student id 1067413 of 07 16050 financial & management accounting assignment
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Executive Master of Business Administration
(Singapore)
A Financial Analysis of Pertama Holdings Limited
Financial Statements
Submitted in part fulfilment of the requirements for:
Financial and Management Accounting Module (07 02798)
Submitted to: Mrs. Anne Ullathorne
Submitted by: Student ID No. 1067413
Word Count: 3120 words
Submission date: 25th October 2009
E XECUTIVE SUMMARY
The purpose of this report lies in conducting an analysis of the financial activities of
Pertama Holdings Limited for determining its suitability for investment or trading partner
and appraising the impact of an accounting policy on Pertama reported results.
Evaluation was conducted between Pertama appraisal of its performance (Chairmans
Report) with findings that was revealed or implied from its financial statements and
performance of its peers (Challenger Technologies Limited). Financial ratios were
selected for analysis of financial statements as mentioned by Atrill (2008.p.182.) on its
usefulness when comparing the financial health of different business as differences may
exist between businesses in the scale of operations.
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IAS 2 was selected as the accounting policy due to the importance of inventories in a
retail entity.
Limiting factors that surface in this report include shortage of listed companies thatmatches Pertama in the size of its finance and operations, different adoption of
accounting policies and reporting timing of annual report and non disclosures of sensitive
information which impact the validity of the findings.
The major findings indicate weaknesses in Pertama business that was not revealed in the
Chairmans statement. Despite the identified shortcomings, the company strengths in key
areas justify recommendation for investment or trading partners.
Pertama accounting policy for inventories are closely aligned to IAS 2 regulations which
lend credence to the reliability and relevancy of its financial reports.
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TABLE OF CONTENTS PAGE
Introduction
1.0 Profile of Pertama Holdings Limited 1~ 2
2.0 Analysis of Pertama Financial Statements for Year 2009 2~ 6
2.1 Profitability Ratios
2.2 Liquidity Ratios
2.3 Asset Management Ratios
2.4 Financial Structure Ratios
2.5 Investor Ratios
3.0 Comparative Appraisal of Pertama and Challenger Performance 6~ 10
3.1 Comparison of Profitability Ratios
3.2 Comparison of Liquidity Ratios
3.3 Comparison of Asset Management Ratios
3.4 Comparison of Financial Structure Ratios
3.5 Comparison of Investor Ratios
4.0 Evaluation of Pertama Chairmans Statement for Year 2009 10~ 11
5.0 Recommendations 12
6.0 Appraisal of Pertama Accounting Policy for Inventories 13~ 14
7.0 Conclusion 14
Bibliography
Appendices
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Introduction
Pertama Holdings Limited was selected for this report as it fulfil the requirements of the
assignment of being a public limited company listed in Singapore Exchange, availability
and accessibility of published financial reports, avenues for data gathering which assist in
the feasibility, reliability and validity of this report.
1.0 Profile of Pertama Holdings Limited
Pertama started as a partnership for undertaking retailing and wholesaling of consumer
electronics products. In 1982, Pertama Holdings was formed as an investment holding
company and subsequently listed in the Singapore Exchange in 1992.
In 1999, Pertama Holdings became a subsidiary of Harvey Norman Ossia (Asia) Pte
Ltd.which is a joint venture company between Australia listed Harvey Norman Hldgs Ltd
and Singapore listed Ossia Intl Ltd.
Over the years, Pertama has embarked on an expansion strategy that culminates in 2009
of a total of 14 stores within Singapore and 6 stores in Malaysia. The principal activities of
its subsidiaries lies in the reselling of consumer electronics, furniture and bedding
products from vendors of established brands i.e. Sony, Acer, Tempur to walk in
customers at its stores. Pertama also operates an advertising and property investment
subsidiary (Eastern Audio Pte Ltd) and has ceased its export and wholesaling business in
2008.
Pertama operate in a monopolistic market that is fragmented by bigger firms i.e. Best
Denki, Courts, Challenger and numerous sole proprietors in a extremely competitive
market due to sharing of similar suppliers base, price cutting and difficulties of securing
of customers loyalties (Annex C)
The state of local economy has direct impact on the growth and revenue generation of
firms in the retail industry (http://app.mti.gov.sg/default.asp?id=745#6) as seen in the
slump in retail performance since end 2008.
Pertama products display high income elasticity due to its luxury and high pricing
perception and revenue generation is subjected to the level of consumer disposable
income.
The management of Pertama possess strong entrepreneur and retail operations
experience which is a valuable asset for enhancing competiveness in a dynamic market
environment.
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2.0 Analysis of Pertama Financial Statements for Year 2009
According to Tony Davies & Tony Boczko (2006 p.136) ratio analysis may be used to
provide cross-sectional analysis and inter-firm comparison..more objective way to aid
decision making. The findings derived from the schedule of Pertama 2009 financial ratios
(Annex A 1.0) are categorised as follows:
2.1 Profitability Ratios
For 2009, Pertama saw a 10.6% ($376.41m from $420.95m) drop in revenue, gross profit
($25.56m from $32.16m) and gross profit margin (6.8% from 7.6% ) despite lower
cost of sales ($$350.85m to $388.78m). This indicate the poor trading conditions
from the onset of recession in Singapore (Annex D) which was worsen by the
cessation of Pertama export and wholesaling business.
The company show resilience in achieving 2.2% PBIT margin that was contributed from
lower administrative expenses ($10.53m from $12.42m), recovery of bad debts
($0.32m) and government grant of $0.5m for Jobs Credit Scheme (source:
http://www.asiaone.com/print/Business/My
%2BMoney/Opinion/Story/A1Story20090123-116738.html. Net profit shows a
slight increase of $6.69m from $6.63m from lower tax expense ($1.64 from
$3.35m) and a reduction in corporate tax rate (17% from 18%).
Significantly, Pertama has been able to lower cost drivers of personnel expenses
($27.56m from $28.8m) that form a major component of retailers expenses given
the labour intensive nature of the industry. However, the doubling of allowance for
inventory obsolescence ($0.83m to $1.55m) raise concerns as it indicate
possibilities of inventories not meeting customers demands, slow turning of
inventories or excessive amounts of obsolete or damaged stocks.
Asset turnover has fallen to 3.6 times which indicate poor investment opportunities or lack
of management efficiency in employing its capital for revenue and profit generation.
This can be seen by the increase of cash and cash equivalents to $77.45m which form
over 50% of current assets and the drop in inventories ($55.68m to $48.98m) which
served as the main driver of revenue generation. Non engagement of the cash hoard
raise concern given the low interest (0.1% to 2.94%) being earned coupled with the
absence of long term debt payments.
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ROCE drop from 9.7% to 8% while ROE stagnant at 6.4% due to fall PBIT and
insignificant increase of and net profit ($6.69m from $6.63m). The figures indicate that
past investments of opening new stores in Singapore and Malaysia have not translated
materially into higher revenue or profits.
2.2 Liquidity Ratios
Pertama maintain high liquidity ratios for 2009 (current ratio 2.9, acid ratio 1.9) which was
contributed by the increase in cash and cash equivalents and lowering of inventories
level. The contributing factors lies in the nature of its business: a) proportion of
inventories as current assets due to reselling activities b) strong cash generation from
operation activities due to the short lead time between sales of goods and collection of
payments.
However, there is low rationale for Pertama in maintaining over liquidity given the lack of
long term debts and continuing inflow of cash from operations. The excessive liquidity
should be engaged on higher yielding initiatives.
2.3 Asset Management Ratios
The 51 days of inventory turnover significantly exceed the stated settlement terms of30days due to trade payables (note 12.). This implied delay between cash outflow for
purchase of goods and cash inflow from selling of goods which arise from slow
movement of purchased goods and considerable amount of obsolescence goods
($1.55m in 2009, note 7.). In addition, Pertama is not capitalising on suppliers capital
through selling off purchased stocks before settlement date. Slow inventory turn raise
concerns as inventories obsolete at a fast pace due to the short life cycle of consumer
electronics products which will require expense of write down for selling purpose.
There is an improvement for debtor turnover (4.2 days from 7.6 days) with the reduction
of trade debtors ($4.36m from $8.75m) and a fall in doubtful debts ($2.87m from $8.75m).
This indicates a prudent and stringent approach in credit allowance for trade debtors for
minimising surfacing of bad debts, which is a sound strategy given the current economic
climate.
Creditors turnover at 27 days remains within the companys 30 days terms (note 12.)
which indicate prompt payment of creditors while maximising credit facilities of creditors.
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The main proportion of payables lies in stocks purchases from vendors for reselling
purpose. Pertama ability to pay within the defined trading terms increase its credit
worthiness, good suppliers relationship while adding strength during company
endeavours for trading terms or marketing support with suppliers.
2.4 Financial Structure Ratios
Pertama has no gearing and debt to equity ratios as its has been maintaining net cash
position in recent years. The lack of gearing cushions the company from downturns of
business cycle such as the present recession. The company has no long term debt and
investment has been self financed from its equity without a need for external borrowings
and financial risks.
