1. 0 Background
1. 1 Hup Seng Industries Berhad
Hup Seng Industries Berhad is an investing keeping company and was incorporated in Malaysia as a populace limited company on 4th October 1991 and received an blessing certification to run the concern on 23rd April 1997. The mission and vision of the company is to bring forth quality fast traveling consumer merchandises every bit good as to be market leaders in fast traveling consumer merchandises. ( Hii. 2010 ) . The chief behaviors of the company is investing keeping. Hup Seng Perusahaan Makanan ( M ) Sdn. Bhd which was established in 1958. Hup Seng Hoon Yong Brothers Sdn. Bhd and In-Comix Food Industries Sdn. Bhd are the subordinates of HSIB Group Sdn. Bhd. The chief activities of the subordinates are in fabricating and selling the biscuits and java mix. and covering or administering the biscuits. confectionery and other nutrient points ( Hup Seng. 2014 ) .
Hup Seng Industries Bhd was listed under Main Market of Bursa Malaysia under the Consumer Products sector. The stock symbol and codification used in Bursa Malaysia is HUPSENG ( 5024 ) ( Bursa Wave. 2014 ) . Hup Seng’s developments can be seen as the merchandises have captured the Black Marias of clients. from all the age of immature and old with an international market exposure that spans Africa. Asia. Oceania. North America and Europe. Hup Seng will be able to go on to heighten. better and make new point of excellence. In twelvemonth 2013 one-year study shows that Hup Seng Industries entire net income for the twelvemonth terminal is RM 50. 081. 724 which shows an addition in the net income compared to 2012 of RM 44. 351. 085 ( Hup Seng. 2013 ) .
1. 2 Hwa Tai Industries Berhad
Hwa Tai Industries Berhad is an investing keeping company and besides a taking biscuit maker in Malaysia which was established in 1962 has been listed on the Stock Exchange Malaysia in 1992. The vision of the company is to be a taking biscuit company and confectionary maker and best known for the merchandise quality and assortment of points. Hwa Tai Manufacturing Sdn. Bhd. . Epro Industries Sdn. Bhd. . Hwa Tai Wholesale Sdn. Bhd. . Hwa Tai Food Industries ( Sabah ) Sdn. Bhd. . Acetai Corporation Sdn. Bhd. . Suria Merah Manufactory ( Segamat ) Sdn. Bhd. and Hwa Tai Import Sdn. Bhd are the subordinates of the company ( Investor. 2014 ) . The company industry merchandises such as cracker. assorted biscuits. cookies. pick sandwich. bar and bite and these are labeled under the trade name name of “Hwa Tai” and “Luxury” .
Hwa Tai Industries Bhd was listed under Main Market of Bursa Malaysia under the Consumer Products sector. The stock symbol and codification used in Bursa Malaysia is HWATAI ( 8478 ) ( Bursa Wave. 2014 ) . Hwa Tai Industries Berhad is developing as it is fabricating high quality biscuits for clients worldwide and besides bring forthing concern opportunities for company spouses. Hwa Tai has 50 old ages of fabrication experience and ability in pull offing the whole concern. In twelvemonth 2013 one-year study shows that Hup Seng Industries entire net income for the twelvemonth terminal is RM 744. 951 which shows an addition in the net income compared to 2012 which was in loss of ( 475. 954 ) . ( Hwa Tai. 2013 )
2. 0 Roles of Directors
The function of president in a company is to be the company’s chief representative and whereby it will affect the company’s ends and policies worldwide. Besides that. president takes lead at general meetings and board meetings. Chairman plans every bit good as behaviors the board meeting with all the managers. The president ensures that all the managers are lending in determination devising and affect in all treatment sing the company’s direction and focuses on cardinal undertaking. Chairman besides makes certain that there is a great communicating with stockholders ( Institute of Directors. 2010 ) .
The functions of board managers of in footings of fiscal coverage are whereby responsible to do certain that the fiscal statements are prepared following the appropriate official accounting criterions in Malaysia and demands of the Companies Act. 1965. The Board besides responsible in giving a sensible appraisal of the fiscal place to its stockholders for quarterly and yearly. The board will make some treatment before O.K.ing and printing them to the public Securities Commission ( “SC” ) and Bursa Securities if there is any recommendation stated by the Audit Committee sing the fiscal statements ( Hup Seng. 2013 ) ( Hwa Tai. 2013 ) .
