UNIVERSITI MALAYSIA SARAWAK

FACULTY OF ECONOMICS AND BUSINESS

EBA 6113
Accounting for Manager
Group Assignment 1
Hup Seng Industries Berhad vs London Biscuits Berhad

Prepared for: Mr. Michael Tinggi

Prepared by

Student Name Matric Number

Abel Stanley anak Kisun 15030763
Jeremy Sim Tzek Han 15030795
Tan Jia Hui 15030665
Tang Tung Teck 15030814

Topics: You are to choose two companies in the same nature of risk.

The report should look at the way the company has changed over the last past 4 years
related.
Hup Seng Industries Berhad
Hup Seng Industries Berhad, established in 1958, has been a household name
synonymous with quality biscuit manufacturing. Today, it is one of Malaysia's leading biscuit
manufacturers with many accumulated outstanding achievements. Through continuous
upgrading, our products have been honored with numerous awards worldwide, marking
important milestones for the company's history.

This has educated consumers on food safety and hygiene and at the same time
fostered their confidence in Hup Seng's products. With an international market coverage that
spans Asia, Africa, Oceania, Europe and North America, Hup Seng's products have captured
the hearts of consumers, young and old in many corners of the world. Henceforth, Hup Seng
shall continue to upgrade, improve and reach new peaks of excellence.

London Biscuits Berhad

London Biscuits Berhad was incorporated in 1981 as a confectionery manufacturer. In
1994, the company was acquired by the Liew Family which provided fresh impetus to the
companys growth. A new factory premises was purchased as its new operating premises and
new production lines were installed to increase the production capacity of its existing
products and to introduce new product types.

In 1998, LBB diversified into cake manufacturing with the launch of its London Pie
Cakes featuring individually packaged cakes with center filled cream in a wide assortment of
flavors. The success of this cake range prompted a further expansion in 2000 into the roll
cake segment with the introduction of the Swiss roll cakes. As of today, LBB is the largest
domestic cake manufacturer and uniquely the only one which produces roll, layer and round
cakes of which the roll cakes are the key product segment of LBB.

In early 2002, LBB was successfully listed on the 2nd Board of Bursa Malaysia and
this was followed up within a short period of time with a transfer to the Main Board of Bursa
in late 2003. The company also becomes a Disney licensee in Malaysia, a status that it retains
till today, for cake and corn confectionery under its Yummies brand featuring classic Disney
characters. In 2005, LBB acquired its 1st ever subsidiary, Kinos Food Industries Sdn Bhd,
which was a very exciting acquisition as Kinos had very similar product, ranges which
complimented LBBs existing distribution channel.
 1. Firm risk management (Liquidity, Financial Risk and Operating Risk)
Liquidity Ratio

Hup Seng Industries Berhad London Biscuits Berhad

Current Ratio
= Current Assets
Current Liabilities
2012
2012 = RM137,802,520.00 = RM119,834,907.00
RM43,748,011.00 RM205,304,756.00
= 3.15 = 0.58
2013
2013 = RM140,114,822.00 = RM149,799,284.00
RM47,087,947.00 RM241,617,098.00
= 2.98 = 0.62
2014
2014 = RM157,796,493.00 = RM151,266,367.00
RM63,178,231.00 RM249,875,504.00
= 2.50 = 0.61
2015
2015 = RM180,085,014.00 = RM237,920,815.00
RM72,018,153.00 RM289,737,325.00
= 2.50 = 0.82
Quick Ratio = Quick Assets
Current Liabilities
2012
2012 = RM117,215,689.00 = RM93,020,810.00
RM43,748,011.00 RM205,304,756.00
= 2.68 = 0.45
2013
2013 = RM119,296,890.00 = RM120,685,233.00
RM47,087,947.00 RM241,617,098.00
= 2.53 = 0.50
2014
2014 = RM137,017,616.00 = RM123,896,228.00
RM63,178,231.00 RM249,875,504.00
= 2.17 = 0.50
2015
2015 = RM158,011,172.00 = RM210,159,608.00
RM72,018,153.00 RM289,737,325.00
= 2.19 = 0.73
Current Assets - Current
Working Liabilities
Capital =
RM137,802,520.00 - 2012 RM119,834,907.00 -
2012 = RM43,748,011.00 = RM205,304,756.00
= RM94,054,509.00 = -RM85,469,849.00
RM140,114,882.00 - 2013 RM149,799,284.00 -
2013 = RM47,087,947.00 = RM241,617,098.00
= RM93,026,875.00 = -RM91,817,814.00
RM157,796,493.00 - 2014 RM151,266,367.00 -
2014 = RM63,178,231.00 = RM249,875,504.00
= RM94,618,262.00 = -RM98,609,137.00
RM180,085,014.00 - 2015 RM237,920,815.00 -
2015 = RM72,018,153.00 = RM289,737,325.00
= RM108,066,861.00 = -RM51,816,510.00

