Accouting report

Analysis of Public Company

Reports

Basic Accounting (FNBE0145)

Assignment

Tony Tang Lee Lung (0314002)

Wong Yeong Cherng (0313378)

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TABLE CONTENT

Cover page 1Background information

3

Recent development 4Profitability Ratio Calculations

5

Financial Stability Ratio and P/E Ratio Calculations

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Profitability Ratio Interpretation

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Financial Stability 8P/E Ratio Interpretation

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Investment Recommendation

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Appendix 11-14References 15

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Background information of Dutch Lady Malaysia Industry Bhd

In the 1950s, Dutch Lady Milk Industry Berhad (Dutch Lady Malaysia)

is a manufacturer of dairy products in Malaysia. In 1963, it was

incorporated and became the first milk company in Malaysia to be listed on

Bursa Malaysia, the local stock exchange in 1968. Royal

FrieslandCampina, a Dutch multinational corporation and one of the largest

milk companies in the world is its holding company.

Dutch Lady Malaysia produces and sells their products to the home

and export market such as Growing-up Milk, Powdered Milk, Condensed

Milk, UHT Milk, Sterilized Milk, Pasteurized Milk, Cultured Milk, Infant

Formula, Yoghurt and Fruit Juice Drinks.

The Company believes in product innovation and is well supported by

Royal FrieslandCampina. The Company continually strives to improve its

processes in order to deliver nutritious products of high quality to its

consumers. Meanwhile, it was the first company in the world to introduce a

growing up milk powder specifically formulated for children from ages one

to three, which are Dutch Lady 123 and Dutch Lady 456.

Since 1995, the company has continually been accredited with ISO

9001 certification. The strong emphasis is also placed on food safety with

HACCP (Hazard Analysis Critical Control Point) System covering all its

plants. Also, the company also has in place ISO 14001 Environment

Management System and OHSAS 18001 (Occupational Health and Safety

Assessment Series). The Company’s products are all halal-certified.

The company’s factory is located in Petaling Jaya. Recently, Dutch

Lady Malaysia is the market leader in key milk categories such as UHT

milk, Sterilized milk and Growing-Up Milk.

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Recent Development

Year 1995 Dutch Lady Malaysia been accredited with ISO 9001

certification

Year 1995 The Hazard Analysis and Critical Control Point

(HACCP) certification has been awarded to Dutch

Lady Malaysia for all its processing and packaging

plants.

Year 1999 Dutch Lady Malaysia attained certification under the

new OHSAS 18001 which contribute to the protection

of employees, visitors and contractors from hazards

Year 2004 Dutch Lady Malaysia attained certification under the

new ISO 14001

Year 2004 Dutch Lady Malaysia received the “NPC productive”

Awards.

Year 2007 Dutch Lady Malaysia received “The Reader’s Digest

Superbrands Gold” Awards.

Year 2010 Dutch Lady Malaysia received the “Putra Brand”

Awards.

Extra award

Dutch Lady Malaysia receives the “Halal certification

for local and international markets” and the halal

certificate issued by JAKIM is renewed every two

years.

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Profitability Ratio

2012 2011(ROE) = 123380

x100%

= 108082x100%Return on

Equity 237644228313

= 51.9% = 47.3%(NPM) = 123380

x100%

= 108082Net Profit Margin

882179 810647X100%

= 14.0% = 13.3%(GPM) = 346704

x100%

= 304472Gross Profit Margin

882179 810647 X100%

= 39.3% = 37.6%(SER) = 120676

x100%

= 106180Selling Exp.Ratio

882179 810647X100%

= 13.7% = 13.1%

(GER) = 27472x100%

= 26134General Exp. Ratio

882179 810647X100%

= 3.1% = 3.2%(FER) = 2862

x100%

= 919Financial Exp. Ratio

882179 810647X100%

= 0.3% = 0.1%

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Financial Stability Ratio

2012 2011Working Capital = 308510 =

324466

161786 135309= 1.91 = 2.4= 1.91: 1 = 2.40: 1

Total Debt = 166640 x100%

= 139360x100%

382774 398514= 43.5% = 35.0%

(IT) = 365 days = 365 days

Stock Turnover

(535475/90114.5)

(506175/83085)

= 61.4 days = 59.9 days(DT) = 365 days = 365 daysDebtor Turnover (882179 /26445)

(810647 / 55945)

= 10.9 days = 25.2 days

(IC) = 6056+123380 = 3104+108082Interest Coverage 6056

3104

= 21.4 times = 35.8 times

Price/ Earning Ratio

=Current share priceEarnings per share

= 46.762.03

= 23.09

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Interpretation

ROEDuring the year 2011-2012 periods, the ROE has increased from 47.3% to 51.9%. This means that the owner is getting more return on his capital.

