Assignment - MK Land

SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
BACHELOR OF QUANTITY SURVEYING (HONOURS)
FIN60203 FINANCIAL MANAGEMENT
MARCH 2018 SEMESTER
MK Land Holdings Berhad
GROUP MEMBERS:
NO. NAME STUDENT ID
1. PANG KAI YUN 0319802
2. SAM WEI YIN 0320364
3. TRACE GEW YEE 0320269
4. YEO KAI WEN 0319844
5. CHOW KAH YIEN 0320300
6. AUDREY TING 0320247
LECTURER : MS TAY SHIR MEN
SUBMISSION DATE : 22 JUNE 2018

TABLE OF CONTENTS
CONTENT PAGE NUMBER
1.0 Corporate Overview
1.1 Vision and Mission
1.2 Subsidiary Company
1.3 Board of Directors
1.4 Key Management Team
1.5 Shareholders
3
4
4
6
8
9
2.0 The Principle Activities of the Company 10
3.0 Analysis of the Revenue Contributions of the Different
Segments
12
4.0 Evaluation of Current State of the Main Industry
4.1 Current size of the market
4.2 Prospects for future growth
4.3 Challenges facing the industry
17
17
18
18
5.0 Company’s Strengths and Weaknesses
5.1 Strengths
5.2 Weaknesses
20
20
20
6.0 Company’s Strategic Plans 21
7.0 Company’s Major Capital Investment and Major Sources of
Funding
7.1 Major Capital Investment
7.2 Major Sources of Funding
22
22
23
8.0 Evaluation on Financial Ratio
8.1 Liquidity
8.1.1 Current Ratio
8.1.2 Quick Ratio
25
25
26
27
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TABLE OF CONTENTS
CONTENT PAGE NUMBER
8.2 Activity
8.2.1 Average Payment Period
8.2.2 Total Asset Turnover
8.2.3 Inventory Turnover
8.2.4 Average Collection Period
8.3 Debt
8.3.1 Debt Ratio
8.3.2 Times Interest Earned
8.3.3 Fixed Payment Coverage Ratio
8.4 Profitability
8.4.1 Gross Profit Margin
8.4.2 Operating Profit Margin
8.4.3 Net Profit Margin
8.4.4 Return on Total Assets
8.4.5 Return on Common Equity
8.4.6 Earnings Per Share
8.5 Market Performance
8.5.1 Price-to-Earnings Ratio
8.5.2 Price-to-Book Ratio (P/B)
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
9.0 Conclusion and Recommendation 47
Reference 48
Appendices 51
2

1.0 Corporate Overview
MK Land Holding Berhad was an investment company. It first debut on the Main Board
of Kuala Lumpur Stock Exchange (KLSE), now known as Bursa Malaysia. In the year of 1999
on 27th
August, MK Land Holding Berhad becomes a Second Board of Manufacturing company
as a result of a reverse takeover. The founder of MK Land Holding Berhad is YBhg Tan Sri
Datuk (Dr.) Hj Mustapha Kamal bin Hj Abu Bakar. The headquarter is located in Petaling Jaya,
Malaysia. MK Land Holdings Berhad is one of the largest capitalised property companies with
the nine private companies owned by the founder. The paid-up capital of MK Land Holding
Berhad is about RM 1.2 billion.
MK Land Holding Berhad has operated in multiple segment, which is property
development, leisure, education and investment holding. Property development including
residential, commercial and mixed development and other related activities. The main property
development projects are Damansara Perdana and Damansara Damai in Petaling Jaya and
Meru Perdana in Ipoh. Leisure activities involve by MK Land Holding Berhad including resorts,
hotels, gold course and theme parks. The company also provides educational services.
Investment holding invests in subsidiaries and property investment.
3

1.1 Vision and Mission
Vision
To be a reliable organisation that deliver quality products and services on timely basis and
within cost.
Misson
To strive towards excellence in providing quality product and services through teamwork for the
betterment of the organization, society and nation, our endeavour - based on self - awareness,
conscience, independent will and imaginations - shall always be guided by correct principle and
value.
1.2 Subsidiary Company
No. Name of Company Principal Activities
1. BML Management Sdn. Bhd. Property maintenance services
2. Bukit Merah Resort Sdn. Bhd. Operator of resort and theme park
3. Centralpolitan Development Sdn. Bhd. Property development
4. Dominant Star Sdn. Bhd. Property development, owner of hotel and
golf course and investment holding
5. Duta Realiti Sdn. Bhd. Dormant
6. Golden Precinct Sdn. Bhd. Property rental and management
7. M K Land Resources Sdn. Bhd. Investment and property holding
8. M K Land Ventures Sdn. Bhd. Investment and property holding
9. M.K. Development Sdn. Bhd. Property development and property
investment
10. Medan Prestasi Sdn. Bhd. Property development, property investment
and investment holding
4

