Liqiudity Ratio

LIQIUDITY RATIO
A company's liquidity is its ability to meet its near-term obligations, and it is a major measure of
financial health. Liquidity can be measured through several ratios.
Current ratio. The current ratio is the most basic liquidity test. It signifies a company's ability to
meet its short-term liabilities with its short-term assets. A current ratio greater than or equal to
one indicates that current assets should be able to satisfy near-term obligations. A current ratio of
less than one may mean the firm has liquidity issues.
Current Ratio = (Current Assets) / Current Liabilities
Quick Ratio. The quick ratio is a tougher test of liquidity than the current ratio. It eliminates
certain current assets such as inventory and prepaid expenses that may be more difficult to
convert to cash. Like the current ratio, having a quick ratio above one means a company should
have slight problem with liquidity. The higher the ratio, the more liquid it is, and the better able
the company will be to ride out any downturn in its business.
Quick Ratio = (Cash + Accounts Receivable + Short-Term or Marketable Securities) / (Current
Liabilities)
Cash Ratio. The cash ratio is the most conservative liquidity ratio of all. It only measures the
ability of a firm's cash, along with investments that are easily converted into cash, to pay its
short-term obligations. Along with the quick ratio, a higher cash ratio generally means the
company is in better financial shape.
Cash Ratio = (Cash + Short-Term or Marketable Securities) / (Current Liabilities)

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BMIA5103 INVESTMENT ANALYSIS
LEVERAGE RATIO
A company's leverage relates to how much debt it has on its balance sheet, and it is another
measure of financial health. Generally, the more debt a company has, the riskier its stock is,
since debtholders have first claim to a company's assets. This is important because, in extreme
cases, if a company becomes bankrupt, there may be nothing left over for its stockholders after
the company has satisfied its debtholders.
Debt/Equity. The debt/equity ratio measures how much of the company is financed by its
debtholders compared with its owners. A company with a ton of debt will have a very high
debt/equity ratio, while one with little debt will have a low debt/equity ratio. Assuming
everything else is identical, companies with lower debt/equity ratios are less risky than those
with higher such ratios.
Debt/Equity = (Short-Term Debt + Long-Term Debt) / Total Equity
Interest Coverage. If a company borrows money in the form of debt, it most likely incurs
interest charges on it.The interest coverage ratio measures a company's ability to meet its interest
obligations with income earned from the firm's primary source of business. Again, higher interest
coverage ratios are typically better, and interest coverage close to or less than one means the
company has some serious difficulty paying its interest.
Interest Coverage = (Operating Income) / (Interest Expense)
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PROFITABILITY RATIO
How good is a company at running its business? Does its performance seem to be getting better
or worse? Is it making any money? How profitable is it compared with its competitors? These
very important questions can be answered by analyzing profitability ratios.
Gross Margin. Gross margin is simply the amount of each dollar of sales that a company keeps
in the form of gross profit, and it is usually stated in percentage terms. The higher the gross
margin, the more of a premium a company charges for its goods or services. Keep in mind that
companies in different industries may have vastly different gross margins.
Gross Margin = (Gross Profit) / (Sales)
Operating Margin. Operating margin captures how much a company makes or loses from its
primary business per dollar of sales. It is a much more complete and accurate indicator of a
company's performance than gross margin, since it accounts for not only the cost of sales but
also the other important components of operating income such as marketing and other overhead
expenses.
Operating Margin = (Operating Income or Loss) / Sales
Net Margin. Net margin considers how much of the company's revenue it keeps when all
expenses or other forms of income have been considered, regardless of their nature. While net
margin is important to take note of, net income often contains quite a bit of "noise," both good
and bad, which does not really have much to do with a company's core business.
Net Margin = (Net Income or Loss) / Sales

