A) Background review of the company

CJ Century Logistics Holdings Berhad is an investment holding company which

provides different varieties of supply chain services in Malaysia. CJ Century Logistics
Holdings Berhad was initially named as Century Logistics Berhad before joining the CJ
Logistic family on 2016. CJ Century Logistics Holdings Berhad is considered as a well-known
company that provides parcel delivery service in Korea. Due to the strength of the brand, the
services provided can expand to a wider range including courier services and last mile solutions.

The services provided by the company includes integrated logistics, oil logistics,
procurement logistics, courier services, data management solutions. The integrated logistics
services provided by the company are freight forwarding which has a network globally with
partner offices in order to ensure full coverage of customers, and also transportation services
such as multiple drop and pick up, full truck load, cross border transportation and container
haulage and contract logistics which customers have access to all the movements through the
Warehouse Management System (CJ Century, n.d.). The company’s courier service not only
provides real-time tracking for customers to trace the status of their items anytime, they also
offer high level of services in the industry such as pre-call delivery which calls will be made to
customers before the items have been delivered, 3 delivery attempts where the delivery services
are carried out multiple times and cash on delivery services. The company also develop in its
subsidiaries such as Century Forwarding Agency Sdn. Bhd. which is a shipping agency and
provides the freight forwarding services. Another subsidiary of the company is Century
Advance Technology Sdn. Bhd which solely engages in the procurement logistics (Market
Screener, n.d.).

The Board of Directors of the Company consists of 9 members. Datuk Lee Say Tsin,
who is the Independent Non-Executive Chairman, Teow Choo Hing as the Managing Director,
Yeap Khoo Soon Edwin who is the Executive Director, along with the Non-Independent Non-
Executive Directors, Hong Sung Yong, Ahn Jae Ho and Lee Eui Sung. Park Chul Moon and
Saryani Binti Che Ab Rahman along with Winston Tan Kheng Huang are the Independent
Non-Executive Directors (CJ Century, n.d.).
B) Financial ratios
C) Discussion on the company’ financial performance using time-series analysis

1. Liquidity ratios
Liquidity ratio measures the quickness of a firm in converting its current assets into cash so
that it can cover its liabilities on a timely basis.

i) Current Ratio
Quick ratio is a financial ratio used to gauge a company’s liquidity and is also known as the
acid test ratio (Averkamp, n.d.).
Formula: 𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐬𝐬𝐞𝐭
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬

2018 2019
RM 208,523,000 RM 216,097,000
= 𝟐. 𝟎𝟓𝟏𝟕 = 𝟏. 𝟕𝟐𝟏𝟏
RM 101,635,000 RM 125,556,000

Based on the calculation done above, the current ratio for year 2018 is 2.0517 which is higher
than the current ratio for year 2019 which is 1.7211. The reason for a decrease in the current
ratio is due to the current liabilities of 2019 which has increased from 2018 by
RM23,921,000. Although the current ratio has decreased by 0.3306 in 2019, CJ Century is
still more than able to repay its short-term liabilities with bigger current assets than its current
liabilities by RM90,541,000.
ii) Quick Ratio
Quick ratio is a financial ratio used to gauge a company’s liquidity and is also known as the
acid test ratio (Averkamp, n.d.).
Formula: 𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐬𝐬𝐞𝐭𝐬 − 𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲
𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬

2018 2019
RM 208,523,000 − RM18,854,000 RM216,097,000 − RM9,539,000
RM 101,635,000 RM 125,556,000
= 𝟏. 𝟖𝟔𝟔𝟐 = 𝟏. 𝟔𝟒𝟓𝟏

In 2018, the company has a quick ratio of 1.8662 which indicates that the company has a
RM1.8662 of liquid assets available to cover RM1 of its current liabilities. In 2019, the
company has a quick ratio of 1.6451 which indicates that the company has a RM1.6451 of
liquid assets available to cover RM1 of its current liabilities. Usually, a ratio of 1.0 is the
minimum ratio to satisfy lenders and investors. The quick ratio for 2019 has decreased from
2018 by 0.2211. With a quick ratio of 1.6451 in 2019, investors and lenders will still most
likely be satisfied with CJ Century’s ability to keep up with short-term debt obligations.
The downside to having a high quick ratio is the company not effectively using its cash to
grow its business (Kokemuller,2020). From the two years, inventories (ending) in 2019 is less
than 2018 by RM9,315,000 indicating that the company in 2019 is more effectively using its
cash to grow its business than 2018.
2. Efficiency ratios
Efficiency ratio is to measure how efficient a firm can utilize its assets.

