Documente Academic
Documente Profesional
Documente Cultură
FIN 328
IOI CORPORATION BHD
2008534937
2008535071
2008590535
2008721819
PREPARED FOR:
ENCIK KHAIRUL ZHARIF BIN ZAHARUDIN
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This project paper have not been shown and accepted either locally and
information.
All sources that we have collected were specifically acknowledged.
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900901-02-5402
900812-12-6096
2008535071
2008590535
LETTER OF SUBMISSION
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Of 2011
Dear Sir,
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900901-02-5402
900812-12-6096
2008535071
2008590535
LETTER OF TRANSMITTAL
Of 2011
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Dear Sir,
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900901-02-5402
900812-12-6096
2008535071
2008590535
PREFACE
The purpose of this project is to fulfil the requirement needed in order to
accomplish our syllabus in Diploma in Investment Analysis (DIIA). This project paper
will be beneficial for our prospective future in related fields.
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In the process of doing this project paper, we are not only get useful
information and experienced the truth meaning of group co-operation. Furthermore,
by doing the presentation it will create self-confidence and interpersonal skills in
dealing with public when start working later.
With the combination of fundamental and technical analysis, as well as the
evaluation of the historical data of the stock price, we believe it could give some
guidance to reader kindly evaluate our recommendation. The main objective on
doing this is to provide in depth in comprehensive studies on company analysis.
In our research concerning the above studies, we have employed
various modes. Most of the data regarding the company are compiled from annual
report, government publications and other references.
Finally, we hope that this project has fulfilled the entire requirement
needed to obtain Diploma in Investment Analysis offered by Universities Technology
Mara.
ACKNOWLEDGEMENTS
All my praises and gratitude to Allah, the Merciful, for His kindness and for
meeting we with many wonderful people who, with His Grace, have had helped us
tremendously in the successful completion of this research.
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With a lot of love, we would like to thanks our lecturer, Sir Khairul
Zharif Zaharudin which acts as well as our guidance by giving us advices and
guidelines in order to ensure this project work properly. Our group also would like to
thanks to the rest who has contributed and involved in our project either directly or
indirectly. We appreciate all your commitment and cooperation.
This project paper was form to analyze the ability of company in issuing
shares and how capable we as managers to manage portfolio to be selected by our
client, investor. Even though there were many obstacles and challenges, we still
managed to cope with it.
Last but not least, we would like to apologize if there has any weakness in
our project. We hope it will be useful and such an effort for those who are interested
to make it as a guidance for the future.
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TABLE OF CONTENT
ii-iii
Letter of submission
iv-v
Letter of transmittal
vi-vii
Preface
vii
Acknowledgement
ix
Overview
Overview
2.2
2.2.1
Developed Country
2-6
2.2.2
Developing Country
6-11
2.2.3
11-14
2.3
2.4
2.5
Asian Country
15
2.3.1
Singapore
16-17
2.3.2
Indonesia
18-19
Malaysia
19
20-21
21-24
Diplomatic Relation
25
2.5.1 Japan
25
25
2.5.3 India
26
2.5.4 Morocco
26
2.5.5 Yemen
26-27
2.5.6 Zambia
27
2.5.7 Indonesia
27-28
2.5.8 Singapore
28
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Overview
3.2
Nature of Industry
3.3
Market Player
29
29-38
38
Introduction
39
4.2
IOI Company
39
40
41
4.3
39-40
41-42
43
43
44-45
46-47
KL Kepong Bhd
4.3.1 Company Background
47
4.3.2 History
48
48
49-50
50
51
51-52
53-54
Overview
55
5.2
55-75
5.3
Market Ratio
76-77
5.4
CAPM Analysis
78-80
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Introduction
81
6.2
81-83
6.3
84-86
6.4
Stochastic
86-88
6.5
Line
89-90
6.6
Candlestick Chart
91-92
6.7
93-95
Conclusion
96
7.2
Recommendation
97
98-107
108-111
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EXECUTIVE SUMMARY
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CHAPTER 1
INTRODUCTON
1.1
Overview
Before making any investment, investor usually make the analysis of the share they
considering. The objective of doing this is to know whether the shares can give any
benefits to the investors. Investors will make decisions whether to buy or sell the
shares based on the analysis they have make.
Investors usually make a few analyses that related to the shares. This is to identify
the steps on making any decisions regarding the shares. So our group have done
this analysis to help potential investors in making their investment decision.
In this analysis, our group focuses on one of the best companies in Malaysia and
one of the leading companies in plantation industry. The company name is IOI
Corporation. Our group analyzed this company based on a few analysis and they
are:
1.1.1 Economic analysis
1.1.2 Industry analysis
1.1.3 Company analysis
1.1.4 Financial analysis
1.1.5 Technical analysis
Based on all this analysis, our group will try to recommended the best suggestions
to help investors to make their decisions whether to buy, sell or hold the investment
in this company.
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CHAPTER 2
ECONOMY ANALYSIS
2.1
Overview
Economy analysis is one of the systematic approaches to measure the optimum use
of resources. It will help investors gain insight into the underlying condition of the
economy and the potential impact it might have on the behaviour of the share
prices. It sets the tone for the entire security analysis process. It can go so far as to
include a detailed examination of each sector of the economic situation, Asian
economic situation and the domestic economy that is Malaysia. Purpose of
economy analysis is always the same that is to establish a sound foundation for the
valuation of common stock.
2.2
World Economy
2.2.1 Developed Country
Developed country is to describe the countries that have high level of developed
followed some criteria which is a contentious issue and is surrounded by fierce
debate. There must be high Gross Domestic Product per capita, must good in
industrialization. The Human Development Index also will measure whether the
country is developed country or not. However, there are anomalies exist when
determine the developed country status. There are some lists of countries that
already being announced as developed country according to their rank1. (For
complete list, please refer to Appendix 1)
2.2.1.1 Japan
Japan is located in East Asia. It is located in the Pacific Ocean. Japan has a total of
6,852 islands extending along the Pacific coast of Asia. About 73 percent of Japan
is
forested,
mountainous,
and
unsuitable
or residential use. Japan also known as the good in making infrastructure. Japan's
population is estimated at around 127.3 million 2. Japan has the longest life
expectancy rate in the world.3 While the emperor retains his throne as a symbol of
1 http://www.indexmundi.com/japan/economy_profile.html
22 http://en.wikipedia.org/wiki/Japan3 http://data.worldbank.org/country/japan
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2009
2010
5231.44
5385.27
6107.08
38,268
39,738
33,804
5143.3
5381.15
6023.39
1.38
-1.35
-0.7
Balance of Payment
1889.5
1448.7
1550
Domestic Investment
NIL
NIL
NIL
24 551 812
047
1.154 trillion
Inflation rates
Economic Cooperation
Major Economic
Advantages
Gross Domestic Product of Japan shows increase in year 2008 to 2009. Japan has
done fairly well in coping with global economic meltdown, but a lot still needs to be
done in order to fully counter this growing menace 4. Japan has the highest gross
public debt in the world.
The Gross National Product shows increasing firstly at 2008 to 2009, but there are
decrease in 20105.The changes of GNP of Japan are due to the Japan economic
3
44
5
http://www.economywatch.com/economic-statistics/Japan/GDP_Constant_Prices_National_Currency/
http://www.nber.org/papers/w3737
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http://www.nber.org/papers/w3737
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2212
9a http://www.indexmundi.com/japan/economy_profile.html9b http://www.indexmundi.com/facts/japan/export-valueindex
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well-known with their good in science and technology. Japan takes out their ability to
conquer most all of the world with their product.
2.2.1.2South Korea
South Korea is also known as Republic Korea. It is located in East Asia of the Korea
Peninsular. South Korea lies in a humid continental and humid subtropical climate.
