Ratio Analysis Final

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RATIO ANALYSIS BETWEEN IJM AND GAMUDA

Group members:

1)Syahirah

2)Nordiana

3)Helmiza

Prepared for:

Dr Noryati Ahmad

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Table of Content

IJM – Background + Time Series1

Gamuda - Background + Time Series2

Cross Sectional IJM and GAMUDA 3

Conclusion4

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TYPES OF RATIO COMPARISONS

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IJM CORPORATION BERHAD

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Background of the company

IJM CORPORATION BERHAD

Listed on the KLSE in September 1986 The founder of Jurutama and Mudajaya At that point of time IGB Corporation-listed

property company saw the synergy that a combination of IGB Construction, Jurutama and Mudajaya.

In 1982, in a friendly takeover- IGB Corporation Bhd. Acquired all the share in Jurutama and Mudajaya.

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VISION AND MISSION

Vision

To be an internationally competitive Malaysian builder of world class infrastructure and buildings.

Mission

To deliver the highest standards of performance in all ventures with the IJM Mark Of Excellence

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IJM CORE BUSINESS

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TIME-SERIES ANALYSIS

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LIQUIDITY RATIOS 2006 2007 2008 2009 2010

Current Ratio 2.32 3.69 4.20 3.26 2.86

Quick Ratio 1.64 3.60 4.01 3.16 2.68

IJM can cover about 29% of its existing 1-year debt obligations with their current liquid assets. Since the ratio is more that 1.0, it indicates that IJM has provide a larger

fund of liquid assets to meet unexpected expenses.

IJM CORPORATION

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ACTIVITY RATIOS 2006 2007 2008 2009 2010

Total Asset Turnover 0.34 0.25 0.16 0.21 0.17

Inventory Turnover 4.75 6.09 5.88 6.56 6.84

Average Collection Period 51.58 29.29 91.40 128.71 135.70

Average Age Inventory 107.03 74.73 96.66 77.13 67.69

IJM is inefficient in using its assets but IJM is good in terms of inventory turnover.

IJM CORPORATION

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FINANCIAL LEVERAGE RATIOS 2006 2007 2008 2009 2010

Debt Ratio 0.70 0.45 0.48 0.46 0.62

Debt-to-Equity Ratio 0.57 0.82 0.85 0.79 1.55

Times Interest Earned 66.30 5.89 2.26 6.95 18.05

The firm’s degree of indebtedness is greater and IJM has more financial leverage. IJM’s ability to make contractual

interest payment is higher based on Times Interest Earned at 18.05.

IJM CORPORATION

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IJM CORPORATIONPROFITABILITY RATIOS 2006 2007 2008 2009 2010

Return on Assets 5.2% 2.9% -0.3% 3.5% 1.4%

Return on Equity 4.2% 5.2% -0.4% 6.0% 3.5%

Gross Profit Margin 28.2% 19.8% 35.8% 27.9% 21.2%

Net Profit Margin 15.3% 11.6% -1.6% 16.8% 8.2%

Operating Profit Margin 0.21 0.16 0.04 0.20 0.12

Earnings per share (RM) 0.05 0.06 -0.01 0.07 0.06

IJM has a poor management of assets and unfavorable net profit margin.

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MARKET RATIOS 2006 2007 2008 2009 2010

Price Earning Ratio 69.69 73.50 -54.72 49.43 65.56

The investors are willing to pay RM65.56 for each RM1.00 of earnings. It shows that the high degree of confidence

that investors have in the firm’s future performance.

IJM CORPORATION

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TREND ANALYSIS

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  Current Ratio Quick Ratio

2006 2.32 1.64

2007 3.69 3.60

2008 4.20 4.01

2009 3.26 3.16

2010 2.86 2.68

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  Total Asset Turnover

Inventory Turnover

Debtors Turnover

Average Collection

Period

Average Age Inventory

2006 0.34 4.75 7.08 51.58 107.032007 0.25 6.09 12.46 29.29 74.732008 0.16 5.88 3.99 91.40 96.662009 0.21 6.56 2.84 128.71 77.132010 0.17 6.84 2.69 135.70 67.69

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  Debt Ratio Debt-to-Equity Ratio

Times Interest Earned

2006 0.70 0.57 66.302007 0.45 0.82 5.892008 0.48 0.85 2.262009 0.46 0.79 6.952010 0.62 1.55 18.05

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 Return on

Assets Return on

Assets

Gross Profit

Margin

Net Profit Margin

Operating Profit

Margin

Earnings per share

(RM)2006 5.2% 4.2% 28.2% 15.3% 0.21 0.052007 2.9% 5.2% 19.8% 11.6% 0.16 0.062008 -0.3% -0.4% -35.8% -1.6% 0.04 -0.012009 3.5% 6.0% 27.9% 16.8% 0.20 0.072010 1.4% 3.5% 21.2% 8.2% 0.12 0.06

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  Price Earning Ratio Book Value Market Book Value Ratio

2006 69.69 1.67 2.042007 73.50 1.39 3.002008 -54.72 1.37 4.352009 49.43 1.46 2.482010 65.56 1.42 2.73

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Background of the company

GAMUDA BERHAD

Gamuda was incorporated on 6 October 1976. Listed on the KLSE on August 1992 Strategies use are, concession agreement, Joint

Venture and tariff agreement. July 2002, Gamuda signed a joint venture agreement

with MMC Engineering to jointly undertake the construction of SMART - an integrated bypass tunnel-cum-motorway in Kuala Lumpur City.

