Financial Analysis Of A Public Listed Company In Bursa Malaysia

Company Overview

Finance is a study to record; collect the financial activities and transactions in the annual report and other reports of the company. The finance study is performed in the business in order to measure and present the final activities and figures of the business (Bloomberg, 2018). In the report, the study has been performed on the ratios, board members of the company and the DuPont analysis method to measure the financial evaluation of the company. For the report, Amway (Malaysia) Holdings Berhad has been taken into consideration along with the main competitor of the company, Hai-O Enterprise Berhad in order to identify the competitor performance of the company as well.

Amway (Malaysia) Holdings Berhad is a Malaysian company which mainly distributes the various products under the label of Amway products. The company offers product such as nutritional, vitamins, wellness products which contains the mineral, supplements etc. The operations are run by the company in two segments which includes 35 age segment and Bumiputers segment (Investing, 2018). The company is operating its services into various other countries as well in order to diversify the market and improve the revenue position of the company.

Currently, the company has made few changes into its corporate governance structure and diversified the market into new countries in order to diversify the market and improve the revenue position of the company. The future perspective of the company explains that the company is planning to launch 10 new products in the market (Borneo Post, 2018). the market study explains that the demand of the products would be improved and because of it an increment could be seen in the sales and profitability position of the business (Malaysia Stock, 2018).

The current board of directors and the independent directors of the company are as follows:

DATO’ AB. HALIM BIN MOHYIDDIN Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Chairman, Senior Independent Non-Executive Director
LOW HAN KEE	Non-Independent Non-Executive Director
SCOTT RUSSELL BALFOUR	Non-Independent Non-Executive Director
MOHAMMAD BIN HUSSIN	Non-Independent Non-Executive Director
LIU, MING-HSIUNG @ MARTIN LIOU	Managing Director
MICHAEL JONATHAN DUONG	Executive Director
TAN SRI DATO’ CECIL WILBERT MOHANARAJ ABRAHAM	Independent Non-Executive Director
TAN SRI FAIZAH BINTI MOHD TAHIR	Independent Non-Executive Director
DATO’ ABDULLAH THALITH BIN MD THANI	Independent Non-Executive Director

(Annual report, 2017)

The annual report (2014), annual report (2015), annual report (2016) and annual report (2017) of the company has been studied and it has been found that the board independency level has been reduced in the company in order to manage the corporate governable structure and the performance of the company. Annual report (2014) explains that the board independency of the company was 60% in year 2014 which has been reduced to 44.44% in the year of 2015, 2016 and 2017. The annual report screenshot has been given in the appendix.

	2014	2015	2016	2017
Independent directors	3	4	4	4
Total number of board members	5	9	9	9
	60.00%	44.44%	44.44%	44.44%

(Annual report, 2014, 2015, 2016 and 2017)

Ratio analysis:

Board Independent Analysis

Ratio analysis study has been conducted further on the financial position and performance of the company of last 4 years in order to identify the liquidity, asset management, financial leverage and the profitability position of the business (Madura, 2014). On the basis of the ratio analysis, below calculations and the analysis has been done.

Liquidity position:

The liquidity ratio describes about the short term debt management capability of the business. The current ratio, quick ratio and the cash ratio of the business describes about decreased trend in the liquidity position of the company in last 4 years. Though, the current ratio, quick ratio and cash ratio of the company is 1.72, 1.07 and 0.84 currently which explains that the short term debt could be managed by the company easily (Annual report, 2017).