Table 2: South Korea Economics Performances
2008
2009
2010
Nil
770.54
852.82
38,268
39,738
29,835
988.59
839.74
960.03
4.7%
2.8%
3%
43515.5
58122
53544.5
Inflation rates
Balance of Payment
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Domestic Investment
Foreign Direct
Investment
Nil
Nil
Nil
11711804
11482972
13069289
Economic Cooperation
Major Economic
Advantages
South Korea has achieved an incredible record of growth and integration into the
high-tech modern world economy. Korea has advanced in developed economy to
attain GDP per capita. South Korea is the first major of ODA. South Korea separate
the annual economy aid to North Korea has been more than twice.10
The Gross National Product of South Korea does not much move. South Korea
made a free trade agreement with United State. This way will attract other country to
make relation with South Korea in imports and exports.
The changes in inflation rate from 2008 to 2010 is because of South Korea adapted
an export-oriented economic strategy to fuel its economy. South Korea was
the seventh largest exporter and tenth largest importer in the world11. The South
Korean economy's high growth potential and apparent structural stability, South
Korea suffers perpetual damage to its credit rating in the stock market due to the
belligerence of North Korea.12
Because of financial crisis, South Korea has problem in Balance of Payment in
2008. In 2009, the Balance of Payment of South Korea becomes stable again. The
financial crisis is because of the credit rating in the stock market.
South Korea also makes economic cooperation with the other countries. For
example, South Korea makes import with China 23.2%, US 10.1%, Japan 5.8%,
10 http://en.wikipedia.org/wiki/Economy_of_South_Korea
11 http://en.wikipedia.org/wiki/Economy_of_South_Korea
12 http://en.wikipedia.org/wiki/Economy_of_South_Korea
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Hong Kong 5.3% and also makes exports with China 16.8%, Japan 15.3%, US 9%,
Saudi Arabia 6.1%, Australia 4.6%.13
South Korea have inflexible labour market, overdependence on manufacturing
exports and rapidly aging population to drive economic growth. This is the speciality
of the South Korea and this will make foreign country to come into the South Korea.
2.2.2Developing Country
The development of a country is measured with statistical indexes such as Gross
Domestic Product, Gross National Product, life expectancy, the rate of literacy and
others. Developing countries is a term generally used to describe a nation with a low
level of material well being. Since there is no single definition of the term developing
countries is recognized internationally, the levels of development may vary widely
and some developing countries have higher average standards of living 14. The
differences between developing countries and developed countries are that
developed countries are more economically developed.
The aspects that will be discussed are the nations Gross Domestic Product
and Gross National Product, the nations inflation rates, the nations trade, the
nations domestic and foreign investment, the nations economic cooperation and
the nations major economic advantages.
We have chosen to study India and Morocco economic performances as they are in
the categories of developing countries. (Refer to appendix 2)
2.2.2.1 India
India had experienced a rapid economic growth following strong economic reforms
from the post-independence socialist economy towards a market-based economy.
13 http://www.indexmundi.com/south_korea/gdp_real_growth_rate.html
14 http://en.wikipedia.org/wiki/Developing_country
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By 2008, India had established itself as the world's second-fastest growing major
economy.15
Table 3: India Economic Performance
2008
2009
2010
1,258.96 billion
1,268.88 billion
1,597.5 billion
1,065.06
1,058.23
1,264.84
1,080
1,220
Nil
9.701%
14.966%
8.608%
Balance of Payment
(131.87 billion)
(31.221 billion)
(105.386 billion)
Domestic Investment
Nil
Nil
Nil
33,033 million
27,098 million
21,007 million
Economic Cooperation
Major Economic
Advantages
in India as they can gain benefits from the economic advantages of India. This will
provide the Indians with more job opportunities thus increased their life standard
and income.
The inflation rate in India is increasing from the year 2008 and 2009 and decreased
in the year 2010.The rising of inflation rate may be a concerned to India government
as the rates is increasing from 9.701% to 14.966% as the rate is much higher than
5% but in the year 2010, the inflation rate of India is decreasing to 8.608%, the
lowest inflation rates compared between the year 2008 until 2010.
From the table above, the balance of payment is increasing from year 2008 to 2009
but decreased drastically in the year of 2010. In the year 2009, the India economy
has shown a drastic growth rate in their trade and business sector. This is because
there are many investments made by foreign companies and resulting in decline of
their imports thus increases the figures of their balance of payment. Furthermore,
their reliance in on external assistance also has decreased since the liberalization of
the economy. However, due to the global economic decline, their imports and
exports had decreased and the balance of payment of India is rising drastically from
(31.221 billion) in 2009 to (105.386 billion) in 2010. In the recent financial period
however, India exports and imports has showed positive growth due to the global
economic recovery.
The foreign direct investment of India had showed a declining trend. This is because
the strictness of the government in their foreign direct investment policies. However,
due to the economic advantages of the country and the economic reforms, it had
attracted major foreign companies and many countries to form an economic
cooperation with and India has established their country as one of the most rapidly
growing country in Asia Pacific region. India is also a member of World Trade
Organization (WTO), South Asian Free Trade Area and The Group of Twenty
Finance Ministers and Central Bank Governors (G-20).
The economic advantages of India are16; i) Geographically strategically located; ii)
Largest democracy with stable political system; iii) Private sector is the backbone of
the economy; iv) India gross domestic product is the fifth largest after USA, China,
Japan and Germany; v) Rapidly growing consumer market with 250 million strong
middle-class income.
16
http://www.aph.gov.au/house/committee/jfadt/india/indiach3.pdf
Page | 22
2.2.2.2 Morocco
Moroccos economy is considered as a relatively liberal economy which is governed
by the law of supply and demand.17 Since 1993, the country has followed a policy
of privatization of certain economic sectors which used to be in the hands of
the government.18 Morocco has become a major player in the African economic
affairs,19 since then and The World Economic Forum placed Morocco as the 2nd
most competitive economy in North Africa behind Tunisia, in its African
Competitiveness Report 2009.20
Table 4: Morocco economic performance
2008
2009
2010
88.897 billion
91.374 billion
103.482 billion
2,850.80
2,899.46
3,248.95
2,520
2,770
Nil
4.229%
(1.574%)
2.164%
Balance of Payment
3,791.4 million
5,472.3 million
3843 million
Domestic Investment
Nil
Nil
Nil
2,466,288,000
1,970,324,000
3,500,000,00
Economic Cooperation
Major Economic
Advantages
# Estimation in 2010
17
http://en.wikipedia.org/wiki/Economy_of_Morocco
18
Leonard, Thomas M.. Encyclopedia of the Developing World. Taylor & Francis. pp. 1085.ISBN 0-4159-7663-4.
19
http://www.moroccobusinessnews.com/Content/Article.asp?idr=18&id=1299
20
http://www.weforum.org/en/initiatives/gcp/Africa%20Competitiveness%20Report/index.htm
Page | 23
The gross domestic product for Morocco is on an increasing trend. This is due to the
diversification of the economy that includes a multi-disciplinary approach to the
development of non-agricultural sector, including the creation of special sector
zones in industry, tourism and services outsourcing. Furthermore, the transformation
also includes higher educational system and the Morocco government had also
introduced an approach that sustained the small-business development and
prospection of external markets. All of these contributed to the stable economy
growth in Morocco. Despite economic crisis, Morocco economy is not badly affected
because the Morocco main economic activity is in agriculture sector. In 2009, King
Mohammed VI has launched two national economic strategies, that is, Plan Maroc
Vert and Plan Emergence.21 Additionally, phosphates production, which accounted
for more than a third of 2008 exports, is being restructured for greater value.22
The gross national income (per capita) for Morocco is increasing from the year 2008
to 2009. This may be due to the higher income of the country as the government is
trying to diversify its economy in order to become more competitive and integrate
further into the global economy as they are trying to reach higher growth levels in
their economy.
The level of inflation rates for Morocco can be considered as low in 2008 but in 2009
the country is experiencing a deflation. This probably caused by the reduction in the
supply of money or credit and also decreases in investment spending either by
personal or government. Deflation can caused economic depression since there is a
lower level of demand in the economy. In 2010, the inflation rate is rise again to
2.164% and the rates is positive and low.
