BBPW3103

BACHELOR OF HUMAN RESOURCE MANAGEMENT WITH HONOURS

JANUARY / 2022

FINANCIAL MANAGEMENT 1

BBPW3103

MATRICULATION NO : 740127105496001

IDENTITY CARD NO. : 740127105496

TELEPHONE NO. : 0133305822

E-MAIL : nahafainah@oum.edu.my

LEARNING CENTRE : SHAH ALAM

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Table of Contents

PART 1...................................................................................................................................................1

INTRODUCTION.....................................................................................................................................1

COMPANY BACKGROUND......................................................................................................................2

Calculation of Relevant Profitability Ratios............................................................................................4

ANALYSIS OF THE RELEVANT PROFITABILITY RATIOS............................................................................6

COMPARISON OF THE COMPANIES' PROFITABILITY............................................................................10

SUMMARY...........................................................................................................................................15

PART II.................................................................................................................................................17

ONLINE CLASS PARTICIPATION............................................................................................................17

REFERENCES........................................................................................................................................19

APPENDIX............................................................................................................................................20
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PART 1

INTRODUCTION

All established organizations strive to achieve their specific goals. Its magnificence
can be determined by tracking its financial performance over time. A performance evaluation
of finance for an organization is a reference to financial activities that have been carried out
over a specific time period (Akhor & Jafaru, 2015). Financial performance refers to an
industry's ability to conduct financial transactions - it is a measure of how well financial
objectives are being are being or have been accomplished. It is the process of measuring the
results of a firm’s policies and operations in monetary terms. It is used to measure firm’s
overall financial health over a given period and can be used to compare similar firms across
the same industry or to compare industries or sectors in aggregations (Kapil & Dinesh, 2018).

The assignment's primary objective is to define the scope and evaluate the profitability ratios
disclosed by companies in the communication and media sectors for the years 2019 and 2020,
based on the annual report in Appendix 1, Appendix 2. Appendix 3 and Appendix 4. Two
companies from the telecommunication sector and two companies from the media sector that
are on the main market of Bursa Malaysia were chosen for the study. This report starts with a
brief introduction to both of the companies that were chosen, followed by the calculation and
analysis of the relevant profitability ratio.

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COMPANY BACKGROUND

The following two companies from the telecommunication sector and two companies
from the media sector selected for the assignment are:

Maxis Berhad

Maxis Bhd. is a Malaysian investment holding company that provides integrated

telecommunication services. It was one of Malaysia's first mobile communications carriers,
having launched in 1995. The company's 2G and 3G networks, respectively, cover 95% and
83% of the country's population. Maxis' service revenue was RM7.725 million in 2020, and
its service revenue EBITDA margin was 49.4%.

DiGi.Com Berhad

DiGi.Com Berhad is a publicly traded company on the main board of Bursa Malaysia
and a subsidiary of the Telenor Group, a leading global telecommunications provider. DiGi
Telecommunications Sdn. Bhd, the company's wholly owned subsidiary, is responsible for
mobile service operations. In May 1995, DiGi launched its digital GSM1800 services,
making it Malaysia's first provider of digital mobile communications. Over the last five years,
DiGi's revenue has increased to RM6.7 billion from RM4.9 billion, with a subscriber base of
11.0 million. DiGi's position as the market leader in prepaid services paved the way for a
number of industry benchmarks in terms of simplicity and innovation.

Sasbadi Holdings Berhad

Sasbadi Holdings Berhad ("Sasbadi Holdings" or "the Company") is an investment

holding company, whereas the Group (defined as Sasbadi Holdings and its subsidiaries) is a
provider of education solutions. Sasbadi Sdn Bhd (SSB) was founded in 1985 and began
publishing printed educational materials. On July 23, 2014, the firm was successfully listed
on Bursa Malaysia Securities Berhad's main market. The group earned RM62.814 million in
the financial year ended August 31, 2020, down from RM87.727 million in the previous
year..

