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SCHOOL OF ARCHITECTURE, BUILDING & DESIGN FOUNDATION IN NATURAL & BUILT ENVIRONMENT

August Intake 2014

Semester 2

MODULE: Basic Accounting (ACC30205/FNBE0145)

LECTURER : Mr. Chang Jau Ho

ASSIGNMENT: Financial Ratio Analysis

Company: QL Resources

WORD COUNT: 1669 words SUBMISSION DATE: June 4th, 2015 (Week 16)

GROUP MEMBERS: AMANDA CHIONG (0320328)

BRIDGET HSU (0320218)

CHAU XET NEE (0320222)

 

   

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CONTENTS    

TITLE   PAGE  

COMPANY  BACKGROUND   3-­‐4  

RECENT  DEVELOPMENT   5  

RATIO  ANALYSIS  &  P/E  RATIO   6-­‐7  

INVESTMENT  RECOMMENDATION   8  

APPENDIX  APPENDIX  A  :  CALCULATION  

APPENDIX  B  :  CONSOLIDATED  BALANCE  SHEET  APPENDIX  C  :  CONSOLIDATED  STATEMENTS  OF  

INCOME  

9-­‐14  

REFERENCE  15  

  3  

COMPANY  BACKGROUND  

 QL  Resources  is  a  sustainable  and  scalable  multinational  agro-­‐food  

corporation  with  a  market  capitalization  of  over  USD$1.2  billion  in  Malaysia  that  

was  founded  by  Dr  Chia  Song  Kun  in  1987.  However,  its  roots  stretch  back  to  the  

late  1970s  which  Dr  Chia  and  his  brothers  supplied  the  calcium-­‐infused  shells  

from  the  dead  mollusks  to  the  local  feed  millers  by  harvesting  these  calcium-­‐

infused  shells  from  a  remote  shore  line  nearby  to  their  home  village.  Through  the  

hard-­‐fought  success  of  this  modest  business,  they  are  able  to  expand  their  

product  range  and  expand  their  market  by  opening  new  branches  across  

Malaysia.  

 

Nowadays,  QL  has  a  coherent,  complementary  set  of  businesses  with  a  

combined  common  objective,  which  is  to  add  value  to  their  broad,  resource-­‐

based  group.  QL  Resources  is  led  by  Dr  Chia  Song  Kun  with  a  mission  of  creating  

nourishing  products  from  agro  resources  and  leading  to  benefits  for  all  parties.  In  

the  same  time,  under  the  leadership  of  Dr  Chia  and  the  integration  from  his  team,  

QL  has  developed  a  strong  business  model  to  achieve  their  common  vision,  which  

is  leading  the  company  to  be  the  preferred  global  agro  based  enterprise.  

 

QL  currently  is  a  diversified  resources  and  agricultural-­‐based  group  with  

the  operation  in  three  core  sectors:  Integrated  Livestock  Farming,  which  includes  

poultry  farming,  feedstuff  trading  and  consumer  brands;  Marine  Products  

Manufacturing,  which  includes  surimi  and  fishmeal  processing  and  consuming  

brands;  and  lastly  Palm  Oil  Activities,  which  includes  milling,  plantations  and  

biomass  clean  energy.  QL  is  among  Asia’s  largest  producers  of  egg  and  surimi  as  

well  as  the  largest  fishmeal  and  surimi-­‐based  products  manufacturer  in  Malaysia.  

QL  is  the  leading  independent  crude  palm  oil  miller  that  owns  and  managed  a  

1,200  HA  mature  palm  oil  estate  in  Sabah  and  another  20,000  HA  oil  palm  

plantation  in  Eastern  Kalimantan,  Indonesia.  All  of  these  core  principal  activities  

are  based  on  Malaysia’s  agriculture  and  fisheries  resources.  

 

  4  

QL  operates  in  and  supplies  to  Malaysia,  Indonesia,  Vietnam  and  China.  

