Accouting report

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Accouting report

  1. 1. Analysis of Public Company Reports Basic Accounting (FNBE0145) Assignment Tony Tang Lee Lung (0314002) Wong YeongCherng (0313378) 1
  2. 2. TABLE CONTENT Cover page Background information Recent development Profitability Ratio Calculations Financial Stability Ratio and P/E Ratio Calculations Profitability Ratio Interpretation Financial Stability P/E Ratio Interpretation Investment Recommendation Appendix References 1 3 4 5 6 7 8 9 10 11-14 15 2
  3. 3. Background information of Dutch Lady Malaysia Industry Bhd In the 1950s, Dutch Lady Milk Industry Berhad (Dutch Lady Malaysia) is a manufacturer of dairy products in Malaysia. In 1963, it was incorporated and became the first milk company in Malaysia to be listed on Bursa Malaysia, the local stock exchange in 1968. Royal FrieslandCampina, a Dutch multinational corporation and one of the largest milk companies in the world is its holding company. Dutch Lady Malaysia produces and sells their products to the home and export market such as Growing-up Milk, Powdered Milk, Condensed Milk, UHT Milk, Sterilized Milk, Pasteurized Milk, Cultured Milk, Infant Formula, Yoghurt and Fruit Juice Drinks. The Company believes in product innovation and is well supported by Royal FrieslandCampina. The Company continually strives to improve its processes in order to deliver nutritious products of high quality to its consumers. Meanwhile, it was the first company in the world to introduce a growing up milk powder specifically formulated for children from ages one to three, which are Dutch Lady 123 and Dutch Lady 456. Since 1995, the company has continually been accredited with ISO 9001 certification. The strong emphasis is also placed on food safety with HACCP (Hazard Analysis Critical Control Point) System covering all its plants. Also, the company also has in place ISO 14001 Environment Management System and OHSAS 18001 (Occupational Health and Safety Assessment Series). The Company’s products are all halal-certified. The company’s factory is located in Petaling Jaya. Recently, Dutch Lady Malaysia is the market leader in key milk categories such as UHT milk, Sterilized milk and Growing-Up Milk. 3
  4. 4. Recent Development Year 1995 Dutch Lady Malaysia been accredited with ISO 9001 certification Year 1995 The Hazard Analysis and Critical Control Point (HACCP) certification has been awarded to Dutch Lady Malaysia for all its processing and packaging plants. Year 1999 Dutch Lady Malaysia attained certification under the new OHSAS 18001 which contribute to the protection of employees, visitors and contractors from hazards Year 2004 Dutch Lady Malaysia attained certification under the new ISO 14001 Year 2004 Dutch Lady Malaysia received the “NPC productive” Awards. Year 2007 Dutch Lady Malaysia received “The Reader’s Digest Superbrands Gold” Awards. Year 2010 Dutch Lady Malaysia received the “Putra Brand” Awards. Extra award Dutch Lady Malaysia receives the “Halal certification for local and international markets” and the halal certificate issued by JAKIM is renewed every two years. 4
  5. 5. Profitability Ratio (ROE) Return on Equity (NPM) Net Profit Margin (GPM) Gross Profit Margin (SER) Selling Exp.Ratio 2012 = 123380 x100 % 237644 = 51.9% = 123380 x100 % 882179 = 14.0% = 346704 x100 % 882179 = 39.3% = 120676 x100 % 882179 = 13.7% (GER) General Exp. Ratio (FER) Financial Exp. Ratio 2011 = 108082 228313 x100% = 47.3% = 108082 810647 X100% = 13.3% = 304472 810647 X100 % = 37.6% = 106180 810647 X100% = 13.1% = 27472 x100 % 882179 = 3.1% = 2862 x100 % 882179 = 0.3% = 26134 810647 = 3.2% = 919 810647 = 0.1% 5 X100% X100%
  6. 6. Financial Stability Ratio 2012 Working Capital Total Debt (IT) Stock Turnover (DT) Debtor Turnover (IC) Interest Coverage 2011 = 308510 161786 = 1.91 = 1.91: 1 = 166640 382774 = 43.5% = 365 days = x100% = = = = = (535475/90114.5) = 61.4 days = 365 days 324466 135309 2.4 2.40: 1 139360 398514 35.0% 365 days (506175/83085) (882179 /26445) = 10.9 days = 59.9 days = 365 days (810647 / 55945) = 25.2 days = 6056+123380 = 3104+108082 3104 6056 = 21.4 times = 35.8 times Price/Earning Current share Ratio = price Earnings per share = 46.76 2.03 = 23.09 6 x100%
