Financial Analysis Report for Sycal Ventures Berhad

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Names: Student IDs:

MELVIN LIM WEI JIEN 0315772

JAKE SIA CHYI SERN 0314396

VOON SZE LUN 0315032

AMY WONG LI HUI 0312406

NOBERT VOO HSIEN YUNG 0303748

Programme: Bachelor of Quantity Surveying (Honours), SCHOOL OF ARCHITECTURE, BUILDING & DESIGN

Email (Group Leader): [email protected] Contact No (Group Leader): 012 6655 329

Subject code and title: QSB3413/QSB3414/FIN60203 FINANCIAL MANAGEMENT

Module Lecturer/ Tutor: Lai Chee Kin

Assignment number: Group Written Assignment Due date: 22 November 2016

Assignment topic as stated in the guidelines provided: Business and financial analyses and forecasts of a company.

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Student Names and IDs:

MELVIN LIM WEI JIEN 0315772JAKE SIA CHYI SERN 0314396VOON SZE LUN 0315032AMY WONG LI HUI 0312406NOBERT VOO HSIEN YUNG 0303748

Programme: Bachelor of Quantity Surveying (Honours), SCHOOL OF ARCHITECTURE, BUILDING & DESIGN

Email : [email protected] Contact No : 012 6655 329

Module code and title: QSB3413/QSB3414/FIN60203 FINANCIAL MANAGEMENT Module Lecturer/ Tutor: Lai Chee Kin

Assignment number: Group Written Assignment Due date: 22 November 2016 Word Count: 4,708

Assignment topic as stated in the guidelines provided: Business and financial analyses and forecasts of a company.

B. This section will be completed by the lecturer/tutor assessing your assignment:

CRITERIA %DISTINCTION

(7.5-10)CREDIT(6-7.4)

PASS(5-5.9)

MARGINAL FAIL(4-4.9)

FAIL(0-3.9) SCORE

Executive summary, introduction, background and principal activities, and strategic plans of the company

5 # ExcellentWell-researched, objective and clearly written.

# Good # Fair # Poor # ConfusingShows little or no research, biased or irrelevant, lacks clarity.

Industry analysis 10 # ExcellentRelevant, up-to-date and well-researched.

# Good # Fair # Poor # ErroneousIrrelevant, outdated, little evidence of research.

Financial analysis 70 # ExcellentAccurate calculations of the latest financial data over two years, comparison with industry data, well-reasoned analyses.

# Good # Fair # Poor # ErroneousMultiple errors in calculations showing lack of understanding, fails to evaluate company by comparing with relevant industry data, no reasoned analysis of financial data.

Financial forecasts 10 # ExcellentAccurate calculations and correct conclusions. Excellent evaluation of the projected cash requirements.

# Good # Fair # Poor # Erroneous

Multiple errors in calculations showing lack of understanding. Forecasts without any basis or justification. Missing or invalid conclusions and analyses.

Structure and presentation, language, reference of sources

5 # ExcellentExcellent headings/sub-headings, layout, pagination. Excellent grammar, spelling. Effective/accurate use of figures and tables. Excellent references of sources.

# Good # Fair # Poor # Erroneous

Inappropriate or no headings, poor and confusing layout, innappropriate or no numbering. Weak grammar, many spelling mistakes, ineffective/inaccurate use of figures and tables. Poor or no references of sources.

Penalty

Total (100%)

Final score (25%)

Any additional comments (if there is any):Comments:

Assessed by: Date:

Sample Moderated by (if any): Date:

Table of Content

Content P g.

1.0 Background……………………………………………………………………………….….…2-52.0 Principal Activities of the Company………………………………………………………..........63.0 Analysis of the Revenue Contributions of Different Segments…………………………….….7-84.0 Current State of the Major Industry of the Company…………………………………….………85.0 Strength and Weaknesses………………………………………………………………….……..96.0 Strategic Plan and Challenges…………………………………………………………….…..9-107.0 Major Capitals…………………………………………………………………………….….….118.0 Cash Flow over the last five years………………………………………………………...…12-159.0 Free Cash Flow in the recent five years………………………………………………….…..16-1910.0 Financial Condition………………………………………………………………………….20-3211.0 Forecast Revenue Growth……………………………………………………………………33-3412.0 Conclusion and Recommendations……………………………………………………………...3513.0 Appendices……………………………………………………………………………….…..36-4914.0 References……………………………………………………………………………………50-51

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1.0 BACKGROUND

1.1 Establishments

Sycal Ventures Berhad is an established player in the construction industry having been around since

1980, the company’s headquarters is in Kuala Lumpur, Malaysia. The company is a public limited

liability company incorporated in Malaysia under the Companies Act, 1965 and is domiciled in Malaysia

(Sycal Ventures – Annual Report 2015). The company operates as an investment holding company and is

listed on the Main Market of Bursa Malaysia Securities Berhad. The Company operates through three

segments: Construction, Property development, and Manufacturing and trading (Reuters, 2016).

The Sycal group is currently active in property development, including new townships and also

the Hotel & Resort sector. The group has delivered more than RM1.5 billion worth of projects for the

government as well as the private sectors, which includes low-rise and high-rise housing, infrastructure,

landmark buildings, universities, hospitals and commercial developments.

1.2 Core businesses

There are 3 core businesses in Sycal Ventures Berhad. Construction and infrastructure activities

represent one of the core business of the group and has contributed approximately 71% of the Group’s

revenue, backed by a construction order book of approximately RM 319 million for the year ended in 31

December 2007 (Sycal Ventures Berhad, 2016).

