Financial Analysis of XOX Berhad / Maxis Berhad PDF

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TABLE OF CONTENTNO. CONTENT PAGE1 PART A1 Background of XOX Berhad1 Financial analysis of XOX Berhad1 - 23 - 82 PART B2 Background of Maxis Berhad2 Financial analysis of Maxis Berhad9 - 1011 - 163 PART C3 Comparison between XOX Berhad andMaxis Berhad17 - 234 PART D4 Conclusion on the financial ananl...

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TABLE OF CONTENT

NO. 1.0

2.0

3.0

4.0

5.0

CONTENT

PAGE

PART A 1.1 Background of XOX Berhad

1-2

1.2 Financial analysis of XOX Berhad PART B

3-8

2.1 Background of Maxis Berhad

9 - 10

2.2 Financial analysis of Maxis Berhad PART C

11 - 16

3.1 Comparison between XOX Berhad and

17 - 23

Maxis Berhad PART D 4.1 Conclusion on the financial ananlysis of

24

two company References

25

1.0 Part A

1.1 Background of XOX Berhad

(Source: Wikipedia)

XOX Berhad is a mobile virtual network operator that provides mobile phone services in Malaysia via Celcom’s 4G+, 4G, 3G and 2G network infrastructure. It was founded in 2005 and although XOX MOBILE is working with Celcom, it maintains its own brand identity, customer service, management structure and staff. XOX Berhad was listed on the Bursa Malaysia Ace Market in July 2011, making history as the first MVNO to be listed on Bursa Malaysia. XOX MOBILE offers prepaid, postpaid and phone bundling services to approximately 1.65m subscribers in Malaysia. The company’s vision is to be a world class company by delivering innovative and creative products to every subscriber globally through their dynamic and inspiring talents. Understanding their consumers is the top priority for them as they strive to constantly design and develop service offering which will appeal to their subscribers and to the mass market. XOX Berhad is a Malaysia based company involved in telecom business sector by providing mobile telecommunication products and services. The company is an investment holding company and operates the XOX MOBILE mobile network in Malaysia. The product line of this company includes onemusic, season pass, voopee, ONEXOX, mobile Internet, international direct dialing (IDD) and postpaid. The ONEXOX plan offers fourth-generation (4G) prepaid Internet service in Australia, Canada, China, Hong Kong, Indonesia, Singapore, Taiwan, Thailand, the United Kingdom and the United States. The Company, through the seasons pass, offers voice package, data package and combo package.

1

XOX Berhad has branches and service centers located throughout Peninsular Malaysia and East Malaysia. The Company's subsidiaries include XOX Com Sdn. Bhd., XOX Management Services Sdn. Bhd., XOX Media Sdn. Bhd., XOX Wallet Sdn. Bhd., X Style Sdn. Bhd., XOX Retail Sdn. Bhd. and One XOX Sdn. Bhd

2

1.2 Financial Analysis of XOX Berhad

Ratio

2017

2018

72201442 36837723

74620947 39190612

= 1.96:1

= 1.90:1

a) Liquidity Current ratio: Current assets Current liabilities

Interpretation: Current ratio of XOX Bhd in 2018 (1.90) is lower than in 2017(1.96). XOX Bhd has less ability to pay short-term obligations or those due within one year compare with 2017.

Quick ratio: Current assets−inventory Current liabilities

72201442 −7585943 36837723

74620947 −9259722 39190612

= 1.75:1

= 1.67:1

Interpretation: Quick ratio of XOX Bhd in 2018 (1.67) is lower than in 2017 (1.75). Excluding inventory, XOX Bhd has less ability to use its quick assets like cash and cash equivalents, marketable securities and accounts receivable to pay its current liabilities compare to 2017.

b) Asset Management Inventory turnover: Sales Inventory

191648275 7585943

3

200959634 9259722

= 25.26 times

= 21.70 times

Interpretation: Inventory turnover of XOX Bhd in 2018 (21.70 times) is less than in 2017 (25.26 times). XOX Bhd sold and replaced inventory during a given period in less turn and less efficiently to control its merchanise compared to 2017.

Days sales outstanding (DSO): Account receivables ×365 Sales

15696685 ×365 191648275

20464282 ×365 200959634

= 29.89 days

= 37.17 days

Interpretation: Days sales outstanding of XOX Bhd in 2018 (37.17days) is longer than in 2017(29.89 days). XOX Bhd is selling its product to customers on credit and taking longer to collect money compare with 2017.

