FAKULTI EKONOMI DAN PENGURUSAN
EPPM2114 FINANCIAL MANAGEMENT
SEMESTER 1 SESI 2022/2023
PROJEK BERKUMPULAN
ANALYSIS OF FINANCIAL PERFORMANCE FOR COMPANY MAXIS AND DIGI
PENSYARAH:
PROF. DR AISHAH ABDUL RAHMAN
NAMA KUMPULAN: MAXIS DIGI
NAMA
NO. MATRIK
NURZAFIRAH BINTI DARMIS
A187145
ROSNAWATI BINTI BASHIR
A188075
NURUL FARHANAH BINTI MOHAMAD NASIR
A189090
AIN FAHIRA BINTI ROSLI
A189321
NUR HIDAYAH BINTI ZAKRY
A190348
TABLE OF CONTENTS
Contents
1.0
INTRODUCTION ............................................................................................................................................3
1.1 MAXIS ....................................................................................................................................................................3
1.1.1 Company Background ......................................................................................................................................3
1.1.2 Main Activities .................................................................................................................................................4
1.2 DIGI.........................................................................................................................................................................4
1.2.1 Company background ......................................................................................................................................4
1.2.2 Main activities or any relevant .........................................................................................................................5
1.3 Information about the chosen companies. ...............................................................................................................6
2.0 FINANCIAL PERFORMANCE ANALYSIS ............................................................................................................7
2.1 Liquidity ratio......................................................................................................................................................7
2.2 Asset management ratio ....................................................................................................................................10
2.2.1. Inventory Turnover Ratio..........................................................................................................................10
2.2.2. Days Sale Outstanding .............................................................................................................................13
2.2.3. Fixed Assets Turnover Ratio ....................................................................................................................15
2.2.4. Total Assets Turnover Ratio ....................................................................................................................18
2.3 Debt management ratio .....................................................................................................................................22
2.3.1. Debt-To-Capital Ration.............................................................................................................................22
2.3.2. Time-Interest-Earned Ratio.......................................................................................................................25
2.4 Profitability ratio ...............................................................................................................................................28
2.4.1. Operating Margin Ratio ............................................................................................................................28
2.4.2. Profit Margin Ratio ...................................................................................................................................30
2.4.3. Return On Assets ......................................................................................................................................32
2.4.4. Return On Equity ......................................................................................................................................34
2.4.5. Return On Invested Capital .......................................................................................................................37
2.4.6. Basic Earning Power Ratio .......................................................................................................................39
2.5 Market value ratio .............................................................................................................................................42
2.5.1 Price-Earnings ratio ...................................................................................................................................42
3.0 CONCLUSION AND SUGGESTION .....................................................................................................................47
3.1 Summary on the overall ratios’ analysis ...........................................................................................................47
3.2 Suggestion to improve financial performance. ..................................................... Error! Bookmark not defined.
1.0 INTRODUCTION
1.1 MAXIS
1.1.1 Company Background
On 19 October 1999, Maxis introduced the prepaid brand "Hotlink”. In 2002, Maxis
acquired TimeCel, a rival mobile service provider, from Time dotcom Berhad. Prior to the
purchase, Maxis offered prefix number beginning with 012, and TimeCel 017. On 27 April
2007, an offer was made to buy out Maxis and privatize the company in preparation for
expansions into the Indonesian, Indian and Qatari markets. The deal was offered by Ananda
Krishnan, who pledged Maxis RM17.46 billion (US$5.1 billion) in exchange for all
remaining shares of the company. The offer is to be formally made by Usaha Tegas, a
company owned by Krishnan, on 3 May 2007, while the Kuala Lumpur Stock Exchange
suspends trading of the company's shares until 3 May. Under the urging of the former Prime
Minister Datuk Seri Najib Tun Razak, Maxis announce that it will re-list the company in
Bursa Malaysia on 11 November 2009. The initial public offering, which constitutes 30% of
the company and involves its Malaysian operations, will raise at least MYR 11.7 billion. In
September 2013, Maxis prepaid, Hotlink launched its #Hotlink plan, which is claimed to be
the first telecommunications company to offer free internet services on cellular networks,
Hotlink calls it "Free Basic Internet" which offers download speeds up to 64kbit/s and which
the management says is enough for checking Facebook, Twitter and Wikipedia on mobileoptimized sites and also essentially eliminating data overage charges which as previously
implemented at MYR 0.10/10KB.