Hup Seng Industries current ratios show the ability the firm has to repay against
every RM1.00 of its debts. In year 2012, for every RM1.00, the firm has RM3.15 of
current assets to settle its debts. The amount decreases by RM0.17 to RM2.98 after a
year. This shows that for every RM1.00, the firm has RM2.98 of current assets to settle
its debts. The amount further decreases by RM0.48 to RM2.50 the following year. The
amount later then maintains the following year at RM2.50. Whereas London Biscuits,
in year 2012, for every RM1.00, the firm has RM0.58 of current assets to settle its
debts. In year 2013, the amount increases by RM0.04 to RM0.62. The amount then
decreases by RM0.01 in the following year to RM0.61 and later then increase by
RM0.21 in year 2015. Therefore, by comparing both current ratios, Hup Seng
Industries has better ability to pay its short-term obligation as compared to London
Biscuits.

Quick ratios explain the immediate debt-paying ability of a firm. In year 2012, for
every RM1.00 current liabilities, Hup Seng Industries has RM2.68 in quick assets to
settle its debts. The following year shows a decrease in amount by RM0.15 to RM2.53.
The amount continued to decreases by RM0.36 to RM2.17 in the following year and
later then increased by RM0.02 to RM2.19 in year 2015. London Biscuits on the other
hand, for every RM1.00 current liabilities, the firm has RM0.45 in quick assets to settle
its debts in year 2012. In year 2013, the amount increased by RM0.05 to RM0.50 and
maintained at RM0.50 the following year. In year 2015, the amount increases by
RM0.23 to RM0.73. Which means, for every RM1.00 current liabilities, London
 Biscuits has RM0.73 in quick assets to settle its debts in year 2015. Hence, it shows that
Hup Seng Industries has higher liquid position than London Biscuits.

Financial Ratio

Hup Seng Industries London Biscuits

Berhad Berhad
Debt Ratio = Total Liabilities
Total Assets
2012
2012 = RM51,705,522.00 = RM283,822,015.00
RM204,947,578.00 RM614,986,037.00
= 25.2% = 46.2%
2013
2013 = RM54,815,919.00 = RM320,153,023.00
RM205,202,821.00 RM683,341,095.00
= 26.7% = 46.9%
2014
2014 = RM71,072,824.00 = RM316,946,153.00
RM226,006,738.00 RM738,622,576.00
= 31.4% = 42.9%
2015
2015 = RM79,323,767.00 = RM339,849,880.00
RM244,988,741.00 RM826,321,732.00
= 32.4% = 41.1%

