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FINANCIAL RESEARCH

T
REPORT FOR
“WCT BERHAD”

ITEM QUESTION CONTENT PAGE


1. ACKNOWLEDGEMENT 2
2. (a) (i) BACKGROUND OF THE COMPANY 3
(ii) CORPORATE STRUCTURE 4
(iii) BOARD OF DIRECTORS 6~12
(iv) CORPORATE VISION & MISSION 13
(v) MILESTONE 14~15
(vi) AWARDS 16~20
(b) FINANCIAL RATIO ANALYSIS 21
(b-i) Importance of Ratio Analysis 21
(b-ii) Limitation of Accounting Ratios 22
(b-iii) Utility of Ration Analysis 23~24
(i) LIQUIDITY RATIO 25
(i-a) CR 25
(i-b) QR 26
(ii) ACTIVITY RATIO 27
(ii-a)ACP 27
(ii-b) INT T/O 28
(ii-c)ASSET T/O 39
(iii) LEVERAGE 30
(iii-a) DR 30
(iii-b) TIE 31
(iv) PROFITABILITY 32
(iv-a) OPM 32
(iv-b) NPM 33
(iv-c) ROE 34
(iv-d) ROA 35
(iv-e) EPS 36
(c) PERFORM TREND ANALYSIS 37~43
(d) IDENTIFY PROBLEM AREAS 44~48
(e) COMMENT OVERALL PERFORMANCE 49~54
3. CONCLUSION 55
4. REFERENCE 55
5. APPENDIX ON BALANCE SHEETS 55~70
OF “WCT BERHAD”

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1.ACKNOWLEDGEMENT
My work as Production Head to Solder Manufacturing industry has been very fulfilling, so it is
with great pleasure that i would like to share my actual practice analysis report to one of the main
board listed construction company as name of “LBS BINA GROUP BHD”. This assignment
report is a part of our Diploma In Management course application theory or knowledge in
“Financial Management study”.

There are many peoples behind the scenes, who provided me with valuable content, coaching,
compelling ideas and insights, and essential support.

I wish to thank the University Course Mate, especially to lecturer who eagerly challenged and
refined our thinking throughout this process.

Not forgetting to my management for keeping me organized and on schedules to meet my


commitment and sponsored me for this Diploma course.

“My management” who have continued to remind me that success in business is not purely a
function of money and how you manage it but also the drive and desire to make a profound
difference to the people you serve.

Finally, my family members in supporting, tolerating and forgiving me not accompany them in
every Sunday throughout the course study.

Of course, i do hope that my assignment can provide most of the desire needs and knit truly
outstanding in application of Financial Management study.

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2.(a)
(i) BACKGROUND OF COMPANY[1]

(i-i). BRIEF INTRODUCTION


WCT, widely known throughout the Malaysian and Middle East construction industry, was
founded on 14 January 1981 under the name of WCT Earthworks & Building Contractors Sdn.
Bhd. WCT represents the initial of surnames of its founders, Wong, Chan and Taing. It became
a public company on 1 April 1994. WCT Berhad, the Company made its debut on the Second
Board of Bursa Malaysia on 16 February 1995 and was elevated to the Main Board on 7 January
1999. Today, WCT is a well diversified group of companies with businesses in civil engineering,
building & infrasturcture construction, property development, property investment &
management and toll highway concession.

(i-ii).PAID-UP CAPITAL (End January 2010)


Ordinary Shares of 778,049,880 at par of RM0.50 each.
Preference Shares of 36,942,177 at par of RM0.10 each.
Warrants of 139,374,777 at par at RM0.50 each

(i-iii). BURSA SECURITIES LISTING - MAIN MARKET


(A FBM100 Compeonent Stock)
Market Capitalisation - RM2.0 Billion at RM2.60 per share.
Bloomberg Code - WCT MK
Reuters Code - WCT.KL
Category - Construction
Stock Number - 9679
Shares - Syariah-compliant Security approved by the Syariah Advisory Council (SAC) of the
Securities Commission (See List of Syariah-compliant Securities)

Click for Broker Coverage.

(i-iv). LAST REPORTED - (12 Months as at 31 Dec 2009)


Revenue (RM'000) - 4,666,602
Pretax Profit (RM'000) - 211,078
Profit After Tax (RM'000) - 147,098
Net Asset Per Share (RM) - 1.64

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2.(a)
(ii) CORPORATE STRUCTURE[2]as at 30 June 2010

• 100% WCT (S) Pte Ltd ##

(ii-ii). DOMESTIC CONSTRUCTION


• 100% WCT Construction Sdn Bhd
• 60% Intraxis Engineering Sdn Bhd
• 100% WCT Machinery Sdn Bhd
• 100% WCT Products Sdn Bhd

(ii-iii). OVERSEAS CONSTRUCTION


• 50% Cebarco-WCT W.L.L. *
• 50% Khalid Abdulrahim Group WCT W.L.L. *
• 100% WCT (Bahrain) W.L.L. *
• 61.9% IWM Construction Pvt Ltd ^^
• 30% Gamuda-WCT (India) Pvt Ltd ^^
• 99.9% WCT Infrastructure (India) Pvt Ltd ^^
• 100% WCT Engineering Vietnam Company Limited #
• 49% AES-WCT Contracting L.L.C. **
• 70% Allied WCT L.L.C. ***

(ii-iv). TOLL CONCESSION


• 100% WCT Overseas Sdn Bhd
• 100% WCT (International) Pvt Ltd ^
• 15.35% CIDB Inventures Sdn Bhd
• 100% WCT (Offshore) Pvt Ltd ^
• 30% Gamuda-WCT (Offshore) Pvt Ltd ^
• 30% Suria Holdings (O) Pvt Ltd ^
• 21.6% Swarna Tollway Pvt Ltd ^^
• 30% Mapex Infrastructure Pvt Ltd ^^
• 30% Emas Expressway Pvt Ltd ^^

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(ii-v). PROPERTY DEVELOPMENT
• 100% WCT Land Sdn Bhd
• 100% Labur Bina Sdn Bhd
• 100% Gemilang Waras Sdn Bhd
• 100% Gabungan Efektif Sdn Bhd
• 100% Camellia Tropicana Sdn Bhd
• 100% Jelas Puri Sdn Bhd
• 100% Labur Bina Management Sdn Bhd
• 100% Atlanta Villa Sdn Bhd
• 70% One Medini Sdn Bhd
• 67% BSC-WCT Company Limited #

(ii-vi). PROPERTY INVESTMENT & MANAGEMENT


• 100% WCT Land Resources Sdn Bhd
• 100% BBT Mall Sdn Bhd
• 100% WCT Properties Sdn Bhd
• 100% BBT Hotel Sdn Bhd
• 100% WCT Hotel & Facilities Management Sdn Bhd
• 100% WCT Property Management Sdn Bhd

Note: -
^ Incorporated in the Republic of Mauritius
^^ Incorporated in India
* Incorporated in the Kingdom of Bahrain
** Incorporated in Dubai, United Arab Emirates
*** Incorporated in the Sultanate of Oman
# Incorporated in Vietnam
## Incorporated in Singapore
@ Effective equity interest

2.(a)
(iii) TOP MANAGEMENT[3]
1. Dato’ Capt. Ahmad Sufian @ Qurnain bin Abdul Rashid
Independent Non-Executive Chairman

Dato’ Capt. Ahmad Sufian @ Qurnain bin Abdul Rashid, aged 60, was appointed to the Board on
12 August 1996. He obtained his Master Mariner qualification with a Master Foreign-Going
Certificate of Competency from the United Kingdom (“UK”) in 1974 and a Diploma in Applied
International Management from the Swedish Institute of Management in 1984. Dato’ Ahmad

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Sufian has also attended the Advanced Management Program at Harvard Business School in
1993.

He has over thirty-eight years of experience in the international maritime industry and is a Fellow
of the Nautical Institute (UK), a Fellow of the Chartered Institute of Logistics & Transport (UK)
and a Fellow of the Institut Kelautan Malaysia. Amongst his previous experience was the creation
and development of the Malaysian national shipping line, Perbadanan Nasional Shipping Line
Berhad, for which he served as its General Manager and Director for seven years between 1982 to
1989. He was also involved in the privatization of the Kuantan Port in the mid 1990’s and served
as its first Executive Director / Chief Executive Officer for two years.

With his extensive business experience and in-depth knowledge in public sector procurement, he
provides invaluable input to the Group’s overall business direction and guides the Board with
impartial and independent advice.

He is a member of the Audit Committee, chairs the Nomination & Remuneration Committee and
acts as an advisor to the Management Committee. Dato’ Ahmad Sufian is also a director of
several public listed companies: he is the Independent Non-Executive Chairman of both GD
Express Carriers Berhad and Alam Maritim Resources Berhad and an Independent Non-
Executive Director of Malaysian Bulk Carriers Berhad and PPB Group Berhad.

2. Taing Kim Hwa


Managing Director

Taing Kim Hwa, aged 56, was appointed to the Board on 14 January 1981 and is one of the
founders of the Company. He graduated in 1978 from Sunderland Polytechnic (now known as the
University of Sunderland), United Kingdom, with a Bachelor of Arts (Hons) degree in
Economics.