Secondly, through Property Development, Sycal Berhad had newly acquired 2 development

subsidiaries, namely Sycal Properties Sdn Bhd (SPSB) and Sycal Resorts Sdn Bhd (SRSB), of which both

has entered 3 new development projects in Cheras, Bukit Gambir and Lumut.

Last but not least, Hotels and resorts represents another of their core activity. One of the missions

of Sycal Berhad is to enhance the reputation of the hotels and resorts under its roof within the hospitality

industry. The group has developed Marina Cove Resort and Marina Heights as apartment concepts which

overlook the popular holiday island, Pangkor Island.

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1.3 Listing

On the 29th of March 1995, Sycal Ventures Berhad became a public listed company and was listed on

the Main Board of Bursa Malaysia (KLSE: SYCAL), (Sycal Ventures Berhad, 2016).

1.4 Shareholders

Name Of Shareholders No. of Holdings %

1. Kenaga Nominees (Tempatan) Sdn Bhd

- Fantastic Hallmark Sdn Bhd53,364,048 16.66


- Westhill Capital Sdn Bhd26,682,024 8.33

3. SYC Holdings Sdn Bhd 18,330,628 5.72


- A Malik Bin Munadi15,382,024 4.80

5. Sungai Kasa Sdn Bhd 14,975,475 4.68

6. Waste Environment Services Sdn Bhd 14,967,762 4.67

7. Flora Luxury Sdn Bhd 12,767,996 3.99


- Rohizir Bin Abdul Rashid 11,300,000 3.53


For GM Aero Support Sdn Bhd10,704,601 3.34

10. Dato’ Seow Yong Chin 7,826,145 2.44

11. Cimsec Nominees (Tempatan) Sdn Bhd

Pengurusan Danaharta Nasional Berhad for Seow

Yong Chin

6,777,330 2.12

12. Chua Seng Boon 5,794,100 1.81

13. Public Nominees (Tempatan) Sdn Bhd

Pledge Securities Account for Chua Seng Onn (E-

TAI/ATR)

4,652,300 1.45

14. Cheong Sau Wah 4,260,019 1.33

15. UOBM Nominees (Tempatan) Sdn Bhd

United Overseas Bank (Malaysia) Bhd4,226,480 1.32

16. Ng Yeow Yin 3,421,449 1.07

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17. Amanah International Finance Sdn Bhd 3,294,574 1.03


Syed Zain Al-Kudcy Bin Syed Mahmood (001)3,256,413 1.02

19. Cimsec Nominees (Tempatan) Sdn Bhd

Danaharta Managers Sdn Bhd for Seow Yong Chin3,222,670 1.01


Pledged securities account for Chua Seng Oun2,910,000 0.91

21. HLB Nominees (Tempatan) Sdn Bhd

Pledged securities account for Cygal Holdings Sdn

Bhd (HLFCHSB/104)

2,599,500 0.81

22. Maybank Nominees (Tempatan) Sdn Bhd

Pledged securities account for Seow Yong Chin

(MDTS)

2,115,000 0.66

23. Ital-Pacific Development Sdn Bhd 1,785,000 0.56


For SYC Holdings Sdn Bhd (001)1,402,254 0.44

25. Cygal Holdigns Sdn Bhd 1,391,250 0.43

26. Visefare Villa Sdn Bhd 1,376,656 0.43


Pledged Securities Account for Yap Kon Hing1,309,200 0.41

28. Lim Kang Pow 1,211,800 0.38


Pledged Securities Account for Lim Lee Foon1,199,950 0.37

30. Malaysia Nominees (Tempatan) Sdn Bhd

Pledged Securities Account for Cygal Holdings Sdn

Bhd

1,175,250 0.37

1.5 Key Management Personnel

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i. Dato’ Sri Haji Abd Rahim Bin Haji Abdul

Chairman / Non-Independent Non-Executive Director

Appointed on 15 March 2006

ii. Dato’ Seow Yong Chin

Group Managing Director / Member of Remuneration Committee

Appointed on 30 November 2005

iii. Syed Zain Al-Kudcy Bin Dato’ Syed Mahmood

Executive Director


iv. Chin Kok Wah

Executive Director


v. Tan Sri Dato’ Seri Dr. Ting Chew Peh

Independent Non-Executive Director / Member of Audit Committee / Chairman of

Remuneration / Member of Nomination Committee

Appointed on 27 June 2014

vi. Dato’ Paduka Dr Abdul Wahid Bin Ahmad Shuhaime

Independent Non-Executive Director / Member of Audit Committee / Chairman of Remuneration

Committee / Member of Nomination Committee

Appointed on 27 February 2012

vii. Tee Lay Peng

Independent Non-Executive Director / Member of Audit Committee / Chairman of Remuneration

Committee / Member of Nomination Committee

Appointed on 30 September 2013

2.0 PRINCIPAL ACTIVITIES OF THE COMPANY

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[Grab your reader’s

Sycal Berhad is principally an investment holding company itself. However, its subsidiaries engage in

various principal activities mentioned below (Sycal Ventures – Annual Report 2015):

Name of subsidiary companies Principal Activities

Sycal Kulai Sdn Bhd Property development

Cygal Construction Sdn Bhd Dormant

Sycal Plant & Machinery Sdn Bhd Contractor for management and operator of plant

and machinery

Cygal Industries Sdn Bhd Dormant

Cygal Hotel Management Services Sdn Bhd Dormant

Cygal Entertainment Sdn Bhd Dormant

Sycal Concrete Sdn Bhd Manufacturing and trading in ready mix concrete

Sycal Geotechniecs Sdn Bhd Dormant

United Golden Mile Aviation Ltd Leasing of aircraft parts and equipment and

provision of related services

Sycal ICC Properties Sdn Bhd Property development

Sycal Properties Management Sdn Bhd Property development, investment holding and

operator of theme park

3.0 ANALYSIS OF THE REVENUE CONTRIBUTIONS OF DIFFERENT SEGMENTS

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[Grab your reader’s

Figure 1.1 showing each segments of revenue of the company in 2014 and 2015.

