Bachelor of Occupational Safety and Health Management with Honours

May 2024

BBPW3103

Financial Management I

NO. MATRIKULASI : 971021016979001

NO. KAD PENGNENALAN : 971021-01-6979

NO. TELEFON : 014-3813917

E-MEL : sabrimohamaazan@oum.edu.my

PUSAT PEMBELAJARAN : JOHOR BAHRU LEARNING CENTRE

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Contents
Lists of Figure.......................................................................................................................................iii
List of Graph.........................................................................................................................................iii
List of Table.........................................................................................................................................iii
Introduction of The Selected Company.................................................................................................4
DRB Hicom Berhad...........................................................................................................................4
Padini Holdings Berhad.....................................................................................................................6
Calculation of Relevant Profitability Ratios..........................................................................................8
DRB Hicom Berhad.........................................................................................................................11
Padini Holdings Berhad...................................................................................................................12
Analysis of The Relevant Profitability Ratios.....................................................................................13
DRB Hicom Berhad.........................................................................................................................13
Padini Holdings Berhad...................................................................................................................15
Comparison of the Company’s Profitability........................................................................................17
Similarity and Differences...............................................................................................................17
Performance Comparison................................................................................................................18
Suggestion for Improvement...........................................................................................................19
Summary.............................................................................................................................................20

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Lists of Figure
Figure 1 – DRB Hicom Group’s 5 Year Financial Highlights..............................................................5
Figure 2 – Padini Holdings Berhad 5 Year Financial Highlight...........................................................7
Figure 3 – Example of Profitability Ratio.............................................................................................8
Figure 4 – Comparison of Company's Profitability............................................................................17

List of Graph
No table of figures entries found.

List of Table
No table of figures entries found.

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Introduction of The Selected Company
DRB Hicom Berhad

DRB-HICOM Berhad, known to many simply as DRB-HICOM, is a cornerstone of

Malaysia's industrial and economic landscape. The company's origins date back to 1980,
when it was formed through the merger of two significant entities: Diversified Resources
Berhad (DRB) and the Heavy Industries Corporation of Malaysia Berhad (HICOM). This
strategic merger was aimed at harnessing the strengths of both organizations to spur industrial
growth and development in Malaysia.

Headquartered in Shah Alam, Selangor, DRB-HICOM has grown into one of

Malaysia's largest and most diversified conglomerates. The company employs over 60,000
people, reflecting its substantial size and impact on the local economy. Its operations span
across multiple sectors, with a significant focus on automotive, services, and property. In the
automotive sector, DRB-HICOM has established a formidable presence. It owns Proton
Holdings Berhad, Malaysia's national car manufacturer, and has significant stakes in Honda
Malaysia and Isuzu Malaysia. Furthermore, the company is involved in the assembly and
distribution of well-known automotive brands such as Volkswagen and Mitsubishi, making it
a pivotal player in the automotive industry.

DRB-HICOM's influence extends beyond automobiles. In the services sector, the

company has made notable investments. It owns Bank Muamalat Malaysia Berhad,
contributing to its strong presence in the banking industry. The company also holds a
substantial interest in Pos Malaysia Berhad, enhancing its footprint in postal and logistics
services. Moreover, DRB-HICOM's ventures include education, aerospace, defense, and
concession businesses, showcasing its diverse business model. The property division of
DRB-HICOM manages an array of development projects, including residential, commercial,
and industrial properties. This segment of the business further underscores its role in shaping
Malaysia's real estate landscape.

Despite its vast and varied operations, DRB-HICOM remains committed to

innovation and excellence. The company continuously adapts to the evolving market
conditions, ensuring its sustained growth and relevance. Its strategic initiatives and
partnerships have solidified its market presence, making it a crucial contributor to Malaysia's
industrialization and economic progress.
 Overall, DRB-HICOM stands as a testament to Malaysia's industrial capabilities and
ambitions, consistently driving forward the nation's economic and industrial development
with its diversified and robust business operations.

