company analisis

7/31/2019 Company Analisis

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CORPORATE STRUCTURE100% Company A Sdn.Bhd

100% Company B Sdn.Bhd

Property 100% Company C Sdn.Bhd 55% Company XA Sdn.Bhd

Development 100% Company D Sdn.Bhd 55% Company DX Sdn.Bhd 70% Company XB Sdn.Bhd

70% Company E Sdn.Bhd 100% Company EX Sdn.Bhd 100% Company XC Sdn.Bhd

100% Company F S dn. Bhd 100% Company FX S dn.Bhd

100% Company G Sdn.Bhd

60% Company H Sdn.Bhd 55% Company MX S dn. Bhd

100% Company I S dn. Bhd 100% Company N X Sdn. Bhd

100% Company LX Sdn.Bhd

Construction 100% Company J Sdn.Bhd

& Infrastructure 100% Company K Sdn.Bhd

80% Company L Sdn.Bhd 55% Company PX Sdn.Bhd

100% Company M S dn. Bhd 100% Company QX Sdn. Bhd

70% Company N Sdn. Bhd 100% Company RX Sdn. Bhd

100% Company O Sdn.Bhd

Manufacturing 100% Company P Sdn.Bhd

Investment 80% Company Q Sdn. Bhd 55% Company WB S dn.Bhd

Property Management 100% Company R S dn.Bhd 50% Company WC S dn.Bhd

70% Company S Sdn. Bhd 100% Company WD Sdn. Bhd

MBG Corporation Business and Financial Analysis

I. Company BackgroundMBG Corporation was incorporated in 1974 and listed on Bursa Malaysia in 1993. It is today one

of the leading property development and construction company and undertake project in

building and infrastructure & works in investment in manufacturing facilities. Apart from

ongoing development and construction project, the corporation has na total land bank of

approximately 1,500 hectares at various planning stages. It is also owned a number of office and

retail assets.

Fig 1. MBG Corporate Structure

II. Corporate Structure of the Company in Relation to Corporate Objectives and BusinessStrategy

Based on the form of shares ownership by MBG Corporation, it appears that corporate business

is investing in three core business which is intended to support the corporate vision to be the

leading property development and construction company. MBG Corporation invested in a widerange of companies, even reaching the lining of the subsidiary companies that have invested

before. Sharing MBG Corporation invested in each company also seems to dominate.


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Of the nine companies that invested by MBG Corporation in the property development sector,

seven companies are fully controlled by these corporate. It is certainly strengthen their

bargaining position in all companies where MBG Corporation invested. One thing that should

become an important concern is that there are many similar companies within the similar sector

or core business. It certainly can be a negative impact when the nine companies are in the same

market segment. This will result in a company must compete with other companies that are still

in the same business group.

The negative thing that was expressed above will turn into a positive if the nine companies, are

on the different market segments. Let's say that if Company A play in High price property

development, while Company B playing in the middle high price property development, and

company C play in the middle or low price property development. If this strategy can be done

then surely MBG Corporation will be a reliable company that can fill any gaps or existing market

segmentation. This strategy will ultimately be able to increase the value of company branding

that automatically will generate performance to the amount of profit and revenue to be

achieved.

In order to support the corporate objective of MBG Corporation then surely any invested coresof businesses have to be analyzing properly in terms of the amount of profit generated. As well

as Manufacturing investment and property management, this sector needs to be analyzed more

deeply related to its role in supporting the objective of MBG Corporation. The resulting product

by this sector should also be used by the other core business is in property development or

construction sector and infrastructure. The resulting product by some company in it also needs

to be analyzed whether the quality and price is accordance with the market expectation. If it is

appropriate, then surely MBG Corporation can add more investments into companies that

include inside that core business.

In order to create a good management system and control, in all of the three core business

which is owned by MBG Corporation, then it certainly needs to be appointed the management

team who responsible for each of the core business and then be able to monitor the level of

revenue and profit generated from each company invested. This is very useful in monitoring the

company that has a high potential for profit or otherwise, to analyze what company that should

be drawn its shareholding, as less prospective business.