REVENUEGROUP VARIANCE

2015 2014

RM'000 RM'000 RM'000 %

Revenue comprises:

Contract revenue 248,351 291,859 (43,508) (15%)

Consultation and project management

fee 7,311 1,200 6,111 509%

Property development revenue 1,458 51,715 (50,257) (97%)

Joint venture development revenue 3,182 - 3,182 100%

Sales of goods and services 61,415 62,609 (1,194) (2%)

TOTAL 321,717 407,383 -85,666 (21%)

Table 1.1: Revenue contribution of different segments in 2014 & 2015.

*(Retrieved from Annual Report 2015)

Total revenue has decreased by RM 85k (21%) from 2014 to 2015. The major contributor to the

decrease is from contract and property development revenue which represent 51% and 59% of the total

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RM

fall in revenue respectively. Moreover, contract revenue represents the largest contributor to total

revenue in 2014 of 72%. This could be due to challenges the group faces in obtaining new revenue in a

price-sensitive industry which is influenced by a downturn in the economy.

4.0 CURRENT STATE OF THE MAJOR INDUSTRY OF THE COMPANY

Due to the recent global financial crisis, the economy in Malaysia is moving slowly (Focus

Economics, 2016). This has resulted in the hiking of prices of houses which in turn has influenced

property transaction activities and residential construction developments to decelerate (Global Property

Guide, 2016).

Sycal Berhad is currently facing the challenges of economic slowdown. In 2016, as a result of

tight fiscal status, the economic growth is expected to sluggish until 4.5% from 4.7% in one year period.

As stated in economics.rabobanks.com, the housing market economist predicted that number of sales for

the housing market in 2016 will attain between 190,000 and 210,000. Hence, it is possible for the

transactions of 206,000 to be transcended.

At the same time, the house price index is expected to rise in between 3.5% and 5.5% (Trading

Economics, 2016). The GDV is expected to grow by 2% in 2016. Therefore, Sycal Berhad is competent

to keep profitable as the purchasing power is positive for the property market.

5.0 ANALYSIS OF COMPANY’S STRENGTHS AND WEAKNESSES

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5.1 Strengths

One of Sycal Venture Berhad’s strength is their company’s quality management. Sycal Ventures

Berhad has been awarded the Bureau Veritas Certification, ISO 9001:2008, to certify that the company is

in compliance with the requirements of the management system standards (Sycal Ventures Berhad, 2016).

Besides, Sycal Ventures Berhad has a handful of completed projects around Malaysia such as the

luxurious condominium, Cheras Heights located at Taman Bukit Cheras. Offices and Commercial

buildings like Tesco and Aeon have been completed and is situated in 3 states, Perak, Selangor and Ipoh.

These projects contribute to the portfolio which in turn builds the group’s reputation.

The group further displays its strengths through the segmentation of services which are serviced

by different subsidiaries. This is to enable each individual subsidiary to focus on their core which in turn

will retain the quality of service. Moreover, the number of subsidiaries allow the group to achieve a

higher bargaining power amongst its competitors and clients.

5.2 Weaknesses

A key weakness that can be witnessed here is that the group’s diversification into the hotels and

resorts industry face the similar price-sensitivity it faces in the construction industry. This suggests that

during the current economic downturn, the group will face an uphill struggle to remain profitable as both

industries will be relatively more negatively affected than other less price-sensitive industries.

6.0 STRATEGIC PLANS & CHALLENGES

6.1 Strategic Plans to seize opportunities

According to Sycal Ventures Berhad’s annual report, they have upcoming planned developments

in developing areas such as Greentown and Klebang, Ipoh, Taiping, Sitiawan, Segari and Sri Iskandar

Perak with the potential total gross development value of RM 1.2 billion which will propel its Property

Development activities to remain as one of the main profit contributor for the company in the next 5 to 10

years.

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Furthermore, the group plans to expand one of their core business which is the Hotels & Resort

segment, by developing new hotels in key locations including the exclusive Pullman Hotel at Greentown,

Perak (Sycal Ventures Berhad, 2016).

6.2 Challenges

6.2.1 Global financial crisis

Global financial crisis may affect local currency. Businesses that often transact in a number of

different currencies due to purchasing raw materials from different countries, may be negatively affected

by the adverse currency exchange rate. (Investopedia, 2016) According to the analysis by Bloomberg, the

the ringgit has dropped 4 percent in the past three months to 4.2035 per dollar in Kuala Lumpur at 8 Nov

2016. Therefore, this will cause operating costs to increase which will reduce profitability.

6.2.2 Goods and Service Tax issue

Goods and Services Tax requires the group to comply with stringent regulations which will

increase cost. Furthermore, non-compliance poses major threats such as penalties and lawsuit for the

group.

6.2.3 Stringent lending policies by bank

In a downhill economy, the group may find it difficult to acquire financing in regards to its

worsening financial health. Thus, with this disability, the group may face threats of increased interest

rates which increases the cost to the business. Moreover, inability to acquire financing is a pervasive issue

which will disable the group’s ability to fund its projects.