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Return on Assets (ROA). Return on assets measures a company's ability to turn assets into
profit.
Return on Assets = (Net Income + Aftertax Interest Expense) / (Average Total Assets)
A company's aftertax interest expense is easy to determine. First, determine its tax rate by
dividing its income tax expense by its pretax income. Then plug that figure into the following
formula:
Aftertax Interest Expense = (1 - Tax Rate) x (Interest Expense)
Return on assets is generally stated in percentage terms, and higher is better, all else equal.
Return on Equity (ROE). Return on equity is a straightforward ratio that measures a company's
return on its investment by shareholders. Like all of the profitability ratios we've discussed, it is
usually stated in percentage terms, and higher is better.
Return on Equity = (Net Income) / (Average Shareholders' Equity)
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NESTLE MALAYSIA BERHAD
Nestl was founded in 1866 by Henri Nestl and is today the world's biggest food and
beverage company. Sales at the end of 2005 were CHF 91 bn, with a net profit of CHF 8 bn.
Nestl employ around 250,000 people from more than 70 countries andh ave factories or
operations in almost every country in the world. The history of Nestl began in Switzerland in
1867 when Henri Nestl, the pharmacist, launched his product Farine Lacte Nestl, a nutritious
gruel for children. Henri used his surname, which means little nest, in both the company name
and the logotype. The nest, which symbolizes security, family and nourishment, still plays a
leading role in Nestls profile. Since it began over 130 years ago, Nestls success with product
innovations and business acquisitions has turned it into the largest Food Company in the world.
As the years have passed, the Nestl family has grown to include chocolates, soups, coffee,
cereals, frozen products, yoghurts, mineral water and other food products.
Beginning in the 70s, Nestl has continued to expand its product portfolio to include pet
foods, pharmaceutical products and cosmetics too. Today, Nestl markets a considerable number
of products, all with one thing in common: the high quality for which Nestl has
become renowned throughout the world The Company's strategy is guided by several
fundamental principles. Nestl's existing products grow through innovation and renovation while
maintaining a balance in geographic activities and product lines. Long-term potential is never
sacrificed for short-term performance. The Company's priority is to bring the best and most
relevant products to people, wherever they are, whatever their needs, throughout their lives.
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Taste of Nestl in each of the countries where Nestl sell products. Nestl is based
on the principle of decentralization, which means each country is responsible for the efficient
running of its business - including the recruitment of its staff.
That's not to say that every operating company can do as it wishes. Headquarters in
Vevey sets the overall strategy and ensures that it is carried out. It's an approach that is best
summed up as: 'centralize what you must, decentralize what you can'. Nestl is a company which
is present in all over the world but It has difference and unique motto to deal in all over the
world. Nestl believes that they should think about their organizations globally but they deal
with people by interacting with them locally
Long-term potential is never sacrificed for short-term performance. The Company's
priority is to bring the best and most relevant products to people, wherever they are, whatever
their needs, throughout their lives. Taste of Nestl in each of the countries where Nestl sell
products. Nestl is based on the principle of decentralization, which means each country is
responsible for the efficient running of its business - including the recruitment of its staff.1
That's not to say that every operating company can do as it wishes. Headquarters in
Vevey sets the overall strategy and ensures that it is carried out. It's an approach that is best
summed up as: 'centralize what you must, decentralize what you can'. Nestl is a company which
is present in all over the world but It has difference and unique motto to deal in all over the
world. Nestl believes that they should think about their organizations globally but they deal
with people by interacting with them locally
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STRENGTHS AND WEAKNESSES
1. Strengths
Nestls has much strength. Their first is that they have a great CEO, Peter Brabeck.
Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes by
renovating existing products, and innovating new products. His explanation of
renovation is that to just keep pace in the industry, you need to change at least as fast
as consumer expectations.
His explanation of innovation is to maintain a leadership position, you also need to
leapfrog, to move faster and go beyond what consumers will tell you. Brabeck has
led Nestle into a position to better achieve the internal growth targets with his.
Another strength that Nestle has is that they are low cost operators. This allows them
to not only beat the competition by producing low cost products, but by also edging
ahead with low operating costs.
2. Weaknesses
The main weakness of Nestle is that they were not as successful as they thought they
would be in France. The launch in France was in 1994, but since the late 1980s,
Danone had already entered the marke twith a health-based yogurt.
The second weakness is that LC-1 was positioned as too scientific, and consumers
didnt quite understand that LC-1 was a food and not a drug.
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Nestle also has multiple critical resources. They have a great research hand
development team. James Gallagher and Andrea Pfeifer were the masterminds behind
the research on the La-1 cultures in the LC-1yogurt. They were also the two that
decided on selling LC-1 as afunctional food. This enabled Nestle to position the
product in a way that differentiated it among the other products in the market. They
also have four pillars that Brabeck, Nestles CEO has identified he believes will help
their internal growth worldwide. These are operating excellence, innovation and
renovation, product availability, and communication.
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2,014 2,015 2,016
Financial Ratio
Revenue MYR Mil 4,809.00 4,838.00 5,064.00
Gross Margin % 35.30 38.60 39.40
Operating Income MYR Mil 725.00 760.00 799.00
Operating Margin % 15.10 15.70 15.80
Net Income MYR Mil 550.00 591.00 637.00
Earnings Per Share MYR 2.35 2.52 2.72
Dividends MYR 2.35 3.05 2.50
Payout Ratio % * 99.50 95.40
Shares Mil 235.00 235.00 235.00
Book Value Per Share * MYR 0.86 0.80
Operating Cash Flow MYR Mil 857.00 751.00 923.00
Cap Spending MYR Mil (361.00) (193.00) (123.00)
Free Cash Flow MYR Mil 496.00 558.00 800.00
Free Cash Flow Per Share * MYR 0.38 0.45
Working Capital MYR Mil (413.00) (509.00) (547.00)
Profitability Ratio
Margins % of Sales
Revenue 100.00 100.00 100.00

COGS
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64.65 61.44 60.55
Gross Margin 35.35 38.56 39.45
SG&A 20.23 22.14 23.50
Other 0.08 0.73 0.24
Operating Margin 15.08 15.71 15.78
Net Int Inc & Other (0.49) (0.67) (0.64)
EBT Margin 14.58 15.04 15.14
Tax Rate % 21.51 18.82 16.88
Net Margin % 11.45 12.21 12.58
Asset Turnover (Average) 2.19 2.02 2.03
Return on Assets % 25.06 24.66 25.57
Financial Leverage (Average) 2.96 3.51 3.85
Return on Equity % 69.08 79.52 93.98
Return on Invested Capital % 58.93 58.79 64.28