NPMDuring the year 2011-2012 periods, the NPM has increased from 13.3% to 14.0%. This means that the owner is getting more profit from the sales.

GPM

During the year 2011-2012 periods, the GPM has increased from 37.6% to 39.3%. This means that the business is getting better in controlling the cost of goods sold.

SER

During the year 2011-2012 periods, the SER has increased from 13.1% to 13.7%. This means that the business is getting worse in controlling the selling expenses.

GER

During the year 2011-2012 periods, the GER has decreased from 3.2% to 3.1%. This means that the business is getting better in controlling the general expenses.

FER

During the year 2011-2012 periods, the FER has increased from 0.1% to 0.3%. This means that the business is getting worse in controlling the financial expenses.

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Interpretation

P/E Ratio

P/E ratio measures how expensive a share is. The higher the P/E ratio, the more expensive a share is, and vice versa. According to the value that was counted, the P/E of 23.09 means that an investor will need to wait for 23.09 years to recoup his investment. A conservative investor will normally pay no more than ratio of 15 for a share that he likes.

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Interpretation

Working Capital

During the year 2011-2012 periods, the WCR has decreased from 2.40: 1 to 1.91: 1. The business ability to pay off current liabilities is getting worse. In addition, it does not reach the minimum 2: 1 ratio.

Total Debt

During the year 2011-2012 periods, the TDR has increased from 35.0% to 43.5%. The Total Debt has increases. However, the debt level is still lower than 50% limit.

Stock Turnover

During the year 2011-2012 periods, the stock turnover has increased from 59.9 days to 61.4 days. The business sells the inventory become slower.

Debtor Turnover

During the year 2011-2012 periods, the debtor turnover has decreased from 25.2 days to 10.9 days. The business is more effective in collecting the debts.

Interest Coverage

During the 2011-2012 periods, the interest coverage has decreased from 35.8 times to 21.4 times. The business ability to pay its interest has decreased. Thus, it has already satisfied the minimum ratio of 5 times.

Investment Recommendation

Dutch Lady Milk Industry Berhad did not demonstrated good

profitability and strong financial stability. However, its shares are

available at a cheap price.

In our opinion, we think that Dutch Lady Malaysia at 2012 is not

that profitable as the year 2011. Thus, we think that it would be

wise to not invest in the company.

According to the ratio calculations above, in terms of the

profitability ratios, the Return on Equity (ROE), Net Profit Margin

(NPM), Gross Profit Margin (GPM), and General Expenses Ratio

(GER) are getting better at 2012 compare to 2011. The company

is using more expenses and getting even worse at controlling

their expenses at 2012 compare to the previous years.

The other factors that Dutch Lady Malaysia (Dutch Lady Malaysia) is

not recommended to be invest is because its working capital, total

debt, stock turnover, debtor turnover, and interest coverage from

the financial stability ratios are getting worse compare to the

previous years.

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References

Dutchlady.com.my (1963). Dutch Lady::The Company: Company Profile. [Online] Retrieved on 7 November 2013. At

http://www.dutchlady.com.my/en/home.asp?page=company&subpage=comp_profile

Dutchlady.com.my (1963). Dutch Lady: The Company: Introduction To Dutch Lady. [Online] Retrieved on 7November 2013. Available at Introduction To Dutch Lady. At

http://www.dutchlady.com.my/en/home.asp?page=company&subpage=intro_dutch

Huang, S. (2011). Dutch Lady Annual Report 2011. [Online] Retrieved on 7 November 2013 At

http://www.dutchlady.com.my/sharedfiles/financial/files/DL_AnnualReport_2011.pdf

Huang, S. (2012). Dutch Lady Annual Report 2012. [Online] Retrieved on 7 November 2013 At

http://www.dutchlady.com.my/sharedfiles/financial/files/DL_AnnualReport_2012.pdf

Dutchlady.com.my (1963). Dutch Lady: The Company: Introduction To Dutch Lady. [Online] Retrieved on 7November 2013. Available at Introduction To Dutch Lady. At

http://www.dutchlady.com.my/en/home.asp?page=company&subpage=success

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