As for Morocco balance of payment, it has emerged as an exporter of manufactured
and agricultural products, as well as a growing tourism destination. In 2008,
Morocco Foreign Trade Minister Abdellatif Mazouz said that members of the
government have agreed to a plan focused on four major areas namely, a concerted
export development strategy, the regulation of imports, market and economic
monitoring, and the adaptation of regulations and working practices in order to
maintain their surplus balance of payment account.23
21 The first seeks to create 1.5m jobs in the agriculture sector, and add around 7.65 billion to GDP through 10.8
billion of investments by 2020, while the second will establish new industrial zones and boost training to increase
efficiency
22 http://en.wikipedia.org/wiki/Economy_of_Morocco
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The foreign direct investment of Morocco shows a decline in 2009, as the global
economy is declined due to the global financial crisis is affecting the amount of
foreign direct investment inflows in Morocco as well as other developing countries.
However, the government is expecting that the foreign direct investment inflows will
increase to US$3.5 billion as the global economy is recovering and the Moroccos
economy is expected to expand 4 percent in 2010. This will attract foreign investors
especially in energy, financial services and telecommunications sectors.
Morocco also has established a major economic cooperation with many major
countries all over the globe. In 1996, Morocco signed an Association Agreement with
the EU to forms the basis for the progressive liberalization of trade with the EU and
established a Euro-Mediterranean Free Trade Area in 201024. Besides that,
Germany together with France, Spain, Saudi Arabia, Italy and China are the
Moroccos major trading partners. Some of them are important for the countrys
tourism industry. In addition, in 2006, Morocco entered a Free Trade Agreement
(FTA) with the US, and in 2008 entered into an advanced status in its 2000
Association Agreement with the EU.
Morocco's economy benefits from the country relatively low labour costs, and its
location near to Europe, which support the key areas of their economy such as
agriculture, light manufacturing, tourism, and transfer of funds. Morocco is also the
world's largest exporter of phosphate, which has long provided a source of export
earnings and economic stability.25
2.2.3.Third World Countries
The term Third World was originally coined in times of the Cold War to distinguish
those nations that are neither aligned with the West (NATO) nor with the East, the
Communist bloc. Today the term is often used to describe the developing countries
of Africa, Asia, Latin America and Oceania. (Refer to appendix 3)
The aspect of economic indicators that will be discussed are the nations Gross
Domestic Product and Gross National Product, the nations inflation rates, the
23 http://www.magharebia.com/cocoon/awi/xhtml1/en_GB/features/awi/features/2008/09/22/feature-02
24 http://www.bmz.de/en/what_we_do/countries_regions/naher_osten_mittelmeer/marokko/index.html
25 http://www.indexmundi.com/morocco/economy_overview.html
Page | 25
nations trade, the nations domestic and foreign investment, the nations economic
cooperation and the nations major economic advantages.
We have chosen to study about Zambia and Yemen economic performances as they
are in the categories of third world countries.
2.2.3.1 Zambia
Zambia is one of Sub-Saharan Africa's most highly urbanized countries. About onehalf of the country is concentrated in a few urban zones strung along the major
transportation corridors, while rural areas are under-populated.
Table 5: Zambia Economic Performance
2008
2009
2010
$14.38 billion
$12.81 billion
$16.192 billion
$1,140 billion
$990 billion
$1,500 billion
$11.93 billion
$12.47 billion
Nil
12.4 %
13.4 %
8.5%
Balance of Payment
($1,038,740,000
)
($405,598,000)
0.615 billion
Domestic Investment
Nil
Nil
Nil
$938,620,000
$699,150,000
Nil
Inflation rates
Foreign Investment
Page | 26
Economic Cooperation
South
Africa(24.2%),Switzerland(13.7%),China(12.4%),
Tanzania(6.9%), Democratic Republic of the
Congo(6.6%), Zimbabwe(5.5%),Thailand(4.7%)
Major Economic
Advantages
Zimbabwe (5.5%) and Thailand (4.7%). In, fact because of politically of Zambia is
not too stable.28
2.2.3.2Yemen
At unification, both the Yemen Arab Republic and the Peoples Democratic Republic
of Yemen were struggling underdeveloped economies. In the north, disruptions of
civil war and frequent periods of drought had dealt severe blows to a previously
prosperous agricultural sector
Table 6: Yemen Economic Performance
2008
2009
2010
$26.92 billion
$26.37 billion
$31.27 billion
$1,175 billion
$1,118 billion
$2,700 billion
21.97 billion
$25.03 billion
Nil
19.0 %
3.7 %
12.14%
($1.251)
($2.565billion)
($1.391 billion)
Nil
Nil
Nil
$1.55 billion
$129.1 million
Nil
Economic corporation
Major economic
advantages
Based on the table above, the Gross Domestic Product (GDP), the world's average
GDP (Current Prices, US Dollars) value is US$ 31.27 Billion; Yemen is less than the
28
http://www.wikipedia/zambia
Page | 28
average. In the previous year, 2009, GDP for Yemen was US$ 26.37 Billion GDP for
Yemen in 2010 was or will be 24.44% more than it was or will be in 2009.
Balances of payment (US Dollars) for Yemen in year 2010 is US$ -1.391Billion. This
makes Yemen No. 134 in world rankings according to balance of payment in year
2010. In the previous year, 2009 balance of payment for Yemen was US$ -2.565
Billion balance of payment for Yemen in 2010 was or will be 45.77% less than it was
or will be in 200929
Next is inflation rates, which is in 2008, the inflation rate are higher with 19.0%. In
the year 2009 the decreasing of inflation rate from 19.0% to 3.7% as the rate is
much lower than 5% may be a concerned to Yemen government ,but then 2010 are
up little bit than 2009 with 12.14%.
Looking at economic cooperation, China was Yemen main import sources, and then
followed by India 20.4%) and Thailand (19.1%). The other countries are Japan,
United Arab Emirates. In fact, there were joint activities by the two countries such as
holding the Malaysian-Yemeni festival in the Yemeni capital Sanaa in March 2010
and holding the symposium on exploring investment opportunities in Yemen30.
Yemen major economic advantages are mainly depends on their small oil reserves
and depends heavily on the oil it produces. Oil constitutes a large part of the state
budget and the decline in oil prices will affect Yemen, but oil is not the only source of
income for Yemen. Recently, this country had discovered gas which will be export,
and can generate income for Yemen. Yemen had been consulting experts on the oil
reserve to calculate the level of benefit in addition to the promising gas projects so
that they can increase to the expenditure on development projects.31
2.3ASEAN
ASEAN is the short form name for Association of Southeast Asian Nations where it
was established on 8th August 1967 in Bangkok in the purpose to create strong cooperation together among ASEAN countries and other countries. For each time in
November, the important meeting will be held in discussing current news. ASEAN
was preceded by an organisation called the Association of Southeast Asia that is
usually called ASA, an alliance including Philippines, Malaysia and Thailand that
was formed in 196132.
Also listed are participants of the ASEAN Regional Forum (ARF), an organization
throughout the Asia-Pacific region whose objectives are to foster dialogue and
consultation, and to promote confidence-building and enhance preventive diplomacy
in the region. The ASEAN is an organization on the Southeast Asian region that
aims to push up economic growth rapidly, development in social and cultural
development among its members and to bring peace among region. (Refer to
appendix 4)
32 http://en.wikipedia.org/wiki/ASEAN
Page | 30
2.3.1Singapore
Singapore also known as Republic of Singapore is a Southeast Asian city-state off
the southern tip of the Malay Peninsula with the population of 5,076,700 in 2010 (as
in estimation). Besides, Singapores port is categorized as one of the five busiest
ports in the world33
Table 7: Singapore Economic Performance
2008
2009
2010
184554.7million
171703.8million
203884million
55,800
54,800
62,100
193.3 million
182.2 million
424.3 million
6.6 %
0.6 %
2.8 %
Balance of Payment
(131.87 billion)
(31.221 billion)
(105.386
billion)
Domestic Investment
Nil
Nil
Nil
$10.9 billion
$16.9 million
Nil
Major Economic
Advantages
33 http://en.wikipedia.org/wiki/Singapore
Page | 31
Based on the table 2 above, we can conclude that year 2008 to 2010 states the
increasing in GDP(current prices) which is due to the unpredictable negative
changes that occur in external environment (also can cause adverse impact to
economy growth of Singapore). So that, global economics issues can effect forecast
of Singapore future economics. GNI in 2008 to the latest year 2010 showing that
Singapore level of labour decreasing, different from the other country. Probably it is
causing by migration of population to the other country. However, the global financial
crisis that occurred in 2008 to 2009 has causing a sharp impact on Singapores;
luckily it was recovered quickly with strong performance in later period.