The board managers will besides be qui vive of the importance of set uping and keeping a sound system in hazard direction and internal control in the company and its subordinates whereby it will protect the shareholders’ involvement and group’s assets. The boards test the effectivity and efficiency of the hazard direction and internal control system on pecuniary. operational and conformance menace and find assorted ways for betterment. The Board makes certainly that there is free flow of hazard information throughout the Group and there is uninterrupted monitoring of hazard direction processes in order to observe and minimise hazards against corporate aims on a timely footing. This can be done by internal hearers. The board and direction will happen the failings detected by the internal hearers by taking the recommendation for farther betterment ( Hup Seng. 2013 ) ( Hwa Tai. 2013 ) .
The board besides takes consideration in ethical behavior and sustainability whereby the employees are often viewed to do certain that the civilization is practiced in their traffics within the group and besides in their association with clients. distributers. providers. governmental and regulative governments and other concern associates. The function of president in this is he or she plays an of import function whereby he will take an action when the employee studies about any misconduct found within the Group ( Hup Seng. 2013 ) ( Hwa Tai. 2013 ) . The board of managers besides maintains a formal relationship with the hearers. The board seeks the auditors’ advice to guarantee conformity with the applicable accounting criterions ( Hup Seng. 2013 ) ( Hwa Tai. 2013 ) .
The function of independent hearers is to convey up of import affairs that need to be discussed during the Audit Committee meetings and Board meetings. Other than that. is to show to give sentiment whether the direction has produced acceptable information in fiscal statements. The hearers besides perform their work by roll uping grounds to get sensible confidence that the amounts and revelations in the fiscal statements are free of material misstatement and if the hearers have issues about the sums or revelations. the hearers will amend the study to specify the issues. The hearer besides adds dependability to the management’s fiscal statement so that the proprietors. bankers. creditors and bankers to utilize with better assurance ( Chartered Accountants. 2013 ) .
3. 0 Ratio Analysis3. 1 Liquidity Ratio
FormulaCURRENT RATIO =CURRENT ASSETS
ACID TEST RATIO =CURRENT ASSETS – CLOSING INVENTORY
3. 11 Hup Seng ( 2013 )Current Ratio =RM140. 114. 822. 00= 2. 98: 1
RM47. 087. 947. 00
Acid Test Ratio =RM140. 114. 822. 00-RM20. 817. 932. 00= 2. 53: 1
RM47. 087. 947. 00
3. 12 Hwa Tai ( 2013 )Current Ratio =RM32. 252. 113. 00= 0. 92: 1
RM35. 215. 109. 00
Acid Test Ratio =RM32. 252. 113. 00-RM5. 175. 586. 00= 0. 77: 1
RM35. 215. 109. 00
Current ratio is one of liquidness ratio that measures a company’s ability to pay its short term liabilities. From the computation. Hup Seng has better liquidness than Hwa Tai. Hwa Tai current ratio at 0. 92: 1 is so much lower than Hup Seng’s at 2. 98:1. It shows that Hup Seng is more capable to pay off its current liabilities at that point of due because of its higher current ratio whereas Hwa Tai’s ratio under 1 indicates that the company will be unable to pay off its current liabilities at that point of due. It can be clearly seen that Hwa Tai’s current liabilities’ figure is larger than its current plus which is non good whereas Hup Seng’s current liabilities’ is far lower compared to Hwa Tai. Hwa Tai will non be able to pay its short term debt with lower current plus. Hwa Tai besides has big figure of current liabilities because of the loans and adoptions.
The liabilities will increase directly off if the company gets a loan to increase their production whereby it is for good intent. This does non intend the company is making severely but Hwa Tai is acquiring many loans systematically even in 2012 as stated in the fiscal place whereas Hup Seng is non acquiring any loan from the bank therefore the current liabilities figure is lower. Acid trial ratio measures a company’s ability to pay off its short term liabilities with short term plus without selling the stock list. This is besides reflected in the acerb trial ratio of 0. 77: 1 for Hwa Tai and 2. 53: 1 for Hup Seng. There is a important difference for both the companies in the same industries. Hup Seng is financially unafraid in short term.