i) Inventory Turnover
Inventory shows the speed a company has sold and replaced its inventory in a year. It also
shows if a business has excessive inventory in comparison to sales level.
Formula: 𝐂𝐨𝐬𝐭 𝐨𝐟 𝐠𝐨𝐨𝐝𝐬 𝐬𝐨𝐥𝐝
𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲

2018 2019
RM 341,165,000 RM 430,933,000
= 𝟏𝟖. 𝟎𝟗𝟓𝟏 = 𝟒𝟓. 𝟏𝟕𝟓𝟗
RM 18,854,000 RM 9,539,000

The inventory turnover for 2018 is 18.0951 and for 2019 is 45.1759. There is an incline in the
inventory turnover from 2018 to 2019 by 27.0808. The average ratio of a good inventory
turnover is being 4 and 6 (Karachiwala, n.d.). The inventory turnover for CJ Century is
exceptionally high due to it being in a transportation and logistics industry. This means
that CJ Century is either constantly selling and replacing its services and products or has a low
inventory as the company is a transport and logistic company. The latter is more probable
as the inventories consists of only assembled products, assembling parts and trading
merchandise. With 2019 having an increase of 27.0808 in inventory turnover, the company
has higher sales than it did in 2018.
ii) Total Assets Turnover
The asset turnover ratio is calculated on an annual basis. The ratio measures the ability of an
organization to produce sales efficiently, and is typically used by third parties to evaluate
the operations of a business. Preferably, less assets will be used to generate high sales, and
therefore with a high total asset turnover ratio. Thus, it needs fewer debt and capital for
its operation since fewer assets are required.
Formula: 𝐒𝐚𝐥𝐞𝐬
𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬

2018 2019
RM 400,998,000 RM 491,985,000
= 𝟎. 𝟕𝟑𝟓𝟖 = 𝟎. 𝟖𝟎𝟐𝟕
RM 545,006,000 RM 612,922,000

Total assets turnover shows the proficiency which the company uses its assets to generate
revenue. The total assets turnover for CJ Century for year 2018 is 0.7358 which means that for
every RM1 of asset, the company can generate approximately RM0.74 of sales. For year 2019
is 0.8027 which means that for every RM1 of asset, the company can generate approximately
RM0.80 of sales. The total assets turnover for CJ Century increases from 2018 to 2019 by
0.0669. The company did not have a very good total assets turnover for 2018 but showed an
increase in total assets turnover for 2019. Thus, CJ Century is using its assets more
efficiently to generate sales than it did in 2018.
3. Leverage Ratios

Financial Leverage Management Ratios measures a company’s ability to meet its financial
obligations.

i) Debt Ratio

Used to compute the total liabilities of an organization as a percentage of its total assets. This
ratio aims to measure the capacity of an organization to settle its debt with its assets. It decides
how many assets should be offered to settle off the total debts. A ratio greater than 1 means
that a portion of debt is fully subsidized by assets. It means the organization has a greater
number of liabilities than assets. A high ratio also demonstrates that the organization might be
putting itself at a danger of default on its loans if interest rates were to rise suddenly.

Formula: 𝐓𝐨𝐭𝐚𝐥 𝐃𝐞𝐛𝐭𝐬

𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬

2018 2019
RM 221,098,000 RM 296,129,000
= 𝟎. 𝟒𝟏 = 𝟎. 𝟒𝟖
RM 545,006,000 RM 612,922,000

CJ Century Logistic Holdings Berhad has RM0.41 of total liabilities for every RM1.00 of total
assets. The debt ratio of CJ Century Logistic Holdings Berhad in year 2018 is 0.41. This is
because its total liabilities is RM221,098,000 and its total assets is RM545,006,000. CJ Century
Logistic Holdings Berhad has RM0.48 of total liabilities for every RM1.00 of total assets. The
debt ratio of CJ Century Logistic Holdings Berhad in year 2019 is 0.48 because its total
liabilities is RM296,129,000 and its total assets is RM612,922,000. The debt ratio of this
company in year 2019 is higher than debt ratio in year 2018. This is because the total liabilities
had increased an amount of RM75,031,000 from RM221,098,000 in 2018 to RM296,129,000
in 2019. Therefore, the ability of CJ Century Logistic Holdings Berhad to handle its financial
obligations in year 2019 is weaker than year 2018.
ii) Debt-to-Equity Ratio

Debt-to-equity measures the relative proportion of total liabilities and common stock equity
used to finance the company’s total assets (Zutter & Smart, 2019).