Balance of payment showing negative value since 2008 to 2010. In 2008 the value
are -131.87, then move to -31.221 in 2009,the up to -105.386 in 2010 which is
showing that export is more than import. It might be Singapore is facing with
problem to obtain their profits.
The next is inflation rates, which is in 2008, the number are still in normal with 6.6%.
Unfortunately, in 2009, it was declined to 0.6 %, then 2010 are up little bit than 2009
with
2.8%434.
Even
though
Singapore
generally
enjoys
fairly
low
level
of inflation rates, due to the higher cost in transport, housing and food have caused
inflation rates to increase significantly from the year 2007 to 201035.
Looking at economic cooperation, Malaysia was Singapore main import sources,
and then followed by Hong Kong (11.6%) and United States (11.2%). The other
country are Indonesia and China (9.7%) and Japan (4.6%).In fact, United States
and Singapore has signed a bilateral free trade agreement on May 6, 2003 and the
agreement entered into force on January 1, 200436.
With the strong and stable manufacturer sector, high skilled workers and has a
strategic port Singapore can be the best port for other countries, with the high skilled
of workers, this enable Singapore to generate more Gross National Income(GNI) in
future.
34
http://www.mas.gov.sg/resource/eco_research/eco_dev_ana/Recent_Economic_Developments.pdf
35 http://www.state.gov/r/pa/ei/bgn/2798.htm#foreign
36 The growth of U.S. investment in Singapore and the large number of Americans living there enhance
opportunities for contact between Singapore and the United States. Many Singaporeans visit and study in the
United States. Singapore is a Visa Waiver Program country.
Page | 32
2.3.2Indonesia
Indonesia also known as the Republic of Indonesia, this country is a founding
member of ASEAN and a member of the G-20 major economies. In 2010, the
population reached to 237, 556, 36, as this indicate that Indonesia are the world's
largest number population of Muslims37.
Table 8: Indonesia Economic Performance
2008
2009
2010
536.73 billion
549 billion
708.54 billion
2245
2349
4200
517.66
529.77
Inflation rates
9.49%
4.9%
5.12%
1956.43
5776.58
(20480.75)
Balance of Payment
688.56
37 http://en.wikipedia.org/wiki/Indonesia
Page | 33
Domestic Investment
Foreign Direct Investment
Nil
Nil
Nil
9.3 million
4.8 million
Nil
Economic Cooperation
Major Economic
Advantages
Gross Domestic Product (GDP) in 2008 a little bit down with 536.73 billion, however
in 2009 and 2010, the amount increase slowly to 549 billion and 708.54 billion plus
the manufacturing sector contributes almost 27.9% to the Indonesian GDP. On the
other side, 38.5% are contributed by tertiary sector which is the faster spreading of
technology IT services given impact to some extent economic movements downturn
around 2000s38. In reflecting from GDP, Gross National Income (GNI) also increases
from year to year. This excellent economic movement bring Indonesia as one of the
developing country in ASEAN.
Look at the Indonesia inflation rate, data use from each year being forecasted by
forecaster rather than end-of-period, according to an index of 2000=100 for average
consumer prices39. Inflation rate stated on 2008 (9.49%) is much higher than 2009
(4.9%) and 2010 (5.12%), besides it also related to global financial crisis that
occurred during that period.
Japan is a country undergoing major import and export co-operation with Indonesia
with 9.3million in 2008 and the next year. This is because the main commodity
imported from Indonesia to Japan is oil, liquid natural gas, coal, fare revenue,
textiles, machinery electrical equipment and others. However, direct investment from
Japan to Indonesia decrease due to economic stagnation faced by Indonesia
(causing by Asia economic crisis in 1997), but still Japan is the main investor to
Indonesia40.
38 http://www.economywatch.com/world_economy/indonesia/structure-of-economy.html
39 http://www.economywatch.com/world_economy/indonesia/economic-forecast.html
40 http://www.id.emb-japan.go.jp/birelEco_id.html
Page | 34
In the viewing major economic advantages, there are a few factor effect Indonesian
growths such as rapid economic growth, low labour cost and increasing skilled
workforce. Side income of this country also including producing rice, tea, coffee,
cocoa, spices, rubber, copra, peanuts, eggs and palm oil.
2.4Malaysia
Malaysias economy record has been one of Asians best. From a country
dependent on agriculture and primary commodities in sixties, Malaysia has today
become an export driven economy spurred on high technology, knowledge based
and capital intensive industries. Malaysias tried to reduce their import but increase
amount of export by continuing efforts to boost domestic demand and to wean the
economy off of its dependence on exports. As an oil and gas exporter, Malaysia has
profited from higher world energy prices, although the rising cost of domestic
gasoline and diesel fuel, combined with strained government finances, has forced
Kuala Lumpur to reduce government subsidies.
during the 1997-1998 Asian financial crisis and applied several valuable lessons to
its economic management strategies that contributed to the economys resilience to
the 2008-2009 global financial crisis. The Economy of Malaysia is a growing and
relatively open state-oriented and newly industrialised market economy.
2008
2009
2010
$220.2 million
$189.3 million
$228.4 million
5.43%
0.65%
1.62%
$123316.5millio
n
$163667.1millio
n
Inflation Rate
Imports
Page | 35
$204012.3millio
n
$159976.9millio
n
$3 956 million
$9 039 million
Foreign Direct
Investment
$ 7.3 Billion
$ 1.4 Billion
1.38 Billion
Interest Rate
3.25%
2.00%
2.75%
Exports
Balance of Payment
Economic Cooperation
Major Economic
Advantages
2.4.1
1.
The GDP in year 2008 is $227 229 million and the amounts fall in year to $193 438
million but the amounts climb back to $236 592 million for year 2010. While the GDP
per capita for year 2008 is 5.21 % and the year 2009 is -2.47 % and for year 2010 is
5.82 %. The amount of GDP and GDP per capita is fall in year 2009 because of
amount of export and import decrease in year 2009.
2.
The GNP of Malaysia in year 2008 is $220.2 million and the amounts dropped to
$189.3 million for year 2009 while the amounts are rising in year 2010 to $228.4
million. The value decreased in year 2009 is because of the amount of export is also
decreased.
3.
Inflation Rate
For the year 2008 the inflation rate is high compare to year 2009 and 2010. The
amount in year 2008 is 5.43%, while in year 2009 is 0.65% and year 2010 is 1.62%.
Page | 36
4.
The amount of an import in year 2008 is $159 965 million and the amount is fall in
year 2009 is $123 316.5 million and in year 2010 is $163 667.1 million. While the
amounts of an export for year 2008 is $204 012.3 million, the amounts dropped to
$159 976.9 million in year 2009 and the increased to $196 878 million in year 2010.
In compared of an import and an export the amounts of an export is higher than an
import because the government want to reduce the amounts of an import and tried
to boost in an export. Other than that the higher value of export is ensure the
positive value in balance of payment.
5.
The amounts of balance of payment (BOP) in year 2008 is $3 956 million while in
year 2009 is $9 039 million and in year 2010 is $21 031 million. The amounts of bop
is increased year over year and this is good for the country because the current
account is more than capital and this also course of increased in value in export
and decreased in value of import.
