SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN

FOUNDATION IN NATURAL BUILD ENVIRONMENT

BASIC ACCOUNTING (ACC30205)

FINANCIAL RATIO ANALYSIS

COMPANY: LBS BINA GROUP BERHAD

LECTURER: MS. TAY SHIR MEN

SUBMISSION DATE: 4TH FEBRUARY 2016

LEONG LI JING 0323628THAM KAI LOON 0323593GILLIAN CHONG 0323941

NOOR DINNA HANI MURAD 0323430

Table of Content

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Content PageBackground History 3Recent Development 4

Profitability Ratio 7Stability Ratio & Liquidity Ratio 8

Price Earnings Ratio 9Share Price 10

Investment Recommendation 12Appendix 13References 25

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Background History

LBS Bina Group is a company who build homes and building which meet the needs of Malaysian from 20 years ago. However, the official LBS date of incorporation is on June 29 th on year 2000. LBS has carefully nurtured a reputation for delivering properties with unsurpassed quality that inspire and enrich. By insisting on continually improving not only construction technologies but the very latest in architectural trends, LBS lives up to its belief that Malaysians deserve homes of the finest workmanship.

Move on, LBS began with one man’s vision. In the 1960s, Dato Seri Lim Bock Seng founded a construction business in Petaling Jaya. Within a few years, LBS’ scale of projects established it as a reputable property developer. Several of its well-publicised accomplishments were Taman Perindustrian Bukit Serdang Seksyen 14 in Selangor, jointly developed with the 1992 Thomas Cup champions, Taman Pinggiran Putra, Serdang and the township project at Bandar Saujana Putra. On January 30th year 2002, LBS Bina Group had their company listed on Bursa Malaysia.

This trend of growth has seen LBS become a dominant player in Malaysia’s property sector, and spread its wings across the seas to China.

Below are some of LBS Bina Group Information;

Company Name : LBS Bina Group Berhad (518482-H)Listed on Bursa Malaysia : 30 January 2002 Main Market (Properties)Stock Code/Name : 5789 / LBSBloomberg Code : LBSMK

Registered Office :

Plaza Seri Setia Level 1–4No. 1 Jalan SS9/247300 Petaling JayaSelangor Darul EhsanMalaysiaTel +60 3 7877 7333Fax +60 3 7877 7111

Registrar :

Tricor Investor Services Sdn Bhd (118401-V)Level 17 The Gardens North TowerMid Valley CityLingkaran Syed Putra59200 Kuala LumpurTel +60 3 2264 3883Fax +60 3 2282 1886

Auditor :

Messrs UHY (AF 1411)11.05 Level 11 The Gardens South TowerMid Valley CityLingkaran Syed Putra59200 Kuala LumpurTel +60 3 2279 3088Fax +60 3 2279 3099

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Recent DevelopmentRecently, LBS Company is planning on to join venture with Chief Minister of Malacca to establish a cultural museum in Zhuhai, China.

Lamdeal Investments Limited (Lamdeal) which is a wholly-owned subsidiary of property developer LBS Bina Group Berhad (LBS) signed a Memorandum of Understanding (MOU) with the Chief Minister of Malacca (Incorporation) (CMI) and witnessed by the Malacca governor Tun Mohd Khalil Yaakob, Chief Minister Datuk Seri Idris Haron and governor of Guangdong province Zhu Xiaodan on April 30th 2015 to establish a cultural museum, one-stop centre and Made-In-Malaysia Excellence exhibition hall within Zhuhai International Circuit (ZIC) to show case the heritage and customary cultural of Melaka.

During the day of signing the Memorandum of Understanding for this project, LBS Managing Director, Dato’ Sri Lim Hock San said, “With this MOU, both parties are allowed to share and facilitate the flow of information on setting up this cultural centre through the CMI’s “One Stop Centre”. We are happy with our experience in Zhuhai, China, we are able to play the bridging role to build a stronger ties between the countries.”