The company cash flow remain healthy and has increased to 2.75 from 1.38 from lower
inventories and trade payables level which reduce the outflow of cash as it operate a
cash business with inventories that is being financed by vendors capital (30 days
payment period) with low trade debtors due to the COD (cash on delivery) terms for
customers purchase.
Pertama free cash flow has grown significantly to $20.69 from $7.24m due to higher cash
inflow from operations activities and lower cash outflow for investing activities ($2.18m
from $6.43m).
2.5 Investor Ratios
Earnings per share (EPS) have dropped due to lower profit available for shareholders
($6.69m from $7.37m). PE ratio has no significant changes at 8.9 due to low changes in
EPS coupled with non fluctuations of shares prices.
Pertama shares are thinly traded as only 11.16% of ordinary shares are held by public
investors (statistics of shareholdings 2009 annual report) with the balance being hold by
company and investment institutions which minimise drastic share price movements.
Despite a token improvement in net profit, Pertama has increased its dividend to
shareholders for a dividend yield of 9.7% against 8.4% in 2008 which arises from the
financial strength of the company, low liabilities and nil long term debts.
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There is a slight drop in earnings yield to 1.1% from 12.1% due to lower EPS. However,
earnings yield is more attractive when compared alternative investment avenues such as
treasury bonds and bank interest.
3.0 Comparative Appraisal of Pertama and Challenger PerformanceGibson (1998 p.202.) point out the analysis of an entitys financial statements is more
meaningful if the results are compared with industry averages and with results of
competitors.
Given the absence of exact entities that mirrors Pertama business profile such as size of
operation and products mixture; Challenger Technologies is selected for comparative
purpose as it shares sufficient similarities for higher validation.
However, the presence of different accounting policies such as valuation of inventories
(FIFO and weighted average) and differing reporting period (June and December) raise
reliability and distortion issues should 2009 be used for appraisal.
Hence, trend analysis is adopted as Aidan and Robin (2006 p.265) acknowledge it made
the results easier to understand and interpret of trends of both companies over 2006 to
2008 (2008 as base) on a like to like basis given similar operating timing.
The interpretations of findings from the schedules of ratios (Annex A 1.1 to A 1.5) are
elaborated as follows:
3.1 Comparison of Profitability Ratios
Both companies saw a trend of growing revenues due to expansion of retail business and
positive filter effect on retail trade from Singapore economic growth prior to the onset of
recession in end 2008 (Annex E).
Pertama out-performed Challenger in gross profit generation, however profit margin yield
is lower which may be contributed to the different product mix as Challenger do not sell
furniture and beddings and different business strategy such as focusing on high margin
products and avoidance of price cutting by Challenger ( Annex C).
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Pertama post lower asset turnover as it conserve its capital in cash and cash equivalents
which form 50% of its current assets. The company focus on expansion of its retail
business without any investment in other non-related business unlike Challenger which
incur higher risk through deploying its working capital in quoted shares, acquisition of
non-core business of Incall Systems Pte Ltd, electronic signage services which hastranslated to revenue of $3.58m in 2008 (source: note 5.&16. Challenger Technologies
Limited.2008 Annual Report p. 59. p. 68.).
From 2006 to 2008, Challenger has achieved higher ROCE against Pertama which
indicates its efficiency in engaging capital on sound investment opportunities for yields in
profits and revenues generation. Similarly, its higher ROE ratios demonstrate
management aptitude in leveraging on equity for maximising returns on shareholdersinvestment in the company without incurring debts from external borrowings.
3.2 Comparison of Liquidity Ratios
Pertama has relatively high liquidity level as compared to Challenger from its trend of its
cash hoarding while maintaining low inventories and liabilities level unlike Challenger
trend of increasing inventories that correspond with increase of stores.
3.3 Comparison of Asset Management Ratios
Unlike Challenger, Pertama has seen an unhealthy trend of increasing days of its
inventory turnover which has exceeded its payment terms of 30days for purchased
goods. Products being sold by both companies have very short life cycle due to constant
introductions of newer models that were communicated to consumers through mass
media for selling objectives.
Goods that remained in the company after payment incur opportunity and economic costs
of marked down which will impact negatively on returns on capital, cash flow and profit
position of the company.
Pertama has improved significantly on its debtors turnover 7.6 days (2008) from 36 days
(2006) which translate to effective credit management and minimising of equity leakage
from non collection of debts.
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Unlike Challenger, Pertama has been a good paymaster for suppliers, exceeding
payment due date for suppliers may erode both reputation and financial confidence of a
company as delays in payments will increase suppliers debtors turnover ratios.
3.4 Comparison of Financial Structure RatiosBoth companies cash receipts have consistently exceed cash payments resulting in
positive cash flow while meeting all financial obligations. The lack of long term debts
lessen cash outflows resulting in good solvency level and permits both companies to
self-finance investments such as opening of new stores without occurring financial risks
from external borrowing.
In addition, both companies positive free cash have sustained their ability for gooddividends payout and gradual building of high cash reserves provide capital for
investment opportunities.
3.5 Comparison of Investor Ratios
Pertama has out-performed Challenger in EPS as it has not diluted shareholders value
by increasing its share base through issue of warrants as performed by Challenger in
2007 and 2008 (note 13.Challenger 2008 annual report p.64.).
Both companies shares are thinly traded due to low percentage being hold by public
investors (Pertama at 11.16%, Challenger at 21.94%) and generally are inactive shares
that do not display wide swings in price resulting in PE ratios range of 6% to 11% over
2006 to 2008.
Challenger pays out higher annual dividends per share due to the company distribution of
accumulated retained earnings to shareholders. In 2007 and 2008, dividends payout
exceeded net profit from operations ($7.3m: $7.1m, $5.5m: $5.3m) while growth in equity
arises from issuance of shares (Challenger 2008 annual report p.35.).
Over 3 years, Pertama mean earnings yield of 10.4% is relatively close to Challenger
mean yield of $13% when discounting the upsurges of its shares prices in 2006 and
2007.
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In addition, Pertama was able to achieve this figure without diluting its shares base and
equity. Both companies figures have out-perform yield from other investment institutions
such as treasury bills and bank deposits.
Pertama performance is on par with Challenger in liquidity, investors and financialstructure ratios. However, Pertama conservative approach in employing its capital has
lowered its ability for earnings and profit expansion. The company needs to review its
asset management strategies such as improving inventory turnover, ROCE for greater
efficiency of its substantial capital base.
4.0 Evaluation of Pertama Chairmans Statement for Year 2009
The context of Pertama Chairmans statement centered on the company adoption of acautious approach in business operations due to the negative implications of current
economic woes.
The statement provides superficial analysis of Pertama business for 2009 without
detailed qualitative reviews of weaknesses that have surfaced in this report.
Pertama has been badly affected by economic conditions both in Singapore and Malaysia
due to over emphasis on retailing activities.
The cessation of export business and lack of alternatives measures for its replacement,
nil cushioning of bad trading conditions from alternate business options will subject the
growth and profitability of Pertama to unpredictable health of the Singapore economy.
Gain in net profit lies from reduced tax expense and losses in Malaysias operations were
not disclosed (note 31.). Concrete reasons and plans for accumulation of $77.4m cash
hoard currently earning minimal interest was not provided which implied poor capital
management by the company.
Measures for overcoming continuing weaknesses of profit margin, PBIT, ROE, ROCE,
inventory turnover was not forthcoming in the statement. There was no comparison done
against competitors and industry results for validation of performance.
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Pertama can afford move away from the cautious stance being adopted by companies
due to sound financial strength, nil long term debts, high liquidity level by seeking
opportunities in a recession period where cash is king for maximising returns for
shareholders and lowering of company vulnerabilities in a low growth competitive retail
industry.
5.0 Recommendations
Aidan and Robin (2006 p.247 248) claim lenders may be sub-divided intoshort- term
creditors, medium-term lenders and long term lenders. Here, trading partners of
Prertama serve as lenders of capital through supplying goods on credit terms.
These lenders undertake financial risks in trading with Pertama and their key interest liesin a) risk factor b) financial strength c) profitability and growth of trading d) solvency of the
company.
From the findings of this report, Pertama is recommended as a trading partner as its
business model is that of a cash generating company with sound financial strength,
continuing profitability of operations and good paymaster records. The nature of its
business being retailing requires constant supply of goods for reselling and its substantial
sales and expansion plans portend good growth of trading opportunities.
The continuing profitability contributes to high liquidity, substantial cash holdings and
absence of long term debts which will mitigate risk of non payments of supplied goods. In
addition, being a listed company that complies with Singapore Exchange requirements,
published reports of Pertama financial statements are readily available which will facilitate
traders measurement of its credit worthiness.
Pertama would be recommended for investors seeking attractive price shares that
provide stable dividend yields from a debt free, low risk company with strong financial
structure and conservative approach towards equity engagement. (Annex G). However,
speculative investors will be disappointed in low fluctuations of Pertama shares given its
thin trading and low amount of shares hold by public.
