FCBH Financial Trend 2001-2005

With FCBH at Ranking at 4th in Capital Gains, its share price

bloomed from RM1.89/share in 2001 to RM10.60/share in 2005. During
this period, the company was able to pay Dividend at a steady 3%.
However, deeper analysis of the financial report reveals unfavourable
elements.
The graph in figure 1.0 depicts the trend of Return on Investment
(ROI) and Return on Equity (ROE) from 2002 to 2005. Both ROI and
ROE of FCB declined during the period of 2002-2005. A decreasing ROE
could be an indication of financial troubles. Beside by taking on too
much debt, the cost of debt rises. In short, ROI and ROE analysis on
FCB in 2005 revealed that the performance of FCB has become weaker
and require immediate actions to be done. Year 2005 registered the
lowest ROI over the past few years due to increase in the companys
total assets as FCB acquired several new aircrafts during the year.
In term of Profitability, figure 3 shows Net profit margin of FCB
decreased from 18% in 2004 to 14% in 2005.The lowering net profit
margin is most likely due to the rising of operating expenses namely fuel.
On the other hand, the Current Ratio reflects the ability of a
company to satisfy its short term obligations using assets that are most

readily converted into cash. As figure 1.1, current ratio of FCB recorded
a decreased in 2005. This means that company ability to pay back its
short-term liabilities with short term assets have indeed weakened. FCB
showed a healthy current ratio of above 1 and the highest ratio in year
2004 and year 2005 of above 3, which mean it may not be efficiently
using its current assets or its short-term financing facilities, indicating
problems in working capital management. The acid-test ratio (table 1.5)
for FCB is quite similar to the Current Ratio, the ratio for year 2004 and
year 2005 is relatively higher than the previous years.
Last but not least, financial leverage ratios are studied to
understand the financial risk that company is under. In table 1.11, all
three ratios: total debt to asset ratio, long-term debt to assets ratio and
total debt to equity ratio saw significant increases in 2005. FCBs longterm loan increase 535% from RM131 million in 2004 to RM833 million
in 2005. Debt to equity ratio indicates the relative uses of debt and
equity to finance the companys assets. Based on the computed ratio,
there's more debt in relation to equity. FCB is being financed by creditors
rather than by internal positive cash flow, which may be a dangerous
trend.