1.0 ACKNOWLEDGEMENT
We would like to express our sincere gratitude to Dr. Muhamad Sukor Bin Jaafar for
his invaluable guidance, support, and encouragement throughout the completion of this report.
His expertise and insightful feedback have been instrumental in shaping the content and
improving the overall quality of this assignment. We would also like to extend our thanks to
our classmates who provided valuable input and shared their perspectives, contributing to a
richer and more comprehensive study. Finally, we are deeply thankful to our family and friends
for their unwavering support and understanding during the challenging moments of this
academic endeavor. This report would not have been possible without the collective support
and guidance from these individuals, and for that, we are truly grateful.
1
2.0 INTRODUCTION
Financial ratio analysis serves as a critical tool for evaluating the financial health and
performance of companies. Financial ratios serve as key indicators of a company's financial
well-being, allowing for a systematic evaluation of its strengths, weaknesses, opportunities,
and threats. These ratios facilitate benchmarking against industry standards and competitors,
aiding in the identification of areas for improvement and potential risks. This report explores
the financial ratios of CelcomDigi Bhd (CELC) and Redtone, two prominent players in the
telecommunications sector.
CelcomDigi stands out as a key player in the telecommunications industry. By
examining various financial metrics, ratios provide insights into different aspects of a
company's operations, liquidity, activity, leverage and profitability. These ratios offer valuable
insights into CelcomDigi's profitability and market valuation. Meanwhile, REDtone Digital
Berhad is a key player in the telecommunications industry, making significant strides in the
competitive market. This Malaysian company has garnered attention for its financial
performance and strategic positioning.
A detailed financial analysis provides a comprehensive understanding of the
company's financial dynamics. Conducting a comprehensive financial ratio analysis
empowers stakeholders to make informed decisions regarding investments, partnerships, and
strategic initiatives. By comparing the financial ratios of CelcomDigi and Redtone,
stakeholders can identify industry leaders and pinpoint areas for improvement.
In conclusion, financial ratio analysis plays a pivotal role in understanding the strengths
and weaknesses of telecommunications companies. Through the evaluation of key financial
metrics, stakeholders can navigate the competitive landscape, fostering strategic decisionmaking for sustained success in the dynamic telecommunications sector.
2
3.0 COMPANY BACKGROUND
3.1 CELCOMDIGI
CelcomDigi Berhad, a communications conglomerate and mobile service provider in
Malaysia, is the result of a merger between Digi.Com Berhad and Celcom in 2022. With equal
ownership from Axiata and Telenor at 33.1% each, CelcomDigi stands as the largest wireless
carrier in the country, boasting over 20.3 million subscribers as of the end of Q4 2022.
Digi Telecommunications Sdn Bhd, CelcomDigi's predecessor, was established in
1990 and quickly gained recognition as a major player in the Malaysian telecommunications
market. Digi's cellular network launch in 2000 marked the beginning of its expansion and
innovation, cementing its position as a leading telecommunications provider throughout the
2000s.
The merger with Celcom in 2022 aimed to create a powerhouse in the Malaysian
telecommunications industry, combining the strengths of both companies to form a stronger
and more competitive entity. With a combined customer base of over 20 million subscribers,
CelcomDigi is poised to deliver enhanced services and innovation to its customers.
CelcomDigi envisions itself as the leading digital enabler in Malaysia, connecting
people, communities, and businesses to a world of possibilities. Committed to providing
innovative and reliable telecommunications services, the company leverages innovative
technologies like 5G, AI, and IoT to empower Malaysians to thrive in the digital age.
Throughout its history, CelcomDigi has made significant contributions to the Malaysian
telecommunications landscape, including providing widespread access to mobile and
broadband services, driving innovation in the industry, connecting Malaysians to a world of
possibilities, and contributing to Malaysia's economic growth and digital transformation.
As CelcomDigi continues to invest in network expansion, digital innovation, and
customer service excellence, it remains committed to empowering Malaysians and playing a
leading role in the country's digital transformation journey.
3
3.2 REDTONE
REDtone's journey began in 1996 when it was established as VMS Technology Sdn
Bhd. The company quickly gained recognition as a leading provider of discounted call
services, catering to the needs of over 600 corporate customers. This early success laid the
foundation for REDtone's future growth and expansion into a broader range of
telecommunications and digital infrastructure services.
In 2002, REDtone was officially incorporated as REDtone Digital Berhad. This marked
a significant milestone for the company as it became a pioneer Multimedia Super Corridor
(MSC) status company. The MSC, established in 1996, was a visionary initiative aimed at
transforming Malaysia into a global hub for information and communications technology (ICT).
REDtone's MSC status recognition solidified its position as a leading innovator and provider
of advanced telecommunications solutions.
REDtone's growth trajectory continued with its listing on the Malaysian Stock
Exchange's MESDAQ market (now known as the ACE Market) in January 2004. This public
listing provided the company with access to capital and enhanced its visibility within the
Malaysian business landscape. In 2015, REDtone's success attracted the attention of Berjaya
Corporation Berhad, a prominent Malaysian conglomerate. REDtone became a subsidiary of
Berjaya Corporation Berhad, further solidifying its position within the Malaysian
telecommunications industry.
REDtone's service portfolio has evolved over the years, reflecting the company's
commitment to staying ahead of the curve in the ever-changing ICT landscape. From its initial
focus on discounted call services, REDtone has expanded its offerings to include broadband
and corporate internet, cloud and IoT, and managed services. Today, REDtone stands as a
leading provider of integrated telecommunications and digital infrastructure services for
organizations in Malaysia. With its strong record of innovation, customer-centric approach,
and commitment to social responsibility, REDtone is poised to continue its growth trajectory
and play a pivotal role in shaping the future of Malaysia's telecommunications and digital
landscape.
4
4.0 FINANCIAL RATIO ANALYSIS
4.1 TREND ANALYSIS (CELCOMDIGI)
PROFITABILITY RATIOS
i.
CELCOMDIGI
PROFIT MARGIN
RETURN ON ASSETS
RETURN ON EQUITY
(%)
(%)
(%)
2018
23.60
25
229
2019
22.75
18
217
2020
19.84
15
201
2021
18.34
15
184
2022
11.26
6
13
30
250
25
200
(%)
20
150
15
(%)
PROFITABILITY RATIOS
100
10
5
50
0
0
2018
2019
PROFIT MARGIN
2020
YEARS
2021
RETURN ON ASSETS
2022
RETURN ON EQUITY
The depicted financial performance of CelcomDigi reveals a concerning downward
trajectory in key profitability ratios over the past five years, signaling potential challenges and
prompting a thorough examination of the company's financial health.
Beginning with the profit margin, CelcomDigi has experienced a consistent decline
from 23.60% in 2018 to 11.26% in 2022. This sustained reduction in profit margin is a cause
for alarm, indicating a worrisome trend where the company's earnings relative to revenue have
been steadily diminishing. The drop from 18.34% in 2021 to 11.26% in 2022 represents a
substantial decrease, raising questions about the firm's ability to maintain profitability in a
competitive market.
5
Similarly, the Return on Assets (ROA) for CelcomDigi has witnessed a decline from
25% in 2018 to 6% in 2022. This indicates a diminishing capacity to generate profits from its
assets. The steady reduction in ROA over the years suggests a potential inefficiency in asset
utilization or changing market dynamics that are impacting the company's ability to extract
value from its asset base.
Furthermore, the Return on Equity (ROE) trend is equally troubling, with a decline
from 229% in 2018 to 13% in 2022. The ROE trajectory, reflecting the company's ability to
generate returns for its shareholders, showcases a significant and consistent drop over the
years. The decline from 184% in 2021 to 13% in 2022 accentuates the urgency for CelcomDigi
to address underlying issues impacting its profitability and shareholder value.
In conclusion, CelcomDigi is confronted with a critical need to reassess its strategic
approach, operational efficiency, and overall business model to reverse the alarming decline
in profitability. Swift and decisive actions, such as cost management, operational
optimizations, and strategic repositioning, will be crucial for CelcomDigi to stabilize its financial
health and restore confidence among stakeholders. Rigorous financial planning and a
proactive response to market dynamics will be essential for the company to regain its footing
and secure a more favorable trajectory for its future prospects.