Times Interest Earned

= Net Operating Profit
Interest Expense
2012
2012 = RM44,351,085.00 = RM14,218,130.00
RM7.00 RM14,428,204.00
= 63,35,869.29 = 0.99
2013
2013 = RM50,081,724.00 = RM18,788,953.00
- RM12,214,659.00
= - = 1.54
2014
2014 = RM51,724,827.00 = RM21,513,819.00
- RM14,037,285.00
= - = 1.53
2015 = RM72,955,092.00 2015 RM22,740,567.00
 =
- RM17,933,776.00
= - = 1.27
Debt to Equity = Long Term Debts
Shareholders' Equity
2012
2012 = RM7,957,511.00 = RM78,517,259.00
RM125,766,590.00 RM277,207,041.00
= 0.06 = 0.28
2013
2013 = RM7,727,972.00 = RM78,535,925.00
RM142,358,796.00 RM298,983,055.00
= 0.05 = 0.26
2014
2014 = RM7,894,593.00 = RM67,070,649.00
RM146,497,641.00 RM344,950,886.00
= 0.05 = 0.19
2015
2015 = RM7,305,614.00 = RM50,112,555.00
RM147,101,370.00 RM379,601,782.00
= 0.05 = 0.13

The debt ratio measures the company ability to cover its debts through its total
assets. In year 2012, Hup Seng Industries has 35.2% of its total assets to cover its total
liabilities. Later in year 2013 shows an increase in figure by 1.5% to 26.7%. The firm a
year later has 31.4% of its total assets to cover its total liabilities in year 2014. Later in
year 2015, the percentage again increases to 32.4%. This shows that the firm has 32.4%
of its total assets to cover its total liabilities. As for London Biscuits, in year 2012, the
firm has 46.2% of its total assets to cover its total liabilities. In year 2013, the firm later
has 46.9% of its total assets to cover its total liabilities. The percentage then decreased
to 42.9% in year 2014 and continues decreased to 41.1%. This can be interpret that Hup
Seng Industries has lower financial risk as compared to London Biscuits as they have
higher total assets percentage to cover their total liabilities.

Debt to equity ratio describes the margin of safety for creditors, and if the
company total equity is less than its debts, consequently, the company will face higher
risk. In 2012, Hup Seng Industries has a safety margin of 0.06. The figure then decrease
by 0.01 to 0.05 in year 2013. The figure then maintain at 0.05 for three years until
2015. London Biscuits on the contrary, in year 2012, the firm has a safety margin of
 0.28. The amount then decreased to 0.26 later in year 2013. The amount later then
continues to decrease by 0.07 to 0.19 in year 2014 and then narrow to a more safety
margin to 0.13. On that account, Hup Seng Industries has better margin of safety for
creditors as compared to London Biscuits because of the lower ratio they have.

Operating Ratio

Hup Seng Industry London Biscuits

Berhad Berhad
Inventory Turnover
= Cost of Goods Sold
Average Inventory
2012 = RM159,924,152.00 2012 = RM195,354,339.00
RM21,489,759.00 RM30,340,991.50
= 7.44 times = 6.44 times
2013 = RM156,828,994.00 2013 = RM230,136,849.00
RM20,702,381.50 RM27,964,074.00
= 7.58 times = 8.23 times
2014 = RM165,263,031.00 2014 = RM279,665,124.00
RM20,798,404.50 RM28,242,095.00
= 7.95 times = 9.90 times
2015 = RM164,570,260.00 2015 = RM310,274,033.00
RM21,426,359.50 RM27,565,673.00
= 7.68 times = 11.26 times

Number of Days
Sales in Inventory
= Average Inventory
Average Daily Cost of
Goods Sold
2012 = RM21,489,759.00 2012 = RM30,340,991.50
RM438,148.36 RM535,217.37
= 49.05 days = 56.69 days
2013 = RM20,702,381.50 2013 = RM27,964,074.00
RM429,668.48 RM630,511.92
= 48.18 days = 44.35 days
2014 = RM20,798,404.50 2014 = RM28,242,095.00
RM452,775.43 RM766,205.82
= 45.94 days = 36.86 days
2015 = RM21,426,359.50 2015 = RM27,565,673.00
 RM450,877.42 RM850,065.84
= 47.52 days = 32.43 days