Pelangi Publishing Group Berhad

Pelangi Publishing Group Berhad ("PPG"), founded in 1979 and listed on Bursa
Malaysia Securities Berhad's main market in 2004, was recognised as one of the region's
leading education service providers. PPG has operational offices in Thailand and Indonesia,

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subsidiaries in Singapore and the United Kingdom, and an associate company in China. Its
headquarters are in Malaysia. PPG continues to manufacture high-quality educational
products and is committed to educating children to the highest possible standards. PPG's
business operations and revenue in Quarter 3 were impacted by the prolonged impact of
MCO. Revenue for fiscal year 2020 was RM57.3 million, a decrease of 11.6 million, or
16.8%, from RM68.9 million in the previous year.

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CALCULATION OF RELEVANT PROFITABILITY RATIOS

A profitability ratio is a metric for determining the profitability of a business.

Profitability is simply the capacity to earn a profit, and a profit is what remains after all costs
and expenses associated with obtaining the revenue have been eliminated. The formulas can
be used to evaluate a business's performance and compare it to that of other businesses in a
comparable position. Data to calculate the profitability ratios is collected from the balance
sheet and the income.

Table 1

DuPont Model Formula

The DuPont return on equity analysis methodology is frequently used by a company's

financial managers to gain useful insights on the company's capital structure and the elements
that contribute to its return on equity breakdown. The DuPont analysis formula is an
expansion of the simple ROE formula. Net profit margin, total asset turnover, and equity
multiplier are three different components that drive return on equity in this extended formula.
The DuPont analysis formula on the selected companies' calculations is shown below.

The first step in DuPont analysis is to show the following formula:

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Return on Assets (ROA) = Net Profit Margin X Total assets turnover

Profit After Tax Sales

= X
Sales Total Assets

DuPont's analysis proceeds to the second step, which is to connect the return on assets and
the return on equity. The following table shows this relationship:

Return on Equity (ROE) = Return on Assets X Equity Multiplier

Profit After Tax Total Assets

= X
Total Assets Total Equity

Table 2

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ANALYSIS OF THE RELEVANT PROFITABILITY RATIOS

Profitability is the primary concern of every business and must be quantified in order
for management to steer the business in the right direction. If an organization has external
investors who have purchased stock in the organization, the organization's management must
demonstrate profitability to those equity investors. Profitability metrics are critical for both
managers and owners of businesses. Profitability ratios that are frequently used to evaluate a
business's performance include the following:

Gross profit margin (GPM) is the portion of revenue generated by each ringgit of sales that
can be used to cover sales and administrative expenses. The higher the gross profit margin,
the more prosperous the business, as it indicates lower sales-related expenses or costs.

Net profit margin (NPM) is indicating a company's ability to earn a profit from each ringgit
of sales after deducting all expenses, such as cost of goods sold, sales expenses, general and
administration expenses, depreciation charges, interest expenses, and tax.

Operating profit margin (OPM) is a measure of an operation's efficiency in terms of cost

reduction and increase in returns before interest and tax. The highest score indicates that the
business is more or less efficient; low scores indicate that the company is not efficient enough
to meet its shareholders' expectations.

Return on assets (ROA) assesses a company's ability to generate profit from its assets.The
higher the ratio, the better the company's standing, as it indicates the management's efficiency
in generating profit from its assets.

Return on equity (ROE) is a company's ability to generate profit for its ordinary
shareholders. The higher the ratio, the better as the company is able to generate a high profit
from its owners.

Earnings per share (EPS) are used to determine the net profit generated by each ordinary
share. This data is frequently prioritized by management and investors as a key indicator of a
business's success. The higher the value of this ratio, the better the shareholders' position.

Profitability analysis for the selected companies as below:

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MAXIS BERHAD 2019 2020 Differences

Gross Profit Margin 41.78% 41.93% 0.15%
Net Profit Margin 16.24% 15.41% -0.83%
Operating Profit Margin 21.77% 20.66% -1.11%
Return on Assets 6.77% 6.30% -0.47%
Return on Equity 21.60% 19.60% -2.00%
Earnings Per Share RM0.19 RM0.18 -RM0.01
Table 3

GPM in year 2020 in slightly higher 0.15% compared to year 2019 is a good
indication of financial health for the company. The NMP in 2020 is lower by 0.83%
compared to the year 2019. This shows that management of purchasing and related
purchasing costs is unsatisfied. OPM for 2020 has dropped by 1.11% compared to 2019,
which means that operating costs are not being managed well. ROA in 2020 is 0.47% lower
than it was in 2019. This shows that the company needs to improve this area so it can stay
competitive and profitable. ROE for 2020 is 2% lower than it was in 2019. This means that
management may not be properly managing the profits made by the owners of the company.
For the year 2020, EPF shares issued will be worth RM0.01 per unit compared to the
previous year, but the difference is small and reflects the actual amount that will be paid out.