1.2 Subsidiary Company (Cont’d)
No. Name of Company Principal Activities
11. Melur Unggul Sdn. Bhd. Dormant
12. M.K. Training & Consultancy Sdn. Bhd. Dormant
13. Paramoden Sdn. Bhd. Property development
14. Paramount Innovation Sdn. Bhd. Dormant
15. Plato Construction Sdn. Bhd. General construction
16. Profil Etika (M) Sdn. Bhd. Dormant
17. Prominent Valley Bhd. Operator of golf club
18. Pujaan Pasifik Sdn. Bhd. Operator of hotel
19. Ritma Mantap Sdn. Bhd. Dormant
20. Saujana Triangle Sdn. Bhd. Property development, property
investment and investment holding
21. Segi Objektif (M) Sdn. Bhd. Property development, owner of resort
and theme park and investment holding
22. Sumbangan Berkat Sdn. Bhd. Operator of hotel
23. Tema Teladan Sdn. Bhd. Property development, owner of hotel an
investment holding
24. Vast Option Sdn. Bhd. Provision of educational services
25. Vibrant Leisure Sdn. Bhd. Property development
26. Zaman Teladan Sdn. Bhd. Property development
5

1.3 Board of Directors
PN. HJH FELINA BINTI TAN SRI DATUK
(DR.) HJ. MUSTAPHA KAMAL
Executive Chairman
MR. HONG HEE LEONG
Senior Independent Non-Executive Director
YBHG. DATUK KASI A/L K.L.
PALANIAPPAN
Non-Independent Non-Executive Director
MS. ANITA CHEW CHENG IM
Independent Non-Executive Director
6

1.3 Board of Directors (Cont’d)
PN. HJH JULIANA HEATHER BINTI ISMAIL
MR. LAU SHU CHUAN
Executive Director
YBHG. DATO’ TAN CHOON HWA @
ESTHER TAN CHOON HWA
7

1.4 Key Management Team
MR. K.MOHANACHANDRAN A/L K.R.
KUNJAN
Group Chief Executive Officer
MR. CHARLES DUNCAN
Senior General Manager
EN. MUSTAFA KAMAL BIN HAWARI
PN. NORIDA BINTI ABU KASSIM
MR. SUDHEV A/L SREETHARAN
Group Senior General Manager
8

1.5 Shareholders
No. Name Equity %
1. Mustapha Kamal Bin Abu Bakar, PhD 479,096,585 39.70 %
2. Kasi K. L. Palaniappan 193,164,815 16.00 %
3. Lembaga Tabung Haji 31,526,500 2.61 %
4. Dimensional Fund Advisors LP 12,661,900 1.05 %
5. Ung Yoke Hong 7,333,900 0.61 %
6. Tung Ah Kiong 6,020,700 0.50 %
7. Ooi Peng Cuan 4,400,000 0.36 %
8. Third Avenue Management LLC 3,448,500 0.29 %
9. Mah Siew Seong 3,380,000 0.28 %
10. Kho Poh Sing 2,700,000 0.22 %
9

2.0 The Principle Activities of the Company
MK Land Holding Berhad had involved in few segments. M K Land Holding operates in
three states in Malaysia which is Selangor, Ipoh and Kedah. The projects involve in Selangor
are Damasara Perdana, Damansara Damai, Taman Bunga Raya and Cyberia. The projects
involve in Ipoh include Bukit merah Laketown, Bandar Technopolis Perdana, Taiping Resort,
Klebang Putra and Meru Perdana. Ombak Villa at Langkawi, Kedah was also one of the
properties of M K Land Holding Berhad.
MK Land Holding Berhad had launched more than 48,000 units of various types of
residential and commercial property. In the year of 2017, M K Land Holding Berhad had sold
out more than 47,000 units. Besides, 65% of the properties out of 48,000 units are affordable
range of less than RM200,000 and the balance 35% are commercial and properties of higher
value. MK Landing Holding Berhad had developed a township project at Damansara Perdana
and Damansara Damai. The first residential development in Damansara Perdana is The
Rafflesia and the latest project was Armanee Terrace Condominium. Next, most of the
residential project at Damansara Damai is affordable homes. The latest project at Damansara
Damai is Residential Suasana. The Group has had a long history of providing affordable homes
in the Ipoh area with completed projects such as Taman Bercham Raya and Taman UK Raya
and Meru Perdana.
Ombak Villa at Langkawi, Kuala Melaka Inn, Bukit Merah Laketown Resort at Perak and
Taiping Golf and Country Club are leisure property by M K Land Holding Berhad. These leisure
properties cater the international and domestic tourism market. Ombak Villa offers a perfect
blend of traditional Malay architecture with modern contemporary interior designed suites and
villas. Guests may choose from the 76 units of Ombak Suites and two units of extravagance –
Seroja Suites or the luxurious Villa Seri Kasturi. Kuala Melaka Inn is a hotel consist of 69 room
which the location is perfect for the leisure and business at an affordable price. Next, Bukit
Merah Laketown Resort is also one of the leisure property owned by MK Land Holding Berhad.
Bukit Merah Laketown Resort is a nature splendor, fronting the magnificent 7,000-acre Bukit
Merah freshwater lake. There are many facilities and a hotel consist of 203 units of fully
furnished room. Taiping Golf and Country Club is nestled next to the dense jungle of Bukit Jana
and amidst a well-manicured tropical garden and tranquil lotus ponds. It is an ideal destination
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for golfers and outdoor enthusiasts as well as corporate guests seeking a venue for banquets,
meetings and conventions. Guests may choose to stay at The Jana, which offers a typical local
village experience.
MK Landing Holding Berhad had developed its business to educational segment. Lake
View College (LVC), formerly known as Bukit Merah Laketown Institute of Allied Health
Sciences (BMLIAHS), began to operate in July 2006 with 116 students enrolled in the Diploma
in Nursing course. This institution is established in the year 2005 under Vast Option Sdn. Bhd.
In January of 2013, the institution had introduced the Diploma in Occupational Safety and
Health (OSH) followed by the Diploma in Environment Health (EH). The purpose of introducing
a new course to the institution is to increase the population of the student.
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3.0 Analysis of the Revenue Contributions of the Different Segments
According to the data extracted from MK Land 2015 annual report, MK Land Holdings
Berhad had generated a revenue of RM 488,316,000.00 in year 2015 (deduction of elimination
with the total amount of RM 34,464,000). From the chart, we can conclude that the property
development generates the most revenue with the amount of RM 451,312,000.00 that weigh
86% of the overall revenue and compare to revenue of 2014, in the year of 2015 had increased
RM 6,815,000.00 of revenue. Besides, in 2015, the revenue from the leisure part has the
amount of RM 35,511,000.00 that weigh 7% of the overall revenue and compare to revenue of
2014, in the year of 2015 had decreased RM 7,338,000.00 of revenue. Moreover, in 2015, the
revenue from the investment holding part has the amount of RM 34,464,000.00 that weigh 7%
of the overall revenue and compare to revenue of 2014, in the year of 2015 had decreased RM
2,390,000.00 of revenue. Lastly, the education part generates a revenue of RM 1,493,000.00
that weigh 0.3% of the overall revenue and compare to revenue of 2014, in the year of 2015
had increased RM 92,000.00 of revenue.
Figure 3.1: Segment Information for year 2015
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Figure 3.2: Revenue Contributions of the Different Segments for year 2015
81% of the overall revenue and compare to revenue of 2015, in the year of 2016 had
decreased RM 163,921,000.00 of revenue. Besides, in 2016, the revenue from the leisure part
has the amount of RM 27,626,000.00 that weigh 8% of the overall revenue and compare to
revenue of 2015, in the year of 2016 had decreased RM 7,885,000.00 of revenue. Moreover, in
2016, the revenue from the investment holding part has the amount of RM 37,388,000.00 that
weigh 11% of the overall revenue and compare to revenue of 2015, in the year of 2016 had
increased RM 2,924,000.00 of revenue. Lastly, the education part generates a revenue of RM
1,798,000.00 that weigh 0.6% of the overall revenue and compare to revenue of 2015, in the
year of 2016 had increased RM 305,000.00 of revenue.
13