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Finally there is one conclusion and recommendations that can be given to the MBG Corporation,

where the structure of the company listed in the MBG Corporation itself is a structure that can

complement and fill in any existing market segmentation, so that the existing level of profit can

be generated from various sectors. This will be very useful in enhancing investor confidence

inside, because if one company collapses then there are still other companies that can

contribute to profits in order to cover the losses that occur.

A structure owned by MBG Corporation also has large potential losses if corporate management

is not keen in analyzing the company that is not prospective or profitable anymore. If it is

allowed, then certainly a potential time bomb that threatens MBG Corporation happen and it

will be difficult to be inevitable, but through an optimal periodic and careful control system off

course the threat can be turned into something very profitable and increase the confidence of

investors involved.

III. Corporate Performance (2007 2011) Trend

In analyzing the performance of MBG Corporation then there are two important points that

must be analyzed, the two important points are the business performance and financial

performance. Both of these can be said almost similar by the common people, but if we examine

further the two things are different and cannot be used in one to assess the existing corporate

performance.

financial performance looks at how the financial resources are being managed, in other words

financial performance only focuses on the financial resources of the business while business

performance looks at the entire sections or departments within the business, business

performance can look at human resources, production, marketing, sales management and other

such sections.1

1 Ben McClure, How To Analyze A Company's Financial Position, June 12 2011,

http://www.investopedia.com
http://www.investopedia.com/http://www.investopedia.com/http://www.investopedia.com/


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Year Ended 31 Dec (RM'000) 2011 Increase % 2010 Increase % 2009 Increase % 2008 Increase % 2007

1 Revenue 2,232,473 486,603 27.87 1,745,870 337,455 23.96 1,408,415 (62,942) (4.28) 1,471,357 166,142 12.73 1,305,215

2 Profit Before Tax 430,594 99,627 30.10 330,967 99,855 43.21 231, 112 (66,755) (22.41) 297,867 (38,706) (12) 336,573

3 P rofi t Attri bu tab le to Sh areh ol de rs 327, 973 76,160 30.24 251,813 80,580 47.06 171, 233 (42,223) (19.78) 213,456 (46,614) (18) 260,070

4 Paid Up Capital 1,374,544 611,938 80.24 762,606 2 0.00 762,604 80 0.01 762,524 258,070 51.16 504,454

5 Shareholder's Equity 3,446,442 1,257,169 57.42 2, 189, 273 152, 052 7. 46 2,037,221 61,879 3.13 1, 975, 342 134,459 7.30 1,840,883

6 Total Assets Employed 5,585,657 1,199,595 27.35 4, 386, 062 433, 811 10.98 3,952,251 391,367 10.99 3,560,884 427,531 13.64 3,133,353

7 Total Net Tangible Assets 3,439,486 1,251,073 57.17 2, 188, 413 152, 062 7. 47 2,036,351 61,889 3.13 1, 974, 462 134,469 7.31 1,839,993

8 Earning Per Share (sen) 19.20 (5.60) (22.58) 24.80 8.00 47.62 16.80 (4.20) (20.00) 21.00 (4.80) (18.60) 25.80

9 Gross Dividend Per Share (sen) 14 (6.00) (30.00) 20 6.00 42.86 14 (3.00) (17.65) 17 (8.00) (32.00) 25

10 Net Tangible Assets Per Share (RM) 14 12 551.16 2.15 0.15 7.50 2.00 0.06 3.09 1.94 (0.80) (29.20) 2.74

Table 1. MBG Corporate Business and Financial Performance (2007 2011)

On table that has been processed above, at least it may demonstrate the business and financial

performance of MBG Corporation from 2007 to 2011. Some indicators show an increase in

performance from year to year, but for some indicators it is undeniable that there was a

considerable reduction, especially for the period 2008 - 2009 where the red indicator shows the

value and the percentage of decline. A more detailed discussion related to the business and

financial performance will be covered in the description below.