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6.0 Appraisal of Pertama Accounting Policy for Inventories
IAS 2 (Annex H) deal with how an organization should value its inventories which give
credence for selecting Pertama accounting policy for inventories given its importance in
retailing and as noted by Tiffin (2004 p. 57.) over (or under) valuing inventory affects the
balance sheet asset value...also affects the related cost of sales, and thus profits by
the same amount.
As per accruals concepts of recognizing costs as they are incurring, Pertama inventories
costs includes all costs in bringing the inventories to their present location, stated at the
lower of costs that are net of volume rebates and other inventory based incentives from
suppliers (notes 2.19.). Rebates are deducted from cost of inventory on goods that
remain unsold at end of financial year which will be reflected in the income statement
Atrill (2008 p. 54.) stressed prudence convention requires the expected loss from future
sales be recognised immediately. Allowance (note 3.) is made for Pertama deteriorated,
damaged, obsolete and slow-moving inventories for bringing the inventories to a saleable
condition for realising its net realisable value (NRV). Allowance is treated as an expense
in cost of sales of the income statement (note 7.) which will reduce net income and value
of inventories in the balance sheet.
Pertama determine its inventories though weighted average cost formula which according
to Aidan, Robin (2006 p. 129.) made no assumption about the way in which goods flow
through the business and is more neutral. Valuation method impact gross profit as cost
of sales will be different under different methods of inventory valuation. For example;
should Pertama adopt FIFO during period of inflation, its costs of goods will be lower as
the value of closing inventory is based on later purchases which will lift up gross profit for
the year and the higher costing purchases will be matched against the following year
revenues.
Pertama do not adopt this approach in elevating its profits due to adherence of the
consistency concept of uniformity of accounting treatment of items from one accounting
period to the next period.
Pertama inventories that are unsold at the end of the year is recognised as an asset and
carried forward under current assets in the balance sheet (note.7) in accordance to the
accruals and going concepts. The value of closing inventory is deducted from the cost of
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sale in the income statement which will affect the gross profit margin that is reported for
the period, liquidity ratios and working capital of the business.
In addition, as per IAS 2, Pertama annual report disclose the accounting policies for
valuing its inventories, details of reversal of inventory write downs (note 3.) and amount ofinventories at NRV are classified in the relevant financial statements.
7.0 Conclusion
The analysis of Pertama financial statements surfaces weaknesses in its business
operations which do not dilute its attractiveness for investment or trading partner purpose.
The company demonstrates good accounting practices by abiding to accounting
treatment for valuing its inventories under IAS2 regulations.
Limiting factors identified is minimised through a review of Pertama non-financial
performance indicators as argue by Tony Davies and Tony Boczko (2006. pp. 172 173)
which may give a more timely indication of the levels of performance achieved than do
financial ratios ..less susceptible to distortion
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Bibliography
1. Aidan Berry, Robin Jarvis. (2006)Accounting in a business context. 4th edn.
China: Cengage Learning. pp.109 154.. pp.247-265.
2. Charles H. Gibson. (1998) Financial Statement Analysis. 7th edn. Ohio: South-
Western Publishing. pp. 202-207.3. David Alexander, Anne Britton, Ann Jorissen. (2003) International Financial
Reporting and Analysis. 1st edn. Great Britain: Thomson Learning. pp. 121-145.
4. Pam Powell.Accounting, Analysis and Planning. Kent: Financial World Publishing.
ISBN 0-85297-614-3 pp. 227-251.
5. Peter Atrill, Eddie Mclaney. (2008)Accounting and Finance for Non Specialist.
6th edn. London: Prentice Hall. p. 54 pp. 181 - 224.
6. Ralph Tiffin. (2004) The Complete Guide to International Financial Reporting
Standards Including IAS and Interpretation. London: Thorogood pp.57-61.7. Robert Perks. (2007) financial accounting understanding and practice. 2nd edn.
Berkshire: McGraw-Hill. pp. 77-100.
8. Dr. Themin Suwardy, (2002) Financial Reporting in Singapore, Cases and
Readings. 2nd edn. Singapore: Pearson
9. Tony Davies, Tony Boczko. (2006) Principles of Accounting and Finance. 1st edn.
Berkshire: McGraw Hill. p.136 pp.
10. Pertama Holdings Limited. Annual Report 2009 pp. 1-73.
11. Challenger Technologies Limited . Annual Report pp. 1-112.
12. http://app.mti.gov.sg/default.asp?id=745#6
13. http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-
116738.html
14. http://www.business.gov.sg/EN/News/Sep2009/20090916singapore.htm
15. http://www.challenger.com.sg/
16. http://www.harveynorman.com.sg/
17. http://www.iasplus.com/dttpubs/pocket2009.pdf
18. http://www.inc.com/resources/retail/articles/200707/hurlbut.html
19. http://www.retailasiaonline.com/magazine/archive/2009/mag2009-01_story03.html
20. http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType=
ANN&symbol=PRTH.SI
21. http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType=
ANN&symbol=CHALbi.SI
22. http://www.theedgesingapore.com/component/content/8600.html?task=view
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http://app.mti.gov.sg/default.asp?id=745#6http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-http://www.business.gov.sg/EN/News/Sep2009/20090916singapore.htmhttp://www.challenger.com.sg/http://www.harveynorman.com.sg/http://www.iasplus.com/dttpubs/pocket2009.pdfhttp://www.inc.com/resources/retail/articles/200707/hurlbut.htmlhttp://www.retailasiaonline.com/magazine/archive/2009/mag2009-01_story03.htmlhttp://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perTypehttp://www.theedgesingapore.com/component/content/8600.html?task=viewhttp://app.mti.gov.sg/default.asp?id=745#6http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-http://www.business.gov.sg/EN/News/Sep2009/20090916singapore.htmhttp://www.challenger.com.sg/http://www.harveynorman.com.sg/http://www.iasplus.com/dttpubs/pocket2009.pdfhttp://www.inc.com/resources/retail/articles/200707/hurlbut.htmlhttp://www.retailasiaonline.com/magazine/archive/2009/mag2009-01_story03.htmlhttp://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perTypehttp://www.theedgesingapore.com/component/content/8600.html?task=view -
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Appendices
A 1.0 Schedule of ratios calculations for Pertama Holdings Limited Year end 30th June 2009
A 1.1 Schedule of comparative profitability ratio calculations for Pertama and Challenger (Year
2006 2009)
A 1.2 Schedule of comparative Liquidity ratios calculations for Pertama and Challenger (Year2006 2009)
A1.3 Schedule of comparative Asset Management ratios calculations for Pertama and
Challenger (Year 2006 2009)
A 1.4 Schedule of comparative Financial Structure ratios calculations for Pertama and
Challenger (Year 2006 2009)
A 1.5 Schedule of comparative Investor ratios calculations for Pertama and Challenger (Year
2006 2009)
B Pertama Holdings Limited. Annual Report 2009 pp. 1-73C Appendices C Commentary of retail business by Challenger Technologies Chairman
(THE EDGE SINGAPORE FEBRUARY 25, 2008)
D How are retailers in Singapore bearing up?
