Assignment Ratio Analysis - Mohd Syafiq Hazwan - 2021329709 - complete PDF

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FIN 430 – INTRODUCTION OF CORPORATE FINANCEINDIVIDUAL ASSIGNMENTSTUDENT NAME: MOHAMAD SYAFIQ HAZWAN BIN HAZEMANMATRIKS NUMBER: 2021329709LECTURER NAME: DR. IMANI BT MOKHTARCompany Selected:1. Background Company1 Background Company of Tenaga Nasional BerhadTenaga Nasional Berhad (200866-W) is the lar...

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FIN 430 – INTR INTRODUCTION ODUCTION OF CORPORA CORPORATE TE FINANCE INDIVIDU INDIVIDUAL AL ASSIGNMENT

STUDENT NAME: MOHAMAD SY SYAFIQ AFIQ HAZWAN BIN HAZEMAN MA MATRIKS TRIKS NUMBER: 2021329709 LECTURER NAME: DR. IMANI BT MOKHT MOKHTAR AR

Company Selected:

1. Background Company

1.1 Background Company of Tenaga Nasional Berhad

Tenaga Nasional Berhad (200866-W) is the largest electricity utility in Malaysia and a leading utility company in Asia with an international presence in United Kingdom, Kuwait, Turkey, Saudi Arabia, Pakistan, India and Indonesia. Since there listing on 28 May 1992, they have grown from strength to strength to become a utility that is responsive to the needs of their stakeholders and the marketplace. In all of their endeavours, TNB are driven by their firm belief that the responsibility to improve lives of the people in Malaysia. TNB are drive successfully by their vision and mission from time to time. The vision is to be among the leading corporations in energy and related business globally. And the mission to get their goal to be reality is TNB committed to excellence in their product and service. TNB has serve 10.08 million customers profile from any profile such as like an industrial, commercial and residential customers. For industrial customer, their engage in the manufacture of goods and services. Although they also make up the smallest segment of TNB customer. Other than that, commercial customer is the second largest source of electricity sales for their profit. Lastly, as at 2020 TNB have the majority customer in residential which is estimated 32.68 million population in Malaysia using their product and services. As the largest electricity utility in Malaysia, their a key contributor to Nation building. In recent years, TNB also embarked on our sustainability agenda through efforts such as renewable energy and other environmental as well as social initiatives as we seek to add value to their stakeholders. TNB believe these activities will not only take Tenaga Nasional Berhad (TNB) into the future, but also continue to grow their business in the long term as they have to transform their selves into be one of the world’s top 10 global utility by 2025.

1.2

Background company of Gas Malaysia Berhad

Gas Malaysia Berhad (“Gas Malaysia”) was established on 16 May 1992 to sell, market and distribute natural gas as well as to develop, operate and maintain the Natural Gas Distribution System (“NGDS”) within Peninsular Malaysia. Gas Malaysia are licensed under the Gas Supply Act 1993 to supply and sell reticulated natural gas in Peninsular Malaysia. With the transition towards the liberalisation of the market set to take place in 2020 through the implementation of the Third-Party Access (“TPA”), Gas Malaysia began efforts in 2019 to meet the TPA’s regulatory framework. By 31 December 2019, Gas Malaysia had successfully unbundled its business operations into two separate entities via the awarding of a distribution license and a shipping license from Suruhanjaya Tenaga. These two entities, which are both wholly owned by Gas Malaysia, are Gas Malaysia Distribution Sdn Bhd (“GMD”) and Gas Malaysia Energy and Services Sdn Bhd (“GMES”). GMD was granted a 20-year distribution license which allows it to take up the role as a gas distributor through its 2,600 kilometres of NGDS throughout Peninsular Malaysia. GMD will also develop, operate and maintain the NGDS to ensure the safe and reliable delivery of gas to customers across Peninsular Malaysia. GMES, meanwhile, was granted a 10-year shipping license and will conduct its role as a gas shipper as the license enables GMES to procure gas from a supplier and arrange the delivery of gas in accordance with the customer’s requirements. This allows GMES to make arrangements with a regasification, transportation or distribution licensee for gas to be processed or delivered via their facilities to consumers’ premises. In addition, Gas Malaysia through Gas Malaysia Retail Services Sdn Bhd also supplies Liquefied Petroleum Gas (“LPG”) to 1,213 commercial customers and 14,160 residential customers. In total, their customer base stands at 28,632. Gas Malaysia industrial customers contribute 99.56% of the total gas volume sold. Further to this, Gas Malaysia has diversified into the non-regulated sphere of the gas distribution business via subsidiary and joint venture companies. These include Gas Malaysia Virtual Pipeline Sdn Bhd, Gas Malaysia Energy Advance Sdn Bhd, Gas Malaysia Synergy Drive Sdn Bhd and Sime Darby Gas Malaysia BioCNG Sdn Bhd. Gas Malaysia remain focused on creating new demand for natural gas and fulfilling customers’ energy requirements, ultimately expanding our customer base to ensure sustainable growth.