Interest Coverage
Cash Flow Ratios

Operating Cash Flow Growth %
YOY 29.08 (12.33) 22.89
Free Cash Flow Growth % YOY 9.78 12.53 43.39
Cap Ex as a % of Sales 7.51 3.99 2.43
Free Cash Flow/Sales % 10.30 11.53 15.79
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Free Cash Flow/Net Income 0.90 0.94 1.26
Balance Sheet Items (in %)
Cash & Short-Term Investments 0.67 0.56 0.96
Inventory 16.08 16.65 18.25
Other Current Assets 22.04 23.60 22.08
Total Current Assets 38.79 40.81 41.29
Net PP&E 56.17 55.05 54.24
Intangibles 2.65 2.52 2.50
Other Long-Term Assets 2.40 1.62 1.97
Total Assets 100.00 100.00 100.00
Short-Term Debt 3.53 9.98 7.21
Taxes Payable 2.24 1.61
Other Short-Term Liabilities 50.93 49.68 56.00
Total Current Liabilities 56.71 61.27 63.21
Long-Term Debt 3.66 3.39 3.38
Other Long-Term Liabilities 5.90 6.87 7.47
Total Liabilities 66.26 71.52 74.06
Total Stockholders' Equity 33.74 28.48 25.94
Total Liabilities & Equity 100.00 100.00 100.00
Liquidity Ratio
Current Ratio
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0.68 0.67 0.65
Quick Ratio 0.40 0.39 0.36
Financial Leverage 2.96 3.51 3.85
Debt/Equity 0.12 0.14 0.14
Efficiency Ratio
Days Sales Outstanding 38.21 40.98 40.59
Days Inventory 45.72 48.17 51.76
Payables Period 128.75 147.46 156.21
Cash Conversion Cycle (44.82) (58.31) (63.86)
Receivables Turnover 9.55 8.91 8.99
Inventory Turnover 7.98 7.58 7.05
Fixed Assets Turnover 4.11 3.63 3.72
Asset Turnover 2.19 2.02 2.03
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SHARE PRICE CHART
Revenues have consistently increased for the past 13 years regardless of economic recessions.
Total revenue grew from RM2,202.5 million in 2000 to RM4,787.9 million in 2013.
Net profits have seen a similar uptrend growing from RM 4,809 million in 2014 to RM5,064
million in 2016. Despite rising raw material costs, Nestl Malaysia has been able to maintain
their gross profit margins due to the introduction of new high margin products.
Net profit margin has steadily increased due to the cost-saving initiatives implemented by the
management. Despite the volatility in Nestl Malaysias operating cash flow, we still see an
overall uptrend from RM 857 million in 2014 to RM 923 million in 2016.
Nestl Malaysias earnings are extremely high quality; cash-flow-to-net-income ratio has
comfortably been above 1 every year except 2015. This means for every dollar of profit Nestl
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Malaysia generates, it receives a dollar in cash flow.
Nestl Malaysias ROE is hugely impressive. Companies with an ROE of 15% or more are
considered pretty good, Nestl Malaysias ROE was 69.08% in 2014 and they grew it further to
93.98% in 2016. However, ROEs can be artificially boosted by debt, so lets have a look at
Nestl Malaysias debt levels. Nestl Malaysias debt/equity ratio has fallen over the last 13
years while ROE has increased in the same time. This is a great sign that shows the company has
been doing an excellent job at deploying its capital.
Due to Nestl Malaysias rising revenues and profits, low debt and high ROEs, the company has
paid an increasing dividend per share for the last 13 years. Shareholders have seen dividends
increase from RM0.821 per share to RM2.50 in 2016. This means dividends have grown, on
average, 8.4% a year the last 13 years.
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FUTURE PROSPECTS AND STRATEGIES
Nestl Malaysia has really been an innovation machine. Going back to three years ago, around
RM100 million to RM140 million of the sales came from the innovations. Last year alone, it
generated RM400 million from innovations. That is very much in line with our commitment to
the country.
Nestl Malaysia have eight factories in Malaysia today and they employ almost 6,000 people. As
you can see in our 2015 annual report, it was not an easy year overall. From a consumer
sentiment perspective, the challenge is that they have to produce and sell on a daily basis. That is
the challenge and the beauty. When it comes to Milo,they sell more than seven million cups a
day in Malaysia. Nestl Malaysia have to do a good job to build and keep consumer trust.
One of the things that not many people know is that in the factories, almost 100 per cent of the
workers are Malaysian. It is a very different model compared with other manufacturing
companies here, where have a lot of foreign labour.
On the fringes, they have foreigners who do the cleaning, but in the factories, the 6,000 workers
are all Malaysians. And that is a beautiful thing because some of these people have been with
them already into the second generation.
Through the financials, Nestl Malaysia have performed very strongly. Overall growth in
Malaysia was flat last year, including export growth, but still delivered a positive growth, and
really strengthened in delivering our operation results.
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Nestl Malaysia focus on productivity, basically cost-efficiency, thats one pillar. They work
with the technologically-advanced new factories, end-of-the-line manufacturing, etc. And the
second area is a very massive innovation drive, as innovation is a key driver of their strategy.
Consumers are changing. In 2016, they saw that, overall, big outlets and hypermarkets, sales
were rather flat or even decreasing. At the same time, convenience store growth was in the
double-digits. People are eating a lot more outside than at home, which is quite an interesting
development.
There are two areas that Nestl Malaysia focused. One area is about going into on-the-go
consumption. People are more pressured for time, they dont have time for breakfast and they
want a convenient solution, so they invest a lot into that focus. They built our Sri Muda factory,
which produces ready-to-drink products.
The second area is about good-for-me products, products that not only taste good, but also have a
lot of benefits. For example, reducing cholesterol.
Nestl Malaysia have also been keeping our prices stable. All the benefits brought in through
productivity, etc, we put back into making sure that over the last two years, they have not
increased prices. And there are no big plans to raise prices. When economic times are tough, the
contribution from their side to make sure that people get great quality products from them at the
most affordable prices.
Theres quite a number coming if new products are coming. Nestl Malaysia strongly said Its
going to be a very strong pipeline, and after Hari Raya.
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GENTING BERHAD
Genting Berhad is a very success example in gambling and entertainment industry. Genting
Berhad was founded by Tan Sri Lim Goh Tong. Genting Highland Hotels starts to open for
business after got the casino license in year 1971 from Malaysias first prime minister, Tunku
Abdul Rahman and being public listed in Kuala Lumpur Exchange. In year 1977, Genting
Company invests in plantation division. After that Genting Company restructures as Genting
Holdings that goes public in year 1989and has a subsidiary, Resort World Bhd. Genting
Highlands consist of indoors and out door games, that include roller coaster, indoor ice room,
and others. Genting Holdings launches Star Cruises, than become Asia-Pacifics leading casino
cruise operator in year 1993. After that, Genting Holdings diversifies with purchase of Sanyen
Paper Mill complex and a 720 MW power plant that placed under Genting Sanyen Power Sdn
Bhd in year 1994. In two year after that, Genting Holdings enters in oil and gas exploration