1.1.2 Main Activities
Maxis Berhad’s telecommunication services are offered all around the country,
so, the services are being targeted all the potential customers wherever in Malaysia, no
matter with rural and urban areas. Maxis Berhad uses product differentiation to target
different group of the customers. Different group of customers may have different needs
and wants. Different plans and services are offered to reach the different group of
customers. From the age segments which are below 25 and above 25, Maxis Berhad is
using different plans to target these 2 groups of potential customers, both male and
female, have the different intention to use the telecommunication services. For the
customers age below 25, Maxis Berhad targets this group by offering the prepaid plan
to them, this group of customers usually use phone to have entertainment, communicate
with friends, and enjoy the social life, they are usually not necessary to make the call-in
whatever situation, they just use the telecommunication service to have entertainment
and lack dealing with important case, but they use it constantly.
1.2 DIGI
1.2.1 Company background
DiGi Telecommunications Sdn.Bhd is known as Mutiara Telecommunications
Sdn.Bhd. The company was formerly known as Mutiara Telecommunications Sdn Bhd
and changed its name to Digi Telecommunications Sdn Bhd in January 1999. Digi
Telecommunications Sdn Bhd is a mobile service provider based in Malaysia. DiGi is
a mobile communication company that engaged in the establishment, maintenance and
provision of telecommunication and related services. The company was founded on 24
May 1995 and headquartered in Shah Alam, Malaysia. Besides that, DiGi is the first
telecommunication industry to launch and operate a fully digital cellular network in
Malaysia. So, Digi can get more market share on Malaysia to compete with
competitors. Digi vision is to be seen as stars in excellent customer experience by
enhancing communications to improve customers’ quality of life, at home, work and
play. Besides that, the mission of Digi is providing customers specific solutions to meet
individual needs for communications, connectivity and access to information and
security. It has provided an environment where our employees can grow and be
fulfilled in position.
1.2.2 Main activities or any relevant
DiGi is a leading mobile telecommunications company providing a range of
mobile and wireless services under the DiGi Prepaid and DiGi Postpaid brand name,
delivering voice, mobile content and data services to both individual and corporate
customers. Its data service focuses on the development of new mobile interactive
services which include infotainment via SMS, WAP, GPRS and MMS. Mobile
content includes value-added and entertainment content for mobile phone. One of the
activities is presented by DiGi telecommunications companies is call Spark. Spark! is
a 5 days 4 night's stay away program and designed to spark original and creative
thinking amongst Malaysian pre-university youth between 17 to 19 years old. Another
activity presented by DiGi is postrophe. Postrophe is DiGi’s web- based creative
expression platform that runs programmes and activities through which all Malaysians
can discover and develop their artistic creative talents.
1.3 Information about the chosen companies.
Competition between Maxis and Digi which both of them is from the same business field
that selling the same product which is mobile communication. Maxis and Digi operating in the
same business field which provide mobile communication services to customers. Digi targeted on
teenagers by providing an entertainment service for this group consumers such as provide free
internet connection with no cost for Digi consumers to view Facebook everyday by using stated
link. Besides, Maxis doesn’t provide this kind of opportunity for their consumers because most
properly they target on those working populations. Maxis promoting family plans package that
charges low cost for family member who using the same network to encourage family member
sign up the package to save their cost. Otherwise, Digi has come out with a package that is once
we have sent message more than RM 2 each day the continue cost will be free as consumers
message to the same network. It only charge RM 2 each day if consumers fulfil the package
condition.
2.0 FINANCIAL PERFORMANCE ANALYSIS
2.1 Liquidity ratio
Liquidity is required for business to measure a company's ability to pay short term
obligations. Current ratio which is also known as working capital ratio is used to measure the
ability of business to pay off the obligations for the next twelve months. This ratio is also used to
evaluate whether a company can be offered short term debts. It is more accurate that liquidity ratios
should fall within a certain range. Businesses with excessively low liquidity ratios already place
their business at risk and might also encounter difficulties in raising capital.
•
Year
Maxis Berhad
2016
2017
2018
2019
2020
Current
2457.88
Assets
(RM
Million)
Current
4996.61
liabilities
(RM Million)
Inventories 5.94
(RM Million)
2242.08
2667.66
2986.00
2822.00
3932.68
4542.01
5657.00
4461.00
4.49
15.92
3
3
Current Ratio 0.49
(x)
0.57
0.59
0.53
0.63
The table above shows the current ratio from 2016 to 2020 for Maxis Berhad.In 2016,
current ratio is 0.46x and increasing until 2018 at 0.59x. In 2019, the current ratio will decrease a
little bit and rise again in 2020. 0.63x is the highest for the five year period. Meanwhile, Quick
ratio is used by business professionals to check their business performance. External parties of
organization also look at the quick ratio to make judgments for investment and financing decisions.
From the table, the ratio also increases until 2018 and decreases a little bit in 2019. In 2020, the
ratio is still the highest. All current ratios and quick ratios are less than 1 indicate that maxis are
having difficulty in meeting its current liability.