III.1 MBG Corporation Business Performance

When we look on the business and financial performance table above, it appears that there was

a pretty good upside trend on revenue indicator. The greatest improvement happened in the

period 2010 - 2011, where the increase in revenue is equal to 27.87%, it raised progressively

compared with the previous increase in revenue in the period 2009 to 2010 that touched the

percentage increase of 23.96%.

Decrease in revenue is not too large in the period 2008 - 2009 which ranged in the range of

4.28%. It is still very reasonable and not too large when compared with the revenue increases

that occurred in two periods thereafter. It can be shown that the corporate management has

been quite adaptive in response to the decline in revenue that occurred, which later changed it

to increase revenue in the next two periods.


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Fig 2. Revenue Indication in Corporate Business Development2

In harmony with the existing revenue indicator, the indicator of profit before tax showed a

rhythm, it looks in the period 2010 - 2011 where 30.3% increase in profit before tax, is slightly

down when compared to the prior year period amounting to 43.21%. The vinegary reality of

course may seen in the previous two periods between 2007 to 2009, which looks from the red

indicator, where a decline in profit is significant enough reached 22:41%.

One very interesting thing was happened in the period 2007 to 2008. From the table it appears

that although there was an increase in revenue, but the resulting of profit was decline, it may

indicate that the efficiency conducted in MBG Corporation could not run optimally. The thing

that should be happened is if the revenue generated automatically increases the level of profit in

corporate will be increased as well.

2David E. Coffman, How to Analyze the Performance of Your Business, 2005, http://managing4results.net
http://managing4results.net/http://managing4results.net/


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Chart 1. MBG Corporation Revenue and Profit before Tax

When we talk in the next three indicator which are shareholders' equity, total assets employed,

and the total net tangible assets, it appears that there is no decreasing trend at all indicators

from the period 2007 - 2011, it is a very positive indication that the assets of the company is

continues growing up which means, it can provide more confidence to investors who wish to join

or add the value of shares in it. The three positive indicators is also giving a description that,

MBG Corporation relatively has a high level of adaptation in the construction industry, it can be

proved through the revenue and profit decline occurred in the period 2008 - 2009 did not affect

the development of assets owned by MBG Corporation.

The best investment period was happened in the period 2010 - 2011 where an increase in

shareholder's equity are very sharp reached 57.42% and the increase was the most aggressive

during the period 2007 to 2011. This can indicate the great confidence of the shareholders or

investors to invest their money in MBG Corporation. This Momentum is also very suitable for

MBG Corporation to develop their business, in the period where there is a large enough of cash

inflows and would be very unfortunate if it was not used in business expansion, especially in two

core business of MBG Corporation which are Property Development and Construction &

infrastructure sectors. One thing that must be observed is that the flow of incoming investors

should not just settle in the banks and be a non-liquid flow of investment money.

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2007 2008 2009 2010 2011

MBG Profit Before Tax 336,573 297,867 231,112 330,967 430,594

MBG Revenue 1,305,215 1,471,357 1,408,415 1,745,870 2,232,473

(RM'

000)

MBG Corporation Revenue and Profit Before Tax


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Chart 2. MBG Corporation Assets (RM000)

Business Indicators that must be observed and has a high potential in reducing the level of

investor confidence are the earnings per share, gross dividend per share, and net tangible Assets

per share. Based on the data that is processed above, it appears that the amount of gross

earnings and dividend per share showed a positive value only in one period which was the

period 2009 2010. It is unfortunate able considering in the period 2010 - 2011 there was a

very significant additional amount of investment, where the total net tangible assets increased

precipitously reached 57.17%

It is most likely caused by an increasing number of profits which is disproportionate to increase

in the number of existing investment. As a result of the greater divisor then of course the

amount of profit that can be received per share would also be decreased. This should be a

particular concern in the preparation of business plan next year in the period 2011 - 2012, where

a large increase in investment is expected to be accompanied by a proportional increase in

profit, so the investor expectation is always maintained in the MBG Corporation.