  7. 7. Interpretation During the year 2011-2012 periods, the ROE has ROE increased from 47.3% to 51.9%. This means that the owner is getting more return on his capital. During the year 2011-2012 periods, the NPM has NPM increased from 13.3% to 14.0%. This means that the owner is getting more profit from the sales. During the year 2011-2012 periods, the GPM has increased from 37.6% to 39.3%. This means that GPM the business is getting better in controlling the cost of goods sold. SER During the year 2011-2012 periods, the SER has increased from 13.1% to 13.7%. This means that the business is getting worse in controlling the selling expenses. During the year 2011-2012 periods, the GER has decreased from 3.2% to 3.1%. This means that the GER business is getting better in controlling the general expenses. FER During the year 2011-2012 periods, the FER has increased from 0.1% to 0.3%. This means that the business is getting worse in controlling the financial expenses. 7
  8. 8. Interpretation Working Capital During the year 2011-2012 periods, the WCR has decreased from 2.40: 1 to 1.91: 1. The business ability to pay off current liabilities is getting worse. In addition, it does not reach the minimum 2: 1 ratio. Total Debt During the year 2011-2012 periods, the TDR has increased from 35.0% to 43.5%. The Total Debt has increases. However, the debt level is still lower than 50% limit. During the year 2011-2012 periods, the stock Stock turnover has increased from 59.9 days to 61.4 Turnover days. The business sells the inventory become slower. During the year 2011-2012 periods, the debtor Debtor turnover has decreased from 25.2 days to 10.9 Turnover days. The business is more effective in collecting the debts. During the 2011-2012 periods, the interest coverage has decreased from 35.8 times to 21.4 Interest times. The business ability to pay its interest has Coverage decreased. Thus, it has already satisfied the minimum ratio of 5 times. 8
  9. 9. Interpretation P/E ratio measures how expensive a share is. The higher the P/E ratio, the more expensive a share is, and vice versa. According to the value that was P/E counted, the P/E of 23.09 means that an investor Ratio will need to wait for 23.09 years to recoup his investment. A conservative investor will normally pay no more than ratio of 15 for a share that he likes. 9
  10. 10. Investment Recommendation Dutch Lady Milk Industry Berhaddid not demonstrated good profitability and strong financial stability. However, its shares are available at a cheap price. In our opinion, we think that Dutch Lady Malaysiaat 2012 is not that profitable as the year 2011. Thus, we think that it would be wise to not invest in the company. According to the ratio calculations above, in terms of the profitability ratios, the Return on Equity (ROE), Net Profit Margin (NPM), Gross Profit Margin (GPM), and General Expenses Ratio (GER) are getting better at 2012 compare to 2011. The company is using more expenses and getting even worse at controlling their expenses at 2012 compare to the previous years. The other factors that Dutch Lady Malaysia (Dutch Lady Malaysia) is not recommended to be invest is because its working capital, total debt, stock turnover, debtor turnover, and interest coverage from the financial stability ratios are getting worse compare to the previous years. 10
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  15. 15. References  Dutchlady.com.my (1963). Dutch Lady::The Company: Company Profile. [Online] Retrieved on 7 November 2013. At http://www.dutchlady.com.my/en/home.asp?page=compan y&subpage=comp_profile  Dutchlady.com.my (1963). Dutch Lady: TheCompany: Introduction To Dutch Lady. [Online] Retrieved on 7November2013. Available at Introduction To Dutch Lady. At http://www.dutchlady.com.my/en/home.asp?page=compan y&subpage=intro_dutch  Huang, S. (2011). Dutch Lady Annual Report 2011. [Online] Retrieved on 7 November 2013 At http://www.dutchlady.com.my/sharedfiles/financial/files/DL _AnnualReport_2011.pdf  Huang, S. (2012). Dutch Lady Annual Report 2012. [Online] Retrieved on 7 November 2013 At http://www.dutchlady.com.my/sharedfiles/financial/files/DL _AnnualReport_2012.pdf  Dutchlady.com.my (1963). Dutch Lady: The Company: Introduction To Dutch Lady. [Online] Retrieved on 7November 2013. Available at Introduction To Dutch Lady. Athttp://www.dutchlady.com.my/en/home.asp?page=comp any&subpage=success 15

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