1.

0 Company Profile
Dutch Lady Milk Industries Berhad or Dutch Lady Malaysia is one of the leaders in the quality
branded dairy business in Malaysia. It was incorporated in 1963. Besides that, it was listed on Bursa
Malaysia in 1968 and it was the first milk company in Malaysia to be listed on Bursa Malaysia. It is
subsidiaries of Royal Friesl and Campina, a Dutch multinational corporation and one of the largest milk
companies in the world.

Dutch Lady Malaysia manufactures and sells a wide range of quality dairy products and fruit
juices for the home and export market such as Growing-up Milk, Powdered Milk, Condensed Milk,
Cultured Milk, Yoghurt and Fruit Juice Drinks. Besides that, the company also introduces the growing
up milk powder specifically for children like Dutch Lady 123 and Dutch Lady 456.

The products of Dutch Lady Malaysia are all halal-certified whereby Muslim can consume their
products without worrying. Besides that, their products also fulfill quality standards like ISO 9001. In
2010, Halal Policy statement was introduced by Dutch Lady Malaysia. This is because the company
wishes to outline the commitment to provide Halal products to Muslim consumers by adhering to Halal
requirements which set high standards for hygiene, quality, safety and sanitary conditions. Besides that,
the Companys halal food sourcing and production throughout the supply chain are in compliance to
DLMI Halal standards and Jabatan Kemajuan Islam Malaysia (JAKIM) requirements.

Like other listed company, Dutch Lady Malaysia also involves in cooperate social
responsibilities activites. For example, company shares the benefits of milk to more than 30,000 school
children annually by participating in the Programe Susu 1 Malaysia (PS1M). Besides that, Dairy
Development Programme (DDP) has helped local farmers with higher production of milk in both quality
and volume, ensuring sustainability of milk supply. The Companys factory is located in Petaling Jaya
and it employs 600 Malaysians. Currently, Dutch Lady Malaysia is the market leader in key milk
categories such as UHT milk, Sterilised milk and Growing-Up Milk.

Company Profile
The principal activities of APOLLO are investment holding and provision of management
services to subsidiaries. The principal activities of the subsidiaries are manufacture of and trading in
compound chocolates and chocolate confectionery products and cakes. Apollo Food Holdings Bhd
(APOLLO) was incorporated on 5th March 1994 as a private limited company under the name Apollo
Food Holdings Sdn Bhd. It subsequently converted into a public company on 8th September 1994 and
changed its name to present Apollo Food Industries Sdn Bhd, The Company that is manufacturing
compound chocolate confectionery products and layer cakes based in Malaysia. Apollos product mainly
divided into two main categories, which are:
Chocolate Wafer products
Layer cake, Chocolate Layer Cake and Swiss roll products
As a leading manufacturer of the Chocolate Confectionery Products and Layer Cake industry in
Malaysia, the Apollo products are distributed in Malaysia and other overseas market, which are
Singapore, Indonesia, Thailand, Philippines, Vietnam, China, Hong Kong, Taiwan, Japan, India, Middle
East, Mauritius, and Maldives.
Quality and innovation are one of the Apollos strengths.
The organization constantly strives to determine and provide the resources needed
a) Implement and maintain the quality management system and continually improve its effectiveness.
b) Produce the products with top quality of raw & packaging materials
c) Using world class wafer and layer cake-manufacturing machinery from Europe and constantly
upgrade and improve to remain competitively.
d) Enhance customer satisfaction by meeting customer requirements.
e) Recognize our customers needs by introduce independence packaging.
f) Ensure the quality assurance procedures, the company had accredited with HALAL. Our AIM To
always fulfilled the customer needs and requirement by using the latest equipment and technology.

2.0 Company Overview

DUTCH LADY MILK INDUSTRIES BERHAD
Market: Main Market
Sector: Consumer Products
Stock Code: 3026
Market Capital (RM): 3.032 Billion

(Source: Investing.com, 3/4/2014)3.0 Common Size Analysis

3

Balance Sheet
Analysis of Common size balance sheet for 5 consecutive years

Common size balance sheet is a standardized balance sheet which is presenting all items in
percentage terms. This will help investors to compare the company financial position across the years or
with competitors. In this analysis, it includes Dutch Lady Milk Industries Berhads 5 years balance sheet
start from 2008 until 2012. Basically, the analysis will discuss on Dutch Lady Milk Industries Berhads
assets, liabilities and equity in 5 years. 5 years common size balance sheet is attached at the end of the
analysis.