market by purchase 45 percent stake in British Gas Muturi PSC in Irian Jaya, Indonesia. Other
than that, Genting Holdings also investing in other country companies such as Australia,
Philippines, Canada, Bahamas, UK and others. In year 2000 Genting Holdings begins it
construction of it new 6,300-room First World Hotel, at Genting Highlands, which is also being
call as the world largest hotel, Genting Holdings acquires equity interest in power plant in India
as part of continued industrial and geographic diversification. Genting Holdings have business in
the star cruise business, properties business. After 33 years of Genting Holdings, the founder of
Genting Highland Hotels, Tan Sri Lim Goh Tong decided to retire at age of 86 and let his son,
Tan Sri Lim Kok Thay to run the business. After three years of retirement, the founder of
Genting Holdings, Tan Sri Lim Goh Tong pass away in 23 October 2007. Tan Sri Lim Kok Thay
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become the CEO of Genting Holdings and builds a memorial land of Tan Sri Lim Goh Tong
named as Goh Tong Memorial Park located 600meter from Goh Tong Villa. Genting Highlands
became the well known with their gambling and entertainment. After few years, Genting
Holdings start to invest in gambling and entertainment in other country such as New York,
Malina, United Kingdom, and also Hong Kong. Genting now has become a well-
known entertainment and gambling company. Genting Holdings successfully to gain a net profit
of RM245.4mil in the quarter end in 31 December compare with a net loss of RM120.78mil a
year before 2010.
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1. Strength
Strong presence in leisure and hospitality segment.
Genting Berhad operates its leisure and hospitality segment through its subsidiary, Genting
Malaysia (formerly known as Resorts World). Its activities cover theme parks, gaming, hotels,
seaside resorts and entertainment. The Genting Group was founded in 1965 by the late Tan Sri
(Dr.) Lim Goh Tong with the development of a beautiful highlands resort, named Genting
Highlands Resort. It located at 2,000 meters above sea level and 58 kilometers from Kuala
Lumpur, capital of Malaysia. The Resort World Genting offers five hotels which include
Maxims Genting, Highlands Hotel, Theme Park Hotel, Resort Hotel, and First World Hotel.
These 5 hotels have more than 8,000 rooms, over 50 fun rides, 200 dining and shopping outlets.
In addition, First World Hotel is the worlds largest hotel which provided 6,000 accommodation
rooms. The main attractions of the resort are its casino, theme park, concert shows, food &
beverage and retail shopping. It is one of the most popular tourist destinations in Malaysia. Apart
from Highland Resort, Genting Berhad also owns and operated 2 seaside properties which are
Awana Kijal Golf, Beach & Spa Resort in Terengganu and Awana Porto Malai in Langkawi.
Strong presence in leisure and hospitality segment would thus improve overall revenue and profit
growth for Genting.
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Diversified business operations
Genting Berhad has a broad and diversified business portfolio, which includes the management
of casinos and resorts, plantations, property development, oil and gas, e-commerce, information
technology and biotechnology. The three main pillars of Genting Berhads investment are
gaming, plantations and energy. However, in year 2013 they are looking for the fourth business.
The group has over 26 years of experience in developing, operating and marketing casinos and
integrated resorts in different parts of the world, including the Americas, Australia, Malaysia, the
Philippines, Singapore and United Kingdom. It has been voted Malaysia's leading corporation
and one of Asia's best managed multinationals. The Genting Berhad's diversified business
reduces its exposure to downturns in demand for any particular product segment and also
increases its growth opportunities.
Biggest Casino
Genting Malaysia now is the biggest casino owner in UK. It owns 46 casinos which under its
subsidiary, Genting UK Plc. The company operates under the Circus, Maxims and Mint brands.
The strong market position in UK in the casino market provides the company competitive
advantage over its peers. Thus, it helps to increase its bargaining power.
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2. Weaknesses
Weaknesses performance of diversified business
The main business of Genting Berhad, hospitality and leisure industry change seasonally. During
peak season especially holiday season, it can accommodate highly while only low
accommodation during off season. In order to reduce fluctuation of revenue, Genting Berhad has
diversified into various other sectors such as plantation, oil, gas, information technology, and
energy etc. Although they have diversified into many sectors, it cannot make revenue as
hospitality and leisure industry. During these years, revenue fell 2.8 percent to 1.43 billion
ringgit from a year ago because of weaker performance in plantations and leisure industry in
Singapore. Furthermore, there are weaknesses in property and manufacturing divisions. It is
estimated that there will be an increase in the property firms; its revenue has become worse and
worse. Additionally, manufacturing divisions revenues increased by 6% but profit before tax fall.
Thanks to this weaker performance, there are negative impacts on the overall growth of the
company.
Overdependence
The central business of Genting Berhad significantly concentrated in Singapore and Malaysia.
The revenue of Genting Berhad derived from Malaysian and Singaporean (39.8 % and 39.7 %).
By depending on Singapore and Malaysia market highly, Genting Berhad`s demands are quite
unstable. The situation of Genting might have hostile impact in the long run due to geographic
concentration. As a result of this, the company overall development may be affected.
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Weak return
It is recognized that weak return in Genting Berhad in the past few years. It shows the weakness
of the management of the company. Its return on investment and return on equity declined during
these years in comparison with 2005 & 2006. As a result of this, it may bring about lack of
investors trustworthiness.
Decreasing company `s current and liquidity ratios
When the company`s debt increased in the past few years, liquidity of the company declined
significantly. Therefore, not only net current assets declined but also company current ratio.
Going down current and liquidity of the company revealed that there are weaknesses of the
company balance sheet. As a consequence of this, it affects the expansion of the business or the
growth of the market.
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2014 2015 2016
Financials Ratio
Revenue MYR Mil 18,217.00 18,100.00 18,365.00
Gross Margin % 34.60 28.40 32.10
Operating Income MYR Mil 4,262.00 3,446.00 5,523.00
Operating Margin % 23.40 19.00 30.10
Net Income MYR Mil 1,807.00 1,749.00 2,512.00
Earnings Per Share MYR 1.94 1.86 2.87
Dividends MYR 0.05 0.15 0.17
Payout Ratio % * 116.10 8.30 9.40
Shares Mil 770.00 746.00 748.00
Book Value Per Share * MYR 11.95 12.26 11.80
Operating Cash Flow MYR Mil 4,399.00 4,744.00 6,277.00
Cap Spending MYR Mil (4,334.00) (4,271.00) (4,334.00)
Free Cash Flow MYR Mil 64.00 472.00 1,943.00
Free Cash Flow Per Share * MYR 0.51 (0.07) 0.39
Working Capital MYR Mil 19,865.00 25,449.00 24,277.00
Profitability Ratio
Margins % of Sales
Revenue 100.00 100.00 100.00
COGS 65.36 71.59 67.86
Gross Margin 34.64 28.41 32.14