Fixed assets turnover: Net Sales assets ¿ ¿

191648275 76045755

200959634 85051839

= 2.52 times

= 2.36 times

Interpretation: Fixed assets turnover o XOX Bhd in 2018 (2.36) is lower than in 2017 (2.52). XOX Bhd less ability of management to generate sales from its investment in fixed assets compared to 2017.

4

Total assets turnover: Sales Total assets

191648275 148247197

200959634 159672786

= 1.29 times

= 1.26 times

Interpretation: Total assets turnover of XOX Bhd in 2018 (1.26 times) is less than in 2017 (1.29 times). XOX Bhd less efficiently to use its assets to generate sales and become less favourable compare to 2017.

c) Debt Management Debt ratio: Total liabilities Total assets

38577209 148247197

40687159 159672786

= 26 %

= 25 %

Interpretation: Debt ratio of XOX Bhd in 2018 (25%) is lower than in 2017 (26%). This implies XOX Bhd more stable with the potential of longevity and able to pay back his loan compare to 2017.

Times-interest-earned (TIE): EBIT Interest charges

Interpretation:

5

2447953 123107

( 5894908 ) 120190

= 19.88

= (49.05)

Time-interest-earned (TIE) of XOX Bhd in 2018 is negative (-49.05) which lower than in 2017 (19.88). This indicates that XOX Bhd could not pay the interest with its negative before tax income and less favorable compare with in 2017.

¿ 2447953 + 6532950+ 2249 ¿ ( 5894908 )+ 8200505+ 2017 123107 + 2249112 120190 + 2017467

EBITDA coverage: EBIT + Dep∧ Amor + Lease pm Interest + Lease pmts+ Loan pm

= 4.73

= 2.02

Interpretation: EBITDA coverage of XOX Bhd in 2018 (2.02) is lower than in 2017 (4.73). XOX Bhd is more difficulties in meeting its debt and lease obligations compare to 2017.

d) Profitability Net profit margin on sales: Net income Sales

1988649 191648275

(6220974 ) 200959634

= 1.04%

= (3.10%)

Interpretation: Net profit margin on sales of XOX Bhd in 2018 is negative (-3.10%) and lower than in 2017 (1.04%). This indicates that XOX Bhd get loss with each dollar of sales generated and not effectively to convert sales into net income compare to 2017.

Operating profit margin on sales: 2447953 191648275

6

(5894908) 200959634

EBIT Sales

= 1.28%

= (2.93%)

Interpretation: Operating profit margin on sales of XOX Bhd in 2018 is negative (-2.93%) and lower than in 2017 (1.28%). This indicates that XOX Bhd get loss after paying for variable costs of production and not efficiency to control the costs and expenses associated with business operations compare to 2017.

Gross Profit margin on sales: Sales−COGS Sales

191648275 −104939547 191648275

200959634 −110458627 200959634

= 45.24%

= 45.03%

Interpretation: Gross profit margin on sales of XOX Bhd in 2018 is positive (45.03%) but still lower than in 2017 (45.24%). This shows that XOX Bhd not did well in managing its cost of sales and less to cover for operating, financing, and other costs compare to 2017.

Basic earning power (BEP): EBIT Total assets

2447953 148247197

(5894908) 159672786

= 1.65%

= (3.69%)

Interpretation: Basic earning power of XOX Bhd in 2018 is negative (-3.69%) and lower than in 2017

7

(1.65%). This shows that XOX Bhd is less ability to use assets to generate operating income compare to 2017.

Return on total assets (ROA): Net income Total assets

1988649 148247197

(6220974) 159672786

= 1.34%

= (3.90%)

Interpretation: Return on total assets of XOX Bhd in 2018 is negative (-3.90%) and lower than in 2017 (1.34%). This indicates that XOX Bhd is not effectively to earn a return on its investment in assets compare to 2017.

Return on common equity (ROE): Net income Common equity

1988649 109669988

(6220974) 118985627

= 1.81%

= (5.23%)

Interpretation: Return on common equity of XOX Bhd in 2018 is negative (-5.23%) and lower than in 2017 (1.81%). This indicates that XOX Bhd is not efficiently to use the money from shareholders to generate profits and grow the company compare to 2017.

e) Market value Earning per share (EPS):

8

Net income Number of shares out

1988649 6627830

(6220974) 9285036

= RM 0.3 per share

= RM (0.67) per share

Interpretation: Earning per share of XOX Bhd in 2018 is negative (-0.67) and lower than in 2017 (0.3) mean XOX Bhd is more loss and not has profits to distribute to its shareholders compare to 2017.