Figure 1 – DRB Hicom Group’s 5 Year Financial Highlights

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Padini Holdings Berhad

Padini Holdings Berhad, established in 1971, is a leading fashion and apparel

company based in Malaysia. Over the past decades, Padini has evolved from a small business
into a well-known name in the retail industry, synonymous with stylish and affordable
fashion. Headquartered in Hicom-Glenmarie Industrial Park, Shah Alam, the company has a
significant presence both domestically and internationally, employing thousands of people
and operating over 300 stores worldwide.

Padini's journey began as a manufacturer and wholesaler of garments, focusing on

women's wear. The company's dedication to quality and style quickly earned it a loyal
customer base. Recognizing the growing demand for trendy and affordable clothing, Padini
shifted its focus to retail, launching its first brand, Padini, followed by other successful
brands like Vincci, Seed, PDI, P&Co, Miki, and Padini Authentics. These brands cater to a
wide range of fashion needs, from casual wear to formal attire, shoes, and accessories,
ensuring something for everyone.

The company's growth is driven by its keen sense of market trends and commitment
to offering high-quality products at accessible prices. Padini's stores are strategically located
in major shopping malls and popular retail spots, making its products easily accessible to a
broad audience. In addition to its brick-and-mortar presence, Padini has embraced the digital
age with a strong online platform, allowing customers to shop from the comfort of their
homes.

Padini Holdings Berhad's success is also attributed to its focus on sustainability and
corporate responsibility. The company strives to minimize its environmental impact by
adopting eco-friendly practices in its manufacturing processes and promoting sustainable
fashion. Furthermore, Padini engages in various community initiatives, reflecting its
commitment to giving back to society.

Padini's blend of quality, affordability, and style, coupled with its dedication to
sustainability, has cemented its position as a beloved brand in the fashion industry. As it
continues to expand and innovate, Padini Holdings Berhad remains a vital player in
Malaysia's retail landscape and a prominent name in global fashion.

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Figure 2 – Padini Holdings Berhad 5 Year Financial Highlight

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Calculation of Relevant Profitability Ratios

The profitability ratio gauges how well the business can turn investments and sales into
profits. It serves as a gauge of the company's effectiveness and efficiency in accomplishing
its profit goal (Assoc Prof Dr Yusnidah Ibrahim, Faudziah Zainal Abidin, Norlida Abd
Manab, Rusmawati Ismail, & Zaemah Zainuddin, 2021).

(Assoc Prof Dr Yusnidah Ibrahim, Faudziah Zainal Abidin, Norlida Abd Manab, Rusmawati
Ismail, & Zaemah Zainuddin, 2021)

Figure 3 – Example of Profitability Ratio

Gross Profit Margin

Higher gross profit margins indicate reduced implementation costs for sales operations,
which is good for the company's financial standing.

By dividing gross profit by sales, one can determine gross profit margin. After the business
has covered all of the costs of the goods, it displays the balance % for each ringgit of sales.

The calculation of the gross profit margin is shown below:

Gross Profit Margin

X 100
Sales

Net Profit Margin

The company's capacity to make a profit from each ringgit of sales after subtracting all costs,
such as cost of goods sold, sales expenses, general and administrative expenses, depreciation
charges, interest expenses, and tax, is measured by its net profit margin. The company's
standing is improved by a bigger net profit margin since it indicates effective purchasing
management at low costs.

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By dividing the profit after tax by sales, one can determine the net profit margin. Therefore,
the following formula is used to determine net profit margin:

Profit Ater Tax

X 100
Sales

Operating Profit Margin

The operating profit margin evaluates how well operations manage to cut expenses and boost
returns before interest and tax. A higher operating profit margin is preferable because it
shows that the business can run effectively. Following is the formula for calculating
operational profit margin:

Operating Profit
X 100
Sales

Return On Assets

The efficiency with which a business uses its assets to produce profit is measured by its
return on assets or return on investment. The status of the company is improved by a larger
ratio since it shows how effectively management uses its resources to produce profits.

The formula for calculating return on assets is as follows:

Profit After Tax

X 100
Total Assets

Return On Equity

Return on equity is a metric that identifies how effectively a business produces profits for its
common owners. The better the ratio, the more profit the company may produce for its
owners.

The formula for return on equity is as follows:

Profit After Tax

X 100
Shareholders Equity

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Earnings Per Share

The net profit that is produced from each common share is calculated using earnings per
share. The management and investors frequently prioritize this information because they view
it as a crucial sign of the business's performance. As a result, the standing of the shareholders
improves as this ratio's value increases.