DIGI.COM BERHAD 2019 2020 Differences

Gross Profit Margin 52.57% 50.06% -2.51%
Net Profit Margin 22.75% 19.84% -2.91%
Operating Profit Margin 30.04% 26.36% -3.68%
Return on Assets 17.58% 14.91% -2.67%
Return on Equity 217.12% 201.49% -15.63%
Earnings Per Share RM0.18 RM0.16 -RM0.02
Table 4

GPM in 2020 is 2.51% lower than in 2019 due to increased expenditures or costs
associated with undertaking sales activities. NPM in 2020 is 2.91 percent lower than it was in
2019.This demonstrates an unsatisfactory management of purchases and associated
purchasing expenditures. OPM has decreased by 3.68% percent for 2020, indicating that
operating costs are not being handled effectively. ROA is 2.67 percent lower in 2020 than it
was in 2019, indicating a need for development in this area to ensure the company remains
profitable and competitive. The ROE for 2020 is 15.63 percent lower than the ROE for 2019,

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indicating that management may not be effectively managing profits generated by the owners'
investment. In 2020, EPF will pay RM0.02 less for each unit of shares issued than in 2019.
This difference is negligible and reflects the actual amount allocated to shareholders.

SASBADI HOLDING 2019 2020 Differences

Gross Profit Margin 41.44% 25.89% -15.55%
Net Profit Margin 3.72% -14.25% -17.97%
Operating Profit Margin 7.84% -14.81% -22.65%
Return on Assets 1.47% -4.27% -5.74%
Return on Equity 2.11% -6.13% -8.24%
Earnings Per Share RM0.01 -RM0.02 -RM0.03
Table 5

The GPM in year 2020 is lower at 15.55% compared to year 2019 as this shows
higher expenditures or costs involved in implementing sales activities. The NPM in 2020 is
lower by 17.97% compared to the year 2019. This shows that management of purchasing and
related purchasing costs is unsatisfied. The OPM for 2020 has dropped by 22.65%, which
means that operating costs are not being managed well. ROA in 2020 is lower by 5.74%
compared to last year, which indicates a need for improvement in this area to ensure the
company can remain competitive and profitable. ROE for 2020 is 8.24% lower than ROE for
2019. This means that management may not be properly managing the profits made by the
owners of the company. In 2020, EPF decreased by RM0.03 for each unit of share issued
compared to 2019. This difference has a small monetary value and reflects the actual amount
that will be distributed to shareholders.

PELANGI PUBLISHING 2019 2020 Differences

Gross Profit Margin 36.85% 32.41% -4.44%
Net Profit Margin 2.67% -4.74% -7.41%
Operating Profit Margin 6.05% -3.20% -9.25%
Return on Assets 1.30% -2.03% -3.33%
Return on Equity 1.87% -2.87% -4.74%
Earnings Per Share RM0.02 -RM0.03 -RM0.05
Table 6

In 2020, GPM is 4.44 percent lower than in 2019. This is because sales activities have
become more expensive or cost more to do. The 2020 NPM is 7.41 percent lower than the

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2019 NPM. This demonstrates an unsatisfactory management of purchasing and associated

purchasing costs. When compared to 2019, OPM for 2020 has decreased by 9.25 percent,
indicating that operating costs are not being managed effectively. In 2020, ROA was 3.33
percent lower than in 2019. This shows that the company needs to improve this area to stay
profitable and competitive. The ROE for 2020 is 4.74 percent lower than for 2019, indicating
that management may not be effectively managing profits generated by the owners'
investment. In 2020, EPF will pay RM0.0.5 less for each unit of shares issued than in 2019.
This difference is negligible and reflects the actual amount distributed to shareholders.