•
Year
Digi Berhad
2016
2017
2018
2019
2020
Current
12149.24
Assets
(RM
Million)
Current
2828.53
liabilities
(RM Million)
Inventories 4.78
(RM Million)
1885.86
2089.76
1857.18
1530.56
2281.86
2695.16
2757.49
2514.17
5.91
6.11
9.05
13.72
Current Ratio 0.76
(x)
0.83
0.78
0.67
0.61
Quick (acid 0.76
test ratio
0.82
0.77
0.67
0.60
The table above shows quantitative data collected for currents assets and currents liabilities
from year 2016 until 2020 based on annual reports’ Digi.Com Berhad to calculate the current ratios
and quick ratio. Started with 2016, the current ratio was 0.76x. Followed by 2017, the current ratio
rose to 0.83x however, in the following year, the ratio keeps descending. In 2018, the current ratio
was 0.78x then decreased by 0.11x which result in 0.67x in 2019 and 0.61x in 2020. The industry
average for current ratio is 4.2x and the normal ratio is 1 while the current ratios of Digi. Com
Berhad in the 5 years were lesser than the industry average even the normal ratio. It may indicate
that Digi. Com Berhad may facing some problems or it could be determined as a business that
collect cash from customers longer before they must pay to the suppliers. In another point of view,
the firm can stay comfortably even remain less than one if inventory turns into cash more briskly
than the account payable. The quick ratio was just slightly different from the current ratio as it
excluded inventories and their inventories didn’t cost too much. However, quick ratio is more
conservative than current ratio. In 2016 and 2019, both ratios were just the same while in the other
three years quick ratio were less 0.01 than the current ratio; in 2017 the quick ratio was 0.82x,
0.77x in 2018 and 0.60x in 2020. Based on the average for the 5 years, quick ratio of Digi. com
represent it has RM0.70 of current assets for each RM1 of current liabilities
.
2.2 Asset management ratio
2.2.1. Inventory Turnover Ratio
Inventory Turnover ratio signifies the number of times inventory is sold and restocked each
year. The inventory turnover ratio can help businesses make better decisions on pricing,
manufacturing, marketing, and purchasing.
•
Maxis Berhad
Year
2016
Cost
of 3605.00
Goods Sold
(RM
Million)
2017
4678.00
2018
4744.00
2019
4919.00
2020
57.00
Average
9.60
Inventory
over Period
(RM Million)
5.22
10.25
9.50
3.00
Inventory
375.52
Turnove
r Ratio
(x)
896.17
462.83
517.79
1519.00
For Maxis Berhad, the ratios fluctuate. 2016 has the lowest at 375.52x and 2020 is the
highest with 1519x. However, Maxis should be aware that if the ratio is low, there might be
obsolete inventory and if the ratio is way higher, there might be danger of stockouts.
• digi
Year
2016
Cost of Goods 447.30
Sold (RM
Million)
2017
464.80
2018
462.80
2019
432.90
2020
484.90
Average
Inventory
over Period
(RM Million)
18.34
Inventory
24.4
Turnover
Ratio (x)
13.15
14.55
18.53
28.30
35.4
31.8
23.4
17.1
In 2016, the company had a 24.4x inventory turnover ratio, which jumped to 35.4x in 2017.
The company's performance in 2017 was good since its inventory was used efficiently. However,
in 2018 it fell to 31.8x, and in the following two years, it fell to 23.4x and 17.1x, respectively, in
2019 and 2020. This suggests that the company's inventory turnover is less efficient than it was
the prior year. The highest inventory turnover performance was obtained in 2017.
2.2.2. Days Sale Outstanding
Maxis Berhad
Year
2016
Receivables
2453.71
(RM Million)
2017
2696.11
2018
3074.57
2019
3573.00
2020
3020.00
Average
23.59
Sales
Per
Days
(RM Million)
23.83
25.18
25.52
24.56
Days Sales 104
Outstanding
(days)
113
122
140
123
Day Sales Outstanding refers to the average number of days a business takes to collect its
receivables after a sale is made. Here, we can see that Maxis Berhad has a poor credit policy or its
collection procedure is inefficient. As the year increases, the ratio keeps increasing. From 104 days
in 2016 to 140 days in 2019. Only in 2020, the amount of days is a little bit lower than the previous
year at 123 days. Maxis should be aware that higher DSO often fails to convert order to cash, and
in some cases, it is written as bad debt. This situation may lead to unstable financial health.