E Singapore Economic Indicators
F 1.0 Pertama Balance Sheet (Year 2006 to 2009)
F 1.1 Pertama Income Statement (Year 2006 to 2009)
F 1.2 Pertama Cash Flow Statement (Year 2006 to 2009)
F 1.3 Challenger Balance Sheet (Year 2006 to 2009
F 1.4 Challenger Income Statement (Year 2006 to 2009)
F 1.5 Challenger Cash Flow Statement (Year 2006 to 2009)
G Pertama Holdings: Undervalued retailer offers high dividend; recovery could spur growth
H IAS 2 (Inventories)
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Appendix A 1.0. Schedule of ratios calculations for Pertama Holdings Limited Year end 30th June 2009
NB Accounting Equation: Fixed assets + Current Assets Current Liabilities = Ownership Interest + Long Term Loans
Year 2009 ($000): 14,320 + 136,826 47,227 = 103,919
Year 2008 ($000): 17,002 + 133,834 47539 = 103,297
RATIOS FORMULA USED FINANCIAL YEAR 2009 $000DETAIL OF CALCULATION
FINANCIAL YEAR 2008 $000DETAIL OF CALCULATION
PROFITABILITY RATIOS
Gross Profit Revenue minus Cost of sales 376,413 350,853 = 25,560 420,953 388,784 = 32,169
Gross Profit Margin Gross profit X 100%Revenue
25,560 X 100% = 6.8%376,413
32,169 X 100% = 7.6%420,953
PBIT Margin Operating profit X 100%Revenue
8,345 X 100% = 2.2%376,413
9,987 X 100% = 2.4%420,953
Asset Turnover Sales (or turnover) = number of timesCapital employed
376,413 = 3.6 times151,146 47,227
420,953 = 4.1 times150,836 47,539
ROCE Profit before interest and tax X 100%Capital employed
8,345 X 100% = 8%151,146 47,227
9.987 X 100% = 9.7%150,836 47,539
ROE Profit after tax X 100%Net assets
6,699 X 100% = 6.4%103,919
6,636 X 100% = 6.4%103,297
LIQUIDITY RATIOS
Current Ratio Current assets : Current liabilities 136,826 : 47,227 = 2.9 to 1 133,834 : 47,539 = 2.8 to 1
Quick Ratio Current assets less stock : Current liabilities 87,838 : 47,227 = 1.9 to 1 78,145 : 47,539 = 1.6 to 1
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ASSET MANAGEMENT RATIOS
Inventory Turnover Average inventory X 365 days = number days of stocksCost of sales
48,988 X 365 days = 51 days350,853
55,689 X 365 days = 52 days388,784
Debtor (Receivables) Turnover Debtors X 365 days = x days outstandingSales
4,368 X 365 days = 4.2 days376,413
8,754 X 365 days = 7.6 days420,953
Creditors (Payables) Turnover Trade payables X 365 days = days of creditors unpaidCost of sales
26,073 X 365 days = 27 days350,853
24,807 X 365 days = 23 days388,784
FINANCIAL STRUCTURE
GearingPrior charge capital .Total capital employed 0 0
Debt to equityDebt X 100%Equity
0 0
Cash flow Cash from operationsOperating profit
22,921 = 2.758,345
13,772 = 1.389,987
Free cash flow Operating cash from operation Capital expenditure 22,921 2,230 = 20,691 13,772 6,530 = 7,242
INVESTOR RATIOS
Market price of share 25.0 cents (at 22ndh June 2009) 25.5 cents (at 20th June 2008)
EPS Profit available for shareholdersNumber of shares issued
6,699 = 2.80cents239,117
7,373 = 3.08 cents239,117
PE ratio Market price of shareEPS
25.0 cents = 8.92.80 cents
25.5 cents = 8.33.08 cents
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Dividend yield Annual dividend per shareMarket price of share
5811 / 239117 = 9.7%25.0 cents
5109 / 239117 = 8.4%25.5 cents
Earnings yield
EPSMarket price of share
2.80 cents = 11.2%25.0 cents
3.08 cents = 12.1%25.5 cents
Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73
Share Price: http://www.reuters.com/finance/stocks/chart?symbol=PRTH.SI
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Appendix A1.1 Schedule of comparative Profitability ratios calculations for Pertama and Challenger (Year 2006 2009)
Company Formula used Year 2008 ($000) Year 2007 ($000) Year 2006 ($000)
Pertama Gross prof it Revenue minus Cost of sales 421 388.8 = 32.2 409.1 373 = 36.1 396.2361.2 = 34.9
Challenger Grossprofit
Revenue minus Cost of sales 168 133 = 35 136.1107.6 = 28.5 92.3 73.7 = 18.6
Pertama Gross profitmargin
Gross profit X 100%Revenue
32.2 / 421 X 100% = 7.6% 36.1 / 409.1 X 100% = 8.8% 34.9 / 396.2 X 100% = 8.8%
Challenger Grossprofit margin
Gross profit X 100%Revenue
35 / 168 X 100% = 20.8% 28.5 / 136.1 X 100% = 20.9% 18.6 / 92.3 X 100% = 20.2%
Pertama PBIT marginOperating profit X 100%Revenue 10 / 421 X 100% = 2.4% 13.6 / 409.1 X 100% = 3.3% 11.9 / 396.2 X 100% = 3.0%
Challenger PBITmargin
Operating profit X 100%Revenue 7.2 / 168 X 100% = 4.3% 8.8 / 136.1 X 100% = 6.5% 6.1 / 92.3 X 100% = 6.6%
Pertama Assetturnover
Sales or turnoverCapital employed 421 / (150.8 -47.5) = 4.1 times 409.1 / (161.1 -57.6) = 4.1 times 396.2 / (132.8 -38.5) = 4.2 times
Challenger Assetturnover
Sales or turnoverCapital employed 168 / (46.7 -23.9) = 7.4 times 136.1 / (38.7 -16.4) = 6.1 times 92.3 / (26.5 -12.0) = 7.7 times
Pertama ROCE
PBIT X 100%
Capital employed 10 / (150.8 -47.5) X 100% = 9.7% 13.6 / (161.1 -57.6) X 100% = 13.1 % 11.9 / (132.8 -38.5) X 100%= 12.6%
Challenger ROCE PBIT X 100%Capital employed 7.2 / (46.7- 23.9) = 31.6% 8.8 / (38.7 -16.4) = 39.4% 6.1 / (26.5 -12.0) = 42.1%
Pertama ROE Profit after tax X 100%Net assets 6.6 / (150.8 -47.5) X 100% = 6.4% 10.4 / (161.1 -58.3) X 100% = 10.1 % 9.3 / (132.8 -38.5) X 100%= 9.9%
Challenger ROE Prof it af ter tax X 100%Net assets 5.3 / (46.7- 24.7) = 24.1% 7.1 / (38.7 -16.8) = 32.4% 4.5 / (26.5 -12.5) = 32.1%
Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73, Challenger Technologies Limited . Annual Report pp. 1-112
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Appendix A1.2 Schedule of comparative Liquidity ratios calculations for Pertama and Challenger (Year 2006 2009)
Company Formula used Year 2008 ($000) Year 2007 ($000) Year 2006 ($000)
Pertama Current ratio Current assets : Current l iabi li ties 133.8 : 47.5 = 2.8 : 1 145.3 : 57.6 = 2.5 : 1 121.9 : 38.5 = 3.2 : 1
Challenger Current Ratio Current assets : Current liabilities 39.6 : 23.9 = 1.6 : 1 32.9 : 16.4 = 2.0 : 1 22.2 : 12.0 = 1.8 : 1
Pertama Quick ratio Current assets less stock : Currentliabilities
78.1 : 47.5 = 1.6 : 1 100 : 57.6 = 1.7 : 1 82.3 : 38.5 = 2.1 : 1
Challenger Quick ratio Current assets less stock : Currentliabilities
30.4 : 23.9 = 1.3 : 1 24.7 : 16.4 = 1.5 : 1 15.0 : 12.0 = 1.3 : 1
Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73, Challenger Technologies Limited . Annual Report pp. 1-112
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Appendix A1.3 Schedule of comparative Asset Management ratios calculations for Pertama and Challenger (Year 2006 2009)
Company Formula used Year 2008 ($000) Year 2007 ($000) Year 2006 ($000)
Pertama Inventory turnover Average inventory divide cost ofsales times 365 days
55.7 / 388.8 X 365 = 52 days 45.3 / 373.6 X 365 = 44 days 39.6 / 361.3 X 365 = 40 days
Challenger Inventory turnover Average inventory divide cost ofsales times 365 days
9.2 / 133.0 X 365 = 25 days 8.2 / 107.6 X 365 = 28 days 7.2 / 73.7 X 365 = 36 days
Pertama debtors turnover Trade debtors divide by revenuetimes 365 days
8.8 / 421 X 365 = 7.6 days 32.8 / 409.1 X 365 = 29.3 days 32.9 / 396.2 X 365 = 30.3 days
Challenger debtors turnover Trade debtors divide by revenuetimes 365 days
5.3 / 168 X 365 = 11.5 days 4.4 / 136.1 X 365 = 11.8 days 3.5 / 92.3 X 365 = 13.8 days
Pertama creditors turnover Trade payables divide by revenuetimes 365 days
24.8 / 421 X 365 = 21.5 days 32.0 / 409.1 X 365 = 28.6 days 21.8 / 396.2 X 365 = 20.08 days
Challenger creditors turnover Trade payables divide by revenuetimes 365 days
18.6 / 168 X 365 = 40.4 days 12.2 / 136.1 X 365 = 32.7 days 9.0 / 92.3 X 365 = 35.6 days
Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73, Challenger Technologies Limited . Annual Report pp. 1-112
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Appendix A1.4 Schedule of comparative Financial Structure ratios calculations for Pertama and Challenger (Year 2006 2009)
Company Formula used Year 2008 ($000) Year 2007 ($000) Year 2006 ($000)
Pertama Gearing Prior charge capital .Total capital employed
0 0 0
Challenger Gearing Prior charge capital .Total capital employed
0 0 0
Pertama Debt to equity Debt X 100%Equity
0 0 0
Challenger Debt to equity Debt X 100%Equity
0 0 0
Pertama Cash Flow cash from operation divideoperating profit
13.8 / 10 = 1.38 27.7 / 13.6 = 2.04 10.9 / 11.9 = 0.92
Challenger Cash Flow cash from operation divideoperating profit
14.6 / 7.2 = 2.02 10.7 / 8.8 = 1.22 8.4 / 6.1 = 1.38
Pertama Free cash flow cash from operation minuscapital expense
$13.8m -$6.5m =$7.3m $27.7m -$8.5m =$19.2m $10.9m -$2.8m =$8.1m
Challenger Free cash f low cash from operation minuscapital expense
$14.6m -$2.4m =$12.2m $10.7m -$3.1m =$7.6m $8.4m -$2.9m =$5.5m
Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73, Challenger Technologies Limited . Annual Report pp. 1-112
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Appendix A1.5 Schedule of comparative Investor ratios calculations for Pertama and Challenger (Year 2006 2009)
Company Formula used Year 2008 ($000) Year 2007($000) Year 2006 ($000)
Pertama EPS Profit available for shareholders
Number of shares issued
3.10 cents 4.40 cents 3.90 cents
Challenger EPS Profit available for shareholders
Number of shares issued
2.40 cents 3.60 cents 2.50 cents
Pertama profit for shareholder $7.4m $10.6m $9.3m
Challenger profit for shareholder $5.3m $7.1m $4.5m
Pertama basic average shares 239.12 239.12m239.12m
Challenger basic average shares 221.83 195.43 177.78
Pertama Share pricing at end oftrading month (June )
25.5 cents 49.0 cents 39.0 cents
Pertama PE ratio Market price of shareEPS
8.22 11.14 10.0
Challenger Share pricing at end oftrading month (June)
26.50 cents 22.0 cents 18.0 cents
Challenger PE ratio Market price of shareEPS
11.04 6.11 7.2
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Pertama gross dividend commonstocks
5.1
4.8
3.1
Pertama dividend yield Annual dividend per shareMarket price of share
2.4 = 9.4%25.5
2.0 = 4.08%49.0
1.3 = 3.33%39.0
Challenger gross dividends commonstocks
5.5
7.3
4.0
Challenger dividend yield Annual dividend per shareMarket price of share
2.4 = 9.1%26.50
3.3 = 15%22.0
2.2 = 12.22%18.0
Pertama earnings yield
EPSMarket price of share
3.10 = 12.16%25.5
4.40 = 8.98%49.0
3.90 = 10.0%39.0
Challenger earnings yield
EPSMarket price of share
2.40 = 9.06%26.5
3.60 = 16.36%22.0
2.50 = 13.89%18.0
Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73, Challenger Technologies Limited . Annual Report pp. 1-112
Pertama Share Price: http://www.reuters.com/finance/stocks/chart?symbol=PRTH.SI
Challenger Share Price: http://www.reuters.com/finance/stocks/chart?symbol=CHALbi.SI
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Appendix C Commentary of retail business by Challenger Technologies Chairman (THE EDGE SINGAPORE FEBRUARY 25, 2008)
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Appendix D How are retailers in Singapore bearing up?
