BWBB3083 CORPORATE BANKING

GROUP A

FIRST SEMESTER 2022/2023 (A221)

- ASSIGNMENT 3 -

7-ELEVEN MALAYSIA HOLDINGS BERHAD:

OPERATING AND CASH CYCLE ANALYSIS

SUBMITTED TO:

DR. LU MING PEY

PREPARED BY: GROUP 10

NO NAME MATRIC NO

1. LAU KELLY 279528

2. JOANE SAW WEN HUEY 279568

3. LEE WEI ZHENG 279763

4. MONICA JULIANA A/P MOSES 280964

5. HAMSA VAHINI A/P THILLAI RAMAN 282072

SUBMITTED BY:

4 JANUARY 2023
Table of Content
1.0 COMPANY BACKGROUND

7-Eleven is one of the established retailer around the world, the business that 7-Eleven
ventured into is the selling of convenient goods such as snacks, drinks, cigarette, candies,
instant noodles, etc. As of 2019, 7-Eleven has successfully established its business through
franchising in 17 countries with a total number of 68,236 stores around the world. 7-Eleven
stores can be found in Japan, Vietnam, Malaysia, United Arab Emirates, U.S.A., Thailand,
Taiwan, Sweden, South Korea, Singapore, Philippines, Norway, Mexico, Australia,
Denmark, Canada and China (Saito, 2019). 7-Eleven Malaysia Holidings Berhad
incorporated on 4th June 1984, throughout over 30 years of business in Malaysia, many
Malaysians are relying on 7-Eleven as 7-Eleven provides the sense of convenience to the
people and it operates 24 hours and 7 days a week.

7-Eleven Malaysia Holdings Berhad is a company that equipped with its value,
mission and vision. The general value of the company is to make things easy and fast for
people in improving the effectiveness and deliver good values to its customers by
understanding and make connections with them (7-Eleven, n.d.). 7-Eleven Malaysia Holdings
Berhad is listed in main market of Bursa Malaysia on 30th May 2014 through the Initial
Public Offering (IPO), its IPO has successfully raised 530.32 million shares, offered at RM
1.38 per share at RM0.10 par value due to its trustworthiness and people’s dependency on 7-
Eleven (1-million-dollar-blog, 2014). 7-Eleven Holdings Berhad is a subsidiary to 7-Eleven
Malaysia Sdn. Bhd. and the ownership of the companies go to Berjaya Retail Berhad.

7-Eleven is one of the companies that equipped with creativity and innovation, they
constantly strive to improve its service and finding ways to influence its customers’
purchasing behaviour. For example, 7-Eleven Holdings Berhad created their own products
such as potato chips and Slurpee to make sure the specific customers come back to them.
Slurpee is also known as the “Brain Freeze” drink that selling at almost all 7-Eleven stores in
Malaysia, this product can be considered as the successful product that most of the customers
come back for due to its affordable price and unique experience. 7-Eleven is able to sell it at
an affordable price as there is no third-party fees involve, the 22oz of Slurpee is only selling
at RM 1.70 (Ng, 2021). As of November 2022, the share price of 7-Eleven Malaysia
Holidays Berhad rose 51% compared to three weeks ago, it is proven that 7-Eleven is
elevating its business and en route achieving its goals (Lim, 2022).
2.0 Operating Cycle of 7-Eleven Holdings Berhad over the last 5 years

Operati ng cycle
80
70 76
73
69
60 62 63
50
40
30
20
10
0
2017 2018 2019 2020 2021

Operating cycle

An operating cycle also goes by the name working capital cycle. Any company,
whether it be in the financial sector, a trade association, or the manufacturing industry, needs
time to see the fruits of its labour. In other words, if you invest money, produce or execute
something for a while, and then sell it, you will benefit. Nevertheless, you would not be able
to cash in on that profit right away after making the original deposit. It needs some time to
complete. The time it takes from investing cash in assets to recovering it as cash is known as
the operating or working capital cycle. The cycle here denotes the amount of time needed to
realise. The operating cycle is the typical amount of time needed for a company to invest its
initial capital to purchase raw materials, produce products, sell those products, and then get
payment from customers for those products. This is helpful for determining how much
working capital a company will require to keep up with or expand its operations.

