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Analysis of Public Company
Reports
Basic Accounting (FNBE0145)
Assignment
Tony Tang Lee Lung (0314002)
Wong Yeong Cherng (0313378)
1
TABLE CONTENT
Cover page 1Background information
3
Recent development 4Profitability Ratio Calculations
5
Financial Stability Ratio and P/E Ratio Calculations
6
Profitability Ratio Interpretation
7
Financial Stability 8P/E Ratio Interpretation
9
Investment Recommendation
10
Appendix 11-14References 15
2
Background information of Dutch Lady Malaysia Industry Bhd
In the 1950s, Dutch Lady Milk Industry Berhad (Dutch Lady Malaysia)
is a manufacturer of dairy products in Malaysia. In 1963, it was
incorporated and became the first milk company in Malaysia to be listed on
Bursa Malaysia, the local stock exchange in 1968. Royal
FrieslandCampina, a Dutch multinational corporation and one of the largest
milk companies in the world is its holding company.
Dutch Lady Malaysia produces and sells their products to the home
and export market such as Growing-up Milk, Powdered Milk, Condensed
Milk, UHT Milk, Sterilized Milk, Pasteurized Milk, Cultured Milk, Infant
Formula, Yoghurt and Fruit Juice Drinks.
The Company believes in product innovation and is well supported by
Royal FrieslandCampina. The Company continually strives to improve its
processes in order to deliver nutritious products of high quality to its
consumers. Meanwhile, it was the first company in the world to introduce a
growing up milk powder specifically formulated for children from ages one
to three, which are Dutch Lady 123 and Dutch Lady 456.
Since 1995, the company has continually been accredited with ISO
9001 certification. The strong emphasis is also placed on food safety with
HACCP (Hazard Analysis Critical Control Point) System covering all its
plants. Also, the company also has in place ISO 14001 Environment
Management System and OHSAS 18001 (Occupational Health and Safety
Assessment Series). The Company’s products are all halal-certified.
The company’s factory is located in Petaling Jaya. Recently, Dutch
Lady Malaysia is the market leader in key milk categories such as UHT
milk, Sterilized milk and Growing-Up Milk.
3
Recent Development
Year 1995 Dutch Lady Malaysia been accredited with ISO 9001
certification
Year 1995 The Hazard Analysis and Critical Control Point
(HACCP) certification has been awarded to Dutch
Lady Malaysia for all its processing and packaging
plants.
Year 1999 Dutch Lady Malaysia attained certification under the
new OHSAS 18001 which contribute to the protection
of employees, visitors and contractors from hazards
Year 2004 Dutch Lady Malaysia attained certification under the
new ISO 14001
Year 2004 Dutch Lady Malaysia received the “NPC productive”
Awards.
Year 2007 Dutch Lady Malaysia received “The Reader’s Digest
Superbrands Gold” Awards.
Year 2010 Dutch Lady Malaysia received the “Putra Brand”
Awards.
Extra award
Dutch Lady Malaysia receives the “Halal certification
for local and international markets” and the halal
certificate issued by JAKIM is renewed every two
years.
4
Profitability Ratio
2012 2011(ROE) = 123380
x100%
= 108082x100%Return on
Equity 237644228313
= 51.9% = 47.3%(NPM) = 123380
x100%
= 108082Net Profit Margin
882179 810647X100%
= 14.0% = 13.3%(GPM) = 346704
x100%
= 304472Gross Profit Margin
882179 810647 X100%
= 39.3% = 37.6%(SER) = 120676
x100%
= 106180Selling Exp.Ratio
882179 810647X100%
= 13.7% = 13.1%
(GER) = 27472x100%
= 26134General Exp. Ratio
882179 810647X100%
= 3.1% = 3.2%(FER) = 2862
x100%
= 919Financial Exp. Ratio
882179 810647X100%
= 0.3% = 0.1%
5
Financial Stability Ratio
2012 2011Working Capital = 308510 =
324466
161786 135309= 1.91 = 2.4= 1.91: 1 = 2.40: 1
Total Debt = 166640 x100%
= 139360x100%
382774 398514= 43.5% = 35.0%
(IT) = 365 days = 365 days
Stock Turnover
(535475/90114.5)
(506175/83085)
= 61.4 days = 59.9 days(DT) = 365 days = 365 daysDebtor Turnover (882179 /26445)
(810647 / 55945)
= 10.9 days = 25.2 days
(IC) = 6056+123380 = 3104+108082Interest Coverage 6056
3104
= 21.4 times = 35.8 times
Price/ Earning Ratio
=Current share priceEarnings per share
= 46.762.03
= 23.09
6
Interpretation
ROEDuring the year 2011-2012 periods, the ROE has increased from 47.3% to 51.9%. This means that the owner is getting more return on his capital.