		AMWAY MALAYSIA HOLDINGS BHD
Liquidity Ratios		2014	2015	2016	2017
Current Ratio
Current Assets /		286,135	312,393	336,232	335,660
Current liabilities		131,014	189,206	212,110	195,611
Answer:		2.18	1.65	1.59	1.72
Quick ratio
Current Assets – Inventory /		201,706	228,490	241,338	209,501
Current Liabilities		131,014	189,206	212,110	195,611
Answer:		1.54	1.21	1.14	1.07
Cash Ratio
Cash + cash equivalents		173272	182473	200551	163402
Current liabilities		131014	189206	212110	195611
Answer:		1.32	0.96	0.95	0.84

(Annual report, 2016)

Asset management position:

The asset management ratio describes about the efficiency level and the current asset management of the business. The inventory, payable and receivables turnover of the business describes about various changes in the efficiency level of the company. The overall changes into the various ratios describe that the credit policies have been changed by the business and because of that the higher working capital is required by the business to run the operations from 2014.

		AMWAY MALAYSIA HOLDINGS BHD
Asset Management Ratios		2014	2015	2016	2017
Inventory Turnover (days)
Average Inventory /		84,429	83,903	94,894	126,159
Cost of Sales	# days	597,341	763,522	815,522	740,024
Answer:  (note the above needs to be x 365)		51.59	40.11	42.47	62.23
Payable turnover ratio
Accounts payable /		124378	180529	204686	106045
Cost of Sales		597,341	763,522	815,522	740,024
Answer:  (note the above needs to be x 365)		76.00	86.30	91.61	52.30
Receivables Turnover (days)
Average trade debtors /		28,434	46,017	40,787	32,218
Sales revenue  (note used operating revenue)	# days	855,804	1,019,924	1,087,501	984,214
Answer:  (note the above needs to be x 365)		12.13	16.47	13.69	11.95

(Annual report, 2017)

Financial leverage position:

The financial leverage ratio describes about the long term debt management and solvency position of the business (Kaplan and Atkinson, 2015). The debt to asset, interest coverage and asset turnover ratio of the business describes about decreased debt level against the assets, better earnings position to pay the cost of debt and the better turnover against the total resources of the business. The overall evaluation explains that expect the debt asset level, the other financial position of the business is better.

		AMWAY MALAYSIA HOLDINGS BHD
Financial leverage		2014	2015	2016	2017
Debt to asset ratio
Total debt		25	27	11	21
Total assets		362,559	394,643	422,885	409,705
Answer:		0.000	0.000	0.000	0.000
Interest cover ratio
EBIT /		127,692	81,158	63,805	70,501
Interest expenses		6,922	8,160	9,203
Answer:		18.447	9.946	6.933
Asset turnover
Net sales /		855,804	1,019,924	1,087,501	984,214
Average fixed assets		76,424	82,250	86,653	74,045
Answer:		11.198	12.400	12.550	13.292

(Annual report, 2017)

Profitability position:

The profitability ratio describes about the profit generation capability of the business. The return on total assets, gross profit margin and return on equity of the business describes about decreased trend in the profitability position of the company in last 4 years. Though, the current earnings of the company are still better and company could improve them through making the changes into various internal activities.

		AMWAY MALAYSIA HOLDINGS BHD
Profitability Ratios:		2014	2015	2016	2017
Return on Total assets
Net profit /		99,848	63,928	54,649	52,644
Total Assets		362,559	394,643	422,885	409,705
Answer:	%	27.54%	16.20%	12.92%	12.85%
Rate of return on ordinary equity
Net profit /		99,848	63,928	54,649	52,644
Total equity		231,520	205,410	210,764	214,073
Answer:		43.1%	31.1%	25.9%	24.6%
Gross profit margin
Gross profit /		258463	256402	271979	244190
Sales Revenue		855804	1019924	1087501	984214
Answer:		30.2%	25.1%	25.0%	24.8%

(Annual report, 2017)

DuPont method:

DuPont analysis is a performance measurement tool which evaluates the different drivers to calculate the return on equity of the business (Kurth, 2013).  The DuPont level of Amway (Malaysia) Holdings Berhad has been studied and compared with the Hai-O Enterprise Berhad to identify the total earnings of the company against the equity position and various factors which has affected the level of the return in the business. Hai-O Enterprise Berhad is the main competitor of the company because of the same industry, products and similar market share. The DuPont study has been performed on Amway (Malaysia) Holdings Berhad firstly and it has been found that the return on total assets of the company is lower i.e. 12.85%. The reasons behind the lower level of return on assets are higher assets level in the business. Though, the equity level of the company is lower in the business because of that, the return on equity of the business is 24.59% (higher than the return on assets) of the business. It explains that the company is generating great profit against the available funds of the business.