Mr Taing brings to the Group his entrepreneurship and is the key driver of the Group’s growth

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and success. He is responsible for setting the overall vision and strategy of the Group and is
instrumental in transforming the Company from its early days as a private company specializing
in earthworks to its present form with interests in engineering, construction, property
development, property investment and management. Since year 2000, the Group has been
reporting significant increases in revenue and profitability.

Under his stewardship, the Group has also expanded its geographical presence by venturing to the
Middle East, India and Vietnam.

Mr. Taing is a member of the Options Committee and acts as an advisor to the Management
Committee. He is a major shareholder of the Company through his interest in WCT Capital Sdn
Bhd.

3. Goh Chin Liong


Deputy Managing Director

Goh Chin Liong, aged 50, was appointed to the Board on 12 August 1996. A civil engineer by
training, he graduated from the University of Malaya with a Bachelor in Engineering (Hons) Civil
and has over 20 years of experience in the construction industry.

Mr Goh started his career as a project engineer/ manager and was involved in several construction
projects before joining WCT Berhad in 1991 as a senior project manager. He became General

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Manager (Construction Division) in 1995 with expanded responsibilities for the Group’s overall
construction activities. He was promoted to Executive Director in 1996 and became Deputy
Managing Director in July 2001, responsible for the Group’s strategic business direction,
operational performance, strategic management of the Group’s resources as well as project cost
efficiency and profitability.

Under Mr Goh’s direction and supported by a team of dedicated management and staff, the
Group succeeded in securing substantial construction contracts both locally and overseas. The
notable contracts secured in 2009 include the first contract awarded under the new Low Cost
Carrier Terminal at Kuala Lumpur International Airport, Sepang, four (4) contracts for
infrastructure works in Medini, Iskandar Malaysia, and the contract to undertake additional works
in the New Doha International Airport in Qatar. The Group further secured the contract for the
Bahrain City Centre Hotels Fit-Out Works in February 2010. The Group has also made in-roads
into the property development sector in Vietnam with the award of an Investment Certificate in
January 2008 for a mixed development project in Ho Chi Minh City.

Mr Goh chairs the Management Committee and is a member of the Options Committee

4. CHOE KAI KEONG *


Executive Director

Choe Kai Keong, aged 59, was appointed to the Board on 6 September 2000. He graduated from
Sunderland Polytechnic (now known as the University of Sunderland), United Kingdom, in 1979
with a Bachelor of Science in Civil Engineering. Mr Choe has over thirty years of experience in
engineering consultancy, project management and property development.

He joined WCT Group as a Project Manager in 1990 and progressed through a range of senior

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management positions culminating in his appointment as Executive Director in 2000. His
responsibility over the Group’s construction business was later extended to include the property
development portfolio in 1998 in line with the Group’s business diversification. He became
Executive Director of WCT Land Berhad (“WCTL”, now known as WCT Land Sdn Bhd), the
Group’s property development subsidiary, upon its listing on Bursa Malaysia Securities Berhad in
2004, but remained as a Non-Executive Director of WCT Berhad. When WCTL was
subsequently privatized on 12 March 2008, Mr Choe was re-designated as Executive Director of
WCT Berhad effective 14 April 2008, focusing on the operations of the Group’s Property
Division.

Mr. Choe is a member of the Management Committee.

5. LIANG KAI CHONG *


Executive Director

Liang Kai Chong, aged 48, was appointed to the Board on 1 January 2004. He graduated in 1986
with a Bachelor of Science (Honours) in Mathematics from the University of Malaya and holds a
postgraduate Diploma in Quantity Surveying from the Institution of Surveyors, Malaysia.

He is a member of the Institution of Surveyors, Malaysia and the Royal Institution of Chartered
Surveyor, United Kingdom.

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Mr Liang has over twenty four years of experience in the construction industry. He spent his
early career with MTD Group, a prominent Malaysian construction group, where he was involved
in the negotiation, tendering, construction and completion of many challenging projects in
Malaysia. He was its Head of Contracts before he left to join WCT Group in 1997.

He started his career in WCT Group as the Head of Contracts and progressed to be entrusted with
expanded roles and responsibilities as the General Manager in 2001. He was promoted to
Executive Director in 2004, responsible for WCT Group’s Engineering & Construction Division
operations for all local and overseas projects, ranging from contracts procurement to project
implementation and execution. He sits on the Executive Committees of all construction projects.

He is a member of the Management Committee

6. LOH SIEW CHOH *


Executive Director

Loh Siew Choh, aged 53, was appointed to the Board on 23 June 2006. He is a Fellow of the
Chartered Association of Certified Accountants, United Kingdom and a member of the Malaysian
Institute of Accountants.

His 15-year career at the former Renong Berhad Group of Companies (“Renong Group”), started
in 1982, spanned numerous functions including financial control, international project fund

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raising, business development, contracts negotiation and procurement, privatization of mega
projects, corporate planning and restructuring as well as operational management. He held senior
management positions in the listed companies of the Renong Group including as Chief Operating
Officer of both United Engineers Berhad and Faber Group Berhad and as Managing Director of
Crest Petroleum Berhad.

Prior to joining WCT Berhad, he was the Joint Managing Director cum Chief Executive Officer
of Ipmuda Berhad, responsible for the reconstruction and restoration of its businesses. As
Executive Director of WCT Berhad, he is responsible for the Group’s domestic and international
business development, in addition to his responsibility over the Group’s corporate and financial
functions.

He is a member of the Management Committee

7. CHEAH HON KUEN


Independent Non-Executive Director

Cheah Hon Kuen, aged 53, was appointed to the Board on 26 November, 1994. He graduated
from the University of Singapore with a Bachelor of Science in 1980 and holds a Diploma in
Education from the National University of Singapore. He is a member of the Institute of
Electrical and Electronic Engineers Inc., USA (IEEE).

Upon graduation, Mr Cheah worked as a system manager with a naval architect in Singapore
designing shipbuilding and structural engineering softwares. In 1982, he ventured into computer
software, hardware and IT training businesses and eventually listed the IT and training company
on the Stock Exchange of Singapore in 1993.

Upon his return to Malaysia, he joined WCT Berhad as an independent non-executive director
and serves as a member on its Audit Committee. Mr Cheah is currently the chairman of both the
Audit Committee and the Options Committee, and is a member of the Nomination &
Remuneration Committee.

8. CHOO TAK WOH


Independent Non-Executive Director

Choo Tak Woh, aged 59, was appointed to the Board on 16 December 1999. He completed his
professional accountancy education in 1977 at Luton College of Higher Education, Bedfordshire,
(now known as University of Bedfordshire), United Kingdom. He was admitted as a Fellow of
the Institute of Chartered Certified Accountants (United Kingdom) in 1986 and is currently a
member of the Malaysian Institute of Accountants.

Mr Choo started his career in finance and accounting when he joined the New Straits Times Press

11
(“NSTP”) Group, a media and publishing group, as an assistant accountant. During his 27-year
career with the NSTP Group, he held senior management positions in several functions including
accounting, corporate finance and general management.

He is a member of the Audit Committee and the Nomination & Remuneration Committee and an
Advisor to the Risk Management Committee.

2.(a)
(iv) CORPORATE VISION & MISSION[4]
(iv-i). CORPORATE VISION:
• To be a leader in the field of engineering, construction, property development and
management known for its innovation and excellence

(iv-ii). CORPORATE MISSION:


• To provide excellent quality products and services that exceed customers’ expectations;
• To ensure shareholders receive an equitable return on their investments;
• To provide employees with a safe and healthy working environment as well as
opportunities for career advancement through systematic training;

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• To create wealth and improve the quality of life for the betterment of the communities we
operate in;
• To play a significant role towards achieving the nation’s social and economic
objectives; and
• To contribute our resources for the well-being of society and the environment.

2.(a)
(v) MILESTONE[5]
Jan Company was founded as WCT Earthworks and Building Contractors Sdn. Bhd. under
198 the Companies Act, 1965, Malaysia .
1
199 Successfully Completed 1st Major Infrastructure Project - Selangor Turf Club, Sungai
3 Besi, Malaysia.
199 Listed & Quoted on the Second Board of Bursa Malaysia as WCT Engineering Berhad
5 (WCT).
199
Ventured into Property Development.
6
Successfully Completed Bulk Earthworks of the Kuala Lumpur International Airport
(KLIA) Project (More than 50 Million Cubic Metres Earth Excavated).

13
199 1st Property Sales Launch - Integrated Township Bandar Bukit Tinggi, Klang,
7 Malaysia.
199 Successfully Completed the Sepang F1 Circuit - Contract Value of RM308 million,
8 with Record Time of 14 Months.
199
Transferred to Main Board of Bursa Malaysia - Construction Sector.
9
1st Foray into Overseas Construction - India.
200
Achieved ISO 9002: 1994 Certification.
1
Malaysian Construction Industry Excellence Award (MCIEA) - Special Projects
Category - Sepang F1 Circuit.
SI-KPMG Shareholder Value Award No.1 for Construction, Infrastructure and
Property Category.
200
MCIEA - Builder of the Year.
2
Forged Strategic Partnership with Cebarco Bahrain SPC, Kingdom of Bahrain
Achieved Accumulated Property Sales of RM1.0 billion.