Account
Receivable
Turnover = Net Sales
Average Account
Receivable
2012 = RM247,818,145.00 2012 = RM253,519,864.00
RM34,745,109.50 RM52,063,147.50
= 7.13 times = 4.87 times
2013 = RM251,407,055.00 2013 = RM289,978,832.00
RM34,959,253.00 RM68,430,759.00
= 7.19 times = 4.24 times
2014 = RM262,217,996.00 2014 = RM359,995,183.00
RM34,972,487.50 RM89,361,707.00
= 7.50 times = 4.03 times
2015 = RM286,860,291.00 2015 = RM402,539,026.00
RM35,678,669.00 RM138,838,960.00
= 8.04 times = 2.90 times

Number of Days
Sales in Average Account
Receivable = Receivable
Average Daily Sales
2012 = RM34,745,109.50 2012 = RM52,063,147.50
RM678,953.82 RM694,574.97
= 51.17 days = 74.96 days
2013 = RM34,959,253.00 2013 = RM68,430,759.00
RM688,786.45 RM794,462.55
= 50.75 days = 86.13 days
2014 = RM34,972,487.50 2014 = RM89,361,707.00
RM718,405.47 RM986,288.17
= 48.68 days = 90.60 days
2015 = RM35,678,669.00 2015 = RM138,838,960.00
RM785,918.61 RM1,102,846.65
= 45.40 days = 125.89 days

Total Asset
Turnover = Net Sales
Average Total Assets
2012 = RM247,818,145.00 2012 = RM253,519,864.00
RM204,380,691.00 RM204,380,691.00
 = 1.21 = 1.24
2013 = RM251,407,055.00 2013 = RM289,978,832.00
RM205,075,199.50 RM205,075,199.50
= 1.23 = 1.41
2014 = RM262,217,996.00 2014 = RM359,995,183.00
RM215,604,779.50 RM215,604,779.50
= 1.22 = 1.67
2015 = RM286,860,291.00 2015 = RM402,539,026.00
RM235,497,739.50 RM235,497,739.50
= 1.22 = 1.71

Non-Current
Assets Turnover = Net Sales
Non-Current Assets
2012 = RM247,818,145.00 2012 = RM253,519,864.00
RM67,145,058.00 RM67,145,058.00
= 3.69 = 3.78
2013 = RM251,407,055.00 2013 = RM289,978,832.00
RM65,087,999.00 RM65,087,999.00
= 3.86 = 4.46
2014 = RM262,217,996.00 2014 = RM359,995,183.00
RM68,210,245.00 RM68,210,245.00
= 3.84 = 5.28
2015 = RM286,860,291.00 2015 = RM402,539,026.00
RM64,903,727.00 RM64,903,727.00
= 4.42 = 6.20

Inventory turnover indicates that how many times the inventory is replaced or
sold within an accounting period. Within the year 2012, Hup Seng Industries turns over
its inventory 7.44 times. In the following year, the number of turnover increases by 0.14
times to 7.58 times and then continues to increase by 0.37 times to 7.95 times in year
2014. In year 2015, the number of turnovers decreases by 0.27 times to 7.68 times. This
makes Hup Seng Industries average turnover ratio at 7.66 times over the past four
years. London Biscuits on the other hand, has an inventory turnover ratio at 6.44 times
in year 2012. In year 2013, its inventory turnover ratio increased by 1.79 times to 8.23
times. The following year, it continues to increase by1.67 times to 9.90 in year 2014.
The figure keeps increase to 11.26 times in the year 2015. This makes a difference of
1.36 times. Hence, the average inventory turnover ratio for London Biscuits for the past
four years is at 8.96 times. Therefore, Hup Seng Industries is not converting its
inventory into cash as quick as compared to London Biscuits.
 Number of days sales in inventory represents the number of days to complete its
inventory cycle. In year 2012, Hup Seng Industries required 49.05 days to complete its
inventory. In year 2013, the days required to complete its inventory cycle improved by
0.87 days to 48.18 days. The number of days keeps improving from 48.18 days to 45.94
days in year 2014 and continues to improve to 45.40 days in the year 2015. This makes
it an average of 47.14 days to complete its inventory cycle for the past four years. As
for London Biscuits, in year 2012, it requires 56.69 days to complete its inventory
cycle. After a year, the figure improved by 12.34 days to 44.35 days to complete its
inventory cycle. The figure continues to improve to 36.86 days and 33.43 days in year
2014 and year 2015 respectively. This gives an average of 42.58 days to complete its
inventory cycle for the past four years. Thus, London Biscuits is converting its
inventory into cash better as compared to Hup Seng Industries.

