrival in the food industry for companies such as Pizza Hut competitors are rare
because of Kawan Food Company is known food industry.

4.2

THREAT OF SUBSTITUTION : MEDIUM

As other factors, factor substitute products also threatening to companies
operating in the market or industry members who have indirect relevance.
Strategies planning better to understand the threat of substitute products can
develop a comprehensive strategic action plan. In particular, the context based
factor of substitute products is slightly different with newcomer factor or factors
venom competition because of these factors can be used as an indirect
competition. This statement is based on the background of the competing
companies are different from each other.
In the Kawan Food Company, the threat of substitute materials less likely
to occur. This is because the food produced by companies such as Pasta, kuih
bakul and so on not all wearing or eating food. If the food is not already , it will
not affect the public. This is because not all ethnic groups in Malaysia are like and
eat these foods.

4.3

SUPPLIER BARGAINING POWER : MEDIUM

Requirements to make an assessment of the factors suppliers is
very high because it can give better reflect of the environment of
an industry. The level of threat or opportunity caused by the
supplier can influence the survival of the party gets its supply.
Some of the industry's most influential factor. However not all of
the providers are really acting as a supplier to our customers.
The companies treat their customers poorly visible everywhere.
In general, when a large number of suppliers, a small number of
buyers, there are many substitute products, the products
supplied do not represent the majority of buyers operating costs
and the cost to switch products are too high and when the
provider intends to acquire the buyer.
In terms of bargaining power suppliers Kawan Food
company, bargaining power of suppliers is high. For example, if
the process is to create a food products company involves an
item of suppliers is limited, it must and had to take the goods
from the supplier even though the price is expensive.

4.4

CONSUMER BARGAINING POWER : HIGH

Buyers are considered as individual or group the most powerful
in the business world because without them there would not be
the business world. Within a food industry in Kawan Food
company, the bargaining power of customers is very essential
aspect. This is because the prices should always be kept not
higher than the competitors prices. In this case customers
power is strong as customer might set the price. As soon as
prices are increased way too much, the clients will leave our
supplier from Kawan Foods company. So this power can be high.

4.5

INTENSITY OF RIVALRY : MEDIUM

Competition among firms is very high in the food industry.
People always need to eat, and many of them like to do it in the
food industry. Therefore, more and more companies open food,
causing greater competition. Therefore, one of the main goals of

every food company is to gain competitive advantage among

other companies. This can be done in several ways: changes in
prices,

increase

product

differentiation

or

provide

special

discounts. Price should be made with caution and do not exceed

the price of competitors. Once it became clear that the number
of customers has decreased, new offers such as product
differentiation or special discount is available to get back old
customers and attract new one.

5.0

SWOT ANALYSIS
STRENGTH
S1 Wide distribution coverage
S2 Strong history and

WEAKNESS
W1

Reliance of raw material

W2

High investment

W3

More pollution

reputation
S3 Automation of production
process
S4 Innovation in recipes
S5 Quality certification
THREAT

OPPORTUNITY

T1 Competitors of food in the

O1 Create a new menu of

market

frozen food
O2 Better product

T2 Location of company
T3 Cost of product

packaging
O3 New product
development can increase
their market share
O4 Globalization

6.0

TOWS ANALYSIS

IFAS

STRENGTH

WEAKNESSES

S1 Wide distribution

W1 Reliance of raw material

coverage
S2 Strong history and
EFAS

reputation
S3 Automation of
production process
S4 Innovation in recipes
S5 Quality certification

W2 High investment
W3 Area the factory polluted

OPPORTUNITY

SO STRATEGY
(S5 + O2)

WO
STRATEGY
(W1 + O4)

Produce diversity of product to

Take advantage of emerging

entrance the global market.

market abroad to enhance the

O1 Create a new
menu of frozen food
O2 Better product

quantity of supplier.

packaging
O3 New product
development can
increase their market
share
O4 Globalization
THREAT

ST STRATEGY
(S4 + T1)

WT STRATEGY
(W2 + T3)

Using knowledge and skill of

Using high investment to enhance

management team.

the quality and quantity of

T1 Competitors of
food in the market
T2 Location of

product better than competitors.

company
T3 Cost of product.

7.0

RATIO ANALYSIS

7.1

LIQUDITY RATIO

Current Ratio

2012

2013

Current asset
Current liability

= 58,534,679
16,769,916

= 74,280,720
18,684,071

= 3.49 times

= 3.97 times

The company current ratio on 2013 is about 3.97 times that is higher than 2012. The higher of
current ratio show the capabilities of company to pay its obligations. Its shows the company is
in good financial health.

