a.

Background Information of Companies

Far East Holding Berhad (FEHB) was established in 1973 under the Companies Act,
1965 as a private limited company under Far East Holdings Sdn Bhd in Malaysia. On
the 1980, Far East Holding Sdn Berhad was converted to a public company and it was
changed under the name Far East Holdings Sdn. Bhd. On 1986, it was converted to a
public company and its name was changed to its present form. The oil palm tree is
primary product of the companys strength and confidence intention to hold oil palm
tree in the future. In addition, the company present authorized share capital is RM
300000 comprising 3000000 ordinary share of RM 1.00 each. However, Far East
Holding Berhad made its debut on the Bursa Malaysia Securities Berhad to the public
offer for sale of 172 hundred thousand shares in 1990. On 1991, when its entire issued
and paid up share of 560 hundreds thousands were listed and quoted (Far East
Holdings, n.d.).

The principal of the subsidiaries of the company is oil palm plantation and palm oil
mill it has estates located at Pahang Tenggara, Pahang in West Malaysia. FEHB is
engaged in the cultivation and production of oil palms, production and sales of fresh
fruits bunches crude palm oil and palm kernel and involve in investment holding in
Malaysia. The headquarters of the company dedicated and committed to provide oil
palm plantation advisory and management services to all its estates. Besides that, the
company has established its operation to overseas and the company was success to
produced 302454 metric tons of fresh fruits bunches during the year ended 2009.
During the same period, the company subsidiaries were Dawn Oil Palm Plantation
Sdn Bhd, Radiant Apex Sdn Bhd, Kampung Aur Oil Palm Sdn Bhd, Far East Delima
Plantation Sdn Bhd and so on. Since Malaysia Oil Palm industry recorded recovery in
2002 despite a weak global economy occur. However, the future prospects of FEHB
has further expanded and planning to roughly about 140km from Kuantan and 19km
from Kuala Rompin Town. The good location of the region in addition to relatively
flat feature, high rainfall makes an ideal place to establish oil palm plantations and
export demand is forecast to further improve from higher world demand for edible oil.
(Far East Holdings, 2012)

FEHB major shareholder are Lembaga Kemajuan Perusahaan Pertanian Negeri
Pahang (LKPP) with 25.18% share, Prosper Trading Sdn Bhd as a second largest
shareholder with 23.68% shares, Hikmat Elit Sdn Bhd as a third largest shareholder in
FEHB with 8.02% shares, lastly, LKPP Corporation Sdn Bhd with 5.96% shares. The
paid up capital of the company at 2012 is 141 hundreds thousands units of ordinary
share (Far East Holdings, 2010). On year 2007, EFHB completed acquisition
represent 14.50% equity interest in Prosper Plam Oil Mll Sdn Bhd from Lembaga
Kemajuan Perusahaan Pertanian Negeri Pahang. Far East Holdings Berhad had also
completed an acquisition of shares in Prosper Palm Oil Mill (PPOM) represent
10.70% of equity interest from Kampong Aur Oil Palm Company Sdn Berhad. As the
same time, it acquired Spectacular Potential Sdn Bhd (The Edge, 2013).


b. The Industry Analysis (Far East Holdings)

Porter five forces analysis is a framework for industry analysis and business strategy
development. It determines the competitive intensity and also the attractiveness of a
market. It is consist of five forces which are threat of new entrants, threat of substitute
products or services, bargaining power of suppliers, bargaining power of buyers and
intensity of competitive industry (WikiCFO, 2010).

Threat of new entrants

First of all, Far East Holding Berhad (FEHB) has a low threat of new entrants. It is
because of the higher barrier of entry for the new business company. For example,
initial capital investment is high. In such, FEHB has been established several decades
and possess huge property. By fully utilizing the property, FEHB can generate high
sales and obtain the highest market share in the plantation industry. In addition, brand
names of company are well known. Lastly, a low threat of new entrants makes an
industry more attractive and increases profit potential for the firms already competing
within that industry.


Threat of substitute products

Moreover, Far East Holding Berhad (FEHB) has a low threat of substitute products or
services. For instance, FEHB's main activities are cultivation of oil palm, productions
and sales of fresh fruit bunches, crude palm oil and palm kernel. Palm oil is a
substitution of other product and it is cheap substitute for butter because of its
nutritional benefits. Lastly, a low threat of substitute products makes an industry more
attractive and increases profit potential for the firms in the industry.

