perhaps u can compare by

company: ex: explain cash

ratio for the 3 companies, to
make it more presentable

please refer to group 3

facts 2.5, there are ratios that
FINANCIAL STATEMENT ANALYSIS
did not include the formula
focus 3.5
writing 3.5
FINC 3305

9.5/12 x 10= 7.92 SEMESTER 2, 2021/2022

presentation 8.8

FIRST DRAFT GROUP ASSIGNMENT

PREPARED BY: GROUP 4

NAME NO. MATRIC SECTION

1. Nazifah Hannani binti Nordin 1918904 1

2. Quratul Ain binti Azmi 1910450 1

3. Nur Aina Natasya binti Saruddin 1915270 1

4. Qhurratu Aina binti Roslan 1918712 1

PREPARED FOR: DR. FATIMAH NOOR RASHIDAH BINTI MOHD SAFIAN

DATE OF 1ST DRAFT SUBMISSION: 15TH APRIL 2022

 TABLE OF CONTENT

INTRODUCTION 4

OBJECTIVE 4

BACKGROUND OF COMPANIES 4
7-Eleven Malaysia Holdings Berhad 4
AEON Co. (M) Berhad 4
Brahim’s Holdings Berhad 5

THE OPINION OF AUDITORS REPORT 6

7-Eleven Malaysia Holdings Berhad 6
AEON Co. (M) Berhad 7
Brahim’s Holdings Berhad 8

EXPLANATION OF RATIOS 8

SIX PERSPECTIVES ANALYSIS 10

7-Eleven Malaysia Holdings Berhad 10
1.1 Common-Size Analysis 14
1.2 Liquidity 15
1.3 Capital Management Structure 16
1.4 Asset Management 17
1.5 Profitability 18
AEON Co. (M) Berhad 19
2.1 Common-Size Analysis 19
2.2 Liquidity 19
2.3 Capital Management Structure 20
2.5 Profitability 21
Brahim’s Holdings Berhad 23
3.1 Common-Size Analysis 29
3.2 Liquidity 30
3.3 Capital Management Structure 31
3.4 Asset Management 32
3.5 Profitability 34

RECOMMENDATION AND CONCLUSION 36

References 37

1
INTRODUCTION

Financial statements are projections of companies’ and any other businesses’ performance for
each of the cyclical years. It presents the important figures and information that are useful for
decision-makers to assess and evaluate a company's past as well as current financial standing and
overall performance. In this report, the financial statements of three different companies in the
same sector, that are 7-Eleven Malaysia Holdings Berhad, AEON Co. (M) Berhad, and Brahim’s
Holdings Berhad are used to be further analyzed. They are public listed companies in Bursa
Malaysia, chosen under different categories and markets which are Shariah-compliant,
non-Shariah compliant in the main market, and PN17.

OBJECTIVE

In this report, basic analysis is performed on the financial statements to:

1. assess, evaluate, and further interpret the companies’ past and present financial health.

2. see if there is any difference between Shariah-compliant, non-Shariah compliant, and PN17
companies in the result of the analysis.
change to position

3. provide suggestions on how the companies can improve their financial standings in the future.

BACKGROUND OF COMPANIES

7-Eleven Malaysia Holdings Berhad

With its mission to consistently serve the changing needs of customers for their convenience,
7-Eleven Malaysia Sdn. Bhd. is the first and largest 24-hour convenience store operator in
Malaysia. It was incorporated in 1984, and 7-Eleven Malaysia Holdings Berhad has become a
prominent convenience store in Malaysia ever since. It made its first appearance in Bursa Saham
Malaysia through its listing on 30th May 2014 and now, being in the main market, about more
than 1.2 billion shares have been issued so far. Nonetheless, it is not a Shariah-compliant
company.

AEON Co. (M) Berhad

The name AEON is very synonymous with supermarkets, yet little do people know that it was
previously named Jaya Jusco which was incorporated on 15th September 1984 in response to the
request of the Malaysian Prime Minister at that time Dato' Seri Dr. Mahathir bin Mohamad. Jaya

2
Jusco Stores Bhd. was then listed in KLSE or Bursa Malaysia on the mainboard back in
December 1996 and it is a Shariah-compliant company. Only in September 2004, the company’s
name was officially changed to AEON Co. (M) Berhad. AEON brand has become prominent in
General Merchandise Stores (GMS) and also for its supermarkets. Until now, AEON has been
extensively increasing its branches in Malaysia.