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7.0 MAJOR CAPITALS

7.1 Major Capital Investment

In 2013, the Group had purchased RM 7,245,000 of property, plant and equipment as well as RM

63,000 in other investments. Property, plant and equipment which was purchased includes freehold office

lots and buildings; plant and machinery; motor vehicles; aircraft parts and equipment; office equipment,

furniture and fittings; and theme park (Sycal Venture Berhad – Annual Report 2013; pg 26).

In 2014, the Group had purchased RM 15,371,000 of property, plant and equipment as well as

RM 63,000 in other investments. Breakdown of property, plant and equipment purchases was same as the

previous year (Sycal Venture Berhad – Annual Report 2014; pg 26).

In 2015, the Group had purchased RM 16,882,000 of property, plant and equipment as well as

RM 63,000 in other investment. Breakdown of property, plant and equipment purchases is the same as the

previous year (Sycal Ventures Berhad – Annual Report 2015; pg 28).

7.2 Source of funding

From 2014, the major source of funding consists of bank borrowings RM 62,578,000. In 2015,

bank borrowings had decreased to RM 60,345,000 (Sycal Ventures Berhad – Annual Report 2015; pg

25).

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8.0 COMPANY’S CASH FLOW OVER THE LAST FIVE YEARS

Company’s Cash Flow

Statement Year2011 2012 2013 2014 2015

Total of Cash and Cash

Equivalents (RM)611,000 485,000 2,270,000 8,340,000 (4,260,000)

Differences (RM) - (126,000) 1,785,000 6,070,000 (12,600,000)

The group experienced a slight fall in cash and cash equivalents in the year of 2011 to 2012

amounting to RM 126k. However, this was immediately reversed when the company generated a cash

surplus of RM 1.7 million in the subsequent year. Additionally, the group also received a huge increase in

cash and cash equivalents amounting to RM 6 million. This suggests that the group has managed to

improve its liquidity despite the challenges it faces in a downhill economy.

In the year 2015, the company made a deficit of RM 12 million in cash and cash equivalents from

the previous year. In hindsight, this clearly indicate that the group is not generating sufficient cash to

confidently cover their costs and could pose as a huge threat.

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8.1 Major cash flow in the latest financial year

Pertaining to the latest operating cash flow below, the group faced a net cash outflow from

operating activities amounting to RM 426 k.

From the extract above, it is clear that the main contributor to the outflow of cash is from the

increase in trade receivables. This means that the group is displaying difficulty in its recoverability of its

debtors. This would then result in insufficient working capital to fund other operating activities which is

adverse to the group.

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Another major cash outflow hails from the group making large investments in plants and

equipments. As the investment requires time to observe its results, the group can be expected to reap

economic benefits from its investments made.

The major cash outflow from financing activities consists of the repayment of loans amounting to

RM 2 million. As this would mean a healthier debt position, the group may also face liquidity issues

pertaining to its working capital.

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8.2 Cash and Cash Equivalents

In conclusion, it clearly indicates that the net changes in cash and cash equivalents is huge from

an inflow in 2014 to an outflow in 2015. This also suggests that the group is not competent enough to

maintain its current cash probably due to the worsening economy.

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9.0 COMPANY’S FREE CASH FLOW IN THE RECENT FIVE YEARS

Year 2011 RM

Net Operating Activities 1,436,000.00

Purchasing Property, Plant & Equipment (908,000.00)

Total FCF 528,000.00

Year 2012 RM

Net Operating Activities 21,420,000.000


Total FCF 21,380,000.00

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Year 2013 RM

Net Operating Activities (14,148,000.00)


Total FCF (14,555,000.00)

Year 2014 RM

Net Operating Activities (41,770,000.00)

Purchasing Property, Plant & Equipment (1,401,000.00)

Total FCF (43,171,000.00)

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Year 2015 RM

Net Operating Activities (426,000.00)

Purchasing Property, Plant & Equipment (1,047,000.00)

Total FCF (1,473,000.00)

Total amount of Free Cash Flow from Year 2011 to 2015

Year of Company’s Free Cash Flow (FCF) Total in RM

31st of December 2011 528,000.00

31st of December 2012 21,380,000.00

31st of December 2013 (14,555,000.00)

31st of December 2014 (43,171,000.00)

31st of December 2015 (1,473,000.00)

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Total Free Cash Flow in 5 Years (34,291.00)

Free cash flow indicates how much cash is available from operating cash flow after accounting

for capital expenditures required to maintain current production capacity.

Initially, the group was experiencing an increasing cash inflows from RM 528k to RM 21 million

from 2011 to 2012. This suggests a healthy liquidity for the group although it may be argued that the

opportunity cost of holding large sums of cash is high.

The situation changed drastically from 2013 to 2015 as the group experienced huge cash

outflows. This may be due to its major capital investments in the 3 years as stated above. Although the

group was susceptible to liquidity issues, the capital investments made commences to reap economic

benefits as shown in the year 2015 when the total cash outflow decreased drastically. Thus, it is probable

that the group will experience cash inflows in the future.