Account receivable turnover measure the number of times a business can collect
back its account receivable within a year. In year 2012, Hup Seng Industries has the
ability to collect its debt 7.13 times within a year. Their ability to collect its debt
increases by 0.06 times to 7.19 times in the following year. In year 2014, it increased by
0.31 times. Therefore, the firm has the ability to collect its debt 7.50 times within a
year. In the following year, the firm has the ability to collect its debt 8.04 times in year
2015. Whereas for London Biscuits, in the year 2012, the firm has the ability to collect
its debt 4.87 times within a year. The following year shows a decreasing in figure by
0.63 times to 4.24 times within year 2013. The figure continue to decrease by 0.21
times to 4.03 times in the following year. Where as in year 2015, the figure drop by
1.13 times to 2.90 times within a year. Henceforward, Hup Seng Industries is much
more efficient as compared to London Biscuits in collecting its credit sales.

The number of days sales in receivable measures the average number of days a
company takes to collect cash from its credit sales. As for Hup Seng Industries, in year
2012, the firm needs 51.17 days to collect cash from its credit sales. In year 2013, the
firm needs 50.75 days to collect cash from its credit sales. In the following year, their
efficiency increases when the firm only requires 48.68 days to collect cash from its
credit sales in year 2014. In the year 2015 shows another improvement in their ability
to collect cash from its credit sales where the firm needs only 45.40 days. London
Biscuits on the contrary, the firm requires 74.96 days to collect cash from its credit
 sales in year 2012. The number of days increases by 11.17 days to 86.13 days. This
means that the firm requires 86.13 days to collect cash from its credit sales in year
2013. The efficiency keep decreasing when the firm needs 90.60 days and 125.89 days
to collect cash from its credit sales in year 2014 and 2015 respectively. In general, Hup
Seng Industries is much more efficient in collecting cash from its credit sales as
compared to London Biscuits.

2. Corporate governance and independent directors in audit committee, nomination

committee and the remuneration committee, and the composition of Independent
directors at the Board Room)

HUP SENG INDUSTRIES BERHAD

a) Corporate Governance and independent directors in:-
i) Audit Committee
The Committee comprises four members, all of whom are Independent Non-Executive
Directors. One member of the committee is a member of the Malaysian Institute of
Accountants (MIA).
The Audit Committee shall:-
Reviewed the quarterly unaudited financial reports before recommending them to the
Board of Directors for subsequent consideration and approval
Reviewed the audited financial statements before submitting them to the Board,
ensuring that the financial statements were prepared in accordance with the applicable
approved accounting standards and provisions of the Companies Act, 1965
Evaluated the performance of the External Auditors and made recommendations on
their appointment to the Board
Discussed and attended to the key aspects of business operations that would affect the
profitability and growth of the Company and its subsidiaries
Reviewed the internal control systems of the Group of the year
Reviewed Internal Audit reports by external Internal Auditors to ensure the
effectiveness of internal controls
Met and discussed with External Auditors and the Financial Controller, without the
presence of management to discuss financial issues and other related matters thereof
Reviewed the quarterly management reports, which provided the detailed breakdown
of income statements of the three subsidiaries, revenue analysis, principal markets of
manufactured products, analysis of sales outlets, production output and capacity, etc.
Reviewed and discussed Related Party Transactions (RPT) and Recurrent Related
Party Transactions (RRPT) with the Group Financial Controller, the External Auditors
and the Company Secretary, to ascertain if the transactions are conducted at arms
 length and on normal commercial terms, and such transactions are not detrimental to
the interest of minority shareholders.
Review the findings of the internal auditors to ensure that any major weaknesses are
recognized and rectified on a timely basis, and an effective and efficient internal
control system is well maintained

ii) Nomination Committee

All the three Nominating Committee members appointed are Independent Non-Executive
Directors.

