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Company History & Business Hwa Tai Industries Berhad (HTIB) is one of the premier and longest established biscuit manufacturers in Malaysia. Established in 1962 and listed on the Stock Exchange Malaysia in 1992. Since then, this fast expanding company has grown to be one of the largest players in the biscuits industry in the country and produce a fine, wide range of superior quality biscuits. It has been successfully marketed domestically and internationally through HTIBs own vast and comprehensive distribution network. Our biscuits are marketed under the brand name or trademark of HWA TAI and LUXURY. We take pride in our excellent innovation and high quality products which have firmly entrenched us not only in Malaysia but also in over 50 countries around the world. We are keenly involved in the integrated supply chain of our products, from manufacture to sales to distribution throughout the entire trade channels. Due to our extensive and comprehensive distribution network, we are also carrying products / brands by other principals for the Malaysian market. Our Vision We aim to be a leading biscuits and confectionery manufacturer in the region known for its product quality and variety. Our Commitment HTIB is committed in producing the best quality biscuit products for our customers all over the world and creating business opportunities for our partners. We have more than 49 years of manufacturing experience and the ability to manage our entire value chain, from procurement of raw materials to distribution of finished products. From the company's very first beginning, we have recognized that the skilled and dedicated people who work for us are critical to our success. We expect high standards from our staff a team totally committed to the provision of the highest quality service in the business.

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Quality Assurance HTIB's dedication to quality is further reinforced by using the most advanced state-of-the art machinery and processing techniques to produce premium biscuits with distinct flavors and tastes. HTIB has developed an internationally recognized Quality Management System based upon MS ISO 9001:2000 to ensure that our products conform to international standards. Awards & Achievements As an active and enterprising company, we participated in the Monde Selection in Belgium with 4 of our products, i.e. Duchess Cookies, Sesamio, Siang-Siang cream crackers & Choose, and we were awarded with 2 gold & 2 silver medals respectively. In the year 2000, Hwa Tai Industries Berhad won two gold medals from the Monde Selection again for Luxury Original Calcium Crackers and Luxury Vegetable Crackers.

HTIB Today HTIB has successfully established a strong presence in Malaysia and has built up a wide international market. Today, our products can be found locally from small sundry shops to big hypermarkets, fast-food chains, airlines and other mass consumption industries. A total of 40% of our company's production is exported internationally to countries such as China, Taiwan, Hong Kong, Singapore, Brunei, USA, Mauritius, Middle East, Papua New Guinea, Maldives, Nigeria and 28 other countries. And we are still growing - support facilities are constantly being upgraded, with our continuous goal of producing the finest product ranges possible.

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1. Horizontal Analysis (Balance Sheet)

Definition:

also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.

120% 100% 80% 60% 40% 20% Total Non Current Assets 0% 2009 -20%
Total Non Current Assets 2009 2008 2007 3% 21% 3% Property, plant and equipment 3% 8% -1% Leasehold land Investment in an associate company Investment properties Prepaid land lease payments

Property, plant and equipment Leasehold land Investment in an associate company Investment properties Prepaid land lease payments

2008

2007

3% 0% 0%

2% -2% -1%

0% 100% 17%

0% 100% 3%

1.1 Horizontal Analysis for Non Current Assets Based on the graph above, the non-current asset basically is the investment of property, plant and equipments, leasehold land, investment in an associate company, investment properties and prepaid land lease payments. The non-current asset growth was the biggest in year 2008, that is 21% as compared to the year 2009 and 2007 which only have 3%. Meaning that compared to this three years, in 2008, Hwa Tai got higher of asset which is not easily convertible to cash or not expected to become cash within the next year.

