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SCHOOL OF
ARCHITECTURE, BUILDING AND DESIGN
FOUNDATION IN NATURAL AND BUILT ENVIRONMENT
BASIC ACCOUNTING (ACC 30205)
FINANCIAL RATIO ANALYSIS
GROUP MEMBERS: LOH MUN TONG (0323680)
TAN JIA SAN (0322406)
CALVIN WONG PING KET (0322481)
KIEW CHEE YUAN (0323297)
LECTURER: MS. TAY SHIR MEN
SUMMISION DATE: 4 FEBRUARY 2016
TABLE OF CONTENT
LOH MUN TONG (0323680) l TAN JIA SAN (0322406) l CALVIN WONG PING KET (0322481) l KIEW
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CONTENT PAGE
Background Study 3
Recent Development 4 - 6
Profitability Ratio 7 - 8
Financial Stability Ratio 9 - 10
Price Earnings Ratio (P/E Ratio) 11
Share Price 12 - 13
Investment Recommendation 14
Appendix 15 - 20
References 21
Brief History of LBS Bina Group Bhd.
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LBS began with one man’s vision in the 1980s – founded as a construction business by
Dato’ Seri Lim Bock Seng. After a decade of rapid growth, LBS ventured into the property
development sector in 1992 where it started its first project of Jelapang Maju Light
Industrial Park in Jelapang, Ipoh. Within a few years, its stable of projects established
LBS as a reputable developer and a dominant player in Malaysia’s property sector.
LBS Bina Group Bhd. is a management and investment holding company, which engages
in the property development business. It operates through the following segments:
Property Development, Management & Investment, Trading & Others, Construction, and
Racing Circuit.
The Property Development segment develops residential, industrial and commercial
properties.
The Management & Investment segment focuses on investment holding and provision
of management services.
The Trading & Others segment involves in trading of building material, insurance agent,
and selling of membership and covering insurance products.
The Construction segment undertakes in the building, project planning and
implementation contracting activities.
The Racing Circuit segment develops and manages racing circuit. The company was
founded on June 29, 2000 and is headquartered in Petaling Jaya, Malaysia.
More recently, the Group re-strategized its business model, launching a brand new
image, identity and direction as part of its long term objective to be an internationally
recognised developer, building and inspiring lifestyle spaces that enhance community
living.
As part of this new direction, the Group has extended its portfolio of quality homes to
the high-end market and has embarked on a progressive journey of change, which
includes the areas of product, customer experience, after-sales services, sustainability,
green technology and design.
LBS builds homes that meet the needs of Malaysians. For over 20 years, LBS has carefully
nurtured a reputation for delivering properties with unsurpassed quality that inspire and
enrich. By insisting on continually improving not only construction technologies but the
very latest in architectural trends, LBS lives up to its belief that Malaysians deserve
homes of the finest workmanship.
Recent Development
LBS Bina Group Bhd has lined up RM6 billion worth of new projects for launch in the
next three years from 2015 to 2017.
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In terms of gross development value (GDV), 60% is planned for Selangor, followed by
25% in Johor and 15% in Pahang.
Managing Director of LBS Bina Group, Datuk Seri Lim Hock San states that property
developer is targeting sales of RM1 billion this year compared with RM644 million
achieved in 2014, mainly on the back of BSP21 serviced residences, BSP Village shop
offices in Bandar Saujana Putra in the Klang Valley.
BSP21 HIGH RISE RESIDENTIAL LOCATED IN BANDAR SAUJANA PUTRA
BSP21 VILLAGE LOCATED IN BANDAR SAUJANA PUTRA
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SKYVILLA, D’ ISLAND RESIDENCE
For the first quarter of 2015, the group achieved sales of RM234 million, a 38% increase
compared with RM169 million in the first quarter of 2014.The improved sales was
mainly due to the positive response from the BSP21 serviced residence that is affordably
priced, which contributed 68% of the total sales in the first quarter of 2015.
Projects to be launched in 2015 include the BSP Village shop offices and BSP21 serviced
residence, Corallia semi-detached homes and SkyVilla condominium in D'Island
Residence in the Klang Valley.
These projects are offering up to some 2,600 units in total with a GDV of RM1.7 billion,
consisting of 81% (RM1.3 billion) residential projects and the remaining 19% (RM369
million) non-residential projects.
It expects to follow in 2016, with some 4,000 units launches in Selangor, Pahang and
Johor with a total GDV of RM2 billion; and by 2017, another 5,100 units with RM2.2
billion in GDV.
LBS's current land bank stood at 2,715 acres with a GDV of RM22.5 billion that will keep
the group busy for 10 years.