Bargaining power of suppliers

Furthermore, Far East Holding Berhad (FEHB) has a low bargaining power of
suppliers. It is because of the buyers are more concentrated than suppliers since
Malaysia is the world's second largest producer of palm oil in 2012. Buyers are price
sensitive and well educated regarding the product. Buyers also purchase product in
high volume and comprise large portion of supplier sales. Lastly, low supplier power
makes an industry more attractive and increases profit potential for the buyer.

Bargaining power of buyers

Besides that, Far East Holding Berhad (FEHB) has a low bargaining power of buyers
due to the buyers is less concentrated than sellers. The buyer is not price sensitive and
uneducated regarding the product. Buyer also purchases product in low volume and
comprise small portion of seller sales. Lastly, low buyer bargaining power makes an
industry more attractive and increases profit potential for the seller.

Competitive rivalry within an industry

Finally, Far East Holding Berhad (FEHB) has a low intensity of competitive industry.
It is because of the industry growth is fast while the fixed costs are low. Furthermore
the competitors are not strategically diverse and the brand loyalty does exist among
the customer in the early time. Another main factor is the exit barriers are low. It
require large amount of money to get the business started. FEHB gain a competitive
advantage in which the production of fresh fruit bunches are higher due mainly to
better palms productivity, improved labour management and increase in mature area
from the replanting programme. Lastly, low intensity of rivalry makes an industry
more attractive and increases profit potential for the firms already competing within
that industry.


c. Assessment of the Management

Corporate Social Responsibility (CSR)

FEHB will continue to contribute positively to the sustainable development of the
economy and the community. As a socially responsible corporation, they put
emphasis on its CSR and will remain committed in its outcomes to institute
programmes that will protect the environment and care for the employee welfare and
the society at large besides building strong relationships with its business associates
(Far East Holdings, 2012).

Besides that, Zero-Burning that adopted by FEHB in its replanting programmes to
demonstrate its emphasis on environmental conservation. This policy is an effective
way for land clearing activities during replanting programme. At the same time, it will
augment soil fertility by replenishing organic matter and improving the soils physical
properties. The eco-friendly system of using barn owls preferred as a method of pest
management to reduce the rat population in the estates area (Far East Holdings, 2012).

FEHB also embarked on getting its operations under the Malaysian Palm Oil Board
(MPOB) Code of Practices. Currently, the groups mill, Kilang Kosfarm Sdn. Bhd.
And two of the FEHB estates namely Bukit Serok and Kampung Aur estates and its
oil palm nursery had been awarded with Certificate of Compliance to the Code of
Practice (Far East Holdings, 2012).

Nevertheless, FEHB introduced the importance of employees with the right skills,
capabilities and competencies as it moves forward. The company also provide the
training programme and refresher courses to their employees to keep them follow up
the latest development in the industry (Far East Holdings, 2012).

Lastly, FEHB at the estate level has in place an Occupational Society and Health
Policy to use in the employee the values of preventive and safety measures in the
working environment of the company (Far East Holdings, 2012).

Corporate Structure



Source: Far East Holding Website


Corporate Strategies

FEHB will continue to reinforce its standing in the oil palm industry and is confident
that the industry would remain stable despite the declining tread as compared to the
previous year. In the first quarter of 2013, the average CPO price was in region of RM
2300- RM 2400 per metric tone. CPO prices in 2013 are expected to be buoyant. The
overall fundamentals of the plantation industry would remain strong arising from
continuous strong demand of palm products. It is envisaged that the average CPO
price for the year 2013 would be in the range of RM 2300 to RM 2500 per metric tone.
Based on this optimism, the prospect of the company performing satisfactory in 2013
is bright (Far East Holdings, 2012).


Recruitment Process

Far East Holdings Berhad is a public listed company in Bursa Malaysia Securities
Bhds main board. Due to expansion, the company is more likely to invite an
ambitious and self-motivated individual to join and group with the company to make
it stronger. The applicant may apply for the company through online resume and
walk-in interview.


Corporate Governance Statement

The Board of Director

The Board has the overall responsibility for corporate government, strategic direction,
formulation of policies and overseeing the investment and business of the company.