79% of the overall revenue and compare to revenue of 2016, in the year of 2017 had
decreased RM 120,813,000.00 of revenue. Besides, in 2017, the revenue from the leisure part
has the amount of RM 23,858,000.00 that weigh 11% of the overall revenue and compare to
revenue of 2016, in the year of 2017 had decreased RM 3,768,000.00 of revenue. Moreover, in
2017, the revenue from the investment holding part has the amount of RM 19,355,000.00 that
14

weigh 9% of the overall revenue and compare to revenue of 2016, in the year of 2017 had
increased RM 18,033,000.00 of revenue. Lastly, the education part generates a revenue of RM
1,914,000.00 that weigh 1% of the overall revenue and compare to revenue of 2016, in the year
of 2017 had increased RM 116,000.00 of revenue.
15

In conclusion, according to the data extracted from MK Land annual report for the year
2015, 2016 and 2017, MK Land Holdings Berhad had generation of revenue had been
decreasing rapidly. From the chart, we can conclude that the property development generates
the most revenue yet it had been decreasing greatly. Besides, the revenue from the leisure part
had been decreasing. Moreover, the revenue from the investment holding part increased from
the year 2015 to 2016 and decreasing from the year 2016 to 2017. Lastly, the education part
had been increasing for these three years.
Figure 3.7: Revenue Contributions of the Different Segments for year 2015, 2016 and 2017
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4.0 Evaluation of Current State of the Main Industry
4.1 Current size of the market
For property development, MK Land had a long history of providing affordable homes in
the Ipoh area. There are 1780 units out of the planned 2,583 units of residential and
commercial development have been completed and handed over to the buyers. There are
presently 189 units under the construction while the 109 units had just been launched for sale
and the remaining 505 units of houses and shops will be expected to start the construction work
in the early 2019. MK Land hope to achieve a better sale compared to the year of 2017
although it is tough to achieve it, but they do have a feeling that they are getting there to pursue
it.
For education, MK Land thinks that education is a long term business strategy. They
decide to rebrand the college as Lake View College, to diverse and increase the programme to
attract the foreign countries for enrollment. Today, Lake View College has a total of 156 of
students enrolled in 5 different courses which are Diploma in Nursing, Diploma in Accounting，
Diploma in Occupational Safety and Health, Diploma in Environmental Health and Diploma in
Hotel Management. They did expand gradually in introducing the marketing team, other
initiatives such as branding, market positioning, network of agent and online registration also
reward scheme to create awareness of the college and increase the number of students.
For leisure, MK Land also exploring and studying the feasibility of increasing the
capacity of the Resort in order to contribute towards the growing demand for the rooms by
2020. Besides that, the MK Land focused on the effort in promoting the Resort as a destination
for many purposes such as meetings, incentives, conferences and exhibitions (MICE) to attract
larger groups.
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4.2 Prospects for future growth
For the forward looking statement for MK Land, the main thrust for MK Land will focus
on the marketing and sales of the completed unsold units in Damansara Perdana, Damansara
Damai and Taman Bunga Rakyat also the sales of the launched Suasana project in Damansara
Damai and Meru Perdana and Klebang Putra in Ipoh. Besides that, MK Land is looking forward
to the residential sales to be the main driver for their revenue and profits as there is going to be
a continued oversupply of commercial property in Klang Valley. MK Land expects that the
competition from other development will be very keen in the years to come, so they are working
towards in delivering quality products on time also leveraging on their past experience to
develop communities with a strong sense of belonging and social interaction, who will work
towards and improving the environment that has been created in the townships. MK Land will
continue to play the role in property development, leisure and education industry in the country
of Malaysia.
4.3 Challenges facing the industry