Magazines Archives - 2009 January
How are retailers in Singapore bearing up?Story 3 - Focus
Unusually early festive sales and heightening competition signal tough times ahead forSingapores recession-hit retail sector. But retailers are seeing this as an opportunity for
differentiation. Jolene Klassen finds out how some players are bracing themselves for thedownturn.
A year ago, Singapores retail industry was riding high on the back of record tourist arrivals,with new attractions such as the Singapore Flyer observation wheel and the countrysinaugural Formula One Grand Prix night races being big draws.
The economy, then enjoying the decades lowest unemployment rate, was abuzz withactivity as new mall projects were announced amid much anticipation over the citystatestwo integrated resorts under construction.
But, as the global financial downturn rippled through markets across the globe late last year,Singapores economy took a downward turn, with pensive government forecasts, which donot appear to be lifting anytime soon.
Visitor numbers last October fell by 8.1% from the year before while retail sales dipped by
3.6% year on year. According to a Nielsen study, the consumer sentiment in 2008 had alsostumbled 10 points to 92in a second double-digit drop for the year.
Predictably, the mood on the streets turned noticeably sombre last festive year-end. Eventhe colourful lights and Christmas trees did little to spread cheer, as consumers began tosquirrel away whatever spare cash they have, says Lau Chuen Wei, executive director ofSingapore Retailers Association(SRA).
At the moment, with all this gloom and doom, people are just afraid to spend, she observes.
Recessionary effects began to be felt in the shops when, for the first time last year, retailers [came] up with offers and discounts awhole month before Christmas, doing their utmost to appeal to their customers and give them value buys, says Lau.
Calling this a rarity, she explains that retailers get their highest yields from the period leading to Christmas right through to the NewYear. This is one of two major peaks in Singapores retailcycle, the other being the Great Singapore Sale, Lau points out.
It seems the dreary outlook for the retail industry set in only in the latter part of 2008. Earlier, the industry was still enjoying thespillover effects of a 2007 that had ended on a very high note, before news of the slowdown started creeping in around the middle oflast year, she says. The industry didnot feel the effects of the global crisis until end-September to early-October. All in all, weve had a pretty good nine months or so.
Despite the slowdown, one perennial concern has remained little changed. Rentals have been escalating, Lau laments. Even now,with the economic crisis, they have still not come down.The rate of increase has perhaps slowed somewhat, but has [yet to see] a downward trend.
The landlords will tell you that its a matter of market forces if the supply is there, the natural thing is that rentals will come down.But, historically, we have not seen that happen.
Real-estate specialist CB Richard Ellis latest ranking names Singapore the 17th most expensive shopping location globally, and sixthin the Asia- Pacific. The countrys rate of rental increases is the 22nd fastest in the world, with rents along Orchard Road going forUS$455psf annually.
Another real-estate consultancy, Cushman & Wakefield, has also credited events like the launch of the ingapore Flyer and the three-day Formula One races for the spike in tourist arrivals, sustaining international retailers business and driving rentals. The number oftourists for the period the races were held had increased 30% over the same period last year.
With the spate of new malls coming up across the island-state at a time of poor economic outlook, it has been speculated thatlandlords may be compelled to lower their rents. But SRAs Lau remains sceptical, maintaining that high retail rentals have been anissue among tenants for the longest time.
She encourages retailers to continue building their brands while standing their ground concerning rentals. Maybe, in the currenteconomic situation, the time has come for retailers having takenmore than they can stomach because their margins just would not let them push on any further to have the upper hand [in rentalnegotiation], she says.
Mall projects still on Despite the anticipation of a protracted slowdown, a number of new malls areslated to come on stream this year. Along Orchard Road alone, four developments are set to open, led by Far East OrganizationsOrchard Central in the first quarter, followed in mid-2009 by ION Orchard, a joint venture between CapitaLand and Sun Hung Kai
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Properties, and Lend Lease Retails 313@Somerset at year-end, while The Meritus Mandarin Hotels Mandarin Gallery, now beingrevamped, is scheduled for completion this October.
On the city outskirts, City Development Ltd also aims to open City Square Mall,the countrys first ecomall, by the end of the year. Farther away in theheartlands, refurbishments and asset- nhancementprojects are breathing new life into suburban properties. Wendy Low, generalmanager of Frasers Centrepoint Ltd, reveals: Aside from the newlycompletedNorthpoint extension [in Yishun], we will be completing assetenhancementworks at the current Northpoint by early [next] quarter. The Frasers entrepoint
Malls group will also be unveiling YewTee Point [this quarter] and a mall inBedok in 2010.
Unfazed by the number of new players, Low believes these new malls willkeep the industry on its toes to the benefit of consumers. Landlords andretailers will be challenged to work very closely to roll out more unique mall andretail concepts.
Shoppers will have more variety and hence choices. Furthermore, we havewitnessed the growing popularity of suburban shopping destinations. Retailershave stretched themselves [to offer] differing concepts at the malls, she adds.
This makes for some good news, bringing more excitement to the scene, Lausays, averring that differentiation remains the key to success in what isbecoming an even more challengingretail landscape. Some [mall owners] are also saying that they will be bringing
in foreign brands that have never been in Singapore before, she reveals.
However, attempts at mall positioning are only the beginning of differentiation,as Lau warns: At the end of the day, if landlords cannot get the tenants that ...match [their] niche, they will end up taking anybody who is ready to pay therent to fill up that space. This could result in copycat malls, whichwill reduce their appeal to shoppers.
Expansion continues, along with investment in training and technology Dubbing tourist dollars the icing on the retail cake, retailershave not forgotten that the bulk of their sales is generated by the domestic market.
In order to keep local consumer confidence from waning further, and at a time when other companies are retrenching staff to stayafloat, homegrown retail group NTUC FairPrice has announced that it plans to train and retrain its employees as well as proceed withthe opening of two new stores this in addition to its third hypermarket, opened last December at Jurong Point.
The government has always pushed for training and re-training, Lau acknowledges. Recently, the Singapore government has set
aside S$600 million (US$406.43 million) for employers staff-training schemes. On top of that, the government has earmarked S$2.3billion in loans for over 120,000 localcompanies to tide them over until after the recession.
Foreign retail groups, too, are taking the slowdown in stride and forging ahead. Isetan Scotts is sprucing up its mens section tointroduce labels by Mango and Croquis, while sportswear brand Nike opened its first 8,000sqf South-east Asian flagship duplex storeat Wisma Atria last November.Meanwhile, technology providers are anticipating a busy year ahead for the retail industry, says Peter Robilliard, solution director,Asia-Pacific and Japan, Torex Retail Holdings Limited,a retail-solutions provider.More and more retailers in Singapore are adopting global Tier-1 solutions. As these retailers become morecompetitive, they look at systems that can help run their business [with] more information to help them make better decisions quicker,Robilliard reveals.