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

20072008

20092010

2011

MBG Shareholder's Equity

Total Assets Employed

Total Net Tangible Assets


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Chart 3. MBG Corporation Shares

III.2 MBG Corporation Financial Performance

In analyzing the financial performance of the MBG Corporation then we will talk more into the

existing ratio of the indicator. The ratio could at least give us an overview in how the endurance

and financial liquidities of these corporate.

Ratio Analysis enables the business owner/manager to spot trends in a business and to compare

its performance and condition with the average performance of similar businesses in the same

industry. Ratio analysis may provide the all-important early warning indications to investor and

shareholders that allow them to solve their business problems before their business is being

collapsed.

Table 2. MBG Corporation Extract Balance Sheet

-

5.00

10.00

15.00

20.00

25.00

30.00

2007 2008 2009 2010 2011

MBG Corporation Shares

Earning per share (sen)

Gross dividend per share (sen)

Net tangible assets per share (RM)


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Some of the ratios that will be a high concern of us in MBG Corporation are:

Liquidity RatiosThese ratios indicate the ease of turning assets into cash. They include the Current Ratio,

Quick Ratio, and Working Capital.

1. Current RatiosThe Current Ratio is one of the best known measures of financial strength. It is

figured as shown below:

Current Ratio = Total Current Assets / Total Current

Liabilities

Base on the balance sheet extract from MBG Corporation

Current Ratio =

=2.43

o The main question this ratio addresses is: "Does your business have enoughcurrent assets to meet the payment schedule of its current debts with a margin

of safety for possible losses in current assets, such as inventory shrinkage or

collectable accounts?" A generally acceptable current ratio is 2 to 1. But whether

or not a specific ratio is satisfactory depends on the nature of the business and

the characteristics of its current assets and liabilities. The minimum acceptable

current ratio is obviously 1:1, but that relationship is usually playing it too close

for comfort.3

o Based on the results of the existing calculations above it appears that thecurrent ratio of MBG Corporation could be said relatively safe or even very safe,

it is seen from the current ratio, which reached a value of 2:43. This can be

judged is a bit exaggerated because the value of current ratio which is

considered the most optimal ratio is 2:00. A high current ratio may mean that

cash is not being utilized in an optimal way. For example, the excess cash might

be better invested in equipment.

3Peter Engel, Budgeting and Finance (1st Books for Business), McGraw-Hill, 1996


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2. Quick RatioThe Quick Ratio is sometimes called the "acid-test" ratio and is one of the best

measures of liquidity. It is figured as shown below:

Quick Ratio = Cash + Government Securities + Receivables /

Total Current Liabilities


Quick Ratio =

= 0,64

o The Quick Ratio is a much more exacting measure than the Current Ratio. Byexcluding inventories, it concentrates on the really liquid assets, with value that

is fairly certain. It helps answer the question: "If all sales revenues should

disappear, could my business meet its current obligations with the readily

convertible `quick' funds on hand?"4

o An acid-test of 1:1 is considered satisfactory unless the majority of your "quickassets" are in accounts receivable, and the pattern of accounts receivable

collection lags behind the schedule for paying current liabilities.

o Based on the results of calculations performed on MBG Corporation quick ratio,it appears that conditions are not sufficient to limit of the normal quick ratio

that is equal to 1. This proves that the total cash held by the MBG Corporation

was not enough to cover their liabilities. Therefore the strategic steps that need

to be done is to sale the fixed assets of the company to make cash flow of MBG

Corporation become more liquid, because on the previous current ratio

calculation this corporate experience an over of current ratio of current ratio

where MBG Corporation has a number more than two, resulting the number of

fixed assets are not liquid in the corporate capital structure.

