General Principles of Intellectual Property: Concepts of Intellectual Proper...
Fm assignment
1. SCHOOL OF ARCHITECTURE, BUILDINGS AND DESIGN
BACHELOR OF QUANTITY SURVEYING (HONOURS)
FINANCIAL MANAGEMENT (FIN60203)
AUGUST 2018 SEMESTER
KEN HOLDINGS BERHARD
FINANCIAL ANALYSIS
Group Members :
NO. NAME STUDENT ID.
1 Goh Song Kit 0322013
2 Loo Siah Mong 0321995
3 Ranee Leow 0328173
4 Soo Yon Li 0322821
5 Wong Jia Jing 0327221
6 Yee Jyh Lin 0322408
LECTURER : MS TAY SHIR MEN
2. 2
Table of Content
1.0 About Ken Holding Berhad
1.1 Background
1.2 Board of Director
1.3 Vision, Mission and Core Value
1.4 Shareholding Listing
Page
4
5
6
8
2.0 Principle Activities
3.0 Analysis of Revenue Contribution
4.0 Current Green Building in Malaysia
5.0 Strength and Weakness
6.0 Strategic plans for seizing opportunities for facing challenges in its
industry
7.0 Major capital investments and major sources of funding
12
13
17
18
19
21
8.0 Evaluate Financial Condition & Financial Trend of Ken Holdings
Berhad
8.1 Liquidity
8.1.1 Current Ratio
8.1.2 Quick Ratio
8.1.3 Inventory Turnover
8.1.4 Average Collection Period
8.1.5 Average Payment Period
8.2 Activity
8.2.1 Return on Common Equity
8.3 Debt
8.3.1 Debt Ratio
8.3.2 Time Interest Earned
8.3.3 Fixed Payment Coverage Ratio
23
25
26
27
29
30
31
32
33
3. 3
8.4 Profitability
8.4.1 Total Asset Turnover
8.4.2 Gross Profit Margin
8.4.3 Operating Profit Margin
8.4.4 Net Profit Margin
8.4.5 Return on Total Asset
8.4.6 Earning per Share (EPS)
8.5 Market Performance
8.5.1 Price / Earning Ratio (P/E)
8.5.2 Price / Book Ratio (P/B)
34
35
36
37
38
39
40
41
9.0 Conclusion and Recommendation 42
Appendices 43
4. 4
1.0 About Ken Holding Berhad
1.1 Background
Ken Holdings Berhad began in the 1980s as a specialist contractor providing
engineering services and has since grown to be the reputable property development
company it stands as today. The KEN entail the dedication to detail and quality as it
continues to make its mark steadily as leaders in green building design.
Ken holding has a branch out some of large projects such as Menara KEN TTDI
situated within the affluent vicinity of Taman Tun Dr Ismail, Kuala Lumpur comprises
Platinum Grade office suites, a performing arts theatre, an art gallery, chains of food and
beverage outlets, a gymnasium, rooftop pool and sky bar and KEN Rimba Condominium
1 (KRC1) that seamlessly integrating contemporary functionality with modern aesthetic,
offering affordable green homes to the market.
Despite the challenging economic environment, the KEN’s achieved a
commendable financial performance with higher revenue of RM104.2 million as compared
to RM92.8 million in the previous year on the back of higher sales and progressive revenue
recognition from the KEN Rimba Condominium 1 project in Shah Alam. Correspondingly,
the profit before tax increased to RM62.9 million during the year.
5. 5
1.2 Board of Director
Senior Management Team
1. To’ Puan Lau Pek Kuan 2. Tan Chek Een
Executive Director Deputy Finance Director
1. Dato’ Tan Boon Kang
Group Executive Chairman
2. Tan Chek Siong
Group Managing Director
3. YAM Dato’ Seri Syed
Azni Ibni Almarhum Tuanku
Syed Putra Jamalullail
Independent Non-Executive
Director
4. Tan Moon Hwa
Executive Director
5. Dato’ Ir. Dr. Ashaari bin
Mohamad
Independent Non-Executive
Director
6. Sha Thiam Lu
Independent Non-Executive
Director
6. 6
1.3 Vision, Missions & Core Values
1.3.1 Vision
Recognizing the responsibilities as a developer and nation builder, we will aspire to
deliver sustainable, quality developments that exceed customers’ expectations.
1.3.2 Missions
1. Enhance shareholders’ value through sustainable resource management and sound
corporate governance that promotes steady earnings growth.
2. Committed to delivering sustainable quality homes that are efficiently planned and
innovatively designed on schedule.