Assets
Current Assets
From the common size balance sheet, we can found out that most of the assets are current assets.
The current assets include inventories, trade and other receivables, prepayments and cash. From 2008 to
2012, the percentages of current assets are roughly 80% on total assets. It is because Dutch Lady Milk
Industries Berhad is a FMCG company which highly depends on the sales of the products. Basically, the
percentage for inventories remains constant from 2008 to 2012 which is 20% - 25%. In other words, the
sales or turnover of the company may not fluctuate and stable. For trade and receivables, it has been
decrease for 5 consecutive years. It starts with 40.60% in 2008 and decrease to 4.23% in 2012. It may
indicate that the ability to collect debt of Dutch Lady Milk Industries Berhad has been improved. It can
bring good images to the company. This is the reason why the cash and cash equivalent of Dutch Lady
Milk Industries Berhad shows the increasing trend. From 2008 to 2012, the percentage of cash and cash
equivalent has been increased from 8.24% to 53.52% which is a massive increment. When the company
able to collect debt more effectively, it will increase the cash and cash equivalent. Thus, during 2012,
Dutch Lady Milk Industries Berhad is able to pay dividend which is more than the net profit as they
have plenty of cash in hand.

Non-Current Assets
Non-current assets for Dutch Lady Milk Industries Berhad are consisted of property, plant and
equipment and intangible assets. It is same with current assets which is remaining constant for 5
consecutive years. The percentage for non-current assets is around 20% to 25% in these 5 years. For
property, plant and equipment, it shows a decreasing trend but in a slower rate. In other words, the
decreasing of percentage of property, plant and equipment is due to the depreciation and amortization.
Besides that, it also shows that Dutch Lady Milk Industries Berhad do not have major acquisition or
selling of non-current assets. Intangible assets also show the similar trend as compare to property, plant
and equipment. It has a decreasing trend but in slower rate.

Liabilities
Current Liabilities
For Dutch Lady Milk Industries Berhad, the current liabilities include trade and other payables,
provision and current tax liabilities. The percentage of current liabilities is decreased from 43.21% in
2008 to 33.95% in 2011. In 2012, the percentage is raise and achieves 42.27%. The possible reasons for
the raise are increment in revenue and high amount payment of special interim payment. Trade and other
payables generally is the debt that Dutch Lady Milk Industries Berhad owes to creditor. Trade and other
payables shows a decreasing trend from 2008 to 2011 which is from 41.61% to 30.57%. It means that
Dutch Lady Milk Industries Berhads ability in paying debt is good. However, the percentage is
increased from 30.57% in 2011 to 38.28% in 2012. In other words, Dutch Lady Milk Industries Berhad
has increased their short term debt to finance the operation of business. It may due to extensive
marketing campaign of company like Drink more do more and introduction of new products like
Dutch Lady Chocolate Drink and Dutch Lady ActivGold. For current tax liabilities, it shows increasing
trend from 2008 to 2012, which is from 1.51% to 3.94%. Since the current tax liabilities are depend on
the net income, it is normal that the percentage of the current tax liabilities also increase.

Non-Current Liabilities
The percentage of non-current liabilities is only 1%-2% of the total. In other words, Dutch Lady
Milk Industries Berhad does not depend on the long term debt to finance their business. The only item in
non-current liabilities is deferred tax liabilities. Generally, deferred tax liabilities are records the fact that
the company will pay more income tax in the future due to transaction that took place during the current
period. The trend of the deferred tax liabilities for Dutch Lady Milk Industries Berhad is fluctuating
across these 5 years which is around 1%-2%.

Equity
From the common size balance sheet, we can see that Dutch Lady Milk Industries Berhad uses
more equity financing rather than debt financing. In 2012, the percentage of the equity is 56.47% and the
liability is 43.53%. From 2008-2011, the percentage of the equity is higher than the percentage of the
liability. There are two items in equity which are share capital and retained earnings.

Share capital is the fund that rose by the company by issuing shares. Basically, the company has
constant of the amount in share capital. In other words, Dutch Lady Milk Industries Berhad does not
raise any new shares in these 5 years. Thus, it means that the Dutch Lady Milk Industries Berhad have
enough capital to run their business.

For retained earnings, it has been increased from 2008 to 2011 which is 33.82% to 48.97%. In
other words, Dutch Lady Milk Industries Berhad able to put in more income in order to funding their
business. However, the retained earnings are dropped to 39.75% in 2012. It is because Dutch Lady Milk
Industries Berhad is giving out their special interim dividend and the amount is greater than the new
profit that company earns. Therefore, it will decrease the retained earnings.

Income Statement
Analysis of Common size income statement for 5 consecutive years
Common size income statement is a standardized income statement which is presenting all items
in percentage terms. It is ease to assists any party to read and compare the income statement. In this
analysis, it includes Dutch Lady Milk Industries Berhads 5 years income statement start from 2008 until
2012. Basically, the analysis will discuss on the revenue, gross profit, operating profit, profit before tax,
net profit, dividend and additional to retained earnings of Dutch Lady Milk Industries Berhad in 5 years.
5 years common size income statement is attached at the end of the analysis.