• Digi berhad
Year
2016
Receivables
1770.25
(RM Million)
2017
1318.15
2018
1601.47
2019
1648.49
2020
1316.93
Average
18.07
Sales
Per
Days
(RM Million)
17.37
18.13
17.25
16.86
Days Sales 98
Outstanding
(days)
76
88
96
78
Outstanding sales days for companies have decreased from 98 days in 2016 to 76 days in
2017. However, the number of days increased to 88 in 2018, and it increased again to 96 in 2019.
However, by 2020, it will have dropped to 78 days. This demonstrates that the company's
outstanding sales performance is inconsistent, as it increases and decreases from year to year. This
decline occurred in 2020, most likely as a result of the COVID-19 outbreak. In general, the best
outstanding sales days occurred in 2019.
2.2.3. Fixed Assets Turnover Ratio
•
Maxis Berhad
Year
2016
Sales
8612
(RM Million)
2017
9419
2018
9192
2019
9313
2020
8966
Net
Fixed 4365
Assets (RM
Million)
4672
5016
6015
6769
Fixed Assets 2.0
Turnover
Ratio (x)
2.0
1.8
1.5
1.3
The fixed asset turnover ratio reveals how efficient a company is at generating sales or
revenue from its existing fixed assets. Generally, A higher ratio implies that management is using
its fixed assets more effectively. In Maxis Berhad cases, the ratios keep decreasing from 2017 until
2020. In 2016 and 2017, the ratio is 2.0 then lower to 1.8. 2020 is the lowest among the five
periods with 1.3x. This shows that Maxis did not fully utilize all their fixed assets to the maximum.
•
Digi berhad
Year
2016
Sales
1474.00
(RM Million)
2017
1564.00
2018
1584.00
2019
1543.00
2020
1543.00
Net
Fixed 610.10
Assets (RM
Million)
705.60
700.40
1017.00
1412.00
Fixed Assets 2.4
Turnover
Ratio (x)
2.2
2.3
1.5
1.1
The fixed asset turnover ratio of the company has dropped from 2.4x in 2016 to 2.2x in
2017. In 2018, it grew to 2.3x once again. In 2019, the fixed asset turnover ratio fell to 1.5x, and
in 2020, it fell to 1.1x. This indicates that management is not making the best use of its fixed assets.
Asset management in the company is inefficient.
2.2.4. Total Assets Turnover Ratio
•
Maxis Berhad
Year
Sales
(RM Million)
2016
8611.80
2017
8696.44
2018
9192.44
2019
9313.00
2020
8966.00
Total Assets
(RM
Million)
19643.08
19249.22
19806.56
21437.00
21932.00
0.44
0.46
0.42
0.41
Total Assets 0.45
Turnover
Ratio (x)
The total asset turnover ratio compares the sales of a company to its asset base. The ratio
measures the ability of an organization to efficiently produce sales and is typically used by third
parties to evaluate the operations of a business. A company with a high total asset turnover ratio
can operate with fewer assets than a less efficient competitor, and also requires less debt and equity
to operate. In 2016, the ratio was 0.45x and lower to 0.44 in 2017. Then, increase to 0.46 in 2018
before continuously decreasing for the next two years. But higher total assets turnover ratio doesn’t
necessarily produce more sales. Maybe Maxis Berhad decided to outsource their production
facilities which resulted in lower their asset base.
•
Digi berhad
Year
Sales
(RM Million)
2016
6597
2017
6340
2018
6527
2019
6298
2020
6153
Total Assets
(RM
Million)
5497.96
5833.61
6206.06
8149.44
8186.73
1.09
1.05
0.77
0.75
Total Assets 1.20
Turnover
Ratio (x)
From 2016 to 2020, the total asset turnover ratio has dropped. The overall asset turnover
ratio was 1.20x in 2016, but it fell to 1.09x in 2017. In the following three years, the total asset
turnover ratio fell from 1.05x in 2018 to 0.77x in 2019 and finally to 0.75x in 2019. This implies
that this company's total asset turnover ratio has decreased for the past five years, indicating that
it is less efficient in managing total assets to create sales. In comparison to previous years, the
company's total asset turnover ratio was the best in 2016.
2.3 Debt management ratio
2.3.1. Debt-To-Capital Ration
•
Maxis berhad
Year
2016
Total
Debt 14922.1
(RM Million) 8
2017
12207.31
2018
12656.83
2019
14367.00
2020
14882.00
Total Assets
19643.0
(RM Million) 8
19249.22
19806.56
21437.00
21932.00
Debt
Capital
(%)
63.42
63.90
67.02
67.86
To 75.97
Debt to Capital ratio shows you how much of the asset base is financed with debt. From
the table, we can see that more than 50% of assets are financed by debt for the five years period.