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10.0 SYCAL VENTURES BERHAD’S FINANCIAL PERFORMANCE

10.1 Liquidity

2015 2014 2013 2012 2011

a. Current Ratio

current assets

current liabilities

434,729,000

225,848,000

= 1.92

443,676,000

224,002,000

= 1.98

328,261,000

211,296,000

= 1.55

192,754,000

132,343,000

= 1.46

190,409,000

113,703,000

= 1.67

b. Quick Ratio

cash+accounts receivable

current liabilities

5,205,000+

173,076,000

225,848,000

= 0.79

9,720,000+

172,333,000

224,002,000

= 0.81

3,529,000+

160,551,000

211,296,000

= 0.78

2,425,000+

36,812,000

132,343,000

= 0.30

1,199,000+

51,329,000

113,703,000

= 0.46

Ratio Analysis Year Changes Year Changes Year Changes Year Changes

2011 2012 2012 2013 2013 2014 2014 2015

Current Ratio 1.67 1.46 -0.21 1.46 1.55 +0.09 1.55 1.98 +0.43 1.98 1.92 -0.06

The current ratio has decreased by 0.21 from the Year 2011 to the Year 2012. This is because of a larger increase in current

liabilities relative to only a small increase in current assets. This means that the group may have increased difficulty in

meeting its short and long term obligations. However, this is offset by the improving liquidity as shown in the in the years

2012 to 2013 (0.09%) and 2013 to 2014 (0.43). This is evidenced by the large increase in current assets such as cash and cash

equivalents. In the year 2014 to 2015, the group experienced a fall of 0.06 in their current ratio which was caused by a slight

increase in current liabilities.

Quick Ratio 0.46 0.30 -0.16 0.30 0.78 +0.48 0.78 0.81 +0.03 0.81 0.79 -0.02

In 2011 to 2012, the group has suffered a fall in quick ratio of 0.16. The fall could be attributed to the relatively higher

increase in current liabilites to its current assets.

The reversed occurred in the subsequent years from 2012 to 2013 and 2013 to 2014 when the group has improved its quick

ratio by 0.48 and 0.03 respectively.

In 2015, the group then experiences a slight fall by 0.02 in its quick ratio.

Overall, the group appears to be able to maintain healthy liquidity ratios (current and quick ratio) which are above 1.5 and 0.5 in the recent

years despite the downturn of the economy. Also, taking into account their prior performances in the earlier years, this clearly indicate that the

group managed to escape issues of having poor liquidity performances.

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10.2 Activity

2015 2014 2013 2012 2011

a. Inventory turnover

Cost of goods sold

Inventory

280,540,000

19,932,000

=14.07x

363,933,000

19,811,000

=18.37x

260,573,000

6,589,000

=39.55x

148,907,000

8,161,000

=18.25x

83,241,000

7,789,000

=10.69x

b. Average collection

period

Accounts receivables

Daily credit sales

189,939,000

297,652,000 x 365

=233.6 days

176,130,000

384,514,000 x 365

=167.4 days

112,942,000

272,125,000 x 365

=151.5 days

51,522,000

157,327,000 x 365

=119.5 days

48,676,000

89,006,000 x 365

=199.6 days

c. Total asset

turnover

Sales

Total assets

321,717,000

434,729,000

=0.74x

407,383,000

443,676,000

=0.92x

292,327,000

328,261,000

=0.89x

169,406,000

192,754,000

=0.88x

100,131,000

190,409,000

=0.53x

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2011 2012 2012 2013 2013 2014 2014 2015

Inventory

turnover

10.69 18.25 +7.56 18.25 39.55 +21.30 39.55 18.37 -21.10 18.37 14.07 -4.3

7.56 times has increased in the inventory turnover ratio from Year 2011 to Year 2012. It is because there is a higher increase

in cost of goods sold but only a slightly increase inventory.

21.30 times has increased in the inventory turnover ratio from Year 2012 to Year 2013. It is because there is a higher increase

in cost of goods sold but only a slightly increase in inventory.

21.10 times has decreased in the inventory turnover ratio from Year 2013 to Year 2014. It is because there is only a slightly

increase in cost of goods sold but a higher increase in inventory.

4.3 times has decreased in the inventory turnover ratio from Year 2014 to Year 2015. It is because there is only a slightly

increase in cost of goods sold but a higher increase in inventory.

Average

collection

199.6 119.5 -80.1 119.5 151.5 +32.0 151.5 167.4 +15.9 167.4 233.6 +66.2

The ratio of Average collection period is decreased in 80.1 days from 2011 to 2012. The reason is as the increased ratio in

average account receivable is lesser than the ratio that increased in daily credit sales.

The ratio of Average collection period is increased in 32 days from 2012 to 2013. The reason is as the increased ratio in

average account receivable is greater than the ratio that increased in daily credit sales.

The ratio of Average collection period is increased in 15.9 days from 2013 to 2014. The reason is as the increased ratio in


The ratio of Average collection period has increased in 66.2 days from 2014 to 2015. The reason is as the increased ratio in


Total asset 0.53 0.88 +0.35 0.88 0.89 +0.01 0.89 0.92 -0.03 0.92 0.74 -0.18

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turnover

0.35 times has increased in the total asset turnover ratio from Year 2011 to Year 2012. It is because there is a higher increase

in sales but only a slightly increase in total assets.

0.01 times has increased in the total asset turnover ratio from Year 2012 to Year 2013. It is because there is a higher increase

in sales but only a slightly increase in total assets.

0.03 times has decreased in the total asset turnover ratio from Year 2013 to Year 2014. It is because there is only a slightly

increase in sales but a higher increase in total assets.

0.18 times has decreased in the total asset turnover ratio from Year 2013 to Year 2014. It is because there is only a slightly

increase in sales but a higher increase in total assets.

The group has displayed its ability to attain good inventory turnover rates at its earlier years, but has drastically worsened in the recent

years. This has been reflected in its falling revenue in the recent years as well. Average collection period has improved yearly which shows the

group’s effort in collecting debts despite the worsening economy. Finally, the total asset turnover has decelerated its performance in its recent

years. This indicates the company is not managing its assets efficiently to generate revenue.

