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GB20003/GD20203
INTERNATIONAL FINANCIAL STATEMENT ANALYSIS
Semester 2,
2018/2019
CASE STUDY
PBA HOLDINGS
BERHAD
Prepared by:
Name Matric No. Programme Tel No.
VISHNUPRRIYA BG17110163 HE20 018-9174043
D/O KALIAPPAN
Submitted to:
MDM NURJEEHAN BINTI AYUB
Date of Submission:
19thAPRIL 2019
TABLE OF CONTENTS
2
SECTION 1: OVERVIEW
1.1 Introduction
PBA Holding Berhad is a public limited company that providing water supply to the
citizen in Pulau Pinang. The headquarter of company is place at Georgetown, Malaysia. Main
activity of this company is to conduct commercial activities involving water suppliers of raw
water, treatment of water, supply and sale treated water to the public or consumer. Vision of
PBA Holding Berhad is meeting all your water supply and mission is PerbadananBekalan Air
Pulau Pinang Sdn Bhd (PBAPP) will be the leading organisation in water supply(Berhad,
2017). The reason why we choose this company is because we understand that water is very
important for our daily life and we tried to understand how a water supply company can
become as bigger as PBA Holding Berhad.
1.2 Objectives
The objective of this research is to analysis the PBA Holding Berhad’s future through
their annual financial report. Other than that, the objective is to learn and get something
interesting through this research and have more knowledge on how to predict a company’s
future.This can help us to analysis the sustainable of a company while invest.
1.3 Methodology
The method we use to analyse the company is to calculate the statement of financial
position, income statement, cash flow and financial ratio to understand the performance of
the company in 3 years from 2015 to 2017. Moreover, we also refer to some official websites
to learn the financial performance and about the company background to ease our analysis.
3
SECTION 2: EXECUTIVE SUMMARY
2.1 Background
PBA Holdings Bhd (PBAHB) is located in Penang, Malaysia. The company was
founded on May 25, 2000 and listed on the Main Board of the Malaysian Bourse (Bursa
Malaysia) in 2002. PBA Holdings Bhd (PBAHB) is a business concern on water supply.
PBAHB's essential 100% owned subsidiary is PerbadananBekalan Air Pulau Pinang Sdn Bhd
(PBAPP), the licensed water supplier and operator for Penang. Besides, other 100% owned
subsidiary is PBA Resources Sdn Bhd (PBAR), a management company that deals and
manages with the Penang Water Services Academy (PWSA).
DATO' Ir.JASENI
BIN MAIDINSA
Group Chief Executive
Officer
4
2.2 Product and Service
There are 3 subsidiaries of PBA Holdings Bhd which arePerbadananBekalan Air
Pulau Pinang Sdn Bhd (PBAPP), PBA Resources Sdn Bhd (PBAR)andPinang Water Ltd. Its
principal activities include abstraction of raw water, treatment of water, supply, and sale of
treated water to customers.
PerbadananBekalan Air Pulau Pinang Sdn Bhd (PBAPP) is a licensed water supplier
and 100% operator for Penang. In 2011, PBAPP collaborated with PDAM TirtaMusi to
improve water supply in Palembang, Indonesia under WaterLinks. These WaterLinks
represents the International Water Association (IWA), the Asian Development Bank (ADB)
and the United States Agency for International Development (USAID).
PBA Resources Sdn Bhd (PBAR), the second subsidiary that manages with the
Penang Water Services Academy (PWSA) and the Air Itam Teambuilding Center (AITC).
Therefore, PBAR is 100% of a management company. PWSA is the first Malaysian institute
to offer water industrial training to the work force of all water providers in Malaysian and
overseas. Besides, PWSA's goal is to encourage and give "real world" technical education
and training programmes to the water supply workforce. Therefore, the AITC is a completely
prepared teambuilding centre that is situated on the grounds of the Air Itam Dam in Penang.