ZIC’s Transformation Plan encompasses the following major principles:

● Zhuhai National High-Tech Zone to become a regional comprehensive service centre;

● To introduce and integrate motorsports into the modern urban life in an open way;

● To create a regional Tourism Centre with a special attraction in the Northern District of Zhuhai;

● To establish a multi-cultural centre to encourage cultural exchanges with a Malacca cultural museum and a MIME exhibition hall.

LBS Bina, in this strategic collaboration with China and it aims to promote Malaysia and Malaysian tourism as well as culture in both countries to further drive economic and business growth in the future.

The Maritime Silk Road is an initiative aimed at investing and fostering new relationship and to bolster existing partnerships in South-East Asia, Oceania, and North Africa.

For now, the project is still on progress.

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Below are some news regarding LBS Bina Group recent development:

From New The Star Online, 9th July 2015, Thursday.

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From The Sun Daily: 6th April 2015.

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Profitability RatioThe following table shows the profitability ratio calculation and interpretation for LBS Bina

Group Sdn Bhd in the year 2012 and 2013.

Profitability Ratios

2012 2013 Interpretation

Return On Equity (ROE)

Net ProfitAverage O /E

×100 %

¿ 39,003,430(526,831,483+506,549,830)÷2

×100 %

¿ 39,003,430516,690,656.5

×100 %

¿7.55%

¿ 397,323,654(872,640,233+526,831,483)÷2

×100 %

¿ 397,323,654699,735,858

×100 %

¿56.78%

The ROE in 2013 (56.78) is higher than the ROE in 2012 (7.55). It means the owner is earning a higher return on the capital in 2013.

Net Profit Margin Ratio (NPM)

Net ProfitNet Sales

×100 %

¿ 39,003,430509,644,355

×100 %

¿7.65%

¿ 397,323,654533,532,722

×100 %

¿74.47%

The NPM in 2013 (74.47) is higher than the NPM in 2012 (7.65). It means the owner is earning a high net profit in 2013.

Gross Profit Margin Ratio (GPM)

Gross ProfitNet Sales

×100 %

¿ 146,227,906509,644,355

×100%

¿28.69%

¿ 168,577,154533,532,722

×100 %

¿31.60%

The GPM in 2013 (31.60) is higher than the GPM in 2012 (28.69). It means the GOGS expense is low and well managed 2013.

General Expenses Ratio (GER)

TotalGeneral ExpensesNet Sales

×100 %

¿ 67,470,147509,644,355

×100 %

¿13.24%

¿ 85,596,945533,532,722

×100 %

¿16.04%

The GER in 2013 (16.04) is higher than the GPM in 2012 (13.24). It means the general expenses are high and not well managed 2013.

Financial Expenses Ratio (FER)

Total Financial ExpenseNet Sales

×100 %

¿ 18,457,247509,644,355

×100 %

¿3.62%

¿ 15,170,850533,532,722

×100 %

¿2.84%

The FER in 2013 (2.84) is lower than the FER in 2014 (3.62). It means the financial expenses are low and well managed.

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Liquidity RatioThe following table shows the liquidity ratio calculation and interpretation for LBS Bina Group

Sdn Bhd in the year 2012 and 2013.

Liquidity Ratio 2012 2013 InterpretationWorking Capital Ratio (WCR)

Total Current AssetTotalCurrent Liabilities

¿ 927,829,389520,720,661

¿1.78 :1

¿ 925,492,766609,599,483

¿1.52:1

Working Capital has decreased from 1.78 : 1 to 1.52 : 1 during 2012 to 2013 which means that the ability to pay off its current liabilities by using current assets is getting worse.

Stability RatioThe following table shows the stability ratio calculation and interpretation for LBS Bina Group

Sdn Bhd in the year 2012 and 2013.