It shows that Hup Seng has adequate hard currency in manus to pay off its liabilities and maintain traveling whereas Hwa Tai’s liabilities will maintain increasing and non paid in clip. Based on the statements of fiscal place for both companies. Hup Seng has a really big sum of hard currency in manus and bank balances with low stock lists whereas Hwa Tai has little sum of hard currency in manus and high stock lists. Inventory contributes big portion in current assets for Hwa Tai which means that it is difficult for the stock lists to turn into hard currency. therefore the liquidness ratio is lower for Hwa Tai. Low hard currency and bank balances makes Hwa Tai could non run into its short term liabilities and if the payment of measures and others has to be made rapidly. the company will confront jobs in paying of its liabilities because the company’s current assets is depending on stock lists.
3. 2 Asset Management Ratio
FormulaInventory TURNOVER =Cost OF GOODS SOLD
Average COLLECTION PERIOD OF ACCOUNTS RECEIVABLE =ACCOUNTS RECEIVABLEX365
3. 21 Hup Seng ( 2013 )Inventory Turnover =RM156. 828. 994. 00= 7. 58 times
( RM20. 586. 831. 00+RM20. 817. 932. 00 ) /2
Average Collection Period of Accounts Receivable =RM35. 872. 644. 00X 365 = 52 yearss
RM251. 407. 055. 00
3. 22 Hwa Tai ( 2013 )Inventory Turnover =RM48. 998. 011. 00= 9. 47 times
( RM5. 172. 887. 00+RM5. 175. 586 ) /2
Average Collection Period of Accounts Receivable =RM24. 624. 077. 00x 365 = 137 yearss
RM65. 799. 286. 00
Inventory turnover measures the figure of times a company’s stock list is being sold and replaced over a period of clip. The stock list turnover of Hup Seng in one twelvemonth is 7. 58 times which is lower compared to Hwa Tai which is 9. 47 times. Hwa Tai’s higher stock list turnover shows a greater gross revenues efficiency and lower hazard of loss through unsalable stock list but in some instance high stock list turnover can do losingss due to deficits. High stock list turnover are unhealthy because they represent an investing with a rate of return of nothing. Hup Seng low stock list turnover is signal of inefficiency. It besides suggests either hapless gross revenues or extra stock list. A low turnover rate can probably take to overstocking. hapless liquidness and obsolescence. but in Hup Seng it does non look to be a concern as the company’s gross net income is still higher than Hwa Tai even with low stock list turnover. Based on the analysis. low stock list turnover for Hup Seng is really making net income to the company and it might be because of the pricing scheme of the merchandise and others.
Hwa Tai high stock list turnover besides might be because the company ever runs out of stock list and doing uneffective buying therefore bring forthing a low gross net income border. Average aggregation period measures how good a company collects its histories receivable form the debitors the stock list turnover for Hwa Tai is about every 39 yearss but the histories receivable aggregation period is really late. In this instance Hwa Tai will non be able to do the payments if the due is faster than the aggregation period of histories receivables. Hup Seng will be able to pay the payments easy because it merely takes 52 yearss for them to roll up the histories receivables.
The mean aggregation period for histories receivable of Hup Seng is 52 yearss which is so much lower compared to Hwa Tai of 137 yearss. It can be clearly seen that Hup Seng’s direction of debitors is more efficient and more liquid compared to Hwa Tai. Hwa Tai has a less liquid debitors compared to Hup Seng. Hup Seng is better in roll uping their histories receivables than Hwa Tai. Hwa Tai company should re-assess on its recognition policy so that the direction of debitors will be better.