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10.3 Debt

2015 2014 2013 2012 2011

a. Debt Ratio

Total liabilities

Total assets

286,193,000

528,225,000

=0.54

286,580,000

511,862,000

=0.56

215,311,000

405,161,000

=0.53

142,879,000

315,140,000

=0.45

128,539,000

291,673,000

=0.44

b. Debt to Equity

Total liabilities

Common stock equity

286,193,000

242,032,000

=1.18

286,580,000

225,282,000

=1.27

215,311,000

189,850,000

=1.13

142,879,000

172,261,000

=0.83

128,539,000

163,134,000

=0.79

c. Interest cover ratio

Operating profits

Interest expense

24,603,000

1,593,000

=15.44

29,195,000

1,480,000

=19.73

20,427,000

228,000

=89.59

12,748,000

917,000

=13.90

6,927,000

1,876,000

=3.69

26


2011 2012 2012 2013 2013 2014 2014 2015

Debt Ratio 0.44 0.45 +0.01 0.45 0.53 +0.08 0.53 0.56 +0.03 0.56 0.54 -0.02

The debt ratio is increased by 0.01 from the Year 2011 to the Year 2012. This is because there is an increment in total

liabilities to total assets.





The debt ratio is decreased by 0.02 from the Year 2014 to the Year 2015. This is because there is only a small increment in

total liabilities to total assets.

Debt to Equity 0.79 0.83 +0.04 0.83 1.13 +0.30 1.13 1.27 +0.14 1.27 1.18 -0.09

The ratio of debt to equity is increased in 0.04 from 2011 to 2012. The reason is as the increased ratio in the total liabilities is

lesser than the ratio that increased in the total equity.


lesser than the ratio that increased in the total equity.


greater than the ratio that increased in the total equity.

The ratio of debt to equity has reduced in 0.09 for the Year of 2014 to the Year of 2015. The reason is as the increased ratio

in the total liabilities is lesser than the ratio that increased in the total equity.

Interest cover 3.69 13.90 +10.21 13.90 89.59 +75.69 89.59 19.73 -69.86 19.73 15.44 -4.29

27

ratio

10.21 times has increased in the interest coverage ratio from Year 2011 to Year 2012. It is because there is a higher increase

in the interest expense but only a slightly increase in profit before taxes and interest.

75.69 times has increased in the interest coverage ratio from Year 2012 to Year 2013. It is because there is a higher increase


69.86 times has decreased in the interest coverage ratio from Year 2013 to Year 2014. It is because there is a greater increase


4.29 times has decreased in the interest coverage ratio from Year 2013 to Year 2014. It is because there is a greater increase


Overall, the group faces increasing debt in the recent years as it is reflected in its major funding which are from bank borrowings. This has

not only caused the group to appear highly geared but also may have difficulty in repaying its interest incurred This can be seen from its

worsening interest cover ratio.

28

10.4 Profitability

2015 2014 2013 2012 2011

a. Gross Profit Margin

Gross profit

Revenue

41,177,000

321,717,000

=0.13

43,450,000

407,383,000

=0.11

31,754,000

292,327,000

=0.11

20,499,000

169,406,000

=0.12

16,890,000

87,322,000

=0.19

b. Return on Assets

Net income

Total assets x 100%

18,452,000

528,225,000 x 100%

=3.49%

35,804,000

511,862,000 x 100%

=6.99%

17,977,000

405,161,000 x 100%

4.44%

8,936,000

315,140,000 x 100%

=2.84%

5,200,000

291,673,000 x

100%

=1.78%

c. Return on Equity

Net income

Shareholders’ equity x 100%

18,452,000

238,203,000 x 100%

=7.75%

35,804,000

222,312,000 x 100%

=16.11%

17,977,000

187,685,000 x 100%

9.58%

8,936,000

170,641,000 x 100%

=5.24%

5,200,000

161,543,000 x

100%

=3.22%

29

Ratio

Analysis

Year Changes Year Changes Year Changes Year Changes

2011 2012 2012 2013 2013 2014 2014 2015

Gross Profit

Margin

0.19 0.12 -0.07 0.12 0.11 -0.01 0.11 0.11 +0.00 0.11 0.13 +0.02

The gross profit margin is decreased by 0.07 from the Year 2011 to the Year 2012. This is because there is a lower increment

in gross profit to revenue.

The gross profit margin is decreased by 0.01 from the Year 2012 to the Year 2013. This is because there is a lower increment


The gross profit margin remains the same from the Year 2013 to the Year 2014. This is because the increment in gross profit to

revenue is equal.

The gross profit margin is increased by 0.02 from the Year 2014 to the Year 2015. This is because there is a higher increment


Return on

Assets

1.78% 2.84% +1.06% 2.84% 4.44% +1.60% 4.44% 6.99% +2.55% 6.99% 3.49% -3.50%

The return on assets is increased in 1.06% from 2011 to 2012. The reason is as the increased ratio in the net income is greater

than the ratio that increased in total assets.

The return on assets is increased in 1.60% from 2012 to 2013. The reason is as the increased ratio in the net income is greater


The return on assets is increased in 0.14 from 2013 to 2014. The reason is as the increased ratio in the net income is greater


The return on assets has reduced in 0.09 for the Year of 2014 to the Year of 2015. The reason is as the increased ratio in the net

income is lesser than the ratio that increased in total assets.