Name of Directors Meeting Attendance
YH Dato Kamaruddin bin Mohammed 8/8
YH Dato Md. Adnan bin Sulaiman 8/8
Mr Tee Kim Tee @ Tee Ching Tee 7/8
Mr Tee Cheng Hua 8/8
Khairul Azahar bin Ariffin 8/8
Hashim Naina Merican bin Yahaya
Merican
8/8
YH Dato Tan Bing Hua 4/8
Tee Lip Teng 4/8
Ng Kee Kim 4/8
Tee Lip Hian 4/8

Board Balance

The current Board consists of seven (7) non-executive directors and one (1) executive
director, with three (3) of the right (8) directors being independent directors with a
synergistic mixture of businessman, planters, professionals and technical expertist.



















d. Ratios Calculation

Ratios Year 2012 Year 2011 Year 2010
Return
On
Assets
(ROA)


=

()

= 9.6559



=

()

= 12.9623



=

()

= 10.2558



Ratios Year 2012 Year 2011 Year 2010
Net profit margin

= 20.6267



=

= 27.0711



=

= 21.2462



Ratios Year 2012 Year 2011 Year 2010
Current ratio






=

= 5.3096
5.31 times


=

= 4.5735
4.57 times

=

= 4.2579
4.26 times

Ratios Year 2012 Year 2011 Year 2010
Total assets
turnover





=

= 0.3589
0. 36 times

=

= 0.3978
0.40 times

=

= 0.3939
0.40 times

Ratios Year 2012 Year 2011 Year 2010
Debt ratio





=

= 0.1421
0.14 times


=

= 0.1463
0.15 times


=

= 0.1449
0.14 times


Ratios Year 2012 Year 2011 Year 2010
Earnings per share






=

= RM 0.59687
RM 0.5969


=

= RM 0.86948
RM 0.8695


=

= RM 0.60462
RM 0.6046


Ratios Year 2012 Year 2011 Year 2010
Price earning ratio


()



=

= 12.5314
12.53
times


=

= 8.1656
8.17 times


=

= 11.4125
11.41
times







Ratios Year 2012 Year 2011 Year 2010
Return on equity






=

()

= 7.7838



=

()

= 11.6378



=

()

= 8.7108



























e. Ratio Analysis

Return on Assets (ROA)
ROA of Far East Holdings Berhad
Ratios Year 2012 Year 2011 Year 2010
Return
On
Assets
(ROA)
= Net
Income
*
Total
Assets

=

()

= 9.6559



=

()

= 12.9623



=

()

= 10.2558



Based on the figure above, the return on assets (ROA) of Far East Holdings Berhad in
2012 is 9.66%, 12.96% in 2011 and 10.26% in 2010. We can see clearly there is an
increment of 2.7% in ROA from 2010 to 2011. However, there is a decline of 3.3%
in ROA from 2011 to 2012. Obviously, Far East Holdings Berhad has the highest
ROA in 2011 which is 12.96%, whereas it has the lowest ROA in 2012 which is only
9.66%.
10.26
12.96
9.66
0
2
4
6
8
10
12
14
2010 2011 2012
P
e
r
c
e
n
t
a
g
e

(
%
)

Year
Return on Assets (ROA)
Series1
In 2011, it demonstrates Far East Holdings Berhad is very efficient and effective in
managing its investment in assets and utilizing its assets to maximize greater sales
volume as well as generate higher profit. It indicates that Far East Holdings Berhad
has RM0.1296 for every ringgit of invested assets. Conversely, in 2010 and 2012, Far
East could only received RM0.1026 and RM0.0966 respectively for every ringgit
invested assets.

Net Profit Margin
Ratios Year 2012 Year 2011 Year 2010

= 20.6267



=

= 27.0711



=

= 21.2462




Based on the figure above, the net profit margin of Far East Holdings Berhad in 2010,
2011, 2012 is 21.25 %, 27.07 %, and 20.63 % respectively. There is an increment of
5.82% from 2010 to 2011. However, there is a decline of 6.44% from 2011 to 2012.
21.25
27.07
20.63
0
5
10
15
20
25
30
2010 2011 2012
P
e
r
c
e
n
t
a
g
e

(
%
)

Year
Net Profit Margin
Series1
In 2011, Far East Holdings Berhad experiences and possesses the highest net profit
margin among the 3 years. It indicates that Far East is very effective and efficient in
converting its revenue into actual profits.
Besides, we can consider in 2011, Far East Holdings Berhad has a good companys
policies, low cost structure, and also production efficiency which results in high net
profit margin. In 2010 and 2012, the net profit margin is slightly low as compared
with 2011 which is 21.25% and 20.63% respectively.
Current Ratio
Ratios Year 2012 Year 2011 Year 2010