An eco- friendly centre, it is outfitted with both indoor and outdoor training facilities and
there is 24 training components, just as convenience and facilities which can fit more than
100 person.
5
Diagram 2.0 illustrate corporate structure of PBA
6
7
SECTION 3: CONSOLIDATED (GROUP) FINANCIAL STATEMENTS
3.1 Statements of Financial Position
3.1.1 Horizontal Analysis
PBA HOLDINGS BHD
COMPANY NO.515119-U PBA Holdings Bhd
(Incorporated in Malaysia)
Company NO 515119-U
Incorporated
STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2017 in Malaysia
HORIZONTAL ANALYSIS Statement of Financial Position at 31 December 2017
GROUP
2017 2016 2015
RM'000 Change ( RM'000) Change ( % ) RM'000 Change ( RM'000) Change ( % ) RM'000
ASSETS
Non - current assets
Property, plant and equipment 1014995 90485 9.79 971193 46683 5.05 924510
Investment in a joint venture 55 -4954 -98.90 1386 -3623 -72.33 5009
Investment in a subsidiaries - - - - - - -
Other investments 2736 297 12.18 2409 -30 -1.23 2439
1017786 85828 9.21 974988 43030 4.62 931958
Current assets
Inventories 7423 -267 -3.47 8770 1080 14.04 7690
Receivable, deposits and prepayments 46805 -14687 -23.88 46562 -14930 -24.28 61492
Current tax assets 5235 3092 144.28 3857 1714 79.98 2143
Cash and cash equivalents 141391 89651 173.27 95028 43288 83.66 51740
200854 77789 63.21 154217 31152 25.31 123065
TOTAL ASSETS 1218640 163617 15.51 1129205 74182 7.03 1055023
TOTAL EQUITY AND LIABILITIES 1218640 163617 15.51 1129205 74182 7.03 1055023
8
3.1.2 – Number Trend
IndexBHD
PBA HOLDINGS
COMPANY NO.515119-U
(Incorporated in Malaysia) PBA Holdings Bhd
Company NO 515119-U
STATEMENTS OF FINANCIAL POSITION AS AT 31Incorporated
DECEMBER 2017 in Malaysia
INDEX - NUMBER TREND Statement of Financial Position at 31 December 2017
TOTAL EQUITY AND LIABILITIES 1218640 115.51 1129205 107.03 1055023 100
9
PBA HOLDINGS
3.1.3 VerticalBHDAnalysis
COMPANY NO.515119-U
(Incorporated in Malaysia) PBA Holdings Bhd
Company NO 515119-U
STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2017
Incorporated in Malaysia
VERTICAL ANALYSIS
Statement of Financial Position at 31 December 2017
2017 2016 2015
RM'000 Percentage ( % ) RM'000 Percentage ( % ) RM'000 Percentage ( % )
ASSETS
Non - current assets
Property, plant and equipment 1014995 83.29 971193 86.01 924510 87.63
Investment in a joint venture 55 0.00 1386 0.12 5009 0.47
Investment in a subsidiaries - - - - - -
Other investments 2736 0.22 2409 0.21 2439 0.23
1017786 83.52 974988 86.34 931958 88.34
Current assets
Inventories 7423 0.61 8770 0.78 7690 0.73
Receivable, deposits and prepayments 46805 3.84 46562 4.12 61492 5.83
Current tax assets 5235 0.43 3857 0.34 2143 0.20
Cash and cash equivalents 141391 11.60 95028 8.42 51740 4.90
200854 16.48 154217 13.66 123065 11.66
TOTAL ASSETS 1218640 100 1129205 100 1055023 100
TOTAL EQUITY AND LIABILITIES 1218640 100 1129205 100 1055023 100
10
3.2 Statements of Income Statement
3.2.1 Horizontal Analysis
Other operating income 25,136 13,149 109.70 21,616 9629 80.33 11987
Administrative expenses -70,763 -10,131 16.71 -72166 -11534 19.00 -60632
Operating profit 40,972 -3,589 8.05 49,857 5296 11.88 44561
Share of (loss)/ profit of equity -36 -245 -117.22 4791 4582 2192.30 209
Profit before tax 40936 -3834 -8.56 54648 9878 22.06 44770
Tax (expense)/income -3656 3114 46.00 7116 13886 -208.19 -6770