3. Embrace sustainable practices to preserve the environment for future generations.
4. Create learning opportunities and a conducive working environment that promote
teamwork and work life balance for sustainable job satisfaction.
1.3.3 Core Values
We are hands-on and committed
We will accomplish, learn and coach effectively with our own hands-on experience. We
will commit ourselves at all times faithfully fulfilling our responsibilities as a developer
to the communities in which we operate.
We take pride in our work
We are proud of our KEN brand and we will keep our brand promise to constantly
improve our ability to contribute to our customers. We will be Careful, Mindful and
Thoughtful in all things that we do to fulfil our Vision Statement.
7. 7
We are innovators and we create value
We will continually innovate and create value for our brand to achieve world class
recognition.
We are part of the KEN Family
We will treat everyone in KEN as a family member and we will pool our abilities to
accomplish our shared goals. No matter how talented we are as individuals, without
cooperation and family spirit, we will be a company in name only.
We embrace sustainable practice – “Mottainai”
We must value the precious resources that we have and use them wisely, efficiently and
effectively. We will embrace sustainable practices and endeavors to create more value by
using lesser resources.
8. 8
1.4 Shareholding listing
1.4.1 Analysis by Size of Shareholdings
Size of shareholdings No. of
shareholders
Percentag
e (%)
No. of shares
held
Percentag
e (%)
Less than 100 shares
100 – 1,000 shares
1001 – 10,000
10,001 – 100,000
100,001 to less than 5% of
issues shares
5% and above of issues
shares
83
115
844
429
71
2
5.38
7.45
54.66
27.78
4.60
0.13
1,769
46,311
5,099,240
12,472,160
76,742,758
84,975,362
0.00
0.03
2.84
6.95
42.79
47.38
Total 1,544 100.00 179,337,600 100.00
Table 1.0
9. 9
1.4.2 Top Thirty Shareholder’s List
No. Name No. of shares hold %
1. Kencana Bahagia Sdn. Bhd. 64,549,638 35.99
2. SJ Sec Nominees (Tempatan) Sdn. Bhd.
Budaya Dinamik Sdn. Bhd.
20,425,724 11.39
3. SJ Sec Nominees (Tempatan) Sdn. Bhd.
Pledged Securities Account for Seloka Aman
Sdn. Bhd.
6,663,000 3,72
4. Tan Chek Siong 6,242,000 3.48
5. Tan Chek Een 6,000,000 3.35
6. Tan Chek Ying 6,000,000 3.35
7. Dato’ Tan Boon Kang 3,963,600 2.21
8. Tan Foo See 3,405,378 1.90
9. Kencana Bahagia Sdn. Bhd. 3,300,000 1.84
10. Teo Kwee Hock 3,132,500 1.75
11. Yeoh Phek Leng 3,060,000 1.71
12. Maybank Nominees (Tempatan) Sdn. Bhd.
Pledged Securities Account for Tan Kian Ling
2,640,000 1.47
13. CIMSEC Nominess (Tempatan) Sdn. Bhd.
CIMB Bank for Tan Kian Ling (MY2236)
2,500,000 1.39
14. To’ Puan Lau Pek Kuan 2,300,000 1.28
15. SJ Sec Nominees (Tempatan) Sdn. Bhd.
Pledged Securities Account for Adat Saga Sdn.
Bhd.
2,095,300 1.17
16. I-Wen Morsingh 1,687,000 0.94
17. To’ Puan Lau Pek Kuan 1,617,000 0.90
18. Tan Chee Koon 1,530,800 0.85
19. Liew Yoon Yee 1,436,000 0.80
20. Low Siew Choong @ Liew Siew Meng 1,265,500 0.71
21. Tan Moon Hwa 1,202,680 0.67
22. DB (Malaysia) Nominee (Tempatan) Sendirian
Berhad
Exempt An for Bank of Singapore Limited
1,131,700 0.63
23. CIMSEC Nominess (Tempatan) Sdn. Bhd.
CIMB Bank for Tan Kian Aik (PBCL-0G0496)
