1.

0 FINANCIAL ANALYSIS

Financial analysis can be defined as a process to evaluate the current performance of a business.
This analysis is actually to analyze whether a company is on the track which means whether a
company is stable, solvent, liquid, or profitable enough to warrant a monetary investment. In this
part, the financial performances of the Cocoaland Holdings Berhad will be assess to know it current
and past performances. To make it easier, this analysis will be focusing on the growth, liquidity,
profitability, leverage and also activity ratios analysis for 5 consecutive years performances from
2014 until 2018.

1.0.1 Growth

Growth
50,000 25
45,000
40,000 20
35,000
RM'000

30,000 15

Sen
25,000
20,000 10
15,000
10,000 5
5,000
0 0
2014 2015 2016 2017 2018
Earnings Per Share (Sen) 9.6 14.3 19.1 14.7 13.5
Dividen Per Share (Sen) 7.5 8 10 13 6
Profit After Income Tax
21,918 32,721 43,800 33,526 30,926
(RM’000)
Axis Title

Earnings Per Share (Sen) Dividen Per Share (Sen) Profit After Income Tax (RM’000)

Based on the graph and data table above, we can analyze the growth performances of the
Cocoaland Holdings Berhad. There was a rapid growth and expansion for this company from the
year 2014 to the year 2016. This can be seen when the profit after income tax keep moving upward
form 2014 until 2017. This growth move parallels with the Earnings per share and dividend per
share of Cocoaland Holdings Berhad. However, their performances going down for the year 2017
and 2018. Cocoaland Holdings Berhad revenues fell 4.99% in 2018 compared to 2017 to 253.82
million. Net income fell 7.76% to 30.93 million. This fell also effect the earnings per share and
dividend per share.
1.0.2 Liquidity

To assess the liquidity, current ratio and quick ratio aspect will be consider. Current ratio measures
Cocoaland’s ability to pay short-term obligations or those due within one year while quick ratio is
an indicator for this company’s short-term liquidity position and measures a company’s ability to
meet its short-term obligations with its most liquid assets after deducting the inventory.

Liquidity Ratio
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2014 2015 2016 2017 2018
Current Ratio 3.44 3.16 4.12 5.05 4.58
Quick Ratio 2.37 2.22 3.04 4.00 3.65

Current Ratio Quick Ratio

Based on the graph and result above, we can conclude that this company is able to fulfill it short
term obligations very well since it ratio indicates more than since the current asset and quick asset
amount is greater than their current liabilities. However this company is too liquid where we can
say that this company has too high amount of current assets which can be detrimental to the
effective use of capital and expansion of the business.

1.0.3 Profitability

To assess the profitability, Net Profit Margin, Return on Asset (ROA) and Return on Equity (ROE)
will be analyses. Net Profit Margin is after tax of profits per dollar of sales. ROA is after tax profits
per dollar of asset while ROE is after tax profit per dollar of shareholders equity.

Based on the profitability ratio graph, we can conclude that the Net Profit Margin, ROA and ROE
increase from the year 2014 until it reach the highest on 2016. However, the profitability ratio
decreasing and went down for the year 2017 and continue decreasing for the year 2018. This
indicates that Cocoaland Holdings Berhad cannot maintain their high profit and not perform very
well. The 2018 value for ROA, ROE and Net Profit Margin for Cocoaland is lower from the
industry requirement where it should be 29.97% for ROE, 13.64% for ROA and 16.27% for Net
Profit Margin.

Profitability Ratio
20.0%

15.0%

10.0%

5.0%

0.0%
2014 2015 2016 2017 2018
Net Profit Margin 8.4% 12.5% 16.1% 12.6% 12.2%
Return on Assets 8.4% 13.0% 15.1% 11.4% 11.0%
Return on Equity 10.0% 16.1% 18.3% 13.4% 13.1%

Net Profit Margin Return on Assets Return on Equity

1.0.4 Laverage

A leverage ratio is any one of several financial measurements that look at how much capital comes
in the form of debt (loans) or assesses the ability of a company to meet its financial obligations.
Two common ratio that usually being used to assess a company leverage ratio are Debt to total
assets ratio and debt to equity ratio. However, from the balance sheet of Cocoaland Holdings
Berhad, we can identify that this company is an unlevered company where they do not have any
financial leverage which is short term or long term debt. This actually does not give a default risk
to the investors since Cocoaland does not has any commitment to pay its debt obligations.

1.0.5 Activity

Activity ratio will measure how Cocoaland Holdings Berhad able to convert different accounts
within the balance sheet into cash or sales. To assess its performances, two types of activity ratio
will be calculated which are Inventory turnover and Asset turnover ratio.

Based on the Activity Ratio graph, Cocoaland Holdings Berhad maintain inventory turnover in the
range 4 to 6 from the year 2014 until 2018. For many business, the best inventory turnover between
4 to 6 and this shows a well balanced between restock items and sales. In other words, this company
do not run out of products and do not have a lot of unsold products. While Asset turnover shows
that this company do not utilize their asset efficiently. This can be seen for every RM1, they
generate revenue below RM1. In addition the year 2017 and 2018 shows the lowest Asset turnover
ratio compared to the other years.