200
Achieved ISO 9001: 2000 Certification.
3
200 Successful Completion of 1st Overseas Project Tada- Nellore Highway, West
4 Bengal, India.
Successful Completion of 1st Middle East Project - Bahrain International Circuit
Project - Contract Value of RM586 million, with Record Time of 16 months.
MCIEA - International Achievement Award.
Listing & Quotation of property division, WCT Land Berhad on the Main Board of
Bursa Malaysia.
200 Industry Excellence Award - Export Excellence Award 2004 - Construction Services
5 Sector
Achieved accumulated property sales of RM2.0 Billion
Achieved OHSAS 18001: 1999 Certification
200
Silver Jubilee - 25th Anniversary
6
Ventured into property investment and management

14
200
Forged strategic partnership with Arabtec Holding PJSC of Dubai, U.A.E.
7
Foray into Dubai construction market – Storm Water Drainage and Sewerage System
Works at the Dubai World Central International Airport, U.A.E.
Foray into Abu Dhabi construction market – Abu Dhabi F1 Circuit on Yas Island, Abu
Dhabi, U.A.E.

Inducted as a component stock of the Kuala Lumpur Composite Index (KLCI) by


Bursa Malaysia Securities Berhad
Secured RM7.3 Billion of new construction jobs – largest for a single year
Road Engineering Association of Malaysia - Road Engineering Excellence Award
200
WCT Land Berhad privatised to 100% owned subsidiary
8
WCT Berhad conferred the BrandLaureate Award 2007-2008 – Best Brand in
Engineering & Construction

Forged strategic partnership with the Employees Provident Fund of Malaysia to


develop a mix-commercial project called the Paradigm in Petaling Jaya, Malaysia.
WCT once again accorded the prestigous Industry Excellence Award - Export
Excellence Award 2008 - Construction Services Sector

200 Forged strategic partnership with Iskandar Investment Berhad to develop a high-rise
9 residential project called the 1Medini Residences in Iskandar Malaysia.

2.(a)
(v) AWARDS[6]
2009

Industry Excellence Award


Export Excellence –
Construction Services
Awarded by the Ministry of
International Trade &
Industry, Malaysia (MITI)

15
2008

The BrandLaureate Award


2007-2008
Best Brand in Engineering &
Construction
Awarded by the Asia Pacific
Brand Foundation (APBF)

2007

Road Engineering Certificate of Award for Certificate of Award for

16
Excellence Award Best Environmental Best Safety & Health
Principal Contractor of Management System Management System
Guthrie Corridor Expressway Design, Construction and Design, Construction and
Awarded by the Road Completion of the Office Completion of the Office
Engineering Association of Building on Plot 3C4, Building on Plot 3C4,
Malaysia Precinct 3, Putrajaya, Precinct 3, Putrajaya,
Malaysia Malaysia
Awarded by Putrajaya Awarded by Putrajaya
Holdings Sdn Bhd Holdings Sdn Bhd

MS ISO 9001 : 2000


Quality Management
System Certification
Provision of Rental and
Maintenance of Construction
Equipment and Machineries
Certification No. AR 4416

2005

Industry Excellence Award OHSAS 18001 : 1999 OHSAS 18001 : 1999


Export Excellence – Occupational Health and Occupational Health and
Construction Services Safety Management Safety Management

17
Awarded by the Ministry of Systems Certification Systems Certification
International Provision of Construction Provision of Residential and
Trade & Industry, Malaysia Services for Building and Commercial Property
(MITI) Civil Engineering Works Development and
including Turnkey Projects Maintenance Services
Certification No. W00710001 Certification No.
W011300010905
2004

International Achievement MS ISO 9001 : 2000


Award Quality Management
Bahrain International Circuit System Certification
Malaysian Construction Development of Residential
Industry Excellence Awards and Commercial Properties
Awarded by the Construction Management (including
Industry Development Board Maintenance) of Residential
of Malaysia (CIDB) and Commercial Properties
Certification No. AR 3353

2003

MS ISO 9001 : 2000


Quality Management

18
System Certification
Provision of Construction
Services for Building and
Civil Engineering Works
including Turnkey Projects
Certification No. AR 2274

2002

Builder of the Year


Malaysian Construction
Industry Excellence
Awards
Awarded by the Construction
Industry Development Board
of Malaysia (CIDB)

2001

Special Project Award SI-KPMG Shareholder


Malaysian Construction Value Awards
Industry Excellence Winner for the Construction,

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Awards Infrastructure and
Sepang F1 Circuit Property Category
Awarded by the Construction Awarded by Smart Investor-
Industry KPMG
Development Board of
Malaysia (CIDB)

2.(b)
RATIO ANALYSIS[7]
A ratio refers to the establishments of relationship between any two interrelated
variables. Ratio analysis stands for the process of determining and presenting the
relationship of items and group of items in the financial statement.

(b-i) Importance of Ratio Analysis


1. Useful in Financial position analysis : -

Accounting ratio revels the financial position of the concern. This helps the bank, insurance
companies and other financial institution in lending and making investment decision.

2. Useful of simplifying accounting figures : -

Accounting ratios simplify summaries and systematic the accounting figures in order to make
them more under stable and in lucid form. They highlight the inter-relationship which exists
between various segments of the business as expressed by accounting statements.

3. Useful in assessing the operational efficiency : -

Accounting ratio will help to have an idea of the working of a concern. The efficiency of the firm
becomes evidnt when analysis is based on accounting ratios. They diagnose the financial health
by evaluating liquidity.

4. Useful in Forecasting puposes : -

If accounting ratio are calculated for a number of years, then a trend is established. This trend
helps in setting up future plans and forecasting.

5. Useful in locating the week spot of the buzz : -

Accounting ratio are of great assistance in locating the weak spots in the business even though
the overall performance may be efficient. Weakness in financial structure due to incorrect
policies in the past or present are revealed through accounting ratios.

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(b-ii) Limitation of Accounting Ratios

1. False result: -

Accounting ratio can be correct only if the data are correct. Sometimes, the information given
in the financial statement is affected by showing position better than what actually.

2. No idea of probable happening in future: -

Ratios are an attempt to make an analysis of the past statement, so they are historical documents.
Now-a-days keeping in view the complexities of the business, it is important to have an idea of
the probable happening in future.

3. Variation in accounting methods : -

The two firms’ results are comparable with the help of accounting ratio only if they follow the
same accounting methods. Comparison will become difficult if the two concern follow the
different method of providing depreciation or valuing stock.

4. Price level changes: -

Changes in price level make comparison for various years difficult. Because of rising prices
fixed assets being shown at cost and not at market price.

5. No common standards: -

It is very difficult to lay a common standard for comparison because circumstances differ from
concern to concern and nature of each industry is different.

6. Different meaning assign to the same term: -

Different firms, in order to calculate ratio may assign different meanings. This may effect the
calculation of ratio in different firms and such ratio when used for comparison may lead to
wrong conclusion.

7. Ignorance qualification factors: -

21
Accounting ratio are tools of quantitative analysis only. But sometimes qualification factors may
surmount the quantitative aspects. The calculation derived from the ratio analysis under such
circumstances may get distorted.

(b-iii) Utility of Ration Analysis

1. PROFITABILITY:-

Useful information about the trend of profitability is available from profitability ratios. The gross
profit ratio, net profit ratio and ratioof return on investment give a good idea of the profitability
of business. On the basis of these ratio investors can get an idea about the overall efficiency of
managers and bank as well as other creditors draw useful conclusion about repaying capacity of
the borrowers.

2. LIQUIDITY:-

In fact, the use of ratios mode ascertain the liquidity of business. The current ratio, liquid ratio
and acid test ratio will tell whether the business will be able to meet its current liabilities and
when they matter. Banks and other lender will be able to conclude from these ratio whether the
firm will be able to pay regularly the interest and loan installments.

3. EFFICIENCY:-

The turnover ratio are excellent guide to measure the efficiency of manager for example, the
stock turnover will indicate how efficiency is being made the debtors turnover will indicate the
efficiency of collection department and assets turn over shows the efficiency with which the
assets are used in business. Such ratio related to present a good picture of the success or
otherwise of the business.

4. INTER FIRM COMPARISON:-

The absolute ratios of a firm are not of much use, unless they are compared with similar ratio of
other firm’s belongings to the same industry. This is inter firm comparison, which shows the
strength and weakness of the firm as compared to other firms and will indicate correctives
measures.

5. INDICATE TREND:-

The ratio of the last three to five years will indicate the trend in the respective fields. For
example, the current ratio of a firm is lower than the industry average, but is the ratio of last five
years shows an improving trend, it is an encouraging trend reverse may also be true. A particular

22
ratio of a company for one year may compare favorably with industry average but, if its trend
shows a deteriorating position. It is not desirable. Only ratio analysis will provide this
information.

6. USEFUL FOR BUDGETARY CONTROL:-

Regular budgetary report in a business whether the system of a budgetary control is in use. It
various ratios are presented in these reports, it will give a fairly good idea about various aspect of
financial position.