K Mohanachandran, who was appointed as MK Land group CEO said that he noticed
that there is an overhang in the commercial and office space development in the market. Thus,
they have not launched any form of commercial developments for quite some times. Therefore,
MK Land rather concentrates on housing and residential developments and try to keep the
products below RM1 Million.
In addition, K Mohanachandran stated that there are not enough affordable housing
development as the major issue is the cost of the land. Is was known as fact that MK Land and
the other companies cannot get a cheap landbank in the Klang Valley, and MK Land have to
move out into the outskirts such as Bukit Beruntung, Rawang which they feel has the potential.
Also, they need to have a cheaper land to develop and provide more affordable housing also
the support of the infrastructure.
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An independent property consultant said that the property market in Malaysia was
expected to remain it weak. Besides that, in the findings of Napic surveyed out that there are a
quite of numbers of total unsold units which causes the property overhang. The property
overhang includes complete constructed with unsold units, under construction with unsold, also
with serviced apartments and others.
Figure 4.3: Total Unsold Residential Properties from year 2014 to year 2017
Knight Frank Malaysia stated that the property market in Malaysia was expected the
performance was derailed by oversupplied position in the main sub-sectors like high-end
residential, office and retail. This will affect some developers postponing their residential
launches whilst to clear the existing stocks by offering an attractive discounts and incentives.
19

5.0 Company’s Strengths and Weaknesses
5.1 Strengths
MK Land’s greatest strength is having the largest land in Damansara Perdana with an
extremely low cost. MK Land has been consistently able to acquire land at a comparatively
lower cost due to their highly discipline in adopting the policy of not buying land at very high
prices and make a wise decision once their criteria are met in the land acquisition.
Besides that, MK Land is able to secure the land consistently. MK Land buys land at a
lower cost in securing privatization projects. The four large privatization projects that are
currently undertaken are Damansara Damai, Damansara Perdana, Bukit Merah Laketown and
Bandar Lembah Beriah.
Furthermore, MK Land is considered the largest landowner near Kuala Lumpur and
Damansara Perdana compared to other property developers. They have about 6,800 acres
which have been approved and converted for development and 5,300 acres which are
undeveloped. Some of the 1,060 acres land is strategically located in Petaling Jaya and 540
acres in the group’s flagship development of Damansara Perdana and Damansara Damai.
Moreover, MK Land has developed core competencies in all the property market
segments. MK Land develops all the right mix properties like residential, retail and commercial.
MK Land readiness to invest substantial amounts to construct infrastructure, highways and
public parks. Hence, it makes the company a strong player in the country’s property.
5.2 Weaknesses
One of the MK Land’s weaknesses is small market capitalization. The company’s
market capitalization is ranged between RM200 million and RM2 billion, so it is considered a
small capitalization company. Besides that, MK Land has a weak dividend payout record where
there is no dividend has been paid in 2016.
20

6.0 Company’s Strategic Plans
Cash is needed for the growth of a company. A business needs to stress its priorities by
making sure they get the sufficient of capital to run their company. Stabilizing the finances of
the company is one of the ways the company can deal with financial stress. Therefore, MK
Land can stabilize their finances by marketing and sales of the completed unsold units in
Damansara Perdana, Damansara Damai and Taman Bunga Raya; and the sales of the
launched Suasana project in Damansara Damai and Meru Perdana and Klebang Putra in Ipoh.
The sales of the residential unit will be the main driver for the company’s revenue and profits as
there is going to be a continued oversupply of commercial property, especially in the Klang
Valley.
In the years to come, competition from other developments will be very strong. Hence,
MK Land have to work towards in building their brand by launching new products and delivering
quality products on time to the purchasers. The company needs to constantly try to offer better
customer service, product quality and marketing. Buyers always demand for the best solutions
for their specific need and hence differentiate the products will create tremendous value for the
users.
Moreover, MK Land plays a role in property development, selling or buying land will
fundamentally provide a myriad of advantages from other type of investment. MK Land can
have raw land investment by purchasing land with the intention of either developing it by
constructing some type of building or holding onto it for long term appreciation value. Raw land
offers the opportunity for MK Land to choose and develop their own development path from the
very beginning.
Finally, MK Land can create joint venture with others company to grow their business.
Creating a joint venture can help the company to gain more expertise without the need to hire
more specialised staffs. Joint venture can also help the company access to new and untapped
markets. It is better to have a good relationship with those in the same industry in order to have
a conducive environment to grow and expand their company.
21

