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MARKS
(GROUP)
PART A: TO BE COMPLETED BY STUDENT

Course Name/
Financial Business (FIN7101)
Course Code:

Lecturer: Assoc. Prof. Dr Nazrul Hisyam Ab Razak

Title of Analysis and Evaluation on Financial Performance of Selected Public Listed

Assignment: Companies (2017-2021)

Submission
Date: 12 November 2022
PART B: DECLARATION

I hereby declare that the assignment is based on my work except for quotations and citations that have
been duly acknowledged. I also declare that this assignment has not been previously or concurrently
submitted for credit, either at Putra Business School or elsewhere.
Name Matric No. Signature

Date: 12 November 2022

PART C: FOR OFFICE/LECTURER USE

Accepted by:
Signature: __________________________________________

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Remarks:
 GROUP ASSIGNMENT

ANALYSIS AND EVALUATION OF COMPANY PERFORMANCES

LISTED IN BURSA MALAYSIA 2017 - 2021

GROUP 1

NAME: STUDENT ID NO:

AZDZHARULNIZAM PBS21101107

USHA NARAYANAN PBS21101126

WILSON LEE YI GINN PBS20301268

NOR SYAHIDA ABD KADIR PBS21101020

SAZLIN BINTI ABDUL KHALID PBS20301260

MUHAMMAD AMIN BIN JAILANI PBS21101024

FINANCIAL BUSINESS (FIN7101)

ASSOC. PROF. DR NAZRUL HISYAM AB RAZAK

PUTRA BUSINESS SCHOOL

12 NOV 2022

TABLE OF CONTENTS

TABLE OF CONTENTS 1
LIST OF EQUATIONS 4
LIST OF TABLES 5
LIST OF FIGURES 6
INTRODUCTION 1
COMPANY 1 1
AEON CO MALAYSIA BERHAD -Syahida 1
COMPANY 3 1
PANASONIC MANUFACTURING MALAYSIA BERHAD - Wilson 1
NESTLE (MALAYSIA) BERHAD - sazlin 1
PETRONAS DAGANGAN BERHAD (PETDAG -5681) -Amin 1
ANALYSIS AND EVALUATION OF COMPANY 2
LIQUIDITY RATIOS 2
CURRENT RATIO 2
TIME SERIES ANALYSIS 2
CROSS SECTIONAL ANALYSIS 2
QUICK RATIO 3
TIME SERIES ANALYSIS 3
CROSS SECTIONAL ANALYSIS 3
CASH RATIO 4
TIME SERIES ANALYSIS 4
CROSS SECTIONAL ANALYSIS 4
ASSET MANAGEMENT RATIOS 5
DAYS SALES OUTSTANDING 5
TIME SERIES ANALYSIS 5
CROSS SECTIONAL ANALYSIS 5
AVERAGE PAYMENT PERIOD 6
TIME SERIES ANALYSIS 6
CROSS SECTIONAL ANALYSIS 6
INVENTORY TURNOVER RATIO 7
TIME SERIES ANALYSIS 7
CROSS SECTIONAL ANALYSIS 7
DEBT MANAGEMENT RATIOS 8
DEBT RATIO 8
TIME SERIES ANALYSIS 8
CROSS SECTIONAL ANALYSIS 8
DEBT-TO-EQUITY RATIO 9
TIME SERIES ANALYSIS 9
CROSS SECTIONAL ANALYSIS 9
EQUITY MULTIPLIER RATIO 10
TIME SERIES ANALYSIS 10
 CROSS SECTIONAL ANALYSIS 10
PROFITABILITY RATIO 11
GROSS PROFIT MARGIN 11
TIME SERIES ANALYSIS 11
CROSS SECTIONAL ANALYSIS 11
NET PROFIT MARGIN 12
TIME SERIES ANALYSIS 12
CROSS SECTIONAL ANALYSIS 12
RETURN ON ASSET 13
TIME SERIES ANALYSIS 13
CROSS SECTIONAL ANALYSIS 13
RETURN ON EQUITY 14
TIME SERIES ANALYSIS 14
CROSS SECTIONAL ANALYSIS 14
MARKET-TO-BOOK RATIO 15
TIME SERIES ANALYSIS 15
CROSS SECTIONAL ANALYSIS 15
PRICE EARNINGS RATIO 16
TIME SERIES ANALYSIS 16
CROSS SECTIONAL ANALYSIS 16
DUPONT ANALYSIS (CURRENT YEAR) 17
CROSS SECTIONAL ANALYSIS 17
CONCLUSION 17
APPENDICES 19
LIST OF EQUATIONS
LIST OF TABLES
LIST OF FIGURES
1. INTRODUCTION

Financial ratio analysis is the examination of a company's financial statements in order to

gauge its financial health and performance. The most common ratios used are liquidity, asset
management, financial leverage, and market value ratio which are included in this report.
There are two main types of financial statement analysis in this report:
a. Evaluating trends within the firm's financial position over time (time series of the past
5-years from 2017 to 2021), and
b. Comparing a company's performance to others in the same industry (cross sectional
analysis; consumer products and services).
Basically, there are three main groups who use financial ratios to make decisions about a
company: managers, equity investors, and creditors. Each group has a different focus when
they are evaluating financial ratios. Managers use financial ratios to make operational
decisions, such as whether or not to invest in new equipment or hire more staff. Equity
investors use financial ratios to decide whether or not to invest in a company and what price
to offer for shares. Creditors use financial ratios to decide how much interest to charge on
loans and whether or not to extend credit at all.
Additionally, trend analysis and DuPont analysis are also applied. Trend analysis is the
comparative study of financial statements to identify trends in a company's financial
performance. This information can be used to benchmark a company's performance against
its industry peers or to identify potential areas of improvement. Meanwhile, DuPont analysis
is a financial ratio that shows how a company is performing by breaking down return on
equity into three components: profit margin, asset turnover, and financial leverage.
The financial ratios and two extended analysis are important to deeply understand the
performance of selected companies included in this report, as below:

1.1. DUTCH LADY MILK INDUSTRIES BERHAD (DUTCH LADY)

Dutch Lady Milk Industries Berhad is a manufacturer of cow milk and dairy products in
Malaysia, Singapore, Hong Kong, Brunei, Philippines and Vietnam since the 1960s. It was
previously under Royal FrieslandFoods, a Netherlands-based multinational co-operative.
Dutch Lady Malaysia is currently a subsidiary of Friesland Campina, which was formed in
December 2008 as a result of the merger between Friesland Foods and Campina. Its current
products include growing up milk, UHT milk, pasteurised milk, sterilised milk, family
powdered milk, low fat and 0% fat drinking yoghurt, and low fat yoghurt.
The company started as Pacific Milk Industries (Malaya) Sdn Bhd on 28 May 1963 where it
was commissioned to produce sweetened condensed milk in its factory in Petaling Jaya,
becoming FrieslandFoods’ first production facility outside the Netherlands. It was
incorporated as a private joint-stock limited company and started with the production of only
condensed milk, before expanding into dairy products. Prior to the expansion, many of its
products began to be distributed to surrounding countries in Asia and Oceania.

On 24 September 1968, the company became the first milk company to be listed on the
countries Stock Exchanges of Kuala Lumpur and Singapore; and by 1975, changing its name
to Dutch Baby Milk Industries (Malaya) Berhad. Following the company modernisation, it
changed its name to Dutch Lady Milk Industries Berhad in 2000 and have been using the
ultra-high-temperature processing (UHT) and packaging technology since 1970s to produce
milk in the country.

The company continued to progressively manufacture and introduce new products into the
Malaysian market – sterilised milk were locally produced and sold in plastic bottles in 1983,
production of chilled milk products started in 1986, and fruit yoghurt and growing up milk
were introduced into the market in 1988. In 2011, Dutch Lady Malaysia was reported as the
market share leader in the growing up milk segment – with the Dutch Lady brand holding
40% of national market share.