7. USEFUL FOR DECISION-MAKING:-

Ratio guides the management in making some of the important decisions. Suppose, the liquidity
ratio shows an unsatisfactory position, the management may decide to get addition liquid funds.
Even for capital expenditure decisions, the ratio of return on investment will guide the
management. The efficiency of various department can be judge on the basis of their profitability
ratios and efficiency of each department can thus be determined.

2.(b)
(i) LIQUIDITY RATIO

(i-a) Current Ratio (CR):-


Formulae:-
Total Asset
Current Ratio =
Total Liability

Year Total Asset Total Liability Current Ratio


(a) (b) (c)= a / b
2005 458,459,000 178,047,000 2.57
2006 61,5045,000 365,639,000 1.68

23
2007 955,003,000 445,240,000 2.14
2008 1,506,515,000 328,568,000 4.59
2009 1,134,765,000 226,558,000 5.01

C U R R E N T R A T IO

5 .5 0
5 .0 0
4 .5 0
4 .0 0
3 .5 0
3 .0 0
2 .5 0
2 .0 0
1 .5 0
1 .0 0
0 .5 0
0 .0 0
2005 2006 2007 2008 2009 YE A R

C U R R E N T R A2 T. 5IO7 1 .6 8 2 .1 4 4 .5 9 5 .0 1

(i-b) Quick Ratio (QR):-


Formulae:-
Total Asset – Inventory
Quick Ratio =
Total Liability

Year Total Asset Total Liability Inventory Quick Ratio


(a) (b) (c) (d) = (a-c) / b
2005 458,459,000 178,047,000 - N/A
2006 615,045,000 365,639,000 - N/A
2007 955,003,000 445,240,000 14,056,000 2.11
2008 1,506,515,000 328,568,000 14,056,000 4.54

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2009 1,134,765,000 226,558,000 16,276,000 4.94
Note: “N/A” => Not Applicable due to no inventory reported in this two years (2005 &
2006).

Q U IC K R A T IO

5 .0 0
4 .5 0
4 .0 0
3 .5 0
3 .0 0
2 .5 0
2 .0 0
1 .5 0
1 .0 0
0 .5 0
0 .0 0
2005 2006 2007 2008 2009 Y E A R

Q U I C K R A T0 I. O0 0 0 .0 0 2 .1 1 4 .5 4 4 .9 4
(ii) ACTIVITY RATIO (ASSET MANAGEMENT RATIO)

(ii-a) Average Collection Period (ACP):-


Formulae:-
Account Receivable
Average Collection Period, (days) =
Net Sales / 365

Year Account Net Sales 365 Average Collection


Receivable (b) (c) Period
(a) (d) = a / (b/c)
(days)

25
2005 38,247,000 83,463,000 365 167.26
2006 44,297,000 120,113,000 365 134.61
2007 71,480,000 358,377,000 365 72.80
2008 73,057,000 579,185,000 365 46.04
2009 99,996,000 439,260,000 365 83.09
NOTE: Account Receivable taken from figures of “Trade Receivables + Other Receivable”.

AC P

1 6 6 .0 0
1 5 6 .0 0
1 4 6 .0 0
1 3 6 .0 0
1 2 6 .0 0
1 1 6 .0 0
1 0 6 .0 0
9 6 .0 0
8 6 .0 0
7 6 .0 0
6 6 .0 0
5 6 .0 0
4 6 .0 0 YEAR
2005 2006 2007 2008 2009
A C P ( d a y s ) 1 6 7 .2 6 1 3 4 .6 1 7 2 .8 0 4 6 .0 4 8 3 .0 9

(ii-b) Inventory Turnover (Int t/o):-


Formulae:-
Cost of Goods Sold
Inventory Turnover Ratio =
Inventory

Year Cost of Goods Sold Inventory Inventory Turnover


(a) (b) Ratio
(c)= a / b
2005 74,778,000 - N/A
2006 87,440,000 - N/A
2007 330,091,000 14,056,000 23.48

26
2008 406,926,000 14,056,000 28.95
2009 342,793,000 16,276,000 21.06
Note: “N/A” => Not Applicable due to no inventory reported in this two years (2005 &
2006).

IN T T / O

2 9 .5 0
2 8 .5 0
2 7 .5 0
2 6 .5 0
2 5 .5 0
2 4 .5 0
2 3 .5 0
2 2 .5 0
2 1 .5 0
2 0 .5 0 YEA R
2005 2006 2007 2008 2009

IN T T /O 0 .0 0 0 .0 0 2 3 .4 8 2 8 .9 5 2 1 .0 6
(ii-c) Asset Turn Over (Asset t/o):-
Formulae:-
Net Sales
Asset Turn Over Ratio =
Total Asset

Year Net Sales Total Asset Asset Turnover


(a) (b) Ratio
(c)= a / b
2005 83,463,000 208,738,000 0.40
2006 120,113,000 202,171,000 0.59
2007 358,377,000 194,005,000 1.85

27
2008 579,185,000 521,589,000 1.11
2009 439,260,000 530,935,000 0.83

A S S E T T /O

1 .8 0

1 .3 0

0 .8 0

0 .3 0 YEA R
2005 2006 2007 2008 2009
A S S E T T /O0 .4 0 0 .5 9 1 .8 5 1 .1 1 0 .8 3

(iii) LEVERAGE (DEBT MANAGEMENT RATIO)

(iii-a) Debt Ratio (DR):-


Formulae:-
Total Liability
Debt Ratio, (%) =
Total Asset

Year Total Liability Total Asset Debt Ratio


(a) (b) (c)= a / b
(%)
2005 323,327,000 667,197,000 0.48

28
2006 466,267,000 817,216,000 0.57
2007 545,855,000 1,149,008,000 0.48
2008 1,16,830,000 2,028,104,000 0.55
2009 777,383,000 1,665,700,000 0.47
Note: Total Liability=> Total Liability (Current + Non-Current)
Total Asset => Total Asset (Current + Non-Current)
PLEASE CHECK NOTE TO DOUBLE CONFIRM ANSWER

DEBT

0 .6 0

0 .5 0

0 .4 0

0 .3 0

0 .2 0

0 .1 0

0 .0 0 YEAR
2005 2006 2007 2008 2009
D E B T (% ) 0 .4 8 0 .5 7 0 .4 8 0 .5 5 0 .4 7

(iii-b) Time Interest Earned Ratio (TIE):-


Formulae:-
Earning Before Interest and Taxes, (EBIT)
Time Interest Earned Ratio =
Interest

Year EBIT Interest TIE Ratio


(a) (b) (c)= a / b
2005 51,237,000 13,939,000 3.68
2006 44,704,000 11,237,000 3.98
2007 137,678,000 12,517,000 11.00
2008 110,249,000 29,050,000 3.80

29
2009 63,804,000 35,156,000 1.81
Note:
EBIT => Taken from Operating Profit (Before Finance Costs) because usually in
the annual reports they will minus out Finance Costs only provide Earning Before
Taxation. Therefore, actual earning shall take figure from “Operating Profit”.
Interest=> Taken from “Finance Costs”.

T IE

1 1 .0 0
1 0 .0 0
9 .0 0
8 .0 0
7 .0 0
6 .0 0
5 .0 0
4 .0 0
3 .0 0
2 .0 0
1 .0 0
0 .0 0 YEA R
2005 2006 2007 2008 2009
T IE 3 .6 8 3 .9 8 1 1 .0 0 3 .8 0 1 .8 1
(iv) PROFITABILITY RATIO

(iv-a) Operating Profit Margin Ratio (OPM),(%):-


Formulae:-
Earning Before Interest and Taxes, (EBIT)
OPM Ratio, (%) =
Net Sales

Year EBIT Net Sales OPM Ratio


(a) (b) (c)= a / b
(%)
2005 51,237,000 83,463,000 0.61

30
2006 44,704,000 120,113,000 0.37
2007 13,7678,000 358,377,000 0.38
2008 110,249,000 579,185,000 0.19
2009 63,804,000 439,260,000 0.15

OP M

0 .6 0

0 .5 0

0 .4 0

0 .3 0

0 .2 0

0 .1 0

0 .0 0 YEA R
2005 2006 2007 2008 2009
O P M ( % ) 0 .6 1 0 .3 7 0 .3 8 0 .1 9 0 .1 5
(iv-b) Net Profit Margin Ratio (NPM),(%):-
Formulae:-
Earning Available to Common Stockholders, (EACS)
NPM Ratio, (%) =
Net Sales

Year EACS Net Sales NPM Ratio


(a) (b) (c)= a / b
(%)
2005 23,429,000 83,463,000 0.28
2006 24,990,000 120,113,000 0.21
2007 86,886,000 358,377,000 0.24

31
2008 60,815,000 579,185,000 0.11
2009 28,036,000 439,260,000 0.06

N P M

0 .3 0

0 .2 5

0 .2 0

0 .1 5

0 .1 0

0 .0 5

0 .0 0 YE A R
2005 2006 2007 2008 2009

N P M ( % ) 0 .2 8 0 .2 1 0 .2 4 0 .1 1 0 .0 6
(iv-c) Return On Equity Ratio (ROE),(%):-
Formulae:-
Earning Available to Common Stockholders, (EACS)
ROE Ratio, (%) =
Total Equity