2. Time Series Analysis 2.1 Time series analysis for Tenaga Nasional Berhad between year 2019 & 2020 2019 (RM, Million)

2020 (RM, Million)

20,725.8 152,284.0

19,818.40 147,210.5

0.13X

0.13X

Current ratio = Current assets Current liabilities Net working Capital = Current assets – current liabilities

20,725.80 152,284.0

–

19,818.40 147,210.5

(131,558.2)

(127,392.1)

47,242.3 172,638.4

40,758.3 173,180.8

0.27X

0.23X

3,127.4 X 360 47,242.3

5,383.7 X 360 40,758.3

23 days

47 days

255,073.3 172,364.2

247,666.0 173,180.8

1.47X

1.43X

102,789.3 172,364.2

100,455.5 173,180.8

0.59X

0.58X

1,965.0 X 100 47,242.3

2,675.3 X 100 40,758.3

4%

6%

1,965.0 X 100 172,364.2

2,675.3 X 100 173,180.8

1.1%

1.5%

Total Asset Turnover ratio = Sales Total Assets

Debt Ratio = Total liabilities Total Assets

Net Profit Margin = Net Profit X 100 Sales

The company’s debt position is worse in 2019 compare to year 2020. Higher debt ratio shows that the company uses higher level of debt to finance its business. And Long term debt in 2019 is more than 2020.

Profitability Ratio

Return On Investment = Net Profit X 100 Total Assets

The company is more efficient in 2019 compare to 2020. Average collection period indicates that the company managed to collect the amount due from its creditors within 23 days compared to 47 days in the 2020. Also TAT ratio is better 2019 than 2020. Leverage

Long Term Debt Ratio = Long Term Debt Total Assets

The company has maintain their liquidity from the past year, however we can look in a year 2020 their have decrease asset and liabilities. In other hand, the net working capital also decrease. Efficiency

Average collection period = Acc receivables x 360 Sales

–

Interpretation Liquidity

The company has better ability in generating profit in 2020 compare to the previous year. Net profit margin and return on Investment signify that the company managed to generate higher level of profit with the given level of sales and assets in 2020 as compared to 2019.

2.2

Time Series Analysis for Gas Malaysia Berhad between year 2019 & 2020 2019 (RM’ 000)

2020 (RM’ 000)

1,049,472 1,203,770

144,755 379,886

0.87X

0.38X

Current ratio = Current assets Current liabilities Net working Capital = Current assets – current liabilities

1,049,472 1,203,770

–

144,755 – 379,886

(154,928)

(235,131)

6,852,635 2,585,273

1,696,596 1,457,683

2.65X

1.16X

788,972 X 360 6,852,635

87,809 X 360 1,696,596

41 days

18 days

1,561,590 2,585,273

379,886 1,457,683

0.60X

0.26X

357,820 2,585,273

0 1,457,683

0.13 X

0

168,156 X 100 6,852,635

228,096 X 100 1,696,596

2.4%

13.4%

168,156 X 100 2,585,273

228,096 X 100 1,457,683

6.5%

15.6%

Total Asset Turnover ratio = Sales Total Assets

Debt Ratio = Total liabilities Total Assets

Net Profit Margin = Net Profit X 100 Sales

The company’s debt position is worse in 2019 compare to year 2020. Higher debt ratio shows that the company uses higher level of debt to finance its business. Company not take the long-term debt in 2020 as a safety way to maintain their debt. Profitability Ratio

Return On Investment = Net Profit X 100 Total Assets

The company is more efficient in 2019 compare to 2020. Average collection period indicates that the company managed to collect the amount due from its creditors within 18 days compared to 41 days in the 2019. Also TAT ratio is better 2019 than 2020. Leverage

Long Term Debt Ratio = Long Term Debt Total Assets

The company has decrease their liquidity from the past year, however we can look in a year 2020 they have decrease asset and liabilities. In other hand, the net working capital for 2020 is worst than 2019.

