MOHAMAD ZAHIRIN BIN YAACOB | 62387115019

CORPORATE FINANCE PBP60273

1.

CASE STUDY: MAS - AIRASIA MERGER

How to create blue ocean from the red ocean.

Red oceans are all the industries in existence today and on the other hand, blue oceans denote all
the industries not in existence today the unknown market space, unexplored and untainted by
competition.
N
o
1
2
3
4
5

Red Ocean Strategy

Blue Ocean Strategy

Compete in existing market space.

Beat the competition.
Exploit existing demand.
Make the value-cost trade-off.
Align the whole system of a firms

Create uncontested market space.

Make the competition irrelevant.
Create and capture new demand.
Break the value-cost trade-off.
Align the whole system of a firms activities

activities with its strategic choice of in pursuit of differentiation and low cost.
differentiation or low cost.

The blue ocean strategy for both airlines would be table as following:
N
o
1

MAS

AIRASIA

Promoting Enrich FFP, including building Targeted non customer who never travel or
alliance with other airlines as partners.

cannot afford the airline fare. ie. first time

flyers, middle class flyers, students, laborers

Make the competition irrelevant.

Air Asia did not target the traditional

customers of Airlines.

Special promotional deals.

Targeted first time flyers, middle class flyers,

students, laborers going home for vacation
and other highly price sensitive customers.

Break the value-cost trade-off.

Created a value innovation propositions to

the customers by focusing on factors that are

MOHAMAD ZAHIRIN BIN YAACOB | 62387115019

CORPORATE FINANCE PBP60273

of great value to the customers

5

Downsizing

business

capacity,

leasing No frills airline that follows a quick

aircraft, avoid costly routes.

turnaround model and offers low fares to

customers

In 2002, Air Asia turning a profit and swiftly opening multiple new routes whilst
undercutting Malaysia Airline and demolishing its monopoly. Air Asia pursue the value
innovation model to establish its low cost airline, which allowed it to reconstruct market
boundaries, reach beyond existing demand and render the bloody red oceans of industry
competition irrelevant. They established a compelling service offering that created a leap
in value in passenger and company value by breaking the value/low cost trade off and
pursuing value innovation.
There are 4 major elements in their strategic move:

2.

Eliminate

Raise

Over the counter booking system

Complimentary food/beverage on

the plane
Seating class booking system

Focus on several key destination

Increase frequency of flight

Reduce

Create

Luxury facilities provided by Airport

lounge
Inflight attendance service
Seat quality

Online booking system

Point to point system

COMPANY SALES GROWTH; AXIATA GROUP BERHAD

AXIATA GROUP BERHAD 5 YEARS FINANCIAL HIGHLIGHTS

MOHAMAD ZAHIRIN BIN YAACOB | 62387115019

CORPORATE FINANCE PBP60273

Year ended 31st December

Operating Revenue (RM Million)

2010
15,62
1

2011
16,29
0

2012
17,65
2

2013
18,37
1

2014
18,71
2

Axiata Group 5 years Operating Revenue

19000000
18500000
18000000
17500000
17000000
16500000
16000000
15500000
15000000
14500000
14000000
2010

2011

PV

RM 15,621,000

FV

RM 18,712,000

4 years

I (growth)

4.617%

2012

2013

2014

The growth of AXIATA GROUP BERHAD is 4.617% through year of 2010 till 2014

3.

BUMI ARMADA; A GROWTH STOCK OR VALUE STOCK?

Which strategy? growth or value? It is likely to have higher return potential over the long term?
The battle between growth and value investing has been going on for years, with each side

MOHAMAD ZAHIRIN BIN YAACOB | 62387115019

CORPORATE FINANCE PBP60273

offering statistics to support its arguments. Value investors argue that a short-term focus can
often push stock prices to low levels, which, in turn, can create great buying opportunities for
value investors.
Growth Stock VS Value Stock
Growth Stock

Value Stock
A growth stock is a share in a A value stock is a stock that tends to trade at a

company

whose

earnings

are lower price relative to its fundamentals and

expected to grow at an above- thus considered undervalued by a value

average

rate

relative

to

the

market. A growth stock usually

does not pay a dividend, as the

investor. A value stock usually high dividend

yield, low price-to-book ratio and/or low priceto-earnings ratio.

company would prefer to reinvest

retained

earnings

in

capital

projects
Bumi Armada Berhad is an oilfield services company which provides marine
transportation, engineering and maintenance services to the offshore oil and gas industry. It is
based in Kuala Lumpur, Malaysia, and has operations in Southeast Asia, South Asia, Central
Africa, South America, Australia and the Caspian Sea region. It is the world's fifth largest
floating production storage and offloading (FPSO) provider with six vessels. The company was
founded in 1995 and it part of Ananda Krishnan's Usaha Tegas group. It shares are listed on the
Main Market of Bursa Malaysia Securities Berhad and traded as MYX: 5210.
Bumi Armada Berhad is categorized as a VALUE STOCK because its price earning ratio is
low as per calculation below;
Price Earning Ratio (P/E)

market value per share / current year earning per share

0.20 / 3.6

0.056

Bumi Armada Berhad growth from 2010 to 2014 is at 17.88%

Therefore

Price to earning growth (PEG)

P/E ratio / Earning Growth

MOHAMAD ZAHIRIN BIN YAACOB | 62387115019

CORPORATE FINANCE PBP60273

0.056 / 17.88 =

0.0031

Bumi Armada Berhad price to earning growth is 0.0031 which is less than 1 indicates that
it is undervalued. Bumi Armada also pay dividend. A growth stock does not pay dividend. The
ROE of Bumi Armada berhad for three (3) financial years shows that it is less than 15%. To be
classified as a growth stock, Bumi Armada Berhad stock must have 15% on their ROE or higher.
The ROE for Bumi Armada Shows that it is getting lower started 2012 to 2014. The current
assets is at twice current liabilities. Bumi Armada Annual Report 2014 shows that total current
asset is at RM 5,300,157,000 while the total liabilities is at RM 2,326,510,000 which indicate
that the current assets is more than current liabilitie.
Therefore, Bumi Armada is categorized as Value Stock.