=

= 5.3096
5.31 times


=

= 4.5735
4.57 times

=

= 4.2579
4.26 times

Based on the figure above, Far East Holdings Berhad manages to achieve a gradual
increment in its current ratio from 2010 to 2012. It increases 0.31 times from 2010 to
2011 and also 0.74 times from 2011 to 2012. It indicates that Far East has sufficient
resources (current assets) like cash in hand to pay its debtors over the next business
cycle.
4.26
4.57
5.31
0
1
2
3
4
5
6
2010 2011 2012
T
i
m
e

(
s
)

Year
Current Ratio
Series1
Besides, the figures extracted from the balance sheet of Far East, its current assets is
increasing gradually for the 3 consecutive years from 2010 to 2012 which is
RM148,927,812, RM227,351,691, and RM272,095,799 respectively.
It gives an idea to indicate that Far East is operating its business efficiently. The
increasing of its current ratio indicates that Far East is capable to pay its obligations
with its sufficient current assets and it does not have problems to pay back its debtors.

Total Assets Turnover
Ratios Year 2012 Year 2011 Year 2010






=

= 0.3589
0. 36 times


=

= 0.3978
0.40 times

=

= 0.3939
0.40 times



Based on the figure above, Far East holdings Berhad maintains its total assets
turnover of 0.4 times from 2010 to 2011. However, it experiences a decline from 0.4
times to 0.36 times in 2012. It has been dropped for 0.04 times from 2011 to 2012.
This slightly decline in total assets turnover of Far East Holdings Berhad is due to its
decline in sales and also increment of its total assets in 2012. In 2012, it indicates that
Far East Holdings Berhad is not using well its assets efficiently in generating sales. In
0.4 0.4
0.36
0.34
0.35
0.36
0.37
0.38
0.39
0.4
0.41
2010 2011 2012
T
i
m
e

(
s
)

Year
Total Assets Turnover
Series1
2012, the drop in sales from RM479,254,327 to RM452,361,796 and increment in
total assets which results in lower total assets turnover.

Debt Ratio
Ratios Year 2012 Year 2011 Year 2010





=

= 0.1421
0.14 times


=

= 0.1463
0.15 times


=

= 0.1449
0.14 times



Based on the figure above, Far East Holdings Berhad has a low debt ratio which is
less than 1 which determines it has a good long-term solvency. Far East Holdings
Berhad has approximately the same debt ratio at the range of 0.14 to 0.15.
In 2010 and 2012, its debt ratio is remained the same of 0.14 times, whereas its debt
ratio is slightly increased to 0.15 in 2011. It indicates Far East possesses a good
financial health and low risk in solvency. This low debt ratio also indicates that Far
East Holdings Berhad has low risk in its business operation. Therefore, Far East
Holdings Berhad is able to borrow loans easily due to its good financial health and
solvency.


0.14
0.15
0.14
0.134
0.136
0.138
0.14
0.142
0.144
0.146
0.148
0.15
0.152
2010 2011 2012
T
i
m
e

(
s
)

Year
Debt Ratio
Series1
Basic Earnings per Share
Ratios Year 2012 Year 2011 Year 2010






=

= RM 0.59687
RM 0.5969


=

= RM 0.86948
RM 0.8695


=

= RM 0.60462
RM 0.6046



Based on the figure above, Far East Holdings Berhad has the highest basic earnings
per share (EPS) in 2011 which has generated RM0.8695 to its shareholders. From
2010 to 2011, there is an increment of RM0.2649 in EPS which from RM0.6046 to
RM0.8695. However, from 2011 to 2012, there is a decline of RM0.2726 in EPS
from RM0.8695 to RM0.5969.
The earning power of Far East Holdings Berhad has improved in 2011, but it also has
declined in 2012. In general, Far East Holdings Berhad is still making profit and able
to generate approximately 60 cents to 90 cents per share to its shareholders among
the 3 years.




0.6046
0.8695
0.5969
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
2010 2011 2012
R
i
n
g
g
i
t

M
a
l
a
y
s
i
a

(
R
M
)

Year
Series1
Price-earnings ratio
Ratios Year 2012 Year 2011 Year 2010


()



=

= 12.5314
12.53
times


=

= 8.1656
8.17 times


=

= 11.4125
11.41
times



Based on the figure above, Far East Holdings Berhad has the highest P/E ratio in 2012
which is 12.53 times. It is because its current market share price is the highest among
the 3 years which is RM7.48 as compared to the year of 2010 and 2011. Moreover, in
2012, Far East Holdings Berhad has the lowest earnings per share of RM0.5969.
This high P/E ratio indicates the market and investors are willing to pay for the
earnings of the company. In addition, it also represents that the market has good and
high expectations for the future of Far East Holdings Berhad. In the previous year of
2010, the P/E ratio is 11.41 times also can be considered as high. However, in 2011,
there is a decline of 3.24 times from 11.41 to 8.17 times. It is because in 2011 Far
East Holdings Berhad has the highest EPS of RM0.8695 which is then results in low
P/E ratio.