Revenue
Basically, revenue is income which company receives from his ordinary business activity. Dutch
Lady Milk Industries Berhad able to increase their revenue by 24% from year 2008 to 2012 which is
around RM 170 million. As compare to one of their main competitors, Nestle (Malaysia) Berhad able to
achieve increment of 17% from year 2008 to 2012. In other words, Dutch Lady Milk Industries Berhad
performs better than Nestle (Malaysia) Berhad in these 5 years. The increase of revenue is mainly due to
high demand of companys core products like milk powder and liquid dairy products.

Gross profit
Gross profit is the sum left after revenue minus the cost of goods sold. In year 2012, the gross
profit of Dutch Lady Milk Industries Berhad is 39.30% of revenue. It shows improvement from year
2008 which is only 25.98%. The increment of gross profit is due to Dutch Lady Milk Industries Berhad
ability to reduce their cost of goods sold. From the common size income statement, we can see that the
cost of goods sold in year 2008 and 2012 is indifferent. Besides that, the cost of goods sold in year 2008
is 74.02% of revenue and 60.70% in 2012 which is a decrease of 10.32%. Introduction of new
technology and innovation in product are possible reasons of reduction of cost of goods sold.

Operating profit
Operating profit is known as earnings before interest and tax (EBIT). Operating profit is the
income that company earns after deduct the operation expenses like administrative expenses,
transportation, sales commission and so on. Basically, the operating profit for Dutch Lady Milk
Industries Berhad also show increasing trend which is increase from 8.17% in 2008 to 18.43% in 2012.
This is because the effect of increment in gross profit. We can see that the percentage of the operating
expenses do not fluctuate much across these 5 years. Generally, the ranges of the percentage are from
19% to 24%. In other words, the operating expenses of Dutch Lady Milk Industries Berhad do not
change across these 5 years.

Profit before tax

Profit before tax is computed by using operating profit minus interest expenses. Basically, profit
before tax can tell us how much money company spends to pay their interest cost. Besides that, it also
shows that company is financed more to debt finance if company pays a lot of interest cost. Dutch Lady
Milk Industries Berhads profit before tax also shows an increasing trend which is increase from 8.13%
in 2008 to 18.79% in 2012. It is believed that the reason of the increasing is due to increase in gross
profit. As we can see from the common size income statement, the finance cost of Dutch Lady Milk
Industries Berhad is very low which is below 1%. The highest finance cost is 0.32% in 2012. Thus, we
can see that Dutch Lady Milk Industries Berhad do not depend much on debt financing.
Net profit
Net profit is the earning of the company after deducting all the expenses, interest cost and tax.
Sometimes, net profit also referred as net income or net earnings. Basically, net profit is the key
indicator for the company performance. It can measure how effective a company in doing business to
maximize the profit. The net profit for Dutch Lady Milk Industries Berhad is only 5.99% in 2008 and
increase by 8% and result in 13.99% in 2012.It shows a great improvement. As mentioned earlier, the
reduction in cost of goods sold is the main reason of the increment in net profit. Other than that, the
increase of the revenue also play important role in increment of net profit. The net profit margin of
Dutch Lady Milk Industries Berhad is good as compare to Nestle (M) Berhad. Nestle (M) Berhad net
8

profit margin is only 8.8% in 2008 and 11.1% in 2012. Thus, Dutch Lady Milk Industries Berhad shows
a great improvement.

Dividend
Dividend is a form of profit distribution to the shareholder who is the owner of the company.
From the income statement, we can see that the dividend payment remains constant from year 2008 to
2012 which is around 5%-7%. However, it shows a drastically increase in 2012 which is roughly 19%.
The increment of the dividend is due to the distribution of special interim dividend.

Additional to retained earnings

Basically, retained earnings are the earnings that company does not distribute to the shareholders
as dividend but use for company future operation. In most cases, earnings that retained by company is to
invest in research and development, expansion of business and so on. Additional to retained earnings
referred to the earnings that company adds from net profit to the retained earnings account for every
year. The additional to retained earnings are increasing across the year 2008 to 2011 for Dutch Lady
Milk Industries Berhad. It increases from 0.09% to 7.61%. However, the additional to retained earnings
for Dutch Lady Milk Industries Berhad shows negative in the year of 2012 which is -4.88%. In other
words, there is no additional to retained earnings but a reduction of retained earnings. It is because the
special interim dividend that distributed in year 2012 is more than the net profit. In other words, Dutch
Lady Milk Industries Berhad paying more dividend than their net profit.

