BASIC ACCOUNTING

ASSIGNMENT:FINANCIAL RATIO REPORT

Lecturer: Ms. Tay Shir MenGroup Members: Kimberley Fay Bernard Lo (0324237)Kok Ka Shing (0323553)Pui Chun Shian (0323470)Adam Wong (0322520)Contents

1

No. Content Page No

1. History of LBS Berhad 32. Recent Development 4-53. Profitability Ratio 6-74. Financial Stability Ratio 8-95. Price Earning Ratio 106. Report 11-127. Investment Recommendation 138. Appendix 14-219. Reference 22

Brief history of LBS

2

LBS Bina Group Berhad is a Malaysian based company that specialises in construction and property development. The company was founded in 29th June 2000 by Dato’ Seri Lim Bock Seng. The company made its debut on the Main Board of the Kuala Lumpur Stock Exchange (KLSE) also known as Bursa Malaysia on 30th January 2002. Its headquarters is located in Petaling Jaya, Malaysia. LBS operates in a few segments, most notable in property development, management & investment, trading & others, construction, and racing circuit. The Construction segment undertakes in the building, project planning and implementation contracting activities. The management & investment part handles investment holding and provision of management services. Trading & others focuses on trading building materials and the selling of membership and covering insurance products.

Tan Seri Lim Bock Seng Company’s motto:

- Chairman of LBS Bina Group - BELIEVE

- BECOME

- BEHOLD

Most Recent Developments

3

D’ Island Residence – CoralliaThe company’s most recent development. 3968 sq.ft with a lofty 14-feet ceiling. Consists of 5 bedrooms, 1 utility and 6 bathrooms. Currently has 86 units.

High Rise – Bandar Saujana PutraA lifestyle-focused development with over 70 amazing facilities. Still currently in development phase by Utuh Sejagat Sdn. Bhd with an area of 21.14 acres. Expected date of completion is within 4 years.

4

Rumah Selangorku BSP Bayuan MasLBS launched this project mainly to help lower and middle income earners to own houses at reasonable prices. This project was in line with the state government’s commitment to build more affordable homes in Selangor.

D’ Island Residence – SkyVillaIt is a 17 storey building with 2 blocks and a total of 352 units only. Built up in a range from 1026-1218 square ft. Has a spacious living environment equipped with panoramic view of township and waterfront.

5

Profitability Ratio

Profitability Ratio

2012 2013 Interpretation

Return on Equity (ROE)

39003430516690656

X100%

=7.5%

397323654699735858

X100%

= 56.78%

Higher ROE in the year 2013 compared to 2012 shows that the business, LBS is earning higher returns of capital in 2013.

Net Profit Margin (NPM)

39003430509644355

X100%

= 7.65%

397323654533532722

X100%

= 74.47%

An increase in NPM for the year 2013 is a positive sign and it indicates that LBS kept its expenses lower compared to the year 2012. Thus, this gives the business more profit for 2013. Other than that, this shows that LBS controlled their overall expenses better in 2013.

Gross Profit Margin (GPM)

146227906509644355

X100%

= 28.69%

168577154533532722

X100%

= 31.59%

This shows LBS’ ability to control their COGS expenses. A higher GPM means that the expenses is better managed. The COGS expenses are well managed in 2013 resulting in

6

a higher GPM.General Expenses Ratio (GER)

67470147509644355

X100%

= 13.24%

85596945533532722

X100%

= 16%

The year 2013 shows that the GER is higher compared to 2012. A higher general expense would result a lower NPM.

Financial Expenses Ratio (FER)

18457247509644355

X100%

= 3.62%

15170850533532722

X100%

= 2.84%

FER in the year 2013 is lower than 2012. This indicates that the financial expense in 2013 is lesser than 2012. As such, this leads to a higher NPM in 2013 because the financial expense is lower.

7

Financial Stability Ratio

Stability Ratio 2012 2013 InterpretationWorking Capital Ratio (WCR)

927829389520720661

= 1.8 : 1

925492766609599483

= 1.5 : 1

For every RM1 of current liability in the year 2013, the business, LBS has 1.5 of current assets to pay for it. It has a lower ratio than 2012. However, a business should preferably have a minimum of 2:1 of current assets to current liability to ensure that the business does not face difficulties.

Total Debt Ratio (TDR)

9081768341435008317

X100%

=63.29%

11371724372009812670

X100%

=56.58%

For 2013, the TDR is lower than 2012, having a TDR of 56.58% and 63.29% respectively. As the TDR is lower in 2013, this results in a

8

higher amount of owner’s equity. It is strongly advised that a business’ TDR does not exceed more than 50% as it would have a higher risk of bankruptcy.

Inventory Turnover Ratio (ITR)

365 ÷36341644915721777

=15 days

365÷36495556818084313

= 18 days

It takes 18 days for the business in 2013 to sell one batch of goods. The business in 2013 cannot sell goods rapidly, generating more cash quickly to pay off its liabilities.

Interest Coverage Ratio (ICR)

5746067718457247

=3.1 times

41249450415170850

=27 times

LBS’ ICR is higher in 2013 than in 2012. This means that the business’ ability to pay off its interest expense in higher than 2012. In the year 2013, LBS has enough profit to pay its interest expenses 27 times. To avoid bankruptcy, a

9

business’ interest coverage should not fall below 5 times.

