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Account assignment report finale
1. 1
School of Architecture, Building and Design
Foundation in Natural and Built Environment
Basic Accounting (ACC30205)
Assignment: Financial Ratio Analysis
Company Name: LBS Bina Group
Lecturer: Ms Tay Shir Men
Group Members:
Tan Jit Kim (0323854)
Loh Wen Jun (0323551)
Joshua Lim Sie Khai (0323959)
Alfred Loh Kai Xuan (0323581)
2. 2
Content
No Title Pages
1. Background study 3-4
2. Recent development 5
3. Profitabilityratio 6-7
4. Financialstabilityratio 8-9
5. P/E ratio 10-12
6. Investment recommendation 13
7. Appendix 14-23
8. Reference 24
3. 3
Background Study
LBS are an investment holding company. LBS build homes that meet the needs of
Malaysians. Over 20 years, LBS has carefully gained a reputation for delivering
properties with the highest quality that inspire and enrich people from around the world.
LBS are engaged in development of residential and commercial properties, Management
and Investment, which is engaged in investment holding and provision of management
services. Besides, LBS is also engaged in trading, which is trading in building material,
insurance agent, and selling of membership and covering insurance.
LBS have a high reputation in the construction industry. Not only is their technologies in
the construction industry is the best but they are also insisting on continually improving
their technologies. LBS is following the latest trend in the architectural world and also
following the rising technologies in the world now. LBS have a vision and lives up to it
which is they belief that Malaysians deserve homes of the finest workmanship. LBS
started in 1960 when one man suddenly realised his dreams in starting a business in the
construction industry. This man is Dato’ Seri Lim Bock Seng. Dato’ Seri Lim Bock Seng
founded the construction business in Petaling Jaya, Selangor. Within a few years of
starting their business,
LBS’ reputation in the construction industry began to raise a lot of clients vouched that
their service is good. As their reputation rise, the scale of projects that they receive is
bigger. This established LBS as a reputable property developer. Several of its well
publicised accomplishments were Taman Perindustrian Bukit Serdang Seksyen 14 in
Selangor, jointly developed with the 1992 Thomas Cup champions, Taman Pinggiran
Putra, Serdang and the township project at Bandar Saujana Putra. This trend of growth
has seen LBS become a dominant player in Malaysia’s property sector. They have high
hopes to spread its wings across the seas to China and hopefully the rest of the world.
4. 4
LBS FOUNDATION is launched on the 6th of June 2015 as a consolidated corporate
social responsibilities platform for the Group. It is aimed to strengthen the Group’s
corporate social responsibilities strategy as to improve the quality of life and to benefit
the community at large.
VISION The vision of the LBS Group is to be an internationally recognized developer;
building and inspiring delightful spaces that enhance community living. LBS Foundation
is aspires to create a strong and harmony society through improving the well being of the
community and promoting a sustainable development.
OBJECTIVES improving the quality of life of the community and carrying out the
sustainable development
EDUCATION Creating a better nation through providing financial assistance and better
learning environment to students and schools
COMMUNITY Building strong and harmony society by improving general well-being of
the underprivileged group and promoting heritage, sports, arts and cultural
ENVIRONMENT Protecting and preserving environment through education and
partnering programmes
HEALTH Improving the health and welfare of the needy group
5. 5
Recent Development
LBS build 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 also the very latest in architectural trends, LBS lives up to its belief that
Malaysians deserve homes of the finest workmanship.
Since then, the scenic lakes of Puchong, a habitat born of a vision of exquisite living for
the privileged few, surrounded the township of D’ Island Residence. At a glance, D’
Island had been launched in 2011. The size of the land is around 175 acres and the land
tenure, which is leasehold 99 years. The surrounding area of D’ Island is guarded which
has 3 tiers to enhance the security and the safety of the residences living there. Besides
that, the most common features and activities of D’ Island is that there is Landscape Lake
with aquatic features, parking and jogging tracks and around the area there are also
lakeside recreational facilities created for the residences. Last but not least, there are also
planned commercial and retailed areas located around there. In addition, the accessibility
of D’ Island of the four accessible highways, which are ELITE (Shah Alam to KLIA),
SKVE (Klang to Kajang), LDP (Puchong to Damansara) and KESAS (Shah Alam to
Ampang) are also beneficial to the residences as they can have an easy access to the
specific location.