By dividing the total number of issued common shares by the net profit, one can calculate
earnings per share. The following chart illustrates how earnings per share are calculated:

Profit Available ¿Ordinary Stakeholders ¿

Number of Ordinary Shares Issued

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DRB Hicom Berhad

Ratio Formula Year 2020 (RM) Year 2021 (RM) Year 2022 (RM)
Gross Profit Margin 2,370,482,000 1,595,084,000 2,221,044,000
= X 100 = X 100 = X 100
13,155,536,000 12,378,135,000 15,512,016,000
Gross Profit Margin
X 100 = 18.01% = 12.88% = 14.31%
Sales
Net Profit Margin 548,832,000 ( 348,948,000) 291,123,000
= X 100 = X 100 = X 100
13,155,536,000 12,378,135,000 15,512,016,000
Profit Ater Tax = 4.17% = -2.81% = 1.87%
X 100
Sales

Operating Margin Profit 540,096,000 ( 291,267,000) 409,992,000

= X 100 = X 100 = X 100
13,155,536,000 12,378,135,000 15,512,016,000
Operating Profit
X 100 = 4.10% = -2.35% = 2.64%
Sales

Return on Asset 548,832,000 ( 348,948,000) 291,123,000

= X 100 = X 100 = X 100
45,596,190,000 47,118,651,000 51,489,188,000
Profit After Tax = 1.20% = -0.74% = 0.61%
X 100
Total Assets

Return on Equity 548,832,000 (348,948,000) 291,123,000

= X 100 = X 100 = X 100
9,857,118,000 9,097,826,000 9,688,401,000
Profit After Tax = 5.56% = -3.83% = 3.00%
X 100
Shareholders Equity

Earnings Per Share 548,832,000 ( 348,948,000) 291,123,000

= = =
7,579,720,000 7,202,716,000 7,365,715,000
= RM 0.07 = RM -0.04 = RM 0.39
 Profit Available ¿Ordinary Stakeholders ¿
Number of Ordinary Shares Issued

Padini Holdings Berhad

Ratio Formula Year 2020 (RM) Year 2021 (RM) Year 2022 (RM)
Gross Profit Margin 537,604,000 389,470,000 507,513,000
= X 100 = X 100 = X 100
1,354,679,000 1,029,387,000 1,319,097,000
Gross Profit Margin
X 100 = 39.68% = 37.84% = 38.47%
Sales
Net Profit Margin 75,174,000 54,057,000 154,103,000
= X 100 = X 100 = X 100
1,354,679,000 1,029,387,000 1,319,097,000
Profit Ater Tax = 5.55% = 5.25% = 11.68%
X 100
Sales

Operating Margin Profit 107,321,000 74,146,000 205,110,000

= X 100 = X 100 = X 100
1,354,679,000 1,029,387,000 1,319,097,000
Operating Profit = 7.92%
X 100 = 7.20% = 15.55%
Sales

Return on Asset 75,174,000 54,057,000 154,103,000

= X 100 = X 100 = X 100
1,397,535,000 1,274,483,000 1,494,031,000
Profit After Tax = 5.38% = 4.24% = 10.31%
X 100
Total Assets

Return on Equity 75,174,000 54,057,000 154,103,000

= X 100 = X 100 = X 100
765,780,000 801,786,000 891,050,000
Profit After Tax = 9.82% = 6.74% = 17.29%
X 100
Shareholders Equity

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 Earnings Per Share 75,174,000 54,057,000 154,103,000
= = =
765,780,000 801,786,000 891,050,000
Profit Available ¿Ordinary Stakeholders = RM¿ 0.10 = RM 0.07 = RM 0.17
Number of Ordinary Shares Issued

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Analysis of The Relevant Profitability Ratios
DRB Hicom Berhad
Gross Profit Margin

The gross profit margin for DRB Hicom Berhad decreased from 18.01% in 2020 to 12.88%
in 2021, before improving to 14.31% in 2022. This indicates that the company faced
significant challenges in 2021, potentially due to increased costs or decreased sales prices,
which negatively impacted its profitability. The recovery in 2022 suggests that the company
managed to address some of these issues, possibly through better cost management strategies
or an improvement in sales performance. Factors such as increased raw material costs, supply
chain disruptions, and lower sales volumes in 2021, followed by recovery in sales and
improved economic conditions post-pandemic in 2022, could have influenced these changes.