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200% 100% 0% 2009 -100% -200% -300% -400% -500% -600% -700% Cash and bank balance Total Current Assets 2008 2007 Prepayments Fixed deposit place with licensed bank Tax recoverable Inventories Trade and other receivables

Total Current Assets

Inventories

Trade and Other receivables 9% 7% 2%

Prepayments

Fixed Deposit Place 0% 100% 0%

Cash and Bank Balance

Tax Recoverable

2009 2008 2007

4% -3% 4%

-24% 18% -15%

110% 0% 0%

7% -624% 65%

-53% 56% 80%

1.2 Horizontal Analysis for Current Assets Based on the graph, current assets include inventories, trade and other receivables, prepayments, fixed deposit place, cash and bank balance and tax recoverable. All this assets are readily to be converted into cash within one year in the normal course of business. Based on the result above, in 2009 and 2007, the current assets are higher compare to 2008. As we can see, total for non current 2008 is higher and the total current asset is lower. Trade receivable was at the highest in year 2009 when comparing year-to-year (9%). The lowest trade receivable trend is in 2007 (2%). Trade receivable trend dropped drastically in year 2007 from 2008 (7% dropped to 2%). This is in tandem with the economic trend. During good years, the trade receivable is good, and during bad times, the trade receivable is bad. Since experiencing an economic downturn in 2008, Hwa Tai decrease. Their cash reserves are remain positive in 2009 and 2007. During the economic downturn, the cash in 2008 moved to negative (-624%). By reason of this matter, Hwa Tai experienced losses in 2008.
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2007 Total Assets 2008

2009

0%

2%

4%

6%
Total Assets 4% 8% 4%

8%

10%

2009 2008 2007

1.3 Horizontal Analysis for Total Assets The total assets registered the highest in years, 2008 (8%) respectively. The increased in the year 2008 are due to: i. ii. iii. iv. v. vi. increased in investment on property, plant and equipments (8%) increased in inventories (18%) increase in investment properties (100%) increased in prepaid land and lease payment (100%) increased in fixed deposit place (100%) increased in noncurrent assets (21%)

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200% 100% 0% 2009 -100% -200% -300% -400% -500% -600% 2008 2007 Loans and borrowings Deferred tax liabilities Hire purchase liabilities Total Non Current Liabilities

2009 2008 2007

Total Non Current Liabilities 21% -58% -482%

Loans and Borrowings 21% 0% 0%

Deferred Tax Liabilities 0% 20% 100%

Hire Purchase Liabilities 0% 0% -470%

1.4 Horizontal Analysis for Non Current Liabilities

Noncurrent liabilities are the obligations of the firm that generally are due more than one year after the balance sheet date. The portion of noncurrent liabilities consists of loans and borrowings and hire purchase liabilities. In addition, deferred tax liabilities are an important component of liabilities for many companies. Based on the graph, in 2009, Hwa Tai posses the highest noncurrent liabilities (21%) compared to 2008 and 2007. These liabilities represent money Hwa Tai owes one year or more in the future. In 2009, Hwa Tai bought more assets in terms of transportation in order to expand their businesses after downturn in 2008.

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150% 100% 50% 0% 2009 -50% -100% -150% -200% 2008 2007

Trade and other payables Hire purchase liabilities Short term borrowings Loans and borrowings Term loans Bank overdraft Provisions Tax Payable Total Current Liabilities

Total Current Liabilities 2009 2008 2007 5% 17% 9%

Trade and Other Payables 21% 0% 0%

Hire Purchase Liabilities 0% 20% 100%

Loans and Borrowings

Term Loans

Provisions

Tax Payable

Bank Overdraft

Short Term Borrowings

-3% 0% 0%

0% 0% 100%

95% -93% -16%

11% -14% 0%

0% 100% 9%

0% 0% -470%

1.5 Horizontal Analysis for Current Liabilities Current liabilities are understood as all liabilities of the business that are to be settle in cash within the fiscal year or the operating cycle. Based on the data above, total current liabilities increase in 2008 (17%). Managing current liabilities is very important to Hwa Tai and other companys cash flow process and extended viability. The increase of current liabilities in 2008 is because of increase of other payable. In 2009, the current liabilities is lower because there are no hire purchase liabilities compare to another two years (2008, 2007).