6
ACTIVITY RATIOS
ii.
CELCOMDIGI
Account
Average
Inventory
Fixed Asset
Total
Receivable
Collection
Turnover
Turnover
Asset
Turnover
Period
(ITO)
(TIMES)
Turnover
(TIMES)
(DAYS)
(TIMES)
2018
4.39
81
107
2.26
1.05
2019
4.81
74
69.19
1.15
0.76
2020
5.63
63
44.91
1.04
0.68
2021
5.74
62
54.13
1.11
0.72
2022
2.53
141
41
0.49
0.17
(TIMES)
140
160
120
140
100
120
100
80
80
60
60
40
40
20
20
0
DAYS
TIMES
ACTIVITY RATIOS
0
2018
2019
2020
Years
2021
2022
Average Collection Period (Days)
Account Receivable Turnover
Inventory Turnover (ITO)
Fixed Asset Turnover
Total Asset Turnover
CelcomDigi's activity ratios, vital indicators of the company's efficiency in managing its
assets, have exhibited a concerning downward trend over the past five years. This decline in
efficiency raises alarms as it may potentially lead to lower profitability in the future. A detailed
breakdown of individual ratios offers insights into the challenges faced by CelcomDigi and
suggests areas for improvement to ensure sustainable business performance.
Starting with the Account Receivable Turnover, which gauges the efficiency of debt
collection, CelcomDigi showed improvement from 4.39 times in 2018 to 5.73 times in 2021.
However, the significant dip to 2.53 times in 2022 raises questions about potential challenges
in the current economic climate or alterations in credit policies. The need to closely monitor
7
and address this decline is crucial to sustaining healthy cash flow and ensuring financial
stability.
Examining the Average Collection Period, which signifies the time taken to collect
receivables, a decrease from 81 days in 2018 to 141 days in 2022 initially suggests faster debt
collection. However, the observed increase in 2022 mirrors the trend in the Account
Receivable Turnover ratio, indicating a potential need for CelcomDigi to reassess and optimize
its credit and collection procedures.
The Inventory Turnover Ratio, reflecting efficiency in managing inventory, exhibited
significant fluctuations over the years. While it peaked at 107 times in 2018, it dropped
considerably to 41 times in 2022, signaling a potential need for improvement in inventory
management strategies. Addressing this decline is vital to preventing excess inventory holding
costs and ensuring optimal resource allocation.
The Fixed Asset Turnover Ratio, indicating revenue generation per dollar of fixed
assets, declined from 2.26 times in 2018 to 0.49 times in 2022. This suggests underutilization
of fixed assets, necessitating a thorough review of asset utilization strategies to enhance
operational efficiency and maximize returns.
The Total Asset Turnover, reflecting overall efficiency in utilizing all assets, witnessed
a substantial decrease from 1.05 times in 2018 to 0.17 times in 2022. This underscores the
urgency for CelcomDigi to take proactive measures to maximize returns on investments and
enhance overall operational efficiency.
In conclusion, CelcomDigi's activity ratios highlight concerns about declining efficiency
in asset management. To maintain long-term profitability and competitiveness, the company
needs to address these challenges promptly.
8
iii.
LEVERAGE RATIOS
CELCOMDIGI
DEBT RATIOS
TIMES INTEREST
FIXED CHARGE
(%)
EARNED
COVERAGE
(TIMES)
(TIMES)
2018
89.15
17.12
0.05
2019
91.95
8.54
0.81
2020
93.29
7.62
1.67
2021
92.77
8.32
1.38
2022
57.40
5.82
1.04
18
100
90
80
70
60
50
40
30
20
10
0
16
14
TIMES
12
10
8
6
4
2
0
2018
2019
2020
TIMES INTEREST EARNED
2021
(%)
LEVERAGE RATIOS
2022
FIXED CHARGE COVERAGE
DEBT RATIOS (%)
CelcomDigi's leverage ratios offer a nuanced view of their financial health, presenting
a mixed picture that underscores both potential risks and positive developments. Examining
these ratios provides valuable insights into the company's reliance on debt, its ability to meet
financial obligations, and recent shifts in its financial structure.
Starting with the Debt Ratios, which consistently exceeded 89% for most years, there
is a clear indication of CelcomDigi's high dependence on debt financing. This heightened debt
burden raises concerns about the company's vulnerability to adverse economic conditions.
However, a noteworthy and positive development emerged in 2022, where the debt ratio
significantly decreased to 57.40%. This reduction suggests a recent improvement in
CelcomDigi's financial structure, potentially signaling a strategic move towards a more
balanced mix of debt and equity.
9
Moving on to the Times Interest Earned Ratio, which gauges the company's ability
to meet interest payments, there was a decline from 17.12 in 2018 to 5.82 in 2022. While this
downward trend raises eyebrows, it is essential to note that the ratio remains comfortably
above the minimum threshold of 1. This implies that CelcomDigi continues to maintain
sufficient coverage of interest expenses, mitigating immediate concerns about its ability to
meet interest obligations.
Considering the Fixed Charge Coverage Ratio, which assesses the company's
capacity to manage all fixed financial obligations, including interest and debt, the ratio dipped
below 1 in 2022. However, it consistently stayed above 0.05 throughout the preceding years,
indicating a generally acceptable ability to handle fixed financial charges. This suggests that,
despite the temporary dip, CelcomDigi has historically demonstrated a reasonable capacity to
manage its fixed financial commitments.
In summary, CelcomDigi's leverage ratios highlight a high reliance on debt, posing
potential challenges during economic downturns. However, the company's ability to cover
interest expenses and manage fixed charges has generally remained within an acceptable
range. The significant decrease in debt ratios in 2022 is a positive signal, indicating a potential
shift towards a more balanced and sustainable financial structure.
10
iv.
LIQUIDITY RATIOS
CELCOMDIGI
CURRENT RATIOS (TIMES)
QUICK RATIOS (TIMES)
2018
0.78
0.75
2019
0.67
0.64
2020
0.61
0.12
2021
0.49
0.07
2022
0.49
0.15
TIMES
LIQUIDITY RATIOS
0,9
0,8
0,7
0,6
0,5
0,4
0,3
0,2
0,1
0
2018
2019
2020
YEARS
CURRENT RATIOS
2021
2022
QUICK RATIOS
Beginning in 2018, CelcomDigi's current ratio stood at 0.78%, indicating that its current
assets were sufficient to cover 78% of its current liabilities. However, this ratio steadily
decreased over the subsequent years, reaching 0.67% in 2019, 0.61% in 2020, and remaining
at 0.49% in both 2021 and 2022. A current ratio below 1 implies that the company may face
challenges in meeting its short-term obligations, as its current assets are insufficient to cover
the entirety of its current liabilities.
CelcomDigi's quick ratio, which measures the company's ability to meet its immediate
liabilities without relying on the sale of inventory. In 2018, the quick ratio was 0.75 times,
signalling a relatively healthier position. However, this ratio declined to 0.64 times in 2019,
further dropping to 0.12 times in 2020, 0.07 times in 2021, and marginally recovering to 0.15
times in 2022. A quick ratio below 0.5 is generally considered a worrisome indication of
potential financial distress, highlighting the company's limited ability to cover its short-term
liabilities without relying on inventory sales.
11
The persistent decline in both the current and quick ratios suggests that CelcomDigi
may be grappling with diminishing liquidity. In conclusion, the consistent decline in
CelcomDigi's liquidity ratios raises significant concerns about the company's ability to meet its
short-term obligations. Addressing these challenges promptly and implementing effective
liquidity management strategies will be crucial for CelcomDigi to restore confidence among
stakeholders and ensure its financial stability in the ever-evolving telecommunications
industry.
12
4.2 TREND ANALYSIS (REDTONE)
i.