However,  its  market  penetration  is  transcontinental.  For  instance,  the  livestock  

sector  is  responsible  in  supplying  eggs  to  neighboring  ASEAN  countries  including  

Philippines,  Singapore,  Cambodia,  Brunei  and  further  afield  to  Hong  Kong.  In  the  

other  hand,  the  company’s  fisheries  sector  supplies  fishmeal,  surimi  and  frozen  

food  to  countries  including  Japan,  Korea,  Singapore,  Pakistan,  Bangladesh,  Spain,  

Portugal  and  North  America.  For  the  palm  oil  sector,  the  development  is  recently  

focusing  in  Sabah,  Malaysia  and  Eastern  Kalimantan,  Indonesia.  QL  is  a  pioneer  of  

the  field  in  clean  energy  palm  biomass  fuel  and  has  a  global  market  for  its  

solution.  All  of  these  activities  are  well  aligned  with  government  initiatives  to  

grow  the  field  of  agriculture  and  also  the  fisheries  industries.  Other  than  that,  tax  

incentives  are  available  for  these  sectors,  which  are  subsidies  by  the  government  

in  purpose  to  encourage  their  core  activities.  

   

  5  

 RECENT  DEVELOPMENT    

QL  Resources  has  acquired  a  stake  in  property  developer  SunsuriaBhd  recently,  which  is  embarking  on  the  Xiamen  University  Malaysia  Campus  property  development  project  in  Sepang.  QL  know  the  major  shareholder  of  Sunsuria,  Datuk  Ter  Leong  Yap  with  a  50.12%  of  the  company  and  have  confidence  in  his  ability  to  deliver  on  the  property  projects.  QL’s  substantial  shareholders  had  bought  a  stake  of  more  than  5%  in  Sunsuria  via  it’s  private  investment  company,  Ruby  Technique  Sdn  Bhd.  Sunsuria’s  share  price  has  been  rising  recently.  On  the  March  of  2015,  the  stock  was  only  trading  at  RM1.50  level  and  it  has  increased  to  56.49%  on  a  year-­‐to-­‐date  basis.  Its’  share  price  has  increased  recently  to  RM2.05.  The  company  principal  activity  has  been  changed  from  a  wooden  and  fire  rated  door-­‐maker  to  property  development  and  this  changers  has  improved  the  earnings  of  the  corporation.  The  company’s  net  profit  has  increased  to  138.54%  to  RM3  millions  for  the  nine  months  to  Dec  31st,  2015,  which  on  the  back  of  a  271.93%  increase  to  RM56.03  millions  in  revenue.  QL’s  net  profit  has  rose  24.67%  to  RM55.62  millions  on  the  back  of  a  10.09%  increase  in  revenue  to  RM732.82  millions.  Other  than  that,  QL  has  failed  in  its  project  to  takeover  bid  of  fellow  poultry  player  Lay  Hong  Bhd.  Since  then,  Lay  Hong  has  proposed  a  15%  share  placement  which  in  turn  will  reduce  38%  of  QL’s  current  stake  in  the  company.                                      

  6  

 PROFITABILTY    

 

Stability    Financial

Stability Ratio

2013

2014

Interpretation

Working  Capital      𝑇𝑜𝑡𝑎𝑙  𝐶𝑢𝑟𝑟𝑒𝑛𝑡  𝐴𝑠𝑠𝑒𝑡𝑠  

𝑇𝑜𝑡𝑎𝑙  𝐶𝑢𝑟𝑟𝑒𝑛𝑡  𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠  ×100  

 

768,075,000537,258,000

 

=  1.43:  1  

880,936,000560,848,000

 

=  1.57:1    =  ====  

During  the  2013  –  2014  periods,  the  business  working  capital  has  increased  from  1.43  :  1  to  1.57  :1.  This  means  The  business  ability  to  pay  current  liabilities  is  better  .In  addition  ,  it  does  stratified  the  minimum  requirement  of  2:1  .    

Total  Debt    

𝑇𝑜𝑡𝑎𝑙  𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠  𝑇𝑜𝑡𝑎𝑙  𝐴𝑠𝑠𝑒𝑡𝑠   ×100  

 

1,048,892,0002,008,530,000

×100%  

=  52.2%  

895,907,0002,241,622,000

×100%  

=40%  

During  the  2013  –  2014  periods  ,  the  total  debt  has  decreased  from  52.2%  to  40%  .  The  business  total  debt  has  decreased.  However,  it  satisfied  the  maximum  50%  limit  .  