2.4.2
Monetary policy is the actions of central bank or other regulatory committee that
determine the size and rate of growth of the money supply.41 It is maintained trough
certain actions taken by the central bank such as increasing the interest rate or the
amount of money in the bank reserves. Monetary policy can be either of
expansionary42 or contractionary43. Monetary policies in Malaysia is governed and
controlled by the Central Bank of Malaysia (BNM). BNM is responsible for the
development and the stability of financial system in Malaysia. In Malaysia, there are
several policy set out by the BNM such as overnight policy rate. Overnight policy
rate is an overnight interest rate set by BNM for monetary policy direction 44. The
41 http://www.investopedia.com/terms/m/monetarypolicy.asp
42 an expansionary policy increases the total supply of money in the economy more rapidly than usual
43 contractionary policy expands the money supply more slowly than usual or even shrinks it
44 Overnight Policy Rate is the interest rate at which a depository institution lends immediately available funds
(balances within the central bank) to another depository institution overnight
Page | 37
changes in OPR will affect base lending rate (BLR), short-term interest rates, fixed
deposit rate, foreign exchange rates, long-term interest rates, the amount of money
and credit, and, ultimately, a range of economic variables. Thus it shows that the
changes in OPR set up by the BNM will have effect in others interest rates in
Malaysia and OPR can be said as an underlying instrument for BNM to control the
money supply and interest rates in our country. Besides OPR, BNM also used open
market operations and national reserves as the underlying instrument in order to
determine the money supply and to stabilize the monetary condition in our economic
framework.
Table 10: Malaysia overnight policy rate
Year
Overnight Policy
Rate (%)
2006
3.5
2007
3.5
2008
3.25
2009
2010
2.75
In the year of 2006, the overnight policy rate in Malaysia is 3.5% due to the
increasing trend in inflation rates. Due to the increasing demands of commodities
that result in the significant upward pressures on the prices of resources worldwide,
it has pushed the inflation levels high to 3.61% the highest level since the Asian
Financial Crisis. In order to maintaining price stability and achieving the maximum
sustainable level of economic growth, the Bank took the actions to normalize the
interest rate in order to allow monetary policy to be better place to respond to risk of
higher inflation. In 2007, the overnight policy rate of Malaysia still unchanged due to
the challenges of inflationary pressures and the rising risk from unstable global
financial markets.
During 2008, the overnight policy rate of Malaysia is declining to 3.25% from the
previous years. This is because in the year of 2008, the policy is focused turned to
restraining the insignificance of the domestic economic slowdown. The reducing in
overnight policy rate is taken to stimulate the monetary supply to ensure that the
Page | 38
Gross International
Reserves (US$ Billions)
2006
8245732
2007
10134482
2008
9153600
2009
9667775
2010
10649829
In order to maintain and achieving financial stability, the Bank had the power to
control Malaysia international reserves. Increasing in international reserves show
that the intent to reduce the money supply in the country and otherwise. It is to
control the availability of Ringgit in the economy as well as maintaining the value of
Ringgit compared to US Dollar. In 2007, Malaysias gross international reserve is
decreasing from the previous year. It is due to the rising of the inflation rates and
reduced the risk of declining in Ringgit due to the high risk from the global financial
market condition.
In 2008, the Bank had reduced the international reserves in order to increase the
amount of Ringgit in the economy due to the domestic economic slowdown. The
Page | 39
Page | 40
and
Japan
economic
relationship
involved
government
officials,
South Korea
Korea first established diplomatic relations with Malaysia in February 1960. The
Malaysian Embassy in Korea was built in May 1962 and the Korean Embassy was
built in Malaysia in April 1964. Many Korean officials have visited Malaysia over the
years including former Korean President Kim Young-sam in 1996, Prime Minister
Page | 41
Goh Kun in 1997, former Korean President Kim Dae-jung in 1998 and current
President Lee in December 2005. Malaysian officials have also visited Korea
including Prime Minister Mahathir in 1993 and 2000, Deputy Prime Minister Anwar
Ibrahim in 1996, Minister of Foreign Affairs Syed Hamid Albar in 1999, Sultan
Salahuddin Abdul Aziz Shah in 2001 and Prime Minister Abdullah Ahmad Badawi in
2004. Recently, both Prime Minister, Dato Seri Haji Mohd Najib bin Tun Haji Abdul
Razak and President Lee Myung-bak had met upon to agree the possible KoreaMalaysia Free Trade Agreement that will benefited the both countries. In 2010,
South Korea was Malaysia's 13th largest trading partner, exporting electrical
materials, medical parts, iron and steel to Malaysia while importing mineral fuels,
electrical products and mechanical appliances from Malaysia.
2.5.3
India
Malaysia and India had established trade relationships years before the
Independent. During that time spices are the main component of trading between
the two countries. As the economics of both countries has expanded since then, the
economic relationships of both countries are also strengthening over time. Both
countries have a high commission that is located in New Delhi and Kuala Lumpur.
In 2010, Malaysia and India established the Malaysia-India Comprehensive
Economic Cooperation Agreement (MICECA). It is a comprehensive agreement that
covers trade in goods, trade in services, investments and movement of natural
persons. Malaysia and India also have agreed to undertake cooperation in several
areas such as infrastructure development, human resource development, science
and technology, including health, creative industries, tourism, SMEs and finance.
2.5.4. Morocco
Malaysia and Morocco have maintained cordial bilateral relations since establishing
diplomatic relations in 1996. To date, both countries have signed several
agreements and Memorandum of Understanding. Among them included Trade
Agreement (1997), Economic, Technical, Scientific and Cultural Cooperation
Agreement (2001), Avoidance of Double Taxation Agreement (2001), Air Service
Agreement (2001) and Promotion and Protection of Investment Guarantee
Agreement (2002). Embassy of The Kingdom of Morocco is located at Jalan
Ampang and Malaysia Embassy is located in Rabat, Morocco.
2.5.5. Yemen
Page | 42
The relationships between Yemen and Malaysia had progressed over the years.
Major exports from Malaysia to Yemen were iron and steel products, palm oil, wood
products and processed food while imports from Yemen were mostly crude
petroleum, seafood and metal products. In 2007, the commercial exchange between
Malaysia and Yemen is set to grow from the current relatively limited volume as the
joint economic trade committee of both countries is making headway to unlock
business potentials available in both countries. As a result, in 2009, trade between
the two countries amounted to RM986.4 million with Malaysia's exports to Yemen
hitting RM720.9 million and imports reaching RM265.6 million. The relationships of
both countries is said to be strengthen as both countries officials have discussed
trade cooperation relations between their countries in 2010. Yemen's ambassador to
Malaysia Abdullah al-Muntasir and Malaysian Minister of International Trade and
Industry, Dato' Sri Mustapha Mohamed confirmed the importance of both countries
participations in international trade fairs and special promotions for investment and
tourism opportunities.46
2.5.6Zambia
In 2011, Malaysia and Zambia had established economic cooperation by the
involvement of Malaysias Kulim Hi-Tech Park and Japan International Cooperation
Agency in constructing a special economic zone in order to develop Zambia as a
middle income country. Through this project, the Government of Zambia has been
exposed to opportunities to secure trade and investment from Asian countries,
namely Malaysia, India, Thailand and hopefully from Japan as well and to
strengthen its capability to manage increase in trade and investment in a
sustainable manner with capacity development of Zambia Development Agency and
its related Ministries and organizations in partnership with private sector.47 As overall
goal, the project expects actual investment from Asia and creation of job
opportunities in Zambia. Zambia Finance and National Planning Minister, Dr.
Situmbeko Musokotwane also said that a Malaysian Islamic banking institution had
been given a license to operate in Zambia.48
2.5.7Indonesia
46 http://www.almotamar.net/en/8221.htm
47 http://www.impactalliance.org/ev_en.php?ID=49126_201&ID2=DO_TOPIC
48
http://biz.thestar.com.my/news/story.asp?file=/2011/6/20/business/20110620121704&secbusiness
Page | 43
Page | 44
CHAPTER 3
INDUSTRY ANALYSIS
3.1
Overview
Industry analysis is one of the market assessment tools that designed to provide an
idea of the complexity about business of a particular industry that we doing
research. Industry analysis involves reviewing the political, economic and market
factors that will influence the way the industry develops. Major factor that influence
the industry analysis can include the power wielded by suppliers and buyers,
likelihood of new market entrants and the conditions of competitors.
3.2
Nature of industry
Every industry has its own characteristics that can be evaluated to foresee the
condition of the industry or to be more specific to know what prospect the industry
has. IOI is categorized in plantation sector.