Brahim’s Holdings Berhad

Initially, Brahim’s Holdings faced a few transformations back then in the early stages of its
operations before it was named as it is now. In 1983, Yang Mulia Dato' Seri Tunku Mahmud bin
Tunku Besar Burhanuddin started a business named Tamadam Bonded Warehouse Sdn Bhd
(Tamadam) which the company offers freight forwarding, transportation services, and bonded
warehousing. Then, in 2008, Tamadam announced that it has reached an agreement with the
vendors of Brahim's-LSG Sky Chefs Holdings Sdn Bhd ("BLH") and Dewina Hosts Sdn Bhd
("DH") to acquire 51 percent of BLH and 51 percent of DH, respectively. The acquisition
decision was proposed in regard to the belief that the foodservice and catering businesses have
significant development potential, and that by partnering with BLH and DH in these markets,
they are able to increase the value for the shareholders of Tamadam. Hence, the purchase has
resulted in the Group's new primary business being oriented toward food services, thus, logistics
and warehousing became non-core business activities. From 2009 onwards, they focused on
growing the airline catering business.

BLH prides itself on offering 100% certified halal meals as well as a fully integrated food
logistics supply chain that includes warehouses, cold rooms, and distribution assistance. There
are some major airline clients that were dealing with BLH during that time, such as MAS, Japan
Airlines, Cathay Pacific, Korean Air, Air Asia, and Thai Airways. The name of Tamadam
Bonded Warehouse Berhad was changed to Brahim’s Holdings Berhad effectively on 1st June
2011. Brahim's is a prominent HALAL inflight food firm in the world, as well as a major
operator of restaurants and cafés in KLIA and KLIA2. Brahim’s caters to domestically and
abroad commercial airlines based in KLIA and Penang, with MAB being its most important
client.

On February 28, 2019, the Company slipped into Practice Note 17 (PN17) status after ok
shareholder stock dropped below the 25% threshold which triggered the specified requirements
under paragraph 2.1(a) of PN 17 of Main Market Listing Requirements. According to BHB's
unaudited interim financial statements for the fourth quarter ended 31st December 2018, in the
terms of consolidated basis, the company's shareholders' equity was less than RM40.0 million or
less than 25% of its issued capital. As a result, BHB is now classified as a PN17 company.

3
Source: Annual Report2020 Brahim’s Holdings

THE OPINION OF AUDITORS REPORT

7-Eleven Malaysia Holdings Berhad

7-Eleven Malaysia Holdings Berhad’s 2020 financial report was audited by Ernst & Young PLT.
There are a few areas where the auditors give focus on while auditing, and they are:

1. Recognition of rebates and incentives income from vendors as the company received
numbers of incentives and rebates from the vendors or suppliers to which the company
made goods purchase from.

This has resulted in a significant amount of the company's profit before tax. There is a
need for auditors to check whether the recognition of rebates and incentives income done
by the judgment of management was done in the right way or not.

2. Revenue from contracts with customers and cost of sales. The company has a heavy
use of information technology systems to record and store its high volume of data which
consists of transactions with low value. This contributes to a higher risk of material
misstatement relating to timing and the amount of revenue and cost of sales recognised.

3. Changes in group composition. The Group purchased 75% equity interest of Caring
Pharmacy Group Berhad. Hence, the auditors need to assess thoroughly whether the

4
 Group performed the assets’ fair values determination and valuation right or otherwise
since it involves assumptions that are judgmental.

Overall, the auditors are of the opinion that the Group’s and Company’s financial statements are
portrayed in a true and fair view according to Malaysian Financial Reporting Standards (MFRS),
International Financial Reporting Standards (IFRS), and the requirements of the Companies Act
2016 in Malaysia.

AEON Co. (M) Berhad

In the case of AEON Co. (M) Berhad, KPMG Desa Megat PLT was the independent auditor in
charge for the Group’s and Company’s 2020 financial report.

They are of the opinion that the accompanying financial statements give a true and fair
view of the financial position of the Company and of its financial performance and its cash flows
for the year then ended in accordance with MFRS, IFRS and the requirements of the Companies
Act 2016 in Malaysia.

However, it is notable to highlight the key areas of audit for the company’s financial statements
as following:

1. Impairment of property, plant and equipment and right-of-use assets because Group
and Company recorded a significant value of property, plant and equipment (PPE) and
right-of-use assets in the year which amounted to RM3,366,955,000 and
RM1,689,636,000 respectively. Thus, there is a risk that the carrying value of these assets
may be higher than the recoverable amount.

2. Inventory because the company recorded too high value of inventory amounted to RM
623,644,000 for the year of 2020. Allowance is made against inventory for expected
shrinkage and slow moving or outdated inventory losses. Inventory valuation is a key
audit matter due to the judgment used in determining the degree of allowance needed.

3. MFRS 16, Leases. While many businesses get hit by Covid-19, there are amendments on
MFRS 16, Leases – Covid-19-Related Rent Concessions and AEON Co. (M) Berhad
early adopted this amendment. It raises concern to the right-of-use assets of
RM1,689,636,000 with a corresponding lease liabilities of RM2,230,339,000. As MFRS
16 is in the application, it requires the auditors to assess if the application is done
appropriately or not.