3. 3 Fiscal Leverage Ratio
FormulaDebt TO TOTAL ASSETS =Entire LIABILITIES
Debt TO STOCKHOLDERS’ EQUITY =Entire LIABILITIES
3. 31 Hup Seng ( 2013 )Debt to Total Asset =RM54. 815. 919. 00= 0. 27: 1
RM205. 202. 821. 00
Debt to Stockholders’ Equity =RM54. 815. 919. 00= 0. 36: 1
RM150. 386. 902. 00
3. 32 Hwa Tai ( 2013 )Debt to Total Asset =RM35. 930. 856. 00= 0. 70: 1
RM51. 019. 722. 00
Debt to Stockholders’ Equity =RM35. 930. 856. 00= 2. 38: 1
RM15. 088. 866. 00
The debt ratio measures the extent to which borrowed financess have been used to finance a company’s operation relation to its entire plus. Entire liabilities include all current and non-current liabilities which is besides named as economic loads whereas entire plus represent the owned points of the company which is knows as economic resources. The debt to entire plus ratio for Hup Seng is 0. 27:1. This portrays that 27 % of the company’s entire assets are financed through creditors such as Bankss. loans from the bank. stock list providers. authorities revenue enhancements. stockholders dividends and other types of debt. It can be said that for every RM0. 27 the company owes. it owns RM1. 00 worth of assets. Hup Seng has a lower debt to entire assets ratio compared to Hwa Tai of 0. 70:1 which indicates that Hup Seng is much more stable and the fiscal place besides stronger. Hwa Tai has a higher debt to entire plus ratio which possibly because the company pays more involvement on borrowed financess which reduces their net income.
This clearly shows that Hwa Tai needs more hard currency to pay the monthly payments every bit good as involvement related to the debt. Other cause of higher debt to entire plus ratio for Hwa Tai is might because of the company was unable to pay off its current liabilities in that point of due which causes them to pay involvement for the late payment. Other than that. debt to equity ratio measures the investings provided by the creditors against the investings provided by the company’s shareholders. Hup Seng has a lower debt to equity ratio at 0. 36:1 whereas Hwa Tai has a higher debt to equity ratio at 2. 38:1. It can be said that for every RM 1. 00 invested by the company. the creditors have invested RM0. 36. It clearly shows that Hup Seng company’s proprietors have invested more than the creditors. therefore the lesser the money it owes. Hwa Tai company proprietors invested much lesser than their creditors which mean the company owes more money and less stable in footings of their fiscal place. Hwa Tai could be in hazard if the creditors start to demand refund of debt. The company besides will hold troubles in obtaining loans for new undertaking whereas Hup Seng will be able to acquire loans easier because the company is financially strong. 3. 4 Profitability Ratio
Gross PROFIT Rate =GROSS Net incomeX100
ROCE ( RETURN ON CAPITAL EMPLOYED ) =Net income BEFORE INTEREST AND TAXX100
TOTAL ASSETS – CURRENT LIABILITIES
3. 41 Hup Seng ( 2013 )Gross Net income Rate =RM94. 578. 061. 00X100 = 37. 62 %
RM251. 407. 055. 00
ROCE ( Return on Capital Employed ) =RM50. 081. 724. 00X100 = 31. 67 %
RM205. 202. 821. 00-RM47. 087. 947. 00
3. 42 Hwa Tai ( 2013 )Gross Net income Rate =RM16. 801. 275. 00X100 = 25. 53 %
RM65. 799. 286. 00
ROCE ( Return on Capital Employed ) =RM744. 951. 00X100 = 4. 7 %
RM51. 019. 722. 00-RM35. 215. 109. 00
Gross net income ratio measures how profitable a company sells its stock list. Hup Seng gross net income rate is 37. 62 % which is higher than Hwa Tai which is at 25. 53 % . It can be said that Hup Seng is selling their stock list at higher net income per centum. Even though Hwa Tai’s stock list turnover is higher but the gross net income figure is low compared to Hup Seng. It shows that Hwa Tai needs to sell a batch of points to keep an adequate return on the capital invested by the company whereas Hup Seng is selling fewer points but acquiring a higher and adequate net income. Hup Seng acquire higher gross net income ratio with low stock list turnover because they might hold bought the stock list really cheap compared to Hwa Tai.