As one of the leading dairy company’s in Malaysia, Dutch Lady Malaysia strive to continue
providing better nutrition for the nation and to continuously help build a stronger Malaysia
for generations to come. This helps to fulfill purpose of Nourishing Our Planet and People in
Every Stage of Life.

Today, DLMI is a 600-strong company that offers an extensive range of quality and delicious
milk based dairy products, from formulated milk powder, yoghurt drinks to fresh milk and
UHT, distributed nationwide to help Malaysians stay nourished and healthy to help them
move forward in life.

5-YEAR FINANCIAL SUMMARY

2
1.2. AEON CO. (M) BERHAD (AEON)

The Japan United Stores company or JUSCO was formed in Japan since 1969. Three
founders Takuya Okada, Kazugi Futagi, and Jiro Inoue, owners of different mid-sized retail
business were collaborated to create a conglomerate that provide Japanese the best value
produce and services.

Later in 1994, the company help modernizing Malaysian retail industry under the JAYA
JUSCO STORES SDN. BHD. They were listed on Kuala Lumpur Stock Exchange Main
Board in 1996. The company transformed to AEON CO (M) BHD in September 2004.

Align with the meaning of AEON in Latin i.e., eternity, their goal is to work together
endlessly with customers, stakeholders, and the community to create a future of limitless
possibilities. to date, this company consists of 34 AEON General Merchandise Store, 28

3
Aeon Mall, 9 AEON Maxvalu, 65 Aeon Wellness, 42 Daiso, and 4 Komai- So brand from
west to east Malaysia. They offered various range of products such as daily essentials,
household items, apparel, pharmaceuticals, and many others.

Apart from that, AEON also come up with E-Commerce Platform, that give customers easy
access their product offerings through online services. AEON Makan is the digital platform
for their F&B tenants and food operators within the vicinity of AEON Malls

With the vision of building the AEON Living Zone, their strategies are focusing on

· Enhancing the existing business model

· Energizing AEON people

· Enable New Retail Business Model.

· Entrepreneurial Data Driven Technology, and

· Empower Aeon Ecosystem

This company also committed to sustainability and dedicated to being a good corporate
citizen. In 2022, their total workforce is 8172. Their board comprises of 8 directors including
chairman.

This company was ranked Malaysia’s Top 10 brands for Customer Experience Excellence by
KPMG’s Global Customer Experience Report in 2021.

>

1.3. NESTLE (MALAYSIA) BERHAD (NESTLE)

Nestle's history begins with the establishment of the Anglo-Swiss Condensed Milk Company
in 1866. In 1867, Henri Nestlé created a revolutionary infant food, and in 1905, the company
he founded merged with Anglo-Swiss to form the Nestlé Group. During this time, cities
expand, and railways and steamships lower commodity costs, boosting international trade in

4
consumer goods. Nestle now has over 270,000 employees, over 2,000 brands, and a presence
in 186 countries. Nestle Malaysia's commitment to providing Malaysians with high-quality
products dates back more than a century. Nestlé began in Malaysia in 1912 as the Anglo-
Swiss Condensed Milk Company in Penang, and later moved to Kuala Lumpur in 1939 due
to growth and expansion. Nestlé has been nourishing Malaysians with quality brands and
products since 1912, while maintaining Halal excellence and integrity. Following the
country's independence in 1957, there was a demand for more job opportunities and product
options.

Following that, in the mid-1960s, Nestle launched the Culinary Products Division, producing
innovative culinary solutions under the well-known MAGGI brand. As a result, we
established our first manufacturing facility in Malaysia. Nestlé Malaysia now has 6 factories
and employs over 5,000 people across the country, producing over 500 Halal-certified
products. Many of our key brands, such as Milo, Maggi, Nescafé, and Kit Kat, have become
household names in Malaysian households for generations. Nestle is firmly committed to
offering the very best in quality, nutrition, and taste, having been present in the nation and in
the hearts of Malaysians for over a century. In terms of consumer products Nestle Malaysia
have more than 2,000 brands world wide, from global icons to local favourites such as; dairy
products, foods, coffee, ready-to-drink products, cereals, ice cream, confectionery, toddler
nutrition, and health science.

Nestle Malaysia (Nestle 4707) has been a publicly listed company on Bursa Malaysia since
1989 in the main market sector of Consumer Products & Services. In 5 years (2017 - 2021)
share performance indicate that the highest share during the year 2018 (RM157.40) and the
lowest share during year 2017 (RM74.12)

5
1.4. PANASONIC MANUFACTURING MALAYSIA BERHAD (PANASONIC)

Panasonic was formerly Matsushita Sales & Service Sdn Bhd (MASCO) and was established
on 29 March 1976. After that, MASCO was renamed with National Panasonic Malaysia Sdn
Bhd (NPM) in 1992. As a global brand unification movement of Panasonic, NPM was
officially called Panasonic Malaysia Sdn Bhd (PM) from 1 October 2003. Panasonic
Malaysia Sdn Bhd is a company engaged in the business of sales, service, and marketing for

6
the Panasonic brand of electrical and electronic consumer and business solutions. It has a
long-standing presence for more than 30 years. Its current managing director is Mr. Keisuke
Nishida.
Panasonic's management philosophy has been contributing to society through its products and
services whilst putting the customers first. Based on this, the company strives to improve
Customer Satisfaction (CS) and offers products, solutions, and services that enrich the lives
of people around the world. Providing repairs and customer service support through its global
service network, Panasonic strives for sincerity, accuracy, and speed, and acts with humility
and appreciation. This finds its basis in the principle of "true service" that the company's
founder handed down through its words. The company's fundamental stance is, thus, to
provide customers with trust, peace of mind, and satisfaction.
Panasonic places product safety as its top priority and manufactures products that truly serve
the customer. At Panasonic, they place great attention on product quality and strive to create
safe reliable products to all their customers around the world can use, no matter the situation.
To that end, Panasonic's Quality Policy states that the company will "truly serve customers by
way of providing products and services that continuously meet and satisfy the needs of
customers and society." Panasonic also ensures, through a separately defined basic policy on
product safety, that the ideals of quality assurance and product safety are thoroughly followed
throughout the entire Panasonic Group. To put these policies into practice, each company
including Panasonic Malaysia has implemented systems for performing its business with
independent responsibility and self-regulation under the supervision of the Chief Quality
Officer (CQO). Adding to this, Panasonic periodically holds “quality strategy meetings” and
“quality managers’ meetings”, both to enhance cooperation within the group and ensure
quality improvement efforts.

7
1.5. QL RESOURCES BERHAD (QL)

QL Resources Berhad (QL) is an integrated agro-based business group, producing nourishing

products from agro resources in Integrated Livestock Farming, Marine Products
Manufacturing, Clean Energy and Convenience Store Chain. QL produces protein
nourishment products via its operational footprints in Malaysia, Indonesia and Vietnam.
Their products are distributed domestically and across Asia, Europe and North America. QL
is one of the largest egg producers in Southeast Asia, with a daily output of 4.5 million. They
are also engaged in deep-sea fishing, aquaculture and production of surimi fish paste, an
ingredient used widely in processed food in Asia. QL is the largest surimi producer in Asia,
making 50,000 tons a year.

In accordance with their outlined strategy to grow downstream via long-term scalable
business, QL has embarked on a convenience store chain in Malaysia by being the master
franchise of the Japanese convenience store, FamilyMart. In order to strengthen the konbini

8
concept retail shop, FamilyMart has an e-commerce platform which allows online ordering
and delivery services.