1,000,000 0.56
24. UOB Kay Hian Nominees (Tempatan) Sdn.
Bhd. Pledged Securities Account for Teo Siew
Lai
930,100 0.52
10. 10
25. Universal Trustee (Malaysia) Berhad
TA Islamic Fund
828,000 0.46
26. Liew Yoon Yee 700,500 0.39
27. Lim Pay Kaon 700,000 0.39
28. Cartaban Nominees (Tempatan) Sdn. Bhd.
AXA Affin General Insurance Berhad
632,300 0.35
29. Lau Chin Kok 623,000 0.35
30. Yeo Khee Huat 593,000 0.33
TOTAL 152,154,720 84.85
Table 1.1: List of Thirty Largest Shareholders
11. 11
1.4.3 Substantial Shareholders
Name of substantial
shareholders
No. of ordinary shares
Direct % Indirect %
1. Kencana Bahagia Sdn. Bhd. 67,849,638 37.83 - -
2. Dato’ Tan Boon Kang 3,963,600 2.21 83,766,638 46.71
3. To’ Puan Lau Pek Kuan 3,917,000 2.18 83,813,238 46.73
4. Anton Syazi bin Ahmad Sebi - - 20,425,724 11.39
5. Aryati Sasya bin Ahmad Sebi - - 20,425,724 11.39
6. Budaya Dinamik Sdn. Bhd. 20,425,724 11.39 - -
Table 1.2: Substantial Shareholders (As Shown In the Register Of Substantial
Shareholders)
To summarize, the 30 largest shareholders in Ken Holdings Berhad with the total
numbers share holds of 152,154,720 with 84.85% of the overall share of the Ken Holdings.
While on the other hand, substantial shareholder is defined under the Corporations Act to
be someone who owns 5% or more of the voting shares in a company. Kencana Bahagia
Sdn holding the most direct ordinary share with 67,849,638 with 37.87 %. While To’ Puan
Lau Pek Kuan holding the most indirect ordinary shares with 83,813,238 of 46.73%.
12. 12
2.0 Principle Activities
Ken’s Holding Berhad is mainly engaged in investment holding and also provide
management services around Malaysia. As for the principal activities of subsidiary
companies, they are branched into various sectors, such as property holding, investment
and development, specialist engineering services, geo-technical, civil engineering and
building works, land reclamation and marine engineering, property management and car
park management. The subsidiary companies are shown below.
Diagram 2.0
15. 15
Revenue of KEN Holdings Berhad are generally divided into a few segments.
Namely, Property Development, Management Fees, Construction Contract, Investment
Properties, as well as other income such as, Rental income, Interest income and Dividend
income. Analysis clearly show that Property Development segment contribute the most to
KEN Holdings Berhad’s revenue (Chart 3.1 & Table 3.1). Table 3.2illustrate the revenue
growth of the group which is generally positive, increases from year to year with an
exceptional drawback in year 2015.
In year 2013, revenue are segmented into property development and management
fees. Property development was RM 55,492,000 and management fees of RM 336,000. In
year 2014, both segment, property development and management fees had increased to RM
90,688,000 and RM 394,000 respectively. This shows an overall growth of 63.14% from
year 2013 to year 2014 (Table 3.2), despite facing tight lending policies by Bank Negara
Malaysia due to falling oil price.
However, in year 2015, analysis show a decrease in overall revenues. Property
development segment decreased 18.63%, from RM 90,688,000 in year 2014 to RM
73,789,000 in year 2015. In spite of decrease in property development, there is still a slight
increase in management fees segment. Management fees increases from RM 394,000 to
RM 477,000 in year 2015. The drawback of revenue in 2015 was due to depreciation in
Ringgit as a consequences of poor economic growth. Additionally, such sentiments are
expected to remain weak in the first half of 2016 as it steadily improves toward the second
half of the year.
In year 2016, property development and management fees each contributed
RM92,492.000 and RM 324,000 to overall revenue. Property development shows
improvement with an increase of 25.35% while management fees on the other hand
decreased 3.21%. The increment of property development due to new sales registered and
higher progress billings for KEN Rimba Condominium 1 project. Nevertheless, there is
16. 16
still an increase of 24.98% in overall revenue in year 2016 despite the challenging property
market.
Finally, for year 2017, overall revenue had increased 12.27% as compared to
previous year. However, there is a slight decrease in management fees of RM 306,000.
Engagement of two new segment into 2017 revenue, namely, Construction Contract and
Investment Properties had slightly contribute to the increase of overall revenue. Their
earning were RM 284,000 and RM 2,063,000 respectively. Not only that, property
development had also increase from RM 92,492,000 to RM 101,555,000 as a result of
upturn on sales made from KEN Rimba Condominium 1 project.
17. 17
4.0 Current Green Buildings in Malaysia
Malaysia’s construction industry has been registered positive growth during 2013-
2017. But the forecast period from 2018-2022, the industry will most probably to expand
but in a very slow pace. The main reason why green buildings will increase in the future is
because people are getting aware of the environmental conditions.