Profit for the financial year 37280 -720 1.90 61764 23764 62.54 38000
Total comprehensive income for the financial year 37447 -1180 -3.05 58825 20198 52.29 38627
11
3.2.2Index-Number Trend
PBA Holdings Bhd
Company NO 515119-U
Incorporated in Malaysia
Statement of Income Statement at 31 December 2017
Total comprehensive income for the financial year 37447 96.95 58825 152.29 38627 100
12
3.2.3 Vertical Analysis
Total comprehensive income for the financial year 37447 12.00 58825 18.00 38627 12.86
13
3.3 Statements of Cash Flow
3.3.1 Horizontal Analysis
CASH AND CASH EQUIVALENTS AT END C 141,391 273.27 95,028 183.66 51,740 100
14
3.3.2 Index-Number Trend
PBA Holdings Bhd
Company NO 515119-U
Incorporated in Malaysia
Statement of Cash Flow at 31 December 2017
15
3.3.3Vertical Analysis
PBA Holdings Bhd
Company NO 515119-U
Incorporated in Malaysia
Statement of Cash Flow at 31 December 2017
Notes RM’000 % RM’000 % RM’000 %
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 40,936 37.41 54,648 49.09 44,770 45.89
Amortisation of deferred income -2,753 -2.52 -4,677 -4.2 -756 -0.77
Amortisation of deferred liabilities -1,595 -1.46 -1,595 -1.43 -1,595 -1.64
Deemed loss on deconsolidation of a subsidiary - - 113 0.1 - -
Depreciation of property, plant and equipment 56,267 -51.42 53,586 48.14 56,288 57.7
Dividend income -55 -0.05 -45 -0.04 -139 -0.14
Gain on disposal of other investments -159 -0.15 -78 -0.07 -1,633 -1.67
Gain on disposal of property, plant and equipment -95 -0.09 - - - -
Impairment loss on property, plant and equipment - - 646 0.58 6,277 6.43
Impairment loss on receivables 1,482 1.35 1,850 1.66 1,558 1.6
Interest income -1,710 -1.56 -1,368 -1.23 -1,021 -1.05
Property, plant and equipment written off 278 0.25 834 0.75 1,471 1.51
Reversal of impairment loss on other investments - - - - -236 -0.24
Share of results of joint venture 36 0.03 -4,791 -4.3 -209 -0.21
Operating profit/(loss) before working capital changes 92,632 84.65 99,123 89.04 104,775 107.41
Inventories 1,347 1.23 -1,080 -0.97 1,281 1.31
Receivables -1,725 -1.58 11,986 10.77 -18,620 -19.09
Payables 19,209 17.55 1,384 1.24 12,216 12.52
Cash generated from/ (used in) operations 111,463 101.86 111,413 100.09 99,652 102.15
Income tax paid -2,072 -1.89 -2,104 -1.89 -2,105 -2.16
Income tax refunded 41 0.04 2,009 1.8 4 0.004
Net cash from/ (used in) operating activities 109,432 100 111,318 100 97,551 100
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows from deconsolidation of a subsidiary A - - -115 -0.14 - -
Dividends received 1,423 1.81 6,795 8.03 139 0.14
Interest received 1,710 2.17 1,368 1.61 1,021 1.01
Proceeds from disposal of other investments 1,601 2.03 2,575 3.04 14,188 14.1
Proceeds from disposal of property, plant and equipment 95 0.12 - - - -
Purchase of other investments -1,675 -2.12 -2,649 3.13 -5,380 -5.35
Purchase of property, plant and equipment B -81,980 -104 -92,589 -109.42 -110,564 -109.91
Net cash (used in)/from investing activities -78,826 -100 -84,615 -100 -100,596 -100
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid -13,240 84.03 -12,413 -74.84 -12,413 -783.15
Government loans received 30,000 190.39 30,000 180.89 14,000 883.28
Repayment of government loan -1,000 6.35 -1,000 -6.03 - -
Purchase of treasury shares -3 0.02 -2 -0.01 -2 -0.13