The ratio 75.97 in 2016 is the highest that allocate more asset finance by debt. The higher a
company's debt ratio, the more it is said to be leveraged. Highly leveraged companies carry more
risk of missing debt payments. However, there is no perfect score or ideal debt to capital ratio. As
with all financial metrics, a “good ratio” is dependent upon many factors, including the nature of
the industry, the company’s lifecycle stage, and management preference.
•
Digi berhad
Year
2016
Total
Debt 4978.69
(RM Million)
2017
5314.90
2018
5532.87
2019
7489.45
2020
7580.88
Total Assets
5497.96
(RM Million)
5833.61
6206.06
8149.44
8186.73
Debt
Capital
(%)
91.11
89.15
91.90
92.60
To 90.56
The table shows total debt to total capital for Digi.Com Berhad from year 2016 until 2020.
In 2016, the debt ratio was 90.56% which consists of their company’s assets and paid by their
liabilities’ company. The next year, in 2017 Digi.Com Berhad shows that the debt ratio increased
slightly from 90.56% to 91.11%. In 2018, the debt ratio decreased to 89.15% but in 2019 and 2020
the debt ratio went up to 91.90% and 92.60%. This shows that this company purchased their assets
which depends to loans to gain more company’s assets. The more percentage of debt ratio that the
company’s gain, the more debts that company get. In conclusion, the debt ratio in 2018 was
recorded a good percentage, 89.15% among all years.
2.3.2. Time-Interest-Earned Ratio
Times interest earned ratio is a solvency metric that evaluates whether a company is earning
enough money to pay its debt. It specifically compares the income a company makes prior to
interest and taxes to what interest expense it must pay on its debt obligations.
•
Maxis Berhad
Year
2016
EBIT
4551.00
(RM Million)
2017
4709.00
2018
3799.00
2019
3,733.00
2020
3,759.00
Interest
469.943
Charges
(RM Million)
445.032
389.054
469.000
489.000
TIE Ratio (x)
10.58
9.76
7.96
7.69
9.68
The table shows the TIE ratio for maxis from 2016 until 2020. In 2017, the TIE ratio
increased by 10.58x from 9.68 in the previous year and also indicates the highest. Then, the ratio
will keep decreasing until 2020 at 7.69x. The higher the TIE ratio, the better the performance of
the company. It is because the company can afford to pay the interest expenses.
•
Digi berhad
Year
2016
EBIT
2304.00
(RM Million)
2017
2100.00
2018
2112.00
2019
2069.00
2020
1805.00
Interest
78.078
Charges
(RM Million)
132.457
129.984
231.076
212.547
TIE Ratio (x)
15.85
16.25
8.95
8.49
29.51
The table shows Times-Interest-Earned Ratio (TIE) from Year 2016 to 2020. In 2016, Digi.Com
was recorded the highest TIE ratio with 29.51x while in 2017, the TIE ratio decreased to 15.85x.
In 2018, Digi.Com Berhad shows that the TIE ratio become slightly increased to 16.25x.
Meanwhile, in 2019 and 2020, it dropped drastically to 8.95x and 8.49x respectively. This shows
that in year 2016, this company have good performance and the company have a comfortable
coverage of interest due to the highest record of TIE ratio.
2.4 Profitability ratio
Profitability ratios are used to assess a business's ability to generate earnings relative to its
revenue, operating costs, balance sheet assets, or shareholders' equity over time. Profitability ratios
indicate how efficiently a company generates profit and value for shareholders.
2.4.1. Operating Margin Ratio
Operating margin can tell how well a business manages its resources. The operating margin
measures how much profit a company makes on sales after paying for variable costs of production.
Higher margins are considered better than lower margins, and means more dollar’s sales kept in
profit.
•
Maxis Berhad
Year
EBIT
(RM Million)
2016
4551.00
2017
4709.00
2018
3799.00
2019
3,733.00
2020
3,759.00
Sales
8611.80
(RM Million)
8696.44
9192.44
9313.00
8966.00
Operating
Margin (%)
54.15
41.33
40.08
41.93
52.85
Maxis operating margin in 2016 was 52.85%. Then increased to 54.15% in 2017. But
Maxis operating margin started to decrease significantly in 2018 until 2020. 2019 marks the lowest
at 40.08%. In order to improve operating margin, Maxis may consider improvement through
management control, usage of resources efficiently, improved pricing and effective marketing.
•
Digi Berhad
2016
2017
2018
2019
2020
Year
EBIT
2304.00
2100.00
2112.00
2069.00
1805.00
Sales
6597.00
6340.00
6527.00
6289.00
6153.00
Operating
Margin
34.92
33.12
32.36
32.85
29.34
The table shows Digi.Com Berhad's Company operating margin was 34.92% in 2016, but
it fell to 33.12 % in 2017. In 2018, it was 32.36%. However, it increased slightly by 32.85 in 2019.