QL was built back in 1970’s as a family business based on

entrepreneurial spirit. Their value remains unchanged since their
humble beginning which is “all that we do must benefit all”. This is
reflected in their name where QL are the initials of quan li ( 全 利 )
which means ‘Benefits for All’. QL’s financial period is from 1 April of
the first year to 31 March of the following year. QL was first traded publicly in Bursa
Malaysia in May 2006 with the price of RM0.276/share. The share price has gradually
increased to RM6.05/share as of Mar 2021.

1.6. PETRONAS DAGANGAN BERHAD (PDB)

PETRONAS Dagangan Berhad (PDB) is a progressive energy and solutions partner that has
been enriching lives for a sustainable future for over 39 years. Their customers and
innovation have always been their priority and continue to deliver best-in-class hydrocarbon
offerings through their core businesses of retail, commercial, liquefied petroleum gas (LPG),
and lubricant.
For retails, PDB offers fuel and non-fuel products and services through PETRONAS stations
and Kedai Mesra. They expanded Makan@Mesra and Mesra own-label products, as well as
launching Segar@Mesra to provide a collaborative environment for local farmers to connect
with customers. PDB also created Setel®, Malaysia's first mobile application that integrates
fuel payment, retail and loyalty benefits in one platform. Recently, PDB has introduced
Deliver2Me, Malaysia’s first in-car shopping experience. Meanwhile, PDB offers Diesel, Jet
A-1, Fuel Oil, Bitumen, Gasoline, Kerosene, Petroleum Coke and Sulphur to various
industries and market segments. PDB also offers a suite of cleaner energy solutions through
Liquefied Natural Gas bunkering solutions as well as Virtual Pipeline System. They are
currently exploring the supply of Sustainable Aviation Fuel for Malaysia’s aviation industry.
Besides that, PDB is the market leader in Malaysia LPG business. They offer LPG to the
Household, Commercial and Industrial segments. Their products are designed to meet safety
standards and supplied through the nation’s largest LPG supply and distribution network.
Being Malaysia’s No. 1 Cooking Gas in the Household segment, PDB strives to remain ahead
of the curve by providing greater convenience to customers (e.g., expanding availability of
gas cylinders at PETRONAS stations/mini markets, launching Gas PETRONAS mobile app).

9
For Commercial and Industrial segments, PDB is passionate about creating value to
customers through fully integrated LPG product offerings as well as providing technical
solutions to support their business. Finally, PDB offers premium lubricant products
developed through PETRONAS Fluid Technology Solutions, including Passenger Car Motor
Oils, Motorcycle Oils, Commercial Vehicle Lubricants as well as Industrial and Marine
Lubricants. These products are offered via three flagship brands: PETRONAS Syntium,
PETRONAS Sprinta and PETRONAS Urania. PDB has also expanded its automotive service
centre (PETRONAS AutoExpert) in order to grow its Lubricant business and capture new
customers.
PDB was first traded publicly in Bursa Malaysia in May 2006 with the price of RM4.06/share
and the summary of their last 5 years performance are shown in Appendix X.

10
11
2. ANALYSIS AND EVALUATION OF COMPANY

2.1. LIQUIDITY RATIOS

Liquidity ratios are important tools that can be used to assess a company's ability to pay its debts, as
well as its overall solvency. This report will cover current ratio, quick ratio and cash ratio. By
understanding liquidity ratios, investors, creditors, shareholders and even suppliers can get a better
sense of a company's financial stability.

2.1.1. CURRENT RATIO

The current ratio measures a company's ability to pay its short-term debts. It is calculated by
dividing a company's current assets by its current liabilities. Current assets are those that can be
converted to cash within 12 months, while current liabilities are those that must be paid within 12
months. A higher current ratio indicates a more liquid company indicating that a company has a
large amount of liquid assets relative to its short-term liabilities, and vice versa.

Investors, creditors, shareholders and suppliers use the current ratio to assess a company's financial
health and ability to meet its obligations. The investors and creditors identify a high current ratio
indicates that a company has a strong ability to pay its short-term obligations. On the other hand, a
low current ratio may indicate that a company is having difficulty meeting its short-term financial
obligations. Meanwhile for the shareholders, they note that a high current ratio may also be
indicative of inefficient use of assets, since the company may be holding more cash and other liquid
assets than necessary. Additionally, the suppliers also use the current ratio to decide whether to
extend credit to a company. A high current ratio indicates that a company is likely to be able to pay
its bills on time. A low current ratio may indicate that a company is at risk of defaulting on its
payments.

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Table X
Consolidated current ratio of all companies over 5 years and the industry average.

Current Ratio 2017 2018 2019 2020 2021

DUTCH LADY 1.02 0.95 1.08 0.89 1.58
AEON 0.34 0.37 0.36 0.35 0.51
NESTLE 0.65 0.68 0.65 0.59 0.59
PANASONIC 1.68 1.14 2.17 2.39 1.99
QL 1.41 1.60 1.52 1.39 1.42
PDB 1.64 1.67 1.54 1.68 1.44
Industry Average 1.12 1.07 1.22 1.22 1.26

Figure X
5 years trend of current ratio by all 5 companies and the industry average.

2.1.1.1. TIME SERIES ANALYSIS

Over the past 5 years, AEON, DUTCH LADY and PANASONIC have shown similar uptrend in
parallel with the industry average as compared to NESTLE, QL and PDB that have the downtrend.
Theoretically, a company with a downtrending current ratio may be in danger of bankruptcy,
especially for those with less than 1.00 current ratio which are NESTLE and AEON. This means all
their short-term liabilities can not be covered even if all their assets are liquidated or there are
increases in the company's liabilities outpacing their assets.

13
DUTCH LADY
In the past 4 years since 2017, DUTCH LADY has had a stable ratio around 1.00 and increased to a
safer position in 2021 making it 1.58. There are some factors resulting in the increment in 2021
which are:

a. Increments of prepayment from related companies represents advance payments made for
future raw materials purchases, and
b. The rising amount of cash and cash equivalent

Both factors contributed to a 67.2% spike of the total current assets. Besides that, the lowest ratio
was in 2020 when the current liabilities hike by 11% and the surge in COGS by 12.3% as compared
to 2019.

AEON
The company is probably at risk of bankruptcy because the current ratio is less than 1.00 but in
overall the trend is upward gradually since 2017. However, the trend does not show any significant
difference over the past 5 years except in 2021 when the ratio rose to 0.51. This happens due to
notable reduction of account payable since 2020 and averaging to a drop of 1.9% over the 5 years in
total. Additionally, in 2021 current liabilities and COGS decline to 20.1% and 11.9% respectively as
compared to 2020.

NESTLE
NESTLE has a similar pattern with AEON and is currently facing the same risk of bankruptcy due
to the low current ratio. Despite of increase in inventory by 12.6% over the same period, as
mentioned above, the trend is declining due to some possible reasons:
a. Average growth of account payable amount of 6.5%
b. Increase in COGS of 9.5% as compared to 2020 or overall 3.4% over the period.

PANASONIC
Figure X has shown a waving trend of PANASONIC’s current ratio for the past 5 years. In overall,
PANASONIC surpassed all other companies except in 2018 due to the surge in current liabilities by
62.5% as compared to 2017. This is reported that PANASONIC had xxx

QL
Meanwhile for QL, the current condition is not risky like others because the average current ratio is
high at 1.47 within the 5 years period despite the downturn pattern. It is considerable to say that QL

14
manages to balance their current assets and liabilities where they do not keep too much cash or other
liquid assets than necessary, and at the same time do not create unnecessary debts. In fact, in 2018,
QL marked their highest ratio due to lower account payable by 12.7% that contributed to overall
current liabilities at that year being reduced by 12.6% as compared to 2019. The improvement of the
current ratio is also driven by higher sales amount by 8%. However, in 2020, the current ratio went
down to the lowest at 1.39 due to higher current liabilities driven by higher account payable by
12.5% as compared to previous year. Reduction in inventory of 13.4% and surge of COGS by
14.2% are also the reasons.