Stock  turnover    

= 365 ÷𝑐𝑜𝑠𝑡  𝑜𝑓  𝐺𝑜𝑜𝑑𝑠  𝑆𝑜𝑙𝑑  𝐴𝑣𝑒𝑟𝑎𝑔𝑒  𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦    

365 ÷ (1,795,179,000186,285,000

)  

=  37.9days    

365 ÷ (2,052,930,000224,180,000

)  

=  39.9days    

During  the  2013  –  2014  periods,  stock  turnover  has  increased  37.9days  to  39.9days  .  The  business  sell  its  goods  slower  compare  to  last  

Profitability Ratios

2013

2014

Interpretation

Return  on  Equity  (ROE)    

!"#  !"#$%&

!"#$%&#  !"#$%  !"#$%&×100  

 

 137,552,000

(880,034,000 + 638,000) ÷ 2×100%  

 

=137,552,000919,836,000

×100%  

 = 15%  

 166,754,000

(959,638,000 + 1,345,715,000)×100%  

 

=166,754,0001,152,676,500

×100%  

 = 14.5%  

During  the  2013  –  2014  periods  ,  the  ROE  is  decrease  from  15%-­‐14.5%  .  The  business  is  getting  less  return  from  its  capital  compare  to  last  year  .  

Net  Profit  Margin  (NPM)    !"#  !"#$%&  

!"#  !"#$%  ×100  

 

 137,552,0002,146,307,000

×100%  

= 6.4%  

 166,754,0002,457,186,000

×100%  

= 6.8%  

During  the  2013  –  2014  periods  the  NPM  is  increase  from  6.4%  -­‐  6.8%  .  The  business  ability  to  control  its  expenses  is  better  than  last  year.    

Gross  Profit  Margin    (GPM)    !"#$$  !"#$%&

!"#  !"#$%  ×  100    

 

 351,128,0002,146,307,000

×100%  

= 16.4%  

404,256,0002,457,186,000

×100%  

=16.5%  

During  the  2013  –  2014  periods  ,  the  GPM  has  increased  from  16.4%  -­‐  16.5%  the  business  ability  to  control  its  COGS  expenses  is  better  than  last  year.    

Selling  Exp.  Ratio  (SER)    𝑇𝑜𝑡𝑎𝑙  𝑆𝑒𝑙𝑙𝑖𝑛𝑔  𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠  

𝑁𝑒𝑡  𝑆𝑎𝑙𝑒𝑠 ×100  

 

117,318,0002,146,307,000

×100%  

=  5.5%  

137,246,0002,457,186,000

×100%  

=  5.6%  

During  the  2013  –  2014  periods  the  SER  has  increased  from  5.5%-­‐5.6%.  The  business  is  getting  worse  at  controlling  the  selling  expense.  

General  Expenses  Ratio  (GER)    𝑇𝑜𝑡𝑎𝑙  𝐺𝑒𝑛𝑒𝑟𝑎𝑙  𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠  

𝑁𝑒𝑡  𝑆𝑎𝑙𝑒𝑠   ×100  

 

15,765,0002,146,307,000

×100%  

=  0.7%  

19,359,0002,457,186,000

×100%  

=  0.8%  

During  the  2013  –  2014  periods  ,  the  GER  has  increased  from  0.7%-­‐0.8%.  The  business  is  getting  worse  at  controlling  the  general  expense.  

Financial  Expenses  Ratio  (FER)    𝑇𝑜𝑡𝑎𝑙  𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙  𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠  

𝑁𝑒𝑡  𝑆𝑎𝑙𝑒𝑠   ×100  

 

28,593,0002,146,307,000

×100%  

=  1.3%  

35,119,0002,457,186,000

×100%  

=  1.4%  

During  the  2013  –  2014  periods  ,  the  FER  has  increased  from  1.3%-­‐1.4%.  The  business  is  getting  worse  at  controlling  the  financial  expense.  

  7  

year  .  

Debtor  Turnover  =365  ÷ !"#$%&  !"#$%  

!"#$#%&  !"#$%&    

 

365 ÷ (1,073,153,500247,334,000

)  

=  84.1days    

365 ÷ (1,228,593,000276,051,000

)  

=  82days    

During  the  2013  –  2014  periods,  the  debtors  turnover  has  decreased  form  84.1  days  to  82  days  .  Debt  collect  is  faster  than  last  year.    