7.0 Company’s Major Capital Investment and Major Sources of Funding
7.1 Major Capital Investment
In year 2015, MK Land has purchased RM 7,408,000 of property, plant and equipment.
Property, plant and equipment which was purchased includes freehold land, leasehold land,
buildings and resort properties, plant and machinery, motor vehicles, furniture, fixtures and
fittings, computers, office equipment, renovation, cutlery and kitchen utensils, and golf and
recreational equipment. Besides that, MK Land has invested RM 11,006,000 in money market
funds.
Figure 7.1.1: Cash flows from investing activities for the financial year ended 30 June 2015
buildings and resort properties, plant and machinery, motor vehicles, furniture, fixtures and
fittings, computers, office equipment, renovation, cutlery and kitchen utensils, and golf and
recreational equipment.
FIgure 7.1.2: Cash flows from investing activities for the financial year ended 30 June 2016
22

buildings and resort properties, plant and machinery, motor vehicles, renovation, furniture,
fixtures and fittings and equipment.
Figure 7.1.3: Cash flows from investing activities for the financial year ended 30 June 2017
7.2 Major Sources of Funding
In year 2015, the share capital of MK Land is RM1,207,262,000. Moreover, MK Land
has short-term borrowings of RM 5,6870,000 and long-term borrowings of RM 19,673,000.
Short-term borrowings include revolving credits, term loans and hire purchase payables while
long-term borrowings include term loans and hire purchase payables.
Figure 7.2.1: Equity and liabilities for the financial year ended 30 June 2015
23

In year 2016, the share capital of MK Land is same as in the year 2015, which is
RM1,207,262,000. Furthermore, MK Land has short-term borrowings of RM 10,960,000 and
long-term borrowings of RM 33,422,000. Both short-term borrowings and long-term borrowings
include term loans and hire purchase payables.
In year 2017, the share capital of MK Land has increased to RM1,216,296,000. Besides
that, MK Land has short-term borrowings of RM 27,250,000 and long-term borrowings of
RM 27,606,000. Both short-term borrowings and long-term borrowings include term loans and
hire purchase payables.
24

8.0 Evaluation on Financial Ratio
8.1 Liquidity
Ratio 2015 2016 2017
Current Ratio 1.33 1.44 1.62
Quick Ratio 1.09 1.17 1.29
25

8.1.1 Current Ratio
Figure 8.1.1: Current ratio for year 2015, 2016 and 2017
The current ratio is a type of liquidity ratio to measure a company’s ability to pay short
term and long term to meet the financial obligations. It compares a company current asset to its
current liabilities.
From year 2015 to year 2017, the current ratio of MK Land has increased each year. In
year 2015, the ratio is 1.33 increased to 1.44 in year 2016 and continue increase to 1.62 in year
2017. The number 1.33 in year 2015 means that the company has RM 1.33 in current asset for
every ringgit in current liabilities.
This increase shows that the company’s ability in paying off its current liability is getting
better in the following year and it satisfies the minimum ratio of 2:1. The increase in current ratio
from year 2015 to year 2017 is due to the decrease in current liabilities of MK Land from year
2015 to year 2017.
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8.1.2 Quick Ratio
Figure 8.1.2: Quick ratio for year 2015, 2016 and 2017
The quick ratio is a more conservative measure of liquidity using its quick assets to pay
off its current debt. It is also known as acid-test ratio. It compares the cash and current asset
(minus inventory) that can be converted into cash during the year with the liabilities that should
be paid within the year.
From year 2015 to year 2017, the quick ratio of MK Land has increased each year. In
year 2015, the ratio is 1.09 increased to 1.17 in year 2016 and continue increase to 1.29 in year
2017. The number 1.09 in year 2015 means that a company has RM 1.09 of liquid assets
available to cover each ringgit current liabilities.
This increase shows that the company’s ability using its cash and current assets in
paying off its current liability is getting better in the following year. The increase in quick ratio
from year 2015 to year 2017 is due to the decrease in current liabilities of MK Land from year
2015 to year 2017.
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8.2 Activity
Ratio 2015 2016 2017
Inventory Turnover (Times) 1.76 1.10 0.66
Average Collection Period (Days) 182.00 182.28 182.60
Average Payment Period (Days) 622.80 489.21 829.61
Total Turnover Asset (RM) 0.25 0.16 0.12
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8.2.1 Inventory Turnover
Figure 8.2.1: Inventory turnover for year 2015, 2016 and 2017
The inventory turnover is used to show how effective a company’s inventory is managed
by comparing the cost of goods sold with inventory.
The inventory turnover of MK Land shows a decreasing trend over the years. The
inventory turnover has decreased drastically in the last 3 years. The ratio dropped from 1.76
times in year 2015 to 1.10 times in year 2016 and keep declining to 0.66 times in year 2017.
The decrease in inventory turnover from year 2015 to year 2017 is due to the decrease in cost
of good sold of MK Land from year 2015 to year 2017.
A low inventory turnover rate shows that the company is not converting its inventory into
cash as quickly as before. The company may have an oversupply of stock or poor market
sales.
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8.2.2 Average Collection Period
Figure 8.2.2: Average collection period for year 2015, 2016 and 2017
Average collection period is used to measure the amount of time a company takes to
receive payment owed by their customers.
The average collection period of MK Land shows an increasing trend over the years.
The average collection period increased to 182.28 days in year 2016 when compared to 182
days in year 2015. In year 2017 there is only a slight increase of the average payment period.
An increasing of the average payment period shows that the company is collecting the
payments slower. It might due to the worsening of the economy that affect the customer cash
flows and causing the delay in payment.
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8.2.3 Average Payment Period
Figure 8.2.3: Average payment period for year 2015, 2016 and 2017
Average payment period is used to measure the number of days taken by the company
to pay off the credit purchases.
From the graph above, we can see that the average payment period of MK Land from
year 2015 to year 2016 has dropped from 622 days to 489 days which mean that MK Land
used shorter period to make payment to creditors in year 2016. However, the average payment
period sudden rise up to 829 days in year 2017.
An increasing of the average payment period in year 2017 may create risk for the
company’s liquidity position. The creditors will be unhappy, and may refuse to extend credit in
the future, or they may offer less favorable terms. Some creditors give companies a discount for
timely payments, the company may be paying more than it needs to for its supplies.
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8.2.4 Total Asset Turnover
Figure 8.2.4: Total asset turnover for year 2015, 2016 and 2017
Total asset turnover is used to measure the ability of a company to generate sales from
its assets. It compares the amount of sales or revenues with the total assets.
The total asset turnover of MK Land shows a decreasing trend over the years. The total
asset turnover ratio from year 2015 to year 2016 has decreased from RM 0.25 to RM 0.16. The
number 0.25 means that the company is generating RM 0.25 in sales for every RM 1.00
invested in assets. In year 2017, the total asset turnover dropped to RM 0.12.
The decrease in total asset turnover from year 2015 to year 2017 indicates that MK
Land is not using the assets efficiently. The total sales of MK Land are decreasing from year
2015 to year 2017.
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8.3 Debt
Ratio 2015 2016 2017
Debt Ratio (%) 39.78 35.53 28.75
Times Interest Earned (Times) 8.27 4.39 6.87
Fixed Payment Coverage Ratio (Times) 2.56 0.51 0.80
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8.3.1 Debt Ratio
Figure 8.3.1: Debt ratio for year 2015, 2016 and 2017
The debt ratio indicates the percentage of the company’s assets that are financed by
debt. It compares the company total debt to the total assets.
From year 2015 to year 2017, the total debt ratio of MK Land business has decreased
from 39.78% to 28.75%. In year 2015, the ratio is 39.78% and decreased to 35.53% in year
2016 and continue decreasing to 28.75% in year 2017. The company has a debt to asset ratio
of 39.78% in year 2015 means some form of debt has supplied about 39.78% of every ringgit of
the company’s assets.
The debt ratio is decreasing from year 2015 to year 2017 is due to the total debt on the
MK Land business has decreased. It shows that the company has more asset worth than the
liabilities and it is satisfying the 50% of the maximum limit. This means that MK Land has a
lower financial risk.
34