Quick Ratio

Current asset- inventory

Current liability

2012

2013

= 58,534,679 5,911,089
16,769,916

= 74,280,720 8,545,097
18,684,071

= 3.13 times

= 3.51 times

Quick ratio shows a sign of strength or weakness in the financial health of the company. On
2013, quick ratio is higher than 2012. It indicated the better position of the company.

7.2

PROFITABILITY RATIO
Return on Asset

Net income
Total asset

2012

2013

= 1,885,679
60,000,000

= 6,356,529
60,000,000

= 0.031 times

= 0.105 times

Return of assets indicated how profitable a company is relative to its total assets. ROA shows

the efficiency of management using its assets to generate earnings. From this analysis, ROA
of the company on 2012 is 0.031 times and 0.105 times on 2013. This show that year 2013 is
respectively higher return value than year 2012.
Return on Equity

Net income
Total equity

2012

2013

= 1,885,679
73,533,907

= 6,356,529
77,730,436

= 0.025 times

= 0.081 times

Return on equity measure of profitability of stockholders investment. ROE of the company on

2012 and 2013 was 0.025 and 0.081 times respectively. Based on analysis, company is
efficient in generating income on new investment on 2013 compare to year 2012.
Return on Investment

Net profit
Cost of investment

2012

2013

= 1,885,679
53,641,511

= 6,356,529
54,957,386

= 0.035 times

= 0.115 times

Return on investment of company is 0.035 times and 0.115 times in year 2012 and 2013. High
ROI means the investment gains is better compare to investment cost. Its mean the company
gain profit on investment during a year.
Earnings per share (EPS)

Net income
Number of outstanding
share

2012

2013

= 1,885,679
60,000,000

= 6,356,529
60,000,000

= 0.031 times

= 0.105 times

Earnings per share represent the portion of a company earning that is allocated to each share

of common stock.

8.0

STRATEGIC DIRECTION
SO STRATEGY:
Making the innovation on the existing products to produce diversified of products in the
market. The revenue of Kawan Food company will increased. Diversity of products
caused new entrance of products in the global market. Kawan Food company can added
value to their existing products to produce diversity of products with different function
and capability. Thus, the customers have a choice. They will choose the best for their
needs. Diversity of products make Kawan Food company is totally different with the
competitor.

WO STRATEGY:
Reliance of raw materials to the supplier is the weaknesses of Kawan Food company.
Although, the supplier give a high price but, Kawan Food company need to pay for the
raw material as they have no choice. Take advantage of emerging market abroad to find
new supplier which is can give the best price for the raw materials. It is will reduce the
production cost.

ST STRATEGY:
Strong management team surely can adapt during economic slowdown. A good structure
of management used by Kawan Food company give a benefit for them during the
economic crisis to avoid big loss. The top management and the employees will cooperate
together using their knowledge, skill and contribute their effort for the sake of the
company.
WT STRATEGY:
Make high investment using of automated machines is very costly for the company. But,
Kawan Food company can used that machine to produce high quality and more quantity
of products compare to other competitor. Kawan Food company will increased their
revenue and profit by using their weaknesses.

9.0 CONCLUSION
Kawan Food 's products conform to the highest health and food standards around the
world Apart from ISO 22000:2005 and BRC (British Retail Consortium)certification, our
products are also certified as Halal by the Islamic Development Department of Malaysia
(JAKIM), which meets the Islamic World Body Requirements. This company inform and
educate their business partners about company standards, so that they meet the highest
quality requirements. Quality is the priority business objective and enduring obligation.
In a conclusion, Kawan Food Berhad is a potential company that BOD IZAARA
PLC must invest. Other than that, Kawan Food also listed in KLSE bourse so that it was
suitable to BOD IZAARA PLC make the investment.

REFERENCE
Kawan Food Berhad, (2013). Annual Report 2013
Retrieved from http://kawanfood.com.my/areport/eupe_ar_2013.pdf
Haim Hilman Abdullah, (2011). Pengurusan Strategik Konsep dan kes Edisi ketiga
Retrieved from : topdevelopers.iptoperty.com
Kawan Food Berhad, (2013). Food Industries Business
Retrieved from http://www.wikinvest.com/stock/oxford industries Significant threats
business