11.41
8.17
12.53
0
2
4
6
8
10
12
14
2010 2011 2012
T
i
m
e

(
s
)

Year
Price-earnings Ratio
Series1
Return on Equity (ROE)
Ratios Year 2012 Year 2011 Year 2010






=

()

= 7.7838



=

()

= 11.6378



=

()

= 8.7108



Based on the figure above, Far East Holdings Berhad has the highest return on equity
(ROE) of 11.64% in 2011. On the other hand, it has the lowest ROE of 7.78% in
2012. In 2010, its ROE is 8.71%.
The highest ROE of 11.64% in 2011 indicates Far East Holdings Berhad is having a
better utilization of the investment dollars from the investors to generate higher profits.
It is because in the year of 2011, Far East Holdings Berhad manages to generate very
high net profit of RM119,685,884. Whereas in 2010 and 2012, it could only generate
the net profit of RM82,437,962 and RM84,163,426 respectively.
It indicates Far East Holdings Berhad has generated RM0.1164 of net income for
every RM that has been invested by the investors in 2011. This high ROE tells the
investors of Far East Holdings Berhad their capital is effectively being reinvested or
8.71
11.64
7.78
0
2
4
6
8
10
12
14
2010 2011 2012
P
e
r
c
e
n
t
a
g
e

(
%
)

Year
Return on Equity
Series1
utilized by a company in generating profits. However, in 2010 and 2012, it has
generated RM0.7778 and RM0.0871 respectively to its investors due to low net profit
generated. Therefore, in 2010 and 2012, investors could only receive RM0.7778 and
RM0.0871 of net income respectively for every RM that has been invested.

f. Cash Flow Statement Analysis

Cash Flow Inflow
Items
2012
(RM)
2011
(RM)
2010
(RM)
Receivables, deposits
and prepayments.
22,080,603 20,567,279 12,131,355
Payables 10,768,958 5,547,380 4,009,329
Dividend received 5,000,000 24,832,857 2,362,857
Table 6.1: Extract from Statement of Cash Flows: Cash Flow Inflow Items/Sources.
Cash Flow Outflow
Items
2012
(RM)
2011
(RM)
2010
(RM)
Income tax paid 25,249,848 29,245,071 15,769,475
Interest paid - 3,701 13,135
Investment in
subsidiaries
- - -
Repayments of
borrowing
24,836 5,059 18,582
Dividend paid 64,185,525 51,878,892 29,707,484
Table 6.2: Extract from Statement of Cash Flow: Cash Flow Outflow Items/Sources.

From the two tables shown above, there is an important source or item in cash inflow
and cash outflow of Far East Holding Berhad. The inflows of cash flow are increase
in receivables, deposits and prepayments, increase in payables, and decrease in
dividends received. While, the cash outflow are decrease in income tax paid, decrease
in interest paid, no investment in subsidiaries, increase in repayments of borrowing
and increase in dividends paid to shareholders. The purpose of cash flows is to know
the business liquidity even the revenue is increase does not means that company is
good in liquidity due to cash shortage.

By comparing the cash flow statements of Far East Holding Berhad which ended in
31 December in year 2010, 2011, and 2012, we can see that the net cash flow of the
Group is declining in year 2012. The summary of the net cash flow that affected by
its activities (operating, investing and financing) stated in year 2010 (RM 31,370,610),
2011 (RM 50,107,652) and 2012 (RM 23,303,318). From these figures, among these
three years is showing that there is fluctuation, where in year 2010 and 2011 shown
increasing in activities of net cash flows yet in year 2011 and 2010 shown decreasing
in activities of net cash flows. However, we can say that the year 2011 is the most
favorable year in terms of liquidity. But when it comes to year 2012, the cash flow has
dramatically declined as much as RM 26,804,334. Although the cash flow in year
2011 has been improved, but in overall it is still declining.