4.0 Financial Ratio Analysis

Financial ratio is the relationships determined from a firms financial information. The uses of
financial ratio includes help the investors to do comparison between business firm, determine the
performance level of business firm and so on. By using financial ratio as tools, investors able to
9

determine whether is it worth to invest in particular business firm or not. In this analysis, few important
financial ratios are computed from the financial statement of Dutch Lady Milk Industries Berhad.
Besides that, 5 years ratios are computed to look at the trend of the performance and justifications will
be made.

Current Ratio
Formula:

Current Assets
Current Liabilities
2012

2011

2010

2009

2008

Industry
Indicato
r

Current
Ratio

1.91

2.40

2.20

2.00

1.78

1.15

Current Ratio
3
2.5
2

Current Ratio

1.5
1
0.5
0
2012

2011

2010

2009

2008

Current ratio is used to analysis a companys liquidity. Basically, current ratio is computed to see
the ability of company to handle short term debt by using short term assets (current asset). In 2012,
10

Dutch Lady Milk Industries Berhad is able to achieve 1.91 for current ratio. In other words, it means that
Dutch Lady Milk Industries Berhad has RM1.91 in current asset for every RM1.00 in current liabilities.

From the chart above, we can see that the current ratio of Dutch Lady Milk Industries Berhad
keep increasing from 1.78 in 2008 until 2.40 in 2011. However, it is dropped by 0.49 in 2012 which is
1.91. This is because company has higher current liabilities in 2012. As the company is quite active in
different marketing campaign, it increases the debt of the company. Besides that, launching of new
products like Dutch Lady Chocolate drink also increase the current liabilities as more money is spent.
However, if compare with the industry indicator, Dutch Lady Milk Industries Berhad is able to maintain
its Current ratio and doing a great job as the ratio of 1.91 is higher than 1.15 which is industry indicator.

11

Quick Ratio
Formula:

Current AssetsInventory
Current Liabilities
2012

2011

2010

2009

2008

Industry
Indicato
r

Quick
Ratio

1.37

1.71

1.52

1.41

1.18

0.59

Quick Ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2012

Quick Ratio

2011

2010

2009

2008

Quick ratio is also known as acid-test ratio. It is because inventories have the least liquidity. Thus, quick
ratio measures a company's ability to meet its short-term obligations with its most liquid assets. For
Dutch Lady Milk Industries Berhad, the quick ratio in 2012 is 1.37.
12

From the chart above, we can see that the trend of the quick ratio is similar with the trend of
current ratio. It starts with 1.18 in 2008 and reaches the peak at 1.71 in 2011. However, the ratio is
declined to 1.37 in 2012. The reason of the decline is due to increment in current liabilities as company
is expanding their business. As compare to industry indicator, Dutch Lady Milk Industries Berhad can be
regarded as able to maintain a healthy in its liquidity. This is because 1.37 is higher than 0.59 which is
industry indicator.
Average Age of Inventory
Formula:

365
ITO
2012

2011

2010

2009

2008

Industry
Indicato
r

Average Age
of Inventory

59.16

67.34

59.25

45.40

51.92

Average Age of Inventory

80
70
60
50

Average Age of Inventory

40
30
20
10
0
2012

2011

2010

2009

2008

13

Average Age of Inventory is the average amount of time it takes for a company to sell its
inventory. One calculates the average age of inventory by dividing the value of average inventory by the
cost of goods sold and multiplying the result by 365 days.
From the chart above, the trend of Average Age of Inventory ratio is similar to the trend of the
equity to other ratios. It starts with 51.92 days in 2008 and decrease until 45.40 days in 2009 and
eventually up to 67.34 days in 2011. Therefore, we can conclude that the number Average Age of
Inventory is a mixed stream of days throughout the years. However, Dutch Lady Milk Industries
Berhads Average Age of Inventory ratio is efficient and it is considered healthy among industry s it is
below the industry ratio.

Inventory Turnover
Formula:

Cost of Goods Sold

Inventories
2012

2011

2010

2009

2008

Industry
Indicato
r

Inventory
Turnover

6.17

5.42

6.16

8.04

7.03

6.09

14

Inventory Turnover
9
8
7
6
Inventory Turnover

5
4
3
2
1
0
2012

2011

2010

2009

2008

Inventory turnover is a ratio showing how many times a company's inventory is sold and
replaced over a period. In other words, it is a common measure of the firms operational efficiency in the
management of its assets. The higher the ratio is, the more efficiency the firm manage its inventories. It
is important because the holding cost of the inventory is high, if the firm hold the inventory for long
period, it will incur more cost. Besides that, inventory may become obsolete if it is kept for long period.
However, some business firm has low inventory turnover like jewelry business and art gallery. In 2012,
the inventory turnover for Dutch Lady Milk Industries Berhad is 6.17. In other words, it means that
company turnover the inventory 6.17 times per year.

