Semester 2 sesi 2018/2019

PAF3023 : PERAKAUNAN AWALAN

TITLE

ANALYSIS AND INTERPRETATION OF

FINANCIAL RATIOS

HWA TAI INDUSTRIES BERHAD &

HUP SENG INDUSTRIES BERHAD

BIL NAMA NOMBOR MATRIK

1 NURLIYANA ZAFIRAH BINTI ADNAN D20181083670
2 NUR FARAH LYANA BINTI ZULKEFLLY D20181083691
3 NURSYAFIQAH BINTI MOHD SAMINGIN D20181083703
4 SITI RAIHANA BINTI ROSLAN D20181083699
5 NURSUHAILAH BINTI WAHID D20181083655
6 SITI SUHANA BINTI SEMAN D20181083657

GROUP A

PENSYARAH: ENCIK BAHARUDIN BIN OMAR

1. Background of the Hup Seng Industries Berhad

Hup Seng Industries Berhad (HSIB)’s mission is to produce quality fast moving

consumer products and their vision is to be market leaders in fast moving

consumer products. HSIB is a consumer industrial company, along with its subsidiaries,

engaged in the manufacture and sale of biscuits and other related products, principally in

Malaysia. The company was incorporated in the year 1991. The registered

headquarters of the company is located in Batu Pahat, Johor. The company is

publicly traded on the Kuala Lumpur Stock Exchange under the ticker symbol HUP

SENG. The principal activities of the groups are the manufacture and sale of biscuits and

confectionery products.

Hup Seng is one of Malaysia’s leading biscuits manufacturers. The company’s

products include cream crackers, Marie biscuits, sandwich, cookies, and assorted biscuits

under the brand name Kerk, Ping Pong, In-Comix, Ong San Yong and Wang Wang. The

company possesses ISO 9001:2000 certified for quality management system. H u p

Seng markets its products in Asia, Africa, Oceania, Europe and

NorthAmerica with 69 agents in 40 countries. Also operates as a parent company of Hup

Seng Hoon Yong Brothers Sdn. Bhd, which is engaged in sales and distribution of

biscuits, confectionery and other food stuff, Hup Seng Perusahaan Makanan Sdn.

Bhd, which isinvolved in the manufacturing of all its products from a factory

located in Tongkang Pecah, Batu Pahat, and Johor. All the main raw materials (flour, sugar,

refined bleached deodorized palm (RBD) olein, RBD palm oil, biscuit tins, biscuits

wrappers and cartons) are sourced locally. The Group’s products are distributed locally by

Hup Seng Hoon Yong Brothers Sdn Bhd (HSHY), covering the Klang Valley, Kota Bahru,

Kuantan, Ipoh, Butterworth, and Alor Setar. Other distributors are located in West Malaysia

(Kuala Lumpur) and in East Malaysia (Tawau, Sandakan, Kuching, Bintulu, Miri, and Sibu).
 Hup Seng Industries Berhad (HSIB) is a Malaysia-based investment holding company.

The Company's subsidiaries are engaged in the manufacture and sales of biscuits and coffee

mix, and dealers in biscuits, confectionery and other foodstuff. The Company operates

through three segments: the biscuit manufacturing segment, the beverage manufacturing

segment and the trading division segment. The biscuit manufacturing segment is engaged in

the business of manufacture and sales of biscuits. The beverage manufacturing segment is

engaged in the business of manufacture and wholesale of coffee mix and all kinds of

foodstuff. The trading division segment is engaged in the business of sales and distribution of

biscuits, confectionery and other foodstuff. The Company offers Special Cream Crackers,

Marie Biscuits, Coffee Marie Biscuits, Coconut Cookies, Butter Cookies, Peanut Butter

Sandwich, Lingo Assorted Biscuits and Fancy Assorted Biscuits.

1.1. Main Financial Information
2. Background of the Hwa Tai Industries Berhad

Hwa Tai Industries Berhad is one of the premier and longest established biscuit

manufacturers in Malaysia. Established in 1962 and listed on the Stock Exchange Malaysia in

1992. Since then, this fast expanding company has grown to be one of the largest players in

the biscuits industry in the country and produce a fine, wide range of superior quality

biscuits.