For cash flow generated from operating activities for these three years is 2010 (RM
70,424,908), 2011 (RM 56,268,220) and 2012 (RM 75,385,093). From the figure, we
can see that the most liquid between these three years is year 2012, while the least
liquid is year 2011. The most favourable for Far East Holding Berhad owes the most
liquid in year 2012, which enables to expand its businesses such as reinvest business,
repay debt, and so on. The primarily captures to its sales revenue, account receivables
and account payables. From the sales revenue, we can see that revenue is decreasing
from year 2011 (RM 479,254,327) to 2012 (RM 452,361,796) is RM 26,892,531.

However, its receivables and payables are increasing as it is shown in table 6.1, which
it cause net cash flow from operating activities of year 2012 increasing to RM
75,385,093. In other words, the trend of fluctuation profitability for Far East Holding
Berhad and this could effects its cash flow. As it will affects the cash flow unstable
from year to year. Based on year 2012, the cash flow generated from operating
activities for next year will be unknown, as there is a decrease in profitability is not
certainly results in a decrease in cash flow. Meanwhile, the current ratio is actually
improving among these three years, which means that the liquidity of the company is
improving.

Next, according to the cash flow generated from investing activities, the most liquid
financial year is year 2011 (RM 25,044,960), follows by 2012 (RM 1,610,480) and
then 2010 (-RM 10,398,508). In year 2012, Far East Holding Berhad had purchased
some investments because its amount is increased for RM 705,732, from 2011 ( RM
294,268) and 2012 (RM 1,000,000). Therefore, its cash flow generated from investing
activities is declining from year 2011 to 2012. The reason was the company invested
its hectares in matured area and immature area (replanting), the amount of
hectares 2012 (16,218 matured area and 2,648 immature area) is increasing compared
to hectares 2011 (15,049 matured area and 2,528 immature area).

Furthermore, by using investing activities generated cash flows together with the ratio
analysis, we can forecast that the company is in high level of risk in year 2012, which
it can lead to high return for investment. It is because the price-earnings ratio is to
know how expensive of its stock to determine its risk level. Besides, the returns on
assets is decreasing from 2011 (12.96%) to 2012 (9.66%), where the company will
purchase less in property, land and equipment. Therefore, it may increase its cash
flow generated from investing activities for next year and its long-term assets.

For the cash flow generated by financing activities, the most liquid financial year is
year 2012 (-RM 53,692,255), follows by 2011 (-RM 31,205,528) and then 2010 (-RM
28,655,610). This shows that, there is operation consistently trend of the figure which
the higher the better, where it can benefits Far East Holding Berhad to repurchase its
shares, dividend payment in cash, bonus dividend payment and more. This is the
prove which we can see that in the dividend paid to shareholders is increasing each
year from year 2010 to 2012, which are RM 29,707,484, RM 51,878,892 and RM
64,185,525 respectively.

Moreover, by using financing activities generated cash flows together with the ratio
analysis, we can forecast that the company will likely to decrease of financing
activities generated cash flows for next year. It is because the debt ratio for 2012 is
0.14 times. For example of high debt ratio, when the debt ratio was increased in year
2011, which is 0.15 times, that affects generated the payable of the year 2012
amounted RM 10,768,958. This can explain why the payables amount was increasing
from year 2011 (RM 5,547,380) to 2012 (RM 10,768,958). Since the debt ratio in
2012 (0.14 times) lesser than year 2011 (0.15 times), it shows that next year payable
amount will be lesser as the cash flow generated by financing activities will be lesser
as well.


g. Common-size Income Statement (Horizontal)