Nominating Committee is responsible for:-

Reviewing composition of the Board and making recommendation on the
appointment of new Director and Board Committees member to the Board
Conducting annual review on the required mix of skills, experience and core
competencies required on the Board, as well as the size of Board and Non-Executive
participation
Reviewing on an annual basis the appropriate balance and size of the Board for
determination of the number of Directors on the Board
Recommending suitable orientation, educational and training program to continuously
train and equip the existing and new Directors
Assessing the effectiveness of the Board, the Board Committees and the contribution
of each individual director
Review and assessing the gender diversity of the Board
Assessing and recommending to the Board, the continuation of terms of office of
Independent Directors
 Committee may use the services of professional recruitment companies to source for the
appropriate candidates for directorship. In carrying out its duties and responsibilities, the
Nominating Committee will basically have full, free and unrestricted access to the
Companys records, properties and personnel.

iii) Remuneration Committee

All of the Committee members appointed are Non-Executive Directors.

The Committee is responsible for:-

 Assessing the performance and commitment of the Groups Directors and senior
management officers and ensuring their remuneration package reflects their
involvement, responsibility undertaken, contributions and level of performance for the
year.
Recommending to the Board on the appropriateness of the remuneration package of
the Directors and senior management officers based on their assessment.
The individual Directors, including Executive Directors and Non-Executive Directors
(including the Non-Executive Chairman) should abstain from the deliberations and
voting on decisions in respect of their own remuneration package and entitlement.
Remuneration Committee will in principle have full, free and unrestricted access to
the Companys record, properties and personnel. The Remuneration Committee may
obtain the advice of external consultants on the appropriateness of remuneration
package.
b) Composition of Independent Directors at the Board Room
LONDON BISCUITS BERHAD
a) Corporate Governance and independent directors in:-
i) Audit Committee
The present composition of the Audit Committee comprises of three members whom
are Non-Executive Director, with the majority of them being Independent Non-
Executive Directors.

The Audit Committee:-

Reviewed with the External Auditors on their External Audit Plan and finding
on Internal Control System and the audit regarding the financial statements
Reviewed the Groups quarterly financial results together with the
management and recommended to the Board for approval prior to release to
Bursa Securities
Reviewed the Annual Audited Financial Statements before submitting them to
the Board of Directors, ensuring that the financial statements were prepared in
accordance with the applicable approved accounting standards and provisions
of the Companies Act 1965
Reviewed the External Auditors scope of work and audit plan for the year
Evaluated the performance of the External Auditors and made
recommendations on their re-appointment to the Board
Reviewed Internal Audit Plan, Internal Audit Reports with recommendations
from the Internal Auditors managements response and follow-up actions
taken by the management
Met with the external auditors without the presence of any executive board
member and management personnel
 Discussed and addressed the key aspects of business operations that would
affect the profitability and growth of the Company and its subsidiaries
Reviewed and discussed Related Party Transactions (RPTs) and Recurrent
Related Party Transactions (RRPTs) with the Group Accountant, the External
Audtiors and the Company Secretary, to ascertain if the transactions were
conducted at arms length and on normal commercial terms, and such
transactions were not detrimental to the interest of minority Shareholders

ii) Nomination Committee

To recommend appointment of new candidates to Board of Directors, reviews the
effectiveness and its performance assessment of the Board of Directors and the Board
Committees.