In 2020, it recorded a total of 29.34%, a decrease from the previous year. Overall, the best
operating margin was in 2016.
2.4.2. Profit Margin Ratio
Profit margin is the measure of a business, product, service's profitability and also to gauge
the degree to which company’s business activity makes money the most. The higher the number,
the more profit the business makes relative to its costs.
•
Maxis Berhad
Year
2016
Net Income 1983.81
(RM Million)
2017
2159.11
2018
1778.90
2019
1509.00
2020
1371.00
Sales
8611.80
(RM Million)
8696.44
9192.44
9313.00
8966.00
Profit Margin
(%)
24.83
19.35
16.20
15.29
23.04
Profit margin for Maxis Berhad in 2016 is slightly higher than 2017. It is 23.04% and
24.83% respectively. However, profit margin started to decrease in 2018 until 2020 consecutively.
•
Digi Berhad
2016
2017
2018
2019
2020
Year
Net Income
1632.66
1476.70
1540.79
1432.95
1220.97
Sales
6597.00
6340.00
6527.00
6289.00
6153.00
Profit Margin
24.75
23.29
23.61
22.75
19.84
Based on the company above, Digi.Com Berhad recorded the highest percentage of profit margin
in 2016 with 24.75%. In 2017, the profit margin decreased to 23.39% but it slightly increased in
2018 with 23.61 %. The profit margin fall back in 2019 with 22.75% and keep decreasing in 2020
with 19.84% only. It shows that Digi.Com Berhad recorded a good profit margin in 2016 among
5 years with 24.75%.
2.4.3. Return On Assets
Return on Assets analyzes in comparison to assets to see how effective a company
deploying assets to generate sales and profit.
•
Maxis Berhad
Year
2016
Net Income 1983.81
(RM Million)
2017
2159.11
2018
1778.90
2019
1509
2020
1371
Total Assets 19643.08
(RM Million)
19249.22
19806.56
21437.00
21932.00
Return on
Assets (%)
11.22
8.98
7.039
6.25
10.10
From the table above, ROA in 2016 was 10.10% and increased by 11.22% in 2017. But ROA
started to drop by 8.98% in 2019. Then, 7.039% in 2019 and 6.25% in 2020. The drop means lower
return of assets. A lower ROA can be a red flag for Maxis that management might not be deriving
the full potential benefits from the assets it owns.
•
Digi Berhad
2016
2017
2018
2019
2020
Year
Net Income
1632.66
1476.70
1540.79
1432.95
1220.97
Total Assets
5497.96
5833.61
6206.06
8149.44
8186.73
Return
on 29.70
Total Assets
25.31
24.83
17.58
14.91
Based on the company above, Digi.Com has recorded the highest return on total assets in 2016
with 29.70%. In 2017, it decreased to 25.31%. Then, the return on total assets again slightly
decreased to 24.83% in 2018 and it keep decreasing2 years in a row, 2019 and 2020 to 17.58%
and 14.91% respectively.
2.4.4. Return On Equity
•
Year
Maxis Berhad
2016
2017
2018
2019
2020
Net Income 2.013
To Common
(RM Million)
2.180
1.780
1.512
1.382
Average
4.455
Common
Equity
(RM Million)
5.833
7.048
7.075
7.026
Return on
Equity (%)
37.4
25.3
21.4
19.7
45.2
Return on Equity (ROE) measures how well a company generates profits for its equity
investments. It also reveals the business’ efficiency at turning shareholder investments into profits.
ROE helps investors choose investments and can be used to compare one company to another to
suggest which might be a better investment. The percentage of ROE shows that the ratios declining
start in 2016 until 2020. It started at 45.2% in 2016 and by 2020, the ratio has already become
19.7%.
•
Digi Berhad
2016
2017
2018
2019
2020
Year
Net Income To 363.9
Common
363.0
372.8
350.1
303.5
Average
Common
Equity
115.7
127.6
144.2
162.9
157.3
Return
Common
on 314.4
284.5
258.5
215.0
192.9
According to Digi.Com Berhad, the return on common equity for 2016 is 314.14%. Then, it fell
by 284.5% in 2017. Furthermore, the return on common equity fell by 258.5% in 2018 and is
expected to fall by 215% in 2019 and 192.9% in 2020.