Far East Holdings Berhad Income Statements
2012
(RM)
2011
(RM)
2010
(RM)
Revenue 452,361,796 479,254,327 436,016,498
Other operating
income
3,240,636 3,370,042 6,536,218
Amortization of
investment held to
maturity
713,662 1,493,423 1,421,631
Gain on financial
asset at fair value
through profit and
loss
847,815 445,672 1,738,796
Effect on
consolidating
subsidiary previously
under winding
petition
230,400 - -
Amortization of
amount due from
subsidiary
- - -
Loss on initial
recognition of
amount due
- - -
Staff costs (10,288,034) (11,821,891) (8,625,091)
Changes in inventory 1,140,617 6,610,882 (5,933,499)
Finished goods (122,829,140) (128,959,645) (128,444,139)
purchased
Raw material
purchased
(125,773,019) (161,952,105) (142,433,943)
Production cess (875,164) (889,216) (950,709)
Carriage outwards (3,555,883) (3,344,632) (3,726,918)
Upkeep, repair and
maintenance of
assets
(2,690,697) (2,502,887) (2,770,932)
Utilities and fuel (889,602) (1,420,499) (1,857,917)
Depreciation (10,811,124) (9,583,868) (7,018,734)
Upkeep and
cultivation
(36,615,836) (26,871,289) (23,083,366)
Harvesting (17,162,085) (11,341,667) (11,754,710)
Estate general
charges
(6,484,750) (5,094,382) (3,655,280)
Replanting expenses (9,415,250) (9,495,518) (7,514,418)
Diminution value of
investment in
associate
- - -
Impairment on
investment in
associate
- - -
Impairment loss for
other receivable
- (859,480) -
Other operating
expenses
(13,613,061) (14,071,959) (11,607,136)
Finance income 3,795,911 2,717,090 1,416,817
Finance cost - (3,071) (13,135)
Share of profit after
tax of equity
accounted associates
20,374,728 52,482,212 25,770, 272
Profit before tax 121,702,460 156,161,539 113,510,305
Tax expenses (28,394,995) (26,421,958) (20,873,315)
Profit for the year 93,307,465 129,739,581 92,636,990
Far East Holdings Berhad Common-size Income Statements
(Change from base, 2010 is base year)
2012 2011 2010
Revenue 3.75 % 9.92% 100%
Other operating
income
-50.42% -48.44 % 100%
Amortization of
investment held to
maturity
-49.80% 5.05% 100%
Gain on financial
asset at fair value
through profit and
loss
-51.24% -74.37% 100%
Effect on
consolidating
subsidiary previously
under winding
petition

Amortization of
amount due from
subsidiary

Loss on initial
recognition of
amount due

Staff costs 19.28% 37.06% 100%
Changes in inventory 119.22% 211.42% 100%
Finished goods
purchased
0.40% 100%
Raw material
purchased
-11.69% 13.70% 100%
Production cess -7.95% -6.47% 100%
Carriage outwards 4.59% -10.26% 100%
Upkeep, repair and
maintenance of
-2.90% -9.67% 100%
assets
Utilities and fuel -52.15% -23.54% 100%
Depreciation 54.03% 36.55% 100%
Upkeep and
cultivation
58.62% 16.41% 100%
Harvesting 46.00% 13.50% 100%
Estate general
charges
77.41% 39.37% 100%
Replanting expenses 25.30% 26.36% 100%
Diminution value of
investment in
associate

Impairment on
investment in
associate

Impairment loss for
other receivable

Other operating
expenses
17.28% 21.24% 100%
Finance income 167.92% 91.77% 100%
Finance cost -76.62% 100%
Share of profit after
tax of equity
accounted associates
-20.94% 103.65% 100%
Profit before tax 7.22% 37.57% 100%
Tax expenses 36.03% 26.58% 100%
Profit for the year 0.72% 40.05% 100%

Interpretation:

According to income statement of Far East Holdings Berhad from year 2010 to 2012,
we had realized that the revenue of the company in year 2010 to 2011 was increased
9.92%, and there was an increased 3.75% of revenue for year 2012. The main reason
cause the total revenue of Far East Holdings Berhad was increased because of the
Groups excellent financial performance. The stronger performance was largely
attributable to improved as well as better production of fresh fruit bunches (FFB) and
higher palm oil prices. For year 2011, the Group achieved a higher average crude
palm oil (CPO) price of RM3, 118 per metric ton when compared to RM2, 538 per
metric ton for the previous year. For 2012, the revenue decline due mainly to the
decreased in CPO price of 3%. The CPO price for 2012 was recorded at RM3, 017 per
metric ton when compared to RM3, 118 per metric ton for the previous year.

Besides, the total operating expenses of the company to year 2011 was increased
21.24% over the preceding year. In year 2012, the total operating expenses of
company is kept increasing since 2010, it was increased 17.28%. The increasing for
the operating expenses of company was due to the increased of depreciation of
property, plants and equipment which have an increased of 36.55% in year 2011,
54.03% in year 2012. Moreover, it also caused by the staff costs for the company was
increased significantly with 37.06% in year 2011 and 19.28% in year 2012. The raw
material purchased also affect the increase of operating expenses. It increase 13.70%
in year 2011 and decrease 11.69% in year 2012. In relation, the operating expenses of
year 2012 slightly decrease compared to year 2011. The increasing operating
expenses of company are also caused by new planting and replanting. The replanting
expenses increase 26.36% in year 2011 and increase 25.30% in year 2012 compared
to year 2010. Furthermore, upkeep and cultivation, harvesting, and estate general
charges have an impact of the operating expenses.