The functions of Nominating Committee are:-

To consider and recommend the candidate for directorship of the Board and
membership of the various Committee to the Board
To facilitate an annual assessment of the required mix of skills and experience
of the individual Board Members and the Board Committees
To recommend the appropriate Board Balance and its size, including non-
executive participation
 iii) Remuneration Committee

Remuneration committee is responsible to recommend to the Board on all elements of

remuneration and terms of employment of Executive Directors and Senior
Management.

b) Composition of Independent Directors at the Board Room

The Board has nine members, comprising one Non-Independent Executive Director,
five Non-Independent Non-Executive Directors and three Independent Non-Executive
Directors.
3. Amount of money spent on long term investment over the last four years.

London Biscuits Berhad

Year Amount of money spent on long term investment
2012 RM91,730,921 (RM91,678,857 + RM52,064)**
2013 RM22,656,138 (RM22,012,138 + RM644,000) **
2014 RM41,438,725
2015 RM20,831,459

Hup Seng Industries Berhad

Year Amount of money spent on long term investment
2012 RM3,988,473
2013 RM2,680,777
2014 RM8,717,474 (RM300,000 + RM8,417,474)**
2015 RM13,227,940 (RM10,341,560 +RM2,886,380)**

London: The amount of money spent on long term investment of London has reduced
by RM70, 899,462 from RM91, 730,921 to RM20, 831,459 in year 2012 to 2015. The
reason for decrease in the amount of London long term investment was due to
decrease in the purchase of property, plant and equipment.

Hup Seng: The amount of money spent on long term investment of Hup Seng shows
the different pattern as London, it shows an increase of RM9, 239,467 from year 2012
to 2015. The reason for the increase in Hup Seng long term investment was owed to
increase in placement of deposit in a licensed bank starting since year 2014.

Overall: Long term investments are something that not used in a company operating
activities to generate revenue. In other words, long term investment is an asset that a
company intends to hold more than one year, it may include real estate, bond and
stock. In year 2015, the amount of money spent on long term investment by London is
higher than Hup seng.
4. Profit and Market value over the last four years. You may want to measure the
value of EPS/ROE or Torbin Q (Total Market Value/ Total Asset Value)

Hup Seng Industries Berhad

2012 2013 2014 2015
EPS 27.12 30.62 4.77 6.84
Net Profit 32,540,686 36,744,846 38,147,021 51,454,126
Shareholders' Equity 153,242,056 150,386,902 154,933,914 165,664,974
0.24433541
ROE 0.212348273 4 0.246214789 0.310591459
No. shares
outstanding 120,000,000 120,000,000 800,000,000 800,000,000
Market price@31
Dec 0.57 1.30 0.81 1.29
Total Market Value 68400000 156000000 648000000 1032000000
Total Asset 204,947,578 205,202,821 226,006,738 244,988,741
1.31540269
Tobin's Q 2.99630962 9 0.34877583 0.237392191

London Biscuits Berhad

2012 2013 2014 2015
EPS 9.71 8.96 9.71 8.35
Net Profit 13,762,777 15,079,256 17,311,670 18,198,429
Shareholders' Equity 331,164,022 363,188,072 421,676,423 486,471,852
0.04151913
ROE 0.041558793 9 0.041054394 0.037409007
No. shares
outstanding 114,186,568 138,065,418 147,688,209 179,859,699
Market price@31 Dec 0.67 0.68 0.64 0.83
93884484.2
Total Market Value 76505000.56 4 94520453.76 149283550.2
Total Asset 614,986,037 683,341,095 738,622,576 826,321,732
0.13739036
Tobin's Q 0.124401199 8 0.127968541 0.180660322
 EPS
35

30

25

20

15

10

0
2012 2013 2014 2015

Hup Seng London Biscuits

Both EPS of Hup Seng and London Biscuits shows reduction from year 2012
to year 2015. As for Hup Seng, the large decrease in EPS is mainly due to increase in
share capital and profit in 2015. There is only a slight improve in profit from year
2012 to 2015 for London Biscuits which lead to only a small reduction in its EPS.
Hup Seng experienced a drastic increase of profit in year 2015 by excelling in both
domestic and export sales. Its improved profit performance is caused by optimal
utilization of existing operational facilities, favorable trends in cost of the raw
materials. Falling ringgit against most of the currencies benefits Hup Seng that
engaged on export trades but a great negative impact on London Biscuits cost of
production. Its cost burden is further increased by implementation of GST.