Year EACS Total Equity ROE Ratio


(a) (b) (c)= a / b
(%)
2005 23,429,000 383,870,000 0.06
2006 24,990,000 350,949,000 0.07
2007 86,886,000 603,153,000 0.14

32
2008 60,815,000 911,274,000 0.07
2009 28,036,000 888,317,000 0.03

R O E
0 .2 0

0 .1 5

0 .1 0

0 .0 5

0 .0 0 YE A R
2005 2006 2007 2008 2009
R O E ( % ) 0 .0 6 0 .0 7 0 .1 4 0 .0 7 0 .0 3
(iv-d) Return Of Total Assets Ratio (ROA),(%):-
Formulae:-
Earning Available to Common Stockholders, (EACS)
ROA Ratio, (%) =
Total Asset

Year EACS Total Asset ROA Ratio


(a) (b) (c)= a / b
(%)
2005 23,429,000 667,197,000 0.04
2006 24,990,000 817,216,000 0.03
2007 86,886,000 1,149,008,000 0.08

33
2008 60,815,000 2,028,104,000 0.03
2009 28,036,000 1,665,700,000 0.02

R O A

0 .1 0

0 .0 8

0 .0 6

0 .0 4

0 .0 2

0 .0 0 YEA R
2005 2006 2007 2008 2009
R O A ( % ) 0 .0 4 0 .0 3 0 .0 8 0 .0 3 0 .0 2

(iv-e) Earning Per Share Ratio (EPS),(Rm):-


Formulae:-
Earning Available to Common Stockholders, (EACS)
EPS Ratio, (Rm) =
Number of Shares Outstanding

Year EACS Number of Shares EPS Ratio


(a) Outstanding (c)= a / b
(b) (Rm)
2005 23,429,000 500,000,000 0.05
2006 24,990,000 500,000,000 0.05
2007 86,886,000 381,131,383 0.23

34
2008 60,815,000 385,977,281 0.16
2009 28,036,000 389,285,964 0.07
Note: Figures of “Numbers of Shares Outstanding” above has been converted into
Ordinary Shares of Rm0.50 each as per annual report for year of 2007, 2008 & 2009.
Whereas for the year of 2005 & 2006 Ordinary Shares is subject to Rm1.00 each therefore
it is not necessary to do conversion.

EP S

0 .2 5

0 .2 0

0 .1 5

0 .1 0

0 .0 5

0 .0 0 YEAR
2005 2006 2007 2008 2009
E P S ( R m ) 0 .0 5 0 .0 5 0 .2 3 0 .1 6 0 .0 7
2.(c) Perform a Trend analysis in a summary form. Make some critical comments on
liquidity and profitability.

(i). SUMMARY OF LIQUIDITY


(i-a). Current Ratio

35
C U R R E N T R A T IO

5 .5 0
5 .0 0
4 .5 0
4 .0 0
3 .5 0
3 .0 0
2 .5 0
2 .0 0
1 .5 0
1 .0 0
0 .5 0
0 .0 0
2005 2006 2007 2008 2009 YEAR

C U R R EN T R A T IO 2 .5 7 1 .6 8 2 .1 4 4 .5 9 5 .0 1
ANALYSIS COMMENTS:
Graph above showing Current Ratio patterns of Liquidity in company “WCT BERHAD”
in years of 2005 to 2009. Based on the graph, we managed to observe symptom of increasing in
the ratio for the passed 5 years as summary below:-
2005 2006 2007 2008 2009
CURRENT
2.57 1.68 2.14 4.59 5.01
RATIO
INCREASED /
(0.89) 0.46 2.42 0.42
DECREASED RATIO
INCREASED / (34.6) 27.3 113.1 9.15
DECREASED (%)
AVERAGE CR 3.20
“WCT BERHAD” are getting stronger in liquidity performance based on the current
ratio in the passed 5 years although slightly dropped in the year of 2006. This shows that
company short term assets have managed to meet their short term creditors and
obligations. Besides, they also managed to achieve a good current ratio flow after year of 2006.
In overall the company maintained a good liquidity performance for current ratio with an
average ratio of 3.20 achieved for the last 5 years from year 2005-2009.

(i-b). Quick Ratio

36
Q U IC K R A T IO

5 .0 0
4 .5 0
4 .0 0
3 .5 0
3 .0 0
2 .5 0
2 .0 0
1 .5 0
1 .0 0
0 .5 0
0 .0 0
2005 2006 2007 2008 2009 YEAR

Q U IC K R A T IO 0 .0 0 0 .0 0 2 .1 1 4 .5 4 4 .9 4
ANALYSIS COMMENTS:
Graph above showing patterns of Quick Ratio in “WCT BERHAD” from the year of
2005 to 2009. Based on the graph, no inventories were reported in the year of 2005 and 2006. As
a result, value of Quick Ratio not able to generate as shown in the graph. However, we are still
able to analyze the ratio as summary below:-
2005 2006 2007 2008 2009
QUICK
N/A N/A 2.11 4.54 4.94
RATIO
INCREASED /
N/A N/A 2.43 0.40
DECREASED RATIO
INCREASED / N/A N/A 115.2 8.8
DECREASED (%)
AVERAGE QR 3.86
Quick Ratio for WCT BERHAD was at highest in the year 2009 (at a ratio of 4.94)
and they were at lowest in the year 2007 (at a ratio of 2.11) The company achieved a
best positioning in the current year of 2009 as they were able to meet their short term
obligations with their most liquid assets. In overall, the company maintained a good quick
ratio with an average ratio of 3.86 from year 2007-2009.

(ii). SUMMARY OF PROFITABILITY

37
(ii-a). Operating Profit Margin Ratio
OPM

0 .6 0

0 .5 0

0 .4 0

0 .3 0

0 .2 0

0 .1 0

0 .0 0 YEA R
2005 2006 2007 2008 2009

O P M (% ) 0 .6 1 0 .3 7 0 .3 8 0 .1 9 0 .1 5
ANALYSIS COMMENTS:
Graph above showing Operating Profit Margin Ratio patterns of Profitability in company
“WCT BERHAD” for years of 2005 to 2009. Based on the graph, we managed to observe incline
in the ratio for the passed 5 years as summary below:-
2005 2006 2007 2008 2009
OPM RATIO,
0.61 0.37 0.38 0.19 0.15
(%)
INCREASED /
(0.24) 0.01 (0.19) (0.04)
DECREASED RATIO
INCREASED / (39.3) 2.7 (50.0) (21.1)
DECREASED (%)
AVERAGE OPM (%) 0.34
The Operating Profit Margin in “WCT BERHAD” is decreasing with cumulative down
fall in the passed 5 years although slightly increased in year of 2007. This shows that company
is badly affected in the operating income with high amount of contribution to the company either
in direct-fixed and direct variable unit costs before paying to taxes or interest. In overall the
company are performing Operating Profit Margin ratio with an average ratio of 0.34
achieved for the last 5 years from year 2005-2009.

(ii-b). Net Profit Margin Ratio

38
NPM

0 .3 0

0 .2 5

0 .2 0

0 .1 5

0 .1 0

0 .0 5

0 .0 0 YEA R
2005 2006 2007 2008 2009
N P M (%) 0 .2 8 0 .2 1 0 .2 4 0 .1 1 0 .0 6
ANALYSIS COMMENTS:
Graph above showing Net Profit Margin Ratio patterns of Profitability in company
“WCT BERHAD” for years of 2005 to 2009. Based on the graph, we managed to observe incline
in the ratio for the passed 5 years as summary below:-
2005 2006 2007 2008 2009
NPM RATIO,
0.28 0.21 0.24 0.11 0.06
(%)
INCREASED /
(0.07) 0.03 (0.13) (0.05)
DECREASED RATIO
INCREASED / (25.0) 14.3 (54.2) (45.5)
DECREASED (%)
AVERAGE NPM (%) 0.18
The Net Profit Margin in “WCT BERHAD” encountered similar inclines pattern with
Operating Profit Margin and decreasing with cumulative down fall in the passed 5 years although
slightly increased in year of 2007. This shows that company is badly affected in the low profit
margin in the net sales income in which result might not capable to pay the taxes or interest. In
overall the company are performing Net Profit Margin ratio with an average ratio of 0.18%
achieved for the last 5 years from year 2005-2009.