PROFITABILITY RATIOS
REDTONE
PROFIT
RETURN ON
RETURN ON
MARGIN (%)
ASSETS (%)
EQUITY (%)
2018
5.2
2.28
7.39
2019
10
2.85
14.46
2020
10.6
3.44
4.1
2021
3.8
16.41
11.60
2022
24.6
13.58
19.90
PROFITABILITY RATIOS
30
25
(%)
20
15
10
5
0
2018
2019
2020
YEARS
PROFIT MARGIN
2021
2022
RETURN ON ASSETS
RETURN ON EQUITY
Starting with the Profit Margin, Redtone has experienced a noteworthy surge from
5.2% in 2018 to 10% in 2019. This positive momentum continued in 2020, reaching 10.6%,
demonstrating the company's ability to generate more profit relative to its revenue. Although
there was a dip in 2021 to 3.8%, Redtone rebounded impressively in 2022, achieving a
remarkable profit margin of 24.6%. This overall positive trend indicates an increasing efficiency
in cost management and revenue generation, solidifying Redtone's position as a profitable
player in the telecommunications sector.
Examining the Return on Assets (ROA), Redtone's performance showcases a
consistent upward trajectory. Starting at 2.28% in 2018, the ROA increased to 2.85% in 2019,
reflecting the company's improved ability to generate profit from its assets. The positive trend
continued, with a substantial surge in 2021 to 16.41%. While there was a slight decrease to
13
13.58% in 2022, the overall trend signifies Redtone's effective utilization of assets to generate
profits, underscoring operational efficiency and strategic asset management.
Similarly, Redtone's Return on Equity (ROE) demonstrates a compelling story of
improvement. Beginning at 7.39% in 2018, the ROE surged to 14.46% in 2019, indicating the
company's ability to generate more earnings for its stockholders. Although there was a
temporary decline to 4.1% in 2020, Redtone rebounded significantly in 2021 to 11.60% and
achieved an even higher ROE of 19.90% in 2022. This highlights Redtone's commitment to
maximizing shareholder value and the company's effectiveness in utilizing equity to generate
returns.
In summary, Redtone's profitability ratios paint a positive picture of the company's
financial performance over the last five years. The upward trajectory in profit margin, coupled
with the consistent improvement in ROA and ROE, reflects a strategic and efficient
management approach. While there was a temporary dip in some ratios in 2021, the
subsequent rebound in 2022 suggests resilience and adaptability in navigating market
dynamics. These positive trends bode well for Redtone's future prospects, positioning the
company as a promising player in the telecommunications industry. Continued vigilance and
strategic planning will be essential to sustain and build upon these achievements in the
evolving business landscape.
14
ii.
ACTIVITY RATIOS
REDTONE
ACCOUNT
AVERAGE
INVENTORY
FIXED ASSET
TOTAL
RECEIVABLE
COLLECTION
TURNOVER
TURNOVER
ASSET
TURNOVER
PERIOD
(TIMES)
(TIMES)
TURNOVER
(TIMES)
(DAYS)
2018
1.76
204
270
5.92
0.56
2019
5.17
69
51.91
12.64
0.78
2020
1.58
228
324.83
7.55
0.70
2021
1.31
273
305.37
9.73
0.63
2022
1.47
243
332.02
19.52
0.53
(TIMES)
ACTIVITY RATIOS
300
300
200
200
100
100
0
DAYS
TIMES
400
0
2018
2019
2020
YEARS
2021
2022
Fixed Asset Turnover
Average Collection Period
Account Receivable Turnover
Inventory Turnover (ITO)
Total Asset Turnover
Redtone's activity ratios provide valuable insights into the efficiency of its operational
and asset management strategies. Analyzing these ratios over the past five years reveals a
mixed picture, showcasing areas of notable improvement alongside opportunities for
enhancement.
Starting with the Account Receivable Turnover, the ratio indicates Redtone's
efficiency in collecting receivables. In 2018, the ratio was relatively low at 1.76 times, signaling
a slower collection process. However, Redtone made significant strides, reaching an
impressive 5.17 times in 2019. Unfortunately, a subsequent decline occurred, with the ratio
dropping to 1.47 times in 2022. This suggests a recent decline in efficiency, indicating that
Redtone may be facing challenges in collecting receivables promptly.
15
The Average Collection Period, measuring the time it takes for Redtone to collect
receivables, exhibited a dramatic improvement from 204 days in 2018 to 69 days in 2019.
However, this positive trend reversed, with the average collection period increasing to 243
days in 2022. The correlation with the decline in Account Receivable Turnover reinforces the
notion that Redtone is taking longer to collect its receivables, necessitating a closer
examination of credit and collection processes.
Turning to Inventory Turnover, the ratio was exceptionally high in 2020 (324.83 times)
and 2021 (305.37 times), indicating efficient inventory management. Although there was a
slight decrease to 332.02 times in 2022, Redtone continues to manage its inventory effectively.
This is a positive sign for operational efficiency and cost control.
The Fixed Asset Turnover Ratio, reflecting how efficiently Redtone utilizes fixed
assets, was notably high in 2022 at 19.52 times. This suggests that Redtone is generating
substantial revenue per dollar of fixed assets, showcasing effective utilization and operational
efficiency.
Examining the Total Asset Turnover, the ratio has remained relatively stable over the
past five years, ranging from 0.53 times to 0.78 times. This indicates consistent efficiency in
using all assets, but there may be opportunities for further improvement. Evaluating ways to
optimize asset utilization could contribute to overall operational efficiency.
In conclusion, Redtone's activity ratios showcase a mixed performance. While the
company has made significant improvements in inventory management and fixed asset
utilization, challenges in account receivable collection and the overall efficiency of asset
utilization are evident.
16
iii.
LEVERAGE RATIOS
REDTONE
DEBT RATIOS
TIMES INTEREST
FIXED CHARGE
(%)
EARNED (TIMES)
AVERAGE (TIMES)
2018
31.57
27.50
4.09
2019
30.67
32.60
2.43
2020
37.90
30.12
3.29
2021
34.25
41.50
2.99
2022
25.02
47.62
3.35
45
40
35
30
25
20
15
10
5
0
40
35
30
25
20
15
10
5
0
2018
2019
2020
YEARS
2021
(%)
TIMES
LEVERAGE RATIOS
2022
TIMES INTEREST EARNED (TIMES)
FIXED CHARGE AVERAGE (TIMES)
DEBT RATIOS
Redtone's leverage ratios offer a compelling insight into the robust financial health and
prudent financial management practices of the company. Examining these ratios over the past
five years reveals a consistently positive trajectory, underscoring Redtone's sound approach
to capital structure and financial stability.
Starting with the Debt Ratios, which indicate the proportion of Redtone's total capital
financed by debt, the fluctuations observed over the past five years have been within a
relatively low range of 25.02% to 37.90%. This consistent moderation suggests that Redtone
has maintained a healthy balance between debt and equity financing, effectively managing
financial risk. The conservative approach to debt financing contributes to the company's
overall financial stability and resilience.
Moving to the Times Interest Earned ratio, which measures Redtone's ability to cover
its interest expenses, a remarkable improvement is evident. The ratio increased substantially
17
from 27.50 times in 2018 to an impressive 47.62 times in 2022. This upward trend signifies
that Redtone is generating significantly more income than required to meet its interest
obligations, reinforcing the company's strong financial standing and ability to navigate potential
economic challenges.
Similarly, the Fixed Charge Coverage ratio, assessing Redtone's capacity to meet all
fixed financial obligations, including interest and debt, mirrors the positive trend observed in
the Times Interest Earned ratio. Experiencing a substantial upward trajectory, the Fixed
Charge Coverage ratio reached 3.35 times in 2022. This signifies that Redtone can
comfortably cover its fixed charges, further solidifying its financial health and demonstrating a
robust capability to manage various financial obligations.
In summary, Redtone's leverage ratios collectively paint a positive and encouraging
picture of the company's financial health. The low debt ratios reflect a conservative and
prudent approach to debt financing, while the substantial increases in both Times Interest
Earned and Fixed Charge Coverage ratios underscore Redtone's strong capacity to manage
financial obligations. This positioning suggests that Redtone is well-prepared for future growth
and investment opportunities, instilling confidence among stakeholders and paving the way
for sustained success in the dynamic telecommunications industry.
18
iv.