There are also primarily education such as schools and university located within the
distance of D’ Island. Moreover, there are also renowned shopping mall and
entertainment centre such as IOI mall, Tesco and Giant. D’ Island has unbelievably
luxury homes amidst lush blooms and natural flora surrounding it. In other words, it is
one of the finest quality home developments, further made unique due to its prime
location, 15 minutes from the capital of Kuala Lumpur.
6. 6
ProfitabilityRatio
The following table shows the profitability ratio calculation and interpretation for LBS
Bina Group Berhad in the year 2012 and 2013.
Profitability Ratios 2012 2013 Interpretation
Return On Equity (ROE)
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑂/𝐸
× 100%
39,003,430
516,690,656.5
𝑥 100
=7.56%
397,323,654
699,735,858
𝑥 100
= 56.78%
In the of year 2012 the ROE is
7.65% and 56.78 in 2013.Higher
ROE in the year 2013 compared
to 2012 shows that the business
of LBS Bina Group is earning
higher returns of capital in
2013.
Net Profit Margin (NPM)
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
× 100%
39,003,430
509,644,355
𝑥 100
=7.65%
397,323,654
533,532,722
𝑥 100
=74.47%
The NPM for year 2012 is
7.65% and 74.47 for year 2013.
NPM for LBS Bina Group has
increased from the year 2012
and this indicates that LBS Bina
Group reduces its overall
expenses are low compared to
the year 2012. Thus, this will
result in higher net profit and
shows that LBS Bina Group
controlled their overall expenses
better in 2013.A higher NPM is
more likely to generate a higher
ROE.
Gross Profit Margin Ratio
(GPM)
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
× 100%
146,227,906
509,644,355
𝑥 100
=28.69%
168,577,154
533,532,722
𝑥 100
= 31.59%
In year 2012 the GPM is 28.69
and 31.59% in year 2013.This
had proved that 2013 had better
COGS expenses compare to
year 2012. A higher gross profit
that COGS expense is well
managed. A low COGS will
results in a higher gross profit,
and a higher net profit margin
(NPM) as well
General Expenses Ratio
(GER)
𝑇𝑜𝑡𝑎𝑙 𝐺𝑒𝑛𝑒𝑟𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
× 100%
67,470,147
509,644,355
𝑥 100
=13.24%
85,596,945
533,532,722
𝑥 100
= 16.04%
GER for 2012 is 13.23%and
16.04% for 2013.This indicated
that 2013 had a higher GER
than 2012. This mean the
general expenses are higher in
2013 compare to 2012.
7. 7
Financial Expenses Ratio
(FER)
𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
× 100%
18,457,247
509,644,355
𝑥 100
= 3.62%
15,170,850
533,532,722
𝑥100
= 2.84%
The GER for the year
2012 is 3.62% and
2.84% for year 2013.In
2012 had a higher FER
compare to 2013. This
shows a higher amount
of financial expenses in
2012.Thus, this mean
that financial expenses
in 2013 are well
managed than 2012 and
this will result a higher
net profit margin (NPM)
in 2013.
8. 8
Financial StabilityRatio
The following table shows the financial stability ratio calculation and interpretation for
LBS Bina Group Berhad in the year 2012 and 2013.
Liquidity Ratio 2012 2013 Interpretation
Working Capital Ratio
(WCR)
𝑇𝑜𝑡𝑎𝑙 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡
𝑇𝑜𝑡𝑎𝑙 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖 𝑒 𝑠
927,829,389
520,720,661
= 1.78: 1
925,492,766
609,399,483
= 1.52: 1
For every RM1 of
current liabilities, LBS
has 1.78 of current asset
to pay it off in 2012 and
1.52:1 in 2013.This
shows that 2012 had a
higher WCR compare to
2013.The business will
facing some difficulties
to pay the current
liabilities because both
of the ratio are less than
2:1.