Industry Analysis from 2006 to 2010
Agriculture in Malaysia makes up twelve percent of the nation's GDP. Sixteen
percent of the population of Malaysia is employed through some sort of agriculture
Page | 45
49
50
www.wikipedia.org/malaysia
51
www.economicplantation.com
52 www.wikipedia.com/commodity
53 Sime Darby Annual report 2006
Page | 46
Malaysia relies on export to expand market. Palm oil is the major generator of
foreign exchange in Malaysia. 54
The Malaysia Investors Association (MIA) has urged the government to look into the
need to provide better roads in East Malaysia, particularly those leading to the
plantations. The population of agriculture for East Malaysia was too small. So, the
Federal Government has allocated RM 4.7 billion for the development and
maintenance for uses in agriculture sector.55
There are companies that related to agriculture sector. For example Sime Darby
BHD (Sime Darby) , Golden Hope plantations Bhd and Kumpulan Guthrie Bhd.
These companies had undertaken a merger that had created the countrys fourth
biggest company on Bursa Malaysia. 56
Prime minister, Datuk Seri Najib Tun Razak had publicly requested GLCs to divest
non-core assets and focus on their areas of strengths, and Sime Darby is the top
candidate. Prime Minister of Malaysia wants to upgrade Malaysians plantation
product so that we can import our product to another countries. To make sure our
economy and our standard same as other countries, Malaysia must also good in
plantation services so that we can export our product to another countries so that we
can increase our economy stability.57
In other ways, Malaysians plantation sector remain strong and supportive of a long
term uptrend agriculture commodities prices. The absence of a price catalyst would
see plantation stocks along with crude palm oil. (CPO) prices remain range-bound in
the immediate term.58 Research from OSK, in maintaining overweight call on the
sector, the Bull Run in the commodity has not come to an end as there has not been
any sign of buying frenzy.
54 www.wikipedia.com/commodity
55 www.wikipedia.com/commodity
56 www.wikipedia.com/commodity
57 www.wikipedia.com/platationmanagement
58 http://www.gentingplantations.com/news/2006/index.htm
Page | 47
There are reasons why oil palm plantations cover millions of hectares in the world.
These are because of the crops are not in the same line of productivity. These can
be proving where every single hectares of oil palm, 5,000 kilograms of crude palm
oil can be produce.60
Year 2006 Analysis
59 www.wikipedia.com/plantationmanagment
60
JourneytoForever.com
Page | 48
In 2006, Malaysia representing more than 1% (3.5 million metric tons) from total
exports of crude palm oil to another big country such as China. The factor of these
happen is because of Malaysias economy expanded to 5.9% in 2006.61 GDP in
2006 was better than 5.2% than 2005, and was mainly boasted by high demand
from other country for Malaysias palm oil and rubber. There are also demand for
other product such as electronics and electrical products. By the way, the economy
of Malaysia has increased in the second quarter to 6.2%. 62These are also because
of the effect increasing of demanded in plantation sector. For the whole 2006, the
strong performance of the rubber and palm oil production helped enabled the
agriculture sector to rise to 6.5% compared to 2,5% in year 2005. The stability of
economy in 2006 is one of the factor the performance of plantation sector are good.
Plantation group is one of the biggest groups that make export to the other country.
Plantation sector gave a lot of contribution to the Malaysia especially in 2006. They
showed a lot of increase in export product to the overseas. 63
Year 2007 Analysis
The world economic is continue to expanding for the fifth consecutive year in 2007,
although at a more moderate pace, at the middle of high crude oil prices and
uncertainties in the economy of the US. While growth is relatively lower than 2006
performance, it is nevertheless remain strong with further expansion in economic
activities, especially in the increasing rapidly emerging economies.
64
Global inflation
affected to the manageable levels although it has back edge upwards due to high
crude oil prices. Growth prospects for the Malaysia economy remain favourable in
2007, despite uncertainty in the global economic environment. With strong domestic
economic basics enable the economy to grow at 6.0% in 2007. In plantation sector,
the rubber-based industry continued to register growth of 8.0%. 65 In line higher
domestic and external demand, sales of rubber products are also increased during
the same period. Rubber gloves are largest component of the rubber-based
61
62
63
64
65
Page | 49
industry. By the way, the sales of latex also catheters also registered double digit
growth of 66.5%. Malaysia rubber gloves made from natural rubber latex are highly
demanded for their unique mix of high elasticity and tensile strength of properties as
well as excellent film-forming characteristic.
66
The production of crude palm oil in 2007 is recorded lower output of 15.7 million
tonnes. In the early part of the year, major floods destroyed newly matured trees and
disrupted harvesting activities in the southern of Malaysia. Production of crude palm
oil in Johor is the worst- hit by the floods. The production declined by 15.5% during
the first quarter of 2007. Better estate management and higher quality agriculture
inputs are partially offset the negative impact of unfavourable weather. Higher palm
oil prices are encouraging better efficiency in oil palm harvesting. 67 By the way, the
production of crude palm oil decreased 8% during the first 6 months of 2007. The
flood-affected areas in 2007 caused lower output of other product. However, oil
extraction rate for the same period improved to 20%. The total oil palm planted area
is to increase by 2.7% to 4,277,548 hectares in 2007. It is owned by the private
plantation companies and federal government. The new oil palm areas are mainly
in Sarawak and Sabah. By the way, Sabah has the largest oil palm area. Malaysia
remains the largest palm oil producers in the world. 68
The global stock of palm oil is expected to decrease in 2007. This is because of the
supply increased demand from major markets. Palm oil stock in Malaysia for the first
six months averaged drop to 17.9%. Projection of higher world demand palm based
bio fuel industry as well as tight supply is expected to push crude palm oil prices
higher. The average crude palm oil price for the first 7 months of 2007 showed
increased of 60.4% per tonne in the corresponding period of 2006. The local
delivered crude palm oil price soared to an all-time high per tonne in June 2007. 69
Rubber production for the first six months of 2007 declined 3.5%. The decline was
mainly due to the wintering season and excessive rainfall, especially in the first
quarter of the year.70 For the year, production of rubber is projected to expand 1.3%
with increase output in the second half of the year. Rubber planted areas continued
to decline causes the prices low.
Year 2008 Analysis
The global economy has been affected since the second half of year 2007 by high
crude oil prices at record levels coupled with the spill over effects of the sluggish US
economy due to the burgeoning banking credit crisis and the subprime loan
deterioration. The surging fuel, food and commodities prices aggravated the already
worsening global inflationary pressure.71Despite this challenging global scenario, the
Malaysian economy has performed relatively well. The National Economy registered
a stronger 6.3% Gross Domestic Product (GDP) growth rate in 2007, from 5.9%
the year before.72
The fall in commodity prices is not all bad news. Consumers benefit from lower
prices and manufacturers had lower costs. Importing countries also can get
reduced an import bills, but for developing countries like Malaysia which are
commodity exporters, the losses far outweigh the benefits, as export earnings fall
and millions of producers suffer reduced incomes.
For the past few years there has been a boom in prices of most commodities. Some
analysts even has predicted that there had been a structural shift in commodity
trends and the boom would last many years, instead of being part of the usual
boom-and-bust cycle. Other analysts saw the super-boom as partly driven by real
demand increase especially in China but also significantly driven by speculators.