4Idem


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3. Working CapitalWorking Capital is more a measure of cash flow than a ratio. The result of this

calculation must be a positive number. It is calculated as shown below:

Working Capital = Total Current Assets - Total Current Liabilities


Working Capital (RM million) = (762,6+ 2189,3 + 1058,5) (1637) = 2373,4

o Bankers look at Net Working Capital over time to determine a company's abilityto weather financial crises. Loans are often tied to minimum working capital

requirements.5

o Based on the results of these calculations the working capital of MBGCorporation is still be positive, which means total current assets held is still able

to pay the total current liabilities in the current period.

o A general observation about these three Liquidity Ratios is that the higher theyare the better, especially if you are relying to any significant extent on creditor

money to finance assets.

Leverage RatioThis Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on

debt financing (creditor money versus owner's equity):

Leverage Ratio = Total Liabilities / Net Worth


Leverage Ratio =

= 0,476

o Generally, the higher this ratio, the more risky a creditor will perceive its exposure inyour business, making it correspondingly harder to obtain credit.

o Based on the above calculation it appears that the Leverage Ratio of MBGCorporation is still relatively low with a ratio below one, this means that investors or

bank lenders could have a relatively high confidence of this corporation.

5Idem


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Return on Investment (ROI) RatioThe ROI is the most important ratio of all. It is the percentage of return on funds invested in

the business by its owners. In short, this ratio tells the owner whether or not all the effort

put into the business has been worthwhile. The ROI is calculated as follows:

Return on Investment = Net Profit before Tax / Net Worth


Return on Investment =

x 100 = 12,52%

o Based on the results of existing calculations it appears that, MBG Corporation has aROI ratio at 12.52%, the figures were apparently not very significant when compared

with the prevailing interest rate on commercial banks ranging between 6% - 8%, but

this rate is still better when compared with the investor money in bank

o If the ROI is less than the rate of return on an alternative, risk-free investment suchas a bank savings account, the owner may be wiser to sell the company, put the

money in such a savings instrument, and avoid the daily struggles in business

management.

IV.Capitalization of MBG Corporation

Capitalization in corporate comprises of share capital, debentures, loans, free reserves, etc.

Capitalization represents permanent investment in companies excluding long-term loans.6

Capitalization can be distinguished from capital structure. Capital structure is a broad term and it

deals with qualitative aspect of finance. While capitalization is a narrow term and it deals with

the quantitative aspect.

If we analyze it further so that there are three forms of capitalization in the MBG Corporation,

which are:

1. Equity CapitalOtherwise known as net worth or book value, this figure represents assets minus

liabilities. There are some businesses that are funded entirely with equity capital (cash

written by the shareholders or owners into the company that have no offsetting liabilities.)

6Jim Blasingame, Capitalization in Finance, April 15, 2003,http://www.managementstudyguide.com,
http://www.managementstudyguide.com/http://www.managementstudyguide.com/http://www.managementstudyguide.com/http://www.managementstudyguide.com/


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Although it is the favored form for most people because you cannot go bankrupt, it can be

extraordinarily expensive and require massive amounts of work to grow your enterprise.

Chart 4. Capitalization of MBG Corporation through the Increase of Total Nett Tangible Assets

Base on the data processed above, it appears that the total net assets in the form of tangible

assets owned by MBG Corporation for 2011 is RM 3.44 Billion in which these assets continue

to grow when compared with net tangible assets owned at the beginning of 2007 that isequal to 1.84 RM billion, an increase in the number of assets increases also may indicate that

the capitalization of the corporation MBG is progressively from year to year, which makes

this corporate can invest the assets into other business sectors as well as to increase the

confidence of shareholders and the bank as a lender.

2. Debt CapitalThis type of capital is infused into a business with the understanding that it must be paid

back at a predetermined future date. In the meantime, the owner of the capital (typically a

bank, bondholders, or a wealthy individual), agree to accept interest in exchange for you

using their money.