LIQUIDITY RATIOS
REDTONE
CURRENT RATIOS
QUICK RATIOS
(TIMES)
(TIMES)
2018
2.29
2.28
2019
2.67
2.66
2020
2.56
2.56
2021
2.63
3.62
2022
3.28
3.27
LIQUIDITY RATIOS
4
TIMES
3
2
1
0
2018
2019
2020
YEARS
CURRENT RATIOS
2021
2022
QUICK RATIOS
The presented graph illuminates Redtone's liquidity ratios, encompassing both the
current ratio and quick ratio, pivotal metrics that gauge the company's ability to meet shortterm obligations with its assets. These liquidity indicators are crucial in assessing Redtone's
financial flexibility and its capacity to honor immediate financial commitments.
The current ratio, a metric reflecting the ratio of current assets to current liabilities,
witnessed an upward trajectory for Redtone from 2.29 times in 2018 to 2.67 times in 2019,
indicative of an initially strengthening ability to settle short-term obligations. However, there
was a slight dip in 2020, with the current ratio decreasing to 2.56 times, signaling a potential
challenge in covering immediate liabilities. Encouragingly, Redtone rebounded in 2021,
registering a current ratio of 2.63 times, and experienced a significant boost in 2022, reaching
3.28 times. This positive shift suggests an improvement in the company's ability to fulfill shortterm obligations, showcasing resilience and adaptability.
Simultaneously, the quick ratio, a measure of the company's capability to settle shortterm obligations with its most liquid assets, demonstrated a consistent increase from 2018 to
2019. The quick ratio surged from 2.28 times in 2018 to 2.66 times in 2019, indicating a robust
19
ability to cover immediate liabilities with highly liquid assets. However, there was a marginal
decline in 2020, with the quick ratio decreasing to 2.56 times, signaling a potential constraint
in using the most liquid assets to meet short-term obligations. In 2021, Redtone displayed a
modest improvement, with the quick ratio rising slightly to 3.62 times, suggesting a potential
reversal in the earlier downward trend. Nonetheless, there was a subsequent decrease in
2022 to 3.27 times, highlighting the importance of ongoing vigilance regarding liquidity
management.
The fluctuation in both the current and quick ratios underscores the dynamic nature of
Redtone's liquidity position. While the company showcased resilience and adaptability,
evidenced by the rebound in 2021 and a notable surge in 2022, continuous monitoring and
strategic liquidity management will be essential to navigate potential challenges in the everevolving business landscape.
In conclusion, the presented liquidity ratios depict Redtone's ongoing efforts to
enhance its financial flexibility and meet short-term obligations effectively. The positive trends
observed in both ratios, especially the notable increase in 2022, suggest a promising
trajectory. However, careful consideration and strategic planning will be imperative to sustain
and fortify Redtone's liquidity position amidst the uncertainties inherent in the
telecommunications industry.
20
5.0 COMPARATIVE ANALYSIS (CELCOMDIGI, REDTONE)
5.1 PROFITABILITY RATIOS (CELCOMDIGI, REDTONE)
i.
PROFIT MARGIN
CELCOMDIGI
YEARS
REDTONE
PROFIT MARGIN (%)
2018
23.60
5.2
2019
22.75
10
2020
19.84
10.6
2021
18.34
3.8
2022
11.26
24.6
PROFIT MARGIN
30
25
(%)
20
15
10
5
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
A comparative analysis of the profitability ratios of Celcomdigi and Redtone reveals a
consistent trend favoring Celcomdigi over the past five years, with higher profit margins across
the board. This financial disparity can be attributed to a combination of factors that underscore
Celcomdigi's dominance and resilience in the telecommunications sector.
Examining the profit margins for the years 2018 to 2022, Celcomdigi consistently
outperformed Redtone. In 2018, Celcomdigi boasted a profit margin of 23.60%, significantly
surpassing Redtone's 5.20%. The trend continued in 2019, with Celcomdigi at 22.75%
compared to Redtone's 10.00%. Even in 2020, as the global landscape faced economic
challenges, Celcomdigi maintained a profit margin of 19.84%, while Redtone recorded
10.60%. The year 2021 witnessed Celcomdigi's profit margin at 18.34% against Redtone's
3.80%. However, a surprising shift occurred in 2022 when Redtone experienced a surge in
profitability, boasting a profit margin of 24.60%, while Celcomdigi's margin dipped to 11.26%.
21
Celcomdigi's sustained lead can be attributed to various strategic advantages. The
company commands a larger market share, positioning itself as the leading mobile operator
in Malaysia with a customer base exceeding 11 million. This substantial market presence
affords Celcomdigi economies of scale, enhancing its bargaining power with suppliers and
contributing to more efficient operations.
Furthermore, Celcomdigi's success can be attributed to its diversified product and
service offerings. By providing a broad range of telecommunications solutions, Celcomdigi
caters to diverse consumer needs, thereby securing multiple revenue streams. This
diversification not only insulates the company from market fluctuations but also enhances its
competitiveness.
In contrast, Redtone, with around 3 million customers, faces inherent challenges in
competing with Celcomdigi. The smaller customer base limits Redtone's ability to leverage
economies of scale, resulting in a less competitive position in terms of pricing and service
offerings. Additionally, Redtone's focus on the fixed broadband market, while valuable in
providing specialized services, inherently presents a less profitable landscape compared to
the dynamic and lucrative mobile market.
While Celcomdigi's consistent profitability signifies its industry leadership and strategic
prowess, the surprising surge in Redtone's profitability in 2022 warrants further investigation.
This unexpected shift may be attributed to specific market dynamics, strategic initiatives, or
external factors influencing Redtone's performance during that period.
In conclusion, Celcomdigi's superior profitability ratios over the years underscore its
strategic advantages, market dominance, and adept management.
22
ii.
RETURN ON ASSETS
RETURN ON ASSETS
30%
25%
20%
15%
10%
5%
0%
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
The 5-year comparative analysis of Return on Assets (ROA) between CelcomDigi and
Redtone reveals a notable and evolving trend in their respective abilities to generate profits
from their assets. This analysis provides valuable insights into the changing dynamics of
efficiency and profitability within the two telecommunications companies.
In 2018, CelcomDigi exhibited a robust ROA of 25%, surpassing Redtone's ROA of 2.28%.
This suggested that CelcomDigi was more efficient in converting its assets into profits
compared to Redtone. However, over the subsequent years, a clear shift in this comparative
performance emerged.
By 2019, CelcomDigi's ROA experienced a decline to 18%, while Redtone demonstrated
improvement, reaching an ROA of 2.85%. This narrowing gap indicated a convergence in their
efficiency in utilizing assets for profit generation. In 2020, CelcomDigi's ROA further decreased
to 15%, while Redtone's increased to 3.44%.
23
The divergence in ROA trends became more pronounced in 2021, as CelcomDigi's ROA
declined to 15.00%, while Redtone's ROA surged significantly to 16.41%. Both companies
experienced an increase, but Redtone's substantial improvement showcased a more
pronounced upward trajectory.
In 2022, CelcomDigi's ROA declined sharply to 6.00%, reflecting a significant drop in its
ability to generate profits from its assets. Conversely, Redtone's ROA experienced a more
modest decline to 13.58%, maintaining its lead over CelcomDigi.
In conclusion, this comparative analysis underscores the evolving landscape of asset
efficiency and profitability in the telecommunications sector. For CelcomDigi, addressing the
sharp decline in ROA is imperative for sustained competitiveness and financial health.
Meanwhile, Redtone's consistent improvement positions the company favorably within the
industry.
24
iii.
RETURN ON EQUITY
CELCOMDIGI
YEARS
REDTONE
RETURN ON EQUITY (%)
2018
229
7.39
2019
217
14.46
2020
201
4.1
2021
184
11.60
2022
13.00
19.90
RETURN ON EQUITY
250
(%)
200
150
100
50
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
The comprehensive 5-year comparative analysis of Return on Equity (ROE) between
CelcomDigi and Redtone reveals a noteworthy divergence in their respective abilities to
generate profits from equity. This analysis sheds light on the evolving dynamics of efficiency
and profitability within the two telecommunications companies.
In 2018, CelcomDigi exhibited an impressive ROE of 229%, far surpassing Redtone's
ROE of 7.39%. This stark contrast indicated CelcomDigi's superior efficiency in transforming
equity into profits compared to Redtone. However, a significant shift in this comparative
performance became evident in the subsequent years.