PDB
As mentioned earlier, PDB and both NESTLE and QL are currently encountering a declining trend.
However, PDB is standing in a safe zone where their average current ratio is 1.59. PDB achieved
their highest current ratio in 2020 due to the remarkable lowering amount of account payable by
33.7% and drop in COGS by 39.7% as compared to previous year. Similar to QL, PDB has proven
that they have successfully optimised their assets as well as managing their liabilities.

2.1.1.2. CROSS SECTIONAL ANALYSIS

It is obvious that only QL, PDB and PANASONIC marked the trend above the industry average
while DUTCH LADY, NESTLE and AEON are below the par. It is understood that DUTCH
LADY, NESTLE and AEON will have trouble meeting its short-term obligations, and as a result,
their stock prices may suffer when the shareholders may also be less likely to invest in the company.
The company's creditors may also rarely extend credit to the company. Those companies are not
doing as well as those above the industry average, they do not optimise generating enough cash to
cover their debts. Therefore, they need to find ways to increase its current ratio or they may be at
risk of bankruptcy. The company may need to take out loans or sell assets to raise cash for example.

In contrast, QL, PDB and PANASONIC have better financial positions because they have more
short-term assets available to cover its current liabilities. This indicates that the company is more
financially stable and has a lower risk of bankruptcy. However, their current ratio is higher than the
industry average can also be a sign that they are not efficiently using its assets, which can negatively
impact profitability. Additionally, it is also expected that QL, PDB and PANASONIC hoard assets
and not invest in growth opportunities.

15
2.1.2. QUICK RATIO

A quick ratio, also called the acid-test ratio, is a measure of a company's liquidity, measuring
its ability to pay its short-term liabilities with its most liquid assets. A high quick ratio
indicates that a company has a lot of assets that it can quickly turn into cash to pay its debts.
This is important for companies that are in financial distress and need to pay their debts
quickly. A low quick ratio means that a company is not as liquid and may have difficulty
paying its debts. This can impact the company's financial performance when it is declining or
decreasing.

Generally, one of the key drivers of a company's quick ratio is its inventory. If a company has
a lot of inventory, it will take longer to turn it into cash. This can impact the company's
liquidity and make it more difficult to pay its debts. Another driver of the quick ratio is
accounts receivable. If a company has a lot of accounts receivable, it means that it is owed a
lot of money by its customers. This can impact the company's liquidity because it will take
longer to receive the payments.

Table X
Consolidated quick ratio of all companies over 5 years and the industry average.

Quick Ratio 2017 2018 2019 2020 2021

DUTCH LADY 0.61 0.51 0.61 0.42 1.05
AEON 0.07 0.07 0.06 0.08 0.18
NESTLE 0.37 0.38 0.31 0.27 0.20
PANASONIC 1.59 1.09 2.06 2.21 1.84
QL 0.96 1.12 0.93 0.93 0.95
PDB 1.38 1.39 1.31 1.50 1.40
Industry Average 0.83 0.76 0.88 0.90 0.94

Figure X
5 years trend of quick ratio by all 5 companies and the industry average.

16
2.1.2.1. TIME SERIES ANALYSIS

2.1.2.2. CROSS SECTIONAL ANALYSIS

17
2.1.3. CASH RATIO

Table X
Consolidated cash ratio of all companies over 5 years and the industry average.

Cash Ratio 2017 2018 2019 2020 2021

DUTCH LADY 0.22 0.11 0.21 0.17 0.39
AEON 0.03 0.04 0.03 0.03 0.10
NESTLE 0.008 0.004 0.006 0.005 0.004
PANASONIC 1.05 0.70 1.35 1.45 1.15
QL 0.34 0.39 0.27 0.29 0.35
PDB 0.92 0.68 0.91 1.03 0.48
Industry Average 0.43 0.32 0.46 0.50 0.41

Figure X
5 years trend of cash ratio by all 5 companies and the industry average.

2.1.3.1. TIME SERIES ANALYSIS

2.1.3.2. CROSS SECTIONAL ANALYSIS

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2.2. ASSET MANAGEMENT RATIOS

Asset management ratio is an indicator of how successfully a company is utilising its

assets to generate revenue (Asset Management (Turnover) Ratios, 2022). To
understand better on how the six companies are using their assets in converting to
sales, analysis on days sales outstanding, average payment period and inventory
turnover ratio are conducted.

2.2.1. DAYS SALES OUTSTANDING

Days sales outstanding (DSO) indicates the average number of days it takes for
credit sales to be converted to cash or for a company to collect its account
receivables. Figure XX illustrates the formula to calculate DSO while Figure XX
illustrates the 5 year DSO trends for all the six companies in comparison to the
industry average.
Figure XX : DSO Formula

Figure XX : Days Sales Outstanding

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2.2.1.1. TIME SERIES ANALYSIS

Based on Figure XX, DSO for Dutch Lady is in the reducing trend where it
reduces from 36.59 days in 2017 to 24.59 years in 2021. The same trend can be
observed in Nestle where the DSO reduces from 40.30 in 2017 to 24.00 in 2021.
While for AEON, the DSO reduced from 6.33 days in 2017 to 4.00 days in 2019
before increasing to 13.16 days in 2021. Panasonic has observed the same trend
where the DSO reduced from 37.98 days in 2017 to 26.00 days in 2020 before
increasing to 39.03 in 2021. DSO for QL was in a declining trend from 45.88
days in 2017 to 36.52 in 2020 before increasing slightly to 40.17 days. However,
PDB is showing an upward trend where the DSO increases from 21.52 days in
2017 to 55.81 days in 2021.

Overall, we can infer that Dutch Lady, Nestle and QL are improving their
transition of credit sales to cash. On the other hand, AEON, Panasonic and PDB
are having difficulties converting their credit sales to cash which is reflected in
their increased DSO values. Therefore, AEON, Panasonic and PDB might face
cash flow issues in the near future if they did not improve their DSO as practised
by Dutch lady, Nestle and QL.

2.2.1.2. CROSS SECTIONAL ANALYSIS

A comparison of the DSO of each company with the industry average indicates
that Dutch Lady, Nestle, Panasonic and QL have a higher DSO compared to the
industry average for the year 2017 until 2020, while AEON and PDB was having
a DSO of lower than industry average for the same timeframe. However, for the
year 2021, Dutch Lady, AEON and Nestle were having a lower DSO compared to
industry average while Panasonic, QL and PDB were having higher DSO
compared to industry average. In general, it is essential for companies to turn
credit sales to cash as soon as possible for a better cash flow and company
sustainability. Therefore, Panasonic, QL and PDB should take immediate actions
to improve their DSO.

20
2.2.2. AVERAGE PAYMENT PERIOD

Average Payment Period (APP) is the average days that a company takes to pay
off credit accounts payable (Average Payment Period Formula | Example |
Calculation Explanation, 2017). APP is calculated based on two consecutive
years. APP can be used to reveal a company’s cash flow and creditworthiness.
Figure XX illustrates the formula to calculate APP while Figure XX illustrates the
five year APP trends for all the six companies in comparison to the industry
average.
Figure XX : APP Formula

Figure XX : Average Payment Period

21
2.2.2.1. TIME SERIES ANALYSIS

Based on Figure XX, the APP for Dutch Lady slightly reduced from 12.88 in
year

2018 to 11.93 in 2019 before increasing to 16.76 in 2021. Similarly, APP for
AEON reduced from 193.28 in 2018 to 184.69 in 2019 before increasing to
187.44 in 2021. Nestle also registered an APP of 152.41 in 2018 before
reducing to 150.93 in 2019 and bouncing back to 150.18 in 2021. QL also
registered the same trend where its APP reduced from 39.98 in 2018 to 37.48
in 2019 before increasing to 43.36 in 2021. Panasonic on the other hand
recorded a reducing trend of APP where it reduces from 68.20 in 2018 to
65.71 in 2021. However, PDB recorded an increased APP trend where it
increases from 41.51 in 2018 to 53.19 in 2021.