Formula: 𝐓𝐨𝐭𝐚𝐥 𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬

𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬 ′ 𝐄𝐪𝐮𝐢𝐭𝐲

2018 2019
RM 221,098,000 RM 296,129,000
= 𝟎. 𝟔𝟖 = 𝟎. 𝟗𝟑
RM 323,908,000 RM 316,793,000

CJ Century Logistic Holdings Berhad has RM0.68 of total liabilities for every RM1.00 of
shareholders’ equity. The debt-to-equity ratio of CJ Century Logistic Holdings Berhad in year
2018 is 0.68 because its total liabilities is RM221,098,000 and its shareholders’ equity is
RM323,908,000. CJ Century Logistic Holdings Berhad has RM0.93 of total liabilities for every
RM1.00 of shareholders’ equity. The debt-to-equity ratio of CJ Century Logistic Holdings
Berhad in year 2019 is 0.93 because its total liabilities are RM296,129,000 and its shareholders’
equity is RM316,793,000. The debt-to-equity ratio of this company in year 2019 is higher than
debt-to-equity in year 2018. This is because the total liabilities had increased an amount of
RM75,031,000 from RM221,098,000 in 2018 to RM296,129,000 in 2019. Besides, the
shareholders’ equity also decreased an amount of RM7,115,000 from RM323,908,000 in
2018 to RM316,793,000 in 2019. Both debt-to-equity ratio of year 2018 and 2019 is lesser than
1, which also means that the company is using more equity than debt to finance and CJ Century
Logistic Holdings Berhad is using more equity than debt to finance in year 2019.
4. Profitability Ratios

Profitability ratios measures how efficient a firm is in using its assets and in managing its
operations.

i) Net Profit Margin

Net Profit margin calculate the level of profit from each ringgit of sales and measure the
efficiency of operation. (Zutter & Smart,2019).

Formula: 𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞

× 100
𝐒𝐚𝐥𝐞𝐬

2018 2019
RM 9,784,000 −RM7,531,000
× 100 = 𝟐. 𝟗% × 100 = −𝟏. 𝟕%
RM341,165,000 RM 430,933,000

For every RM1 of sales, the net profit of CJ Century Logistic Holdings Berhad is RM0.029.
The net profit margin of CJ Century Logistic Holdings Berhad in year 2018 is 0.029 because
its net profit is RM9,784,000 and its sales is RM341,165,000. For every RM1 of sales, the net
loss of CJ Century Logistic Holdings Berhad is -RM0.017. The net profit margin of CJ Century
Logistic Holdings Berhad in year 2019 is -0.017 because its net loss is RM7,531,000 and its
sales is RM430,933,000. The net profit margin of this company in year 2019 is lower than
net profit margin in 2018. The net profit margin of the company had decreased 4.6% from
year 2018, 2.9% to year 2019, -1.7%. This is because the net profit had decreased an amount
of RM17,315,000 from RM9,784,000 in 2018 to – RM7,531,000 in 2019. Therefore, the net
profit margin of CJ Century Logistic Holdings Berhad is not stable.
ii) Return on Total Assets

The return on total assets calculate the overall effectiveness of management in generating profit
with its available assets (Zutter & Smart, 2019).

Formula: 𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐢𝐭

𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬

2018 2019
RM 9,784,000 −RM 7,531,000
× 100 = 1.8% × 100 = −1.2%
RM 545,006,000 RM 612,922,000

For every RM1 of total asset, the net profit of CJ Century Logistic Holdings Berhad is RM0.018.
The return on total assets of CJ Century Logistic Holdings Berhad in year 2018 is 0.018
because its net profit is RM9,784,000 and its total assets is RM545,006,000. For every RM1
of total asset, the net loss of CJ Century Logistic Holdings Berhad is –RM0.012. The return
on total assets of CJ Century Logistic Holdings Berhad in year 2019 is -0.012 because its net
profit is -RM7,531,000 and its total assets is RM612,922,000. The return on total assets of
this company in year 2019 is lower than in 2018 and the return on total assets of 2019 is even
negative. The return on total assets of the company had decreased 3% from 1.8% in 2018 to
-1.2% in 2019. This is because the net profit had decreased an amount of RM17,315,000
from RM9,784,000 in 2018 to – RM7,531,000 in 2019. In short, the net profit is 1.8% of the
total assets in year 2018 and the net loss is -1.2% of the total assets in year 2019.
5. Market Value Ratio

It measures a company’s performance (CJ Century Logistics Holding Berhad) as perceived by

the financial market. It indicates what investors think of management’s past performance and
future prospects (Good or bad performance before and after). Market value ratio is used to
evaluate the company’s current market share price with the stock which held by public. It is
being used by investors (Existing & Potential) to calculate whether the share price is over-
priced or underpriced (AccountingTools, 2019).

i) Price to Earnings ratio (P/E Ratio)

A valuation ratio of a company’s current share price compared to its per-share earnings. It
shows how much investors are willing to pay per dollar of earnings. A high P/E suggests
that investors are expecting higher earnings growth in the future compared t o companies
with a lower P/E.