Net cash from/ (used in) financing activities 15,757 100 16,585 100 1,585 100
NET INCREASE IN CASH AND CASH EQUIVALENTS 46,363 32.79 43,288 45.55 -1,460 -2.82
CASH AND CASH EQUIVALENTS AT BEGINNING 95,028 67.21 51,740 54.45 53,200 102.82
CASH AND CASH EQUIVALENTS AT END C 141,391 100 95,028 100 51,740 100
16
SECTION 4: ANALYSIS
4.0 Financial Ratio
4.1 Short-term liquidity
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑅𝑀 200,854
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜:
𝑅𝑀 170, 978
= 1.175
Current Ratio measures the ability of a company to meet its current debts as they fall
due(McGraw.Hil, 2009). The PBA Holdings Bhd current ratio increases from 0.827 in 2015
to 1.175 in 2017(Phipps, 2017). The more current assets the company have, the better the
chances the company will be able to pay current liabilities.This indicates that the company’s
current ratio has good short-term financial strength and encouraging for a business.
= 1.131
A more stringent test of short-term liquidity, based on the acid-test ratio, measure
how well the company can pay off its liabilities using its most liquid assets(McGraw.Hil,
2009). The quick ratio increases from 0.775 in 2015 to 1.131 in 2017. This shows that the
company has enough short-term assets (increasing) to cover its immediate liabilities without
selling inventory. The greater the company’s liquidity and this will better able to meet current
obligations using liquid assets.
𝑅𝑀 46,683.5
𝐶𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑖𝑜𝑑: 312353
365
= 55 𝑑𝑎𝑦𝑠
Collection period is average number of days required to convert receivables into cash
(McGraw.Hil, 2009).The average number of days required for conversion of receivable to
cash also provides useful information regarding liquidity(McGraw.Hil, 2009). PBA’s
18
collection period for receivable is approximately 55 days in 2017 which took lesser days to
convert into cash comparing to two previous years 60 days in 2016 and 64 days in 2015
respectively(Phipps, 2017). This average collection period can be used as a benchmark
against another company's performance(Kenton, 2018).
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠
𝐷𝑎𝑦𝑠 𝑡𝑜 𝑠𝑒𝑙𝑙 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑠𝑎𝑙𝑒𝑠
365
𝑅𝑀 8,096.5
𝐷𝑎𝑦𝑠 𝑡𝑜 𝑠𝑒𝑙𝑙 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 = 225,754
365
= 13 𝑑𝑎𝑦𝑠
19
4.2 Capital structure and solvency
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡 𝑡𝑜 𝑒𝑞𝑢𝑖𝑡𝑦 =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑀 394,263
=
𝑅𝑀 824,377
= 2.0909
Total debt to equity is measures the riskiness of the firm’s capital structure in term of
the relationship between the funds supplied by creditors (debt) and invest
(equity)(McGraw.Hil, 2009).PBA’s total debt to equity ratio of 2.09 in 2017 higher compared
to 0.4112 in 2016 and 0.3997 in 2015. However, for the large companies like PBA, the
maximum acceptable debt-to-equity can be more than 2.0(Hayes, 2010).
20
𝑅𝑀 223,285
=
𝑅𝑀 824,377
= 0.271
Long-term debt to equity is to know how much debt of the company has to
pay(McGraw.Hil, 2009).The PBA slightly has less liabilities and more equity when
comparing the previous two years(McGraw.Hil, 2009). According to the data, the company is
stable since the company has the ability to service its debt obligation through cash flow and
expected will remain solvent in long-run.