SG&A
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9.70 8.12 10.59
Other 8.47 12.51 7.82
Operating Margin 23.40 19.04 30.07

Net Int Inc & Other
EBT Margin 23.40 19.04 30.07
Tax Rate % 26.01 24.62 17.95
Net Margin % 8.21 7.67 11.69
Asset Turnover (Average) 0.25 0.22 0.20
Return on Assets % 2.07 1.71 2.36
Financial Leverage (Average) 2.23 2.25 2.21
Return on Equity % 4.66 3.82 5.26
Return on Invested Capital % 3.94 3.38 4.37
Key Ratios -> Growth

Cash Flow Ratios
YOY (5.75) 7.82 32.34
Free Cash Flow Growth % YOY (87.85) 630.34 312.00
Cap Ex as a % of Sales 23.80 23.60 23.60
Free Cash Flow/Sales % 0.35 2.61 10.58
Free Cash Flow/Net Income 0.04 0.27 0.77
Cash & Short-Term Investments 30.13 28.27 29.13
Accounts Receivable 2.53
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Inventory 0.57 0.54 0.63
Other Current Assets 6.56 7.44 2.55
Total Current Assets 37.27 36.25 34.84
Net PP&E 35.32 34.82 35.30
Intangibles 12.13 12.87 12.64
Other Long-Term Assets 15.28 16.06 17.22
Total Assets 100.00 100.00 100.00
Accounts Payable 5.61
Short-Term Debt 2.50 1.65 2.39
Taxes Payable 0.78 0.33 0.37
Other Short-Term Liabilities 6.87 5.81 0.24
Total Current Liabilities 10.16 7.79 8.61
Long-Term Debt 14.62 19.02 17.01
Other Long-Term Liabilities 30.29 28.81 29.05
Total Liabilities 55.07 55.62 54.67
Total Stockholders' Equity 44.93 44.38 45.33
Total Liabilities & Equity 100.00 100.00 100.00
Liquidity Ratio
Current Ratio 3.67 4.65 4.04
Quick Ratio 3.52 4.17 3.68
Financial Leverage 2.23 2.25 2.21