As compared a green building to a normal building, green building is so much more
energy efficient. According to the EPA, a single ENERGY STAR qualified home can keep
4,500 lbs of greenhouse gases out of the air each year. Location, Size and Building
Design.Green building starts with environmentally-sensitive land use. It also improves the
indoor environment quality so that the air inside the building is much fresher. It does not
only give benefits, but also gives opportunity for design innovation.
People in this era should start thinking about how beneficial it is for green buildings
to the environment. First off, the quality of living in a green building will increase the
environment by being more sustainable. Looking at long terms, it actually saves more
money as the future maintenance are not as much as compared to the normal buildings. As
for people who wants to invest in green building, it is an amazing idea as the resale value
will gradually increase overtime.
Well, there are reasons why green buildings are not widely implemented. To build
a green building, a significant amount of knowledge and education towards this industry
must be at the expert level. And the cost of construction at the start might be very costly,
workers of constructing the green building must also be skillful.
18. 18
5.0 Company’s Strengths and Weaknesses
The most appealing strength of KEN Holdings Berhad is their achievement in
Green Development. Since 2006, KEN Holdings Berhad was recognize as Malaysia first
Multiple award-winning green developer through a luxury condominium project, KEN
Bangsar. BCA Green Mark GOLDPLUS Award was the very first achievement of the
organization.
Aside from all the triumphs of achievements, KEN Holdings Berhad has also been
doing a great effort in leading the society by acknowledging the people about the benefits
of green buildings. And that is why they are the top developers and acting as a role model
to the other developers in Malaysia. Their main goal is to be aware of the environments by
reducing the pollution as well as waste in this industry. And yes, they are improving the
environment. The other thing is they are not putting an end into developing new ideas,
continue to strive for the better as they create value to the society. Health has been one of
the greatest issue to the society, and yet they are the one that human beings are looking for.
KEN Holdings Berhad, they develop the green buildings to increase health and productivity.
Through design elements like temperature and lighting control, use of low-VOC paints and
adhesives for better indoor air quality and the addition of indoor plants and natural air
ventilation, the health and productivity of building occupants can be increased drastically.
Well, there are definitely potential barriers to be faced by the company. First off,
the people might not understand how the green building sector may benefit them. The
reason being is because the public are not aware of the long term benefits, but instead they
looked at it in the short run. Other potential barriers would be the hinder growth are mostly
high cost of green technology solutions. The green materials usually incur a green premium
above the cost of standard construction which makes misconception to the public that these
buildings are costly. Not only that, the workers needed to construct green buildings are
needed to be extremely professional and skillful as the way to construct is different from
the usual construction.
19. 19
6.0 Ken Holding Berhad strategic plans for seizing opportunities and for facing
challenges in its industry
A company strategic plan is used to set for objectives, strengthen operations,
priorities and to ensure that the employees and stakeholders are working toward a common
goals. It is important that an organization have an efficient strategic planning in order to
achieve their goals. Ken Holding Berhad has its own strategy plans for seizing
opportunities to benefit the company and organization in the industry. Beside, Ken Holding
Berhand desire to bring sustainable and quality developments that can exceed their
customers’ expectation by recognizing their responsibilities as a developer and nation
builder.
In 2013, Ken Holding Berhad chose to make improvement on the Mass Rapid
Transit (MRT) Line between Sungai Buloh and Kajang as one of the strategic plan for
seizing opportunities. This will enhance openness in the suburban areas and increase the
demand for properties. In addition, it creates a huge turning point to put the country a step
nearer to turning into a developed nation by 2020 as it helps the economy and property
sector. Besides that, the other Infrastructure development in Malaysia includes East Coast
Rail Link (ECRL) , Mass Rapid Transit (MRT), Pan Borneo Highway and the Kuala
Lumpur-Singapore High-Speed Rail (HSR).
One of the strategic planning that Ken Holding Berhad had planned in the past few
year is to expand the Green Development, seizing the opportunities since there is not many
green development in Malayisa. To create a positive earning to the group in the next few
years, KEN Holdings tends to expand from green residential developments to mixed green
township development. Ken Holding had an agreement with Perbadanan Kemajuan Iktisad
Negeri Kelantan (PKINK) to work together on the first development in Kota Bharu,
Kelantan which located next to Kota Bharu Mall on Jalan Hamzah. Which show a strategic
location to provide great accessibility with the fully support of state government. Thus, it
will bring a new lifestyle to the local residential and the state economy.
20. 20
In addition, Ken Holding has meet the international green building standards and
also gained reputation in green developments. Ken Holding built on the foundation of
engineering expertise and credible properties for its developments to sustainable
development. They believe that continuously strive to provide affordable high rated green
developments will gain attraction from the younger working class and meet the growing
need for affordable homes.