Interest  Coverage      𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡  𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 + 𝑁𝑒𝑡  𝑃𝑟𝑜𝑓𝑖𝑡  

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡  𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠    

 

28,593,000 + 137,552,00028,593,000

 

=5.8times    

35,119,000 + 166,754,00035,119,000

 

=5.7times      

 

During  the  2013  –  2014  periods  ,  the  interest  coverage  has  decreased  from  5.8times  to  5.7times  .  The  business  ability  to  pay  its  interest  expense  is  getting  worse.  In  addition  ,  its  satisfied  the  requirement  of  minimum  5  times  .    

 PRICE  /  EARNING  RATIO    

=Current  share  priceEarnings  per  share

 

 

=3.9900.14

   =  28.5  years      Interpretation    Based  on  the  P/E  ratio  calculate  above,  the  company’s  price  earning  is  28.5  years    .  This  means  that  the  share  price  of  the  company  is  low  and  the  investor  will  have  to  wait  for  a  period  of  about  28  years  to  recoup  his  investment.                                

  8  

     Investment  recommendation        

During  the  year  2013  and  2014.  There  is  moderately  change  in  the  gross  profit  margin.  During  the  period  2013  and  2014  the  GPM  has  increased  from  16.4  to  16.5%.  This  shows  that  QL  company  has  better  ability  to  control  it's  expenses  is  better  than  last  year.  Besides  that  ,  there  was  a  slight  decrease  in  return  of  equity  (ROE)  which  is    15%-­‐14.5%.As  a  result  the  business    is  getting  less  return  from  its  capital  in  the  year  of  2013  compare  to  the  year  of  2014  .       On  the  stability  ratio  side  ,  working  capital  was  increasing  from  1.43:1  to  1.57:1  .  Hence  ,  both  of  the  ratios  did  not  reach  the  minimum  requirement  of  2:1  and  this  show  that  QL  company  has  a  hard  time  to  pay  liabilities  with  current  assets  therefore  ,  the  total  debt  of  the  company  has  decreased  from  52.2%  to  40%  .  However,  it  satisfied  the  maximum  50%  limit  .  The  selling  rate  of  QL  company  product  has  getting  slower  which  has  increasing  from  37.9  days  to  39.9  days  .  Other  than  that  the  interest  coverage  of  year  2013  has  slightly    drop  from  5.8times  to  5.7times  .  It  mean  that  the  business  ability  to  pay  its  interest  expense  is  getting  worse.  In  addition  ,  its  satisfied  the    minimum  requirement  of  5  times  .  Therefore  ,    QL  company  does  not  have  any  problem  of  paying  interest  .  From  the  analysis  ,  QL  company  has  a  moderate  of  stability  ratio  .      

As  a  conclusion,  QL  company  has  shown  moderate  potential  in  profitability  ratios  and  financial  stability  ratio  in  their  investment  .  However,  I  think  it  is  not  wise  to  invest  in  QL  company  because  it  required  a  long  period  of  about  29  years  for  the  investor  to  recoup  their  investment,  company  share  price  is  RM3.99  per  share  which  consider  low  .      

  9  

Appendix      Balance  Sheet      

                 

  10  

   Profit  &  Loss  Statement    

 

  11  

                   

  12  

 Cash  Flow  Statement  

   

  13  

     

  14  

                     

  15  

 References    (n.d.). Retrieved May 28 , 2015, from http://www.ql.com.my/ QL substantial shareholders take up stake in Sunsuria - Business News | The Star Online. (n.d.). Retrieved May 28, 2015, from http://www.thestar.com.my/Business/Business-News/2015/04/27/QL-to-take-up-stake-in-Sunsuria/?style=biz Profile: QL Resources Bhd (QRES.KL). (n.d.). Retrieved May 30, 2015, from http://in.reuters.com/finance/stocks/companyProfile?symbol=QRES.KL Share Price Movement. (n.d.). Retrieved June 1, 2015, from http://www.malaysiastock.biz/Corporate-Infomation.aspx?type=A&value=Q&securityCode=7084