Debt/Equity
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0.33 0.43 0.38
Efficiency Ratios
Days Sales Outstanding 80.90 79.25 60.70
Days Inventory 12.33 12.68 15.57
Payables Period 130.79 133.73 151.02
Cash Conversion Cycle (37.56) (41.80) (74.74)
Receivables Turnover 4.51 4.61 6.01
Inventory Turnover 29.59 28.79 23.44
Fixed Assets Turnover 0.72 0.63 0.58
Asset Turnover 0.25 0.22 0.20
SHARE PRICE CHART
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Year on year Genting Bhd had relatively flat revenues 18.10bn to 18.65bn, though the company
grew net income 43.63% from 1.75bn to 2.51bn. A reduction in the cost of goods sold as a
percentage of sales from 71.59% to 67.86% was a component in the net income growth despite
flat revenues.
In 2016, Genting Bhd increased its cash reserves by 7.22%, or 1.71bn. The company earned
6.28bn from its operations for a Cash Flow Margin of 34.18%. In addition the company used
2.98bn on investing activities and also paid 2.05bn in financing cash flows. Genting Bhd has a
Debt to Total Capital ratio of 21.46%, a lower figure than the previous year's 42.88%. Year on
year, both dividends per share and earnings per share excluding extraordinary items growth
increased 71.43% and 54.02%, respectively.
The positive trend in dividend payments is noteworthy since very few companies in the Hotels &
Motels industry pay a dividend. Additionally when measured on a five year annualized basis,
both dividend per share and earnings per share growth ranked in-line with the industry average
relative to its peers.
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According to research findings from Affin Hwang Investment Bank, the future of Genting
Malaysia (GENM) looks positive due to the investments it is making into growing its gaming
capacity. This report comes following a review with GENMs management.
Visitor arrivals for the resort are set to grow sharply and the management expects Resorts World
Genting (RWG) to record 30 million visitors annually by 2020. Currently RWG contributes 80%
of GENMs group earnings.
The research also states that the bulk of GENMs earnings growth is set to expand under the
Genting Integrated Tourism Plan (GITP). An additional RM5.38billion capital expenditure is
now being allocated towards expanding its gaming capacity in the podium (Sky Plaza).
Among others, the Fox World theme park will also ramp up its offerings and cost about
RM2billion (previously RM1billion) to create. This is in a bid to offer better rides and undergo a
major transformation to expand from 9 to 18 rides. All these are set to lure in more visitors.
Page | 28
They believe GENMs relatively aggressive target is likely within managements reach given the
crowd pulling factor of having the worlds first 20th Century Fox World theme park as well as
its positioning as a shopping heaven. As a reference, Universal Studios Singapore (USS)
attracted 2 million visitors in the first nine months of its opening. However, it is notable that USS
is double the size of the Fox World theme park.
Over the past decade, visitor growth to RWG has been more modest since the resort has started
to show signs of its age, having just celebrated its 50th anniversary in 2015. The study stated that
the 10-year (2002-2012) visitor arrival to Genting Highlands registered a CAGR of only 2.9%.
Since GENM began renovations in RWG in 2013, visitor decline was also to be expected.
Page | 29
Nonetheless, overall tourist arrivals in Malaysia have been relatively strong and exhibited a 10-
year (2004-2016) CAGR of 5.7%. Besides that, the relatively still weak RM should be a boon for
foreign visitors as well.
Page | 30
MAXIS COMMUNICATIONS BERHAD
Maxis Communications Berhad is a leading mobile phone service provider in Malaysia. It was
started in the year 1995. Maxis Communications is part of Ananda Krishnan's business empire.
In 1996, the company launched Malaysia's first three satellites, MEASAT 1, 2 and 3. And the
fourth satellite, MEASAT 1R, was damaged during transport to the launch site and is under
reconstruction.
Saudi Telecom Company bought 25% of Maxis. Tatparanandam Ananda Krishnan was born
1938 is a Malaysian businessman and philanthropist of Sri Lankan Tamil origin. Nicknamed
TAK, he is currently estimated to have a net worth of US$7.4 billion according to Forbes' latest
annual list of billionaires, making him the third wealthiest man in Southeast Asia behind Robert
Kuok and Ng Teng Fong and number 119 in the world. Ananda Krishnan is also the wealthiest
Tamil in the world, ahead of Shiv Nadar, who is the 10th richest man in India.
In 2002, Maxis purchased Time cel, a rival mobile service provider, from Time dot Com Berhad.
Prior to the purchase, Maxis offered phone numbers beginning with 012, and Time Cell 017.
Now, subscribers can choose between the two. In 1999, Maxis introduced the popular pre-paid
brand "Hotlink", which currently has 10 Million customers.
On April 27, 2007, an offer was made to buy out Maxis and privatize the company in preparation
for expansions into the Indonesian and Indian markets. The deal was offered by Ananda
Page | 31
Krishnan, who pledged Maxis RM17.46 billion (US$5.1 billion) in exchange for all remaining
shares of the company. The offer is to be formally made by Usaha Tegas, a company owned by
Krishnan, on May 3, 2007, while the Kuala Lumpur Stock Exchange suspends trading of the
company's shares until May 3.
Page | 32
1. Strength
Maxis Communication Berhad has their total subscriber in Malaysia operation alone is 8.9
million with the total of net Aviation Digital Data Services (adds) of +388k. By this amount,
Maxis Communication is a leading mobile phone service provider in Malaysia. Their mobile
services are provided over the 900 & 1800 MHz GSM band and as July 2005, they upgraded into
the 2100 MHz UMTS band.
In Maxis, there are a lot of services and products provided to felicitate its customers needs and
wants. Maxis provide a variety of mobile communication products and services. They offer
prepaid call plans, monthly subscription plans, global roaming, MMS, WAP (over both GSM
and GPRS), Residential Fixed Line services, Broadband Internet plans, and as of early 2005, 3G
services to both prepaid and postpaid subscription customers. For business customers, Maxis
offer VSAT services (satellite based communications) and BlackBerry based mobile services
besides regular services. Maxis also provide an online Music store for its customers to download
multimedia content.
Maxis most popular service is its prepaid brand Hotlink, which currently serves over 8 million
customers in Malaysia. They are currently heavily promoting a new International Direct Dialing,
IDD 132 service, which offers discounted calls to landlines in selected countries, at a rate of 20
sen per minute which is, at certain times for many subscribers, even cheaper than a local call.
Page | 33
Maxis is currently involved in a price war with its competitors in the prepaid SIM market which
has driven its Hotlink starter pack prices down to RM6.
There are several high-profile celebrities who have signed on as spokespersons for Maxis,
including big names such as Siti Nurhaliza, all the Akademi Fantasia's stars, along with many
other local celebrities. Currently, Maxis is the default carrier for the iPhone.
2. Weaknesses of Maxis
Maxis as one of a leading telecommunication company in Malaysia is sending sms ads to all
maxis users regardless of who he or she is, what position have, how old is he and many different
segmentation that will have to be under consideration to send right ads sms. For instance, the
professor does not like to see sms inviting him to have Cohen's or Rihanna's ringtone or willing
to participate in a test selecting who is the singer of that particular sign. It is an interesting sms,
perhaps, for teenagers not for all adults or every user. This mass marketing will damage the trust
and convenience for maxis users. It bothers and disturbs him, consequently will damage the
maxis brand image.
Other problem is about the newly launch products such as Maxis Broadband. They offer 3
options, Wireless Broadband, Wired Broadband and Voice2go. Wireless Broadband offers
internet access and exploration anywhere. Wired Broadband offers high-speed internet access
from home. Voice2go offers management of calls through advanced Maxis VOIP service. These
products received many complain from the subscriber. The complain such as low coverage of
Page | 34
UMTS or HSDPA signal, exist a contract 12 months that confusing the customers and the fine
amount if customer wanted to terminated broadband services below than 12 month usage.
2014 2015 2016