5
Brahim’s Holdings Berhad

Independent auditors’ opinion in Brahim’s Holdings financial report is a bit worrying as the
auditors do not express an opinion on the accompanying financial statements of the Group and of
the Company because they have not been able to obtain sufficient appropriate audit evidence
from Brahim’s Holdings. The appointed independent auditors are from Baker Tilly Monteiro
Heng PLT.

Brahim’s Holdings triggered the Practice Note 17 (PN17) prescribed criteria of the
Listing Requirements of Bursa Malaysia on 28 February 2019 subsequently after the sinking of
shareholders’ equity value which is less than RM40 million. A significant fall in demand
especially in the air travel sector (as one of Brahim’s Holdings focus is in-flight catering) has
resulted in the Group's net loss after tax of RM238.277.

The consequences that follow, raise doubt about the ability of the company to continue
as a going concern. It impedes the auditors from receiving required audit evidence to provide a
basis for an audit opinion on the financial statements. All in all, the auditors opine that some of
the accounting and records in Brahim’s Holdings financial report are not properly kept in
accordance with Company Act 2016 provision in Malaysia and that they have not obtained all
the information and explanations that they required.

EXPLANATION OF RATIOS

In this paper, there will be six perspective analyses used to analyze 7-Eleven Malaysia Berhad,
AEON Co. (M) Berhad and Brahim’s Holdings Berhad financial statements. They are common
size analysis, liquidity, capital management structure, asset management and profitability.

Common size analysis

Common size analysis compares a company's financial statement either between other
companies in the same industry (vertical) or past years performance of the company itself
(horizontal). Each line of item in the financial statements, in our case statement of profit or loss,
is expressed in percentage with the oldest year of comparison as the basis year. For this paper,
horizontal analysis will be used where company’s 2018, 2019 and 2020 statement of profit or
loss are used for comparison with 2018 as the basis year. It will be useful to identify the
company’s strength and its inefficiencies through the changes of percentage over the three years
period.

6
Liquidity

As for liquidity, it is to see how efficient the company is in serving the short term obligations
with its current assets, without raising any external capital. Two ratios are chosen for this
purpose firstly, current ratio and secondly, acid test ratio. Both ratios are derived from dividing
current assets with current liabilities except that acid test ratio excludes inventory from the
calculation. Therefore, the ratio should be at least 1.

Capital management structure

Debt ratio is calculated by having total liabilities over total assets, in which it determines the
ability of the company to pay its long term debts. Apart from that, the ratio also explains how
much the company’s assets are financed by debt which also means, if the ratio is greater than 1
then, the company is said to have more liabilities than assets. In the meanwhile, debt/equity ratio
will show whether or not the company is highly leveraged. If the ratio is greater than 1 then it
simply means that the company is relying more on borrowings to finance its business’s growth.

Asset management

To measure asset management of a company, two ratios which are inventory turnover and days
sales in inventory are used. From inventory turnover, it will tell how fast the company sells and
replaces all of the inventories in hand. It is determined by having the cost of goods sold (COGS)
divided by average inventory. Hence, the larger the number, the better. While days sales in
inventory is a ratio used to measure how many days the company needs to take to completely sell
all of the inventories, thus, the smallest ratio figure, the better the company's performance is.

Profitability

Profitability ratio is used to assess how a company generates profits from its sales. For this, there
are two ratios used: firstly, net profit margin in which a company's profitability is determined
after all expenses have been deducted. The formula is to divide net income with net sales.
Second is the return on assets where the effectiveness of a company in generating profits out of
assets is measured. To calculate, the net income will be divided over average total assets.

any reference?

7
SIX PERSPECTIVES ANALYSIS

1. 7-Eleven Malaysia Holdings Berhad

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1.1 Common-Size Analysis

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 In 2019, the revenue increased by 6.5% compared to 2018 due to the growth in 165 new
stores, improvement in same store sales and consumer promotion activities that led to 6%
increase in gross profit that was also driven by favorable sales mix and improved logistics
expenses recovery. The group’s revenue kept increasing by 8% in 2020 as they take into account
9 months of consolidation of Caring’s pharmaceutical stores in the year, beside the opening of
few more new stores. However, their gross profit decreased by 2.7% mainly due to the decline in
revenue of Convenience Stores segment that are affected by COVID-19 pandemic that caused
their operating hours to be restricted. Their other operating income increased by 20.4% in 2020
compared to previous year after including Caring’s operations and marketing income of their
Convenience Stores. Due to the lower staff cost and utilities in 2020, the selling and distribution
expenses decreased by 4.6%.