Maneesh Sah, marketing director, Asia-Pacific at Torex, adds that during recessionary times, retailersshould focus not only on increasing sales by creating impulse buys, but also on sustaining customer$loyalty to brands. Retailers are not shying away from investing in technology, even in these times. It clearly means that, [far] from
stopping their IT investments, retailers are using this downturn toimplement technology, retain customers and increase customer loyalty, Sah maintains, stressing the importance of using technologyin the retail environment to further convert browsers into customers.
Lau affirms that, in terms of technology, Singapore is reputed for being a well-connected country. She adds: To survive, retailers areby and large looking at what will contribute to the Industry players in Thailand now pin their 2009 retail-growth forecast at only 2%-3%,about half of the 4% expected to have een recorded for the year just ended. next dollar in sales and how they can contain costs.
On the whole, a lot of Singaporeans still see shopping as ... more than just going out to buy something. It is a whole leisure activity tomeet up with friends and be with the family. Just to trawl theshops, whether they buy or not, is something that Singaporeans still cling on to and enjoy doing.
To view other stories, get a copy of Retail Asia. To subscribe, please download the subscription formfrom http://www.retailasiaonline.com/subscription.html
Source http://www.retailasiaonline.com/magazine/archive/2009/mag2009-01_story03.html
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Appendix E Singapore Economic Indicators
Real Economic Growth
Share of GDP by Industry
Source: http://www.singstat.gov.sg/stats/charts/econ.html
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Appendix F 1.0 Pertama Balance Sheet (Year 2006 to 2009)
Pertama Holdings Limited (PRTH.SI) (Stock Exchange of Singapore)
In Millions of Singapore Dollars(except for per share items)
20092009-06-30 20082008-06-30 20072007-06-30 20062006-06-30
2005
2005-06-30Restated2006-06-30
Cash 36.4 37.7 36.4 9.6 7.7Cash & Equivalents -- -- -- -- --Short Term Investments 44.7 28.6 27.9 35.3 31.9Cash and Short Term Investments 81.2 66.3 64.4 44.8 39.6Accounts Receivable - Trade, Net 4.4 8.8 32.8 32.9 26.9Notes Receivable - Short Term -- -- -- -- --Receivables - Other 2.0 2.8 2.0 4.6 5.1Total Receivables, Net 6.4 11.5 34.8 37.5 31.9Total Inventory 49.0 55.7 45.3 39.6 51.1Prepaid Expenses 0.2 0.3 0.9 -- --Other Current Assets, Total -- -- -- -- --Total Current Assets 136.8 133.8 145.3 121.9 122.7Property/Plant/Equipment, Total - Gross 34.7 35.6 30.8 22.3 22.6
Accumulated Depreciation, Total (21.3) (19.2) (15.6) (12.5) (12.0)Property/Plant/Equipment, Total - Net 13.4 16.4 15.2 9.8 10.6Goodwill, Net -- -- -- -- --Intangibles, Net -- -- -- -- --Long Term Investments -- -- -- -- --Note Receivable - Long Term -- -- -- -- --Other Long Term Assets, Total 0.9 0.6 0.6 1.1 0.6Other Assets, Total -- -- -- -- --Total Assets 151.1 150.8 161.1 132.8 133.9Accounts Payable 26.1 24.8 32.0 21.8 31.3Payable/Accrued -- -- -- 13.3 10.9Accrued Expenses 7.9 7.5 8.5 -- --Notes Payable/Short Term Debt 0.0 0.0 0.0 0.0 0.0Current Port. of LT Debt/Capital Leases -- -- -- -- --Other Current liabilities, Total 13.3 15.3 17.1 3.4 2.9Total Current Liabilities 47.2 47.5 57.6 38.5 45.2
Long Term Debt -- -- -- -- --Capital Lease Obligations -- -- -- -- --Total Long Term Debt 0.0 0.0 0.0 0.0 0.0Total Debt 0.0 0.0 0.0 0.0 0.0Deferred Income Tax -- -- -- -- --Minority Interest 0.0 0.0 0.7 0.0 --Other Liabilities, Total -- -- -- -- --Total Liabilities 47.2 47.5 58.3 38.5 45.2Redeemable Preferred Stock, Total -- -- -- -- --Preferred Stock - Non Redeemable, Net -- -- -- -- --Common Stock, Total 66.7 66.7 66.7 66.7 59.8Additional Paid-In Capital 0.4 0.4 0.3 0.2 7.1Retained Earnings (Accumulated Deficit) -- -- -- -- --Treasury Stock - Common -- -- -- -- --ESOP Debt Guarantee -- -- -- -- --Unrealized Gain (Loss) 43.4 42.5 40.3 32.5 26.3Other Equity, Total (6.6) (6.3) (4.5) (5.1) (4.4)Total Equity 103.9 103.3 102.8 94.3 88.7Total Liabilities & Shareholders' Equity 151.1 150.8 161.1 132.8 133.9Shares Outs - Common Stock Primary Issue 239.12 239.12 239.12 239.12 239.12Shares Outstanding - Common Issue 2 -- -- -- -- --Shares Outstanding - Common Issue 3 -- -- -- -- --Shares Outstanding - Common Issue 4 -- -- -- -- --Total Common Shares Outstanding 239.12 239.12 239.12 239.12 239.12Total Preferred Shares Outstanding -- -- -- -- --
DataSource: http://www.reuters.com/finance/stocks/incomeStatement?
stmtType=BAL&perType=ANN&symbol=PRTH.SI
Appendix F 1.1 Pertama Income Statement (Year 2006 to 2009)
Pertama Holdings Limited (PRTH.SI) (Stock Exchange of Singapore)
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In Millions of Singapore Dollars(except for per share items)
20092009-06-30
Period Length12 Months
20082008-06-30
Period Length12 Months
20072007-06-30
Period Length12 Months
20062006-06-30
Period Length12 Months
20052005-06-30Restated
2006-06-30Period Length
12 Months
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Revenue 376.4 421.0 409.1 396.2 393.3Other Revenue, Total -- -- -- -- --Total Revenue 376.4 421.0 409.1 396.2 393.3Cost of Revenue, Total 350.9 388.8 373.0 361.3 355.2Gross Profit 25.6 32.2 36.2 34.8 38.1Selling/General/Admin. Expenses, Total 19.9 21.2 24.3 24.7 26.8Research & Development -- -- -- -- --Depreciation/Amortization -- -- -- -- --Interest Expense, Net - Operating -- -- -- -- --Interest/Investment Income - Operating (0.8) (1.4) (1.6) -- --
Interest Expense(Income) - Net Operating -- -- -- -- --Unusual Expense (Income) -- -- -- -- --Other Operating Expenses, Total (1.8) 2.5 (0.1) (1.8) (0.8)Total Operating Expense 368.1 411.0 395.5 384.3 381.2Operating Income 8.3 10.0 13.6 11.9 12.1Interest Expense, Net Non-Operating -- -- -- -- --Interest/Invest Income - Non-Operating -- -- -- -- --Interest Income(Exp), Net Non-Operating -- -- -- -- --Gain (Loss) on Sale of Assets -- -- -- -- --Other, Net -- -- -- -- --Net Income Before Taxes 8.3 10.0 13.6 11.9 12.1Provision for Income Taxes 1.6 3.4 3.2 2.6 2.2Net Income After Taxes 6.7 6.6 10.4 9.3 9.9Minority Interest 0.0 0.7 0.2 0.0 --Equity In Affiliates -- -- -- -- --U.S. GAAP Adjustment -- -- -- -- --Net Income Before Extra. Items 6.7 7.4 10.6 9.3 9.9Accounting Change -- -- -- -- --Discontinued Operations -- -- -- -- --Extraordinary Item -- -- -- -- --Tax on Extraordinary Items -- -- -- -- --Net Income 6.7 7.4 10.6 9.3 9.9Preferred Dividends -- -- -- -- --General Partners' Distributions -- -- -- -- --Miscellaneous Earnings Adjustment -- -- -- -- --Pro Forma Adjustment -- -- -- -- --Interest Adjustment - Primary EPS -- -- -- -- --Income Available to Com Excl ExtraOrd 6.7 7.4 10.6 9.3 9.9Income Available to Com Incl ExtraOrd 6.7 7.4 10.6 9.3 9.9Basic Weighted Average Shares 239.12 239.12 239.12 239.12 239.12Basic EPS Excluding Extraordinary Items 0.028 0.031 0.044 0.039 0.041Basic EPS Including Extraordinary Items 0.028 0.031 0.044 0.039 0.041Dilution Adjustment 0.0 0.0 0.0 -- --Diluted Weighted Average Shares 239.12 239.88 239.47 239.12 239.12Diluted EPS Excluding ExtraOrd Items 0.028 0.031 0.044 0.039 0.041Diluted EPS Including ExtraOrd Items 0.028 0.031 0.044 0.039 0.041DPS - Common Stock Primary Issue 0.021 0.024 0.020 0.013 0.014Gross Dividends - Common Stock 5.8 5.1 4.8 3.1 2.2Total Special Items 0.0 (0.1) 0.8 -- --Normalized Income Before Taxes 8.4 9.9 14.4 11.9 12.1Effect of Special Items on Income Taxes 0.0 (0.0) 0.2 -- --Inc Tax Ex Impact of Sp Items 1.7 3.3 3.3 2.6 2.2Normalized Income After Taxes 6.7 6.6 11.0 9.3 9.9Normalized Inc. Avail to Com. 6.7 7.3 11.2 9.3 9.9Basic Normalized EPS 0.028 0.031 0.047 0.039 0.041Diluted Normalized EPS 0.028 0.031 0.047 0.039 0.041
DataSource: http://www.reuters.com/finance/stocks/incomeStatement?