Other than that. Hup Seng might hold gotten a large sum of purchase price reductions for the stock lists been bought from the maker whereas Hwa Tai got lesser or no price reduction for points purchased. In this instance the gross net income will be higher because the costs of purchases are lower. Return on capital employed or ROCE measures how expeditiously a company can bring forth net incomes from its capital employed by comparing net income and involvement before revenue enhancement to capital employed. Hup Seng has an first-class ROCE of 31. 67 % but Hwa Tai has a instead hapless ROCE of 4. 7 % . Hup Seng is accomplishing the superior ROCE with a more efficient usage of its capital employed through its net net income to gross revenues of 14. 62 % but Hwa Tai has hapless net net income to gross revenues of 0. 63 % . Hup Seng is wholly making net income as their ROCE is higher than the borrowed money to fund the assets whereas Hwa Tai is non doing much net income because the ROCE is really low compared to the owings.
Hwa Tai’s low ROCE might be because of low plus turnover because the company is non bring forthing a sufficient volume of concern for the size of plus base. This can be prevented by increasing the gross revenues of the company or disposing some of the assets to increase the ROCE. It shows that Hup Seng has a better long term profitableness ratio based on the computation with efficaciously executing assets for consideration on long-run funding. Hwa Tai must raise more money in a cost effectual manner to acquire a higher return. By this. the company will be able to see its portion monetary value addition which is measured by ROCE.
4. 0 Four other measurings
4. 1 Ratios
FormulaROA ( RETURN ON ASSET ) =Net IncomeX100
Average TOTAL ASSETS
Net PROFIT MARGIN =Net Net income AFTER TAXX100
4. 12 Hup Seng ( 2013 )ROA ( Return on Asset ) =RM36. 744. 846. 00×100 =17. 92 %
( RM205. 202. 821. 00+RM204. 947. 578. 00 ) /2
Net Net income Margin =RM36. 744. 846. 00×100 =14. 62 %
RM251. 407. 055. 00
4. 13 Hwa Tai ( 2013 )ROA ( Return on Asset ) =RM413. 406. 00×100 =0. 78 %
( RM51. 019. 722. 00+RM54. 453. 843. 00 ) /2
Net Net income Margin =RM413. 406. 00×100 =0. 63 %
RM65. 799. 286. 00
ROA or Return on Asset measures how profitable a company is comparative to its entire assets. By mensurating how efficient the company is utilizing its assets to bring forth net incomes. Based on the computation. Hup Seng has a much higher ROA which is 17. 92 % whereas Hwa Tai is merely at 0. 78 % . It shows that Hup Seng is efficaciously change overing the money it has to put into the net income. Hup Seng higher ROA indicates that the company is gaining more money but with less investing.
Hwa Tai’s low figure indicates that the company is non expeditiously utilizing their assets because their earning is really low. It can be said that Hwa Tai is gaining RM0. 0078 for each RM1 in assets. A really low figure of ROA for Hwa Tai shows that the company is really plus heavy whereby they are puting a batch of money on heavy and expensive machineries to bring forth income but it failed. This might be because of incorrect allotment of assets. A really high figure of ROA for Hup Seng shows that the company is plus visible radiation. They are puting money on other assets and successfully bring forth good income because they allocated the assets expeditiously.
Net net income border measures how much net income a company makes comparative to its gross revenues. Hup Seng higher ratio of 14. 62 % shows that the company is really good in cost control whereas Hwa Tai has a really low ratio of 0. 63 % . A good direction and operations of the company is really of import in acquiring a high net income. It tells the investor how profitable the company is and how good the company is being managed. Net net income shows the per centum of staying gross revenues after being deducted by all operating disbursals. involvement and revenue enhancements. Based on the analysis from the statement of comprehensive income for both the companies. it can be seen that gross net income figure and entire disbursals figure for Hwa Tai is about the same.
Hwa Tai’s disbursal direction is really hapless but the net net income border besides significantly low because of long term loan that has been borrowed by the company to increase its production capacity as stated in the statement of fiscal place. It does non intend that the company is making severely. The investors want to see high net income so that it is adequate to administer dividends whereas the creditors want the company to pay back its loans. Hwa Tai will be able to maximise its net income by cutting down the disbursals and the direction needs to budget the disbursals. Hwa Tai should execute better in production. merchandising. pricing. revenue enhancement and stock list direction so that the net net income border can be increased.