Administration and other operating expenses increased by 23.9% due to the higher staff
cost, impairment loss on receivables, maintenance expenses and provision for restoration cost.
The costs keep increasing by 40.4% in 2020 as they include the operations of Caring beside the
incurred of higher professional fees for corporate exercises as well as impairment for
non-performing stores and investment in an Associate. Finance cost increased by 340% in 2019
as they adopted MFRS 16: Leases and increased by 24.4% in 2020 due to the Caring’s operations
and interest expense on loan for various corporate exercises. Profit after tax in 2020 noted a
lowest amount amongst the three fiscal years due to the high expenses and finance cost as
discussed above.

1.2 Liquidity

13
 1.2.1 Current Ratio

For every ringgit of current liabilities, 7-Eleven has RM 0.63 of current

assets to cover their current liabilities in 2018. The current ratio indicates
that 7-Eleven does not have sufficient money to pay short-term debt
obligations. The ratio was slightly decreased in 2019 when 7-Eleven had
only RM0.55 to cover every ringgit of their current liabilities and a
nonchalant increase in 2020 to RM 0.63 for each ringgit's current liabilities.
Thus, the ratio concludes that the company might suffer from cash flow
problems and does not have enough current assets to pay its current
liabilities.

1.2.2 Acid Test Ratio

In 2018 and 2019, 7-Eleven has RM 0.23 of liquid assets to cover each
ringgit of their current liabilities and noted an insignificant increase in 2020
when they have RM0.31 to cover their current liabilities. Hence, the ratio
indicates that 7-Eleven is unable to pay its short-term debt obligation by
using its quick assets. Under current liabilities, 7-Eleven has total borrowing
of RM 201,365,000 in 2020 which is notably higher than in previous years,
that comprises bankers' acceptance, revolving credit, and term loan facilities
which were utilized for corporate exercises, working capital, and capital
expenditures funding for new stores opening as well as store refurbishments.
This big amount of borrowings as well as trade payables resulting in a huge
amount of current liabilities that exceed current assets amount causing a
very low liquidity ratio.

1.3 Capital Management Structure

14
 1.3.1 Debt Ratio

Debt ratio for 7-Eleven was 0.88, 0.93, and 0,92 in 2018, 2019 and 2020
respectively. The ratio does not exceed 1 indicating that they have more assets
than debt. 7-Eleven has a very big amount of total liabilities that produce a very
high capital structure ratio. The rule of thumb for debt ratio should not exceed
0.5, as the debt portion should be less than 50% of total assets. reference?

1.3.2 Debt-Equity Ratio

Debt to equity ratio of 7-Eleven was 7.10, 12.93, and 11.63 in 2018, 2019, and
2020 respectively. The ratio is really high as the good debt to equity ratio was
between 1 to 1.5. This indicates that 7-Eleven aggressively uses its debt to
finance its growth. It's a sign that 7-Eleven may be in financial distress and
unable to pay its debtors.

1.4 Asset Management

1.4.1 Inventory Turnover

For 2018, the inventory turnover for 7-Eleven was 6 times, which means that
the goods are purchased and sold out more than 6 times per year on average.
Similarly, inventory turnover for both 2019 and 2020 was 7 times per year,
which indicates a slightly higher than in 2018. 7-Eleven has an average of high
inventory turnover which shows that they are operating effectively with the
inventory on hand and the opportunity for the inventory to become obsolete is
very low.

1.4.2 Days Sales in Inventory

15
 In 2018, 7-Eleven took 59 days to sell all the inventory on hand before
restocking the new inventory. However, in 2019, the group took only 52 days to
sell all the existing inventory which is a week faster than the previous year. In
2020, it took 58 days for them to clear out the inventory, longer than 2019
aligning with 2018. any policy stated in the notes to the financial
statement?

1.5 Profitability

1.5.1 Net Profit Margin

In 2018 and 2019, 7-Eleven has a net profit of RM0.03 for each ringgit sales
generated, which decreased to RM0.02 in 2020. The results indicate that
7-Eleven has a low net profit after deducting all operating expenses, interest,
and taxes.

1.5.2 Return on Assets

In 2018, the company generated RM0.10 in net profit per year for every ringgit
invested in assets. The amount decreased by 3 cents for each subsequent year to
RM0.07 and RM0.04. The return is small due to the possibility of unproductive
assets in 2018 and 2019, as well as the Covid-19 struct in 2020 that resulted in
the movement and business operating hours restricted under the various stages
of movement control orders nationwide that affected the group’s performance
severely.