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COMPARISON OF THE COMPANIES' PROFITABILITY

To define the relationships between synthetic indicators (ROA and ROE) and
analytical indicators, the DuPont model was used. The model is built around the fundamental
indicator of return on assets, which is determined by the multiplier effect of profit margin and
sales volume, with a subsequent modification or extension to account for the effect of
financial leverage (Sheela and Karthikeyan, 2012). To make investment decisions, we
frequently compare the business models of companies in the same industry to see if we can
explain the differences in valuation and which company has better financial metrics.

Telecommunication sectors

DuPont ANALYSIS MAXIS DIGI

2019 2020 2019 2020
NET PROFIT MARGIN 16.24% 15.41% 22.75% 19.84%
ASSET TURNOVER 0.42 0.41 0.77 0.75
RETURN ON ASSETS 6.77% 6.30% 17.58% 14.91%
EQUITY MULTIPLIER 3.19 3.11 12.35 13.51
RETURN ON EQUITY 21.60% 19.60% 217.12% 201.49%
Table 7

NET PROFIT MARGIN

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2019 2020

MAXIS DIGI

Figure 1

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ASSET TURNOVER
1.00
0.80
0.60
0.40
0.20
0.00
2019 2020

MAXIS DIGI

Figure 2

RETURN ON ASSETS
20.00%
15.00%
10.00%
5.00%
0.00%
2019 2020

MAXIS DIGI

Figure 3

EQUITY MULTIPLIER
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2019 2020

MAXIS DIGI

Figure 4

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RETURN ON EQUITY
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2019 2020

MAXIS DIGI

Figure 5

According to our analysis of the profitability ratios for the telecommunications sectors
for year 2020, we discovered that Digi's return on equity (ROE) is higher than Digi's (201.49
percent for Digi and 19.60 percent for Digi). This higher return on equity (ROE) is influenced
by Digi's higher return on assets in comparison to Maxis and less by the equity multiplier
pattern of funding. Digi’s return on assets is 14.91 percent, while Maxis’ is 6.32 percent. Digi
and Maxis have a large difference in their equity multipliers, at 13.51 times for Digi and 3.11
times for Maxis.The return differential between Digi and Maxis is influenced by the
difference in net profit margins relative to total asset turnover. Meanwhile, the profit margin
disparity between Digi (9.84%) and Maxis (15.41%) is significant in comparison to the
disparity in total asset turnover (0.75 times for Digi and 0.41 times for Maxis).

Digi's net profit margin is impacted by its higher operating profit margin in
comparison to its gross profit margin. Thus, Digi’s return on equity is higher as a result of its
managers' increased efficiency in running the business.

Media Sector

DuPont ANALYSIS SASBADI PELANGI

2019 2020 2019 2020

NET PROFIT MARGIN 3.72% -14.25% 2.67% -4.74%

ASSET TURNOVER 0.40 0.30 0.49 0.43

RETURN ON ASSETS 1.47% -4.27% 1.30% -2.03%

EQUITY MULTIPLIER 1.43 1.44 1.44 1.42

RETURN ON EQUITY 2.11% -6.13% 1.87% -2.87%

Table 8

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NET PROFIT MARGIN

5.00%
0.00%
2019 2020
-5.00%
-10.00%
-15.00%
-20.00%

SASBADI PELANGI

Figure 6

0.60
ASSET TURNOVER
0.50
0.40
0.30
0.20
0.10
0.00
2019 2020
SASBADI PELANGI

Figure 7

RETURN ON ASSETS
2.00%
1.00%
0.00%
2019 2020
-1.00%
-2.00%
-3.00%
-4.00%
-5.00%

SASBADI PELANGI

Figure 8

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EQUITY MULTIPLIER
1.45
1.44
1.43
1.42
1.41
1.40
2019 2020

SASBADI PELANGI

Figure 9

RETURN ON EQUITY
3.00%
1.00%
-1.00% 2019 2020

-3.00%
-5.00%
-7.00%

SASBADI PELANGI

Figure 10

While comparing the media sectors of Sasbadi Holdings Berhad (SSB) and Pelangi
Publishing Group Berhad for the year 2020, we discovered that both companies have a
negative return on equity. PPG's (-2.87 percent) is greater than SSB's (-6.13 percent).
However, SSB has a slight difference in their equity multipliers. SSB's profit margin is lower
than PPG's (-4.74 percent). However, the difference in total asset turnover (0.43 percent for
PPG, 0.30 times for SSB) does not appear to be significant. The difference in net profit
margins between PPG and SSB has an effect on the return differential.