Formula: 𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐦𝐚𝐫𝐤𝐞𝐭 𝐩𝐫𝐢𝐜𝐞 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞

𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞

2018 2019
Earnings per share: Earnings per share:
RM 9,784,000 −RM 7,531,000
= RM0.0249 = −RM0.0193
392,933,000 390,261,000
Price/Earnings Ratio: Price/Earnings Ratio:
RM 1.010 RM 0.390
= 𝟒𝟎. 𝟕𝟑 = −𝟐𝟎. 𝟐𝟏
RM0.0248 − RM0.0193
Investors of CJ Century Logistic Holding Investors of CJ Century Logistic Holding
Berhad are willing to pay RM40.73 for Berhad are not willing to pay anymore for
every RM1 of earnings per share that the every RM1 of earnings per share that the
company produced. company produced.

As the calculation shown above, CJ Century Logistic Holding Berhad has P/E of RM40.73
in 2018 and -RM20.21 in 2019. Obviously, its P/E ratio was decreased to RM60.94 from
2018 to 2019. It is because of net income for CJ Century Logistic Holding Berhad
decreases from RM9,784,000 in 2018 to -RM7,531,000 in 2019 and the earning per share
of CJ Century Logistic Holding Berhad has an inverse relationship with P/E ratio. In
addition, it also indicates that this company’s performance is currently be
undervalued or that firm is doing extremely worse than its previous year.
ii) Market-to-book ratio

A valuation ratio of company’s current share price compared to its book value. It helps a
company to compare the net assets that are available relating to the selling price of its
stock. This ratio is typically used by the investors to show the market view of the particular
stock’s value and used to describe how much equity will the investors are paying for each
dollar in net assets (Corporate Finance Institute, 2017).

Formula: 𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐦𝐚𝐫𝐤𝐞𝐭 𝐩𝐫𝐢𝐜𝐞 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞

𝐁𝐨𝐨𝐤 𝐯𝐚𝐥𝐮𝐞 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞

2018 2019
Book value per share: Book value per share:
RM323,908,000 RM316,793,000
= 0.8243 = 0.8117
392,933,000 390,261,000
Market-to-book ratio: Market-to-book ratio:
RM1.010 RM0.390
= 𝟏. 𝟐𝟑 = 𝟎. 𝟒𝟖
RM0.8243 RM0.8117
Investors of CJ Century Logistic Holding Investors of CJ Century Logistic Holding
Berhad are willing to pay RM1.23 for each Berhad are willing to pay RM0.48 for each
RM1 of the stock value. RM1 of the stock value.

From the table above shows that CJ Century Logistic Holding Berhad has Book-to-market
ratio of RM1.23 in 2018 and RM0.48 in 2019. Obviously, its market-to-book ratio has
decrese to RM0.75 from 2018 to 2019. It is because of total equity for CJ Century
Logistic Holding Berhad decreases from RM323,908,000 in 2018 to RM316,793,000 in
2019 and the book value per share of CJ Century Logistic Holding Berhad has an inverse
relationship with market-to-book ratio. It also indicates that this company’s stock is
undervalued in 2019 and the total assets actually have become less comparable
compare to last year (2018).
D) Overall conclusion on the firm performance

According to the annual reports of the company in 2018 and 2019, the overall
performance of the company is not ideal. The financial performance analysis and evaluation
based on time-series had shown that majority of the financial ratios of the company are getting
worse compared to the previous year.

For the liquidity ratios, it has shown that the company is becoming weaker in meeting
its obligations as the current ratio and quick ratio of the company has dropped in 2019.
Although the figure of the current ratio in year 2019 still indicates the company is able to cover
its current liabilities, but the decreasing of the ratio also shows that the ability of the company
to cover its obligation is getting poor as the figures is near to 1 in year 2019. The decreasing
of quick ratio in the financial status of the company also indicates that the company is not doing
well as the satisfactory level of the investors are dropping when the quick ratio decreases.
Therefore, CJ Century Logistics Holdings Berhad is becoming unstable in managing the
obligations.