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2. AEON Co. (M) Berhad

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 2.1 Common-Size Analysis

For the financial year ended 31 December 2020, AEON marked revenue of RM 4.051
billion, 10.8% lower compared to the previous financial year;s RM4.539 billion. It was claimed
that the company topline performance was lower, attributed to reduced income particularly from
retail business segment, which saw turnover decline by 11% year-on-year to 93.06% from 2019.
On the back of lower revenues, AEON posted operating profit of RM259.3 million, 27.7% lower
than the preceding financial year’s RM358.7 million. Since in year of 2018 Malaysian
experienced an unprecedented transition of government with its subsequent impacts on the
business environment and consumer sentiments. Consumer Sentiment Index (CSI) rose to its
highest level following the general election as the new government move to zerorise and
subsequently abolish the goods and services tax (GST). This momentous has been slightly
affected AEON’s revenue performance in 2018. As the year ended, the company recorded a total
revenue of RM4.354 billion, which represented an increase of 5.65 as compared with previous
corresponding year mainly due to contribution from its new stores and shopping malls that

21
opened in September 2017 and in April 2018. Newly renovated stores also further contributed to
the increase in revenue.

In year 2020, the operating activities were surely declining than previous year marked
only 108.16% compared to 2019’s of 149.66% from the based year due to pandemic COVID-19.
In total, operating expenses decreases in financial year 2020 with 52.84% to the based year than
75.01% in 2019. The decrease was attributed to AEON’s cost agile structure, restructuring of its
marketing activities and a declcine in business development and operational activities undertaken
in year 2020. The higher operating expenses specifically like higher rental and depreciation
expenses recorded a lower operating profit in 2018. AEON adopted MFRS 16 effective from 1
January 2019. MFRS 16 introduces a single, on-balance sheet lease accounting model for
lessees. Under MFRS 16, a lessee recognizes a right-of use assets representing its right to use the
underlying asset and a lease liability representing its obligation to make lease payments. After
the adoption, there’s ann increase in profit before tax after adjustment for current financial year
recorded at RM222.6 million with an increase of 6.6% compared to the preceding financial year
of RM208.8 million. Then, the company achieved a better profiit after tax of RM109.3 million
for the year which represent a growth a 3.9% over the previous year performance.

2.2 Liquidity

2.2.1 Current ratio

The figure above indicates for every ringgit of current liabilities, AEON has
RM0.37 ringgit of the current asset to cover their current liabilities in the year
2018, then the ratio decreased slightly to RM0.36 in the year 2019, and continue
to decline to RM0.35 ringgit in 2020. The current ratio shows that AEON does
not have enough current assets to pay any short-term obligations because AEON’s
current ratio is lower than minimum 1.0 when the industry average is 1.5. In other
words, in terms of liquidity, AEON does not have enough liquid assets to convert
into cash to pay its short-term obligations. Nevertheless, the management in its
annual report asserts that the company’s cash level is still in a good position to
cover the company’s working capital.

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 2.2.2 Acid test ratio

Acid test ratio is performed to again assess AEON’s liquidity in paying all
short-term liabilities but this time, inventory is excluded from calculation. In
2018, AEON Co. Berhad has RM0.07 of liquid assets to cover their current
liabilities. The ratio remarkably declined in the year of 2019 with RM0.06
available for every RM1 current liabilities. Then, in 2020 the ratio significantly
increased to RM0.08.

In comparison of AEON’s acid test ratio with previously calculated current ratio,
there is a clear huge difference between the figures over the past three years. In
2020 for example, the current ratio is 0.35 while the acid test ratio is only 0.08.
This could be interpreted as AEON is having too much inventory over the three
years and it is what contributes to the company’s current asset the most.

2.3 Capital Management Structure

2.3.1 Debt ratio

As for structuring business capital, AEON Berhad obtained about 57% of their
funds from creditors in 2018, followed by 74% in 2019 and slightly declining to
73% in 2020 to finance the company’s assets or growth. Despite the high
percentage, the median debt ratio for retail industry is 0.73, which indicates that
AEON’s capital structure follows the normalcy in industry practice (ReadyRatios,

23
 n.d.). The ratio nonetheless did not exceed 100% (1.0) which shows that the
company has more assets than debts.

2.3.2 Debt/equity ratio

In comparison with equity funds, debt to equity ratio for AEON Berhad is 1.30,
2.86 and 2.65 for the year 2018, 2019 and 2020 respectively. While this ratio
compares how much the company finances its business with debts compared to
internal funds (equity), AEON’s debt to equity ratio is showing an up and down
trend. The higher ratio in 2019 and 2020 indicates AEON took up more debts to
finance their business growth. While the median debt equity ratio for similar
industries is 1.82, AEON’s debt proportion is quite high for the last two years
(ReadyRatios, n.d.).

2.4 Asset Management

2.4.1 Days sales in inventory

Cannot be performed due to insufficient information.

2.4.2 Inventory turnover

Cannot be performed due to insufficient information.