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16% 14% 12% 10% 8% 6% 4% 2% 0% 2009 2008 2007 Total Liabilities

2009 2008 2007

Total Liabilities 6% 14% 6%

1.6 Horizontal Analysis for Total Liabilities The trend for total liabilities peaked in the year 2008, which is at 14%. This peaked is due to the increase in total current liabilities. This increase is due to the bank overdraft at 100%.

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0% 2009 -2% -4% -6% -8% -10% -12% -14% -16% Total equity 2008 2007

2009 2008 2007

Total Equity -2% -14% -3%

1.7 Horizontal Analysis for Total Equity Total equity is the net worth of business and includes such elements as the value of common and preferred shares. According to the data, the highest total equity is in year 2009 (-2%). In Hwa Tai situation, this company experience higher accumulated losses in three years. However, in 2009, the equity is increased from 2008.

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2.

Horizontal Analysis (Income Statement) Definition: also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.

40% 20% 0% 2009 -20% -40% -60% -80% -100%

Revenue 2009 2008 2007 -7% -9% -1% Cost of Goods Sold 10% 22% -36% Gross Profit -13% -3% -76%

2008

2007 Revenue Cost of Good Sold Gross Profit

2.1 Horizontal Analysis for Income Statement (Revenue, Cost of Goods Sold, Gross Profit) Based on the data, total revenue both the three year dropped into negative figure. However, the highest total revenue is for year 2007 (-1%). For cost of goods sold, the sale was highest in 2008 (22%). At this year, the more purchase of raw materials, consumables and inventories. The gross profit was at highest in year 2008, that is -3%. Second highest is in year 2009, that is -13%. The lowest gross profit is in year 2007 at -76%. This is in tandem with the revenue generated for that respective year.

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200% 100% 0% 2009 -100% -200% -300% -400% -500% 2008 2007 Profit/ Loss before Taxation Profit/ Loss after Taxation

Profit/ Loss before Taxation 2009 2008 2007 67% -386% 124%

Profit/ Loss after Taxation 81% -394% 134%

2.2 Horizontal Analysis for Income Statement (Profit before Tax and profit after Tax) Hwa Tai experienced the worst profit before tax (PBT) and profit after tax (PAT) in 2008 (-386% PBT and -394% in PAT). The decrease of PBT and PAT is due to the economic downturn that happened in 2008. However, during 2009 and 2007, PBT and PAT are higher compared to 2008.

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3. Ratio Analysis Definition: expresses the relationship among selected items of financial statement data. Financial ratio classified into three categories, liquidity ratio, profitability ratio and solvency ratio.

Current Ratio A liquidity ratio that measures a companys ability to pay short term obligations.

Current Ratio

2010

= = = =

Current Assets Current Liabilities 35,343,809 35,774,652 0.99 0.99 : 1

The ratio of 0.99: 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.99 of current assets.
Current Ratio
2009

= = = =

Current Assets Current Liabilities 36,746,539 37,634,489 0.98 0.98 : 1

The ratio of 0.98 : 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.98 of current assets.
Current Ratio
2008

= = = =

Current Assets Current Liabilities 35,795,328 45,486,169 0.79 0.79 : 1

The ratio of 0.79 : 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.79 of current assets.

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Current Ratio and Acid Test Ratio

Current Ratio Acid Test Ratio Series 3

0.99 0.8

0.98 0.83 0.79 0.65

2010

2009

2008

Based on the output of current ratio, for every three year, Hwa Tai ratio is under 1. Because of this matter, Hwa Tai would be unable to pay off its obligations. This data shows that the company is not in a good financial health but it does not mean that Hwa Tai will go bankrupt. Acid Test ratio This indicator to determine whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

Acid Test Ratio

2010

Cast + Short Term Investment + Receivables (Net) Current Liabilities = 28,530,006 35,774,652 = 0.80 = 0.80 :1