Even though Ken Holding had its own strength to create opportunities for
development, however there are also some challenges faced in the property development.
In 2015, the property sector had faced few obstacles. For instance, the adjustment of
interest rate, rising of inflation and implementation of GST. One of the main problem is
rises of interest rate, which cause the demand of the property as the affordability of the
property increase and there is also oversupply issue in the property industry. In other words,
there are many competitors in this particular industry and the prices of the property had to
be decreased by the competitors in order to get more sales of the property.
21. 21
7.0 Ken Holding Berhad major capital investments and major sources of funding
Ken’s Holding Berhad has their capital investments in various sectors, such as
investment holding, property holding, investment and development, specialist engineering
services, geo-technical, civil engineering and building works, land reclamation and marine
engineering and property management. However, Ken’s Holding Berhad has their major
capital investments in investment holding where the company acts as a holding company
by owning shares of other companies. Below are the assets, which show the total amount
the company had their major capital investments in the last 3 financial years.
Diagram 7.0
22. 22
Ken’s Holding Berhad operates their business through a few major funding
resources. Firstly, Ken’s Holding Berhad raise fund by loaning and borrowing from long
term payable and short term payable. Besides that, the company generate money by selling
part of itself in the form of shares to investors, which is known as equity funding. Below
shows the total liabilities and equity that the company used in raising their fund in the last
3 financial years.
Diagram 7.1
23. 23
8.0 Evaluate Financial Condition & Financial Trend of KEN Holdings Berhad
8.1 Liquidity
Liquidity is defined as the ability to convert into cash with the assets of the
company quickly purchase or sell an asset without causing a drastic change in the asset's
price.
Liquidity can be measured by two approaches:
a) Comparing current assets and current liabilities to get current ratio
b) Examine the ability to convert account receivable and inventory into cash on a timely
basis to get acid test or quick ratio
8.1.1 Current Ratio
Chart 8.0 : Current Ratio
Current Ratio is used to compare a firm’s current asset to its current liabilities.
Equation of Current Ratio is used total Current Asset divided by Current Liability.
24. 24
As shown in the chart above, it is shown that Ken Holding Berhad had a average
enough uses of current assets to repay their current liabilities. Based on that chart above,
we can see that in Year 2013, Ken able to get back average of RM1.26 for every RM1 of
current liabilities. Moving on in the Year 2014, Ken’s performance is getting increasing
from RM1.26 to Rm1.77 for every RM1 of the current liabilities. However in the following
year 2015, the performance get worse when they only get RM1.29 for the RM1 of the
current liability. Situation got worse in 2016 where Ken only get RM1.19 for every RM1
of the current liabilities. But thing changed during the year of 2017 when the economic is
better and Ken’s performance boost up to RM2.30 for every RM1 of the current liabilities.
The situation of current ratio fluctuates but in overall Ken’s had a good ability to pay the
current liabilities with current assets in the latest year.
25. 25
8.1.2 Quick Ratio
Chart 8.1 : Quick Ratio
Quick ratio is defined as Acid Test Ratio to compares the cash and current asset
(minus inventory) that can be converted into cash during the year with liabilities that should
be paid within the year. This ratio provides a better measure of overall liquidity only when
a firm’s inventory cannot be easily converted into cash.
As the chart shown above, Ken Holding Berhad have only RM0.58 of liquidity
current assets to pay RM1 of current liabilities without inventories which was not a really
good sign of performance. However in 2014, the performance of Ken has slightly increase
RM0.11 to RM0.69 for RM1 of current liabilities without inventories. The performance
was slightly decrease again during the year 2015 to RM 0.62 to pay RM1 of current
liabilities without inventories. Economic in Year 2017 get worsen when the liquidity
become only RM 0.43 to pay the RM1 current liabilities. However in year 2017, the
economic seems to be recover as Ken’s performance increased a lot from RM 0.43 to
RM0.72 to RM1 of current liabilities.The situation of current ratio fluctuates from Year
2013 to Year 2016 but it gets very well on the Year 2017 when Ken has the ability to pay
the current liabilities without the inventories on that year.
26. 26
8.1.3 Inventory Turnover
Chart 8.2 : Inventory Turnover
Inventory turnover measures how many times the company can turn over its
inventory during the year to determine the liquidity of a firm’s inventory). A higher
inventory turnover value represents a higher ability in selling its inventory in the year.