2.4.5. Return On Invested Capital
•
Maxis Berhad
Year
Net Income
(RM Million)
2016
2.217
2017
2.256
2018
1.865
2019
1.716
2020
1.487
Total
14.356
Invested
Capital
(RM Million)
14.588
14.690
15.860
16.881
Return on
Invested
Capital (%)
15.500
12.700
10.800
8.800
15.400
Return on Invested Capital (ROIC) allowed access to business’ efficiency in allocating
capital to profitable investments. ROIC is the amount of money a company makes that is above
the average cost it pays for its debt and equity capital. ROIC for Maxis Berhad started by 15.400%
in 2016 and slightly increased to 15.500% in 2017. However, it’s declining until 8.800% in 2020.
This situation shows that Maxis might not efficiently put the capital under its control toward
profitable investment or projects.
•
Digi Berhad
Year
NOPAT
Average
Invested Capital
2016
2017
2018
2019
2020
2.242
2.019
2.206
2.097
1.904
2.307
3.012
3.295
4.589
5.934
67.000
67.000
45.700
32.100
Return
on 97.200
Invested Capital
For Digi.Com Berhad, the return on invested capital in 2016 was 97.200%. Later on in 2017, there
was a 45.070% decrease which has taken down the ratio to 67.000%. In the following year 2018,
the ratio remains the same at 67.000%. In 2019, the ratio went down to 45.700% with a decrease
of 46.610%. Finally, in 2020, there was another decrease of 42.370% which brought the ratio down
to 32.100%.
2.4.6. Basic Earning Power Ratio
•
Maxis Berhad
Year
2016
EBIT
4551.00
(RM Million)
2017
4709.00
2018
3799.00
2019
3,733.00
2020
3,759.00
Total Assets
19643.08
(RM Million)
19249.22
19806.56
21437.00
21932.00
Basic Earning 23.17
Power Ratio
(%)
24.46
19.18
17.41
17.14
Basic Earning Power ratio is also called BEP ratio. Bep used to show how effectively the
businesses use their assets to generate income. Companies with higher BEP means more
effectiveness. As for Maxis Berhad, the figure shows the ratio increasing a little bit in 2017 and
decreasing significantly in 2018,2019 and 2020. The BEP ratio in 2016 was 23.17% which is the
second highest while 17.14% in 2020 is the lowest. Maxis should figure out how to leverage their
assets and extract more value from it. Investors favor higher BEP than lower BEP.
•
Digi Berhad
Year
EBIT
(RM Million)
Total Assets
(RM Million)
Basic
Earning
Power Ratio
(%)
2016
2304.00
2017
2100.00
2018
2112.00
2019
2069.00
2020
1805.00
5497.96
5833.61
6206.06
8149.44
8186.73
41.91
36.00
34.03
25.39
22.05
In 2016, Digi.Com Berhad’s basic earning power (BEP) ratio was 41.91%. Later on in 2017,
Digi.Com Berhad experienced a decrease of 16.42% to 36.00%. Digi.Com Berhad then
experienced another slight decrease in ratio in 2018 to 34.03%. It was a decrease of 5.79%. The
following year 2019, Digi.Com Berhad had another decrease in ratio. A decrease of 34.03%
happened and the ratio went down to 25.39%. In 2020, Digi.Com Berhad also had yet another
slight decrease and the number went down to 22.05%. It was a decrease of 15.15%.
2.5 Market value ratio
The market value ratios are important for investors and management because they evaluate
the current price of publicly held company’s stock. These ratios help decide whether the shares are
overvalued, undervalued, or at par with the market. These ratios help in making investment
decisions in stocks of companies.
2.5.1 Price-Earnings ratio
•
Year
Share
(RM)
Maxis Berhad
2016
price 5.02
2017
5.21
2018
4.81
2019
5.00
2020
4.90
Earnings per 26.80
share (cent)
28.60
22.70
19.30
17.70
Priceearnings ratio
18.22x
21.19x
25.91x
27.68x
18.73x
Price earnings ratio evaluates whether the shares are overpriced or underpriced and also
compares company price with earnings per share. a high P/E ratio could mean that a company's
stock is overvalued, or that investors are expecting high growth rates in the future. In 2016, the
price earnings ratio for Maxis Berhad was 18.73x and slightly decreased in 2017 by 18.22x. Then,
in 2018 the ratios increased significantly by 21.19x in 2018 and 25.91x in 2019. The highest priceearnings ratio for Maxis Berhad is in 2020 with 27.68x.
•
Digi Berhad
Year
Share price
Earnings
share
2016
2017
2018
2019
2020
3.90
4.28
3.98
4.14
3.99
19.00
19.80
18.40
15.70
22.53x
20.10x
22.50x
25.41x
per 21.00
Price- earnings 18.57x
ratio
In 2016, Digi.Com Berhad’s price-earnings ratio was 18.57x. In the next year which is 2017, they
experienced an increase by 21.32% where the ratio was 22.53x. In 2018, there was a slight increase
in the ratio which brought it down until 20.10x. They managed to bring the numbers up a little bit
in 2019 were the ratio increased 11.94% to 22.50x. In 2020, the ratio kept on increasing until
25.41x.