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Acid Test Ratio

2009

= =

Cast + Short Term Investment + Receivables (Net) Current Liabilities 31,403,261

37,634,489 = 0.83 = 0.83 :1 Acid Test Ratio = Cast + Short Term Investment + Receivables (Net) Current Liabilities = 29,411,898 45,486,169 = 0.65 = 0.65 : 1

2008

Acid test ratio for the respective three years shows that Hwa Tai always gain less than 1 ratio. Its shows that this company cannot pay their current liabilities and should be looked at with extreme caution. This acid test ratio is much lower compare to current ratio, it means the current assets for this company in highly dependent on inventory.

Receivable Turnover This ratio measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.
Receivables Turnover = Net Credit Sales Average Net Receivables = 77,016,224 25,424,055 = 3.03 = 3.03 times

2010

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Average collection period

2010

365 days Receiveables Turnover = 365 3.03 = 120.49 = every 120 days

A high ratio implies either Hwa Tai operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. Based on the output, Hwa Tai receivables are collected on average every 120 days.

Receivables Turnover

2009

= = = =

Net Credit Sales Average Net Receivables 72,125,922 27724051 2.60 2.6 times

Average collection period

2009

= = = =

365 days Receiveables Turnover 365 2.60 140.30 140 days

Based on the output, Hwa Tai receivables are collected on average every 140 days.

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Receivables Turnover

2008

Net Credit Sales Average Net Receivables = 80,245,698 29129452.5 = 2.75 = 2.75 times

Average collection period

2008

= =

365 days Receiveables Turnover 365 2.75

= 132.50 = 132 days

Based on the output, Hwa Tai receivables are collected on average every 132 days. From the data in the three respective years, Hwa Tai took mostly more than 100 days to collect debts from the creditor and it will cause problem in running the business. Furthermore, this matter will decrease the confidence of the investor to invest in this company. Inventory Turnover This ration showing how many times a company's inventory is sold and replaced over a period

Inventory Turnover

2010

= = =

Cost of Goods Sold Average Inventory (54,393,416) 5,735,449 -9.48 9.48 times

Days in Inventory

2010

365 days Inventory Turnover = 365 -9.48 = -38.49 = 38.49 days

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In 2010, 9.48 times Hwa Tai inventory is sold and replaced over a period. High inventory levels are seems unhealthy because it represents an investment with a rate of return of zero and it will give trouble to the company if the prices begin to fall.

Inventory Turnover

2009

Cost of Goods Sold Average Inventory = (49,769,251) 5684149 = (8.76) = 8.76 times = 365 days Inventory Turnover = 365 (8.76) = -41.69 = 41.69 days = Cost of Goods Sold Average Inventory = (63,838,577) 5855317.5 = (10.90) = 10.90times = 365 days Inventory Turnover = 365 (10.90) = -33.48 = 33.48 days

Days in Inventory

2009

Inventory Turnover

2008

Days in Inventory

2008

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Profit Margin This probability ratio measures how much out of every ringgit of sales a company actually keeps in earnings.

Profit Margin

2010

= Net Income Net Sales = 385,127 77,016,224 = 0.01 = 0.50 = 0.50%

Profit Margin

2009

= Net Income Net Sales = 2,051,989 72,125,922 = 0.03 = 2.85 = 2.85%

Profit Margin

2008

= Net Income Net Sales = 415,178 80,245,698 = 0.01 = 0.52 = 0.52%

Higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Based on the output in 2010, Hwa Tai got 0.50% profit margin. It means that the company has a net income of RM0.005 for each ringgit of sales. And this number did not show the good performance during 2010. Same goes to 2008, the company only has a net income of RM0.0052 for each ringgit of sales. However, this company had little increased their profit margin in 2009 which the company has a net income of RM0.0285 for each ringgit of sales.
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Asset Turnover It measures the amount of sales generated for every ringgits worth of assets.