Net Profit Margin

The net profit margin for DRB Hicom Berhad fell drastically from 4.17% in 2020 to -2.81%
in 2021, indicating a loss, but recovered to 1.87% in 2022. The negative margin in 2021
suggests that the company faced significant operational challenges or incurred substantial
non-operating expenses during that year. The recovery in 2022 indicates that the company
managed to improve its operational efficiency, reduce costs, or increase revenues. Factors
contributing to the loss in 2021 could include extraordinary expenses, higher interest costs, or
one-time losses, likely exacerbated by the COVID-19 pandemic. Improved operational
efficiency, cost-cutting measures, or increased revenues in 2022 helped the company return to
profitability.

Operating Profit Margin

The operating profit margin also showed a similar pattern, with DRB Hicom Berhad's margin
turning negative from 4.10% in 2020 to -2.35% in 2021, before improving to 2.64% in 2022.
This indicates that the company’s core operations were unprofitable in 2021, likely due to
higher operational costs, reduced sales, or inefficiencies. The improvement in 2022 suggests
that the company undertook measures to restructure operations, better control costs, or
capitalize on increased demand. The pandemic's impact on operational costs and revenue
streams in 2021 and subsequent recovery in 2022 were significant factors influencing these
changes.
Return on Asset (ROA)

The return on assets (ROA) for DRB Hicom Berhad declined from 1.20% in 2020 to -0.74%
in 2021, indicating inefficiency in using assets to generate profit. It improved to 0.61% in
2022, although it remained below the 2020 level. The negative ROA in 2021 suggests that the
company was unable to effectively utilize its assets to generate income, likely due to
decreased revenues or higher expenses. The improvement in 2022 indicates better asset
management or increased revenue generation from assets. Poor asset utilization, decreased
revenues, or higher expenses in 2021, followed by better asset management and increased
revenue in 2022, were key factors affecting ROA.

Return on Equity (ROE)

The return on equity (ROE) for DRB Hicom Berhad followed a similar trend, turning
negative from 5.56% in 2020 to -3.83% in 2021, and then improving to 3.00% in 2022. The
negative ROE in 2021 indicates that the company struggled to generate profits from
shareholders' equity, likely due to net losses, decreased revenues, or increased equity base.
The recovery in 2022 suggests improved profit generation, effective use of equity, or possibly
share buybacks. The negative ROE in 2021 could have been influenced by net losses and
decreased revenue, while the improved profitability and effective use of equity in 2022
contributed to the recovery.

Earning Per Share (EPS)

The earnings per share (EPS) for DRB Hicom Berhad decreased from RM0.07 in 2020 to -
RM0.04 in 2021, indicating a loss per share, but saw a substantial increase to RM0.36 in
2022. The negative EPS in 2021 suggests that the company incurred net losses, reducing
shareholder value. The significant increase in 2022 indicates a strong earnings recovery,
suggesting improved net income or reduction in the number of shares outstanding. Factors
contributing to the loss per share in 2021 could include net losses, reduced operational
efficiency, or extraordinary expenses, while higher net income, improved profit margins, or a
reduced number of shares outstanding in 2022 led to the increase in EPS.

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Padini Holdings Berhad
Gross Profit Margin

Padini Holdings Berhad’s gross profit margin decreased slightly from 39.68% in 2020 to
37.84% in 2021 and then improved marginally to 38.47% in 2022. The slight decline in 2021
suggests some challenges, possibly due to increased costs of goods sold or pricing pressures.
However, the marginal improvement in 2022 indicates a stabilization or slight recovery in
profitability. Factors influencing these changes could include fluctuations in raw material
costs, changes in consumer demand, or adjustments in pricing strategy.

