Deciding which company suitable to be added your investment portfolio proves to be challenging as it

brings a lot of risk and uncertainty. There are also various method an investor can use ranging from
fundamental to technical analysis to hedge the risk, boosting the confidence of investor when building
their portfolios. In this report, the top – down analysis is used to select a potential company that
investors can look into before deciding if they choose to invest in the company or not. Top – down
analysis is a method that involves first looking at the market as a whole, then looking into details of the
market to filter and look into the smaller components. The adaptation of the top-down analysis in this
report is by first looking at Malaysia’s economy as a whole, then narrowed down to the sector and
industry that shown to be performing well in the past with the potential of satisfying performance in the
coming future. When the sector and industry have been decided, investor can look into the respective
companies within the chosen sector and industry to further investigate their investment options.

As mentioned in question (2), the selected sector and industry that is being focused is the consumer
services industry. This industry have proved to have the ability to survive Malaysia’s economy situation,
it also have shown to have good potential of its growth. However, within this sector, there are a long list
of company stocks that one can invest in. This report will first look into the basic ratio such as P/E ratio
and DuPont Analysis to first determine the company selected, then it will also use fundamental analysis
with news and article to further support if the company is of good investment.

The company that have been selected for further analysis are Malaysia Airports Holding Bhd. It has a P/E
of 168.55 (I3investor, 2017) an ROE of 0.81. Although the ROE does not seems to be an impressive
indicator, the DuPont analysis will further assist in determining if this company is under good
management or not. In addition, P/E ratio could be very attractive to investor as it shows to be higher
than most of the company listed in the same sector. In addition, this company have also been selected
as it have been recently been exposed to the “Jack Ma Effect” have also been effect the most by it.
Some investors might speculate that this is a temporary effect, it is worth looking into the companies to
determine if there are more to the companies than just a temporary spike that could give investors
satisfying return in the future.

Malaysia Airport Holding Bhd is the company that operates and manages Malaysia’s aviation gateways
that generates its’ main revenue through passenger service charges (PSC), aircraft landing and parking
fees and other ancillary charges to airlines (Malaysia Airports, 2017). It is listed since 1999 as the first
airport company to be listed on the stock market.

Since P/E ratio and DuPont ratio are used as an indicator when deciding which company to invest in,
investor will need to understand the meaning of these indicator. P/E ratio is the ratio for valuing the
company’s stock price to its earning per share (Kennon, 2017). It is a good determinate to see if the
company is overvalued or undervalued. It is also used to understand how much investors are willing pay
for each stock. The latest unaudited P/E for the company is at 168.55 (I3investor, 2017). This P/E is
relatively high which shows that investors are very willing to pay a high price for this stock.
DuPont on the other hand is a modification on calculating the return of equity (ROE). It uses the gross
value for assets but the accumulation of depreciation is being ignored (Accounting Explained, 2017). This
analysis gives out a higher ROE but it shows investors how well the management of the company uses
the assets of the company to generate revenue. While the use of net asset value also produces ROE,
DuPont method allows the investor to see the factor that causes the ROE to vary. ROE can be
represented with the following formula:

ROE=Profit Margin × Asset Turnover Ratio × Equity Multiplier

The ROE for Malaysia Airport Holding Bhd is currently at 0.45 (Malaysia Airports, 2017). However,
DuPont Analysis will allow us to look into in which aspects that causes the company to achieve ROE to
be at 0.45 (Malaysia Airports, 2017). The respective ratios of profit margin, asset turnover ratio and
equity multiplier are at 1.04, 0.18 and 1.16 (Malaysia Airports, 2017). This shows that Malaysia Airport
Holding Bhd has a good maintenance of lower cost of good with high profit margin, they do not do well
very well on Asset turnover. However, Malaysia Airport Holding Bhd generates revenue mainly from
Airport fees and rental, therefore it is expected for them to have a low asset turnover rate.

Major news concerning Malaysia Airport Holding Bhd that could spark investor interest would be the
launch of the first Alibaba e-hub outside of China (Lee, 2017). Kuala Lumpur International Airport has
space that could accommodate to accommodate Alibaba Group to pilot their distribution services. With
that information, Malaysia Airport Holding Bhd is expecting to generate more than 7 billion ringgit worth
of domestic and foreign investment (Lee, 2017). This has shown that Malaysia Airport Holding Bhd will
be expecting a satisfying growth in the coming future.