According to the chart above, there is a significant increase in the inventory
turnover from year 2013 to 2014 as it increases from 0.38 to 0.62. It shows that in year
2014, the ability of the company to turnover its inventory is higher as compared to year
2013. Then in year 2015, it slightly dropped to 0.60 and followed by an improvement of
inventory turnover at 0.74 in year 2016. Generally, the inventory turnover of Ken Holdings
Berhad is better at each year from year 2013 to 2016. However in year 2017, it had a steep
drop to 0.54 of inventory turnover. It is not a good sign as it shows that the company only
manage to turnover its inventory 0.54 times in year 2017. It indicates that in year 2017, the
inventory turnover slowed down as compared to the previous year and might have excess
inventory. The ability of the company to sell its inventory fluctuates moderately throughout
these five years.
27. 27
8.1.4 Average collection period
Chart 8.3 : Average Collection Period
Year Calculation Figure
2012 Trade and other
receivables(BS)
23,981
2013 Trade and other
receivables(CF)
-8,755
15,226
2013 Trade and other
receivables(BS)
+15,353
Annual credit sales 30,579
Year Calculation Figure
2013 Trade and other
receivables(BS)
15,353
2014 Trade and other
receivables(CF)
-8,848
6,505
2014 Trade and other
receivables(BS)
+6,505
Annual credit sales 13,010
28. 28
Year Calculation Figure
2014 Trade and other
receivables(BS)
6,505
2015 Trade and other
receivables(CF)
-(7,957)
14,462
2015 Trade and other
receivables(BS)
+14462
Annual credit sales 28,924
Year Calculation Figure
2016 Trade and other
receivables(BS)
12,076
2017 Trade and other
receivables(CF)
-(5,545)
17,621
2017 Trade and other
receivables(BS)
+17,819
Annual credit sales 35,440
Average collection period indicates how long it takes to collect the firm’s
receivables. Company with short collection period tend to have a better cash flow.
The average collection period of Ken Holdings Berhad maintained at 183 days for
four consecutive years from year 2013 to year 2016. It then increase to an average
collection period of 184 days in year 2017. The graph above shows that year 2017 takes
Year Calculation Figure
2015 Trade and other
receivables(BS)
14,462
2016 Trade and other
receivables(CF)
-2,386
12,076
2016 Trade and other
receivables(BS)
+12,076
Annual credit sales 24,152
29. 29
one day longer to collect its payment as compared to previous years. Hence, the receivables
in year 2017 is slightly less liquid.
8.1.5 Average payment period
Chart 8.4 : Average payment period
Average payment period interprets the number of days needed by the firm to pay
off credit purchases.
The graph clearly shown that there is a drastic decrease in average payment period
from 1341 days in year 2013 to 279 days in year 2014. However, there is an increase to
844 days in year 2015. This might be due to the lack of cash flow. The situation has been
improving since year 2016 till year 2017 with an average payment period of 596 days and
336 days respectively. It indicates that firm has a good cash flow in year 2017 and is able
to pay off its creditors in a shorter period.
30. 30
8.2 Activity
8.2.1 Return on common equity
Chart 8.5 : Return on common equity
Return on common equity (ROE) is calculated to analyze the firm’s accounting
return on common stockholders’ investment. It shows how effective the firm is in using
the money received from common stockholder in generating income.
The ROE of Ken Holdings Berhad has increases from 11.38% in year 2013 to 15.05%
in year 2014. It then followed by a drastic drop to 10.06% in year 2015. The decrease in
ROE may be due to the increase in issuance of common stock which resulting the increase
in total equity and decrease in net income. There is a slight increase in year 2016 with a
10.91% of generated income. In the most recent year, Ken Holdings Berhad managed to
generate the greatest income of 16.79%. It is possible that in year 2017, Ken Holdings
Berhad reduces the issuance of common stock or practices share buybacks to reduces the
total equity.
31. 31
8.3 Debt
8.3.1 Debt ratio
Chart 8.6 : Debt Ratio
Debt Ratio indicates the percentage of the company’s assets that are financed by
debt. Having a high percentage of debt ratio represents the company has more asset
financed by debt, which means the company will be facing a higher financial risk.
From year 2013 to year 2014, the total debt ratio of KEN Holdings Berhad
decreases from 34.30% to 24.92%. However, the debt ratio of the company increases to
30.53% in year 2015. The company has its total debt ratio decreases again from 30.53% to
16.10% from year 2015 and year 2017.
As shown above, KEN Holdings Berhad is doing well in maintaining their debt
ratio, which resulting in lower financial risk to their company in the last 4 financial years.
32. 32
8.3.2 Times interest earned
Chart 8.7 : Time interest earned
Times Interest Earned explains the company's ability to service the interest
payments. It indicates whether the company is able to cover its interest expense with its
operating income available.