Total Debt Ratio (TDR)
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
× 100%
908,176,834
1,435,008,317
𝑥 100
=63.29%
1,137,172,437
2,009,812,670
𝑥 100
= 56.58%
In 2012 63.29% if
business assets is funded
by liabilities In 2013,
56.58% of the business
assets is funded by
liabilities. For 2013 the
TDR had been decrease
by 6.71% from year
2012. Although both of
the TDR is slightly
above 50% but the
business is still safe
from bankruptcy
because the range to
face a higher rate of
bankruptcy still far away
Inventory Turnover Ratio
(ITR)
365 ÷
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
365÷
363,416,449
(13,593,510 + 17,850,045)
÷ 2
= 23 Days
365 ÷
364,955,568
(22,575,116 + 13,593,510)
÷ 2
= 20 Days
In year 2012 the
business inventory
turnover is 23 Days. In
year 2013 the business
inventory turnover is 20
Days. This show that the
business can sell its
goods at a faster rate by
3 Days compare to
2012.
9. 9
Interest Coverage Ratio
(ICR)
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒 + 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
18,457,247+39,003,430
18,457,247
= 3.11 times
15,170,850 + 397,323,654
15,170,850
= 27.2 times
In 2012 the business
interest coverage ratio is
3.11 times. In 2013 the
business interest
coverage ratio is 27.2
times. This means that
the business in 2013 has
enough profits to pay its
interest expenses by
27.2 times compare to
2012, which had an
increase of 24.09.
10. 10
Price Earning Ratio (P/E Ratio)
2012
Basic earnings per share: 9.7
Current share price: 0.86
(0.86/0.097) = 8.9 times
2013
Basic earnings per share: 96.09
Current share price: 1.55
(1.55/0.9609) = 1.6 times
The P/E ratio measures how expensive a share is. In the year 2012, the P/E
ratio is 8.9 times while in the year 2013 the P/E ratio is 1.6 times. This
means that the share in 2013 is less expensive compared to the share in the
year 2012. A P/E ratio of 8.9 indicates that an investor will need to wait for
8.9 years to recover his investment.
11. 11
LBS Bina Group Bhd (5789.KL)
FTSEBursa Malaysia KLCI (^KLSE)
Based on the graph above, it shows that the share price for LBS Berhad and index for
FTSE Bursa Malaysia KLCI. Before determining whether to invest in either in a
company or a overall market share KLCI, which company has a better percentage over
the time period from 31 December 2014 to 31 December 2015 must be understood.
Hence, 4 different points of time will be viewed to determine the performance of both the
graphs.
12. 12
First point of time, the share price for LBS Berhad is 1.6800 on 19 May 2015, and the
index for FTSE Bursa Malaysia KLCI is 1809.72. At 7 July 2015, the share price
decrease to 1.6000 and the index decrease to 1712.30. The decrease of share price is
(1.6000-1.6800)/1.6800 = -0.05%, whereas the index changes is (1712.30 – 1809.72)/
1809.72 = -0.05%. This is to say that the performance of the company is equally balanced.
At 6 August 2015 the share price is 1.4800 and the index for FTSE Bursa Malaysia KLCI
is 1694.64. At 1 September 2015, the share price decrease to 1.2800 and the index
decrease to 1609.21. The decrease of share price is (1.2800-1.4800)/1.4800 =-0.14%,
whereas the index changes is (1609.21-1694.64)/1694.64 =-0.05%. This is to say that the
performance of the company is worse than the index.
At 7 October 2015 the share price is 1.4100 and the index for FTSE Bursa Malaysia
KLCI is 1689.25. At 6 November 2015, the share price increase to 1.4400 and the index
increase to 1685.70. The increase of share price is (1.4400-1.4100)/1.4100 =0.021%,
whereas the index changes is (1685.70-1689.25)/1689.25 =-2.1%. This is to say the
performance of the company is better than the index.
At 26 November 2015 the share price is 1.3500 and the index for FTSE Bursa Malaysia
KLCI is 1683.09. At 30 December 2015, the share price increase to 1.4400 and the index
increase 1693.14. The increase of share price is (1.4400-1.3500)/1.3500=0.067%,
whereas the index changes is (1693.14-1683.09)/1683.09=5.97%. This is to say the
performance of the company is worse than the index.