Return on 3.22% 5.24% +2.02% 5.24% 9.58% +4.34% 9.58% 16.11% +6.53% 16.11% 7.75% -8.36%

30

Equity

The return on equity is increased in 2.02% from 2011 to 2012. The reason is as the increased ratio in the net income is greater

than the ratio that increased in shareholder’s equity.





The return on equity is decreased in 8.36% from 2014 to 2015. The reason is as the increased ratio in the net income is lesser


All in all, the gross profit margin has improved in piecemeal, this can be explained by the difficulty of the group in generating revenue.

The group’s return on assets and equity have, however, improved in all the years except for 2015. This could be due to the group incurring heavy

expenses such as bad debts in the current situation of the economy which reduces profits.

31

10.5 Market Performance

2015 2014 2013 2012 2011a. Earnings per ShareNet incomeTotal outstanding common shares

17,293,000320,250,000

=0.05

34,999,000320,250,000

=0.11

17,432,000320,250,000

=0.06

8,907,000288,256,000

=0.03

5,056,000251,959,000

=0.02

b. Price / EarningsMarket value per shareEarnings per share

0.410.05

=8.20

0.330.11

=3.00

0.280.06

=4.67

0.180.03

=6.00

0.200.02

=10.00

c. Price / Book RatioMarket value per shareEquity book value / share

0.410.74

=0.55

0.330.69

=0.48

0.280.59

=0.47

0.180.59

=0.31

0.200.64

=0.31

Ratio Analysis Year Changes Year Changes Year Changes Year Changes2011 2012 2012 2013 2013 2014 2014 2015

Earnings per share

0.02 0.03 +0.01 0.03 0.06 +0.03 0.06 0.11 +0.05 0.11 0.05 -0.06

The earnings per share is increased with RM0.01 from 2011 to 2012. The reason is as the increased ratio in net income is greater than the ratio that increased in total common outstanding shares.The earnings per share is increased with RM0.03 from 2012 to 2013. The reason is as the increased ratio in net income is greater than the ratio that increased in total common outstanding shares.The earnings per share is increased with RM0.05 from 2013 to 2014. The reason is as the increased ratio in net income is greater than the ratio that increased in total common outstanding shares.The earnings per share is decreased with RM0.06 from 2014 to 2015. The reason is as the increased ratio in net income is

32

lesser than the ratio that increased in total common outstanding shares.

Price/ earnings ratio

10.00 6.00 -4.00 6.00 4.67 -1.33 4.67 3.0 -1.67 3.00 8.20 +5.20The price/ earnings ratio is decreased with 4.0 times from 2011 to 2012. The reason is as the increased ratio in market value per share is lesser than the ratio that increased in earnings per share.The price/ earnings ratio is decreased with 1.33 times from 2012 to 2013. The reason is as the increased ratio in market value per share is lesser than the ratio that increased in earnings per share.The price/ earnings ratio is decreased with 1.67 times from 2013 to 2014. The reason is as the increased ratio in market value per share is lesser than the ratio that increased in earnings per share.The price/ earnings ratio is increased with 5.20 times from 2014 to 2015. The reason is as the increased ratio in market value per share is greater than the ratio that increased in earnings per share.

Price/ book ratio 0.31 0.31 +0.0 0.31 0.47 +0.16 0.47 0.48 +0.01 0.48 0.55 +0.07The price/ book ratio is remained unchanged from 2011 to 2012. The reason is as the increased ratio in market value per share is lesser than the ratio that increased in equity book value/ shares.The price/ book ratio is increased with 0.16 times from 2012 to 2013. The reason is as the increased ratio in market value per share is greater than the ratio that increased in equity book value/ shares.The price/ book ratio is increased with 0.01 times from 2013 to 2014. The reason is as the increased ratio in market value per share is greater than the ratio that increased in equity book value/ shares.The price/ book ratio is increased with 0.07 times from 2014 to 2015. The reason is as the increased ratio in market value per share is greater than the ratio that increased in equity book value/ shares.

Apart from earnings per share, the group has improved its price/earnings and price/book ratio. This has increased the attractiveness of the shares in the stock exchange.

33

11.0 FORECAST REVENUE GROWTH

2015 2016

RM'000

% of

Revenue RM'000

Revenue 321,717 100.0% 341,020

Cost of Sales (280,540) -87.2% (297,372)

Gross Profit 41,177 12.8% 43,648

Other Operation Income 6,426 2.0% 6,812

47,603 14.8% 50,459

Administration Expenses (10,854) -3.4% (11,505)

Other Operating Expenses (13,211) -4.1% (14,004)

Profit/(Loss) From Operations 23,538 7.3% 24,950

Finance Costs (1,727) -0.5% (1,831)

Profit/(Loss) Before Taxation 21,811 6.8% 23,120

Taxation (3,359) -1.0% (3,561)

Profit/(Loss) For the Year 18,452 5.7% 19,559

Other Comprehensive Income (1,402) -0.4% (1,486)

Total Comprehensive Income/(Loss)

for the Year17,050 5.3% 18,073

Table 1.2: Shows the assumed revenue growth of 6% for FY2016

34

)1()()( 211

DPSSSLS

SARNF

Required New Funds (RNF)

A/S = Percentage relationship of variable assets to sales

S = Change in sales

L/S = Percentage relationship of variables liabilities to sales

P = Profit margin

S2 = New sales level

D = Dividen payout ratio

Calculations in RM’000

434,729 (19,30

3) -

225,848 (19,30

3) - ( 17,293 ) (341,020) (1-0)321,7

17 321,7

17 321,71

7

= 135%(19,303) - 70%(19,303) - (5.4%)(341,020)(1)

= 26,084 - 13,551 - 18,331

= (5,793)

Hence, from the calculations and information above, the company does not required to find any required new funds to fund this sales growth.