Return on Investment (ROI) is the income earned on the invested capital(McGraw.Hil, 2009).
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝑅𝑂𝐸 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦
𝑅𝑀 37280
𝑅𝑂𝐸 =
𝑅𝑀 812, 275
𝑅𝑂𝐸 = 0.046
Return on equity is a measure how much both common and preferred shareholders
earned for their investment in the company(McGraw.Hil, 2009).PBA’s return in equity
21
shows the fluctuation as it increases from 0.051 in 2015 to 0.079 in 2016 whereas it decline
to 0.046 in 2017. This means that PBA requires more capital to generate profits.
𝑅𝑀 312,353 − 𝑅𝑀 225,754
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑅𝑀 312,353
= 0.277 𝑥 100%
= 27.7%
22
𝑅𝑀 40,936
Operating Profit Margin (pre − tax) =
𝑅𝑀 312,353
= 0.131 𝑥 100
= 13.1 %
Operating Profit Margin (pre-tax) is to understand the financial health of the company
in terms of knowing whether or not company’s profit is enough to pay off its other
expenses(McGraw.Hil, 2009). The company’s pre-tax increases from (0.149 𝑥 100) =
14.9% in 2015 to (0.167 𝑥 100) = 16.7% in 2016, however it declines to
(0.131 𝑥100) = 13.1% in 2017. The decrease in the income from the operation and sales
from year 2016 to 2017 causes the operating profit margin (pre-tax) to decrease also. Thus,
the company should increase in that particular items.
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Net Profit Margin =
𝑆𝑎𝑙𝑒𝑠
𝑅𝑀 37,280
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑅𝑀 312,353
= 0.119 𝑥 100%
= 11.9 %
Net Profit Margin is measures profitability after consideration of all revenue and
expense, including interest, taxes and operating expenses items(McGraw.Hil, 2009).Net
profit margin increase (0.127 𝑥100) = 12.7% in 2015 to(0.189 𝑥 100) = 18.9% in 2016,
however it decreases (0.119 𝑥 100) = 11.9%in 2017. The drastic decrease in net income
and slight decrease in sales in from 2016 to 2017 causes the net profit margin reduces.
23
4.4Asset turnover (Utilization)
𝑆𝑎𝑙𝑒𝑠
𝐴𝑠𝑠𝑒𝑡 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐴𝑠𝑠𝑒𝑡𝑠
According to the result, the asset turnover in 2015 was the highest compare to year
2016 and 2017. The asset turnover had been decreased to 0.2991 in 2016. It continues to
decrease from 2016 to 2017 which is from 0.2991 to 0.2661. The company has high asset
turnover because the company generate low profit margins which is 11.9% (refer to net profit
margin).
The market performance of a listed company can be evaluated by its earnings per
share(Fun, 2014). As shown in table above, the earnings per share show that the basic per
share is about 11.48 cent in 2015. The drastic increase in EPSabout 18.66 cent in 2016,
however it decline again about 11.26 cent in 2017. This meaning that the company had
difficulties in buying back their stocks. Thus the market performance of the company
decreases.
24
4.2 Cash flow
The statement of cash flow is a presentation of the inflows and outflows during a
period of an individual asset or liability, and cash, or cash and cash equivalents. The focus of
the statement is on cash inflows and outflows(Klammer, 2017). There are two methods of
calculating cash flow which is direct method and indirect method(B.Murphy, 2019). The
statement of cash flow classifies cash flow into three major cash activity groups which is
operating, investing and financing activities (Klammer, 2017). Those are inflows and
outflows that affect each category.
4.2.1 Methods
The direct method adds up all the various types of cash payments and receipts,
including cash paid to suppliers, cash receipts from customers and cash paid out in salaries
(B.Murphy, 2019). These figures are calculated by using the beginning and end balances of a
variety of a business accounts and examining the net decrease or increase in the accounts.