As from the chart, we can find that Dutch Lady Milk Industries Berhad has a inconsistent trend
on the inventory turnover. In 2009, the company is able to make the highest inventory turnover in these
5 years which is 8.04 times. This is because company left little inventories in hand at that particular year.
As compare to industry indicator, Dutch Lady Milk Industries Berhad is able to reach the standard of the
industry which is 6.07. In other words, the efficiency of Dutch Lady Milk Industries Berhad in managing
their inventory is in moderate level and can be consider as efficient.
15

Average Collection Period

Formula:

Account Receivable
(Annual Sale/365)
2012

2011

2010

2009

2008

Industry
Indicato
r

Average
Collection

6.69

19.24

33.85

46.97

59.39

Period

16

Average Collection Period

70
60
50
Average Collection Period

40
30
20
10
0
2012

2011

2010

2009

2008

Average Collection Period is the approximate amount of time that it takes for a business to receive
payments owed, in terms of receivables, from its customers and clients.

From the chart, the Average Collection Period for Dutch Lady Milk Industries Berhad decreases
drastically especially from 2008 and 2012. It starts with 59.39 days in 2008 and able to achieve 19.24
days in 2011 and 6.69 days in 2012. We can say that the value of the Average Collection Period is too
low in 2012. It may not indicate the firm is very effective in collecting the payments from its customers.
As compare to the market indicator, Dutch Lady Milk Industries Berhad is considered outstanding in
Average Collection Period as the industry indicator is only 12.24 times only.

17

Average Payment Period

Formula:

Account Payable
(COGS/365)
2012

2011

2010

2009

2008

Industry
Indicato
r

Average
Payment

99.89

87.85

76.57

55.23

44.62

Period

18

Average Payment Period

120
100
80

Average Payment Period

60
40
20
0
2012

2011

2010

2009

2008

Average payment period is the average period taken by the company in making payments to its creditors.
It is computed by dividing the number of working days in a year by creditors turnover ratio.
From the chart, Dutch Lady Milk Industries Berhad shows it doesnt improve on paying the
creditors. In 2008, the period is 44.62 days while it increases up to 99.89 days in 2012. It shows that
Dutch Lady Milk Industries Berhad is not improve and not efficient on Average Payment Period. The
chart shows Dutch Lady slowly increases its time or period on paying its creditors and liabilities.
Total Asset Turnover
Formula:

Sales
Total Assets

2012

2011

2010

2009

2008

Industry
Indicato
r

Total Asset
Turnover

2.305

2.034

2.266

2.462

2.466

19

Total Asset Turnover

3
2.5
2
Total Asset Turnover
1.5
1
0.5
0
2012

2011

2010

2009

2008

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales from its
assets by comparing net sales with average total assets.
Based on the chart above, Dutch Ladys Total Asset Turnover is not efficient as it starts from
2.466 in 2008 and decreases down to 2.305 in 2012. This shows how much the Total Asset Turnover of
Dutch Lady has been decreased and in order to increase it, Dutch Lady have to increase its Sales to
match up the Assets.
Debt Ratio
Formula:

Total Liabilities
Total Assets

2012

2011

2010

2009

2008

Industry
Indicato

20

Debt Ratio

0.435

0.350

0.358

0.360

0.440

r
-

Debt Ratio
0.5
0.45
0.4
0.35
0.3

Debt Ratio

0.25
0.2
0.15
0.1
0.05
0
2012

2011

2010

2009

2008

Debt ratio is a solvency ratio that measures a firm's total liabilities as a percentage of its total assets. In a
sense, the debt ratio shows a company's ability to pay off its liabilities with its assets. In other words,
this shows how many assets the company must sell in order to pay off all of its liabilities.
Based on the chart above, we have seen that Dutch Lady best years for lowest debt ratio was in
2011 with 0.350 meanwhile Dutch Lady suffered highest Debt Ratio in 2008 with 0.440. This shows
Dutch Lady has been efficient on regulates its debt ratio during 2009 until 2011.

Time Interest Earned

Formula:

EBIT
Interest

2012

2011

2010

2009

2008

Industry

21

Indicato
r
Time
Interest

26.85

44.89

101.04

181.89

10.31

Earned

Debt Ratio
200
180
160
140
120

Time Interest Earned

100
80
60
40
20
0
2012

2011

2010

2009

2008

Times interest earned is the financial ratio that compares interest before interest expense and taxes to the
total interest expense. Time interest earned ratio measures the ability of a company to pay its interest
expense based on its current income levels.