Activity Ratio
5.20 0.80
5.10 0.78
0.76
5.00 0.74
4.90 0.72
0.70
4.80
0.68
4.70 0.66
4.60 0.64
0.62
4.50 0.60
4.40 0.58
2014 2015 2016 2017 2018
Inventory Turnover 5.07 4.85 4.82 4.65 5.07
Asset Turnover 0.77 0.70 0.72 0.65 0.65

Inventory Turnover Asset Turnover

2.0 FUNCTIONAL ASPECTS

Function in business organization can be describe as one aspect that pertains to the outcomes or
results produces from the function of the organization itself or role and its environment. In simple
words, it is actually what a company or organization does to achieve goals and purposes. Generally
there are several functional area which are Management, Operations, Marketing, Financial and
Research and Development.

2.0.1 Management

The Cocoaland Holdings Berhad management functional aspect can be observe through the
Planning, Organizing, Leading and Controlling (POLC) framework. For the planning, Cocoaland
Holdings Berhad has its own Vision, Mission, Goals and Objectives that they plan and want to
achieve. Besides, for the Organizing part, this can be refer through the corporate structure and
Cocoaland Holdings Berhad Board Charter where it sets out the composition, roles and
responsibilities, the processes of the Board. All director should avoid the conflict of interest
between their private activities and company business. The composition of the Board structure
consist of not less than two (2) but not more than twelve (12) following the Company Constitution.
Company must ensure that at least two or one third of the board are independent directors based
on the Company Constitution. There are several board processes such as board meetings, Notice
Agenda and Meeting Papers, Access to Information and lastly Professional Development. The
Board have their own responsibilities and roles in managing the company. Besides, Cocoaland
also has its own corporate structure for Cocoaland Holdings Berhad.

In leading, the board has setup different Board Committees with different function to assist the
board in discharging it fiduciary duty. The board will give guidance and supervision and Board
Committees will report to the board.

2.0.2 Operations

Basically operations refer to the process of manufacturing or how a company provide services.
Based on the corporate structure of Cocoaland Holdings Berhad, Cocoaland Industry Sdn Bhd and
B plus Q Sdn Bhd are two subsidiary that in charge in the manufacturing. There are 4
manufacturing arm in Rawang, Kepong and Kampar. Since October 2018 the management has
implemented labour cost-saving measures, cutting down unnecessary headcount at the operational
level also they have retrained certain staff to increase productivity (Lin, 2019)

2.0.3 Marketing

In marketing functional aspects, there are three things need to be focus on which are market
position, market segmentation, marketing mix (price, promotion, product and place) and product
distribution. In terms of market position, the customer consist of every person of any age group
and gender while the areas of market concentration for the distribution of products are comprises
of local market and export market. For local market, a wide range of Cocoaland products are
carried by reputable retail stores such as Giant, Aeon, Tesco, Mydin and many more while for
export market, the product exported to more than 40 countries including China, Middle East,
Korea, USA and Vietnam. Cocoaland Holdings Berhad involving in selling many range of
processed, preserved food, confectionary and soft beverage products. Cocoaland Holdings Berhad
market their products through advertise in Malaysia but also others country.
2.0.4 Financial

In terms of financial functional aspect, it is the function to do best financial course of action. Every
business and organization strategy is to increase and maximize the financial value of a firm. For
Cocoaland Holdings Berhad, the Board Committee is one of the responsible entity to monitor the
financial performances. In terms of financial aspect, the board need focus on the adoption of any
significant change or departure in the accounting policies and practices of the company and its
subsidiaries, the raising of borrowing facilities involving substantial amounts, approval of the
strategy, business plans and annual budgets, also the approval of the annual financial statements
and interim reports. After two consecutive years of earnings decline, Cocoaland is hoping to at
least maintain the previous year’s performance for the current financial year ending Dec 31, 2019.
The earnings decline is due to rising labour costs and escalating packing material costs. (Lin, 2019)

2.0.5 Research and Development (R&D)

Research and Development also helps to drive Cocoaland growth in order to achieve their goals
and objectives. In example, the development of the fruit gummy. It took the team more than six
months to develop a method to manufacture the fruit gummy, which not only had a long shelf life
but also maintained its texture. This has made Cocoaland a pioneer in the locally-produced fruit
gummy market.

References

(2018). Cocoaland Holdings Berhad Annual Report 2018. Kuala Lumpur: Cocoaland Holdings Berhad.

(2013). Cocoaland Holdings Berhad Board Charter. Cocoaland Holdings Berhad.

Cocoaland Holdings Bhd (CCLD). (n.d.). Retrieved November 12, 2019, from Investing.com:
https://www.investing.com/equities/cocoaland-holdings-bhd-ratios

Lin, W. E. (2019, September 17). Cocoaland Looking at M&A to Accelerate Growth. Retrieved from The
Edge Markets: https://www.theedgemarkets.com/article/cocoaland-looking-ma-accelerate-
growth