8.3.2 Times Interest Earned
Figure 8.3.2: Time interest earned for year 2015, 2016 and 2017
The times interest earned is used to measure a company’s ability to meet its debt
obligations. It shows how many times a company can cover its interest charges on a pretax
earnings basis.
From the graph above, we can see that the times interest earned of MK Land has
decreased to 4.39 times in year 2016 compared with 8.27 times in year 2015. Nevertheless, the
times interest earned in year 2017 has increased slightly to 6.87 times compared to year 2016.
The decreased in 2015 to 2016 shows that the business ability to pay its interest
expense is getting worse, but it is getting better in year 2016 to 2017 as there is a slight
increase in the times interest earned. In addition, a business should never fall below 5 times.
35

8.3.3 Fixed Payment Coverage Ratio
Figure 8.3.3: Fixed payment coverage ratio for year 2015, 2016 and 2017
The fixed payment coverage ratio is to measure a company’s ability to satisfy the fixed
charges such as interest expense and lease payments.
From the graph above, we can see that the fixed payment coverage ratio of MK Land
has dropped drastically from year 2015 to year 2016. It decreased from 2.56 times in year 2015
to 0.51 times in year 2016. However, the times interest earned slightly increase to 0.8 times in
year 2017.
The decreased from year 2015 to year 2017 shows that the MK Land ability to pay its
fixed payments is getting worse. This means that the company is more risky as the company
can barely pay its monthly bills.
36

8.4 Profitability
Ratio 2015 2016 2017
Gross Profit Margin (%) 42.77 48.59 59.11
Operating Profit Margin (%) 17.01 14.11 23.14
Net Profit Margin (%) 11.05 5.53 9.43
Return on Total Assets (%) 2.79 0.91 1.10
Return on Common Equity (%) 4.63 1.41 1.54
Earnings Per Share (RM) 0.04 0.01 0.02
37

8.4.1 Gross Profit Margin
Figure 8.4.1: Gross profit margin for year 2015, 2016 and 2017
Gross profit margin is a profitability ratio that calculates the amount of money left over
from sales after all cost of its products have been paid. Gross profit margin is important to show
how efficiently a company can produce and sell their product.
The graph above shows an increasing trend of the gross profit margin of MK Land. The
gross profit margin of MK Land has increased 5.82% in year 2016 when compared to 42.77% in
year 2015. In year 2017, the gross profit margin increased 10.52% and reached the peak of
59.11%.
The increase of gross profit margin from year 2015 to year 2017 shows that MK Land
has become more efficient in using its materials and labour to produce and sell products. The
higher the gross profit margin, the better the performance of the company in the industries.
38