The overall efficiency ratios of the company had increased. The increase of inventory
turnover reflects that the flow of the funds and inventories of the business are performing
well, yet the inventory turnover of company had increased dramatically in 2019 which might
not be a good sign as it indicates that the inventory of the company may be insufficient to meet
the customers’ demand. On the other hand, the total assets turnover of the company had
increased and it was a good sign as the ratio reflects that the company was able to generate
higher sales using its assets in year 2019 compared to the previous year.

Furthermore, the leverage ratios of the company had increased which indicates the
company is becoming weak in meeting its short term and long-term obligations. The debt ratio
of the company in year 2019 reflects that it needs more liabilities to finance the company’s
assets. The debt-to-equity ratio is still less than 1 where the company uses more equity than
debt to finance the assets, yet the ratio had increased to 0.93 which it is near to 1 and this shows
that the company is not able to use more equity to finance its assets compared to the previous
year. The leverage ratios show that the capacity of the company to meet short term and long-
term obligations is in a declining trend.

Apart from that, the company’s profitability ratios reflect that the company is not
stable in generating profits. The company is having loss instead of generating profits in year
2019 and this indicates that the company’s financial performance is dropping. The company is
generating profit in year 2018 as the net profit margin of the company in year 2018 is still
positive. In year 2019, the net profit margin decreased drastically till -1.7 and the company
begins to suffer loss. As for the return on total assets, the ratio also dropped from a positive
figure to a negative figure. The return on total assets reflects that the company is not effective
in managing the available assets to generate profits. Hence, the performance of the company
in generating profits is descending.

Last but not least, the market ratios of the company are also declining. The PE ratio of
the company in year 2019 reflects that the amount of money that its investors are willing to pay
for the company’s earnings is decreasing and it reached to a negative figure. This indicates
that the company is underperforming in the market and there might be no investor is willing to
invest in the company. In addition, the decreasing of the MB ratio shows that the company is
not doing well in the market as the ratio reflects how the investors in the market view the
performance of the company.

In a nutshell, the company is underperforming and undervalued in the market. The

company is unstable in using its ability to meet obligations, generate sales and profits which
caused the company suffering financial loss and becoming less comparable in the market.
E) Recommendations on how the overall performance of the company could be
improved

Based on the inventory turnover of efficiency ratio, the inventory turnover of 18.0951
in year 2018 has increased to 45.1759 in year 2019. A high turnover might indicate that there
are insufficient stocks to be replenished. But, the total assets turnover in 2019 is higher than
in 2018, which means there is more sales. High inventory turnover in the company leads to
better sales, but the company can still improve its overall performance by using an automated
inventory system. With this system, replenishment of orders, delivering of customers’ items,
tracking of stocks in warehouses, and syncing of order and inventory data can be done
automatically in a faster way. It also helps in generating documents for orders, shipping, and
invoices, which lower inventory management cost (“Skubana”, 2020). By using the system,
the company is able to meet customers’ demand because there will be no overstock or
understock in warehouses, hence leads to a better sales performance.

Based on Price to Earnings ratio (P/E ratio) of Market Value Ratio, the P/E Ratio has
decreased by RM60.94 from 2018 to 2019. With the low P/E Ratio, the company’s performance
is bad. This is because its net income in year 2019 is lower than in year 2018. To improve the
overall performance, the company will have to improve its net income by fixing overhead
cost. The company can fix overhead cost by enhancing its available resources. The company
should manage its warehouse in a suitable layout and optimize usage of facilities. By
rearranging the warehouse, there will be more space for storing stocks and parcels. With proper
arrangement, the company does not have to spend more money to rent or to build additional
warehouses. By managing warehouses, the company is also able to make shipment of packages
faster and easier (“Logistics Jobs Asia's Team”, 2018). With this, company is able to reduce
unnecessary expenses and improve net income.

Based on the debt ratio of leverage ratios, the debt ratio has increased from 0.41 to 0.48.
The company has increased total liabilities of RM75,031,000 between year 2018 and year 2019.
To improve the overall performance, the company may restructure their liabilities.
Restructuring liabilities helps to reduce the amount of debt that a company owes. The company
may replace loans with loan that has a lower interest rate, loan that is more secured to reduce
interest rate, and shareholder funds. The company could also communicate with a tax advisor
to delay tax payment (“Team Technology”, 2020). Company that is weak in handling
obligations can rearrange their debts and change the terms for paying back money to creditor,
which helps to improve liquidity.

All in all, CJ Century Logistics Holdings Berhad will still have to make some effort to
improve their financial ratios. Observe financial decisions based on the ratios helps in improve
the performance of company in long run and value of business. They will need to lower
inventory management cost, improve its net income by fixing overhead cost, and restructure
their liabilities so that they can avoid financial difficulties