By 2019, CelcomDigi's ROE declined to 217%, while Redtone demonstrated
improvement, reaching an ROE of 14.46%. This narrowing gap indicated a convergence in
their efficiency in utilizing equity for profit generation. In 2020, both companies experienced a
decline in ROE, with CelcomDigi's dropping further to 201%, while Redtone's declined more
sharply to 4.10%. Despite the decline, CelcomDigi maintained a higher ROE than Redtone in
2020.
25
In 2021, CelcomDigi's ROE declined to 184%, while Redtone's ROE recovered slightly
to 11.60%. Both companies exhibited a slight recovery, but CelcomDigi's ROE remained
higher than Redtone's. The notable change occurred in 2022 when CelcomDigi's ROE sharply
declined to 13.00%, while Redtone's ROE increased significantly to 19.90%. This marked the
first time Redtone surpassed CelcomDigi's ROE, showcasing a remarkable improvement in
Redtone's ability to generate profits from equity.
The overarching 5-year comparative analysis highlights Redtone's substantial
increase in ROE, contrasting with CelcomDigi's significant decline. Redtone's consistent
improvement positions the company as more adept at leveraging its equity for profitability,
while CelcomDigi faces challenges in maintaining the efficiency it demonstrated in 2018. As a
result, Redtone's ROE has now surpassed CelcomDigi's by a notable margin in 2022.
In conclusion, this comparative analysis underscores the shifting landscape of equity
efficiency and profitability in the telecommunications sector. For CelcomDigi, addressing the
sharp decline in ROE is imperative for sustained competitiveness and financial health.
Meanwhile, Redtone's consistent improvement positions the company favorably within the
industry.
26
5.2 ACTIVITY RATIOS (CELCOMDIGI, REDTONE)
i.
ACCOUNT RECEIVABLE TURNOVER
CELCOMDIGI
YEARS
REDTONE
ACCOUNT RECEIVABLE TURNOVER (TIMES)
2018
4.39
1.76
2019
4.81
5.17
2020
5.63
1.58
2021
5.74
1.31
2022
2.53
1.47
TIMES
ACCOUNT RECEIVABLE TURNOVER
7
6
5
4
3
2
1
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
The Account Receivable Turnover is a financial ratio that measures how efficiently a
company manages its receivables. A higher Account Receivable Turnover generally indicates
that a company is collecting its receivables more quickly, which is a positive sign of efficient
management. A lower turnover may suggest that the company is taking more time to collect
payments.
In examining the Account Receivable Turnover (ART) for CelcomDigi, the year 2018
provides a baseline with an ART of 4.39 times, and no percentage change is available as there
is no previous year for comparison. Moving to 2019, the ART increased to 4.81 times,
representing a percentage increase of approximately 9.56%. This uptick indicates that
CelcomDigi enhanced its efficiency in collecting receivables compared to the preceding year.
The positive trend continued into 2020, where the ART rose to 5.63 times, reflecting a
percentage increase of around 17.05%. This suggests a continued improvement in
receivables management. In 2021, the ART reached 5.74 times, with a modest percentage
increase of approximately 1.96%, indicating relatively stable performance. However, in 2022,
27
there was a significant decrease to 2.53 times, resulting in a percentage decrease of
approximately -55.97%. This substantial drop suggests a potential issue in CelcomDigi's
receivables management, possibly indicating prolonged payment collection or challenges in
credit control.
Shifting focus to Redtone, the period from 2018 to 2019 witnessed a remarkable
improvement in ART, surging from 1.76 to 5.17, representing a substantial percentage
increase of approximately 193.18%. This substantial improvement in efficiency suggests
effective management of receivables during that period. However, from 2019 to 2020, there
was a significant decline as the ART dropped from 5.17 to 1.58, resulting in a considerable
percentage decrease of approximately -69.47%. The subsequent years, 2020 to 2021,
witnessed a further decrease in ART from 1.58 to 1.31, with a percentage decrease of
approximately -17.09%, indicating a slight decline in receivables management efficiency.
However, in 2021 to 2022, there was a small improvement as the ART increased from 1.31 to
1.47, reflecting a percentage increase of approximately 12.21%. These fluctuations in ART for
Redtone underscore the dynamic nature of its receivables management, suggesting varying
degrees of efficiency and potential challenges in different years.
To conclude, CelcomDigi, there was an overall increasing trend from 2018 to 2021, but a
significant decrease in 2022. For Redtone, there was a substantial increase from 2018 to
2019, followed by fluctuations in subsequent years.
28
ii.
AVERAGE COLLECTION PERIOD
CELCOMDIGI
YEARS
REDTONE
AVERAGE COLLECTION PERIOD (DAYS)
2018
81
204
2019
74
69
2020
63
228
2021
62
273
2022
141
243
AVERAGE COLLECTION PERIOD
300
DAYS
250
200
150
100
50
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
The Average Collection Period is a financial metric that represents the average number
of days it takes for a company to collect payment from its customers after a sale is made. A
lower Average Collection Period is generally considered better as it indicates that the company
is collecting payments more quickly. A higher collection period may suggest that the company
takes longer to collect payments.
Over the observed years, CelcomDigi's Average Collection Period (ACP)
demonstrated a consistent improvement in payment collection efficiency. From 2018 to 2019,
the ACP decreased by approximately 8.64%, signaling enhanced effectiveness in receivables
management. This positive trend continued in 2019 to 2020, with a further reduction of about
14.86%, indicating sustained efficiency. The ACP remained relatively stable from 2020 to
2021, decreasing by approximately 1.59%, showcasing consistent performance. However, in
2021 to 2022, there was a significant increase of approximately 127.42%, suggesting potential
challenges in CelcomDigi's receivables management, resulting in a longer average time to
collect payments.
29
Conversely, Redtone experienced significant fluctuations in its ACP. The period from
2018 to 2019 saw a remarkable improvement, with the ACP decreasing by approximately
66.18%, indicating effective receivables management strategies. However, from 2019 to 2020,
there was an unexpected increase of about 230.43%, reflecting challenges or changes in
payment collection processes. This trend persisted in 2020 to 2021, with the ACP increasing
by approximately 19.74%, indicating ongoing challenges in Redtone's receivables
management. Although there was a slight decrease in 2021 to 2022, with a percentage
decrease of approximately 10.99%, the ACP remained considerably higher than in earlier
years, suggesting continued challenges in payment collection. These variations in ACP for
both CelcomDigi and Redtone provide valuable insights into the effectiveness of their
respective receivables management strategies and highlight areas for potential improvement
or attention.
To conclude, for CelcomDigi, there was an overall decreasing trend from 2018 to 2021,
but a significant increase in 2022. For Redtone, there was a substantial decrease in 2019,
followed by an increase in the subsequent years.
30
iii.
INVENTORY TURNOVER
CELCOMDIGI
YEARS
REDTONE
INVENTORY TURNOVER (TIMES)
2018
107
270
2019
69.19
51.91
2020
44.91
324.83
2021
54.13
305.37
2022
41
332.02
TIMES
INVENTORY TURNOVER
350
300
250
200
150
100
50
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
Inventory Turnover is a financial ratio that measures how many times a company's
inventory is sold and replaced over a specific period. A higher inventory turnover generally
indicates more efficient inventory management A higher Inventory Turnover generally
indicates that a company is selling and restocking its inventory more frequently, which can be
a sign of effective inventory management. A lower turnover may suggest slower inventory
sales and potentially excess inventory.
In examining the Inventory Turnover for CelcomDigi and Redtone over the specified
years, notable trends in inventory management efficiency emerge. For CelcomDigi, from 2018
to 2019, there was a substantial decrease in Inventory Turnover from 107 times to 69.19 times,
indicating a 35.99% reduction. This decline suggests a slower pace in inventory turnover,
possibly influenced by changes in sales dynamics or inventory management practices. The
trend persisted from 2019 to 2020, with the turnover decreasing to 44.91 times, representing
a further 35.08% decrease. However, in 2020 to 2021, there was an increase to 54.13 times,
signifying a 20.55% improvement, potentially reflecting enhanced sales performance or
improved inventory management. Nonetheless, in 2021 to 2022, the turnover decreased to 41
31
times, indicating a 24.29% reduction, which may signify adjustments in market demand or
inventory strategies.