Therefore, in the case of 7-Eleven Malaysia the operating cycle in 2017 took 76 days
while in 2018 it reduced to 69 days and decreased to 62 days in 2019 but in following years
which is in 2020 the operating cycle has increased to 63 days and 73 days in 2021. Thus, the
trend that shows on the operating cycle 7eleven Malaysia has performed well in 2019 and had
an increase in 2020 and 2021. 7-Eleven Malaysia's operating cycle can be used to assess the
company's financial health by providing information about its ability to settle liabilities. A
short operational cycle for the business indicates that payments will come in steadily. The
more quickly the business makes revenue, the easier it will be for it to pay off any obligations
that are due or grow its business as necessary.
3.0 Cash Cycle of 7-Eleven Holdings Berhad over the last 5 years
4.0 Suggestion of Types of Working Capital Finance

The purpose of obtaining funding for working capital is to supply a company with
liquid money so that it may continue to run its day-to-day activities. This can be
accomplished by using the asset's accounts receivable and inventory as the source of money
for the capital. These money are not held aside for future construction projects, rather they
are required to be used in order to cover operational expenses. Loans for working capital are
one form of debt financing that may be made accessible to businesses. Other forms of debt
financing include the loans for working capital give business owners the ability to swiftly fill
in temporary gaps in their cash flow. In practical terms, this represents a significant
advantage. Debt financing does not require the business owner to give up any ownership
share in the company, which is another advantage of this method of funding (Find Venture
Debt, 2021).

The unsecured working capital loan provided by Standard Chartered Bank was the
best option for 7-Eleven Malaysia Sdn. Bhd. when it came to obtaining company working
capital. According to Chen (2021), it is possible for a borrower to get an unsecured working
capital loan without being required to provide collateral. Unsecured working capital loans
typically come with more accommodating conditions for making repayments. While 7-
Eleven Malaysia has a record of accomplishment of being fiscally responsible, it is
anticipated that they will have less issue repaying the unsecured working capital loan. In
addition, 7-Eleven Malaysia depends on a variety of resources in order to accomplish duties
such as expanding operations, purchasing new equipment, maintaining inventory records, and
remaining within budgetary constraints.

7-Eleven can choose from a wide range of unsecured working capital loans offered by
Malaysian creditors, each of which has its own unique set of qualities and potential uses.
These are regarded to be short-term loans and do not need any security to be provided by the
borrower. Lines of credit, inventory factoring, and merchant cash advances are typical
examples of unsecured kinds of business finance (Treece, 2022). Due to the fact that 7-
Eleven Malaysia may not be required to provide collateral for the loan, it is possible for the
company to apply for an unsecured working capital loan. A personal guarantee from a top
executive or large investor was taken in place of genuine security for this form of working
capital loan rather than the actual collateral itself.
 As few as fourteen days may pass from the time an application for an unsecured
working capital loan is made and when approval is given. There is a possibility that a 7-
Eleven franchise in Malaysia might qualify for a loan of between RM100,000 and RM1.5
million, with repayment terms ranging from 12 to 84 months. In addition, the borrower's
predetermined monthly loan payments to Standard Chartered Bank would be automatically
debited each month from the standard checking account held by 7-Eleven Malaysia (Standard
Chartered Bank Malaysia, 2022).

Borrowers of unsecured personal loans, as well as borrowers of unsecured

commercial working capital loans, are not required to provide any property or other assets as
security for their loans. On the other hand, banks determine the risk associated with a
borrower by looking at the credit score of the organisation. Since 7-Eleven Malaysia has been
in business for a significant amount of time, it is able to meet all of its commitments.
CreditMantri (2021) implies that a personal guarantee from the business owner or another
applicant is required because this loan does not need collateral. If the firm is unable to make
its payments, the borrower has contractually agreed to cover the shortfall with his own
personal funds. The company is required to keep a record of all outstanding corporate loans,
including paperwork for tax filings and bank records. It is possible that 7-Eleven Malaysia
may be requested to present a business plan as proof of the potential for the company to
thrive.

Interest is accrued and due whenever the main amount of an unsecured working
capital loan is paid back in full. These money can be put toward covering any operating
expense incurred by the firm, such as the acquisition of new machinery or initial stock of
goods. 7-Eleven Malaysia is required to always make payments in line with the conditions of
the loan agreement during the length of the loan. It is feasible for a company to prepay some
or all of its debt. There are occasions when the interest rate on an unsecured working capital
loan is significantly higher than the interest rate on a secured loan, despite the fact that there
are benefits for the borrower. Unsecured working capital loans present a greater risk for the
lending institution, which is why they are often granted for a shorter time period than secured
working capital loans (Rogers, 2022).

Hence, 7-Eleven Malaysia is free to spend the money it receives from the unsecured
working capital loan in any manner that it considers appropriate because there are no
limitations placed on how the money can be used. This means that 7-Eleven Malaysia has to
utilise the short-term liquidity offered by an unsecured working capital loan in order to solve
cash flow concerns and invest in equipment, industrial decoration, and new staff to enhance
the operation of the business.