By comparing the LBS Bina Group between with the overall market share for KLCI,
LBS Bina Group share most of the time is dropping, while FTSE Bursa Malaysia KLCI
there are some times where it dropped but not as bad as LBS Bina Group. Besides that,,
the 4 point of time that has been calculated shows that LBS Bina is not recommended for
investing in.
13. 13
Recommendation
According to our analysis and interpretation, the LBS Bina Group 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. Even though the general expenses
ratio (GER) had increase from 13.24% to 16.04% between the year 2012 and 2013, but
the overall profit had increased this shows that the business is profitable. Besides that, the
Financial expenses ratio (FER) had decreased from 3.62 to 2.84 in between year 2012
and 2013, this mean that the financial expenses in 2013 are well managed. The ability of
LBS Bina Group to pay off its current liabilities had slightly worsen from 1.78:1 to
1:52:1 this shows that the liabilities had increase, although it did not exceed the 2: 1 ratio.
Besides that, LBS Bina Group’s total debt ratio (TDR) showed that its total debt has
decreased by 6.71%, making it 56.58% in 2013. Although the TDR is slightly above 50%
but the business still be safe from bankruptcy because the range to suffer a higher rate of
bankruptcy still far away. For the inventory turnover, in year 2012 the turnover period is
23 days. However, it was faster by 3 days in 2013 to 20 days. This shows a good sign so
that the company can pay off more cash to pay off its liabilities. Moreover, LBS Bina
Group’s interest coverage ratio (ICR) is 3.11 times in 2012 and increase to 27.2 times in
2013, which had shown an improvement in the business’ ability to pay its interest
expense.
LBS Bina Group’s profit had increased 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 to warrant an investment. In the year 2012, the P/E ratio is 8.9
times and it decreased to 1.6 times in year 2013. This indicated that the share price in
2013 is less expensive compared to 2012. Since the P/E ratio in year 2012 is 8.9 times,
this shows that an investor will need to wait for 8.9 years to recover his investment. As
for year 2013, the investor will only be waiting for 1.6 years to recover his investment.
Based on our analysis above, LBS Bina Group’s overall financial ratios are actually
increasing all over the year although there are also some decreasing but it won’t affect
much to the company because the profit are increasing all over the year, this show that it
is a profitable business. In conclusion, it would be a good choice to invest in the LBS
Bina Group due to the P/E ratio because the time taken for investor to recover their
investment is pretty short.
14. 14
From our analysis to the share price of LBS Bina Group Berhad, the share price has
decrease most of the time in the year 2015.Futhermore, our country Malaysia is facing
economy recession in 2015.Thus, it is not encouraged for investor to invest in LBS Bina
Group Berhad in the year 2015 because the share price keep dropping most of the time in
year 2015. In conclusion, it not may be a good choice to invest in this company in the
year 2015.
25. 25
References
1. http://www.lbs.com.my/about-us/corporate/overview-information/
(History and Recent developments)
2. http://finance.yahoo.com/q?s=LBSB.KL&ql=1 LBS Bina Group Bhd
(5789.KL)
3 .
http://finance.yahoo.com/q;_ylt=AqyEOHZEmq3hZcMbSO5rh.nxVax_;_yl
u=X3oDMTFhcG1zOXE5BHBvcwMxMgRzZWMDeWZpU3ltYm9sTG9v
a3VwUmVzdWx0cwRzbGsDa2xzZQ--?s=%5EKLSE FTSE Bursa Malaysia
KLCI (^KLSE)
4.
https://attachment.fbsbx.com/file_download.php?id=974964365922845&eid
=ASu3sS0v6_l1RpccSaIQk-
YzoRCZhDs3Qx7Tf1Wot_HA4vaiGLg__YtIblXQghfsyvg&inline=1&ext=
1454507761&hash=ASsQr-qccM-Hu8bd (LBS Bina Group Berhad Annual
Report2012).
5.
https://attachment.fbsbx.com/file_download.php?id=1049066538485986&ei
d=ASssdrypjWMfmN5VZLLJsoSkbyHSQtmkNKQEUIBpIJ0dCAJrAQPK
DPXwvnJ0e4zWKE0&inline=1&ext=1454507780&hash=ASvW9PrKlEgO
cFnJ
(LBS Bina Group Berhad Annual Report2013.)