In contrast, Redtone experienced substantial fluctuations in Inventory Turnover. From
2018 to 2019, there was a significant decrease from 270 times to 51.91 times, reflecting an
80.75% decline and suggesting a major shift in the speed of inventory turnover. The
subsequent year, 2019 to 2020, saw a remarkable increase to 324.83 times, marking a
substantial 525.26% rise and indicating a significant improvement in inventory turnover,
potentially driven by increased sales or more efficient inventory management. In 2020 to 2021,
there was a slight decrease to 305.37 times (a 5.99% decrease), despite the turnover
remaining high, suggesting continued efficiency in inventory management. Finally, in 2021 to
2022, there was a further increase to 332.02 times, representing an 8.72% improvement and
implying sustained sales growth or enhanced inventory management practices. These
fluctuations in Inventory Turnover for both companies provide valuable insights into their ability
to optimize inventory levels and meet customer demand effectively, with changes influenced
by factors such as market dynamics, sales performance, and evolving inventory management
strategies.
To conclude, for CelcomDigi, there was a decrease in inventory turnover from 2018 to
2020, followed by an increase in 2021 and a decrease again in 2022. For Redtone, there were
fluctuations in inventory turnover, with a substantial decrease in 2019 and 2020, followed by
an increase in 2021 and a slight increase in 2022.
32
iv.
FIXED ASSET TURNOVER
CELCOMDIGI
YEARS
REDTONE
FIXED ASSET TURNOVER (TIMES)
2018
2.26
5.92
2019
1.15
12.64
2020
1.04
7.55
2021
1.11
9.73
2022
0.49
19.52
FIXED ASSETS TURNOVER
25
TIMES
20
15
10
5
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
Fixed Asset Turnover is a financial ratio that measures a company's ability to generate
revenue from its fixed assets. It's calculated by dividing the total revenue by the average fixed
assets. A higher fixed asset turnover generally indicates better utilization of fixed assets. A
higher Fixed Asset Turnover generally indicates that a company is generating more revenue
for each dollar invested in fixed assets, which is a positive sign of asset efficiency. A lower
turnover may suggest that the company is not efficiently utilizing its fixed assets to generate
revenue.
Examining the Fixed Asset Turnover for CelcomDigi and Redtone across the specified
years reveals distinctive trends in the efficiency of utilizing fixed assets to generate sales. For
CelcomDigi, from 2018 to 2019, there was a notable decrease in Fixed Asset Turnover from
2.26 times to 1.15 times, indicating a 49.56% reduction in efficiency. This decline may suggest
challenges in optimizing asset utilization or shifts in operational strategies. The trend continued
in 2019 to 2020, with a further decrease to 1.04 times, marking a 9.57% decrease, potentially
indicating ongoing challenges in maximizing fixed asset efficiency. However, in 2020 to 2021,
there was a slight increase to 1.11 times, reflecting a 6.73% improvement, suggesting potential
33
adjustments in operational processes or enhanced sales efficiency. Nonetheless, in 2021 to
2022, the Fixed Asset Turnover sharply decreased to 0.49 times, representing a significant
55.86% reduction. This substantial drop may signify challenges in effectively utilizing fixed
assets, potentially influenced by changes in business operations or a decline in sales.
Conversely, Redtone's Fixed Asset Turnover demonstrated distinct fluctuations. From
2018 to 2019, there was a remarkable increase from 5.92 times to 12.64 times, marking a
substantial 113.51% rise, suggesting significant improvements in asset utilization efficiency.
However, in 2019 to 2020, there was a decrease to 7.55 times, resulting in a 40.17% reduction,
indicating challenges in maintaining the previous year's level of efficiency. The trend reversed
in 2020 to 2021, with an increase to 9.73 times, reflecting a 28.81% improvement, potentially
indicating enhanced operational processes or increased sales efficiency. Notably, in 2021 to
2022, the Fixed Asset Turnover sharply increased to 19.52 times, representing a significant
100.82% rise, implying exceptional improvement in utilizing fixed assets effectively. These
variations underscore the importance of assessing the efficiency of fixed asset utilization for
both companies, considering factors such as operational strategies, sales dynamics, and
changes in business processes.
To conclude, for CelcomDigi, there were fluctuations in fixed asset turnover, with a
decrease from 2018 to 2019, a slight decrease in 2020, an increase in 2021, and a significant
decrease in 2022. For Redtone, there were significant fluctuations, with a substantial increase
in 2019, followed by decreases in 2020 and 2021, and a significant increase again in 2022.
34
v.
TOTAL ASSET TURNOVER
CELCOMDIGI
YEARS
REDTONE
TOTAL ASSET TURNOVER (TIMES)
2018
1.05
0.56
2019
0.76
0.78
2020
0.68
0.70
2021
0.72
0.63
2022
0.17
0.53
Times
TOTAL ASSETS TURNOVER
1,2
1
0,8
0,6
0,4
0,2
0
2018
2019
2020
Years
CELCOMDIGI
2021
2022
REDTONE
Total Asset Turnover is a financial ratio that measures a company's ability to generate
revenue from its total assets. It's calculated by dividing the total revenue by the average total
assets. A higher total asset turnover generally indicates better utilization of assets. A higher
Total Asset Turnover generally indicates that a company is generating more revenue for each
dollar invested in total assets, which is a positive sign of asset efficiency. A lower turnover may
suggest that the company is not efficiently utilizing its total assets to generate revenue.
The Total Asset Turnover for CelcomDigi and Redtone over the specified years reveals
distinctive trends in the efficiency of utilizing total assets to generate sales. For CelcomDigi,
from 2018 to 2019, there was a notable decrease from 1.05 times to 0.76 times, indicating a
27.62% reduction in efficiency. This decline may suggest challenges in optimizing asset
utilization or shifts in operational strategies. The trend continued in 2019 to 2020, with a further
decrease to 0.68 times, marking a 10.53% decrease, potentially indicating ongoing challenges
in maximizing total asset efficiency. However, in 2020 to 2021, there was a slight increase to
0.72 times, reflecting a 5.88% improvement and suggesting potential adjustments in
operational processes or enhanced sales efficiency. Nonetheless, in 2021 to 2022, the Total
35
Asset Turnover sharply decreased to 0.17 times, representing a significant 76.39% reduction.
This substantial drop may signify challenges in effectively utilizing total assets, potentially
influenced by changes in business operations or a decline in sales.
Similarly, Redtone's Total Asset Turnover demonstrated distinct fluctuations. From
2018 to 2019, there was a remarkable increase from 0.56 times to 0.78 times, marking a
significant 39.29% rise and suggesting improvements in asset utilization efficiency. However,
in 2019 to 2020, there was a decrease to 0.70 times, resulting in a 10.26% reduction, indicating
challenges in maintaining the previous year's level of efficiency in total asset utilization. The
trend reversed in 2020 to 2021, with a decrease from 0.70 times to 0.63 times, reflecting a
10% decrease and suggesting ongoing challenges in optimizing asset utilization or shifts in
business strategies. Notably, in 2021 to 2022, the Total Asset Turnover decreased from 0.63
times to 0.53 times, representing a 15.87% decrease, indicating potential challenges in
effectively utilizing total assets, potentially influenced by changes in business operations or a
decline in sales. These variations underscore the importance of assessing the efficiency of
total asset utilization for both companies, considering factors such as operational strategies,
sales dynamics, and changes in business processes.
To conclude, for both CelcomDigi and Redtone, there were fluctuations in total asset
turnover over the years. CelcomDigi had a decrease from 2018 to 2019, a further decrease in
2020, an increase in 2021, and a significant decrease in 2022. Redtone had an increase from
2018 to 2019, a slight decrease in 2020, a further decrease in 2021, and another decrease in
2022.
36
5.3 LEVERAGE RATIOS (CELCOMDIGI, REDTONE)
i.
DEBT RATIOS
CELCOMDIGI
YEARS
REDTONE
DEBT RATIOS (%)
2018
89.15
31.57
2019
91.95
30.67
2020
93.29
37.90
2021
92.77
34.25
2022
57.40
25.02
DEBT RATIOS
100
(%)
80
60
40
20
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
A comparative analysis of the debt ratios of CelcomDigi and Redtone reveals an ongoing
downward trend favoring Celcomdigi over the past five years, with higher debt expenses
across the board. A lot of factors that highlight Celcomdigi's strength and dominance in the
telecom industry can be blamed for this financial gap.