4.1 Documents required in applying for the Working Capital Finance

In order for a bank (also known as a lender) to grant a working capital loan, the bank will
need certain documents from the company (borrower). These documents are known as loan
documents. In most cases, they are statements of the borrower's personal and financial
records that are required for loan approval (ContractsCounsel, 2022). The bank will analyse
these documents to decide whether to offer the loan. Without the proper loan documentation,
the lender will not be able to begin processing any loan applications. As previously stated, we
believe that Standard Chartered Bank would be a good place for 7-Eleven to obtain an
unsecured working capital loan. In addition, the loan application process requires various
documents, as detailed below.

Firstly, a national registration identity card for a director, shareholder or guarantor is

required. A national identity card is a portable document that proves the citizenship and
identity of an individual. These cards are generally plastic and include digitally integrated
information. In addition, authorisation to borrow requires a resolution from the board of
directors and a meeting and vote among the board members. As 7-Eleven has taken out a loan
from Standard Chartered Bank, this will act as an endorsement of the validity of the debt. If
the vote fails, the corporate resolution to borrow from the bank cannot stand. As a result, the
company will not be able to obtain any further financing.

The next document is memorandum and articles of association (M&A). The M&A is
the governing document that defines the parameters of a company's relationship with the
outside world. Under the Companies Act 2016, the M&A is now commonly referred to as the
constitution. Generally, it is the formal document that governs the operation of the company
and sets out its purpose and powers. Moreover, a Certificate of Incorporation (Form 9) or
Notice of Registration (Form under section 15) is also required as evidence that the company
has been formed. This document functions similarly to a company's identity card (IC).

Furthermore, shareholders, share allotments, and issued share capital (Form 24 or

Form under Section 48) are required to identify the most recent quantities, details of
authorised capital, and paid-up capital of 7-Eleven. Also, in order to recognize any changes in
its operation, a Notice of Situation of Registered Office (Form 44 or Form Under Section
46(3)) and Details of Company specific of directors, managers, and secretaries (Form 49 or
Form Under Section 58) are necessary.

It is also important to have documents such as bank statements for the last six months
for all major operating accounts, as well as the most recent audited financial statements, as
this will help track costs and expenses, in addition to monitoring any unauthorised
transactions or errors. As bank do not have continuous access to the day-to-day operations of
7-Eleven, they must rely on the financial statements to obtain important information about the
company's financial health and risks.

It is also needed to provide the directors, shareholders, or guarantors with an up-to-

date income tax form (Form B), if necessary, in order to provide the bank with information
on the different kind of sources of income and to tell them whether they are qualify for the
loan. Finally, the directors, shareholders or key person must sign a personal guarantee in
order to provide the bank with additional security in the event of loan being granted and to
give the bank the option to take legal proceedings against the guarantor in the event that 7-
Eleven defaults on the loan.

In sum, an unsecured working capital loan would be the most suitable option for 7-
Eleven given the company's good credit rating as well as the fact that the company would not
be needed to put up any collateral in order to secure the loan. Consequently, 7-Eleven's
directors should prevent any late payments or defaults, since this might negatively impact
their credit score, and working capital loans are often tied to the owner's personal credit.

5.0 CONCLUSION
References

Bragg, S. (2022, September 2). The operating cycle of a business. AccountingTools.

Retrieved December 28, 2022, from https://www.accountingtools.com/articles/what-is-
the-operating-cycle-of-a-business.html

Chen, J. (2021, February 22). Unsecured Loan. Retrieved from

https://www.investopedia.com:
https://www.investopedia.com/terms/u/unsecuredloan.asp#:~:text=An%20unsecured
%20loan%20is%20supported,higher%20credit%20scores%20for%20approval

ContractsCounsel. (2022). Loan Documents. Retrieved from ContractsCounsel:

https://www.contractscounsel.com/t/us/loan-documents#:~:text=They%20are
%20typically%20statements%20of,approval%20process%20by%20a%20lender.

CreditMantri. (2021, November 30). What Are The Benefits Of Getting An Unsecured
Business Loan For My Small Business. Retrieved from https://www.creditmantri.com:
https://www.creditmantri.com/article-what-are-the-benefits-of-getting-an-unsecured-
business-loan-for-my-small-business/

Find Venture Debt. (2021). Working Capital Financing. Retrieved from

https://www.findventuredebt.com: https://www.findventuredebt.com/types-of-
venture-debt/working-capital-financing

Rogers, K. (2022, May 31). Secured vs. Unsecured Business Loans: What's the Difference?
Retrieved from https://www.thebalancemoney.com:
https://www.thebalancemoney.com/secured-vs-unsecured-business-loans-5216703

Standard Chartered Bank Malaysia. (2022). An unsecured business term loan. Retrieved from
https://www.sc.com/my: https://www.sc.com/my/business-banking/loans-and-
working-capital/business-instalment-loan/

Treece, K. (2022, December 02). Best Unsecured Business Loans Of December 2022.
Retrieved from https://www.forbes.com: https://www.forbes.com/advisor/business-
loans/best-unsecured-business-loans/