From an overall five year trend perspective, AEON, Nestle and Panasonic
are having reduced APP values while Dutch Lady, QL and PDB are having
increased APP values. AEON, Nestle and Panasonic are able to pay their
suppliers in a shorter period of time compared to Dutch Lady, QL and PDB.
In an ideal situation, a company is expected to hold on to cash as long as
possible. However, a delayed payment to a supplier is an undesirable
situation because it can cause the supplier to fall into a cash flow crisis which
might then affect the entire supply chain ecosystem.

2.2.2.2. CROSS SECTIONAL ANALYSIS

Comparison between APP of the six companies with the industry average shows
that AEON and Nestle are having higher APP than the industry average for the
five years duration. On the other hand, Dutch Lady, Panasonic, QL and PDB are
having lower APP compared to industry average. AEON and Nestle need to
reduce their APP to the industry average to ensure their suppliers are not falling
into a cash flow crisis which can then directly impact their business as well. On
the other hand, Dutch Lady can consider to increase their APP to that of the
industry average so that they can improve their cash flow which will then lead to
a better cash or asset management.

22
23
2.2.3. INVENTORY TURNOVER RATIO

Inventory turnover ratio (ITR) measures the efficiency of a company in managing

its inventory (Corporate Finance Institute, 2020). Companies need to understand
and monitor their ITR so that they can make smarter decisions in many areas such
as pricing, manufacturing, marketing, purchasing, and warehouse management
(Jenkins, 2022). Figure XX illustrates the formula to calculate ITR while Figure
XX illustrates the five year ITR trends for all the six companies in comparison to
the industry average.
Figure XX : ITR Formula

Figure XX : Inventory Turnover Ratio

24
2.2.3.1. TIME SERIES ANALYSIS

Based on Figure XX, ITR for Dutch Lady has increased from 5.12 in 2018 to
5.2 in 2020 before reducing to 4.7 in 2021. AEON on the other hand, has
recorded an ITR of 4.02 in 2018 before reducing to 3.56 in 2021. Similarly,
Nestle has recorded the same trend where the ITR was recorded at 6.78 in
2018 before gradually reducing to 5.63 in 2021. Panasonic also recorded the
same trend where ITR was recorded at 19.01 in 2018 before dropping to
11.10 in 2021. QL also reduced their ITR from 6.82 in 2018 to 6.11 in 2021.
However, PDB has recorded a drastic increase in its ITR where the ratio was
seen to increase from 32.35 in 2018 to 69.86 in 2021.

In overall, companies are showing a positive trend when it comes to ITR

where they are trying to turn their inventory into sales rather quickly to
generate revenue with exception to PDB where the trend seems to be the
opposite. One reason for the drastic increase of ITR ratio for PDB in 2021 is
because of the Covid-19 pandemic where Malaysia was seen to undergo
several sessions of lockdown and industries were forced to reduce or limit
their operation. Therefore, PDB had to hold a higher inventory in that year.

2.2.3.2. CROSS SECTIONAL ANALYSIS

Comparison of ITR between the six companies and industry average shows that
in general Dutch Lady, AEON, Nestle and QL are having a lower ITR compared
to industry average. Panasonic was having higher ITR compared to industry
average from 2018 to 2020 while in 2021, Panasonic managed to bring down its
ITR to below the industry average. PDB on the other hand, recorded a higher ITR
compared to industry average for the whole five year period. PDB needs to bring
its ITR to the level of industry average so that it can have better inventory
management and be able to generate revenue from its inventory. Holding on to its
inventory for a long period of time will lead to a cash flow crisis which can
disrupt its operation in the long run.

25
2.3. DEBT MANAGEMENT RATIOS

The phrase debt ratio refers to a financial ratio that reflects the degree of indebtedness
in a company. The debt ratio is defined as the decimal or percentage ratio of total debt
to total assets. It is defined as the percentage of a company's assets that are funded by
debt. For the company analysis, we will use these four (4) ratios to determine how
well the company manages overall debt. The ratios are the Debt Ratio, Debt to Equity
Ratio, Equity Multiplier Ratio and Times Interest Earned Ratio.

2.3.1. DEBT RATIO

The debt ratio compares the overall debt of a company to its total assets. This offers
creditors and investors a rough picture of how much leverage a company is using. The
lower the percentage, the less leverage is used and the better the company's equity
position. In general, the larger the percentage, the greater the risk assumed by the
company.

Formula of Debt Ratio :

Companies analysis in 5 years (2017 - 2021)

Company/Year 2017 2018 2019 2020 2021

Dutch Lady Milk Industries 0.73 0.74 0.67 0.67 0.45

Bhd.

AEON CO (M) Bhd. 0.55 0.57 0.74 0.73 0.70

NESTLE (Malaysia) Bhd 0.76 0.77 0.76 0.81 0.80

Panasonic Manufacturing 0.52 0.50 0.51 0.58 0.47

Bhd.

26
QL Resources Berhad 0.42 0.43 0.45 0.49 0.47

Petronas Dagangan Berhad 0.38 0.36 0.40 0.31 0.41

AVERAGE 0.56 0.56 0.59 0.60 0.55

2.3.1.1. TIME SERIES ANALYSIS

2.3.1.2. CROSS SECTIONAL ANALYSIS

27
2.3.2. DEBT-TO-EQUITY RATIO

The Debt to Equity ratio (also known as the "debt-equity ratio," "risk ratio," or
"gearing") is a leverage ratio that compares total debt and financial liabilities to
total shareholders' equity. The D/E Ratio, as opposed to the debt-assets ratio,
utilizes total equity as the denominator. A high debt-equity ratio can be beneficial
because it indicates that a company can easily complete its debt commitments
(through cash flow) and is leveraging to boost equity returns.

2.3.2.1. TIME SERIES ANALYSIS

2.3.2.2. CROSS SECTIONAL ANALYSIS

28
2.3.3. EQUITY MULTIPLIER RATIO

2.3.3.1. TIME SERIES ANALYSIS

2.3.3.2. CROSS SECTIONAL ANALYSIS

29
2.4. PROFITABILITY RATIO

The profitability ratio assesses a company's ability to earn profits and indicates its
efficiency in generating profit and value for shareholders. The profitability ratio
determines the scope of the company's profit to the size of the business. Profitability
demonstrates the business's ability to produce a return on investment based on its
available resources compared with an alternative investment. It shows the combined
effects of liquidity, asset management, and debt on operating results (Eugene et al.,
2008).
2.4.1. GROSS PROFIT MARGIN

Gross profit is the difference between revenue and the costs of production—called
cost of goods sold (COGS). Gross profit margin measures a company's efficiency in
generating gross profit from sales of products. This indicator reflects how successfully
a company generates revenue and manages the costs involved in producing its
products. The higher number means they are more efficient in generating profit for
every dollar of the cost involved (Anfisa, 2020). The formula for Gross Profit
Margin:

GROSS PROFIT MARGIN 2017 2018 2019 2020 2021

DUTCH LADY MILK
INDUSTRIES BHD 37.68% 39.70% 37.94% 32.44% 35.26%
AEON CO (M) BHD. 40.46% 40.45% 37.63% 38.84% 39.89%
NESTLE (MALAYSIA) BHD 37.09% 38.73% 37.58% 36.32% 34.15%
PANASONIC
MANUFACTURING
BERHAD 19.93% 20.23% 18.45% 19.01% 18.69%
QL RESOURCES BERHAD 18.08% 18.27% 18.98% 19.43% 19.87%
PETRONAS DAGANGAN
BERHAD 8.30% 9.17% 10.29% 11.86% 11.13%
INDUSTRY AVERAGE 26.93% 27.76% 26.81% 26.32% 26.50%

Table x: Gross Profit

30
 Figure x: Gross Profit Margin

2.4.1.1. TIME SERIES ANALYSIS

The industry average for Gross Profit Margin for 2017-2021 ranges from
26.5% to the highest of 27.76% recorded in 2018. Dutch Lady Milk Industries
Bhd recorded the highest profit margin in 2018 at 39.7% and started to decline
below 2017's result in 2020 at 32.44%. In 2021, they were able to bounce at
35.26%. Even with the reinstatement of 2017 accounting, Aeon Co M registered
the highest Gross Profit Margin at 40.46% and gradually declined to 40.45% in
2018 and 37.3% in 2019. During the COVID-19 pandemic, Aeon Co M improved
their result by 1.2 in 2020 and remained at 39.89% in 2021.