The difference in net profit margins between PPG and SSB has an effect on the return
differential. SSB's profit margin is lower than PPG's (-4.74 percent). However, the difference
in total asset turnover (0.43 percent for PPG, 0.30 times for SSB) does not appear to be
significant.

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SUMMARY

Calculating a company's profitability ratios can reveal a lot about it. It's better to think
of ratios as a detective storey than as a formula. When combined with other data like
management and economic situation, ratio analysis can reveal a lot.
The backgrounds of the selected companies, namely Maxis Berhad and Digi.Com Berhad
from the telecommunications sector, and Sasbadi Holding Berhad and Pelangi Publishing
Group Berhad from the media sector, are listed on the main board of Bursa Malaysia. The
financial and income statements are used as data for the calculation of the profitability ratio
to estimate the ability of the firm to produce a profit on the selected companies, based on
annual reports ending in 2019 and 2020.
The calculation and profitability analysis show that both companies in
telecommunications sector have a lower return on equity in 2020 than last year. Comparing
companies between Digi.Com Berhad has the highest return on equity, or profit per unit of
shareholder capital. The higher operating profit margin than gross profit margin influences
Digi's net profit margin. Managers are more efficient at running businesses. Maxis Berhad
must generate revenue at a high cost per unit. Improvements in this area are extremely
beneficial to the company's future profitability. Digi and Maxis invest heavily in network
upgrades. This is important for the firms' future growth.
While companies in the media sector seem to experience losses and stress. The return
on equity of Sasbadi Holding Berhad and Pelangi Publishing Group Berhad is lower and
negative in 2020 than it was last year. SSB's equity multipliers are slightly different from
PPG's, but SSB's profit margin is lower. Currently, the difference in total asset turnover
appears negligible. This difference reflects the actual amount distributed to shareholders. The
net profit of both companies also showed a low percentage compared to their gross profit
margins. This shows that both companies need to improve management efficiency in
managing their operations.
The COVID-19 pandemic has caused significant difficulties for business
environments globally. The lockdown measures and reduction in mobility have created many
obstacles within the supply chain (Sharma et al., 2020). Consumers, businesses, and
communities worldwide are experiencing widespread anxiety and economic suffering as a
result of the coronavirus (COVID-19) pandemic. The situation is rapidly shifting, with far-
reaching consequences. COVID-19 has a negative effect on the economy's many sectors.

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Nonetheless, certain sectors continue to grow. The telecoms sector is one of them. The
internet plays a big role in community activities that are increasingly done online, which
improves the performance of telecommunications providers.

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PART II

ONLINE FORUM PARTICIPATION

The five (5) postings on the opinion role of the capital market in providing opportunities for
companies are publicly listed..

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REFERENCES

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and Rockwell Prof. (Dr.) Kapil Khatter, Dinesh Mathur Prof. (Dr.) Kapil Khatter,
Research Supervisor, Jagannath University, Jaipur Dinesh Mathur, Research Scholar,
Jagannath University, Jaipur
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companies in india using dupont analysis. ACADEMICIA: An International
Multidisciplinary Research Journal, 11(5), 779-788.
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8. Yu, Y., Li, Y., Zhang, Z., Gu, Z., Zhong, H., Zha, Q., Yang, L., Zhu, C., & Chen, E.
(2020). Abibliometric analysis using VOSviewer of publications on COVID-19.
Annals ofTranslational Medicine, 8(13), 816–816. https://doi.org/10.21037/atm-20-
4235

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APPENDIX

Appendix 1: Annual Report 2020 Maxis Berhad

Appendix 2: Annual Report 2020 Digi.Com Berhad

Appendix 3: Annual Report 2020 Sasbadi Holdings Berhad

Appendix 4: Annual Report 2020 Pelangi Publishing Group Berhad

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