By looking at the Debt Ratio from 2018 to 2022, Redtone exhibited a consistent superiority
over CelcomDigi. In 2018, CelcomDigi boasted a debt ratio of 89.15%, significantly surpassing
Redtone's 31.57%. The trend suddenly increased in 2019, with CelcomDigi at 91.95%
compared to Redtone's 30.67%. Even in 2020, as the global landscape faced economic
challenges, CelcomDigi maintained an increase of 93.29%, while Redtone also recorded an
increase of 37.90%. The year 2021 observed that CelcomDigi debt ratio decreased a little bit
from 2020 at 92.77% against Redtone's 34.25%. However, a surprising shift occurred in 2022
when Redtone experienced a decrease in expenses, boasting a debt ratio of 25.02%, while
CelcomDigi ratio dipped to 57.40%.
37
Furthermore, CelcomDigi is a big company. It has a big size and life cycle stage of a
company that can influence its debt ratio. CelomDigi is generally larger and more established
companies that have greater access to debt markets and may use debt for strategic purposes.
But compared to Redtone, it also has great access to debt markets because the smaller and
newer company may have lower debt ratios as they focus on building equity.
Redtone’s showed a greater decrease in debt ratios in 2022 because of lower financial
risk. It is because a lower debt ratio indicates that the company has less financial leverage,
which reduces its overall financial risk. It is important that the optimal debt ratio varies by
industry and company characteristics.
38
ii.
TIMES INTEREST EARNED (CELCOMDIGI, REDTONE)
CELCOMDIGI
YEARS
REDTONE
TIMES INTEREST EARNED
2018
17.12
27.50
2019
8.54
32.60
2020
7.62
30.12
2021
8.32
41.50
2022
5.82
47.62
TIMES INTEREST EARNED
60
TIMES
50
40
30
20
10
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
A financial indicator of a company's capacity to pay interest on outstanding debt is revealed
by comparing CelcomDigi and Redtone over a five-year period using times interest earned
(TIE). This analysis offers insightful information about how the two telecom companies'
earnings and effectiveness are changing.
In 2018, CelcomDigi exhibited a strong TIE of 17.12 times, surpassing Redtone's TIE of
27.50 times. This year indicates that Redtone’s has a greater ability to cover interest costs
compared to CelcomDigi because a higher earnings before interest and tax reflects stronger
operating profitability. But in the years that followed, there was a noticeable change in this
relative performance.
By 2019, CelcomDigi's TIE experienced a degradation to 8.54 times, while Redtone
demonstrated growth, reaching a TIE of 32.60 times. This closing difference suggested an
increase in their ability to generate profits from the use of assets. In 2020, CelcomDigi's TIE
further decreased to 7.62, while Redtone's also reduced to 30.12 times.
39
The variations in TIE trends showed more improvement in 2021, as CelcomDigi's TIE
increased to 8.32 times, while Redtone's TIE raised significantly to 41.50 times. Both
companies experienced growth, but Redtone's significant progress demonstrated a more
marked upward trend.
In 2022, CelcomDigi's TIE declined sharply until 5.82 times, showing a sharp decline in its
capacity to turn a profit from its assets. On the other hand, Redtone's TIE experienced a more
increase to 47.62 times, maintaining its lead over CelcomDigi.
In conclusion, this comparative analysis by highlighting how a company’s ability to service
its debt between these two companies, CelcomDigi and Redtone. It is important to consider
these factors in the company’s specific case when interpreting the TIE ratio. By that, Redtone
has a higher TIE compared to CelcomDigi because a company having a great times interest
earned (TIE) ratio is considered a robust operating performance, characterized by healthy
profit margins and efficient cost management.
40
iii.
FIXED CHARGE AVERAGE
CELCOMDIGI
YEARS
REDTONE
FIXED CHARGE AVERAGE
0.05
0.05
4.09
0.81
0.81
2.43
1.67
1.67
3.29
1.38
1.38
2.99
1.04
1.04
3.35
FIXED CHARGE COVERAGE
5
TIMES
4
3
2
1
0
0,05
0,81
1,67
YEARS
CELCOMDIGI
1,38
1,04
REDTONE
A higher Fixed Charge Coverage ratio indicates a company’s ability to satisfy fixed
financial obligations. A Fixed Charge Coverage Ratio above 1.0 times implies that the
company is making enough money to cover its fixed charges, which is good.
A thorough 5-year analysis of CelcomDigi and Redtone Fixed Charge Coverage shows
significant differences in the two companies’ capacity to make equity profits. The two telecom
companies’ changing efficiency and profitability dynamics are clarified by this analysis.
In 2018, CelcomDigi exhibited Fixed Charge Average of 0.05 times, far surpassing
Redtone's Fixed Charge Average of 4.09 times. This establishing difference demonstrates how
much more effectively Redtone converted assesses a company’s ability to cover its fixed
charges into earnings than CelcomDigi. But in the following years, a notable change in this
comparative performance was obvious.
By 2019, CelcomDigi's Fixed Charge Average improved to 0.81 times, while Redtone
demonstrated decreased, reaching the Fixed Charge Average of 2.43 times. This closing
difference suggested that they were becoming better at using interest expense and lease
41
payments to generate profits. In 2020, both companies experienced an increase in Fixed
Charge Average with CelcomDigi's raising further to 1.67 times, while Redtone's also grew
more sharply to 3.29 times. According to research, Redtone will continue to have a higher
Fixed Charge Average than CelcomDigi in 2020.
In 2021, CelcomDigi's ROE declined 1.38 times, while Redtone's Fixed Charge Average
partially recovered to 2.99 times. While both businesses showed signs of decreased, Redtone
continued to be higher than CelcomDigi. The notable change occurred in 2022 when
CelcomDigi's Fixed Charge Average sharply reduced to 1.04 times, while Redtone's Fixed
Charge Average increased significantly to 3.35 times. This time Redtone’s Fixed Charge
Average exceeded that of CelcomDigi because of higher earnings before interest and tax that
provides more room to cover fixed charges due to that the profitability and operational runs
efficiency directly impact the EBIT.
For Redtone’s, the trend showed higher compared to CelcomDigi, which means the
trends in the fixed charge coverage ratio sign of financial stability. It suggests that the company
is generating sufficient earnings to comfortably cover its fixed charges that reduce the risk of
default on debt obligations over time because it can provide insights into a company’s financial
stability and management’s ability to navigate economic challenges.
This comparative analysis concludes by highlighting the changing fixed average efficiency
and profitability landscape in the telecommunications industry. It is important for investors and
analysts to consider the ratio of a company’s growth stage and specific business. By that,
Redtone has a higher Fixed Charge Coverage compared to CelcomDigi. The company
showed more consistency but is not suitable for continuous improvement because of the
company's operating efficiency that generates strong earnings from their core in business,
indicating effective cost management and profitability.
42
5.4 LIQUIDITY RATIOS (CELCOMDIGI, REDTONE)
i.
CURRENT RATIOS
CELCOMDIGI
YEARS
REDTONE
CURRENT RATIOS (times)
2018
0.78
2.29
2019
0.67
2.67
2020
0.61
2.56
2021
0.49
2.63
2022
0.49
3.28
CURRENT RATIOS
3,28
3,5
3
2,67
TIMES
2,56
2,29
2,5
2,63
2
1,5
1
0,78
0,67
0,61
0,49
0,5
0,49
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
The comparative analysis of CelcomDigi and Redtone's current ratios over the past
five years provides valuable insights into their respective financial positions. Examining these
ratios reveals notable trends in liquidity and financial health, emphasizing the differences in
their ability to meet short-term obligations.
In 2018, CelcomDigi's current ratio stood at 0.78, indicating that its current assets could
cover 78% of its current liabilities. In contrast, Redtone boasted a higher current ratio of 2.29,
signaling a stronger financial position with 2.29 times more current assets than current
liabilities. This initial comparison suggested that Redtone held a superior financial standing
compared to CelcomDigi.