Stability Ratios 2012 2013 InterpretationTotal Debt Ratio (TDR)

Total LiabilitiesTotal Assets

×100 %¿ 908,176,834

1,435,008,317×100 %

¿63 %

¿ 1,137,172,4372,009,812,670

×100 %

¿57%

Total debt has decreased from 0.63 to 0.57 during the year 2012 to 2013 which means that the total debt level has lower down.

Inventory Turnover Ratio (ITR)

365÷ Cost of Goods SoldAverage Inventory

¿365days÷ 363,416,449(13,593,510+17,850,045)÷2

¿365days÷ 363,416,44915,721,777.5

¿15.79 days

¿365days÷ 364,955,568(22,575,116+13,593,510)÷2

¿365days÷ 364,955,56818,084,313

¿18.09days

Stock Turnover has increased from 15.79 days to 18.09 days during year 2012 to 2013 which means that the business is selling the stocks slower.

Interest Coverage Ratio (ICR)

Interest Expense+Net ProfitInterest Expense

¿ 39,003,430+18,457,24718,457,247

¿ 57,460,67718,457,247

¿ 397,323,654+15,170,85015,170,850

¿ 412,494,50415,170,850

Interest coverage has increased from 3.11 to 27.19 from year 2012 to 2013. This means that the business’s ability to pay its interest expenses is getting better.

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¿3.11׿ ¿27.19׿

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Price Earning Ratio (P/E Ratio)

2012Basic earnings per share: 0.097Current share price: 0.84

P/E Ratio

= Current share price

Basic earnings per share

= 0.84

0.097

= 8.66 times

2013Basic earnings per share: 0.96Current share price: 1.56

P/E Ratio

= Current share price

Basic earnings per share

= 1.560.96

= 1.63 times

The P/E ratio measures how expensive a share is. In the year 2012, the P/E ratio is 8.66 while the P/E ratio in year 2013 is 1.63. This means that the share in year 2013 is less expensive compared to the share in year 2012. The P/E ratio of 8.66 in year 2012 indicates that the investor will need to wait for nearly 8.66 years to recoup the investment while the P/E ratio of 1.63 in year 2013 indicates that the investor will need to wait for nearly 1.63 years to recoup the investment.

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Share Price

LBS Bina Group Berhad (5789.KL)

FTSE Bursa Malaysia KLCI (^KLSE)

Based on the graph above, it shows that the share price for LBS Bina Group Berhad and index for FTSE Bursa Malaysia KLCI. Before determining whether to invest in either in a company or an overall market share KLCI, which company has a better percentage over the time period from January 2015 to December 2015 must be understood. Hence, 4 different points of time will be viewed to determine the performance of both the graph.

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First point of time, the share price for LBS Bina Group Berhad is 1.6800 on 19 May 2015, and the index for FTSE Bursa Malaysia KLCI is 1809.72. At 7 July 2015, the share price decrease to 1.6000 and the index also decrease to 1712.30. The decrease of share price is (1.6000-1.6800)/1.6800 = -4.76%, whereas the index changes is (1712.30-1809.72)/ 1809.72= -5.38%. This is to say that the performance of the index is worse than the company.

The share price for LBS Bina Group Berhad is 1.2800 on 1 September 2015, and the index for FTSE Bursa Malaysia KLCI is 1609.21. At 1st October 2015, the share price increase to 1.3400 and the index increase to 1633.93. The increase of share price is (1.3400-1.2800)/1.2800 = 4.69%, whereas the index changes is (1633.93-1609.21)/1609.21= 1.54%. As such, the performance of the company is better than the index.

For the third point of the graph, on 4 February 2015 which the share price is 1.5700 for LBS Bina Group Berhad and the index for FTSE Bursa Malaysia KLCI is 1815.86. At 25 March 2015, the share price decrease to 1.5200 and the index increase to 1819.10. The decrease of share price is (1.5200-1.5700)/1.5700 = -3.18%, whereas the index changes is (1819.10-1815.86)/1815.86= 0.18%. Hence the performance of the index is better than the company this time.