24
2.5 Profitability

2.5.1 Net profit margin

AEON Berhad has a net profit of 0.03 cent for each ringgit of sales generated in
the year 2020, 0.04 cent for both 2019 and 2018. This can also be interpreted as,
4% of profit is generated out of the company's sales in 2018 and 2019, while 3%
in the year of 2020. Compared with the retail’s industry median return on sales of
2.8%, AEON is apparently doing well in spite of a slight drop in 2020
(ReadyRatios, n.d.).

AEON in its management discussion and analysis admits that global Covid-19
pandemic starting early March 2020 caused too many contact restrictions and
later severe drop in people’s income which explains the decrease in its sales.
Nevertheless, it cannot be so true as AEON nonetheless still maintains its net
profit margin with a very slight difference for the affected year. It’s probably due
to management’s strategic cost restructuring which has successfully brought the
company’s big chunk of expenses down as explained in the annual report 2020.

25
2.5.2 Return on asset

AEON Berhad has produced 0.04 cent in net profit per year in 2018 and 2019 for
every ringgit invested in the asset. While in 2020, it decreased half of the previous
year profit to 0.02 cent net profit. Since the higher the return is the better, and
AEON’s did not manage to increase their profit after 2 years, it could be a sign of
unproductive assets where AEON has low performance to generate profit by
utilizing their assets.

Eventhough AEON remarkably has increased their total asset in 2020 but their
profits are declined compared to previous year which made their denumetrator
heavier than numerator and resulting in low percentage of return.

The company leases a number of shopping malls and shopping outlets that run
between one year and twelve years, with an option to renew the lase after that
date. Lease payments are increased every three to five years to reflect current
market rentals. The rent concession with the landlord of the shopping malls and
shopping outlets has been negotiated due to COVID-19 pandemic. Right-to-use
asset is the second highest value of assets for two conservative year, but the
concession resulting decrease in value of right-to-use asset. Thus, affecting profit
gained from leasing the shopping outlets. AEON’s retail business earnings
declined by 32.1% to reach RM77.9 million in year 2020. On the back of reduced
rental collection, rental commission receivable and car parkincome, profits for
AEON’s Property and Management segment was lower by 14.6% year-on-year at
RM229.6 million.

26
3. Brahim’s Holdings Berhad

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3.1 Common-Size Analysis

Revenue recorded in 2019 increased by 11.49% compared to 2018. This is due to the new
airline customers and better customer ordering in terms of the number of flights and number of
meals which contributed to the growth in income. However, there was an extreme decline in
revenue in 2020 about 81.45% mainly because of the impact of the Covid-19 strike that hit
negatively around the world leading to the disruption in the aviation and hospitality industry.
Moreover, a reduction in revenue generated was also derived from the cut down in the number of
flights operated. Brahim’s catering flight service served an average of only 70 aircraft per day in
2020, prepared an average of only 5,000 inflight meals per day compared to 2019 where it
catered to an average of 220 aircraft per day and prepared an average of 45,000 inflight meals
per day.

Following the decrease in revenue in FY2020, the Group generated a loss in the gross
profit as the cost of sales incurred during the fiscal year exceeds the revenue earned. While in
2019, the gross profit increased by 16.76% from 2018. The increment of 416.36% in impairment
losses of financial instruments was due to the impairment losses on trade and other receivables
amounted to RM11,591,000.00 which is higher than the year 2019. Impairment losses on
goodwill amounted to RM102,270,00.00 affected the increase in expenses by about 87.55%.

In 2018, the loss from operations of RM116,824,000.00 was lessened by about 98.91%,
which was showing a better figure in 2019 but the loss has still occurred during FY2020 and it is

33
much higher than in 2018. The finance cost of interest on loans, overdrafts, liabilities, and others
in 2019 increased much higher than in 2018 but decreased slightly in 2020.

3.2 Liquidity

3.2.1 Current Ratio

In 2018, Brahim’s Holdings had RM0.61 of current assets to cover every ringgit of their
current liabilities and it shows an increase for 2019 when it had RM0.66 and this shows a
slight improvement over 2018. However, in 2020, there was a significant difference in the
ratio when it only had RM0.15 of current assets to cover every ringgit of its current
liabilities. These ratios conveyed that Brahim did not have sufficient funds to pay for its
obligations.

3.2.1 Acid Test Ratio

For 2018, each RM1.00 of current liabilities, Brahim’s only had RM0.56 of liquid assets
available to pay for the current liabilities, and respectively there was an insignificant
improvement in 2019, where it had RM0.61 to cover the obligations. Nonetheless, the
Group faces a radical drop in its acid-test ratio where it only had RM0.13 of liquid assets
available which are its cash and bank balance excluding the inventories to pay for every
RM1.00 of current liabilities.