However, the operating income of Far East Holdings Berhad was declined
continuously from year 2010 to 2012. For year 2011, the total operating income of
company is declined 48.44% over than year 2010. In year 2011, the company had get
50.42% decline for their total operating income. It is due mainly gains on financial
asset at fair value through profit and loss. In year 2011, gain on financial asset at
fair value through profit and loss is decreased 74.37% based on the year 2010. For
year 2012, company had decreased 51.24% of gain on financial asset at fair value
through profit and loss compared to year 2010.

Lastly, profit for the year of Far Easy Holdings Berhad was increased continuously
from year 2010 to 2012. In year 2010, the profit for the year of the company was
increased 40.05% based on the net profit of year 2010. For year 2011, company had
get 0.72% growth for their profit compared to year 2010 because of the higher
production. According to the company annual report, the Group recorded higher
production of FFB at 274,032 metric ton, an increase of 6% in year 2011 when
compared to 257,825 metric ton produced in 2010. For year 2012, the Group recorded
higher production of FFB at 316,153 metric ton, an increase of 15% when compared
to 274,032 metric ton produced in 2011. The higher production of FFB recorded was
due mainly to better palms productivity, improved labor management and increase in
mature area from the replanting program. Identically, it is caused by increasing of
company finance income, such as gain on disposal asset classified as held for sale,
gain of bargain purchase of a subsidiary and gain on deemed disposal of associate. In
such, finance income has an increasing of 91.77% in year 2011 and 167.92% in year
2012 while year 2010 is the base year.


h. Summary and Recommendations

Successful company that may outset the investment principles that will has an
investment proposal process consistency. Consistency is client should get the same
result regardless of their services and see a consultant and firm must giving advice
about security to client. For instance, firm will be receive compensation for giving
advice on learn in investment to manage portfolio security.

First of all, the advise to client whether invest in Far East Holding Berhad (FEHB),
we need to understand what statement of investment principal a common investor is
looking for in a company. The client always focus on return on investment, make sure
their worth make the decision on invest in your company, the company must show the
good performance to the client such as high in ROI value, the company would has a
future financial planned, when facing assets risk, allocate assets, choose manages and
review portfolio how the company going to solve the problem, the company to
constantly growing to meet the future competition, indicate the market share price
would be continue growth so whether investor can achieve the high return upon their
sales. These are the criterion to attract investors partially counted as return in a form
and encourage the investors to make a decision to invest in our company.

From our studies, financial statement analysis lead invest high financial standing
company indicates strong power in generating profit and securing market performance
in good trend. Based on our analysis of financial statement in the above report, it
shows the investment value in Far East Holding Berhad (FEHB). From Far East
Holding Berhad (FEHB) perform analysis (part a to c) we conclude that Far East
Holding Berhad reasons seen by Porter five forces analysis is a framework for
industry analysis and business strategy development. It determines the competitive
intensity and also the attractiveness of a market. Far East Holding Berhad its good
companys policies, low cost structure and also production efficiency which results in
high net profit margin it gain support from the investor and business partners.
However, Far East Holding Berhad has a strong and positive brand image generate
tremendous value secure from its competitor and towards client.

Recommendations

We would suggest our potential investors to invest in our research company.
Based on the studied in this report generally had strong financial statements. After
examining the ratio analysis for example, liquidity ratio, debt management ratio,
efficiency ratio and profitability ratio of Far East Holdings Berhad. The reason is
the company fared better in current ratio, debt-to-equity ratio, trade debtor
collection period, asset turnover, stock turnover and gross profit margin. Several
recommendations on how to improve both companies financial performance
were discussed above. Besides, from the differences that have been
observed and analysed in the financial performance of Far East Holdings
Berhad in 2010, 2011 and 2012, we could reservedly assume that the company has
better future prospect in the industry. This is because the former showed relatively
stronger performance in 2011 than in 2010, as compared to the latter. One of the
most essential factors that investors look for when investing is the debt ratio and
good cash flow. The lower the debt ratio is better. A company with manageable
debt and good cash flow is worth getting to know better, regardless of how the
market is treating the stock. Based on the above analysis, it is obvious that Far East
Holdings Berhad has significantly lower debt-to-equity ratio. Therefore, we can
arguably assume that most investors will invest Far East Holdings Berhad.