Price Earning Ratio (P/E Ratio)

2012

Basic earnings per share: 0.097

Current share price: 0.84

(0.84/0.097) = 8.6 times

2013

Basic earnings per share: 0.96

Current share price: 1.56

(1.56/0.96) = 1.62 times

10

The P/E ratio measures how expensive a share is. In the year 2012, the P/E ratio is 8.6 while in the year 2013 the P/E ratio is 1.62. This means that the share in 2012 is less expensive compared to the share in the year 2013. A P/E ratio of 8.6 indicates that an investor will need to wait for 8.6 years to recoup his investment.

Report

11

The graph above represents the share price of LBS Bina Group for 1st January 2015 to 31st December 2015 and the index for FTSE Bursa Malaysia (KLCI). Both of the graphs were taken from the website Yahoo Finance. The highest point in LBS Bina Group’s shares was on the 19th May 2015 at 1.68 and the lowest point was on 1st September 2015 at 1.28. The highest point in the index for FTSE Bursa Malaysia (KLCI) was on 21st April 2015 at 1862.80 points and the lowest point was on 24th August 2015 at 1532.14 points.

Before we determine whether we should invest in LBS Bina Group’s shares, we should look into both the company and the overall market shares of KLCI to see if it is worth investing in the company’s shares. Hence, we have picked 3 points in time from both the graph will be viewed to determine to performance of the company.

The first point in LBS Bina Group’s shares is in 1st April 2015 is 1.50 and the index for FTSE Bursa Malaysia (KLCI) is 1826.31 points. At 5th May 2015 the share price raised to 1.56 for and the index also rose to 1827.42 points. The increase in share price is (1.56-1.50)/1.50=0.0400%, while the index change is (1827.42-1826.31)/1826.31=0.0006%. This means that the company is outperforming the index at this point of time.

The second point in LBS Bina Group's shares is in 3rd August 2015 is 1.49, while the index for FTSE Bursa Malaysia (KLCI) is 1744.19 points. At 1st September 2015 the company’s share price dropped to 1.28, whereas the index also fell to 1609.21 points. The decrease in share price is (1.28-1.49)/1.49=-0.1409% and the index change is (1609.21-1744.19)/1744.19=-0.0774%. This means even though the company’s share price fell, it is still performing better than the index.

The third and last point in LBS Bina Group’s shares is in 2nd November 2015 is 1.44 and the index for FTSE Bursa Malaysia (KLCI) is at 1664.07. At 1st December 2015 the company’s share price dropped to 1.37, whereas the index rose to 1682.37 points. The decrease in share price is (1.37-1.44)/1.44=-0.0486% and the index change is (1682.37-1664.07)/1664.07=0.0109%. This shows that the company is doing badly when the index is performing well.

In conclusion, by comparing the company’s performance against the overall index, investing in the shares of LBS Bina Group in the year 2015 is recommended but there is a slight risk in investing in the company’s shares as the graph is sometimes unstable. Even though it fluctuates sometimes, it will be better after a certain amount of time.

12

Investment Recommendation

According to LBS’s profitability ratio, the return on equity (ROE), net profit margin (NPM), gross profit margin (GPM) and General Expenses ratio (GER) has improved and showed positive signs for the business. Even though Financial expenses ratio (FER) increase from the year 2012 to the year 2013, the overall profit has indicated that the business is doing fairly well. LBS’s ability to pay off its current liabilities had slightly decreased from 1.8:1 to 1:5:1 but it still did not satisfy the 2:1 ratio of staying within the borderline of borrowing. Besides that, LBS’s total debt ratio (TDR) showed that its total debt has decreased by 6.71%, making it 56.58% in 2013. Having the TDR above 50% is making the business at a higher risk of bankruptcy which isn’t a good sign at all. Their stock turnover has taken a longer period of time so they are taking a longer time to generate cash, slowing down the business from paying off its liabilities. Moreover, LBS’s interest coverage ratio (ICR) has also shown an improvement in the business’ ability to pay its interest expense.

LBS earned more profit in 2013 compared to 2012. In other words, the company has demonstrated a decent profitability and financial stability and its shares are available at a cheap price (P/E Ratio < 15) to warrant an investment. An investor will only need to wait for a short period of time that is 1.62 years (19.44 months) as of 2013 to recoup his investment. The company has shown good promise in terms of their growth in revenue. As such, LBS has proven to be a stable company. So, LBS’s share is worth to invest back then.

In 2014 to 2015, the graph from LBS the business is earning profit. However, it isn’t earning as much profit as it had earned in 2013. Even with that, LBS is still recommended to invest in now based on the graph from 2014 to 2015.

13

Appendix

Consolidated of Financial Statement (2012)

14

15

16

Consolidated Statement of Comprehensive Income (2012)

17

Consolidated of Financial Statement (2013)

18

19

Consolidated Statement of Comprehensive Income (2012)

20

Reference

1. LBS: 2012 Reports. (n.d.). Retrieved February 03, 2016, from http://www.lbs.com.my/investor-relations/financial-reports/2012/

2. LBS: 2013 Reports. (n.d.). Retrieved February 03, 2016, from http://www.lbs.com.my/investor-relations/financial-reports/2013/

3. LBS: About Us. (n.d.). Retrieved February 03, 2016, from http://www.lbs.com.my/about-us/

4. LBS: Latest Launches. (n.d.). Retrieved February 03, 2016, from http://www.lbs.com.my/property-collections/latest-launches/

5. ^KLSE Interactive Stock Chart | Yahoo! Inc. Stock - Yahoo! Finance. (n.d.). Retrieved February 03, 2016, from http://finance.yahoo.com/echarts?s=^KLSE Interactive#{"customRangeStart":1420041600,"customRangeEnd":1451491200,"range":"custom","allowChartStacking":true}

21