Year	Net income / Net sales (%)	Net sales / total assets (x)	Return on total assets (%)	Total assets / Common equity (x)	Return on equity) (%)
2017
AMWAY MALAYSIA HOLDINGS BHD	5.35%	2.40	12.85%	1.91	24.59%

(Annual report, 2017)

In order to identify the industry performance of the company, the return on equity of Hai-O Enterprise Berhad has been calculated and it has been found that the though the return on total assets of the Hai is higher but the return on equity level of Amway is better because of the fact that the common equity level of Amway is lower than the Hai.

Year	Net income / Net sales (%)	Net sales / total assets (x)	Return on total assets (%)	Total assets / Common equity (x)	Return on equity) (%)
2017
HAI-O ENTERPRISE BHD	14.71%	1.11	16.33%	1.28	20.88%

(Morningstar, 2018)

Conclusion:

On the basis of overall study on Amway, it has been found that the performance of Amway is quite better in terms of the financial and non financial performance. The company has managed a great number of independent directors in the company along with that better financial performance has been managed by the company to improve the position among the shareholders and other stakeholders of the company. DuPont analysis also concludes that the performance of Amway is quite better in the industry. 

References:

Annual report. 2014. Amway (Malaysia) Holdings Berhad. [online]. available at: https://klse.i3investor.com/servlets/staticfile/258767.jsp (accessed on 28/9/18).

Annual report. 2015. Amway (Malaysia) Holdings Berhad. [online]. available at: https://cdn1.i3investor.com/my/files/st88k/6351_AMWAY/annual/2015-12-31/6351_AMWAY_AnnualReport_2015-12-31_AMWAY-Annual%20Report%202015_277546452.pdf (accessed on 28/9/18).

Annual report. 2016. Amway (Malaysia) Holdings Berhad. [online]. available at: https://www.malaysiastock.biz/GetReport.aspx?file=AR/2017/4/20/6351%20-%200843018700473.pdf&name=Amway%20-2016%20Annual%20Report%20-%20Part%202.pdf (accessed on 28/9/18).

Annual report. 2017. Amway (Malaysia) Holdings Berhad. [online]. available at: https://klse.i3investor.com/servlets/staticfile/258767.jsp (accessed on 28/9/18).

Bloomberg. 2018. Amway (Malaysia) Holdings Berhad. [online]. available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=4484419 (accessed on 28/9/18).

Borneo Post. 2018. Amway (Malaysia) Holdings Berhad. [online]. available at: https://www.theborneopost.com/2017/01/06/amway-malaysia-banks-on-new-products-to-continue-growth/ (accessed on 28/9/18).

Investing. 2018. Amway (Malaysia) Holdings Berhad. [online]. available at: https://za.investing.com/equities/amway-(malaysia)-holdings-bhd-company-profile (accessed on 28/9/18).

Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.

Kurth, S. 2013. Critical Review about Implications of the Efficient Market Hypothesis. GRIN Verlag.

Madura, J. 2014. Financial Markets and Institutions. Cengage Learning. 

Malaysia Stock. 2018. Amway (Malaysia) Holdings Berhad. [online]. available at: https://m.malaysiastock.biz/Corporate-Infomation.aspx?securityCode=6351&section=financial (accessed on 28/9/18).

Morningstar. 2018. Hai-O Enterprise Berhad. [online]. available at: https://financials.morningstar.com/cash-flow/cf.html?t=7668&region=mys&culture=en-US (accessed on 28/9/18).