From the figure above, we can see that the times interest earned of KEN Holdings
Berhad has gradually increased year to year from year 2013 to 2017, which is 108.82 times
to 538.32 times. The increases indicated that the business’s ability to pay its interest
expense is getting better and better.
33. 33
8.3.3 Fixed payment coverage ratio
Equation = Earning before interest and taxes + Lease payments
Interest + Lease Pymt + {(Principal pymt + Preferred stock dividend) x [1/(1-T)]}
Year 2013 2014 2015 2016 2017
Earning
before
interest and
taxes
(RM’000)
28,257 43,739 31,912 36,945 62,867
Lease
payments
(RM’000)
Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Interest
(RM’000) 261 190 105 105 117
Principal
payment
(RM’000)
16,500 Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Preferred
stock
dividend
(RM’000)
Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Lack of
information,
assume 0
Taxation
(RM’000)
7,362 12,018 8,592 9,219 12,467
Table 8.1
Year 2013 2014 2015 2016 2017
Fixed-payment
coverage ratio
1.25 Lack of
information
Lack of
information
Lack of
information
Lack of
information
Chart 8.2 : Fixed payment coverage ratio
Fixed-payment coverage ratio measures the company's ability to meet all fixed-
payment obligation. However, this financial ratio cannot be completed due to lack of
information.
34. 34
8.4 Profitability
8.4.1 Total asset turnover
Chart 8.8 : Total asset turnover
The total asset turnover is a ratio that measures the effectiveness of the firm in using
its assets in generating sales.
Based on the graph above, it can be deduced that there is a drastic increase in total
asset turnover from 0.20 times in year 2013 to 0.32 times in year 2014. Then it is followed
by a steep drop to 0.22 times in year 2015. The low ratio of asset turnover shows that Ken
Holdings Berhad has a higher asset based but a smaller sales volume. Fortunately, there is
an improvement from year 2015 to year 2017 with an increase of 0.07 times. It can be
concluded that the total asset turnover is best in year 2014 as it is able to generate 0.32
times of sales with all the available assets.
35. 35
8.4.2 Gross profit margin
Chart 8.9 : Gross profit margin
Gross profit margin measures the percentage of each sales dollar remaining after
the firm has paid for its goods.
As shown in the graph above, the gross profit made from the total sales has been
gradually decreasing from 63.94% in year 2013 to 46.64% in year 2016. It indicates that
in year 2013, cost of goods sold is 36.06% of the total sales. Hence, the profit generated is
higher than the cost of goods sold. Unfortunately, in year 2016, the costs of goods sold
shoot up to 53.36%. It shows that the profit generated is lesser than the money spend on
purchasing goods. However, in year 2017, Kens Holdings Berhad manage to increase the
profit earned from total sales at 65.93%. The increase in the profit generated may be due
to the decrease in expenses in purchasing goods in order to maximise the profit.
36. 36
8.4.3 Operating profit margin
Chart 8.10 : Operating profit margin
Operating Profit Margin (OPM) measures the effectiveness of the company in
managing its cost of goods sold and operating expense that determine the operating profit.
It measures the percentage of each sales dollar remaining after excluding all costs and
expenses other than interest, taxes, and preferred stock dividends.
Based on the graph shown above, there is a decrease in OPM from year 2013 to
year 2016. It drops from 50.87% in year 2013 to 39.92% in year 2016. However, it plateau
in year 2017 where it reaches 60.44%. It indicates that the profit earned in year 2017 is
60.44% of the total sales. Moreover, Ken Holdings Berhad are better in managing the cost
of goods sold and operating expenses in year 2017 as compared to the previous years. Also,
it shows that the company is still able to make reasonable profit with remaining sales.
37. 37
8.4.4 Net profit margin
Chart 8.11 : Net profit margin
Net profit margin measures the percentage of each sales dollar remaining after all
costs and expenses, which are inclusive of interest, taxes, and preferred stock dividends,
have been subtracted.
The percentage of net profit margin has gradually decreased from 37.43% in year
2013 to 29.87% in year 2016. It is then followed by a growth in net profit margin in year
2017. In year 2017, the net profit margin reaches to 48.36% of the total sales. It indicates
that Ken Holdings Berhad managed their profit most efficiently in year 2017
38. 38
8.4.5 Return on total assets
Chart 8.12 : Return on total assets
Return on total assets (ROA) measures the overall effectiveness of the management
in generating profits with all its available assets.
There is an increase in ROA from 7.48% in year 2013 to 11.30% in year 2014.