Based on what we have done, we can conclude that for the moment in 2012 Dutch Lady in the
position of being efficient of handle the interest that has been deducted with 26.85. But in 2009, Dutch
Lady faced its highest Time Interest Earned with 181.89.
Gross Profit Margin
Formula:

Gross Profit
Sales

22

2012

2011

2010

2009

2008

Industry
Indicato
r

Gross Profit
Margin

0.393

0.376

0.357

0.331

0.250

Gross Profit Margin

0.45
0.4
0.35
0.3

Gross Profit Margin

0.25
0.2
0.15
0.1
0.05
0
2012

2011

2010

2009

2008

Gross margin ratio is a profitability ratio that compares the gross margin of a business to the net sales.
What we can see from the chart above, we can see Dutch Lady lowest Gross Profit is in 2008
with 0.250 among the years that has been investigated. While, the highest Gross Profit is in 2012, with
0.393 which is in the healthy position and we can conclude that it is efficient than others.

Operating Profit Margin

23

Formula:

EBIT
Sales

2012

2011

2010

2009

2008

Industry
Indicato
r

Operating
Profit

0.184

0.172

0.128

0.119

0.082

Margin

Operating Profit Margin

0.2
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
2012

Operating Profit Margin

2011

2010

2009

2008

The operating margin ratio, also known as the operating profit margin, is a profitability ratio that
measures what percentage of total revenues is made up by operating income.
Based on the observation and chart above, we can see that Dutch Lady has been efficient in
increasing its Operating Profit Margin when we can see in 2012 its highest peak of Operating Profit
Margin with 0.184 while in 2008 for just 0.082.

24

Net Profit Margin

Formula:

Earning Available for Common Stockholders

Sales

2012

2011

2010

2009

2008

Industry
Indicato
r

Net Profit
Margin

0.184

0.172

0.128

0.119

0.082

Net Profit Margin

0.16
0.14
0.12
0.1

Net Profit Margin

0.08
0.06
0.04
0.02
0
2012

2011

2010

2009

2008

The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a profitability ratio
that measures the amount of net income earned with each dollar of sales generated by comparing the net
income and net sales of a company.
From the chart, we can see that Dutch Lady is in the right position to earn more profit as its
growth on Net Profit Margin is consistent and efficient. In 2012 shows that Dutch Lady had 0.184, 0.102
more than in 2008 with 0.082
25

Return on Assets
Formula:

Net Income
Total Assets
2012

2011

2010

2009

2008

Industry
Indicato
r

Return on
Assets

32.23%

27.12%

20.78%

21.50%

14.78%

9.29%

ROA
35
30
25
ROA

20
15
10
5
0
2012

2011

2010

2009

2008

Return on Assets (ROA) is one of the popular indicators for investor to determine the
profitability of business firm. Dutch Lady Milk Industries Berhads ROA is 32.23% which is the highest
from year 2008 to 2012 in 2012.
Generally, the trend of ROA is similar with the trend of profit margin. The ROA for company in
2008 is 14.78% and keeps increasing until 32.23% in 2012. It shows that Dutch Lady Milk Industries
Berhad is keep improving in efficiency of converting their assets to generate more profit. The reason of
26

the increasing trend is due to increment in net income of the company and the total assets remain
consistent across these 5 years. The market indicator for ROA is 9.29% which is much lower than Dutch
Lady Milk Industries Berhads ROA in 2012. In other words, Dutch Lady Milk Industries Berhad is
efficient in the market standard which is outstanding in terms of ROA.

27

Return on Equity
Formula:

Net Income
Total Equity
2012

2011

2010

2009

2008

Industry
Indicato
r

Return on
Equity

57.08%

41.71%

32.35%

33.56%

26.39%

34.66%

ROE
60
50
40

ROE

30
20
10
0
2012

2011

2010

2009

2008

Return on Equity (ROE) is the ratio that measure how business firms generate income from the
equity financing. In other words, it measure how effective the company use shareholders fund to
operate business and generate income. ROE is popular financial ratio for investor as they need to choose
company which can utilize their money to gain profit. Dutch Lady Milk Industries Berhads ROE is
57.08% in 2012.
Again, the trend of ROE for Dutch Lady Milk Industries Berhad follows the trend of the ROA
and profit margin. In 2008, the ROE recorded is 26.39% and it keeps increasing and reaches the peak in
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2012 which is 57.08%. The reduction in equity and increasing in profit are the reasons why the ROE is
high in 2012. However, Dutch Lady Milk Industries Berhad is considered a blue chip for investor as
the ROE is above industry standards for 2 consecutive years. Market indicator is 34.66% whereby Dutch
Lady Milk Industries Berhads ROE for 2011 and 2012 are 41.71% and 57.08% respectively. This shows
that Return on Equity for Dutch Lady is efficient and is in right position to achieve such high standards.

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Earnings per share

Formula:

Net Income
Share Outstanding
2012

2011

2010

2009

2008

Industry
Indicato
r

Earnings
per share

193

169

100

94

67

EPS
250
200
EPS

150
100
50
0
2012

2011

2010

2009

2008

Earnings per share (EPS) are the allocation of the net income of the company to its outstanding
shares. Basically, EPS is used to measure the efficiency of a company to generate income from the
investors fund. It is similar to ROE but there is difference between ROE and EPS. EPS can give a
clearer picture to investor on actual earnings for one share on hand. In 2012, Dutch Lady Milk Industries
Berhads EPS achieve the highest in the history which is RM193 per share.