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Meanwhile, Using Guangdong as a corridor to form a closer connection, LBS Bina plan to
establish a cultural museum, one-stop centre and Made-In-Malaysia Excellence
exhibition hall within Zhuhai International Circuit (ZIC), a piece of land with a racing
circuit (Zhuhai International Circuit) that occupies some 264 acres. Is is made possible
with the strong support from Melaka state government
The cultural museum which will be showcasing the heritage and customary cultural of
Melaka promotes cultural interaction between Malaysia and China, further
strengthening Malaysia’s tourism industry, as well as attracting more international
companies to invest in Malaysia, will inevitably bring about the outlook for the
development of a thriving area of Melaka.”
Under a 60:40 joint venture between LBS and a Chinese government-linked company,
the development of the tourism project is expected to include a theme park, factory
outlet, car showroom, Malaysia cultural centre and hotel.
LBS Bina Group in this strategic collaboration with China aims to promote Malaysia and
Malaysian tourism as well as culture in both countries to further drive economic and
business growth in the future.
Profitability Ratio
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The following table shows the profitability ratio calculation and interpretation for LBS and
KLCI in the year 2012 and 2013.
Profitability Ratios 2012 2013 Interpretation
Return On Equity (ROE)
=7.55% =56.78%
During the year 2012-
2013, the business’
Return On Equity (ROE)
has increases from 7.55%
to 59.33%. This means
that the company is
getting more return from
the capital than last year.
Net Profit Margin Ratio
(NPM)
=7.65% =74.47%
2013, the business’ Net
Profit Margin (NPM) has
increases from 7.65% to
74.47%. This shows that
the company is getting
better at controlling its
overall expenses.
Gross Profit Margin Ratio
(GPM)
=28.69% =31.59%
2013, the business’ Gross
Profit Margin (GPM) has
increase from 28.69% to
31.59%. this shows that
the company is getting
better at controlling its
cost of goods sold
expenses.
General Expenses Ratio
(GER)
=13.24% =16.04%
General Expenses Ratio
(GER) has increase from
13.24% to 16.04%. This
shows that the business is
getting better at
controlling their general
expenses.
Financial Expenses Ratio
(FER)
=3.62% =2.84%
Financial Expenses Ratio
(FER) has decrease from
3.62% to 2.84%. This
shows that the business is
getting better at
controlling their financial
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expenses.
Financial Stability Ratio
The following table shows the stability ratio calculation and interpretation for LBS in the year
2012 and 2013.
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Stability
Ratios
2012 2013 Interpretation
Working
Capital
ratio
(WCR)
= 1.78 : 1 = 1.52 : 1
For every RM1 of
current liability in the
year 2013, the
business, LBS has 1.49
of current assets to pay
for it. It has a higher
ratio than 2012.
However, a business
should preferably have
a minimum of 2:1 of
current assets to
current liability to
ensure that the
business does not face
difficulties.
Total
Debt
Ratio
(TDR)
x 100%
= 63.29%
x 100%
= 56.58%
For 2013, the TDR is
lower than 2012,
having a TDR of
56.58% and 63.29%
respectively. As the
TDR is lower in 2013,
this results in a higher
amount of owner’s
equity. It is strongly
advised that a
business’ TDR does
not exceed more than
50% as it would have a
higher risk of
bankruptcy.
Inventory
Turnover
Ratio
(ITR)
365
= 15.79
= 16 days
365
= 18.09
= 19 days
It takes 19 days for the
business in 2013 to sell
one batch of goods.
The business in 2013
can sell goods rapidly,
generating more cash
quickly to pay off its
liabilities.
Interest
coverage
ratio
= 3.11 times = 27.19 times
LBS’s ICR is higher in
2013 than in 2012.
This means that the
business’ ability to pay
off its interest expense
in higher than 2012. In
the year 2013, MK
Land has enough profit
to pay its interest
expenses 27.19 times.
To avoid bankruptcy, a
business’ interest
coverage should not

Price Earnings Ratio (P/E Ratio)
2012
Basic earnings per share: RM 0.097
Current share price: RM 0.84
RM 0.84 / RM 0.097 = 8.7 times
2013
Basic earnings per share: RM 0.96
Current share price: RM 1.56
RM 1.56 / RM 0.96 = 1.6 times
The P/E ratio measures how expensive a share is. In the year 2012, the P/E ratio is 8.7 while
in the year 2013 the P/E ratio is 1.6. This means that the share in 2013 is less expensive
compared to the share in the year 2012. A P/E ratio of 1.6 indicates that an investor will need
to wait for 1.6 years to recoup his investment.
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Share Price
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Based on the graph above is the stock graph of LBS and KLCI on 1st
January 2015 to 31st December
2015 from Yahoo Finance.
The share price for LBS is RM 1.50 on 1st April 2015, and the index is 1826.31. At 1st May 2015, the
share price increase to RM 1.56 and the index decreases to 1818.27. The increase of share price is
(1.56 – 1.50)/1.50 = 4%, whereas the index changes is (1818.27 – 1826.31)/1826.31 = -0.44%. Hence
the performance of the company is better than the index.