However, in year 2015, the ROA experience a steep drop to only 6.99%. It gradually
increases to 7.76% in year 2016 and to 14.09% in year 2017. The raise from year 2015 to
year 2017 almost doubled. It shows that from year 2015 to year 2017, the firm is earning
more in return of its investment in assets. Therefore, the effectiveness in managing the the
profit generated with its available assets has reached its new height in year 2017 as it has
the highest return with 14.09%.
39. 39
8.4.6 Earnings per share (EPS)
Chart 8.13 : Earning Per Share
Year 2013 2014 2015 2016 2017
Net Profit 20,895 31,953 23,320 27,726 50,400
No. of
issued
shared 191,720 191,720 191,720 191,720 191,720
Table 8.3 : Data collection for earning per share
**base on annual report of 2017, issued shared are 191,720,000 numbers (assume
previous year are same as 2017)
Earnings per share (EPS) denotes the number of dollars earned during the period
on the behalf of each outstanding share of common stock. It indicates the profit available
for common stockholders from each outstanding share.
The graph above shows that the EPS increases from RM0.11 per share in year 2013
to RM0.17 per share in year 2014. Then it is followed by a drop to RM0.12 in year 2015.
From year 2016 to year 2017, there is an increase in EPS by 45%. It shows that the EPS
almost doubled from year 2016 to year 2017 with an earning of RM0.26 per share. The
constant increase in earnings might upraise stock price of the following year.
40. 40
8.5 Market Performance
8.5.1 Price/Earnings (P/E)
Chart 8.14 : P/E Ratio
Price/ Earnings (P/E) ratio evaluates the willingness of investors in paying for $1
of reported earnings.
The graph inclined from year 2013 to year 2014 at 17.51 times. Whereas from year
2014 to year 2015, the graph shows a steep increase where it reaches 145.11 times in year
2015. The increase in P/E ratio indicates that the investors are more willing to invest more
into Ken Holdings Berhad. Moreover, it also indicates that the company has a good
performance that will gain the trusts of fellow investors. However, there has been a drastic
decrease in P/E ration since year 2015. Year 2017 ended with rock-bottom P/E ratio of
only 26.13 times.
41. 41
8.5.2 Price/book ratio (P/B)
Chart 8.15 : P/B Ratio
Price/Book (P/B) ratio compares the market value of a share of stock to the book
value per share of the reported equity found in balance sheet. P/B ratio calculated by
dividing the market price per share with the equity book value share. A ratio that is greater
than 1 indicates that she shares are more valuable than what the shareholders have
originally paid.
P/B ratio of Ken Holdings Berhad has increased greatly from 6.30 times in year
2013 to 14.59 times in year 2016. It can be deducted that the firm has better growth
prospects relative to its risk in year 2015. Unfortunately, the P/B ratio drops drastically to
4.39 times in year 2017. It shows that the share value of Ken Holdings Berhad is now at
risk and may affect their future cash flow. They can increase their market price per share
in order to improve the P/B ratio.
42. 42
9.0 Conclusion and Recommendation
All in all, the cash flow of KEN Holdings Berhad is considered as above average.
From all the past historical data of the liquidity of this company, they are doing better and
better each year. 2017 is the year that they had the least liabilities with an average total
current assets which makes their cash flow more liquid. The company’s inventory turnover
can be seen as a weaker side as the data shows a decrease in cost of goods sold. A higher
inventory turnover value means the higher ability in selling inventory throughout the year.
Hence, they should improve their marketing strategies in order to sell more of their
products. Furthermore, they are improving in their average payment period, this might be
the reason their liquidity is improving.
In the company’s investing activities, it has proven that the company made use of
their stockholders’ investment wisely yet getting a better return as compared to year 2013
and 2017. This company has a very low financial risk as the total debt is only 16.10% in
the year 2017, which has gradually improved from 2015.
Moving on to the company’s profitability, they are selling at a slow improving pace,
which makes them improve little by little every year. In the year 2017, statistic has shown
that the profit generated is higher than the cost of goods sold. Looking through the
company’s net profit, it is obvious that the company’s revenue is increasing, and yet the
expenses have decrease, resulting a big margin in net profit.
KEN Holdings Berhad has such a good management in profits with all its available
assets. The most recent Return on Total Assets is the highest among the years back then.
This means that the firm is earning more in return of its investments assets. The investors
are more willing to invest back in 2015 according to the Price/Earning Ratio. This can be
conclude that in 2015, the company has more projects developing in the society. The share
price of a company is essential as it indicates the performance as well as the profitability
in the company.