For the three consecutive years of both ratios - current ratio and acid test ratio, Brahim’s
Holdings Berhad has a low current ratio which is lower than the average ratio of 1 which
may indicate that the Group faces difficulties to pay its short-term obligations. It is
obviously shown that there was a huge drop between 2019 and 2020 where there were
changes of -77.27% for the Current ratio and -78.69% for the Acid test ratio respectively.

34
3.3 Capital Management Structure

3.3.1 Debt Ratio

The ratio of 1.80 which is more than the average of 1 (100%) in 2018 indicates that
Brahim’s Holdings has more liabilities than the assets which the assets are financed by
the debts. While, in 2019, the ratio of 0.63 or 63% shows that the Group has more assets
than debt since it is below the average.

But, the ratio figure of 2.96 in 2020 shows a higher proportion of debt than the
assets due to the plummet in the Group’s total assets. The rocketed increment of Brahim’s
debt ratio was mainly generated by the decrease in total assets. This deteriorating result
was partly attributed to RM102.27 million in impairment losses from the goodwill
exercise. As a result of this impairment, the Group currently only has minimal goodwill
of RM84,000 in its operations other than airline catering.

3.3.2 Debt-Equity Ratio

The debt-equity ratio for 2018 and 2019 was 1.26 and 1.69 respectively. A good
debt-equity ratio is between 1.0 and 1.5. This ratio conveyed how much the Group relies
on the debt to finance its operations or growth. A high debt-to-equity ratio is frequently
related to a high level of risk. For 2018, the Group has RM1.26 of debt for every RM1 of
its equity and RM1.69 of debt for every RM1 of its equity in 2019. In 2020, the ratio has
a negative debt-equity ratio of -1.51 which illustrate that Brahim’s has a negative
shareholders equity as stated in the Statement of Financial Position amounted to
-RM127,062,000.00 and the liabilities amounted to RM191,965,000.00 exceed its assets
of RM64,903,000.00.

35
3.4 Asset Management

3.4.1 Inventory Turnover

For 2018, Brahim’s inventory turnover was 26 times, which means that the goods
are sold and replaced more than 26 times per year on average. Similarly, inventory
turnover for 2019 was 27 times per year, which indicates a slightly faster increase than in
2018. But for 2020, a slower turnover of 16 per year indicates that there may be low sales
or excess inventory.

These figures are affected by the performance of the Group’s business operation,
especially in 2020. It is acknowledged that Brahim’s serves the inflight kitchen to the
airlines, mainly Malaysia Airline Berhad as its major customer, continuously serves 35
international airlines in 2020, and is also the principal inflight catering service provider
for KLIA, KLIA2, and Penang International Airport. Nevertheless, only a few were
active during the whole year (2020) due to the Covid-19 pandemic. The statistic below
shows a downturn trend in the quantity and number of flights catered throughout the
12-month of 2020.

36
 Source: Annual Report 2020

In addition, the statistic below indicates the total activity summary of Brahim’s
SATS Food Services in 2020 whereby the variables are the number of flights handled and
also the number of meals uplifted.

Source: Annual Report 2020

Based on both statistics above, it can be seen that the Group’s business operation
displays a downward trend in its activities, thus it affects the inventory turnover since its
followed by the number of operations.

37
 The optimal inventory turnover ratio for most sectors is between 5 and 10,
implying that the firm will sell and replace goods every one to two months. Literally,
Brahim’s Holding Bhd is under the consumer product and services sector, and the most
likely ideal inventory turnover ratio for this sector should be approximately an average of
6.86 (Tarver, 2021). Referring to the ratio of the Group, it is known that the Group takes a
long time to turn its inventory into sales, and logically according to the Group’s products
offered, it should sell the inventory quickly to avoid spoilage.

3.4.2 Days sales in inventory

In 2018 and 2019, Brahim’s has an average of 14 days that the Group took to turn
its inventory into sales while in 2020 it took 13 days, a slight difference of 1 day from
both years before.

3.5 Profitability

3.5.1 Net Profit Margin

Net profit margin ratio will enable the decision-makers to evaluate how good the business
is in increasing its profit margin or at least keeping it remains the same over time. It is
significant to investors as greater profit will contribute to greater dividends for
shareholders. For that, the net profit margin is derived from dividing earnings before
interest and tax (EBIT) by net sales.

Brahim’s Holdings Berhad shows a downtrend in its net profit margin throughout
the three latest years, especially in 2020 when the Group recorded the lowest net sales

38
and largest loss before interest and tax (LBIT) leading to the smallest net profit margin,
-2.58. The company, however, has already recorded negative EBIT since the beginning
2018, slightly having an increase in net sales in 2019 before dropping significantly in
2020.