ROE

0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2012 2013 2014 2015

Hup Seng London Biscuits

 Furthermore, Hup Seng achieves increasing and higher ROE from year 2012
to 2015. On the other hand, London Biscuits experiences a decreasing and lower
ROE. ROE of Hup Seng is much higher in compared with London Biscuits. This
means that Hup Seng is worth more to invest as the original investors will be repaid
with the proceeds that derived from the business operations. High returns relative to
the stockholder equity show that the business create substantial returns for every
dollar invested and the shareholder is being reward according to their contribution.
Hup Seng with increasing and higher ROE has the ability for self-funding and
therefore requires no additional debt or equity investments.

Tobin's Q

3.5
3
2.5
2
1.5
1
0.5
0
2012 2013 2014 2015

Hup Seng London Biscuits

The Tobin's Q ratio is a measure of firm assets in relation to a firm's market

value. Hup Seng shows a higher Q in year 2012 and 2013 that implies that the firm's
stock is more expensive than the replacement cost of its assets. Lower Q in 2014 and
2015 means that the cost to replace a firm's assets is greater than the value of its stock.
In other words, the stock is overvalued in 2012 and 2013 but undervalued in 2014 and
2015. On the other hand, London Biscuits also records relatively similar Q-value of
lower than 1.0 throughout the years. This implies that the stock of London Biscuits is
undervalued for the four consecutive years.

In a nut shell, Hup Seng is better performing in term of profitability and

market value compared to London Biscuits. Hup Sengs increasing ROE implies that
it is able to generate much more profit for its shareholders without needing as much
capital. Higher ROE also indicates that Hup Sengs management is deploying the
shareholders capital. Meanwhile, London Biscuits with decreasing and much lower
ROE, is not effectively using equity financing to fund operations and grow the
company.

5. Return to Shareholders policy (Dividend oriented, market appreciation or both)

Hup Seng offers both dividend and stock appreciation for shareholders. As in
2012, the board had declared and offer a net dividend of 3.8 cent per share. A total of
RM36.0 million of dividend had been paid. Meanwhile, in the year 2015, net dividend
rise to 7.5 cent per share and a total dividend payable amount to RM48.0 million.
Shareholders of Hup Seng are able to take the advantage of steady dividend payments.
Dividend-oriented gives a signal that the firm is financially stable and mature. In
addition of consistent, rising dividend, there is significant rise in market price of Hup
Seng from 2012 to 2015. It shows that the company is generating stable cash flow to
support its operation and dividend payouts. As a result, its stock price is less volatile
or in other words, less risky.

London Biscuits allows shareholders to gain solely through market

appreciation as it did not offer any dividend for its shareholders for both 2012 and
2015.The challenging trading environment and business condition are the main reason
London Biscuits do not intend to make dividend payouts. As London Biscuits is still
in its growing stage, it is believed that instead of paying dividends, retaining the
financial resources might help the firm to increase its value through expansion in
capital, operating and investing activities. London Biscuits had gone through a series
of private placement to raise required funds. Thus, it is essential to ensure sufficient
funds in the firm, to avoid the risk of raising money in way that incur high potential
expenses.

Both Hup Seng and London Biscuits allow shareholders to gain through
market appreciation. However, only the former offers dividend payouts for its
shareholders. Dividend payouts gives a signal that it is financially strong as
management is positive regarding future earnings. In short, Hup Seng which is
dividend-oriented can be viewed as a more mature and stable company in compared
to London Biscuits. Instead of paying dividends, earnings are retained to strike for
growth and expansion.