Price/earnings (P/E): Price per share EPS

0.10 0.3

0.060 (0.67)

= 0.33 times

= 0.09 times

Interpretation: Price/earnings of XOX Bhd in 2018 is negative (-0.09) and lower than in 2017 (0.33). XOX Bhd with a negative P/E ratio indicated negative future performance and investors are not willing to pay more for this company’s shares compare to 2017.

Cash flow per share (CFPS): Net income+ Depreciation Number od shares out

1988649 + 6532950 6627830

( 6220974 ) +8200505 9285036

= RM1.29 per share

= RM0.21 per share

Interpretation: Cash flow per share of XOX Bhd in 2018 is positive (0.21) but still lower than in 2017 (1.29). This indicates XOX Bhd has lower financial strength compare to 2017. Price/cash flow (P/CF): 9

Price per share CFPS

0.1 1.29

0.060 0.21

= 0.08 times

= 0.29 times

Interpretation: Price/cash flow of XOX Bhd in 2018 (0.29) is higher than in 2017 (0.08). This mean that XOX Bhd has generates more cash relative to its stock price compare to 2017.

Book value per share (BVPS): Common equity Number of shares out

109669988 6627830

118985627 9285036

= RM16.55 per share

= RM12.81 per share

Interpretation: Book value per share of XOX Bhd in 2018 (12.81) is lower than in 2017 (16.55). This indicates XOX Bhd has less dollar value remaining for common shareholders after all assets are liquidated and all debtors are paid compared to 2017.

Market/book value (M/B): Market price per share BVPS

0.1 16.55

0.060 12.81

= 0.006 times

= 0.005 times

Interpretation: Market/book value of XOX Bhd in 2018 (0.005) is lower than in 2017 (0.006). Both reflect undervaluation when it is less than and means that XOX Bhd’s market does not even perceive value equals to book value.

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2.0 Part B 2.1 Background of Maxis Berhad

(Source: Wikipedia)

Maxis Communications or Maxis Berhad (MYX: 6012) is a communications service provider in Malaysia. The company was founded on August 7, 2009 and is headquartered in Kuala Lumpur, Malaysia. Maxis Bhd is a telecommunications provider. Its primary services include mobile, wireless, fixed, and enterprise services, with the majority of revenue generated from mobile and wireless. The company generates mobile revenue from prepaid and postpaid subscribers, with roughly an even split between both. Within enterprise services, Maxis provides traditional managed services in addition to mobile and fixed services. Additionally, the company owns fiber backhaul infrastructure. The company generates the vast majority of its revenue in Malaysia. Maxis was the first company to launch LTE services in Malaysia on 1 January 2013, starting in the Klang Valley region. Maxis operates 2G GSM/GPRS/EDGE, 3G WCDMA/HSPA+/DC-HSPA, 4G LTE networks. 11

Maxis is leading company which providing telecommunication services in Malaysia and has over 11.4 million service users currently. Nowadays, Maxis is providing a full set of services on various platforms to satisfy the demand of telecommunications for individuals, small enterprises and large organizations, such as mobile fixed line, prepaid line and internet broadband services. Besides that, Maxis was first telecommunication company who launched the 3G services, such as 3G connect Card, PC Webmail, Video Mail and 3G prepaid. The 3G services coverage is up to 740 sites across Malaysia and still being increased. Mobile phone and laptop users can enjoy the entertainment and communication services such as video calls, live mobile TV, games and wireless broadband Internet those are reasonable priced, rapid access with real time result. Maxis has many users of the broadband service because it offered a reasonable price and do promotes the broadband services by offering free modem. Subscribers can get a free modem once they signed up the service package. In addition, Maxis has the customer service centre throughout the country, which provide conveniencies to the customers for paying bills, signing up, and reporting problems. Maxis is currently intensifying its business into Indonesia and India. Become the local communications provider at there is one of the goals to be achieved. Currently, Maxis has acquired 51% stake in Indonesia and 74% equity interest in India. These acquisitions can help maxis to achieve a huge growth in its business.

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2.2 Financial Analysis of Maxis Berhad

Ratio

2017 (RM‘000)

2018 (RM‘000)

A） ）Liquidity Current Ratio: Current assets Current liabilities

2470196 =0.63 x 3944800

2667655 =0.59 x 4542011

Interpretation: In 2017, every Rm1 of the current asset can cover up current liability by 0.63x. Whereas, in 2018 it decreases to 0.59x. The current assets are not enough ability to cover up the current liabilities, which shows the company has a problem in managing the current assets.