Gamuda was voted Best Asian Construction Company by Euromoney magazine.

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VISION AND VALUES Vision

We deliver innovative world-class infrastructure and homes for our customers through our core businesses in infrastructure development and construction, operation and maintenance of public infrastructure concessions, and large-scale urban township development.

Value Innovation Responsible conduct Constant improvement Taking the long view

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GAMUDA CORE BUSINESS

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 LIQUIDITY RATIOS 2006 2007 2008 2009 2010

Current Ratio 2.20 1.93 1.54 1.88 2.30

Quick Ratio 2.15 1.79 1.44 1.81 2.23

Gamuda can cover about 24% of its existing 1-year debt obligations with their current liquid assets. Since the ratio is more that 1.0, it indicates that Gamuda has provide a larger

fund of liquid assets to meet unexpected expenses.

GAMUDA BERHAD

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 ACTIVITY RATIOS 2006 2007 2008 2009 2010

Total Asset Turnover 0.47 0.31 0.30 0.42 0.46

Inventory Turnover 16.30 17.10 12.08 19.18 25.83

Average Collection Period 45.57 47.99 42.19 33.73 28.27

Average Age Inventory 11.76 12.57 20.24 18.55 16.20

Gamuda is efficiently used their assets to generate sales and has effectively managed its credit due to the shorter

credit terms.

GAMUDA BERHAD

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 FINANCIAL LEVERAGE RATIOS 2006 2007 2008 2009 2010

Debt Ratio 0.31 0.41 0.41 0.46 0.45

Debt-to-Equity Ratio 0.46 0.70 0.68 0.86 0.83

Times Interest Earned 22.90 8.91 8.42 12.92 4.10

Gamuda has financed close to 45% of its assets with the debt. Gamuda’s ability to make contractual interest

payment is low based on Times Interest Earned at 4.10.

GAMUDA BERHAD

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GAMUDA BERHADPROFITABILITY RATIOS   2006 2007 2008 2009 2010

Return on Assets 12.6% 7.1% 5.5% 8.2% 4.8%

Return on Equity 13.3% 7.9% 7.5% 10.9% 6.4%

Gross Profit Margin 18.2% 9.5% 8.1% 11.6% 5.4%

Net Profit Margin 19.4% 14.8% 14.8% 14.1% 7.5%

Operating Profit Margin 0.19 0.11 0.11 0.13 0.07

Earnings per share (RM) 0.36 0.21 0.22 0.16 0.10

Gamuda Berhad generates profits at average level with respect to its level of sales, assets and owner’s

investment.

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 MARKET RATIOS 2006 2007 2008 2009 2010

Price Earning Ratio 6.11 9.36 18.83 16.76 27.37

The amount that investors are willing to pay for each RM of Gamuda’s earning is high level and boost up the

confidence level among investors.

GAMUDA BERHAD

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TREND ANALYSIS

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  Current Ratio Quick Ratio

2006 2.20 2.15

2007 1.93 1.79

2008 1.54 1.44

2009 1.88 1.81

2010 2.30 2.23

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  Total Asset Turnover

Inventory Turnover

Debtors Turnover

Average Collection

Period

Average Age

Inventory

2006 0.47 16.30 8.01 45.57 11.762007 0.31 17.10 7.61 47.99 12.572008 0.30 12.08 8.65 42.19 20.242009 0.42 19.18 10.82 33.73 18.552010 0.46 25.83 12.91 28.27 16.20

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  Debt Ratio Debt-to-Equity Ratio Times Interest Earned

2006 0.31 0.46 22.90

2007 0.41 0.70 8.91

2008 0.41 0.68 8.42

2009 0.46 0.86 12.92

2010 0.45 0.83 4.10

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 Return on

Assets Return on

Equity

Gross Profit

Margin

Net Profit Margin

Operating Profit Margin

Earnings per share (RM)

2006 12.6% 13.3% 18.2% 19.4% 0.19 0.362007 7.1% 7.9% 9.5% 14.8% 0.11 0.212008 5.5% 7.5% 8.1% 14.8% 0.11 0.222009 8.2% 10.9% 11.6% 14.1% 0.13 0.162010 4.8% 6.4% 5.4% 7.5% 0.07 0.10

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  Price Earning Ratio Book Value Market Book Value Ratio

2006 6.11 3.00 0.73

2007 9.36 3.04 0.64

2008 18.83 3.05 1.34

2009 16.76 1.54 1.77

2010 27.37 1.60 1.65

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CROSS-SECTIONAL ANALYSIS

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CROSS SECTIONAL FOR 2010

• Gamuda is better than IJM in managing its assets and equity to generate profits.

The net profit margin of IJM is higher than Gamuda.

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• Investors were paying higher in IJM at RM65.56 than Gamuda which is only at RM27.37 for each RM1.00.

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• IJM is better than Gamuda in terms of financial leverage.

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• Gamuda is much better than IJM in terms of managing its assets and inventory to generate sales.

• Gamuda is also taking shorter time for collection and payment period.

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• Both companies, Gamuda and IJM have the ability to cover the debt obligations with their current liquid assets.

• As refer to the ratio, IJM is better than Gamuda in terms of liquidity.

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• The EPS in Gamuda is higher than IJM. EPS will be closely watched by investing public to indicate the successfulness of a company.

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CONCLUSION

Gamuda :1.Profitability

2.Activity3.Financial Leverage

4.Liquidity

Preferable Company: IJM

IJM :1.Profitability

2.Activity3.Financial Leverage

4.Liquidity

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