30

From the chart, the EPS is keep increasing from 2008 to 2012 which is from RM67 per share
until RM193 per share. There is an improvement of almost 200% from year 2008. The reason of the EPS
achieve highest in history is due to the increase in net income and the outstanding shares remains the
same from year 2008 to 2012. In other words, Dutch Lady Milk Industries Berhad able to generate more
profit without raising any funds by issuing shares in this particular period. Thus, the company is very
efficient in generating profit from investors fund.

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Price-Earnings Ratio
Formula:

Price per share

Earnings per shares
2012

2011

2010

2009

2008

Industry
Indicato
r

Price-Earnings
Ratio

19.00

17.47

17.58

12.36

13.43

19.08

PE Ratio
20
15
PE Ratio
10
5
0
2012

2011

2010

2009

2008

Price-Earnings ratio (PE ratio) is a valuation tool that tells you how much you are paying for
each $1 in earnings per share a stock generates. PE ratio is the quick way to look at the valuation of the
stock. For example, let say the share price for a company is RM30.00 per share while the earning per
share is RM3.00. The PE ratio will be 10 and it means that investor need 10 years times to breakeven the
investment if investor buys the share at the market price. Thus, we can say that the PE ratio is the future
prospect of investor towards the company because it depends on the market price. For example, if the
company have market price at RM10.00 and EPS at RM1.00, the PE ratio will be 10. Investor thinks that
the company has bright future prospect and the market price increase to RM15.00. Now, the PE ratio
32

becomes 15. Therefore, we can say that the higher the PE ratio, the better the company is. However,
high PE ratio may bringing the risk of overprice by investor. In 2012, Dutch Lady Milk Industries
Berhads PE ratio is 19.00 which is highest across these 5 years.
From the chart above, we can see that the trend of PE ratio is increasing from year 2008 to 2012
expect in 2009. Basically, Dutch Lady Milk Industries Berhad is awell-established company in industry.
Therefore, it has a high PE ratio because investor thinks that the company is worth to invest. As compare
to industry indicator, the PE ratio of Dutch Lady Milk Industries Berhad is considered moderate and
efficient.

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5.0 Market Share

5 Years Share Price

(Source: Bursa Malaysia)

From the chart provided by bursa Malaysia, Dutch Lady Milk Industries Berhads share price
increased drastically from mid of 2011 until mid of 2012. It increased from RM20.00 until RM47.00.
Increment of the share price in the period is more than 100%. The price level is maintained in the price
range of RM45.00-RM47.00 from 2013 to the current year.
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5 Year KLSE Index

(Source: Yahoo Finance)

As compare to the KLSE index, the share price for Dutch Lady Milk Industries Berhad shows a
different trend. It may due to the nature of the business of Dutch Lady. As we know, KLSE index will be
influence by the volume of the transaction in the share market. In booming economic condition, the
volume will be high as investor and speculator are busy involved in transaction. Thus, it will raise the
index of KLSE. However, if the country is facing economic recession, the index will be dropped. From
the graph above, the index shows an increasing trend from year 2010 until 2011. It has a slightly drop in
year 2012. Then, it keep increasing until the present.
For Dutch Lady Milk Industries Berhad, the share prices generally keep increasing start from
mid of 2011 until 2012. Then, the share price maintains the level until present. The nature of the
business for Dutch Lady Milk Industries Berhad is consumer products industry. In other words, although
it is economic recession, people still consume daily goods like milk, rice and so on. Thus, the share price
trend for Dutch Lady Milk Industries Berhad will be different as compare to KLSE index.

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Percentages of changes in share price (5 Years)