Indirect method starts the operating section with net income (Klammer, 2017). Items
that do not require cash are added and those requiring additional cash are subtracted from net
income to determine cash provided by operations. The vast majority of firms utilize the
indirect method of cash flow reconciliation. In accordance with the statement of cash flows of
PBA Holdings Bhd, they used indirect method in preparing their statement of cash flows
annually.
4.2.2 Cash activities and case analysis of Statement of cash flows from 2015 to 2017
25
accounts like receivables, inventories, prepayments, payables and accrued expenses
(K.R.Subramanyam & J.Wild, 2009).
If net cash from operating activities is negative means it implies that the organization
is spending more cash than it is creating or generating in producing and selling its goods and
services. If it is positive, the organization is generating more money than it is spending on
day-to-day operations. In term of operating activities, the net cash from operating activities
presents that there was an increase in the year 2015 to 2016 which was from RM 97,551,000
to RM 111,318,000 and slightly dropped to RM 109,432,000 in the year 2017 respectively.
The trade receivables in 2015 was (RM 18,620,000) and was RM 11,986,000 in the year
2016. A positive amount in cash flow for trade receivables shows there was a significant
decrease in the value for the account receivables in comparative balance sheet for the year
2016. In 2017 the trade receivables was (RM 1,725,000). To be more precise, an increase in
accounts receivable hurts cash flow and a decrease in accounts receivable helps cash flow.
The cash generated from operations shows constant rise from 2015 to 2017 which was
RM 99,652,00 in 2015 to RM 111,463,000 in 2017. But the slight decrease in net cash from
operating activities from 2016 to 2017 was mainly influenced by the income tax refunded.
The income tax refunded in the year 2016 has the highest refund which was RM 2,009,000
compare to the year 2015 and 2017. A positive operating cash flow is very importantfor a
business.
As reported by the statement of cash flows of PBA Holdings Bhd the net cash (used
in)/from investing activities declined significantly from (RM 110,596,000) in the year 2015
to (RM 84,615,000) in the year 2016 and to (RM 78,826,000) in the year 2017. As per the
statement of cash flows in 2015 the PBA Holdings Bhd invest heavily on the purchase of
property, plant and equipment which was approximately (RM 110,564,000) and on the
purchase of other investment with (RM 5,380,000). The investment that made on the
26
purchases of assets and on the investment in the year 2015 was the highest compare to the
year 2016 and 2017.An increase in capital expenditures means the company is investing in
future operations. However, it also points to a reduction in cash flow. Companies with high
capital expenditures indicates that generally the company is in a state of growth. Interest
received and dividend received also greatly contribute to the net cash (used in)/from investing
activities.
The cash flows from financing activities of PBA Holdings Bhd indicates that the net
cash from/(used in) financing activities for the group increased positively from the year 2015
(RM 1,585,000)to (RM 16,585,000) in 2016 and there was a slight decrease in the amount in
the year 2017 (RM 15,757,000) compare to the amount in 2016 respectively. The total value
of net cash from/(used in) financing activities consists of dividends paid, government loans
received, purchase of treasury shares and repayment of government loan. However,
government loans received played a major role in maintaining the net cash from/(used in)
financing activities to be positive thorough out the years of business operation.A positive
number for cash flow from financing activities means more money is flowing into the
company than flowing out, which increases the company’s assets. Apart from that, the
negative cash flow from financing activities can mean the company is servicing debt, but can
also mean the company is making dividend payments or retiring debt and stock repurchases.
In accordance with the statement of cash flows of PBA Holdings Bhd, they used
indirect method in preparing their statement of cash flows annually. Based on the statement
of cash flows the total cash and cash equivalents at the end of the year from the year 2015 till
the year 2017 shows that the value has been steadily increasing over the years from RM
51,740,000 in the year 2015 to RM 141,391,000 in the year 2017.