stmtType=CAS&perType=ANN&symbol=PRTH.SI
Appendix F 1.2 Pertama Cash Flow Statement (Year 2006 to 2009)
Pertama Holdings Limited (PRTH.SI) (Stock Exchange of Singapore)
In Millions of Singapore Dollars(except for per share items)
20092009-06-30
Period Length12 Months
20082008-06-30
Period Length12 Months
20072007-06-30
Period Length12 Months
20062006-06-30
Period Length12 Months
20052005-06-30
Reclassified2006-06-30
Period Length12 Months
Net Income/Starting Line 8.3 10.0 13.6 11.9 12.1Depreciation/Depletion 5.1 5.1 3.6 3.3 2.8Amortization -- -- -- -- --Deferred Taxes -- -- -- -- --Non-Cash Items 0.8 0.6 2.1 0.7 1.8
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Changes in Working Capital 8.7 (1.8) 8.3 (4.9) 7.6Cash from Operating Activities 22.9 13.8 27.7 10.9 24.2Capital Expenditures (2.2) (6.5) (8.5) (2.8) (1.9)Other Investing Cash Flow Items, Total 0.0 0.1 0.0 0.2 0.2Cash from Investing Activities (2.2) (6.4) (8.5) (2.6) (1.7)Financing Cash Flow Items -- -- -- -- --Total Cash Dividends Paid (5.8) (5.1) (3.7) (3.1) (2.2)Issuance (Retirement) of Stock, Net -- -- -- -- --Issuance (Retirement) of Debt, Net -- -- -- -- --Cash from Financing Activities (5.8) (5.1) (3.7) (3.1) (2.2)
Foreign Exchange Effects -- -- -- -- --Net Change in Cash 14.9 2.2 15.5 5.2 20.3
DataSource: http://www.reuters.com/finance/stocks/incomeStatement?
stmtType=CAS&perType=ANN&symbol=PRTH.SI
Appendix F 1.3 Challenger Balance Sheet (Year 2006 to 2009)
Challenger Technologies Limited (CHALbi.SI) (Stock Exchange of Singapore)
In Millions of Singapore Dollars(except for per share items)
20082008-12-31
20072007-12-31
20062006-12-31
20052005-12-31
20042004-12-31
Cash -- -- -- -- --Cash & Equivalents 24.9 20.3 11.4 10.7 12.7Short Term Investments -- -- -- -- --Cash and Short Term Investments 24.9 20.3 11.4 10.7 12.7Accounts Receivable - Trade, Net 1.7 2.7 2.5 1.7 2.0Notes Receivable - Short Term -- -- -- -- --Receivables - Other 3.6 1.7 1.1 0.5 0.4
Total Receivables, Net 5.3 4.4 3.5 2.2 2.4Total Inventory 9.2 8.2 7.2 6.5 6.0Prepaid Expenses 0.1 0.1 0.1 0.1 0.0Other Current Assets, Total -- -- -- -- --
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Total Current Assets 39.6 32.9 22.2 19.5 21.2Property/Plant/Equipment, Total - Gross 10.7 8.1 5.7 4.3 4.3Accumulated Depreciation, Total (6.0) (3.7) (2.5) (3.2) (3.1)Property/Plant/Equipment, Total - Net 4.7 4.5 3.1 1.1 1.2Goodwill, Net -- -- -- -- 0.0Intangibles, Net -- -- -- -- --Long Term Investments 2.5 1.3 1.2 0.0 0.3Note Receivable - Long Term -- -- -- -- --Other Long Term Assets, Total -- -- 0.0 0.0 0.0Other Assets, Total -- -- -- -- --
Total Assets 46.7 38.7 26.5 20.6 22.7Accounts Payable -- -- -- -- --Payable/Accrued 18.6 12.2 9.0 5.6 6.0Accrued Expenses -- -- -- -- --Notes Payable/Short Term Debt 0.0 0.0 0.0 0.0 0.9Current Port. of LT Debt/Capital Leases -- -- 0.0 0.0 0.0Other Current liabilities, Total 5.2 4.2 3.0 1.3 1.0Total Current Liabilities 23.9 16.4 12.0 6.9 7.9Long Term Debt -- -- -- -- --Capital Lease Obligations -- -- 0.0 0.0 0.1Total Long Term Debt 0.0 0.0 0.0 0.0 0.1Total Debt 0.0 0.0 0.0 0.1 1.0Deferred Income Tax 0.2 0.2 0.2 0.1 0.1Minority Interest 0.2 0.0 0.0 0.0 0.0Other Liabilities, Total 0.4 0.3 0.3 0.0 --Total Liabilities 24.7 16.8 12.5 7.1 8.1Redeemable Preferred Stock, Total -- -- -- -- --Preferred Stock - Non Redeemable, Net -- -- -- -- --Common Stock, Total 18.6 16.1 11.3 6.1 6.1Additional Paid-In Capital 0.0 0.0 0.0 5.2 5.2Retained Earnings (Accumulated Deficit) 3.0 5.7 2.7 2.2 3.3Treasury Stock - Common -- -- -- -- --ESOP Debt Guarantee -- -- -- -- --Unrealized Gain (Loss) 0.4 -- -- -- --Other Equity, Total (0.0) (0.0) (0.0) (0.0) (0.0)Total Equity 22.1 21.8 14.0 13.5 14.6Total Liabilities & Shareholders' Equity 46.7 38.7 26.5 20.6 22.7Shares Outs - Common Stock Primary Issue 228.57 203.20 177.78 177.78 177.78Shares Outstanding - Common Issue 2 -- -- -- -- --Shares Outstanding - Common Issue 3 -- -- -- -- --Shares Outstanding - Common Issue 4 -- -- -- -- --Total Common Shares Outstanding 228.57 203.20 177.78 177.78 177.78Total Preferred Shares Outstanding -- -- -- -- --
DataSource: http://www.reuters.com/finance/stocks/incomeStatement?
stmtType=BAL&perType=ANN&symbol=CHALbi.SI
Appendix F 1.4 Challenger Income Statement (Year 2006 to 2009)
Challenger Technologies Limited (CHALbi.SI) (Stock Exchange of Singapore)
In Millions of Singapore Dollars(except for per share items)
20082008-12-31Period Length
12 Months
20072007-12-31Period Length
12 Months
2006
2006-12-31Reclassified2007-12-31
Period Length12 Months
20052005-12-31Period Length
12 Months
20042004-12-31Period Length
12 Months
Revenue 168.0 136.1 92.3 77.5 75.5Other Revenue, Total -- -- -- -- --Total Revenue 168.0 136.1 92.3 77.5 75.5Cost of Revenue, Total 133.0 107.6 73.7 62.2 61.0Gross Profit 35.0 28.5 18.6 15.3 14.5Selling/General/Admin. Expenses, Total 20.5 17.0 10.8 9.4 4.9Research & Development -- -- -- -- --Depreciation/Amortization 2.3 1.8 0.6 0.4 0.5Interest Expense, Net - Operating -- -- -- -- --Interest/Investment Income - Operating 2.3 (0.4) (0.0) -- --Interest Expense(Income) - Net Operating -- -- -- -- --
Unusual Expense (Income) 1.4 0.0 0.2 -- --Other Operating Expenses, Total 1.9 1.8 1.6 0.9 5.7Total Operating Expense 161.4 127.9 86.7 73.0 72.1Operating Income 6.6 8.2 5.6 4.5 3.4Interest Expense, Net Non-Operating (0.0) (0.0) (0.0) (0.3) (0.1)
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Interest/Invest Income - Non-Operating -- -- -- (0.1) 0.0Interest Income(Exp), Net Non-Operating 0.6 0.6 0.4 0.4 0.4Gain (Loss) on Sale of Assets -- -- -- -- --Other, Net -- -- -- -- --Net Income Before Taxes 7.2 8.8 6.1 4.6 3.7Provision for Income Taxes 1.9 1.7 1.5 0.9 0.9Net Income After Taxes 5.3 7.1 4.5 3.7 2.8Minority Interest (0.1) 0.0 0.0 0.1 0.1Equity In Affiliates -- -- -- -- --U.S. GAAP Adjustment -- -- -- -- --
Net Income Before Extra. Items 5.3 7.1 4.5 3.8 2.9Accounting Change -- -- -- -- --Discontinued Operations -- -- -- -- --Extraordinary Item -- -- -- -- --Tax on Extraordinary Items -- -- -- -- --Net Income 5.3 7.1 4.5 3.8 2.9Preferred Dividends -- -- -- -- --General Partners' Distributions -- -- -- -- --Miscellaneous Earnings Adjustment -- -- -- -- --Pro Forma Adjustment -- -- -- -- --Interest Adjustment - Primary EPS -- -- -- -- --Income Available to Com Excl ExtraOrd 5.3 7.1 4.5 3.8 2.9Income Available to Com Incl ExtraOrd 5.3 7.1 4.5 3.8 2.9Basic Weighted Average Shares 221.83 195.43 177.78 177.78 176.56Basic EPS Excluding Extraordinary Items 0.024 0.036 0.025 0.021 0.016Basic EPS Including Extraordinary Items 0.024 0.036 0.025 0.021 0.016Dilution Adjustment -- 0.0 0.0 0.0 0.0Diluted Weighted Average Shares 230.25 198.13 177.78 177.78 176.56Diluted EPS Excluding ExtraOrd Items 0.023 0.036 0.025 0.021 0.016Diluted EPS Including ExtraOrd Items 0.023 0.036 0.025 0.021 0.016DPS - Common Stock Primary Issue 0.024 0.033 0.022 0.028 0.026Gross Dividends - Common Stock 5.5 7.3 4.0 4.9 4.5Total Special Items 2.8 0.1 0.2 0.0 0.0Normalized Income Before Taxes 10.0 8.8 6.3 4.6 3.7Effect of Special Items on Income Taxes 0.7 0.0 0.1 0.0 0.0Inc Tax Ex Impact of Sp Items 2.6 1.7 1.6 0.9 0.9Normalized Income After Taxes 7.4 7.1 4.7 3.7 2.8Normalized Inc. Avail to Com. 7.4 7.1 4.7 3.8 2.9Basic Normalized EPS 0.033 0.036 0.026 0.021 0.016Diluted Normalized EPS 0.032 0.036 0.026 0.021 0.016
DataSource: http://www.reuters.com/finance/stocks/incomeStatement?