The share price for LBS is RM 1.48 on 6th August 2015, and the index is 1,694.64. At 1st September
2015, the share price increase to RM 1.28 and the index decreases to 1609.21. The decrease of share
price is (1.28 – 1.48)/1.48 = -13.51%, whereas the index changes is (1609.21– 1,694.64)/ 1,694.64=-
5.04 %. Hence the performance of the company is worse than the index.
The share price for LBS is RM 1.28 on 1st of September 2015, and the index is 1,609.21. At 17th of
September 2015, the share price increase to RM 1.55 and the index increase to 1,681.54. The increase
of share price is (1.55 – 1.28)/1.28x100% = 21.09%, whereas the index changes is (1,681.54 –
1,609.21)/1,609.21x100%= 4.49%. Hence the performance of the company is better that the index.
The share price for LBS is RM 1.51 on 23th September 2015, and the index is 1613.17. At 7th
October
2015, the share price decrease to RM 1.41 and the index increases to 1689.25. The decrease of share
price is (1.41 – 1.51)/1.51 = -6.62%, whereas the index changes is (1689.25– 1613.17)/ 1613.17=
4.72%. Hence the performance of the company is worse than the index.
The share price for LBS is RM 1.45 on 11th November 2015, and the index is 1665.32. At 25th
November 2015, the share price decreased to RM 1.35 and the index increases to 1684.42. The
decrease of share price is (1.32 – 1.45)/1.45 = -8.97%, whereas the index changes is (1684.42 –
1665.32)/1665.32 = 1.15 %. Hence the performance of the company is worse than the index.
Since the fluctuation shows that the performance of LBS is worse than KLCI. Hence, by considering
the share price, it is recommended to not to invest LBS as when sometimes the KLCI increase, the
LBS decrease.
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Investment Recommendation
According to LBS’ profitability ratio, the return on equity (ROE), net profit margin (NPM)
and gross profit margin (GPM) has improved and showed positive signs for the business.
While the financial expenses ratio (FER) has decrease which is good for the company.
However, the general expenses ratio (GER) is slightly increase from the year 2012 to the year
2013, the overall profit has indicated that the business is doing fairly well. LBS’s ability to
pay off its current liabilities had slightly decrease from 1.78:1 to 1.52:1 and it did not satisfy
the 2:1 ratio of staying within the borderline of borrowing. Besides that, LBS’s total debt
ratio (TDR) showed that its total debt has decrease 6.71%, making it 56.58% in 2013. Having
the TDR below 50% ensured that the business will not have a higher risk of bankruptcy.
Their stock turnover has taken a shorter period of time so they took a shorter time to generate
more cash inflow, it enable the business to have more ability to pay off its liabilities.
Moreover, LBS’s interest coverage ratio (ICR) has also shown an improvement in the
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business’ ability to pay its interest expense. LBS earned more profit in 2013 compared to
2012.
LBS earned more profit in 2013 compared to 2012. In other words, the company has
demonstrated a decent profitability and financial stability and its shares are available at a
cheap price (P/E Ratio < 15) to warrant an investment. An investor will only need to wait for
a short period of time that is 1.6 years (19.2 months) as of 2013 to recoup his investment.
Based on the analysis above, LBS’s overall performance are actually increasing over the
year. However, It wold be not wise to invest in LBS when we look at its share price, most of
the period of the share price of LBS dropped when the KLCI increased, it shown that LBS is
faced some economy problem during the economy growth. Hence, it is recommended not to invest in
LBS currently.
Appendix
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References
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• http://quotes.wsj.com/MY/XKLS/LBS/company-people
• http://www.thesundaily.my/news/1375620
• http://www.lbs.com.my/about-us/corporate/overview-information/
• http://www.propertyguru.com.my/property-news/2015/9/108919/lbs-bina-group-
jiuzhou-signs-mou-for-upgrading-of-zhuhai-international-circuit-zic
• http://finance.yahoo.com/echarts?s=5789.KL+Interactive#{"allowChartStacking":true}
• http://finance.yahoo.com/q/hp?
s=5789.KL&a=02&b=27&c=2015&d=03&e=3&f=2015&g=d
• http://finance.yahoo.com/q/hp?
s=5789.KL&a=03&b=30&c=2015&d=04&e=1&f=2015&g=d
• http://finance.yahoo.com/echarts?s=
%5EKLSE+Interactive#{"allowChartStacking":true}
• http://finance.yahoo.com/q/hp?s=
%5EKLSE&a=02&b=27&c=2015&d=03&e=1&f=2015&g=d
• http://finance.yahoo.com/q/hp?s=
%5EKLSE&a=03&b=30&c=2015&d=04&e=1&f=2015&g=d
• http://finance.yahoo.com/echarts?s=5789.KL+Interactive#{"allowChartStacking":true}
• http://finance.yahoo.com/q/hp?s=5789.KL&a=11&b=27&c=2012&d=00&e=3&f=2013&g=d
• http://finance.yahoo.com/q/hp?s=5789.KL&a=11&b=27&c=2013&d=00&e=3&f=2014&g=d
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