For the final point of the graph, on 25 November 2015 which the share price is 1.3500 for LBS Bina Group Berhad and the index for FTSE Bursa Malaysia KLCI is 1684.42. At 25 December 2015, the share price increase to 1.3900 and the index decrease to 1652.96. The increase of share price is (1.3900-1.3500)/1.3500 = 2.96%, whereas the index changes is (1652.96-1684.42)/1684.42= -1.87%. Hence the performance of the index is worse than the company this time.

By comparing LBS Bina Group Berhad with the overall market share KLCI, FTSE Bursa Malaysia KLCI is continuously dropping, while LBS Bina Group is increasing although there are times where it dropped but not as bad as FTSE Bursa Malaysia KLCI. Furthermore, the 4 points of time that has been calculated shows that FTSE Bursa Malaysia KLCI is not recommended for investing in.

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Investment Recommendation

For our group’s discussion, we are willing to invest on this company. We made the decision according to three factors which are profitability, stability and share price. A company’s financial situation can be analyses by these three factors and we are going to explain why we made the choice and eleborate about the reason.

First of all, there’s some incresement of LBS Bina Berhad which is shown obviouly in the calculation such as, Return of Equility(ROE), Net Profit Margin Ratio(NPM), Gross Profit Margin Ratio(GPM), Total Debt Ratio(TDR) and Interest Coverage Ratio(ICR). On the other hand, there is also some decreasement that shown on calculation table such as General Expenses Ratio(GER), Working Capital Ratio(WCR) and Inventory Turnover Ratio(ITR).

The profit of the company is definitely earning and is quite high compare to the previous year, so we can invest on this company and it surely will have an amount of profit for the future years. Furthermore, Total Debt Ratio(TDR) of the company had decrease so the issue of company gone bankrupt can be neglect although the Working Capital Ratio(WCR) of the company had decreased but it doesn’t affect the company much.

However, the market share of LBS Bina Berhad is increasing but it did dropped on a few points so it doesn’t has a stable and strong foundation for the share. But as a investor, we do need to bet on the market sometimes so we neglect about the stability of the company since the market share was increasing.

At last, our group member trusted that the company will have a good result as it will earn more profit and the market share will be more stable as the time past.

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Appendix

Statements of Financial Position (2012)

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15

16

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Statement of Comprehensive Income (2012)

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19

Notes to the Financial Statements (2012)

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Statements of Financial Position (2013)

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Statement of Comprehensive Income (2013)

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Notes to the Financial Statements (2013)

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References

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I3investor File Server - LBS-AnnualReport2012.pdf | I3investor. (n.d.). Retrieved February 02, 2016, from http://klse.i3investor.com/servlets/staticfile/220496.jsp

I3investor File Server - LBS-AnnualReport2013.pdf | I3investor. (n.d.). Retrieved February 02, 2016, from http://klse.i3investor.com/servlets/staticfile/241879.jsp

5789.KL Historical Prices | LBS BINA GROUP BHD Stock - Yahoo! Finance. (n.d.). Retrieved February 02, 2016, from http://finance.yahoo.com/q/hp?s=5789.KL

LBS: Property Collections. (n.d.). Retrieved February 03, 2016, from http://www.lbs.com.my/property-collections/

Zhuhai to have a Malaysia-China culture centre - Nation | The Star Online. (n.d.). Retrieved February 03, 2016, from http://www.thestar.com.my/news/nation/2015/07/09/zhuhai-to-have-a-msiachina-culture-centre-expansion-plan-to-include-museum-on-admiral-zheng-he-who-v/

LBS Bina and China's Zhuhai in trade deal - Business News | The Star Online. (n.d.). Retrieved February 03, 2016, from http://www.thestar.com.my/business/business-news/2015/09/21/lbs-bina-and-chinas-zhuhai-in-trade-deal/

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