Financials Ratio
Revenue MYR Mil 8,389 8,601 8,612
Gross Margin % 68 68 68
Operating Income MYR Mil 2,815 2,872 3,152
Operating Margin % 34 33 37
Net Income MYR Mil 1,717 1,739 2,013
Earnings Per Share MYR 0 0 0
Dividends MYR 0 0 0
Payout Ratio % * 144 159 76
Shares Mil 7,507 7,511 7,510
Book Value Per Share * MYR 1 1 1
Operating Cash Flow MYR Mil 4,106 4,073 3,100
Cap Spending MYR Mil (1,236) (1,881) (1,858)
Free Cash Flow MYR Mil 2,870 2,193 1,242
Free Cash Flow Per Share * MYR 0 0 0
Working Capital MYR Mil (1,605) (2,075) (2,539)
Profitability Ratio
Margins % of Sales
Page | 35
Revenue 100 100 100
COGS 32 32 32
Gross Margin 68 68 68
SG&A 20 21 22
Other 15 15 12
Operating Margin 34 33 37
Net Int Inc & Other (5) (5) (5)
EBT Margin 29 29 32
Tax Rate % 29 29 26
Net Margin % 20 20 23
Asset Turnover (Average) 0 0 0
Return on Assets % 10 9 10
Financial Leverage (Average) 4 5 4
Return on Equity % 32 39 45
Return on Invested Capital % 14 13 15
Interest Coverage 11 14 17
Cash Flow Ratio

YOY 18 (1) (24)
Free Cash Flow Growth % YOY 8 (24) (43)
Cap Ex as a % of Sales 15 22 22
Free Cash Flow/Sales % 34 26 14

Free Cash Flow/Net Income
Page | 36
2 1 1
Cash & Short-Term Investments 8 8 4
Inventory 0 0 0
Other Current Assets 6 7 8
Total Current Assets 14 15 13
Net PP&E 22 22 23
Intangibles 62 59 58
Other Long-Term Assets 2 4 7
Total Assets 100 100 100
Short-Term Debt 5 6 6
Taxes Payable 1 1 1
Other Short-Term Liabilities 17 19 19
Total Current Liabilities 23 26 25
Long-Term Debt 45 46 45
Other Long-Term Liabilities 6 6 6
Total Liabilities 74 78 76
Total Stockholders' Equity 26 22 24
Total Liabilities & Equity 100 100 100
Liquidity Ratio
Current Ratio 1 1 0
Quick Ratio 1 1 0
Page | 37
Financial Leverage 4 5 4
Debt/Equity 2 2 2
Efficiency Ratio
Days Sales Outstanding 42 48 60
Days Inventory 6 2 1
Payables Period 206 435 478
Cash Conversion Cycle (158) (386) (416)
Receivables Turnover 9 8 6
Inventory Turnover 65 212 284
Fixed Assets Turnover 2 2 2
Asset Turnover 0 0 0
SHARE PRICE CHART
Page | 38
Year on year Maxis Berhad had revenues remain flat at 8.60bn, though the company grew net
income 15.77% from 1.74bn to 2.01bn. A reduction in the selling, general and administrative
costs as a percentage of sales from 34.96% to 33.57% was a component in the net income growth
despite flat revenues. In 2016, cash reserves at Maxis Berhad fell by 634.60m.
However, the company earned 3.10bn from its operations for a Cash Flow Margin of 36.00%. In
addition, the company used 1.85bn on investing activities and also paid 1.88bn in financing cash
flows. Maxis Berhad has a Debt to Total Capital ratio of 67.63%, a lower figure than the
previous year's 210.04% Year on year, growth in dividends per share remained flat while
earnings per share excluding extraordinary items increased 15.79%.
Additionally, when measured on a three year annualized basis, both dividend per share and
earnings per share growth ranked in-line with the industry average relative to its peers.
Page | 39
The goal of Maxis Berhad was to create a good mobile company and be a truly digital
company. This means that its interactions with anything from users, solutions and operations to
IT and distribution will be digital, and Maxis is very early in the second phase of its
transformation to a digital company.
Apart from getting more customers to migrate to its Maxis OnePlan, the focus of growth is on
4G. It also wants to help companies embrace new ways of working and look at making homes
smarter; to live and operate in a smarter way.Maxis Berhad are shifting more investments
towards large capacity increases in the core network. They invested over RM1.3bil last year,
same amount this year, which is hundreds of millions more than other industry players.
Maxis Berhad are proud to be the highest investor in the Malaysian market and going to really
focus on that quality experience. It is a key priority. 4G average, high speed is the most
important key performance indicator for them. Maxis Berhad focus on the digitalisation of both
themselves and our customers.
Page | 40
RECOMMENDATION
Maxis Berhad
Page | 41
Genting Berhad
Page | 42
Nestle Berhad
Page | 43
Based on the figures above, Genting Berhad highest share price is of genting was blooming
during 2014 and has been dropped recently. The average return on investment for past five years
is 7.54% and average return on equity is 5.26%. Genting Malaysia has been spending lots of
funds on capital expenditures over the past few years, partly due to the redevelopment of Resorts
World Genting. If the level of capital expenditure continues, the company might need to take on
more debt and thus weaken its balance sheet. For perspective, Genting Malaysia had spent a total
of RM5.74 billion in capex from 2014 to 2016. At the end of 2015, the company had RM5.1
billion in cash and short-term investments and RM4.6 billion in total debt.
Nestle Berhad increases the share price since 2014 till 2016. This shows a tremendous
performance of the company. Nestle Berhad delivered a strong performance for the first half of
2016, with higher top and bottom line results. Key drivers were higher domestic sales as a
result of successful new product launches, consumer promotions and double digit growth in the
export business.
Operating profit rose by 23.5% to RM516 million in the first half of 2016 compared to the
corresponding period last year due to favourable raw material prices and improved efficiencies.
Nestl Berhad delivered a strong performance for the first six months of its financial year
ended 30 June 2016, despite a challenging business environment. The Group recorded a
turnover of RM2.6 billion, marking a 5.4% increase from the previous years corresponding
period.
Maxis Berhad share price had dropped for the past three years. The revenue has been
maintained since 2014. Maxis Berhad lost more than a million customers in the last 12 months,
Page | 44
with more than 400,000 leaving in the first three months of this year, the companys quarterly
report showed. Many of the Maxis customers who left this year could be linked to the storm
kicked up on social media over its incentive for new customers that excluded present
subscribers with its mobile Internet user base dropping from nine million in the third-quarter of
2015 to 8.5 million. However, its earnings increased to RM484 million compared to RM477
million in the preceding quarter due to a reduction in its operational costs. Revenue from
prepaid and postpaid services fell 2.5% and 1.7% to RM1.02 billion and RM994 million
respectively.
Page | 45
CONCLUSION
In reality, even the best companies could fail if not managed properly, despite having a
wonderful track record. In the case of Nestl, I can't seem to identify any substantial risks
associated with it. Nestl Malaysia is a pretty impressive company with great financial track
record over the last decade and a solid management team.
However, there is one potential risk which I am quite concerned directors' ownership in the
company. Directors don't seem to have a substantial stake in Nestl. This might lead to the
directors not maximizing their capabilities to enlarge the company's potentials since they only
own negligible stake.
Nevertheless, Nestl is still a very good company for me. The final step, as a investor, is to
determine the intrinsic value of the company and compare it to the current market share price. If
the intrinsic value is above the market price, a value investor calls it undervalued and vice versa.
Based on my valuation, Nestl is undervalued now.
I would like to invest when a company is undervalued because it will increase your potential
return. All in all, Nestl is a very good company for me and a good investment.
Page | 46