The chart below could show the trend of increasing debt to capital through the paid up

capital indicators on Financial performance tables from 2007 to 2011. Indicator paid up

capital showed an increasing trend that is also quite progressive. At the end of 2011 the paid

up capital amounts to be paid was 1.37 Billion RM and nearly three times when we

compared with a paid up capital in 2007 that was just 500 Million RM.

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

2007 2008 2009 2010 2011

MBG Corporation Total Nett Tangible

Assets1,839,993 1,974,462 2,036,351 2,188,413 3,439,486

(RM'000)

MBG Corporation Total Nett TangibleAssets


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The Business is growing and certainly have consequences in the form of increased in

financial liquidity through an increase in the amount of debt that should have a positive

connotation to the amount of revenue and profit generated.

Chart 5. Capitalization of MBG Corporation through the Increase of Paid Up Capital

3. Retained Earnings CapitalThis is the profits which company has made, and which you have left to accumulate in thecompany; which is to say, that the profits didn't take out as salary, bonus, dividend, or other

distribution. Of all the forms of capital the company should have it; this is the best kind,

because this it is the old fashioned way, that the company earned it.7

The banker will like seeing retained earnings capital on the company balance sheet even

more than equity capital because it says two things:

The company had the ability to produce retained earnings by operating profitably; As the owner, we had the discipline to leave this capital in the company instead of

distributing it.

7Idem

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2007 2008 2009 2010 2011

MBG Corporation Paid Up Capital 504,454 762,524 762,604 762,606 1,374,544

(RM'000)

MBG Corporation Paid Up Capital


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Chart 6. Capitalization of MBG Corporation through the Increase of Profit

Based on the increasing trend that occurred in the profit indicator, it appears that retain

earning capital of MBG Corporation's increased from year 2007 - 2011, the decline had

occurred in 2009, but increased again in the next two years. This indicates that the

capitalization of MBG Corporation is quite progressive and able to increase the

confidence of investors and banks to lend to this corporate, besides of the corporate

disciplines to remain invested some of the profit into the liquid assets or cash flow thatwill ultimately positively correlated to the level of corporate liquidity and investor

confidence.

V. Borrowing Portfolio of MBG Corporation in 2011

Based on MBG Corporation borrowing structure 2011 table, it appears that the type of loan

made by a corporate is not only limited to the long term borrowing, but also carried out on short

term borrowing that is used to maintain liquidity levels of MBG Corporation. MBG Corporation

also uses the revolving credit mechanism which revolving credit is a type of credit that does not

have a fixed number of payments, in contrast to installment credit. Corporate revolving credit

facilities are typically used to provide liquidity for a company's day-to-day operations.

One positive thing that can be viewed at a glance that the amount of secured borrowing is still

greater than the amount of unsecured borrowing, it can be said to be positive, because in

general, unsecured borrowing is borrowing that comes from personal loans, bank overdrafts,

credit facilities or lines of credit and corporate bonds, where the Interest rates on unsecured

-

100,000

200,000

300,000

400,000

500,000

20072008

20092010

2011

(RM'000)

2007 2008 2009 2010 2011

Profit Before Tax 336,573 297,867 231,112 330,967 430,594

Profit Attributable to Shareholders 260,070 213,456 171,233 251,813 327,973

MBG Corporation Profit


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Borrowings @ 31Des 2011 RM '000

1 Long Terms Borrowings

1.1 Term Loan 831,098.00

1.2 Bridging Loan 96,718.00

2 Short Term Borrowings

2.1 Secured

a Current Portion of LongTerm Borrowing 53,303.00

b Revolving Credit 96,000.00

c Short Term Loan 5,433.00

2.2 Unsecured

a Short Term Loan 50,000.00

b Revolving Credit 5,000.00

TOTAL 1,137,552.00

loans are nearly always higher than for secured loans, because an unsecured lender's options for

recourse against the borrower in the event of default are severely limited. This happened

because an unsecured lender must sue the borrower, obtain a money judgment for breach of

contract, and then pursue execution of the judgment against the borrower's unencumbered

assets. In insolvency proceedings, secured lenders traditionally have priority over unsecured

lenders when a court divides up the borrower's assets. Thus, a higher interest rate reflects the

additional risk that in the event of insolvency, the debt may be uncollectible.