Nestle Malaysia Bhd registered a lower result, 34.15%, in 2021 may be due to
the impact of a pandemic. We observed the highest margin for Nestle in 2018 at
38.73%. Panasonic Manufacturing's result in 2018 was the highest mark at
20.23% and hovered around 18-19% years after.

31
 Interestingly, QL Resources Sdn Bhd was steadily improving its performance
from 18.08% in 2017 to 18.27% in 2018, 18.98% in 2019, and 19.43% in 2020
and recorded a high gross profit margin in 2021 at 19.87%. Petronas Dagangan
Berhad recorded 8.3% in 2017, then gradually improved year on year until the
highest result in 2020 at 11.86%. Their gross profit margin in 2021 declined by
0.73 points but still managed to sustain at 11.13%.

2.4.1.2. CROSS SECTIONAL ANALYSIS

Based on the data tabulated above, Aeon Co (M) and QL Resources were
performing well in 2020 and 2021 amidst the Covid 19 Pandemic. Dutch
Lady was the most impacted company when the lockdown started in 2020,
but it recovered steadily in 2021 with the improvement of overall economy.
However, the situation is not in favor of Nestle, whereby the impact of Covid,
such as higher commodity prices, brought their profit down even worst in
2021. This were also due to flood situation whereby they experienced a lot of
damages, Panasonic and Petronas not experienced so much impact as their
result differed by around 1 to 2 points between 2019 and 2021. QL Resources
and Petronas experienced steady growth from 2017-2021, even though
Petronas's result declined by 0.73 points in 2021. Nonetheless, the recorded
highest gross profit margin in 2020.

32
2.4.2. NET PROFIT MARGIN

The net profit margin is the ratio of a company net profits to revenues in
percentage. It indicates how much of each dollar a company collects as revenue
translates to profit. Net Profit Margin formula is:

A company may have a growing revenue trend but shrinking in net profit
margin if the operating costs and overhead costs are increasing faster than
revenue.

NET PROFIT MARGIN 2017 2018 2019 2020 2021

DUTCH LADY MILK

11.06% 12.35% 9.65% 6.67% 21.87%
INDUSTRIES BHD

AEON CO (M) BHD. 2.55% 2.41% 2.41% 1.02% 2.35%

NESTLE (MALAYSIA) BHD 12.21% 11.94% 12.19% 10.21% 9.94%

PANASONIC
MANUFACTURING 11.32% 10.93% 9.38% 11.12% 11.95%
BERHAD

QL RESOURCES BERHAD 6.87% 6.21% 6.23% 5.75% 7.43%

PETRONAS DAGANGAN
4.70% 2.74% 2.73% 2.15% 3.09%
BERHAD

INDUSTRY AVERAGE 8.12% 7.76% 7.10% 6.15% 9.44%

Table y: Net Profit Margin

33
2.4.2.1. TIME SERIES ANALYSIS

The industry average net profit margin ranges from 6.15% to 9.44%. On
average, this industry recorded the lowest performance in the year 2020. This
case was valid for Dutch Lady. They started at 11.06% in 2017, grew to 12.35%
in 2018, dropped to 9.65% in 2019, and further dropped during lockdown at
6.67%. Dutch Lady recovered quickly in 2021 with a 21.87% net profit margin.
Aeon Co (M) performance is hovering around 1-2%, with the lowest at 1.02 %
(2020) and the highest at 2.55% (2017). Nestle started with a 12.21% net profit
margin in 2017 and began to decline in 2020 to 10.21%. They were not
recovering well yet post-pandemic as the performance continued dropping in
2021 at 9.94%.

Panasonic maintained its net profit margin of around 11% and seeing dropped
n 2019 to 9.38%. Nonetheless, their performance remains stable amidst the
COVID-19 Pandemic, with 11.12% and 11.95% net profit margins in 2020 and
2021, respectively. As for QL Resources, they maintained an average of 6%
profit margin starting from 2017, only seeing a slightly dropped at 5.75% in 2020
and recovering back to their highest performance in 2021 at 7.43%. The net profit

34
 margin for Petronas Dagangan was highest in 2017 at 4.7% and dropped to
around 2% from 2018 to 2020. Then the performance improved steadily in 2021
at 3.09%.

2.4.2.2. CROSS SECTIONAL ANALYSIS

For the past five (5) years, Dutch Lady recorded the highest net profit
margin at 21.87% in 2021, and the lowest was recorded by Aeon Co (M) in 2020
at 1.02%. In 2020, four (4) companies reported the lowest net profit margin, i.e.,
Dutch Lady at 6.67%, AeonCo at 1.02%, QL Resources at 5.75%, and Petronas
Dagangan at 2.15%. Dutch Lady, Panasonic, and QL reported the highest net
profit margin in 2021 at 21.87%, 11.95%, and 7.43%, respectively. This trend
indicates that they are growing steadily with the economic recovery. Nestle
captured the lowest performance in 2021 at 9.94% though other companies
steadily recovered when the travel restriction was lifted. Besides Nestle, only
AenCo failed to regain its performance at the rate before the pandemic.

35
2.4.3. RETURN ON ASSET

Return on Assets (ROA) is a type of return on investment (ROI) metric that

measures the profitability of a business in relation to its total assets. This ratio
indicates how well a company is performing by comparing the profit (net income)
it’s generating to the capital it’s invested in assets. The higher the return, the
more productive and efficient management is in utilizing economic resources.
Below you will find a breakdown of the ROA formula.

The ROA formula is an important ratio in analyzing a company’s profitability.

The ratio is typically used when comparing a company’s performance between
periods, or when comparing two different companies of similar size in the same
industry. Note that it is very important to consider the scale of a business and the
operations performed when comparing two different firms using ROA.

Typically, different industries have different ROA’s. Industries that are capital-
intensive and require a high value of fixed assets for operations, will generally
have a lower ROA, as their large asset base will increase the denominator of the
formula. Naturally, a company with a large asset base can have a large ROA, if
their income is high enough. Therefore, return on assets should only be used to
compare with companies within an industry.
RETURN OF ASSETS

CURRENT RATIO 2017 2018 2019 2020 2021

DUTCH LADY 30.01% 31.98% 23.21% 14.71% 35.37%
AEON 2.38% 2.26% 1.67% 0.68% 1.45%
NESTLE 24.55% 23.14% 24.68% 19.32% 19.09%
PANASONIC 5.77% 5.54% 4.73% 5.37% 5.40%
QL 6.51% 6.12% 6.12% 5.88% 6.72%
PDB 13.53% 9.48% 8.82% 5.09% 7.39%
INDUSTRY AVERAGE 13.79% 13.09% 23.14% 8.51% 12.57%

36
2.4.3.1. TIME SERIES ANALYSIS

2.4.3.2. CROSS SECTIONAL ANALYSIS

37
2.4.4. RETURN ON EQUITY

Return on Equity (ROE) is the measure of a company’s annual return (net

income) divided by the value of its total shareholders’ equity, expressed as a
percentage (e.g., 12%). Alternatively, ROE can also be derived by dividing the
firm’s dividend growth rate by its earnings retention rate (1 – dividend payout
ratio).