This is now proving correct. There is a slowdown in demand, but more importantly a
flight from commodity markets by speculators, due to the global financial crisis and
the deepening recession.73
The year 2008 will be remembered as one of extremes, particularly by those in the
commodity industry. The earlier part of the year saw soft commodity prices being
70 Malaysia Economic Report 2007/2008 : Economic Management Outlook
71 2008, Annual Report IOI Corporation Berhad
72 2008, Annual Report IOI Corporation Berhad
73 http://www.twnside.org.sg/title2/gtrends/gtrends227.htm
Page | 51
was RM 2,079 per metric tone, a drop of 19% from the 2008 average as the market
took its cue from declining soy oil and fossil fuel prices. 79
The participants of
commodity market should realize that the system is quite volatile and can quickly
turn. Therefore, by open the opportunities to be sized, just as much as to the
dangers to be dodged.80
Over in Asia, we have been fortunate that the worst effects of the recession such as
high unemployment and inflation have not been as acute as in the West. 81 To
address the persistent labour shortage faced by the plantation industry, among the
plantation industry has stepped-up the monitoring of harvesters out turn to ensure
increased productivity and maximization of output. Recruitment of workers,
especially skilled tall palm harvesters, has also been intensified in response to the
increasingly critical industry-wide scarcity of experienced harvesters.82
Since the second half of 2009, it showing a sharp rise in commodity prices which
bodes well for our business. The soybean crop failure in Argentina coupled with
steady demand for crude palm oil from India and China, have provided some
stability to crude palm oil prices and given a confidence to ongoing replanting
programmed in Malaysia and aggressive new plantings in Indonesia by certain
plantation company.83
Although the global financial crisis appears to be moderating, the lingering effects of
high unemployment and low demand, as is the possibility of a downturn in
commodity prices.84 The Malaysian economy was not spared from the global
downturn and registered a decline in the first two quarters of 2009 after grinding to a
halt in the fourth quarter of 2008. Major commodities including palm oil experienced
78 2009, Annual Report Kuala Lumpur Kepong Berhad
79 2009, Annual Report Genting Berhad
80 2009, Annual Report Kuala Lumpur Kepong Berhad
81 2009, Annual Report Kuala Lumpur Kepong Berhad
82 2009, Annual Report Genting Berhad
83 2009, Annual Report Kuala Lumpur Kepong Berhad
84 2009, Annual Report Kuala Lumpur Kepong Berhad
Page | 53
sharp declines followed by substantial fluctuations in prices in line with the major
commodities bust cycle exacerbated by the wild swings in demand and supply
conditions. Activities in the domestic property market also slowed down in tandem
with the decline in overall economic growth.85
In commodity market was not spared the fallout from the financial crisis because of
the prudence demands that most company does by prepared from plantation sector
for all possible outcomes.
The average price of Malaysian CPO in 2010 was RM2, 701 per metric tones, an
increase of 21% from RM2, 236 in 2009, according to the Malaysian Palm Oil Board
(MPOB). The uptrend in prices, coupled with moderately higher export volumes,
lifted the countrys total earnings from exports of palm products to RM59.8 billion in
2010 from RM49.7 billion in the previous year.88
In Malaysia, the commodity market mainly outperformed the broader national trend
to register an increase in crop production for the year, on the back of an
improvement in yields in the Sabah estates.89
In the nut shell, we can see that plantation sector conquer more than 50% in the
economy in Malaysia. Plantation exported products to big countries in the world
such as China. The plantation generated 11.4 million metric tons of crude palm oil.
Since the value of palm oil increase by year to year, so we can conclude that crude
palm oil helps the economic growth in Malaysia. Almost half of Malaysia consists of
oil palm, and the country has become the worlds largest producer and exporter of
palm oil after Indonesia. Plantation also is the friendly-sector because plantation will
not use more dangerous products. For plantation, the main product used natural
resources. In the future, Malaysia should increase the productivity and the quality of
the crude palm oil and rubber because this plant really helped the economic growth
in Malaysia. With this plant, Malaysia can be the biggest country export crude palm
oil and rubber to the world.90
From the industry analysis above, investors may find that it is attractive to invest in
the plantation industry because from the 5 years of analysis that we have done,
plantation sector is a sector with a good performance. It conquers more than 50% of
Malaysian economy and major contributor in our national income. The industry also
said to be in a growing phrase. This is because in Malaysia the crude palm oil
market is a new market and has a big potential to attract more investor in the
futures.
3.3Market Player
88 2008, Annual Report Genting Berhad
89 2010, Annual Report Genting Berhad
90 Malaysia Economic Report 2009/2010 :Economic Management Outlook
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CHAPTER 4
COMPANY ANALYSIS
4.1
Introduction
IOI Company
4.2.1. Background
Page | 56
91 IOI Corp to buy out property arm. New Straits Times, 5th Feb 2009
92 IOI gets SC nod to take unit private. New Straits Times, 25th Oct 2005
93 IOI chairman's passion
for his oil palms . New Straits Times, 31st Oct 2009
Page | 57
Group employs more than 30,000 personnel of more than 23 different nationalities in
15 countries.
4.2.2.History
The idea of initiating international Olympiads in informatics for school students was
proposed to the 24th General Conference of the United Nations Educational,
Scientific and Cultural Organization (UNESCO) in Paris by the Bulgarian delegate
Professor Sendov in October 1987. This plan was included into the Fifth Main
Program of UNESCO for the biennium 1988-1989 (Section 05 215). In May 1989,
UNESCO initiated and sponsored the first International Olympiad in Informatics
(IOI).
The IOI is one of five international science Olympiads. The primary goal of the IOI is
to stimulate interest in informatics (computing science) and information technology.
Another important goal is to bring together exceptionally talented pupils from various
countries and to have them share scientific and cultural experiences.
The IOI is organized annually in and by one of the participating countries. Each
participating country typically sends a delegation of four pupils and two
accompanying adults. The pupils compete individually and try to maximize their
score by solving a set of informatics problems during two competition days. The
problems have been algorithmic programming problems to be solved on a personal
computer. Cultural and recreational events are organized on the remaining days.
business associates, caring for the society and the environment in which we operate
and contributing towards the progress of our nation. 95
Mission
Palm Oil
palm oil
producer, and development and biodiversity of Malaysia palm oil. It also covers
the status of Malaysia as the world's largest palm oil producer, market trends and
outlook in terms of threats from the development of Indonesia palm oil, palm
biodiesel, crude palm oil prices and windfall tax plus
matrix
and SWOT analysis of the industry leading players: Sime Darby, IOI
Corporation
Berhad
and
Kuala
Lumpur
Kepong
Berhad
96
Plantation
Plantation is IOI's biggest income generator. As at June 2009, about 65 per cent of
the conglomerate profits come from its oil palm plantations. The group operates
152,000 hectares of oil palm plantations in Malaysia and 83,000 hectares in
Indonesian. It has 12 palm oil mills with total milling capacity of 4.1 million tonnes
per year at its 80 estates throughout Malaysia.
With oil yield of some 6 tonnes per hectare per year at its matured estates, IOI is the
most efficient plantation company in the world. Malaysia's oil palm average yield for
the last 20 years is stagnant at 4 tonnes per hectare per year97
Property
96 www.reportlinker.com
97 Raising oil palm yields. New Straits Times, 25th Jan 2008
Page | 59
IOI's property businesses can be categorized into real estate development and
property investment holding branching out to leisure and hospitality. The property
segment contributes around 18 per cent of the groups earnings.98
margins in the oleo chemical and specialty oils and fats sectors. The plant
expansions in the Netherlands and in Johor will place the Group in a good position
to tap emerging opportunities. The enzymatic lipid modification manufacturing
process used by the Group in the specialty oils and fats business holds great
promise as it fulfills the quest for healthier edible oils and also offers unique
solutions that cannot be met with conventional lipid modification techniques.100
4.2.6List of Board of Director
Board of Director
Position
Executive Chairman
Executive Director
Executive Director
Executive Director
Independent Non-Executive
Executive Chairman
100
Page | 61
Name of holder
% of Issued Capital
19.38
16.00
11.26
3.07
1.93
1.86
1.79
1.78
1.75
1.65
1.57
1.39
1.36
0.85
0.84
0.75
0.73
0.73
0.68
0.68
0.67
0.61
0.61
0.60
0.59
0.58
0.53
0.51
0.47
0.44
Page | 63
Strengths
The Board assumes full responsibilities for the overall financial performance of the
Company performance. We can conclude that IOI Corporation is doing well although
the company is having a downturn during 2009 that caused by the global financial
crisis. Among IOI, KL Kepong and Industry, IOI profit is the highest. This is indicate,
IOI productivity keep increasing over the years. By that it showing IOI assets
management for it is positive giving positive return. Therefore we can say that IOI
position is much stable compared to KL Kepong and industry.
Weaknesses
In contrast, IOI is taking a lot of debt to finance their operations and expenses.
However, the company still able to meets their obligations as a borrower and did not
have any problems in paying their interest.