4. 2 Theories
The factors that can impact a company’s public presentation in negative position are case. Lawsuit against a company decidedly can convey down a company’s public presentation as it is really clip consuming and particularly can be a batch of money. The state of affairs will be really bad once the company lost against the case and the company will hold to pay the all right and this will do the company to be in loss. It will be really difficult for the company to acquire back in the old place as it is because of drastic alterations. Besides that. hapless direction accomplishment besides can impact a company’s public presentation. This might be because of deficiency of communicating or failure communicating between the workers about what is required and what is being sold in the company. It besides can be because of proficient incompetency and unrealistic outlook from the labour force. Poor direction accomplishment can take to concern failure.
The direction of the company in footings of production. pricing. merchandising. administering. debtor’s direction. stock list direction and revenue enhancement direction plays an of import function on company’s public presentation. If these cardinal factors are non given chief precedence. the company will non be able to execute good. As it is a biscuit company. hapless direction can be in footings of how the company pull off their stock lists buy non maintaining it excessively long until outdate and ever maintain informing the direction about the stock lists of the company. It can do loss for the company if the stock lists are spoiled because it is a nutrient point. The most important impact of hapless direction will be on Human resource whereby grounds for high employee turnover. This is might be because the employees are non being heard and motivated for their work. The weak monitoring of hard currency besides can impact the company’s public presentation.
5. 0 Decision and Recommendation
Based on all the ratios and theories. I will urge purchasing the portions of Hup Seng company because foremost the company is systematically making net income. Hup Seng is has a better liquidness than Hwa Tai and able to pay off its non-current liabilities with their assets. From the plus direction ratio. Hup Seng lower stock list turnover does non impact the company’s public presentation but benefits their company in sense of they are acquiring their histories receivable really fast once the stock lists have been sold which in merely 52 yearss. In footings of fiscal purchase ratio. Hup Seng clearly shows that the company is financially strong because of their low debts and most of the company’s entire assets and investings are from the proprietors of the company and non from the creditors. Besides. in profitableness ratio. the gross net income for Hup Seng is much higher even with lower stock list turnover Hup Seng is doing higher net income compared to Hwa Tai and Hup Seng besides has a great ROCE with efficient usage of capital employed.
Other than that. ROA of Hup Seng besides much better than Hwa Tai because Hup Seng is better in apportioning the assets and acquiring adequate income. The net net income border for Hup Seng is much higher compared to Hwa Tai as the company is really good in footings of disbursal direction. cost control and great in runing the company. Last. the direction of the company is really good in all facets as for illustration the direction of debitors. direction of stock lists and others.
6. 0 Mentions
Bursa Wave. 2014. Bursa Wave. [ Online ]Available at: hypertext transfer protocol: //www. bursawave. com/stock-search/stock/hwa-tai-industries-bhd-2297/ [ Accessed 4 July 2014 ] .Bursa Wave. 2014. Bursa Wave. [ Online ]Available at: hypertext transfer protocol: //www. bursawave. com/stock-search/stock/hup-seng-industries-bhd-2296/ [ Accessed 4 July 2014 ] .Chartered Accountants. 2013. The function and map of external hearers.s. l. : Chartered Accountants. Hii. N. T. . 2010. Hup Seng Completed. s. l. : Scribd.Hup Seng. 2013. Hup Seng Annual Report 2013. Kuala Lumpur: Hup Seng Industries Berhad. Hup Seng. 2014. KLSE Info. [ Online ]Available at: hypertext transfer protocol: //www. klse. info/counters/view/stock/HUPSENG [ Accessed 4 July 2014 ] .Hwa Tai. 2013. Hwa Tai Annual Report 2013. s. l. : Hwa Tai Industries Berhad. Institute of Directors. 2010. Role of the Chairman. s. l. : Institute of Directors. Investor. K. . 2014. Klse Investor. [ Online ]
Available at: hypertext transfer protocol: //klse. i3investor. com/servlets/stk/8478. jsp [ Accessed 4 July 2014 ] .