Return on Equity is a two-part ratio in its derivation because it brings together the
income statement and the balance sheet, where net income or profit is compared
to the shareholders’ equity. The number represents the total return on equity
capital and shows the firm’s ability to turn equity investments into profits. To put
it another way, it measures the profits made for each dollar from shareholders’
equity. Below you will find a breakdown of the ROE formula.

ROE provides a simple metric for evaluating investment returns. By comparing a

company’s ROE to the industry’s average, something may be pinpointed about
the company’s competitive advantage. ROE may also provide insight into how
the company management is using financing from equity to grow the business.

A sustainable and increasing ROE over time can mean a company is good at
generating shareholder value because it knows how to reinvest its earnings
wisely, so as to increase productivity and profits. In contrast, a declining ROE can
mean that management is making poor decisions on reinvesting capital in
unproductive assets.

With net income in the numerator, Return on Equity (ROE) looks at the firm’s
bottom line to gauge overall profitability for the firm’s owners and investors.
Stockholders are at the bottom of the pecking order of a firm’s capital structure,

38
 and the income returned to them is a useful measure that represents excess profits
that remain after paying mandatory obligations and reinvesting in the business.

Simply put, with ROE, investors can see if they’re getting a good return on their
money, while a company can evaluate how efficiently they’re utilizing the firm’s
equity. ROE must be compared to the historical ROE of the company and to the
industry’s ROE average – it means little if merely looked at in isolation. Other
financial ratios can be looked at to get a more complete and informed picture of
the company for evaluation purposes.

In order to satisfy investors, a company should be able to generate a higher ROE

than the return available from a lower risk investment.

RETURN OF EQUITY

CURRENT RATIO 2017 2018 2019 2020 2021

DUTCH LADY 113.18% 122.75% 71.29% 44.04% 64.82%
AEON 5.35% 5.20% 6.45% 2.48% 4.89%
NESTLE 101.05% 100.70% 101.20% 99.21% 97.79%
PANASONIC 12.12% 11.11% 9.74% 12.36% 10.82%
QL 11.22% 10.75% 11.19% 11.43% 12.77%
PDB 21.93% 14.70% 14.60% 7.34% 12.52%
INDUSTRY AVERAGE 44.14% 44.20% 35.75% 29.48% 33.94%

39
2.4.4.1. TIME SERIES ANALYSIS

2.4.4.2. CROSS SECTIONAL ANALYSIS

40
2.5. MARKET/BOOK RATIOS

2.5.1. MARKET-TO-BOOK RATIO

The market to book ratio is typically used by investors to show the market’s perception of a
particular stock’s value. It is used to value insurance and financial companies, real estate
companies, and investment trusts. It does not work well for companies with mostly intangible
assets. This ratio is used to denote how much equity investors are paying for each dollar in
net assets.
The market to book ratio is calculated by dividing the current closing price of the stock by the
most current quarter’s book value per share.
The Market to Book Ratio (also called the Price to Book Ratio), is a financial valuation
metric used to evaluate a company’s current market value relative to its book value. The
market value is the current stock price of all outstanding shares (i.e. the price that the market
believes the company is worth). The book value is the amount that would be left if the
company liquidated all of its assets and repaid all of its liabilities.
The book value equals the net assets of the company and comes from the balance sheet. In
other words, the ratio is used to compare a business’s net assets that are available in relation
to the sales price of its stock.

2017 2018 2019 2020 2021

Dutch Lady Milk Industries Bhd 38.15 37.63 21.76 14.41 5.61
AEON CO 0.63 0.51 0.59 0.45 0.57
NESTLE (MALAYSIA) BHD 43.41 60.26 59.14 66.69 61.61

PANASONIC MANUFACTURING BERHAD 2.02 1.78 2.11 1.79 1.75

QL Resources Berhad 0.79 1.09 1.44 1.38 1.48
PETRONAS DAGANGAN BERHAD 4.29 4.8 4.12 3.97 3.77
Table x.x Comparison of Market to Book ratio for each company

41
2.5.1.1. TIME SERIES ANALYSIS

The market to book ratio, or P/B ratio, is one of the most commonly used ratios to determine
if a company's stock is cheap or expensive. A ratio below 1 indicates that the stock is very
cheap, while a high ratio (such as over 3) may suggest that it is expensive. A market to book
ratio of less than 1 implies that you can buy the company for a lower price than the value of
its assets.

From the table we can see that AEON book to ratio value is less than 1, which means the
stock is very cheap which implies that can be bought for less than the value of its assets.
Even AEON is less than 1, but if we see the condition throughout 5 years, their market to
book ratio fluctuation is not big whereby we can assume the company is growing steadily
even there is a drop in year 2020, but the ratio increase back to 0.57.

From 2017, the highest market to book ratio is Dutch Lady and Nestle with more than 1. It’s
consider an expensive stock or share to own, however Dutch Lady market to book ratio is
decreasing due to their market share price is dropping from 2017 to 2021 which affecting
their market capitalization and lead to lower market book ratio. Besides for Nestle, due to
their outstanding shares and share price during year end stability, Nestle able to secure their
market to book ratio throughout the 5 years. While for the performance of QL Resources,
Petronas and Panasonic, the market to book ratio changes in 5 years are not heavily
fluctuated.

42
2.5.1.2. CROSS SECTIONAL ANALYSIS

For Cross sectional analysis, Dutch ladies and Nestle is selected. Reason being both has the
most similarities in terms of the business structures and it’s operation compare with other.
From above chart, we can see for the 2 different company, their growth and deterioration of
the market to book ratio.

Starting from 2017, both almost having the same market to book ratio where Dutch Lady is
38.15 and Nestle is 43.13. After 5 years of operation, Nestle market book ratio has grow
from 43.13 to 61.61, during year of 2019, there is a slight drop but not much of impact, then
growing in 2020 rocket high to 66.69, while in 2019 market to book ratio drop slightly to
61.61. The slight drop main reason is coming from the increase of shareholder equity which
lead share price drop during end of financial year 2022.

If we are looking at the Dutch Lady, 2017 with a strong ratio of 38.15, however due to share
price dropping from MYR62 to MYR33, it lead the company market book to ratio is drop
stagnantly as well. Main reason of the market book to ratio drop is came from their total
shareholder equity increase which is suppose the outstanding share is brought by Minority
Shareholder Watch Group.

43
2.5.2. PRICE EARNINGS RATIO

The price-to-earnings ratio is the ratio for valuing a company that measures its current share
price relative to its earnings per share (EPS). The price-to-earnings ratio is also sometimes
known as the price multiple or the earnings multiple.
P/E ratios are used by investors and analysts to determine the relative value of a company's
shares in an apples-to-apples comparison. It can also be used to compare a company against
its own historical record or to compare aggregate markets against one another or over time.
P/E may be estimated on a trailing (backward-looking) or forward (projected) basis.

PE ratio is often referred to as the "multiple" because it demonstrates how much an investor
is willing to pay for one dollar of earnings. PE Ratios are sometimes calculated using
estimations of next year's earnings per share in the denominator. When this happens, it is
usually noted.