(ii-c). Return On Equity Ratio

39
ROE
0 .2 0

0 .1 5

0 .1 0

0 .0 5

0 .0 0 YEA R
2005 2006 2007 2008 2009
R O E (%) 0 .0 6 0 .0 7 0 .1 4 0 .0 7 0 .0 3
ANALYSIS COMMENTS:
The Return Of Equity graph above showing patterns of Profitability in company “WCT
BERHAD” for years of 2005 to 2009. Based on the graph, we managed to observe increasing
stage in the first 3 years (2005, 2006 & 2007) but inclining in the year of 2008 & 2009. The
actual details are summarized as below:-
2005 2006 2007 2008 2009
ROE RATIO,
0.06 0.07 0.14 0.07 0.03
(%)
INCREASED /
0.01 0.07 (0.07) (0.04)
DECREASED RATIO
INCREASED / 16.7 100.0 (50.0) (57.1)
DECREASED (%)
AVERAGE ROE (%) 0.07
The Return Of Equity in “WCT BERHAD” are considering to be in the position of
gaining and loosing condition in where gaining in the passed three years (2005, 2006 & 2007)
and start to decrease in latest two years (2008 & 2009). This is not a good sign to the company
because it affects the ratio to measure rate of return on the shareholders investment. In overall
the company are performing Return Of Equity ratio with an average ratio of 0.07%
achieved for the last 5 years from year 2005-2009.

(ii-d). Return Of Total Assets Ratio

40
ROA

0 .1 0

0 .0 8

0 .0 6

0 .0 4

0 .0 2

0 .0 0 YEAR
2005 2006 2007 2008 2009
RO A (%) 0 .0 4 0 .0 3 0 .0 8 0 .0 3 0 .0 2

ANALYSIS COMMENTS:
The Return Of Total Assets graph above showing patterns of Profitability in company
“WCT BERHAD” for years of 2005 to 2009. Based on the graph, we managed to observe
increasing stage in the first 3 years (2005, 2006 & 2007) but inclining in the year of 2008 &
2009. The actual details are summarized as below:-
2005 2006 2007 2008 2009
ROA RATIO,
0.04 0.03 0.08 0.03 0.02
(%)
INCREASED /
(0.01) 0.05 (0.05) (0.01)
DECREASED RATIO
INCREASED / (25.0) 166.7 (62.5) (33.3)
DECREASED (%)
AVERAGE ROA (%) 0.04
The Return Of Total Assets in “WCT BERHAD” are considering to be in the position of
gaining and loosing condition in where gaining in the year of 2005 and slight fall on 2006 but
increased back high in the year of 2007. Subsequently, decrease tremendously in latest two years
(2008 & 2009). This is not a good sign to the company because it affects the ratio to measure net
income to total assets for return of all company assets after interest and taxes. In overall the
company are performing Return Of Total Assets ratio with an average ratio of 0.04%
achieved for the last 5 years from year 2005-2009.

(ii-e). Earning Per Share Ratio

41
EPS

0 .2 5

0 .2 0

0 .1 5

0 .1 0

0 .0 5

0 .0 0 YEA R
2005 2006 2007 2008 2009
E P S (R m ) 0 .0 5 0 .0 5 0 .2 3 0 .1 6 0 .0 7
ANALYSIS COMMENTS:
The Earning Per Shares graph above showing patterns of Profitability in company “WCT
BERHAD” for years of 2005 to 2009. Based on the graph, we managed to observe cumulative
increasing stage in the first 3 years (2005, 2006 & 2007) but inclining in the year of 2008 &
2009. The actual details are summarized as below:-
2005 2006 2007 2008 2009
EPS RATIO,
0.05 0.05 0.23 0.16 0.07
(Rm)
INCREASED /
0.00 0.18 (0.07) (0.09)
DECREASED RATIO
INCREASED / 0.00 360.0 (30.4) (56.25)
DECREASED (%)
AVERAGE EPS (Rm) 0.11
The Earning Per Shares in “WCT BERHAD” are considering to be in the position of
gaining condition in the passed 5 years from 2005 to 2009. The profit of each shares are getting
lesser starting from 2008 to 2009. However, “WCT” still in position of generating profit to
shareholders in strong position. In overall the company are still performing profit of EPS ratio
with an average ratio of Rm0.11 for each ordinary shares for the last 5 years from year
2005-2009.

42
2.(d) Identify the problem areas on liquidity and profitability of the company. Give
solutions or recommendations for further improvement. You may give your critical
review pertaining to the problems faced by the company.

(i). PROBLEM AREAS ON LIQUIDITY


(i-a). Current Ratio
Table below showing passed 5 years Current Ratio for WCT BERHAD:-
DESCRIPTION 2005 2006 2007 2008 2009
CURRENT
2.57 1.68 2.14 4.59 5.01
RATIO
“WCT BERHAD” are getting stronger in liquidity performance based on the current
ratio in the passed 5 years although slightly dropped in the year of 2006. This shows that
company short term assets have managed to meet their short term creditors and
obligations. Besides, they also managed to achieve a good current ratio flow after year of 2006.

(i-b). Quick Ratio


Table below showing passed 5 years of Quick Ratio in “WCT BERHAD”:-
2005 2006 2007 2008 2009
QUICK
N/A N/A 2.11 4.54 4.94
RATIO
Note: For year of 2005 & 2006 no inventories has been reported in the annual report. Therefore,
it is not applicable (N/A).
Quick Ratio for WCT BERHAD was at highest in the year 2009 (at a ratio of 4.94)
and they were at lowest in the year 2007 (at a ratio of 2.11) The company achieved a
best positioning in the current year of 2009 as they were able to meet their short term
obligations with their most liquid assets.

43
(i-c). Comment and Recommendation on overall Liquidity
Based on passed 5 years result of Current Ratio and Quick Ratio in WCT BERHAD,
we can conclude that it is not necessary for the company to increase the current ratio or quick
ratio for the company and no corrective action has to be taken because cash flow in the
company are remain in strong position and lesser amount of inventory with better controlling
system.
In fact, the cash flow in the company should be reported in more sound level.
However, the cash flow held under Housing Development Accounts are amounts held pursuant
to section 7A of the housing Development (Control and Licensing) Act 1966 and are therefore
restricted from use in other operations.
Deposit in licensed bank of the group and the company amounting to Rm15,620,516
(2008:Rm16,049,809) and Rm13,536,048 (2008:Rm13,279,809) respectively are pledged to
banks to secure banking facilities.

In overall, the Group manages its debt maturity profile, operating cash flows and the
availability of funding so as to ensure that refinancing, repayment and funding needs are met.
As part of its overall liquidity management, the Group maintains sufficient levels of cash or
cash convertible investments to meet its working capital requirements. In addition, the Group
strives to maintain available banking facilities at a reasonable level to its overall debt position.
As fas as possible, the Group raises committed funding from both capital markets and balances
its portfolio with some short term funding as to achieve overall cost effectiveness.

44
(ii). PROBLEM AREAS ON PROFITABILITY
(ii-a). Operating Profit Margin Ratio
Data below showing Operating Profit Margin Ratio in company “WCT BERHAD” for
years of 2005 to 2009:-
2005 2006 2007 2008 2009
OPM RATIO,
0.61 0.37 0.38 0.19 0.15
(%)
The Operating Profit Margin in “WCT BERHAD” is decreasing with cumulative down
fall in the passed 5 years although slightly increased in year of 2007. This shows that company
is badly affected in the operating income with high amount of contribution to the company either
in direct-fixed and direct variable unit costs before paying to taxes or interest.

(ii-b). Net Profit Margin Ratio


Data below showing Net Profit Margin Ratio for years of 2005 to 2009:-
2005 2006 2007 2008 2009
NPM RATIO,
0.28 0.21 0.24 0.11 0.06
(%)
The Net Profit Margin in “WCT BERHAD” encountered similar inclines pattern with
Operating Profit Margin and decreasing with cumulative down fall in the passed 5 years although
slightly increased in year of 2007. This shows that company is badly affected in the low profit
margin in the net sales income. If this is to be carry on, then the company may be end up with the
result could not be capable to pay the taxes or interest for coming few years.

(ii-c). Return On Equity Ratio


The Return Of Equity data below showing profitability ratio for the passed 5 years of
2005 to 2009:-
2005 2006 2007 2008 2009
ROE RATIO,
0.06 0.07 0.14 0.07 0.03
(%)
INCREASED /
0.01 0.07 (0.07) (0.04)
DECREASED RATIO
INCREASED / 16.7 100.0 (50.0) (57.1)
DECREASED (%)
AVERAGE ROE (%) 0.07
The Return Of Equity in “WCT BERHAD” are considering to be in the position of
gaining and loosing condition in where gaining in the passed three years (2005, 2006 & 2007)
and start to decrease in latest two years (2008 & 2009). This is not a good sign to the company
because it affects the ratio to measure rate of return on the shareholders investment.

45
(ii-d). Return Of Total Assets Ratio
The Return Of Total Assets graph above showing patterns of Profitability in company
“WCT BERHAD” for years of 2005 to 2009. Based on the graph, we managed to observe
increasing stage in the first 3 years (2005, 2006 & 2007) but inclining in the year of 2008 &
2009. The actual details are summarized as below:-
2005 2006 2007 2008 2009
ROA RATIO,
0.04 0.03 0.08 0.03 0.02
(%)
The Return Of Total Assets in “WCT BERHAD” are considering to be in the position of
gaining and loosing condition in where gaining in the year of 2005 and slight fall on 2006 but
increased back high in the year of 2007. Subsequently, decrease tremendously in latest two years
(2008 & 2009). This is not a good sign to the company because it affects the ratio to measure net
income to total assets for return of all company assets after interest and taxes.