Table 3. MBG Corporation Borrowing Structure in 2011

In measuring the optimality of borrowing portfolio some of the experts use the gearing ratio as

the first indicator for this thing. The gearing ratio is the proportion of a company's debt to its

equity, where a high gearing ratio represents a high proportion of debt to equity, and a low

gearing ratio represents a low proportion of debt to equity. The most comprehensive form of

gearing ratio is one where all forms of debt - long term, short term, and even overdrafts - are

divided by shareholders' equity.

Gearing Ratio = (Long-term debt + Short-term debt + Bank overdrafts)/

(Shareholders' equity)

MBG Corporate Gearing Ratio =

= 0,33

Based on the calculation above it appears that the MBG Corporation gearing ratio is still at a

relatively small value and less than one, which means the total equity owned by MBG


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Year Ended 31 Dec (RM'000) 2011 Increase % 2010 Increase %

1 Revenue 2,232,473 486,603 27.87 1,745,870 337,455 23.96

2 Profit Before Tax 430,594 99,627 30.10 330,967 99,855 43.21

3 Profit Attributable to Shareholders 327,973 76,160 30.24 251,813 80,580 47.06

4 Paid Up Capital 1,374,544 611,938 80.24 762,606 2 0.00

5 Shareholder's Equity 3,446,442 1,257,169 57.42 2,189,273 152,052 7.46

6 Total Assets Employed 5,585,657 1,199,595 27.35 4,386,062 433,811 10.98

7 Total Net Tangible Assets 3,439,486 1,251,073 57.17 2,188,413 152,062 7.47

8 Earning Per Share (sen) 19.20 (5.60) (22.58) 24.80 8.00 47.62

9 Gross Dividend Per Share (sen) 14 (6.00) (30.00) 20 6.00 42.86

10 Net Tangible Assets Per Share (RM) 14 12 551.16 2.15 0.15 7.50

corporation is still very good to be able to pay the total borrowing by the corporate owned.

Gearing ratio will be important considerations in delivering banks loan, because high levels of

gearing ratio may be one indication of corporate inability to pay its debts..

Lenders or bank are particularly concerned about the gearing ratio, since an excessively high

gearing ratio will put their loans at risk of not being repaid. Possible requirements by lenders to

counteract this problem are the use of restrictive covenants that prohibit the payment of

dividends, force excess cash flow into debt repayment, restrictions on alternative uses of cash,

and a requirement for investors to put more equity into the company.

Table 4. MBG Corporation Financial performance 2010 - 2011

If we look at financial data performance above, precisely in the period 2010 - 2011 it seems a

trend that feels quite negative and need to watch out in particular indicator which are

shareholder's equity and gross dividend per share, which at two indicator occurs what we called

as early indication to overcapitalization in which the magnitude of capital inflows cannot be

supported with the comparable increase in profit that caused gross dividend per share to be

decreased when compared with the previous year.

In that period an increasing number of shareholder's equity reaches 50%, but the increase in

profit that occurs only reached 30%, which is probably due to MBG Corporation cannot optimal

in changing the flow of investment into a profit with a comparable increase in value. Trend of

Overcapitalization is needed to be avoided not only to the corporate, but also to the

shareholders inside. Some of the disadvantage could be explained bellow:


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On Shareholderso Since the profitability decreases, the rate of earning of shareholders also decreases.o The market price of shares goes down because of low profitability.o The profitability going down has an effect on the shareholders. Their earnings

become uncertain.

o With the decline in goodwill of the company, share prices decline. As a result sharescannot be marketed in capital market.

