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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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BMIA5103 INVESTMENT ANALYSIS
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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STRENGTHS AND WEAKNESSES

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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BMIA5103 INVESTMENT ANALYSIS
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
Operating Cash Flow Growth %
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

Balance Sheet Items (in %)

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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BMIA5103 INVESTMENT ANALYSIS
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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BMIA5103 INVESTMENT ANALYSIS
FUTURE PROSPECTS AND STRATEGIES

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.

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BMIA5103 INVESTMENT ANALYSIS
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.

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BMIA5103 INVESTMENT ANALYSIS
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.

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BMIA5103 INVESTMENT ANALYSIS
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

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BMIA5103 INVESTMENT ANALYSIS
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.

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BMIA5103 INVESTMENT ANALYSIS
STRENGTHS AND WEAKNESSES

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.

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BMIA5103 INVESTMENT ANALYSIS
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

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BMIA5103 INVESTMENT ANALYSIS
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

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BMIA5103 INVESTMENT ANALYSIS
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


Operating Cash Flow Growth %
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
BMIA5103 INVESTMENT ANALYSIS
2 1 1

Balance Sheet Items (in %)

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
BMIA5103 INVESTMENT ANALYSIS
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
BMIA5103 INVESTMENT ANALYSIS
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.

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BMIA5103 INVESTMENT ANALYSIS
FUTURE PROSPECTS AND STRATEGIES

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.

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BMIA5103 INVESTMENT ANALYSIS
RECOMMENDATION

Maxis Berhad

Page | 41
BMIA5103 INVESTMENT ANALYSIS
Genting Berhad

Page | 42
BMIA5103 INVESTMENT ANALYSIS
Nestle Berhad

Page | 43
BMIA5103 INVESTMENT ANALYSIS
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,
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BMIA5103 INVESTMENT ANALYSIS
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.

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BMIA5103 INVESTMENT ANALYSIS
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.

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BMIA5103 INVESTMENT ANALYSIS