(ii-e). Earning Per Share Ratio


The Earning Per Shares graph above showing patterns of Profitability in company “WCT
BERHAD” for years of 2005 to 2009. Based on the graph, we managed to observe cumulative
increasing stage in the first 3 years (2005, 2006 & 2007) but inclining in the year of 2008 &
2009. The actual details are summarized as below:-
2005 2006 2007 2008 2009
EPS RATIO,
0.05 0.05 0.23 0.16 0.07
(Rm)
The Earning Per Shares in “WCT BERHAD” are considering to be in the position of
gaining condition in the passed 5 years from 2005 to 2009. The profit of each shares are getting
lesser starting from 2008 to 2009. However, “WCT” still in position of generating profit to
shareholders in strong position. In overall the company are still performing profit of EPS ratio
with an average ratio of Rm0.11 for each ordinary shares for the last 5 years from year
2005-2009.

46
(iii-f). Comment and Recommendation on overall Profitability
In the passed 5 years of data above, we encountered few areas raised in the company of
WCT BERHAD as shown below:-
a) Operating Profit Margin and Net Profit Margin are declining in the year of 2008 and 2009
due to economic crisis start affected towards end year of 2007. Those projects in hand have to
be tender and carry on with lower profit margin as covering and sustaining operational cost in
the company. At the same time, it is the strategies of the company in penetrating business into
overseas Middle East country and some other potential overseas country other than Asian. At
the same time, company shall look into potential of increasing sales by doing promotion world
wide as to penetrate into new market.

b) Return of Equity and Return of Assets are claiming to be decline in the latest two years of
2008 and 2009 due to reason of tying up in an excessive asset which is continues the plan
cumulative from year of 2007 (The year making very high profit). The detail involved as
summary below:-
• Building: 2%
• Plant & Machinery: 9%~58%
• Motor & Vehicles: 14%~32%
• Office Equipment: 10%~50%
• Furniture & Fitting: 10%~20%
• Marine Plant, Tug & Barges: 20%
• Renovations: 15%

In 2009, the company recognized an impairment loss of Rm6,697,713 (2008:Nil) in respect of


its investment in WCT Consruction Sdn. Bhd. The impairment loss represents the writedown
of the investment to its recoverable value and has been recognized in the income statement.
The recoverable amount was based on value in use and determined at the level of the cash
generating units”CGU”. In determining value in use for CGU, the cash flows were discounted
at a rate of 13.98% on a pre-tax basis.

At the same time, as at balance sheet, concentration of credit risks in the form of advances to
sub-contractors, advance profit distribution to minority sharaholders of a foreign subsidiary
and performance security deposits comprise 39% (2008:46%) of other receivables of the group.
Outstanding advances to sub-contractors in excess of one year as at 31 December 2009
amounted to Rm17,500,593(2008: Rm21,518,000). The Directors, having considered all
available information, are of the opinion that these debt are collectible in full and require no
further provision for Doubtful Debts. These advances will be recouped through deduction from
work to be performed by sub-contractors.

As a result, brain-storming meeting from the board of directors through committee members in
the group shall be held more closely in order to conduct job with higher efficiency and at the
same time to prevent or eliminate unnecessary expenses or loss to the company in the future.

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2.(e) Comment on the overall performance of the company and its future outlook.

(i) THE PASSED 5 YEARS FINANCIAL HIGHLIGHTS FOR WCT BERHAD AS


BELOW:-
Rm’million 2005 2006 2007 2008 2009
Revenue 825 1,40 2,78 3,79 4,66
0 2 5 7
Profit Before Taxation 128 150 284 159 211
Profit After Taxation # 94 115 229 146 216
Issued Share Capital 213 214 ^356 ^391 ^392
Shareholders’ Fund 534 593 889 1,165 1,254
Total Assets 1,70 2,266 3,484 4,457 4,478
3

Gross Dividend (Sen) 7.50 7.50 8.25 9.50 10.00


Earning Per Share (Sen) 14.9 15.50 23.04 13.18 18.76
0
Net Assets Per Share (Rm) 0.94 1.04 1.31 1.51 1.61
Note: “ # ” =>After exceptional items and share of results in associated companies and jointly
controlled entity.
“ ^ “ =>Includes both ordinary and preference shares.

Based on data above, overall performance for WCT Berhad tends to have potential good
future with the cumulative growing in overall data as shown. Especially in the year 2009, WCT
Group registered a consolidated revenue of RM4.7 billion while recording operating and net
profits of RM244 million and RM147 million, respectively.

The Civil Engineering and Construction Division continued to be the main thrust of the
Group’s business activities. It contributed RM4.5 billion or 96% to the Group’s consolidated
revenue. In terms of operating profits, it achieved RM199 million or 81% of the total operating
profits of the Group.

Meanwhile, the Group’s Property Division registered a revenue of RM139 million or 3%


of the Group’s consolidated revenue. Operating profit was RM28 million or 11% of the Group’s
total operating profits.

Property Investment and Management contributes a recurring flow of income since 2008,
derived mainly from rental income at Bukit Tinggi Shopping Mall. In 2009, total revenue from
this segment amounted to RM33 million, registering an operating income of RM18 million or
7% of the Group’s total operating profits.

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(ii) CIVIL ENGINEERING & CONSTRUCTION.
In most part of 2009, the global construction industry witnessed a challenging period as a
result of the global financial crisis. In view of these circumstances, WCT remained focused in
executing projects in hand and selectively bidding for new jobs in markets we operate in.

At the start of the year, WCT set a modest target of RM1.0 billion new contract orders
considering the global economic climate. Despite that, the construction team successfully
secured new contracts in the Middle East and Malaysia which totalled RM3.4 billion with
WCT’s portion amounting to RM2.7 billion. WCT continued to secure the confidence of
ALDAR Properties PJSC with the award of additional works at the Yas Marina Circuit, Abu
Dhabi, which hosted the inaugural Abu Dhabi F1 Grand Prix on 1 November 2009. The Steering
Committee of New Doha International Airport in Qatar also extended our job scope with the
award of additional works. In Malaysia, as part of the Malaysian Government stimulus package
initiatives, we successfully secured the infrastructure works in Medini Iskandar Malaysia
covering 2,000 acres of development land. This was followed by the contract award for the
earthworks at the new Low Cost Carrier Terminal at the Kuala Lumpur International Airport
(KLIA).

Project Description (2009) Location Contract Value


(Rm million)
Yas Marina Circuit – Additional Works Abu Dhabi, U.A.E. 900
Medini Iskandar Malaysia – Infrastructure Works Johor, Malaysia 766
New Doha International Airport – Additional Works Doha, Qatar 1,425
Low Cost Carrier Terminal @KLIA – Earthworks Selangor, Malaysia 363

Construction activities in Malaysia are expected to expand at a faster pace for the rest of the
year with the continuing infrastructure spending attributed to the stimulus package initiatives and the
9th Malaysian Plan. The commitment towards greater transparency and efficiency by the
Government will elevate the opportunities offered to competent contractors like WCT. As one of the
nation’s most prominent builders in the global market, WCT will remain focused on the domestic
market and continue to contribute towards Malaysia’s development.

In the Gulf, the tightening of credit liquidity will not deter long-term public infrastructure
spending in the region. WCT has been in the Gulf for 8 years where it successfully built a sound
reputation and solid track record. WCT Gulf construction profile includes iconic projects such as
Formula One circuits in both Bahrain and Abu Dhabi, Bahrain City Centre, Yas Marina Royal Yacht
Club in Abu Dhabi and the New Doha International Airport in Qatar. The ability to deliver a world-
class project in a timely manner is key to building a solid foundation in order to be successful in
securing more projects in the future.

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(iii) PROPERTY DEVELOPMENT
As a result of the global economic uncertainties and oversupply concerns in the first half
of 2009, township developers in Malaysia were generally cautious in launching new products.
However, activities in the property market improved in the second half of the year attributed to
growing consumer confidence coupled with low borrowing cost and innovative financing
packages. Although interest rate is expected to rise gradually from here on, we expect the overall
property market recovery to continue into 2010.

The occupancy rate for the office sector decreased to 82% in 2009 due to the large supply
of office space and weak business sentiment. The large supply of office space expected to come
on stream in 2010 and 2011 will put further downward pressure on prices and rentals.
Nevertheless, office development with good surrounding amenities and accessibility is expected
to sustain reasonable investment returns.

The retail market fared positively in the second half of 2009, consistent with improved
consumer sentiment. Occupancy stood well at approximately 86%, and is expected to continue
into 2010 in line with the economic recovery. Despite the large supply of retail space in the
market, the longer term outlook for retail is good with well-positioned retail centres in prime
locations continuing to perform well.

(a)Bandar Bukit Tinggi I, II and Parklands


Demand from owner-occupiers for our properties in our three townships remained stable in
2009, registering sales totalling RM134 million. This demand stability is due to Klang Valley’s
favorable demographics and the facilities and amenities these townships offer, anchored by the
presence of AEON Bukit Tinggi Shopping Centre.

BBT office towers saw the entry of foreign shipping and logistic companies and financial
institutions. The opening of the business class hotel in the second half of 2010 will create synergy
with the office towers and the retail boulevard, complementing the township’s existing amenities.