Asset Turnover

2010

Net Sales Average Assets

= 77,016,224 56502750.5 = 1.363052654 = 1 times

Asset Turnover

2009

Net Sales Average Assets

= 72,125,922 59901160.5 = 1.20 = 1 times Asset Turnover

2008

Net Sales Average Assets

= 80,245,698 63626216.5 = 1.26 = 1 times

Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue. The higher the number the better. It also indicates pricing strategy, companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. But for Hwa Tai, they experienced low profit margin but still low in asset turnover.

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Return on Assets This indicator show how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. It also known as return on investment.

Return on Assets

2010

= Net Income Average Assets = 385,127 56502750.5 = 0.01 = 0.68 = 0.68%

Return on Assets

2009

= Net Income Average Assets = 2,051,989 59901160.5 = 0.03 = 3.43 = 3.43%

Return on Assets

2008

= Net Income Average Assets = 415,178 63626216.5 = 0.01 = 0.65 = 0.65%

ROA will tells company what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. The ROA figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. From the outcome from three respective years, Hwa Thai does
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not show the good ROA because they only got 0.68% for 2010, 3.43% in 2009 and 0.65% in 2008. We can conclude that, Hwa Tai earning less money on high investment. Return on Common Stockholders Equity This ratio show how many ringgit of net income the company earned for each ringgit invested by the owner.
Return on common Stockholder's Equity
2010

= =

Net Income - Preffered Dividends Average Common Stockholders' Equity 385,127 40042400

= 0.01 = 0.96 = 0.96% Return on common Stockholder's Equity

2009

= =

Net Income - Preffered Dividends Average Common Stockholders' Equity 2,051,989 40042400

= 0.05 = 5.12 = 5.12% Return on common Stockholder's Equity

2008

= =

Net Income - Preffered Dividends Average Common Stockholders' Equity 415,178 40042400

= 0.01 = 1.04 = 1.04%

From the result, it seems that in 2009, the owner of the company gain more profit compared to year 2010 and 2008.

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Return on Common Stockholders' Equity

6.00% 5.00% 4.00% Percentage 3.00% 2.00% 1.00% 0.00% 2010 2009 2008 Return on Common Stockholders Equity

From the graph, it shows that this company is not doing well because the percentages keep on fluctuating from three respective years.

Earnings Per Share The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. From the companys annual report, it already stated that the Earning Per share for Hwa Tai companys is RM1 for 2010, RM5 for 2009 and RM1 for 2008. From here we can conclude that, Hwa tai shows increasing rate during 2009.

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Price Earnings Ratio A valuation ratio of a company's current share price compared to its per-share earnings.

Price Earnings Ratio

2010

Market Price per Share of Stock Earnings Per Share = 0.56 1 = 0.56 = 0.56 times = Market Price per Share of Stock Earnings Per Share = 0.56 5 = 0.112 = 0.11 times = Market Price per Share of Stock Earnings Per Share = 0.56 1 = 0.56 = 0.56 times

Price Earnings Ratio

2009

Price Earnings Ratio

2008

In general, a high price earning suggests that investors are expecting higher earnings growth in the future compared to companies with a lower price earning. However, the price earnings ratio doesn't tell us the whole story by itself. It's usually more useful to compare the price earnings ratios of one company to other companies in the same industry, to the market in general or against the company's own historical price earning. It would not be useful for investors using the price earnings ratio as a basis for their investment to compare the price earning of a technology company (high price earning) to a utility company (low price earning) as each industry. It is important that investors note an important problem that arises with the price earning measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the price earning only as good as the quality of the underlying earnings number.
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Payout Ratio The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. For Hwa Tai, no dividend was paid or declared by the company since the end of the previous financial year. The directors do not recommend the payment of any dividends in respect of the financial year ended 31st December for the three respective year. Debt to Total Asset Ratio A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load.