Most of the proportion of the net sales was coming from the catering services.
The catering services segment generated RM297.8 million in sales in 2019, increasing
from RM265.3 million in 2018. New airline customers and better customer ordering in
terms of the number of flights and number of meals contributed to the growth in income.
The drop in ratio occurred due to the drastic decrease in revenue in the catering services
category in 2020 which was RM74.941 million, down from RM297.781 million in 2019.
The large drop in income was mostly due to the extraordinary Covid-19 outbreak that
swept the globe, having a negative effect on the airline and hotel industries in particular.

3.5.2 Return on Assets

Every penny of an investor's investment into the company is expected to be used

effectively to generate returns and assets are not an exception. Return on assets will tell
the investors how effectively the company utilizes its assets to produce a profit. The ratio
is derived by dividing EBIT by average total assets.

Having a deteriorating EBIT over the three years from 2018 to 2020, it is not a
surprise to see a similar downtrend in the Group’s return on assets, except for the year
2019. While return on assets measures how efficient a company’s management is in
maximizing profits from the utilization of its assets, Brahim’s Holdings Berhad fails to
present a good figure for the ratio especially in 2020 when the return on assets is the
lowest.

39
RECOMMENDATION AND CONCLUSION
7-Eleven Malaysia Holdings Berhad
Facts
Low current ratio and slow
inventory turnover
Debt/Equity ratio 12.93 in
2019
rely on shareholder equity is it
AEON
Facts
low return on assets
Decrease in liquidity
Brahim’s Holdings Berhad
Facts
Current Ratio lower than
average of 1 in 3 consecutive
years
Possible Conclusions
Poor sales management
Too reliant on debts
Possible Conclusions
finance growth of assets for
post-pandemic possibilities
and opportunities
Due to the cumulative effect
of an increase in receivables
coupled with continue
payouts to suppliers and
financiers.
Possible Conclusions
Encounter problems in
managing inventory or
lacking standard in collecting
receivables
Further Remarks
Might encounter problems in
getting quick cash to pay
short-term liabilities
especially in circumstances
where demand gets lower.
Company will incur higher
finance costs which reduces
net profit attributable to
shareholders.
Further Remarks
Company should increase
profit too along the assets for
higher return
The balance sheet remains
healthy with assets continuing
to surpass liabilities and
fortunately AEON’s cash
position remains at sufficient
levels, at RM71.4 million to
meet working capital
requirements.
Further Remarks
The Group might has a
negative current ratio and
default on the loans or
liabilities.
40
A negative debt-equity ratio
of -1.51
Low inventory turnover
compared to the particular
industry average
Accumulated losses over the
time
Reduce in operation during
pandemic
Negative shareholders’ equity
shows the unfavour signs to
the investors as the Group’s
liabilities exceed its assets
and it present the Group’s net
worth which investors look
forward when they want to
invest in the Group.
The operation of flight might
be increasing slowly in the
post-pandemic season and
perhaps it will help the Group
to recover the losses.
41
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https://www.bursamalaysia.com/market_information/announcements/company_announce
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7-Eleven Malaysia Holdings Berhad. (2019). 2019 Annual Report.

https://www.bursamalaysia.com/market_information/announcements/company_announce
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7-Eleven Malaysia Holdings Berhad. (2020). 2020 Annual Report.

https://www.bursamalaysia.com/market_information/announcements/company_announce
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AEON Co. (M) Berhad. (2018). 2018 Annual Report.

https://www.bursamalaysia.com/market_information/announcements/company_announce
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AEON Co. (M) Berhad. (2019). 2019 Annual Report.

https://www.bursamalaysia.com/market_information/announcements/company_announce
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AEON Co. (M) Berhad. (2020). 2020 Annual Report.

https://www.bursamalaysia.com/market_information/announcements/company_announce
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f

Brahim’s. (n.d.). About us. Retrieved April 14, 2022, from

https://brahimsfoodisforsharing.com/about-us/

Brahim’s. (n.d.). Our transformation. Retrieved April 14, 2022, from

http://brahimsgroup.com/about/our-transformation/

Brahim’s Holdings. (2007, May 11). Tamadam to acquire Brahim’s – LSG Sky Chefs Holdings.
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ngs/

Brahim’s Holdings Berhad. (2018). 2018 Annual Report.

https://www.bursamalaysia.com/market_information/announcements/company_announce
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Brahim’s Holdings Berhad. (2019). 2019 Annual Report.
https://www.bursamalaysia.com/market_information/announcements/company_announce
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Brahim’s Holdings Berhad. (2020). 2020 Annual Report.

https://www.bursamalaysia.com/market_information/announcements/company_announce
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Retrieved April 14, 2022, from https://www.readyratios.com/sec/industry/G/

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43