Efficiency

Average collection period = Acc receivables x 360 Sales

Interpretation Liquidity

The company has better ability in generating profit in 2020 compare to the previous year. Net profit margin and return on Investment signify that the company managed to generate higher level of profit with the given level of sales and assets in 2020 as compared to 2019.

3.0 Cross Secctional Analysis 3.1

Cross Sectional Analysis Between Tenaga Nasional Berhad and Gas Malaysia Berhad for 2019 TNB

GMB

Interpretation Liquidity

20,725.8 152,284.0

1,049,472 1,203,770

0.13X /

0.87X

Current ratio = Current assets Current liabilities Net working Capital = Current assets – current liabilities

20,725.80 152,284.0

– 1,049,472 1,203,770

(131,558.2) /

(154,928)

47,242.3 172,638.4

6,852,635 2,585,273

0.27X /

2.65X

3,127.4 X 360 47,242.3

788,972 X 360 6,852,635

23 days

41 days

Total Asset Turnover ratio = Sales Total Assets

Efficiency

Average collection period = Acc receivables x 360 Sales

/

Debt Ratio = Total liabilities Total Assets

1,561,590 2,585,273

1.47X

0.60X

102,789.3 172,364.2

357,820 2,585,273

0.59X

0.13 X

1,965.0 X 100 47,242.3

168,156 X 100 6,852,635

4%

2.4%

/

/

Net Profit Margin = Net Profit X 100 Sales

TNB’s debt position is worse than the GMB. Higher debt to total assets shows that the TNB uses higher level of debt to finance its business compare to the GMB. Moreover, TNB has a higher amount of total assets being financed by long term debt compare to the GMB Profitability Ratio

/

Return On Investment = Net Profit X 100 Total Assets

TNB is more efficient in get their asset turnover better than GMB. Average collection period indicates that the TNB managed to collect the amount due from its creditors within 23 days compared to GMB which is take too long time within 41 days.

Leverage 255,073.3 172,364.2

Long Term Debt Ratio = Long Term Debt Total Assets

–

TNB is less liquid compare to the GMB. Current ratio and net working capital indicate that TNB has less ability is paying its shortterm obligation compare to the GMB.

1,965.0 X 100 172,364.2

168,156 X 100 2,585,273

1.1%

6.5%

/

The TNB has ability in generating profit compare to the GMB. However, GMB have profitability on Return On investment from their share and asset that can generate more profit better than TNB.

3.2

Cross Sectional Analysis Between Tenaga Nasional Berhad and Gas Malaysia Berhad for 2020

TNB

GMB

19,818.40 147,210.5

144,755 379,886

0.13X

0.38X

Interpretation Liquidity

Current ratio = Current assets Current liabilities

/

Net working Capital = Current assets – current liabilities

19,818.40 147,210.5

– 144,755 – 379,886 (235,131)

(127,392.1)

/

Total Asset Turnover ratio = Sales Total Assets

Efficiency 40,758.3 173,180.8

1,696,596 1,457,683

0.23X

1.16X

5,383.7 X 360 40,758.3

87,809 X 360 1,696,596

47 days

18 days

247,666.0 173,180.8

379,886 1,457,683

1.43X

0.26X

100,455.5 173,180.8

0 1,457,683

0.58X

0

2,675.3 X 100 40,758.3

228,096 X 100 1,696,596

6%

13.4%

2,675.3 X 100 173,180.8

228,096 X 100 1,457,683

1.5%

15.6%

/

Average collection period = Acc receivables x 360 Sales

/

Debt Ratio = Total liabilities Total Assets

/

/

Net Profit Margin = Net Profit X 100 Sales

TNB’s debt position is worse than the GMB. Higher debt to total assets shows that the TNB uses higher level of debt to finance its business compare to the GMB. Moreover, TNB has a higher amount of total assets being financed by long term debt compare to the GMB Profitability Ratio