8.4.2 Operating Profit Margin
Figure 8.4.2: Operating profit margin for year 2015, 2016 and 2017
Operating profit margin is used to examine how effective the company is in managing its
cost of goods sold and operating expenses that determine the operating profit. In other words, it
shows the remaining revenues after all the operating costs have been paid.
From the graph above, we can see that the operating profit margin of MK Land has
declined 2.90% in year 2016 when compared to 17.01% in year 2015. However, the operating
profit margin starts rising in year 2017 and reaches the highest point of 23.14%. In year 2017,
every ringgit of income, there is a remaining of RM 0.23 after the operating expenses have
been paid.
The operating profit margin decrease and increase from year 2015 to year 2017 is due
to the operating profit decrease and increase from year 2015 to year 2017. A higher operating
profit margin means that the company is making sufficient money from its operations to pay for
its operating costs. It also shows that the company has more money to cover non-operating
costs like interest expense.
39

8.4.3 Net Profit Margin
Figure 8.4.3: Net profit margin for year 2015, 2016 and 2017
Net profit margin is used to measure the percentage of revenue left after deducting all
the expenses, interest and taxes from the sales. The calculation shows the amount of profit a
business can obtain from the total sales.
The graph above shows that the net profit margin of MK Land has dropped 5.52% in
year 2016 when compared to 11.05% in year 2015. However, the net profit margin has
increased to 9.43% in year 2017.
The net profit margin decrease and increase from year 2015 to year 2017 is due to the
net profit decrease and increase from year 2015 to year 2017. A higher net profit margin shows
that the company is able to convert more of its sales into profits. It means that the company is
having a good cost control or having a strong pricing strategy.
40

8.4.4 Return on Total Assets
Figure 8.4.4: Return on total assets for year 2015, 2016 and 2017
Return on total assets is used to measure how effectively a company using its assets to
generate earnings.
From the graph above, we can see that the return on total assets of MK Land has
decreased drastically from year 2015 to year 2016. It dropped from 2.79% in year 2015 to
0.91% in year 2016. However, the return on total assets have increased slightly to 1.10% in
year 2017.
The return on total asset decreased and increased from year 2015 to year 2017 is due
to the net profit decreased and increased from year 2015 to year 2017. The greater the
percentage of return on total assets shows that the company is managing its assets more
effectively to generate income.
41

8.4.5 Return on Common Equity
Figure 8.4.5: Return on common equity for year 2015, 2016 and 2017
Return on common equity is a profitability ratio to measure the ability of a company to
generate profits from the investments of shareholders in the company.
From the graph above, we can see that the return on common equity of MK Land has
dropped drastically from year 2015 to year 2016. It dropped from 4.63% in year 2015 to 1.41%
in year 2016. The return on common equity have a slight increase to 1.54% in year 2017.
The return on common equity decrease and increase from year 2015 to year 2017 is
due to the net profit decrease and increase from year 2015 to year 2017. A higher percentage
of return on common equity shows that the company is using the investors’ fund effectively.
42

8.4.6 Earnings Per Share (EPS)
Figure 8.4.6: Earning per share for year 2015, 2016 and 2017
Earnings per share measures the amount of money that the shareholders earned per
share of outstanding stock. In other words, it is the amount of money each share of stock would
receive if all of the profits were distributed to the outstanding shares.
The earnings per share of MK Land is RM0.04 in year 2015 and dropped to RM 0.01 in
year 2016. However, MK Land’s earnings per share have slightly increased to RM 0.02 in year
2017.
The return on common equity decrease and increase from year 2015 to year 2017 is
due to the net profit decrease and increase from year 2015 to year 2017. A higher earnings per
share means that the company is more profitable and the company has more profits to
distribute to the shareholders.
43

8.5 Market Performance
Ratio 2015 2016 2017
Price-to-Earnings Ratio (Times) 8.08 23.61 18.27
Price-to-Book Ratio (Times) 0.36 0.32 0.27
44

8.5.1 Price-to-Earnings Ratio (P/E)
Figure 8.5.1: Price to earnings ratio for year 2015, 2016 and 2017
The price to earnings ratio is a ratio that measure a company’s current share price with
its earnings per share. It points out how much the investor is willing to pay for a stock based on
its current earnings.
From the graph above, the investors are willing to pay 8.08 times for every ringgit of
earnings in year 2015. In year 2016, the price earnings ratio increased to 23.61 times
compared to year 2015. However, the price to earnings ratio has decreased to 18.27 times from
year 2016 to year 2017. A higher price to earnings ratio indicates a positive future performance
and investors have higher expectations for future earnings growth and are willing to pay more
for this company’s shares.
45

8.5.2 Price-to-Book Ratio (P/B)
Figure 8.5.2: Price to book ratio for year 2015, 2016 and 2017
The price to book ratio is the ratio that used to compare the stock’s market value to the
book value per share of the reported equity on the balance sheet.
From year 2015 to year 2017, the price to book ratio has decreased from 0.36:1 to
0.27:1. In year 2015, the ratio is 0.36 decreased to 0.32 in year 2016 and continue declining to
0.27 in year 2017.
The decrease of price to book ratio from year 2015 to year 2017 shows that the shares
are not more valuable than what the shareholders originally paid. In addition, the ratio which
lower than 1 might indicate that the company’s stock may be undervalued.
46