Liqiudity Ratio

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LIQIUDITY RATIO

financial health. Liquidity can be measured through several ratios.

Current Ratio = (Current Assets) / Current Liabilities

the company will be to ride out any downturn in its business.

Quick Ratio = (Cash + Accounts Receivable + Short-Term or Marketable Securities) / (Current

company is in better financial shape.

Cash Ratio = (Cash + Short-Term or Marketable Securities) / (Current Liabilities)

the company has satisfied its debtholders.

with higher such ratios.

Debt/Equity = (Short-Term Debt + Long-Term Debt) / Total Equity

company has some serious difficulty paying its interest.

Interest Coverage = (Operating Income) / (Interest Expense)

very important questions can be answered by analyzing profitability ratios.

companies in different industries may have vastly different gross margins.

Gross Margin = (Gross Profit) / (Sales)

Operating Margin = (Operating Income or Loss) / Sales

Net Margin = (Net Income or Loss) / Sales

Aftertax Interest Expense = (1 - Tax Rate) x (Interest Expense)

usually stated in percentage terms, and higher is better.

Return on Equity = (Net Income) / (Average Shareholders' Equity)

running of its business - including the recruitment of its staff.

with people by interacting with them locally

Long-term potential is never sacrificed for short-term performance. The Company's

with people by interacting with them locally

Brabeck emphasizes internal growth, meaning he wants to achieve higher volumes by

renovating existing products, and innovating new products. His explanation of

His explanation of innovation is to maintain a leadership position, you also need to

ahead with low operating costs.

Danone had already entered the marke twith a health-based yogurt.

renovation, product availability, and communication.

Revenue MYR Mil 4,809.00 4,838.00 5,064.00

Gross Margin % 35.30 38.60 39.40

Operating Income MYR Mil 725.00 760.00 799.00

Operating Margin % 15.10 15.70 15.80

Net Income MYR Mil 550.00 591.00 637.00

Earnings Per Share MYR 2.35 2.52 2.72

Dividends MYR 2.35 3.05 2.50

Payout Ratio % * 99.50 95.40

Shares Mil 235.00 235.00 235.00

Book Value Per Share * MYR 0.86 0.80

Operating Cash Flow MYR Mil 857.00 751.00 923.00

Cap Spending MYR Mil (361.00) (193.00) (123.00)

Free Cash Flow MYR Mil 496.00 558.00 800.00

Free Cash Flow Per Share * MYR 0.38 0.45

Working Capital MYR Mil (413.00) (509.00) (547.00)

Revenue 100.00 100.00 100.00

Gross Margin 35.35 38.56 39.45

SG&A 20.23 22.14 23.50

Other 0.08 0.73 0.24

Operating Margin 15.08 15.71 15.78

Net Int Inc & Other (0.49) (0.67) (0.64)

EBT Margin 14.58 15.04 15.14

Tax Rate % 21.51 18.82 16.88

Net Margin % 11.45 12.21 12.58

Asset Turnover (Average) 2.19 2.02 2.03

Return on Assets % 25.06 24.66 25.57

Financial Leverage (Average) 2.96 3.51 3.85

Return on Equity % 69.08 79.52 93.98

Return on Invested Capital % 58.93 58.79 64.28

Cash Flow Ratios

Free Cash Flow Growth % YOY 9.78 12.53 43.39

Cap Ex as a % of Sales 7.51 3.99 2.43

Free Cash Flow/Sales % 10.30 11.53 15.79

Balance Sheet Items (in %)