Percentage changes in share price

10
8
6
4
2
0
-2
-4
-6
-8
-10

201
4

* Dotted line indicate period between the years

36

Based on the percentage of changes in the graph, we can conclude that the changes of share price
for Dutch Lady Milk Industries Berhad are not more than 10%. In other words, the increase and
decrease in the share price maximum will be around 8%. It can be considered as a blue chip as the
fluctuation of the share price is not that much as compare other companies.
In 2009, the company has experience a major changes price in early of the year. The share price
has been increased by RM0.80 which is from RM9.10 until RM9.90. The percentage of the increment is
8.9 %. On the particular day, the volume of the transaction is also reach a high number which is 101 Lot.
Thus, it is believed that the increment of the share price is due to active of the transaction. However, the
company is also experience highest drop for percentage in share price at the end of the year. On that day,
the share price is dropped from RM12.66 to RM11.74 which is difference of RM0.92 or 7.27%.
In 2010, the share price is stable as compare to performance of the company in 2009. In
September 2010, the share price is the highest on the month. The share price has been increased from
RM15.36 to RM16.50 which is increment of RM1.14 or 7.42%. Besides that, the volume of the
transaction is around 684Lot which is higher than usual.
The share price is most stable in year 2011 across these 5 years. Basically, the changes of the
percentage in the share price are not more than 5%. However, in the end of the year of 2011, the share
price experience a major drop which is from RM24.44 to RM23.40 which is decrease of RM1.14 or
4.66%.
For 2012, the overall share price is good as most of the times the share price is increased. Two
major increments in share price are happened on February and March. Percentages of change for these
two particular months are 6.59% and 9%. At the end of the year, the share price of company is recorded
RM46.42 on last day in December which is relative high as compare to 2011, RM23.88.
In 2013, the share price may not perform as good as in 2012. Company recorded highest
increment of share price in November which is 4.26% and a decrease of share price in 4.63% in July.
Comparison in between Dutch Lady Milk Industries Berhad and Padiberas Nasional Berhad
BERNAS has a high liquidity as their current ratio and quick ratio is better than the industry
indicator. Dutch Lady Milk Industries Berhad is doing a great job as the current ratio of 1.91 is higher
than 1.15 which is industry indicator. Dutch Lady Milk Industries Berhads quick ratio starts with 1.18
37

in 2008 and reaches the peak at 1.71 in 2011. However, the ratio is declined to 1.37 in 2012. On the
other hand, from year 2008 till year 2011, BERNAS quick ratio increase gradually but in year 2012, it
has decrease slightly. Both business firm has no problem to cope with the short-term debt.
In terms of leverage, both business firms has high leverage as quite a lot of money is borrowed to
financed their business operation. The main reason of Dutch Lady Milk Industries Berhad has higher
debt to equity ratio is due to the increasing of current liabilities. Furthermore, the retained earnings also
decrease due to the payment to shareholders for the special dividend. Same goes to BERNAS as they
have a higher debt-equity ratio compared to Dutch Lady. In other words, the risk of bankrupt for
BERNAS is higher than Dutch Lady.
The efficiency of Dutch Lady Milk Industries Berhad in managing their inventory is in moderate
level. This is due to the inventory turnover of Dutch Lady is maintain same level as the industry
indicator which is 6.07. Besides that, it has an inconsistent trend on the inventory turnover. Although,
BERNAS has a lower inventory turnover which is 6.04 in year 2012 compared to its other years, but it is
just slightly lower than the industry indicator which shows that poor sales and excess inventory, the firm
could be holding obsolete inventory and not selling inventory fast enough.
In terms of receivables turnover, Dutch Lady Milk Industries Berhad starts with 6.07 in 2008 and
able to achieve 22.08 in 2011 and 54.54 in 2012 which considered outstanding in receivables turnover as
the industry indicator is only 12.24 times only. In spite of this, compared to BERNAS, it has a lower
figure may indicate inefficiency in collecting outstanding sales.
In terms of profitability of the business firm, BERNAS has not been effectively generating profit
from its assets and shareholders equity from year 2010 till 2012. Dutch Lady Milk Industries Berhad
shows improvement in profit margin from 2008, where profit margin is 5.99% and keeps increasing until
13.99% in 2012. It shows that Dutch Lady Milk Industries Berhad is a profitable company. Comparing
with industry indicator, Dutch Lady Milk Industries Berhad is a well performer as its profit margin is
beyond the industrial standard which is 10.40%. In terms of ROA, it also shows that Dutch Lady done a
better job as compare to BERNAS. The ROA of Dutch Lady is keep increasing from 2008 until 2012.
For ROE, Dutch Lady Milk Industries Berhad had recorded 26.39% in 2008 and it keeps increasing and
reaches the peak in 2012 which is 57.08%. As compare, BERNAS has a lower percentage of ROA and
ROE compared to Dutch Lady which shows that the company is not very efficient in generating profit.
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BERNAS has lower EPS as compare to Dutch Lady because their company performance is not
stable and facing loss in these five years. Dutch Ladys EPS which keep increasing from 2008 to 2012
this is from RM67 per share until RM193 per share. It means that the company is able to generate more
profit without raising any funds by issuing shares in this particular period. For the PE ratio, BERNAS
has a low PE ratio due to low expactaiton of the investor towards the future prospect of the company.
For Dutch Lady, the PE ratio is high due to the awesome performance in recent years which convince
investor to have confident towards their future prospect.
In conclusion, both companies has a good liquidity position but has a high leverage. In term of
assets management and turnover, Dutch Lady is more efficiency in handling inventories and receivables
collection compared to BERNAS. Dutch Lady has high profitability ratio is due to the milk consumption
in Malaysia is constant.

39