Debt to Total Assets Ratio

2010

Total Debt Total Assets

= 16,029,961 55,460,793 = 0.289032308 = 28.90323079 = 28.90% Debt to Total Assets Ratio

2009

Total Debt Total Assets

= 15,632,505 57,544,708 = 0.271658429 = 27.16584295 = 27.10%

Based on the information of debt to total assets ratio for 2010 and 2009, the percentage of Hwa Tai is below than 30%. For this ratio, the higher percentage, it will give no benefits to the company because the company has to pay the higher interest to all their debt. Because of this matter, Hwa Tai have to pay less than 30% of their interest.

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Time Interest Earned A metric used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt. It is usually quoted as a ratio and indicates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy. Also referred to as "interest coverage ratio" and "fixed-charged coverage".

Times Interest Earned

2010

= =

Income before Income Taxes and Interest Expenses Interest Expenses

722,004 (336,877) = -2.14322735 = 2.14times Times Interest Earned

2009

= =

Income before Income Taxes and Interest Expenses Interest Expenses

2,221,382 (169,393) = -13.11377684 = 13.11times Times Interest Earned

2008

= =

Income before Income Taxes and Interest Expenses Interest Expenses

457,177 (41,999) = -10.88542584 = 10.88times

From these three respective years result, we noticed that ratio for TIE is decrease from year 2008 to 2010. We can say that this company has to struggle in order to survive the company performance and to gain higher profit margin. Basically, for a good company, they need to have higher TIE because they will become easier for them to pay all the interest.

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RATIO
Current Ratio Acid Test ratio Receivables Turnover Average Collective Period Inventory Turnover Days in Inventory Profit Margin Assets Turnover Return on Assets Return on Common Shareholder Equity Earnings Per Share Price Earnings Ratio Debt to Total Assets Ratio Time Interest Earned

2010
0.99:1 0.80:1 3.03times 120days 9.48times 38days 0.50% 1times 0.68% 0.96%

2009
0.98:1 0.83:1 2.6times 140days 8.76times 41days 2.85% 1times 3.43% 5.12%

2008
0.79:1 0.65:1 2.75times 132days 10.9times 33days 0.52% 1times 0.65% 1.04%

RM1 0.56times 28.9% 2.14times

RM5 0.11times 27.10% 13.11times

RM1 0.56%

10.88times

1.1 Summary for Liquidity Analysis, Profitability Analysis and Solvency Analysis

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Conclusion & Suggestion Based on the summary from financial statement analysis above, we can conclude that this company Hwa Tai has a very crucial time in 2008. The reasons why this company did not performance well is because of the economic condition that affect it production. Other than that, Hwa Tai have to compete with biggest competitors such as Hup Seng, Munchy and London Biscuits. As we looked at the current and acid test ratio, in three respective years, Hwa Tai just got below than1. From this result, we can say that, Hwa Tai is having a problem and unable to pay off all its obligations. In this three years (2008, 2009, 2010), the receivables turnover is around two to three times only. Meaning that, Hwa Tai collected their debts from the creditors in around 120 days to 140 days. It is a long period to regain the capital. Haw Tai also took a long period to store their inventory. They took 33 days to 41 days. The good inventory management can be implement if Hwa Tai take at least a week for their product to be store. Higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Hwa Tai highest profit margin is during 2009 (2.85%). The company did not gain many profit compare to others competitors. Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue. The higher the number the better. For Hwa Tai, they only got one times for assets turnover for the three respectively years and return on assets for Hwa Tai is higher at 2009. It shows that, Hwa Tai effectively converting their money in 2009 compared to 2008 and 2010.

From the conclusion above, Hwa Tai must make sure that they are efficiently managed their assets to gain higher profit. They also need to sell their inventory and not to collect the bad debt for a long period. Besides that, they need to manage the creditors in order to make sure they pay all the credit at a given period. In order to fully maximize their assets, they have to generate more income from collecting debt, reduce the days in inventory, reduce the average collective period and increase the current ratio and acid test ratio. The credit management must be well organized in order to success.

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