As the years progressed, CelcomDigi experienced a decline in its current ratio,
dropping to 0.67 in 2019 and further decreasing to 0.61 in 2020. These declines signaled a
weakening financial position for CelcomDigi, as its current assets became less sufficient to
43
meet current liabilities. In contrast, Redtone's current ratio remained relatively stable at 2.67
in 2019 and 2.56 in 2020, indicating sustained financial strength during this period.
The divergence continued in 2021, with CelcomDigi's current ratio plummeting to 0.49,
reflecting a more pronounced deterioration in its financial status. Meanwhile, Redtone's
current ratio improved slightly to 2.63, highlighting the company's ability to strengthen its
financial position.
In 2022, CelcomDigi's current ratio remained at 0.49, indicating a persistently
challenging financial situation. In contrast, Redtone's current ratio climbed significantly to 3.28,
emphasizing an improvement in its financial standing.
The overarching narrative from this comparative analysis underscores the divergent
financial trajectories of CelcomDigi and Redtone. CelcomDigi faced a consistent decline in its
current ratio, signaling increased challenges in meeting short-term obligations and potentially
managing liquidity. Redtone, on the other hand, not only maintained a strong financial position
but also demonstrated an upward trend in its current ratio, showcasing improved liquidity and
financial health.
In conclusion, the comparative analysis of current ratios emphasizes the importance of
liquidity in assessing the financial stability of companies. CelcomDigi's declining current ratio
signals potential challenges, while Redtone's consistently higher and improving current ratio
positions the company as financially resilient. Stakeholders and investors can use these
insights to make informed decisions about the financial health and sustainability of CelcomDigi
and Redtone in the dynamic telecommunications industry.
44
ii.
QUICK RATIOS
CELCOMDIGI
YEARS
REDTONE
QUICK RATIOS (TIMES)
2018
0.75
2.28
2019
0.64
2.66
2020
0.12
2.56
2021
0.07
3.62
2022
0.15
3.27
TMES
QUICK RATIOS
4
3,5
3
2,5
2
1,5
1
0,5
0
2018
2019
2020
YEARS
CELCOMDIGI
2021
2022
REDTONE
The comparative analysis of CelcomDigi and Redtone's quick ratios over the past five
years provides a nuanced perspective on their respective liquidity positions and short-term
solvency. Examining these ratios reveals consistent disparities in their ability to meet
immediate financial obligations.
In 2018, CelcomDigi's quick ratio was 0.75 times, indicating that 75% of its assets were
liquid and readily available to cover short-term liabilities. In contrast, Redtone boasted a
substantially higher quick ratio of 2.28 times, signifying a remarkable 228% liquidity in its
assets. This initial comparison suggested that Redtone held a superior position in terms of
short-term solvency.
As the years unfolded, CelcomDigi's quick ratio faced a decline, dropping to 0.64 times
in 2019 and further plummeting to a concerning 0.12 times in 2020. These declines indicated
a significant tightening of CelcomDigi's liquidity, posing potential challenges in meeting
immediate financial obligations. In stark contrast, Redtone's quick ratio remained relatively
45
stable at 2.66 times in 2019 and 2.56 times in 2020, showcasing sustained liquidity strength
during this period.
The disparity in liquidity positions continued to widen in 2021, with CelcomDigi's quick
ratio falling further to 0.07 times, signaling a situation of very tight liquidity. In contrast,
Redtone's quick ratio surged significantly to an impressive 3.62 times, indicating
extraordinarily strong liquidity.
In 2022, CelcomDigi's quick ratio saw a slight recovery to 0.15 times, suggesting a
modest improvement in liquidity. Meanwhile, Redtone's quick ratio declined slightly to 3.27
times, still maintaining an exceptionally strong liquidity position.
The overarching narrative from this comparative analysis underscores the consistent
advantage Redtone has maintained in terms of liquidity over the past five years. Redtone's
quick ratio consistently outpaced CelcomDigi's, reflecting a more robust ability to cover shortterm obligations and maintain financial flexibility.
In conclusion, the comparative analysis of quick ratios emphasizes the importance of
liquidity in assessing the short-term solvency of companies. CelcomDigi's declining quick ratio
signals tightening liquidity, while Redtone's has a better and consistently higher and stable
quick ratio positions the company as more resilient in meeting immediate financial obligations.
46
6.0 CONCLUSIONS
Based on both financial ratios of both companies, CelcomDigi has a better financial
position than REDtone in almost every way. CelcomDigi has a lower debt-to-equity ratio, which
means that it is less reliant on debt to finance its operations. This makes CelcomDigi less risky
and more likely to be able to weather a financial downturn. CelcomDigi also has a higher times
interest earned ratio, which means that it is better able to meet its interest obligations. This is
important because it shows that CelcomDigi is generating enough cash flow to cover its debt
payments. Finally, CelcomDigi has higher profit margins than REDtone, which means that it is
keeping a larger percentage of its revenue as profit. This suggests that CelcomDigi is more
efficient than REDtone and is better at managing its costs.
Overall, CelcomDigi is the clear winner in terms of financial ratios. It is less risky, more
profitable, and more efficient than REDtone. This suggests that CelcomDigi is a better longterm investment than REDtone.
47
7.0 APPENDIXES
7.1 INCOME STATEMENT CELCOMDIGI
48
7.2
INCOME
STATEMENT
49
REDTONE
7.3 BALANCE SHEET CELCOMDIGI
50
7.4 BALANCE SHEET REDTONE
51
7.5 ANNUAL REPPORT CELCOM 2018-2022
2018
52
53
2019
54
55
2020
56
57
2021
58
59
2022
60
61
7.6 ANNUAL REPORT REDTONE 2018-2022
2018
62
63
64
65
2019
66
67
68
69
2020
70
71
72
2021
73
74
75
2022
76
77
78
7.7 OTHER REFERENCES FROM WEBSITE (CELCOMDIGI)
79
80
81
82
83
84
7.8
OTHER
REFERENCES
FROM
85
WEBSITE
(REDTONE)
86
87
88
8.0 REFERENCES
Wikipedia. (n.d.). CelcomDigi. https://en.wikipedia.org/wiki/CelcomDigi
Celcom. (n.d.). Celcom-Digi Merger. https://www.celcom.com.my/celcom-digi-merger
REDtone. (n.d.). About REDtone. https://www.redtone.com/corporate/about-redtone/
REDtone. (2019). Annual Report 2018.
https://www.redtone.com/wpcontent/uploads/2019/04/REDtone_Annual_Report_201
8.pdf
REDtone. (2019). Annual Report 2019.
https://www.redtone.com/wp-content/uploads/2019/10/REDtone-Annual-Report2019.pdf
REDtone. (2020). Annual Report 2020.
https://www.redtone.com/wp-content/uploads/2020/10/REDtone-AR2020.pdf
REDtone. (2021). Annual Report 2021.
https://www.redtone.com/wp-content/uploads/2021/10/REDtone-Annual-Report2021-1.pdf
REDtone. (2022). Annual Report 2022.
https://www.redtone.com/wp-content/uploads/2022/10/Annual-Report-2022.pdf
CelcomDigi. (2018). Annual Report 2018.
https://celcomdigi.listedcompany.com/misc/FlippingBook_PDF_Publisher/Publication
s/HTML/DIGI_2018-new/89/
CelcomDigi. (2019). Annual Report 2019.
https://celcomdigi.listedcompany.com/misc/FlippingBook_PDF_Publisher/Publication
s/HTML/DIGI_2019-new/167/
CelcomDigi. (2020). Annual Report 2020.
https://celcomdigi.listedcompany.com/misc/ar/ar2020.pdf
CelcomDigi. (2021). Annual Report 2021.
https://celcomdigi.listedcompany.com/misc/ar/ar2021.pdf
CelcomDigi. (2022). Annual Report 2022.
https://celcomdigi.listedcompany.com/misc/FlippingBook_PDF_Publisher/Publication
s/HTML/CelcomDigi_2022/index.html
Wall Street Journal. (n.d.). CelcomDigi Financials.
https://www.wsj.com/market-data/quotes/MY/XKLS/6947/financials/annual/incomestatement
Wall Street Journal. (n.d.). REDtone Financials.
https://www.wsj.com/market-data/quotes/MY/XKLS/0032/financials/annual/incomestatement
89