9.0 Conclusion and Recommendation
MK Land has involve in multiple segment, which is property development, leisure,
education and investment holding. The core business of MK Land is property development.
Almost 80% of their revenue is generated from the property development. From year 2015 to
year 2017, the performance of MK Land is getting worse. In year 2017, the company posted a
net profit of RM 18.13mil, an improvement from year 2016 net profit of RM 16.31mil but much
lower than the RM 53.9mil in year 2015. The reason of the of the worsening performance may
due to the property market remain weak in year 2017 as there are a quite of numbers of total
unsold units which causes the property overhang.
Despite the worsening performance, the liquidity of MK Land is still increasing from year
2015 to year 2017 based on the current ratio and quick ratio. MK Land is still able to meet its
short-term financial obligations as their current liabilities is decreasing from year 2015 to year
2017. However, MK Land needs to pay more attention to the profitability of their company. They
need to generate more revenue to improve their profitability. Moreover, they also can attract
more investors to invest in their company to increase their market performance. Based on the
ratio, the company’s stock may be undervalued.
According to PublicInvest Research, the company lacks of near-term catalysts amid a
generally tough trading environment for the overall property sector. It is recommended that MK
Land should not focus on the marketing and sales of the completed unsold units. They should
not urgently looking to dispose assets if prices are not attractive enough. They should come out
with new projects or land sale. If not, with the current weak market environment, it will affect the
company’s earnings to drop further.
In conclusion, MK Land is still considered financially healthy and is still improving. It is
still worth to invest in MK Land.
47

REFERENCE
(n.d.). Retrieved May 7, 2018, from http://www.mkland.com.my/co_home.html
8893 Stock Price and Chart. (n.d.). Retrieved May 15, 2018, from
https://www.tradingview.com/symbols/MYX-8893/
CapitalCube. (2017, September 13). MK Land Holdings Bhd. :8893-MY: Earnings Analysis:
2017 By the Numbers : September 13, 2017. Retrieved May 26, 2018, from
http://www.capitalcube.com/blog/index.php/mk-land-holdings-bhd-8893-my-earnings-anal
ysis-2017-by-the-numbers-september-13-2017/
Global Property Guide. (2018, March 19). House prices static in Malaysia. Retrieved May
22, 2018, from https://www.globalpropertyguide.com/Asia/Malaysia/Price-History
Local property market continues to self-correct: Knight Frank Malaysia. (n.d.). Retrieved May
22, 2018, from
https://www.nst.com.my/business/2018/01/329939/local-property-market-continues-self-c
orrect-knight-frank-malaysia
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09ED6F300FDF7FDE08106E51&rd=1&h=bl31YuwOw2IDWoyzrWt_jw794Wbw-i1RHqPI
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Malaysian Property Market to Decline in 2018 | CSI PROP – International Properties
Investment. (2018, January 12). Retrieved May 22, 2018, from
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48

REFERENCE
MK Land drafts 5-year roadmap to boost profits. (2009, May 25). Business Times
(Malaysia). Retrieved May 18, 2018, from
http://www.highbeam.com/doc/1G1-200652374.html?refid=easy_hf
MK Land Holdings Berhad (MKLAND) Company Profile. (n.d.). Retrieved May 15, 2018,
from https://www.corporateinformation.com/Company-Snapshot.aspx?cusip=C458D1610
4. (n.d.). MK Land Holdings Berhad company : Shareholders, managers and business
summary | BURSA MALAYSIA: MKLH | 4-Traders. Retrieved May 7, 2018, from
http://www.4-traders.com/MK-LAND-HOLDINGS-BERHAD-6495358/company/
MK Land Holdings Berhad's Competitors, Revenue, Number of Employees, Funding and
Acquisitions. (n.d.). Retrieved May 20, 2018, from
https://www.owler.com/company/mkland
MK Land Holdings Bhd. (n.d.). Retrieved May 7, 2018, from
https://quotes.wsj.com/MY/XKLS/MKLAND/company-people
http://financials.morningstar.com/ratios/r.html?t=8893
Mk land holdings bhd. (n.d.). Retrieved May 20, 2018, from
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er=MKL:MK
https://quotes.wsj.com/MY/XKLS/MKLAND/company-people
MK Land project back on track. (2016, November 30). Retrieved May 22, 2018, from
http://www.theedgemarkets.com/article/mk-land-project-back-track#
MK Land project back on track. (2016, November 30). Retrieved May 22, 2018, from
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49

REFERENCE
MK Land seen under pressure due to 'unstable' earnings. (n.d.). Retrieved from
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-earnings
MK Land stays to merger. (n.d.). Retrieved May 22, 2018, from
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Land&submit=
MKLAND (8893): MK LAND HOLDINGS BHD - Overview | I3investor. (n.d.). Retrieved May
10, 2018, from https://klse.i3investor.com/servlets/stk/8893.jsp
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-earnings
50

APPENDICES
Appendix 1: Statement of Income for the Financial Year Ended 30 June 2015
51

Appendix 2: Statement of Financial Position as at 30 June 2015
52

Appendix 3: Statement of Cash Flow for the Financial Year Ended 30 June 2015
53

Appendix 4: Lease payment for the Financial Year Ended 30 June 2015
Appendix 5: Basic Earning per Share for the Financial Year Ended 30 June 2015
54

55

56

57

58

59

60

61

62

Appendix 16: Ratio Formula and Calculation
63

Appendix 16: Ratio Formula and Calculation (Cont’d)
64

Appendix 17: Market price per share as at 30 June 2015
65

Assignment - MK Land

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