Price to Earning Ratio 2017 2018 2019 2020 2021

Dutch Lady Milk Industries Bhd 0.34 0.31 0.31 0.33 0.09
AEON CO 23.53 19.63 18.25 36.27 23.23
NESTLE (MALAYSIA) BHD 0.38 0.52 0.51 0.59 0.55

PANASONIC MANUFACTURING BERHAD 16.70 16.02 21.67 13.93 16.15

QL Resources Berhad 2.89 4.14 5.19 46.40 46.77
PETRONAS DAGANGAN BERHAD 0.16 0.31 0.28 0.77 0.39
Table x.x, price to earning ratio from 2017 to 2021

2.5.2.1. TIME SERIES ANALYSIS

Companies with a high Price Earnings Ratio are often considered to be growth stocks. This
indicates a positive future performance, and investors have higher expectations for future
earnings growth and are willing to pay more for them.
The downside to this is that growth stocks are often higher in volatility, and this puts a lot of
pressure on companies to do more to justify their higher valuation. For this reason, investing
in growth stocks will more likely be seen as a risky investment. Stocks with high ratios can
also be considered overvalued. Companies with a low Price Earnings Ratio are often

44
considered to be value stocks. It means they are undervalued because their stock prices trade
lower relative to their fundamentals. This mispricing will be a great bargain and will prompt
investors to buy the stock before the market corrects it. And when it does, investors make a
profit as a result of a higher stock price. Examples of low P/E stocks can be found in mature
industries that pay a steady rate of dividends.

From the table above, we can access that high Price to Earning ratio companies are AEON
and Panasonic. From 2017 to 2021, AEON price to earnings ratio is fluctuate with
uncertainty, which makes its stock value volatile, it drop continuously until 2019 in 18.25 but
increase high in 20220 with 36.27 of ratio but decrease to 23.23 in 2021. From here we can
see that AEON profit to earning ratio is changing in uncertainty. On the other hand for
Panasonic price to earning ratio, not much of increase of decrease throughout the 5 years,
except during 2019 where their price to earning hike from 16.02 to 21.67, in the next year it
drop to 13.93.

In view of Petronas, Dutch Ladies and Nestle, 3 of the company price to earning ratio is less
than one. We can consider these 3 company has a steadily growth throughout the 5 years span
of the analysis.

On the other perspective, QL resources has the most volatile price to earning ratio. From
2017 with the ratio of 2.89, but in 2021 the ratio reach 46.77 which makes the most highest
compare with other 4 companies. There is an assumption to make that market is foresee that
QL resources has a growing to earn better in the future.

45
2.5.2.2. CROSS SECTIONAL ANALYSIS

For cross sectional analysis, let us analyse with most volatile company and most stable
company in comparison of price earning ratio.

From 2017, both companies having almost the same price earning ratio, compare with
Petronas, QL resources gradually increase from 2017 to 2019 with average of 1.3 ratio
climbing each year, but until 2020 the price earning ratio hike skyrocket from 5.19 to 46.40.
Most of the reason to assume that investor are looking more profitable channel during the
Movement Control Order in pandemic period. As QL Resources business nature is more to
household necessity or essential require, hence starting from the MCO period, more investor
are looking forward into QL Resources and expecting they can perform better in the futures.
Hence their share price has increase from RM4.67 to RM6.08 in just 1 year where the
increase ratio is more than 30%. Now we looking at Petronas, the line show from 2017 to
2021, there is not much of movement throughout the 5 years. As Petronas is consider one of
the top valued company in Malaysia and investor has more confidence towards this company.
Most of the investor when invest into this company they are just looking for dividend yield
towards the end of each financial year

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2.6. DUPONT ANALYSIS (CURRENT YEAR)

The basic DuPont Analysis model is a method of breaking down the original equation for
ROE into three components: operating efficiency, asset efficiency, and leverage. Operating
efficiency is measured by Net Profit Margin and indicates the amount of net income
generated per dollar of sales.
Asset efficiency is measured by the Total Asset Turnover and represents the sales amount
generated per dollar of assets. Finally, financial leverage is determined by the Equity
Multiplier.

The first two components assess the operations of the business. The larger these components,
the more productive the business is. However, it is worth mentioning that, depending on the
industry in which the company operates, Net Profit Margin and Total Asset Turnover tend to
trade off between each other. For example, a machinery manufacturer is likely to generate a
low turnover of assets and require some heavy investments; thus, this company will probably
see a high profit margin to offset the low turnover.

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 2.6.1. CROSS SECTIONAL ANALYSIS

Dutch Lady PANASONIC

NESTLE QL PETRONAS
Milk MANUFACTU
AEON CO (MALAYSIA) Resources DAGANGAN
Industries RING
BHD Berhad BERHAD
Bhd BERHAD
Dupont Ratio 0.90 0.05 1.00 0.12 0.13 0.13
Profit Margin 10% 10% 10% 10% 10% 10%
Asset Turnover 1.5 1.5 1.5 1.5 1.5 1.5
Financial Leverage 2 2 2 2 2 2
ROE 0.27 0.01 0.30 0.03 0.04 0.04
Table x.x Dupont Analysis base on each company

The purpose of this cross sectional is to help investors understand what is the factors are
driving a company’s Return on Equity. This analysis able to assist in decompose a
company’s in 3 component which is profit margin, asset turnover and financial leverage. We
set a hypothesis by setting the 3 component same ratio and number in order for direct
comparison between these 5 company.
1. Profit margin - 10%
2. Asset Turnover - 1.5x
3. Financial leverage - 2x
By multiplying all the factor with dupont ratio of each company, we will able to simulate the
ROE of the company. This analysis also able to help investors identify which factors are
driving accompany’s ROE. If a company has a high ROE but low profit margin, it may be
because the company has a high asset turnover or high financial leverage.

According to above table, Nestle has the highest return on equity which capped at 30%,
followed by Dutch Lady and QL resources which respectively 20% and 15%. Lowest ROE is
belong to AEON.

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3. CONCLUSION

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4. APPENDICES

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5. REFERENCES

Asset management (turnover) ratios. (2022). Readyratios.com.

https://www.readyratios.com/reference/asset/

‌Average Payment Period Formula | Example | Calculation Explanation. (2017). My

Accounting Course. https://www.myaccountingcourse.com/financial-ratios/average-
payment-period

Corporate Finance Institute. (2020, March 4). Inventory Turnover Ratio.

Corporate Finance Institute; Corporate Finance Institute.
https://corporatefinanceinstitute.com/resources/accounting/inventory-turnover-
ratio/

Jenkins, A. (2022, August 9). Inventory Turnover Ratio Defined: Formula, Tips, &
Examples. Oracle NetSuite; Oracle NetSuite.
https://www.netsuite.com/portal/resource/articles/inventory-management/
inventory-turnover-ratio.shtml

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INSTRUCTION

FIN7101 CORPORATE FINANCE MBA PBS (Group Assignment)

1. ANALYZE AND EVALUATE COMPANY PERFORMANCE (LISTED IN
BURSA MALAYSIA) BY USING LATEST 5 FINANCIAL YEARS.
2.

Year 2021(2 2020(2 2019(2 2018(2 2017(2

Company* 020) 019) 018 017) 016)

Company 1 2.0

Company 2 1.8

Company 3 2.2

Company 4 1.9

Company 5 2.1

Company 6 1.95

Average 1.99

(No of companies depend no. of group members)

- Explains:
(a) Time Series Analysis
(b) Cross Sectional Analysis
3. Please attached Financial informations: Financial Statement, Balance Sheet
and Statement of Cash Flows. (APPENDIX)

4. REQUIRED CATEGORIES OF RATIOS AND ITEM REQUIRED AS

FOLLOWS:
(i) Liquidity Ratios
- Current Ratio
- Quick ratio
- Cash ratio
(ii) Asset Management Ratios

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 - Days Sales outstanding
- Average payment period
- Inventory turnover
(iii) Debt Management Ratios
- Debt ratio
- Debt equity ratio
- Equity multiplier
(iv) Profitability Ratios
- Profit Margin
- Return on Asset
- Return on Equity
(v) Market/Book Ratios
- Market to Book ratios
- Price to Earning ratio
(vi) DuPont Analysis (current year only)
(vii) Conclusion

5. Dateline: 12 NOVEMBER 2022 (6pm) ; Presentation 12/11/22

Prepared by,
NAZRUL HISYAM AB RAZAK
01 OCTOBER 2022

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