27
In term of operating activities, the net cash from operating activities presents that
there was an increase in the year 2015 to 2016 which was from RM 97,551,000 to RM
111,318,000 and slightly dropped to RM 109,432,000 in the year 2017.
Apart from that, as reported by the statement of cash flows of PBA Holdings Bhd the
net cash (used in)/from investing activities declined significantly from (RM 110,596,000) in
the year 2015 to (RM 84,615,000) in the year 2016 and to (RM 78,826,000) in the year 2017.
As for financing activities, PBA Holdings Bhd cash flow indicates that the net cash
from/(used in) financing activities for the group increased positively from the year 2015 (RM
1,585,000) to (RM 16,585,000) in 2016 and there was a slight decrease in the amount in the
year 2017 (RM 15,757,000) compare to the amount in 2016 respectively.
Year Net Operating cash flow Net Revenue Quality of earnings (%)
2015 RM97,551,000.00 RM300,325,000.00 32.48
2016 RM95,028,000.00 RM326,698,000.00 29.09
2017 RM141,391,000.00 RM312,353,000.00 45.27
RM 97,551,000
= × 100 = 32.48 %
RM 300,325,000
RM 95,028,000
= × 100 = 29.09 %
RM 326,698,000
28
𝑁𝑒𝑡 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤
𝑄𝑢𝑎𝑙𝑖𝑡𝑦 𝑜𝑓 𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠 (𝑔𝑟𝑜𝑢𝑝 2017) = × 100
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠/𝑟𝑒𝑣𝑒𝑛𝑢𝑒
RM 141,391,000
= × 100 = 45.27 %
RM 312,353,000
According the calculation of quality of earnings from the year 2015 to 2017, there was a
slight decrease in the year 2015 (32.48 %) to 2016 (29.09 %) but recovered quickly again in
the year 2017 with 45.27 %. It shows that the cash flow from operations and revenue or net
sales of PBA Holdings Bhd almost move at a similar rate over time which is actually very
beneficial for the growth of the company.
29
SECTION 5: SUMMARY OF ANALYSIS
5.1 Strengths and Weakness
5.1.1 Strengths
As presented in the analysis results, the average number of days to sell inventories is
13 days compared to previous two years about 15 days in 2016 and 2015. In other words,the
PBA able to convert inventories into cash nearer and the company is moving its inventory
fast in 2017 comparing to two previous years. It is very important to improve the cash flow of
the company especially in short-term.
5.1.2 Weakness
1. Involved in much of the investment activities.
As reported by the statement of cash flows of PBA Holdings Bhd the net cash (used
in)/from investing activities declined significantly from (RM 110,596,000) in the year 2015
to (RM 84,615,000) in the year 2016 and to (RM 78,826,000) in the year 2017. As per the
statement of cash flows in 2015 the PBA Holdings Bhd invest heavily on the purchase of
30
property, plant and equipment which was approximately (RM 110,564,000) and on the
purchase of other investment with (RM 5,380,000). The investment that made on the
purchases of assets and on the investment in the year 2015 was the highest compare to the
year 2016 and 2017.
2.xxxx
3.xxxx
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4. Government loans in financing activities.
According to the statement of cash flow that reported by PBA Holdings Bhd indicates
that the net cash from/ (used in) financing activities for the group increased positively from
the year 2015 (RM 1,585,000) to (RM 16,585,000) in 2016 and there was a slight decrease in
the amount in the year 2017 (RM 15,757,000) compare to the amount in 2016 respectively.
The total value of net cash from/ (used in) financing activities consists of dividends paid,
government loans received, purchase of treasury shares and repayment of government loan.
This shows that PBA Holdings Bhd still depend on government loans in maintaining the net
cash from/ (used in) financing activities to be positive thorough out the years of business
operation.
32
5.2.2 Analysis of 2016
Zscore 1.817
33
5.2.3 Analysis of 2015
34
CONCLUSION
35
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