On Companyo Because of low profitability, reputation of company is lowered.o The companys shares cannot be easily marketed.o With the decline of earnings of company, goodwill of the company declines and the

result is fresh borrowings are difficult to be made because of loss of credibility.

o In order to retain the companys image, the company indulges in malpractices likemanipulation of accounts to show high earnings.

o The company cuts down its expenditure on maintenance, replacement of assets,adequate depreciation, etc.

Finally based on the borrowing portfolio owned by MBG Corporation, it appears that the

corporate is quite good at managing its debt. Gearing ratio is quite low and it can also be anearly indication of the strength of the corporate capital in facing the economic crisis condition

which sometimes makes the drastic increase in interest rates that will also affect the total debt

to be paid by the corporate. A relatively low gearing ratio may also give more confidence to the

shareholders or bank to add the value for its investment in this corporate.


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VI.Final Opinion of MBG Corporation

By looking at some of the indicators which are analyzed and calculated previously, it appears

that the MBG Corporation is a corporate which have a great expectations to continue to grow in

the future. Level of revenue, profit and assets of the company that continues to grow from year

to year can provide its own optimism for investors and banks to invest in this corporate. Some of

the business and financial performance indicators show a fairly good value where the corporate

has sufficient equity to cover or pay its debts.

Indicator rate of investment (ROI) also showed a similar thing where the rate is above the

interest rate of return offered by commercial banks in general. If we compare with other

business sectors it is of course the existing rate of investment will be relative depending on the

type of business carried on. For a corporate who is engaged in the construction industry, the

level of ROI that can be generated by the MBG Corporation is considered to be quite

progressive.

The rate of investment value is not exceeding for the rate offered by business in other sectors as

well as in the retail business, information technology, or mining, which generally have a relative

higher degree of ROI. Looking at the facts that have been described previously then it will

depend on the preferences of investors who will enter therein. One thing that may be noted is

that the business in the construction industry is a business relatively massive in capital and has a

relatively increased level of demand from year to year.

One analysis that should be the concern of MBG Corporation is the reality that it has a corporate

capitalization trend known as overcapitalization, which is a condition where a corporate cannot

optimally make use of investment that goes into it so that the resulting profit cannot be run

directly proportional to investment flows that enter therein. It happened in the period 2010 -

2011 where the capital flows that go through an increasing number of shareholders equity

reached 50% but not followed by a comparable increase in profit, which increased profit that

occurs only reached 30%.

The Consequences caused by the overcapitalization is a decrease in the value of earnings per

share which reached 22% from the prior year period. It should be a serious concern for the MBG

Corporation as if it persists then it is likely to attract investors to withdraw their share, because

they feel what has been invested cannot provide the level of profit in accordance with what the


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previous investor expectations. Through good management process, it is expected that MBG

Corporation can increase revenue and profit levels are through the optimization of each

business unit contained therein in addition to trying to invest the assets of shareholders equity

and capital into other business sectors are more prospective with a higher profit rate.

Finally with some pretty progressive increase in the indicator that takes place between the

period 2007 - 2011, it can be concluded that MBG Corporation is a prospective corporate which

the rate of investment is quite competitive, within give high confidence to investors who want to

invest in it as well as providing comfort to investors who have invested shares in it.


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References

Ben McClure, How To Analyze A Company's Financial Position, June 12 2011,

http://www.investopedia.com

David E. Coffman, How to Analyze the Performance of Your Business, 2005,

http://managing4results.net

Jim Blasingame, Capitalization in Finance, April 15, 2003,

http://www.managementstudyguide.com,

Peter Engel, Budgeting and Finance (1st Books for Business), McGraw-Hill, 1996
http://www.investopedia.com/http://managing4results.net/http://www.managementstudyguide.com/http://www.managementstudyguide.com/http://managing4results.net/http://www.investopedia.com/

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