Net Profit Margin

The net profit margin for Padini Holdings Berhad showed a slight decline from 5.55% in
2020 to 5.25% in 2021, followed by a significant increase to 11.68% in 2022. The consistent
performance in 2020 and 2021 suggests a stable control over expenses relative to revenue.
The substantial increase in 2022 indicates improved efficiency, higher revenue, or significant
cost reductions. Factors such as improved operational efficiency, cost-cutting measures, or
increased sales likely contributed to the higher net profit margin in 2022.

Operating Profit Margin

The operating profit margin for Padini Holdings Berhad decreased from 7.92% in 2020 to
7.20% in 2021, then significantly increased to 15.55% in 2022. The decline in 2021 suggests
operational challenges, possibly due to higher operating expenses or lower sales. The sharp
increase in 2022 indicates a significant improvement in operational efficiency or revenue
growth. Factors contributing to these changes could include cost management strategies,
operational restructuring, or increased demand for the company's products.

Return on Asset (ROA)

The return on assets (ROA) for Padini Holdings Berhad declined from 5.38% in 2020 to
4.24% in 2021, followed by a substantial increase to 10.31% in 2022. The decline in 2021
indicates less efficient use of assets to generate profit, possibly due to reduced revenue or
higher expenses. The significant improvement in 2022 suggests better asset utilization and
increased profitability. Factors influencing these changes could include improved asset
management, higher sales, or reduced operational costs.

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Return on Equity (ROE)

The return on equity (ROE) for Padini Holdings Berhad decreased from 9.82% in 2020 to
6.74% in 2021, then rose sharply to 17.29% in 2022. The decline in 2021 suggests reduced
profitability or increased equity base. The sharp increase in 2022 indicates significant
improvement in profitability and efficient use of shareholders' equity. Factors such as higher
net income, better equity management, or strategic initiatives like share buybacks could have
contributed to these changes.

Earning Per Share (EPS)

The earnings per share (EPS) for Padini Holdings Berhad decreased from RM0.10 in 2020 to
RM0.07 in 2021, before increasing significantly to RM0.17 in 2022. The decline in 2021
indicates lower net income or higher share count. The substantial increase in 2022 suggests
strong earnings recovery, driven by higher net income or a reduction in the number of shares
outstanding. Factors contributing to these changes could include improved profitability, cost
reductions, or strategic financial management.

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Comparison of the Company’s Profitability

DRB Hicom Berhad Padini Holdings Berhad

Profitability Ratio Industry Average
2020 2021 2022 2020 2021 2022
Gross Profit Margin 30% 18.01% 12.88% 14.31% 39.68% 37.84% 38.47%
Net Profit Margin 6.40% 4.17% -2.81% 1.87% 5.55% 5.25% 11.68%
Operating Profit Margin 10% 4.10% -2.35% 2.64% 7.92% 7.20% 15.55%
Return on Asset 4.80% 1.20% -0.74% 0.61% 5.38% 4.24% 10.31%
Return on Equity 8% 5.56% -3.83% 3.00% 9.82% 6.74% 17.29%
Earning Per Share (RM) RM0.26 RM0.07 -RM0.04 RM0.36 RM0.10 RM0.07 RM0.17

Figure 4 – Comparison of Company's Profitability

Similarity and Differences
When comparing the profitability of DRB Hicom Berhad and Padini Holdings Berhad,
several similarities and differences emerge. Both companies experienced fluctuations in their
gross profit margins from 2020 to 2022. However, Padini Holdings consistently maintained a
much higher gross profit margin compared to DRB Hicom. While DRB Hicom’s gross profit
margin was significantly below the industry average of 30%, Padini Holdings’ margins were
consistently above this benchmark, indicating better cost management or pricing power.

In terms of net profit margin, both companies saw changes across the years. DRB Hicom had
a negative net profit margin in 2021 (-2.81%), indicating a loss, while Padini Holdings
maintained a positive net profit margin in all three years, with a significant increase in 2022
to 11.68%. Padini's net profit margin was closer to or above the industry average of 6.40% in
all years, suggesting stronger profitability. This contrast highlights Padini Holdings’ ability to
manage its costs and revenues more effectively.

The operating profit margin also showed notable differences. DRB Hicom experienced a
negative operating profit margin in 2021 (-2.35%) and struggled to reach the industry average
of 10%. In contrast, Padini Holdings consistently outperformed the industry average,
especially in 2022 with an impressive margin of 15.55%, indicating higher operational
efficiency and effective cost control. This suggests that Padini’s core operations were more
profitable than DRB Hicom’s.