Quick Ratio: 2470196 − 4494 3944800

Current assets−inventory Current liabilities

¿ 0.63 x

Interpretation:

13

2667655 −15919 4542011 ¿ 0.58 x

After deducting the inventory, every Rm1 of the current asset in 2017 is the same as before deducting the inventories, which is 0.63x. However, in 2018 it decreases slightly to 0.58x. It’s also proved that the company has a problem in managing the current assets around two years.

B） ）Asset Management 9192436 =577.45 x 15919

Inventory turnover： ： 9419290 =2095.97 x 4494

Sales Inventory

Interpretation: The company inventory turnover in 2018 (577.45) is lower than in 2017(2095.97). We know that the company current assets management are a problem. However, the inventory isn’t a big influenced in terms of the problem of the current assets.

Days sales outstanding (DSO)： ： Account receivables ×365 Sales

1166808 =45.21 days 9419290 365

1398258 =55.52 days 9192436 365

Interpretation: In 2017, the company took 45.21days to collect from the debtors, which is not really good because it's too long. Moreover, in 2018 the company took more days to collect compare to

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2017.

9419290 =0.57 x 16664246

Fixed assets turnover： ：

9192436 =0.54 x 17138906

Net Sales assets ¿ ¿

Interpretation: For every Rm1 of sales, 2017 and 2018 only can generate 0.57x and 0.54 fixed assets respectively. The company is not used the efficiency tp generate sales from the fixed assets.

9419290 =0.49 x 19134442

Total assets turnover： ：

9192436 =0.46 x 19806561

Sales Total assets

Interpretation: The total assets turnover in 2018 (0.46x) is lower than 2017(0.49x). We already know the company has problems in managing both the current assets and fixed assets, so it also drags down the total asset turnover.

C） ）Debt Management 12188429 =0.6370 x 19134442

Debt ratio Total liabilities Total assets

=63.7%

15

12656830 =0.6390 x 19806561 =63.9%

Interpretation: The company is risky because it used more liabilities to finance on purchasing of assets. Both 2017 and 2018 used about 64%(at par) liabilities and the remaining 36% is financed by equity.

2433388 =5.47 x 445032

Times-interest-earned (TIE):

1979668 =5.09 x 389054

EBIT Interest charges

Interpretation: The company can use 5.47 times to cover up the interest charges by the EBIT which is very good, and in 2018 it’s worse than before.

2433388 + 1033439 + 7462 1979668 + 1067700 + 5193 445032 + 7462 389054 + 5193

EBITDA coverage :

EBIT + Dep∧ Amor + Lease pmts Interest + Lease pmts+ Loan pmts =2.84x

¿ 7.74 x

Interpretation: The inflows of the company have outperformed the outflows by 2.84x in 2017. However, in 2018 the inflows can cover up the outflows by 7.74x. But, it’s not because of the increase of inflows, but because in 2018 they are paid fewer interest charges.

D） ）Profitability

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Net profit margin on sales: Net income Sales

2180042  23% 9419290

1779719 19% 9192436

Interpretation: Because the company has a big amount on sales, so it drags down both net profit margins. However, the company net income is decreased in 2018, incurred the net profit margin also decreases. This indicates the company is having too few profits to generated sales and not effectively to convert sales into net income compared to 2017.

Operating profit margin on sales: EBIT Sales

2433388 26% 9419290

1979668  22% 9192436

Interpretation: The operating profit margin on sales in 2018 is 22%, which is lower than in 2017, 26%. This indicates that the company is getting lost after paying for variable costs of production and not efficiency to control the costs and expenses associated with business operations compared to 2017.

Gross Profit margin on sales: Sales−COGS Sales

9419290−5273648 9419290

9192436−5546600 9192436

¿ 0.4401 x

¿ 0.3966 x

=44.01% Interpretation: 17

=39.66%

The gross profit margin on sales in 2018 is 39.66% which is better, but still lower than in 2017 (44.01%). This shows that the company did not manage its cost of sales well and less ability to cover for operating, financing, and other costs compared to 2017.

2433388 =0.1272 x 19134442

Basic earning power (BEP): EBIT Total assets

=12.72%

1979668 =0.099 5x 19806561 =9.95%

Interpretation: Basic earning power in 2018 is lower than in 2017, which is 9.95% and 12.72% respectively. This shows the company has less ability to use assets to generate operating income compared to 2017.

2180042 =0.1139 19134442

Return on total assets (ROA): Net income Total assets

=11.39%

1779719 =0.0898 19806561 =8.98%

Interpretation: For every Rm1 you invest on you...