NPMDuring the year 2011-2012 periods, the NPM has increased from 13.3% to 14.0%. This means that the owner is getting more profit from the sales.
GPM
During the year 2011-2012 periods, the GPM has increased from 37.6% to 39.3%. This means that the business is getting better in controlling the cost of goods sold.
SER
During the year 2011-2012 periods, the SER has increased from 13.1% to 13.7%. This means that the business is getting worse in controlling the selling expenses.
GER
During the year 2011-2012 periods, the GER has decreased from 3.2% to 3.1%. This means that the business is getting better in controlling the general expenses.
FER
During the year 2011-2012 periods, the FER has increased from 0.1% to 0.3%. This means that the business is getting worse in controlling the financial expenses.
7
Interpretation
P/E Ratio
P/E ratio measures how expensive a share is. The higher the P/E ratio, the more expensive a share is, and vice versa. According to the value that was counted, the P/E of 23.09 means that an investor will need to wait for 23.09 years to recoup his investment. A conservative investor will normally pay no more than ratio of 15 for a share that he likes.
8
Interpretation
Working Capital
During the year 2011-2012 periods, the WCR has decreased from 2.40: 1 to 1.91: 1. The business ability to pay off current liabilities is getting worse. In addition, it does not reach the minimum 2: 1 ratio.
Total Debt
During the year 2011-2012 periods, the TDR has increased from 35.0% to 43.5%. The Total Debt has increases. However, the debt level is still lower than 50% limit.
Stock Turnover
During the year 2011-2012 periods, the stock turnover has increased from 59.9 days to 61.4 days. The business sells the inventory become slower.
Debtor Turnover
During the year 2011-2012 periods, the debtor turnover has decreased from 25.2 days to 10.9 days. The business is more effective in collecting the debts.
Interest Coverage
During the 2011-2012 periods, the interest coverage has decreased from 35.8 times to 21.4 times. The business ability to pay its interest has decreased. Thus, it has already satisfied the minimum ratio of 5 times.
Investment Recommendation
Dutch Lady Milk Industry Berhad did not demonstrated good
profitability and strong financial stability. However, its shares are
available at a cheap price.
In our opinion, we think that Dutch Lady Malaysia at 2012 is not
that profitable as the year 2011. Thus, we think that it would be
wise to not invest in the company.
According to the ratio calculations above, in terms of the
profitability ratios, the Return on Equity (ROE), Net Profit Margin
(NPM), Gross Profit Margin (GPM), and General Expenses Ratio
(GER) are getting better at 2012 compare to 2011. The company
is using more expenses and getting even worse at controlling
their expenses at 2012 compare to the previous years.
The other factors that Dutch Lady Malaysia (Dutch Lady Malaysia) is
not recommended to be invest is because its working capital, total
debt, stock turnover, debtor turnover, and interest coverage from
the financial stability ratios are getting worse compare to the
previous years.
9
10
11
12
13
14
References
Dutchlady.com.my (1963). Dutch Lady::The Company: Company Profile. [Online] Retrieved on 7 November 2013. At
http://www.dutchlady.com.my/en/home.asp?page=company&subpage=comp_profile
Dutchlady.com.my (1963). Dutch Lady: The Company: Introduction To Dutch Lady. [Online] Retrieved on 7November 2013. Available at Introduction To Dutch Lady. At
http://www.dutchlady.com.my/en/home.asp?page=company&subpage=intro_dutch
Huang, S. (2011). Dutch Lady Annual Report 2011. [Online] Retrieved on 7 November 2013 At
http://www.dutchlady.com.my/sharedfiles/financial/files/DL_AnnualReport_2011.pdf
Huang, S. (2012). Dutch Lady Annual Report 2012. [Online] Retrieved on 7 November 2013 At
http://www.dutchlady.com.my/sharedfiles/financial/files/DL_AnnualReport_2012.pdf
Dutchlady.com.my (1963). Dutch Lady: The Company: Introduction To Dutch Lady. [Online] Retrieved on 7November 2013. Available at Introduction To Dutch Lady. At
http://www.dutchlady.com.my/en/home.asp?page=company&subpage=success
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