For return on assets (ROA), both companies had a lower ROA than the industry average of
4.80% in 2021. However, DRB Hicom’s ROA was significantly lower and even negative in
2021 (-0.74%), while Padini Holdings managed to stay positive, with a substantial increase to

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10.31% in 2022, indicating much better asset utilization. This points to Padini Holdings’
ability to generate higher returns from its assets compared to DRB Hicom.

Regarding return on equity (ROE), both companies showed fluctuations. DRB Hicom’s ROE
was negative in 2021 (-3.83%), indicating losses to shareholders, whereas Padini Holdings
maintained positive ROE throughout, with a substantial increase in 2022 to 17.29%, showing
better returns to equity holders. This underscores Padini Holdings’ ability to generate higher
profits from shareholders' equity.

Lastly, in terms of earnings per share (EPS), both companies saw variations over the years.
DRB Hicom had a negative EPS in 2021 (-RM0.04), indicating losses per share, while Padini
Holdings maintained positive EPS, with significant growth in 2022 to RM0.17. Padini’s EPS
was consistently closer to the industry average of RM0.26, highlighting its stronger financial
performance and shareholder value creation compared to DRB Hicom.

Performance Comparison
Based on the analysis of profitability ratios, Padini Holdings Berhad demonstrated better
overall performance compared to DRB Hicom Berhad. This conclusion is supported by
several pieces of evidence:

 Gross Profit Margin: Padini Holdings consistently had higher gross profit margins
than DRB Hicom and remained above the industry average, indicating superior cost
management.

 Net Profit Margin: Padini Holdings maintained positive net profit margins with a
significant increase in 2022, unlike DRB Hicom, which had a negative margin in
2021.

 Operating Profit Margin: Padini Holdings outperformed the industry average and
DRB Hicom, particularly in 2022, showcasing higher operational efficiency.

 Return on Assets (ROA): Padini Holdings had significantly higher and consistently
positive ROA compared to DRB Hicom’s fluctuating and often negative ROA.

 Return on Equity (ROE): Padini Holdings maintained positive and substantially

higher ROE, especially in 2022, indicating better returns to equity holders.

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  Earnings Per Share (EPS): Padini Holdings consistently had positive and growing
EPS, in contrast to DRB Hicom’s negative EPS in 2021, demonstrating stronger
financial performance and shareholder value creation.

Suggestion for Improvement

DRB Hicom Berhad

To improve performance, DRB Hicom Berhad should focus on several key areas. Cost
Management is critical; implementing stricter cost control measures can improve gross and
operating profit margins. Enhancing Operational Efficiency through optimizing operations
can increase productivity and reduce inefficiencies. Exploring new Revenue Growth
opportunities, such as expanding into new markets or enhancing marketing strategies, can
boost sales. Improving Asset Utilization by managing assets more effectively can ensure
better returns. Finally, Debt Management by reducing reliance on debt can improve net profit
margins and return on equity.

Padini Holdings Berhad

Padini Holdings Berhad can build on its strengths by continuing effective Cost Control to
sustain high gross profit margins. Expanding its market reach and exploring new product
lines can drive Revenue Growth. Investing in Innovation and technology can help stay
competitive and enhance operational efficiency. Incorporating Sustainable Practices can
appeal to environmentally conscious consumers and reduce long-term costs. Additionally,
focusing on Employee Development through training and development programs can
improve productivity and operational efficiency.

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Summary

DRB Hicom Berhad and Padini Holdings Berhad are prominent companies in
Malaysia, with DRB Hicom operating in the transportation and logistics sector, while Padini
focuses on fashion retail. To compare their profitability, we calculated key ratios such as net
profit margin, return on assets (ROA), return on equity (ROE), etc. DRB Hicom shows
moderate profitability with stable returns, driven by its diverse business segments. Padini,
however, demonstrates higher profitability ratios, reflecting efficient operations and strong
market presence. The analysis reveals that Padini's focused retail strategy yields superior
profitability compared to DRB Hicom's broader, multifaceted business model.

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PART II

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Online Class Participation

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