35

12.0 CONCLUSION & RECOMMENDATIONS

In conclusion, the group appears to have worsening performance in the year ended 2015 as

compared to prior years. Most of these can be attributed to the downturn in the economy especially since

the group operates in a price sensitive/elastic industry. Despite that, the group still managed to maintain

its financial health mainly by diversifying its revenue streams from those badly affected. The market

performance is another indicator that despite the fall in net profits, the group managed to retain an

attractive figure in the market.

Improvements should be made at generating new revenue as it has been displayed that revenue is

affected the worst amongst all. The utilization of assets should also be taken into consideration as it is the

main driver for generating economic benefits.

36

13.0 APPENDICES

13.1 Pages of Annual Report

37

38

39

40

41

42

43

44

45

46

47

48

13.2 Ratio Formulas

Current Ratio =current assetscurrent liabilities

Quick Ratio =cash+accounts receivablecurrent liabilities

Inventory turnover =

Cost of goods soldInventory

Average collection period

=Accounts receivables

Daily credit sales

Total asset turnover =

SalesTotal assets

Debt Ratio =Total liabilitiesTotal assets

Debt to Equity =

Total liabilitiesCommon stock equity

Time Interest Earned =

Operating profitsInterest expense

Fixed payment coverage ratio

=EBIT+EBT

Interest+EBT

Gross Profit Margin =

Gross profitRevenue

Return on Assets =

Net income Total assets x 100%

Return on Equity =

Net incomeShareholders’ equity x 100%

49

Earnings per Share =

Net incomeTotal outstanding common shares

Price/Earnings =

Market value per shareEarnings per share

Price/Book Ratio =

Market value per shareEquity book value / share

50

14.0 REFERENCES

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2. Audit Committees: The Roles and Responsibilities. (2016). Grfcpa.com. Retrieved 21 November 2016, from http://www.grfcpa.com/resources/publications/audit-committee-responsibilities/

3. About Risk Management Committees: An Invaluable Resource. (2016). Nonprofitrisk.org. Retrieved 21 November 2016, from http://www.nonprofitrisk.org/tools/hallmarks/tools/1aboutRMcommittees.doc

4. Diversification. (2016). Investopedia. Retrieved 21 November 2016, from http://www.investopedia.com/terms/d/diversification.asp

5. Dutch housing market prospects: strong sales and rising prices. (2016). Rabobank. Retrieved 21 November 2016, from https://economics.rabobank.com/publications/2016/may/dutch-housing-market-prospects-strong-sales-and-rising-prices/

6. Free Cash Flow - FCF. (2016). Investopedia. Retrieved 21 November 2016, from http://www.investopedia.com/terms/f/freecashflow.asp

7. Guide, G. (2016). Malaysia’s property market slowing sharply. Global Property Guide. Retrieved 21 November 2016, from http://www.globalpropertyguide.com/Asia/malaysia

8. Guide, G. (2016). Malaysia’s property market slowing sharply. Global Property Guide. Retrieved 21 November 2016, from http://www.globalpropertyguide.com/Asia/malaysia/Price-History

9. Malaysia Economic Outlook. (2016). Focus Economics. Retrieved 21 November 2016, from http://www.focus-economics.com/countries/malaysia

10. Malaysia House Price Index | 1997-2016 | Data | Chart | Calendar | Forecast. (2016). Tradingeconomics.com. Retrieved 21 November 2016, from http://www.tradingeconomics.com/malaysia/housing-index

11. Property market in Malaysia may peak in 2020. (2016). ASEAN Today. Retrieved 21 November 2016, from https://www.aseantoday.com/2016/02/property-market-in-malaysia-may-peak-in-2020/

12. Ratio Analysis: Using Financial Ratios | Investopedia. (2016). Investopedia. Retrieved 21 November 2016, from http://www.investopedia.com/university/ratio-analysis/using-ratios.asp

51

http://www.investopedia.com/university/ratio-analysis/using-ratios.asp

https://www.aseantoday.com/2016/02/property-market-in-malaysia-may-peak-in-2020/

https://www.aseantoday.com/2016/02/property-market-in-malaysia-may-peak-in-2020/

http://www.tradingeconomics.com/malaysia/housing-index

http://www.focus-economics.com/countries/malaysia

http://www.globalpropertyguide.com/Asia/malaysia/Price-History

http://www.globalpropertyguide.com/Asia/malaysia/Price-History

http://www.globalpropertyguide.com/Asia/malaysia

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https://economics.rabobank.com/publications/2016/may/dutch-housing-market-prospects-strong-sales-and-rising-prices/

https://economics.rabobank.com/publications/2016/may/dutch-housing-market-prospects-strong-sales-and-rising-prices/

http://www.investopedia.com/terms/d/diversification.asp

http://l.facebook.com/l.php?u=http%3A%2F%2Fwww.nonprofitrisk.org%2Ftools%2Fhallmarks%2Ftools%2F1aboutRMcommittees.doc&h=KAQGAAzoG

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18. Sycal Ventures Berhad Company Profile. (2016). EMIS. Retrieved 21 November 2016, from https://www.emis.com/php/companyprofile/MY/Sycal_Ventures_Berhad_en_2357138.html

52

https://www.emis.com/php/companyprofile/MY/Sycal_Ventures_Berhad_en_2357138.html

http://www.sycalberhad.com/assets/sycal-ar-2015.pdf





Education

Financial Analysis Report for Sycal Ventures Berhad