stmtType=INC&perType=ANN&symbol=CHALbi.SI
Appendix F 1.5 Challenger Cash Flow Statement (Year 2006 to 2009)
Challenger Technologies Limited (CHALbi.SI) (Stock Exchange of Singapore)
In Millions of Singapore Dollars(except for per share items)
20082008-12-31
Period Length12 Months
20072007-12-31
Period Length12 Months
20062006-12-31
Reclassified2007-12-31
Period Length12 Months
20052005-12-31
Reclassified2006-12-31
Period Length12 Months
20042004-12-31Restated
2005-12-31Period Length
12 Months
Net Income/Starting Line 7.2 8.8 6.1 3.7 2.8
Depreciation/Depletion 2.3 1.8 0.6 0.4 0.5
Amortization -- 0.0 0.0 0.0 0.0
Deferred Taxes -- -- -- -- --
Non-Cash Items 1.1 (0.6) (0.3) 0.7 1.1
Changes in Working Capital 4.0 0.8 1.9 (0.9) (1.3)
Cash from Operating Activities 14.6 10.7 8.4 3.9 3.2
Capital Expenditures (2.4) (3.1) (2.9) (0.4) (0.4)
Other Investing Cash Flow Items, Total (2.0) 0.6 (0.7) 0.2 (0.2)
Cash from Investing Activities (4.5) (2.6) (3.6) (0.2) (0.6)
Financing Cash Flow Items (0.0) (0.0) (0.0) 0.0 (0.8)
Total Cash Dividends Paid (8.0) (4.0) (4.0) (4.9) (0.9)Issuance (Retirement) of Stock, Net 2.5 4.8 0.0 -- 7.4
Issuance (Retirement) of Debt, Net -- 0.0 (0.0) (0.3) 0.4
Cash from Financing Activities (5.5) 0.8 (4.0) (5.2) 6.1
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Foreign Exchange Effects (0.0) 0.0 -- 0.0 (0.0)
Net Change in Cash 4.6 9.0 0.7 (1.5) 8.6
DataSource: http://www.reuters.com/finance/stocks/incomeStatement?
stmtType=CAS&perType=ANN&symbol=CHALbi.SI
Appendices G: Pertama Holdings: Undervalued retailer offers high dividend; recoverycould spur growth
WRITTEN BY JOAN NG
MONDAY, 12 OCTOBER 2009 15:23
Shares of Pertama Holdings, operator of the electronics, appliances and furniture retailing chain HarveyNorman, have outperformed the broad market this year, rising 67.3% to close at 38 cents last Thursday,
versus the Straits Times Indexs gain of 50.5%. And, the stock appears to have the potential to continue
delivering decent returns.
For starters, it appears to be attractively priced. At current levels, it is trading at 13.6 times its FY2009
earnings. The company also boasts a healthy balance sheet, with cash and cash equivalents of $77.5
million and zero debt, as at June 30. That cash pile is equivalent to 32.4 cents per share, just 14.7% short
of its current share price. Pertamas net asset value is 43.5 cents per share. The company also pays
regular dividends. Last year, it paid out 2.45 cents per share, which works out to a yield of 6.4%, based
on its current share price. By comparison, the average yield of STI component stocks is about 3.3% now.
Pertama has been quietly building up its retailing business in Singapore and opening new stores in
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Malaysia. It sells flat-screen televisions, laptops and netbooks, as well as furniture and bedding. And, the
company seems to have weathered the recession quite well. For the financial year to June 2009, its
revenue declined 10.6% to $376.4 million, while its earnings slipped 9.1% to $6.7 million. The primary
reason for the decline in revenue and earnings was the cessation of the companys wholesale business,
according to a statement accompanying its financial results. Its core retailing business still managed to
deliver single-digit revenue growth, though, says Pertamas managing director Angelo Augustus.
Image: Flat-screen TVs, which are increasingly more affordable, are selling well at Harvey Norman. Credit:
Samuel isaac Chua
The company has been expanding especially fast in Malaysia, where Augustus says retail is growing very
nicely at a double-digit rate.
Pertama has had a Harvey Norman store in Malaysia since 2003, but it began to expand rapidly in 2007,
opening five stores in two years. As a result of the initial cost of opening new stores and building up its
brand, Pertamas Malaysian operations chalked up a pre-tax loss of $606,000 for FY2009. Augustus says
he is hopeful of the company breaking even in the current financial year. And, in the longer-term, he sees
its Malaysian operations helping to drive its growth, because of the countrys larger population and
plentiful retail space.
Source: Bloomberg
In Singapore, meanwhile, Pertama has ceased its unprofitable
export business, which resulted in profit before tax for this
segment rising 5.1% y-o-y, to $9 million from $8.5 million
previously. As Singapores economy recovers, Pertamas sales
could get a lift. According to property consultancy DTZ, sales ofprivate homes here are likely to breach the record of 14,811
units sold in 2007. That could mean a flurry of shopping activity
by people wanting to furnish their new homes with appliances
like the latest flat-screen TV. On top of this, consumers who
held back on purchases last year because of the recession might soon have the confidence to begin
spending again. Things like flat-screen TVs are also becoming more affordable and are now a must for
Singaporeans, Augustus says.
Buying shares in Pertama is something of a challenge, though, because they are so tightly held. Thecompanys parent in Australia, , owns 60.7%. A further 17.3% is held by
London-listed , an investment vehicle of New Zealand born businessman Sir Ronald
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Brierley, who is known for tenaciously extracting value from his investments. Fund management group
Fidelity International holds 9.1%.
Investors in Pertama also face the risk of the companys rental costs rising as an economic recovery takes
off. In 2007 and 2008, retail rents in Singapore surged as the economy crested, squeezing margins at
many retailers. A number of local Harvey Norman stores are located in malls that are part of the
group, which recently announced it would be spinning off its malls into a real-estate
investment trust. Also, there is the pressure of competition, which is particularly tough in the electronics
retail business, as price is often the major differentiator for consumers. Harvey Normans closest
competitors in Singapore are Best Denki and Courts, neither of which are listed.
Despite these potential stumbling blocks, however, shares in Pertama look like a bargain right now. Patient
investors can look forward to a steady dividend yield and the possibility of a steep re-rating, if it succeeds
in expanding in Malaysia and begins attracting analyst coverage.
Pertama Holdings: Undervalued retailer offers high dividend; recovery could spur growth
Monday, 12 October 2009 2009 - The Edge Singapore
Source http://www.theedgesingapore.com/component/content/8600.html?task=view
Appendix H IAS 2 (Inventories)
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http://www.theedgesingapore.com/investing/investing-ideas/8600-pertama-holdings-undervalued-retailer-offers-high-dividend-recovery-could-spur-growth.htmlhttp://www.theedgesingapore.com/http://www.theedgesingapore.com/investing/investing-ideas/8600-pertama-holdings-undervalued-retailer-offers-high-dividend-recovery-could-spur-growth.htmlhttp://www.theedgesingapore.com/ -
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http://www.iasplus.com/dttpubs/pocket2009.pdf