2.5.2 Market Book ratio
•
Maxis Berhad
Year
Market cap
(RM Million)
2016
46.547
2017
47.495
2018
41.106
2019
41.002
2020
39.173
Book value
(RM Million)
4.721
6.946
7.149
7.001
7.050
Market/book 9.90x
6.80x
5.70x
5.90x
5.60x
ratio
Market book ratio reveals the value that market currently assigned to each company stock.
Book value is used as a benchmark to see if the market value per share is higher or lower. A low
ratio (less than 1) could indicate that the stock is undervalued, and a higher ratio (greater than 1)
could mean the stock is overvalued. In this case, the Market book ratio of Maxis Berhad is greater
than 1. At the same time, the ratios start to shrink and become 5.60x by 2020. In 2016, the market
book ratio was 9.90x and the highest.
•
Digi
2016
2017
2018
2019
2020
Year
Market cap
33.619
38.117
34.427
34.315
30.261
Book value
519.30
518.70
673.20
660.00
605.90
Market/book
ratio
64.70x
73.50x
51.10x
52.00x
49.90x
In 2016, Digi.Com Berhad had a market/book ratio of 64.70x which is an number compared to
their competitors in the communication sector. If they were put together along with other
communication companies in the distribution of market/book for those companies in Malaysia,
they are significantly outside the interquartile range. Later in 2017, the ratio had an increase of
13.60% which raised it up to 73.50x. However, they experienced a decrease of 43.84% until
51.10x. In the next year which in 2019, a slight increase happened to the ratio which brought it up
to 52.00x. Finally in 2020, they had a decrease of 4.20% which brought the ratio down to 49.90x.
- In this section, each of ratio must be discussed based on the calculated ratios
- Highly encourage to use suitable graph in discussion trend and peer analysis
- Justification must be given on each trend/ peer review. For example, if ROA for
Company A decrease significantly in 2018, you need to justify/ provide reasons
that may cause the decreasing trend.
3.0 CONCLUSION AND SUGGESTION
3.1 Summary on the overall ratios’ analysis
For the liquidity ratio, Maxis Berhad is better than Digi Berhad. It is because Digi Berhad
keep decreasing from 2016 to 2020 compared with Maxis Berhad increasing in 3 years but only
decreasing in 2018. It is shows that Digi Berhad is low in ability to pay short term obligations.
Maxis Berhad is good in sales and restocked per year than Digi Berhad. But, we can see that Digi
Berhad is better at collecting their account receivable that less than 100 days in 5 years compared
with Maxis Berhad which take up to 100 days more. For the assets turnover, there is not much
difference between Maxis Berhad and Digi Berhad because both of the company turnover keep
decreasing. But in 2020, Maxis Berhad is better with 1.3 times turnover means that the company
is generating sales or revenue from its existing fixed assets. Digi Berhad is higher than Maxis
Berhad in total assets turnover but the company can still operate with fewer assets and less efficient
competitors. Less of the assets from Maxis Berhad that base is financed with debt by looking at
their debt-to-capital ratio.
The operating margin for Maxis Berhad is higher than Digi Berhad. Even though, Maxis
Berhad decreased in 2019 but still more than Digi Berhad. It is show that Maxis Berhad gains more
profit that the company makes on sales after paying for variable costs of production. But digi
Berhad is good at profit margin ratio that have higher than Maxis Berhad. Maxis Berhad kept
decreased from 2016 until 2020. Digi Berhad only decreased in 2019 and 2020. Digi Berhad is
better in comparison to assets that to see how effective a company deploying assets to generate
sales and profit. Digi Berhad also good in generates profits for its equity investments compared to
Maxis Berhad. Return on invested capital for Digi Berhad is higher compared to Maxis Berhad.
This shows that Digi Berhad has efficiency in allocating capital to a profitable investment. Digi
Berhad has more effectiveness in businesses that use their assets to generate income by looking at
the basic earning power ratio to compared with Maxis Berhad. The price-earnings ratio for both
companies is average, which means not too overvalued. Lastly, Digi Berhad is better in value that
market currently assigned to each company stock.
Digi Berhad must have fewer liabilities and make sure they can have a high ability to pay
short short-term obligations. Other than that, Maxis Berhad needs to have a better credit policy or
their collection procedure to collect receivables early and in less than 100 days. Maxis Berhad
should less invested capital to gain more in return on invested capital to allow access to business
efficiency in allocating capital to a profitable investment.