The group is carefully planning development of the remaining commercial land in Bandar
Bukit Tinggi I and II to complement the existing commercial activities and further boost the vibrancy
of this township.

Residential development is currently focused in Bandar Parklands, which experienced strong


demand. The completion of the lushly landscaped 12-acre People’s Park in Bandar Parklands creates
a gathering place for the residents to enjoy the sights and sounds of nature. The exclusive higher end
gated residential properties in this township are expected to be launched later part of this year.

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(b) d’Banyan Residency @ Sutera
The exclusive homes at d’Banyan Residency, with the sea, golf course and mountains
forming a scenic backdrop of Kota Kinabalu, Sabah continue to receive good response. Innovative
financing packages with attractive incentives are offered to both local and foreign buyers. Sales and
confirmed bookings registered to date, amounting to approximately RM120 million, is expected to
increase further as the construction reaches an advanced stage.

( c ) BBT One Towers, the Boulevard and Business Class Hotel


The Group aims to transform the larger Bukit Tinggi township into a more lively
community with a good mix of social and commercial activities. Quality amenities with modern
designs have been built to cater to the changing lifestyles and expectations.

The landscape of the southern part of Klang city took on a new look with the completion
of the BBT One Towers and the Boulevard. BBT One Towers will provide especially shipping
companies, financial institutions and government agencies, with a modern corporate office
environment complete with security and a spacious entrance lobby. The low-rise retail Boulevard
is in response to the increasing popularity of al fresco casual dining and street mall shopping.

The business class hotel we are developing in Bandar Bukit Tinggi is nearing full
completion, and will have 250 rooms and a ballroom with a seating capacity for 1,000 people,
offering residents in this part of the Klang Valley a comfortable and convenient banquet venue.
Guests of the hotel will also enjoy facilities such as the business centre, the lobby lounge cum
café, meeting and seminar rooms, swimming pool, gym and ample car parks.

(d) The Paradigm @ Petaling Jaya


The Paradigm is an integrated mixed development sitting on 12.4 acres along the LDP
Expressway in Kelana Jaya, Petaling Jaya. When completed, it will have a shopping mall,
proposed three blocks of Grade A prime offices and a basement car park. Piling works have been
completed and currently basement works and construction of the mall are in progress.

Marketing activities to secure prospective tenants is actively in progress as the Paradigm


Mall is expected to be opened for operation in November 2011. The response has been very
encouraging and we are confident the Paradigm Mall will be a success.

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(e)1 Medini Residences @ Medini, Iskandar Malaysia
On 28 October 2009, WCT signed a joint venture agreement with Iskandar Investment
Berhad, a unit of Khazanah Nasional Berhad, to develop a 10.96-acre land designated for high-
rise condominium development in Medini, Iskandar Malaysia. Iskandar Malaysia is the country’s
single largest urban development to-date, covering approximately 550,000 acres in Southern
Johor. Medini, spanning over 2,000 acres of land, will be developed into an integrated lifestyle,
leisure, cultural and financial district of Iskandar Malaysia.

This 1 Medini Residences, with Gross Development Value of RM600 million, is the first
residential development in Medini, Iskandar Malaysia and comprises 1,341 residential units. It is
planned to commence by the second half of 2010 and will provide quality housing
accommodation to meet the needs of the students, staffs and executives working in the catalytic
developments within Medini such as the Newcastle University, Legoland, Malborough College,
Pinewood Studios and Raffles University.

(f) Platinum Plaza, Ho Chi Minh City, Vietnam


Last year, Vietnam’s property market was affected by the world financial and economic
turmoil. Property price, particularly for high-end products, fell in the second half of 2009. For
2010, it is expected to consolidate further with sustainable demand for medium cost housing,
Grade A offices and modern shopping malls.

The Group’s 67% subsidiary, BSC-WCT Company Limited, holds the Investment
Certificate for the Platinum Plaza which was awarded by the People’s Committee of Ho Chi
Minh City in January 2008. It sits on 22.2 acres of land located in the District of Binh Chanh in
Ho Chi Minh City. It fronts the Nguyen Van Linh Road, a brand new 10 lane East West
Highway, which allows direct access to the north and south via the existing Highway 1A.

The proposed development comprises a shopping mall, 2 office towers, a 4-star hotel, a
SOHO block and car park. The total gross floor area is about 671,960 square metres or 7.2
million square feet. The shopping mall is expected to be the largest in Vietnam when completed.
The project will be developed in 3 phases over a 4-year period after the land has been resettled.

The design of the shopping mall under Phase 1 is ongoing while land compensation and
resettlement were the main activities in 2009. WCT Engineering Vietnam Company Limited, a
wholly-owned subsidiary, will be fully involved in the construction of Platinum Plaza when the
land is fully resettled and compensated.

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(iv) PROPERTY INVESTMENT AND MANAGEMENT
The Group’s first investment property, Bukit Tinggi Shopping Mall with a net lettable
area of 1.0 million sq ft and 5,000 car parks, opened on 24 November 2007. The shopping mall is
leased to AEON Jusco for an initial term of 10 years with an option to renew the lease for
another 3 terms of 5 years each. The lease rental is reviewable every 3 years. It provides a steady
recurring income base to the Group’s financials.

The shopping mall and the car parks at The Paradigm@ Petaling Jaya are under
construction and expected to be completed by 2011. Adding to that, the business hotel within the
Bukit Tinggi township is expected to start generating income from 2011. In Ho Chi Minh City,
Vietnam, the Group has also planned to retain part of the office and the shopping mall at the
Platinum Plaza mixed-commercial development in growing the Group’s property investment and
management business.

(v) HIGHWAY CONCESSIONS


The Group’s investments in Highway Concessions date back to 1999 when WCT, via a
consortium of Malaysian contractors, ventured into India and constructed the 145km Tada to
Nellore highway under the BOT scheme. Tolling commenced in 2004 and the increase in traffic
volume and revenue is very encouraging. Our investments in 2 other BOT highway projects, the
Durgapur Expressway and the Panagarh-Palsit Expressway - were open to traffic in 2005. The
concession company is paid on a semi-annuity scheme by the National Highways Authority of
India.

(vi) FUTURE OUTLOOKS STRATEGIES OF WCT


In 2010, the global economy is expected to perform better. Nevertheless, the Group will
continue to adopt strict financial discipline and conservative approach in doing business. WCT
will continue to be selective about the type of work they accept and concentrate on projects that
fit their profile and strengths. Although business environment is improving, WCT are committed
to exercise prudent cost and cash flow management.

The Group will continue to explore opportunities in the global market to improve their
operational and financial performance. WCT will build on their strengths by growing the core
businesses with market focus in Malaysia, Vietnam and the Gulf States. In achieving this, WCT
are determined to replenish the order book with carefully selected construction projects. The
Group’s land acquisition will continue to be focused in growth corridors and designated
economic zones with good infrastructure and amenities. Developments will concentrate on
properties in the middle and up-market range with a good mix of residential and commercial
content.

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3.CONCLUSION
My personal opinion is that WCT BERHAD is a very potential developing and
construction company in the Malaysia market acting as front leader. With all the prompt
evidence and clear records as shown in the annual report and analysis ratio carried out proven
that this company are looking forward to a successful in the future.

Guideline of overall role of Financial Management is the only activating element of


individual knowledge. The actual job of Financial Management is to provide combines the
productive but passive resources into a realistic life. With a view to getting the expected results
and seeing that things happen as they should, Financial Management has to become a creator of
the economy rather than its creature.

Financial Management forges ahead through innovations in operating situation and the
adoption of far-sighted planning. It visualized the future, initiates changes and achieves the
purpose of any enterprise under highly dynamic conditions. As an activity process, Financial
Management help to plan the future course of actions, organizes people and their work, directs
the operation and controls the performance, and thus ensures the accomplishment of enterprise
objectives. Adaptations and innovations permeate through each of these phases of the
management process.

4. REFERENCES
[1]
1. From http://www.wct.com.my/CMS/content/13/0.aspx : “WCT BERHAD” home page
(Access on 20/07/2010).
[2]
2. From http://www.wct.com.my/CMS/content/156/0.aspx : “Corporate Structure”
(Access on 20/07/2010).
[3]
3. From http://www.wct.com.my/CMS/content/39/0.aspx : “Board of Directors” (Access
on 20/07/2010).
[4]
4. From http://www.wct.com.my/CMS/content/154/0.aspx : “Corporate Vision &
Mission” (Access on 20/07/2010).
[5]
5. From http://www.wct.com.my/CMS/content/29/0.aspx : “Milestone” (Access on
20/07/2010).
[6]
6. From http://www.wct.com.my/CMS/content/38/1.aspx : “Awards” (Access on
20/07/2010).

5. APPENDIX ON BALANCE SHEETS OF “WCT BERHAD”


(i) Year 2009: Please refer to Page 56 ~58
(ii) Year 2008: Please refer to Page 59~61
(iii) Year 2007: Please refer to Page 62~64
(iv) Year 2006: Please refer to Page 65~67
(v) Year 2005: Please refer to Page 68~70

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