It has been successfully marketed domestically and internationally through Hwa Tai’s

own vast and comprehensive distribution network. Our biscuits are marketed under the brand

name or trademark of "HWA TAI" and "LUXURY".

We take pride in our excellent innovation and high quality products which have firmly

entrenched us not only in Malaysia but also in over 50 countries around the world. We are

keenly involved in the integrated supply chain of our products, from manufacture to sales to

distribution throughout the entire trade channels. Due to our extensive and comprehensive

distribution network, we are also carrying products / brands by other principals for the

Malaysian market.
2.1. Main Financial Information
3. Trend Analysis of Company Performance using 5 Main Ratios.

3.1. LIQUIDITY

 Measuring the ability of a business to pay short-term financing and meet the expected

cash.

 Low liquid affects suppliers' trust in the ability of firms to pay off debt and firms may

find it difficult to secure credit facilities in the future.

1. Current Ratio

Measuring the ability of a business to pay off short-term debt or measuring the

current level of assets capable of repaying current liabilities

Current Ratio
Current Ratio = Current Asset__
Current Liabilities
HWA TAI (2016) HUP SENG(2016)
=RM42,720,830 =RM167,992,297
RM34,755,267 RM55,316,403
=1.23 times =3.04 times

Based on the analysis it was found that the current ratio of Hup Seng Company in 2016 was

3.04 times while Hwa Tai Company was 1.23 times. This shows that Hwa Tai's ability to

repay short-term debt is less favorable in 2016 than the Hup Seng Company.
 2. Quick Ratio
 Measuring cash ability and near-cash assets to cover current liabilities.

Quick Ratio
Quick Ratio = Current Asset - Inventories_
Current Liabilities
HWA TAI (2016) HUP SENG(2016)
=RM42,720,830 – RM 6,922,470 =RM 167,992,297 – RM 22,780,115
RM 34,755,267 RM 55,316,403
=1.03 times =2.63 times

Based on the analysis it was found that the Hwa Tai Company's immediate ratios in 2016

were 1.03 times while the company Hup Seng was 2.63 times. This shows that Hup Seng

Company is able to finance debt faster in 2016 than the Hwa Tai Company.
 3.2. PROFITIBILTY

Profitability ratios are financial metrics used by analysts and investors to measure and

evaluate the ability of a company to generate income (profit) relative to revenue, balance

sheet assets, operating costs, and shareholders’ equity during a specific period of time. They

show how well a company utilizes its assets to produce profit and value to shareholders. All

of these ratios can be generalized into two categories, as follows:

i. Margin Ratio

Margin ratios represent the company’s ability to convert sales into profits at various

degrees of measurement.

Net Profit Margin = Net Profit

Sales

Hwa Tai Industries Hup Seng Industries

= 1 ,158,908 X 100 = 49, 405,747 x 100
55,787,600 285,645,179

= 2.08 % = 17.30 %

Hup Seng's net profit margin in 2016 is 17.30% higher than the Hwa Tai company of

2.08%. This shows that for each Rm1.00 sales can contribute a profit of RM 0.17 better than

the Hwa Tai company of RM 0.02.

ii. Return Ratio

Return ratios represent the company’s ability to generate returns to its shareholders.

a) Return on Equity

ROE = Net Income x 100

Total Equity
Hwa Tai Industries Hup Seng Industries
= 1 ,158,908 X 100 = 49, 405,747 x 100
33,038,462 182, 984, 248 .1

= 3.51 % = 27.0 %

The return on Hup Seng's equity in 2016 is 27.0% higher than the Hwa Tai company

of 3.51%. This shows that for every RM 1.00 invested on equities can contribute a profit

of RM 0.27 better than the Hwa Tai company of RM0.04.

b) Return on Asset

ROA = Net Income x 100

Total Asset
Hwa Tai Industries Hup Seng Industries
= 1 ,158,908 X 100 = 49, 405,747 x 100
63,578,798 245,346,154

= 1.28 % = 20.14 %

The return on assets of Hup Seng's company in 2016 was 20.14% higher than the

Hwa Tai company of 1.82%. This shows that for each RM1.00 invested on the assets it

can contribute a profit of RM0.20 better than the Hwa Tai company of RM0.02.

3.3. EFFIENCIENCY

3.4. SHAREHOLDER

3.5. CAPITAL STRUCTURE