/

Return On Investment = Net Profit X 100 Total Assets

TNB is more efficient in get their asset turnover better than GMB. However, average collection period indicates that the GMB managed to collect the amount due from its creditors within 18 days compared to TNB which is take too long time within 41 days. Leverage

Long Term Debt Ratio = Long Term Debt Total Assets

TNB is less liquid compare to the GMB. Current ratio and net working capital indicate that TNB has less ability is paying its short-term obligation compare to the GMB.

/

The TNB has less ability in generating profit compare to the GMB. Hence, GMB have profitability on Return On investment from their share and asset that can generate more profit better than TNB.

4.

Diagram Analysis ratio

4.1

Time Series Analysis Ratio for Tenaga Nasional Berhad and Gas Malaysia Berhad between year 2019 & year 2020

result analysis ratio

Time Series Analysis for Tenaga Nasional Berhad between 2019 and 2020

Liquidity

Efficiency

Leverage

profitability

analysis ratio 2019

2020

result analysis ratio

Time Series Analysis for Gas Malaysia Berhad between 2019 and 2020

Liquidity

Efficiency

Leverage analysis ratio 2019

2020

profitability

4.2

Cross Sectional Analysis between Tenaga Nasional Berhad and Gas Malaysia Berhad in 2019 and 2020

resulta nalysisratio

Cross Sectional Analysis between Tenaga Nasional Berhad and Gas Malaysia Berhad in 2019

Liquidity

Efficiency

Leverage

profitability

analysis ratio TNB GMB

resultanalysisratio

Cross Sectional Analysis between Tenaga Nasional Berhad and Gas Malaysia Berhad in 2020

Liquidity

Efficiency

Leverage analysis ratio

TNB GMB

profitability

5.0

Conclusion

In conclusion, time series analysis is a comparison between a firm’s current performance with past performance. If we look at 2019 to 2020 is a challenging year where these companies have to control their finances in the face of economic conflict in a pandemic era. Therefore, this analysis is used to compare the performance of Tenaga Nasional Berhad between 2019 and 2020. It can be said that Tenaga Nasional Berhad is better in 2020 than in 2019 as the group is found to be more liquid thus increasing their ability to pay their net working capital. However, their debt position was compromised in 2020, where TNB companies had to take longer for the average debt collection period. In addition, if you look at the debt ratio of TNB companies decreased from 2019. This proves that this company is wise in managing their debt in poor economic conditions. Finally, these companies will also be able to increase their profits from 2019 to 2020. Furthermore, if we look at the time series analysis for GMB, we can see a comparison that is almost similar to TNB. Where is a good improvement from 2019 which shows GMB companies are smarter in managing asset liquidity compared to 2019. Next their ability in managing debt collection from accounts receivables also shows an increase. And in 2020, the company also showed a good trend of not making long -term loans to re -stabilize the company's indebtedness. Immediately gave a sudden profit to the company. Next, cross -sectional analysis is a comparison between two companies in the same business or industry category. Both of these companies have their own capabilities in both 2019 and 2020. In 2019, TNB will be smarter to liquidate their assets than GMB. Furthermore, in terms of efficiency, TNB companies are more efficient in managing their asset turnover as well as efficient in collecting debts as soon as they can generate a better net profit margin than GMB. However, GMB is smarter in their long -term debt management and produces a better Return on Investment than TNB. Finally, the cross-sectional analysis of these two companies for 2020 changed according to the trend of that year. If we look at this year's analysis, it is found that GMB is more progressive than TNB. Where GMB can increase their ability in turn over assets and also reduce the debt collection period from Account Receivables. Furthermore, GMB is also smart in managing their debt compared to TNB and generates higher net profit margins from TNB and also increases the rate of return on investment.

6.0

Appendix

1. Financial Statement for Tenaga Nasional Berhad 2019 & 2020 2. Financial Statement for Gas Malaysia Berhad 2019 & 2020...