Page | 64
Opportunities
Company establishment
IOI Corporation Bhd is a big company in Malaysia. This company is easy to make
business dealing with the former or new customer. This is because most of the other
company already give their trust to IOI Corporation Bhd. IOI Corporation Bhd also
aggressively advance toward completion RSPO certification efforts for all existing
and new holdings. IOI Corporation also has advance efforts to implement Controlled
Palm sourcing in European Market. Evaluate demand for same in Asia and North
American markets and expand to those markets if warranted. Furthermore, IOI
Corporation Bhd also expand dialog with markets, key client and NGO stakeholders
with regards to IOI Groups continuing effort to advance the supply and end market
use Roundtable on Sustainable Palm Oil Certificated Sustainable Palm Oil. This
company also can create more opportunity in the future because they are now
among the establish company in plantation industry in our country as long as they
keep focus and booster their performance and concern with their establishment
named in this field.
Threads
Strong Competitors
IOI Corporation Bhd has to build itself more perfectly as it is well-known competitors
in the plantation sector but with different approach named by KL Kepong.
has
diversified
its
business
activities
such
as
resource-based
worldwide presence. The company is listed on the Bursa Malaysia and is Malaysias
third-largest palm oil producer. KLK was ranked 1816th in the Forbes Global 2000
Leading Companies, with market cap of USD 7.26 billion.102
4.3.2History
The Kuala Lumpur Rubber Company, Limited ("KLR")(1906-1960)
KLR was founded in London, in 1906 to oversee some 600 ha; Plantations (rubber
and coffee) in Malaya (now Malaysia) in 1907, the shares of KLR were listed on the
London Stock Exchange.103
Kuala Lumpur-Kepong Amalgamated Ltd ("KLKA")(1960-1973)
In 1960, KLR changed its name to KLKA. The group started to plant oil palm in
Fraser Estate. The group's first mill, the Fraser Mill was opened in 1967. In 1971,
KLKA opened its Head Office in Kuala Lumpur. The next year, KLKAs tax residence
was transferred from the United Kingdom to Malaysia.104
In 1973, Kuala Lumpur Kepong Berhad ("KLK") was incorporated in Malaysia and
under a Scheme of Reconstruction; KLKA went into voluntary liquidation with KLK
taking over the assets and liabilities of KLKA. The company's shares are listed on
the stock exchanges of Kuala Lumpur, Singapore and London. In 1979, the Head
Office was moved from Kuala Lumpur to Ladang Pinji, Perak.105
106
2010
104
105
106
Page | 66
Mission
To offered quality products and services at competitive prices and being a good and
responsible corporate citizen.107
4.3.4Main Economics Activities
Plantation
Plantation is the core business of KLK. Currently, KLK has more than 250,000 of
plantations areas in Malaysia and Indonesia. The annual production for fresh fruit
bunches (FFB) is 3.1 million tonnes. KLK's own mills and refineries will then process
the crop into crude palm oil, RBD palm oilmen and steering, and kernel oil and cake.
Meanwhile, in 2010, the production of rubber was approximately 23 million kg. As of
September 2010, the geographical distribution of the group's plantations is as
follows:
Region
Area (ha.)
Percentage
Peninsular Malaysia
69,261
28%
Sabah, Malaysia
40,359
16%
Indonesia
139,126
56%
Total
248,746 (100%)
The core division of the sector is KLK Oleo, one of the largest palm oil based oleo
chemicals producer in the world. KLK marked it entrance into oleo chemicals back in
1991, with the opening of Palm-Oleo Sdn. Bhd. Currently, KLK Oleo consists of nine
companies, six in Malaysia, two in China and one in Europe . The full list of the
companies is shown below.108
Country
Company
Business
Malaysia
107
108
Page | 67
KSP Manufacturing
Sdn. Bhd.
Soap Noodles
Palmamide Sdn.
Bhd.
Ethylene Bis-Stearamide
& Alkanolamides (Diethanolamides/Monoethanolamide
s)
KL-Kepong Oleomas
Sdn. Bhd.
Palm-Oleo (Klang)
Sdn. Bhd.
Biodiesel
Taiko Palm-Oleo
(Zhangjiagang) Co.,
Ltd.
Shanghai Jinshan
Jingwei Chemical
Co., Ltd.
KLK Emmerich
GmbH
China
German
y
Others
KLK also owns Dr. W. Kolb Holding AG, a producer of non-ionic surfactant
in Switzerland and Stolthaven (Westport) Sdn. Bhd., a common user liquid storage
terminal at Westport, Port Klang.109
Property
KLK owns KL-Kepong Country Homes Sdn. Bhd. Notable residential areas
developed by KLK are Desa Coalfields & Bandar Seri Coalfields, both in Sungai
Buloh, Selangor.110
Retailing
109
110
Page | 68
Crabtree & Evelyn is a retailer of personal care products, toiletries, home fragrance
products and fine foods with the headquarters in Woodstock, Connecticut, USA. The
brand is sold in 40 countries.111
Position
R. M. Alias
Chairman
Executive Director
111
112
113
Page | 69
% of Issued Capital
45.65
10.66
4.43
1.58
1.31
1.27
1.07
0.97
0.97
0.92
114
0.67
0.62
0.60
Page | 70
0.57
0.52
0.51
0.49
0.48
0.47
0.46
0.41
0.38
0.38
0.37
0.32
0.32
0.30
0.30
0.29
0.29
Page | 71
Strengths
KL Kepong is a large company with a good total asset. They has increased their
total asset every year since 2006. KL Kepong also has increase in net income in
2010. They also has decrased their debt since 2009. This shows that they can pay
their debts to the debtors and to avoid financial risk. They also have high in profit
because they has increased their profit in 2010.
Weaknesses
However, KL Kepong is very weak and not liquid. Their performance always change
year by year. KL Kepong did not maintain or increase their performance year by
year.
Page | 72
Opportunities
Company establishment
KL Kepong Plantation Bhd is one of big companies in Malaysia. KL Kepong Bhd
also trusted by other company because of they have strength position in the market.
KL Kepong Bhd have a Building University Relationships. These group foster
relationships with local universities by participated their career fair and talks to
attract graduate with good leadership calibre to fill various job vacancies in line with
its succession plan. KL Kepong Bhd also has a long-term relationships have been
developed with non-profit organisations such as New Horizon and Persatuan
Daybreak, which support the disabled. KL Kepong also gives financial aid to several
foundations which assist the economically and physically disadvantaged.
Threads
Strong Competitors
KL Kepong has to build itself more perfectly as it is well-known competitors in the
plantation sector but with different approach. From the company analysis, it is
attractive to investor for making an investment in the IOI Corporation since it is an
established company and have a good reputation. Furthermore, IOI also is a leading
company in the plantation industry compared to KL Kepong.
Page | 73
CHAPTER 5
FUNDAMENTAL ANALYSIS
5.1Overview
Fundamental Analysis examines a companys relatives strengths and weakness
within its industry or industries. Once industry analysis has identified a potential
investment area, the companies within the industry need to be evaluated. At this
level, we look into every single significant detail from competitive position to financial
position and also the management. (Refer to appendix 5, 6, and 7)
5.2
Financial ratios
TOTAL ASSETS
20000000
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
2006
2007
2008
2009
Ke
po
ng
KL
Pl
an
ta
tio
n
Sa
wi
t
Sa
ra
wa
k
bu
na
n
O
il
Ri
m
Pa
lm
Sa
ra
wa
k
Pl
an
ta
tio
n
G
en
tin
g
IO
I
2010
Interpretation: The amount of total assets in a company can determines the size of
the particular company. From the chart above, we can conclude that the closest
competitor of IOI is KL Kepong. Based on this finding, we can made comparisons
between the performance of IOI, KL Kepong and Industry Average performance.
From the figures above also, total assets of the companies can also represent the
market share of the company. It is the alternative method to calculate the market
share of the company since revenue of the company may fluctuate from time to
time.
Page | 74
SALES
16000000
14000000
12000000
IOI
10000000
Industry
KL Kepong
8000000
6000000
4000000
2000000
0
2006
2007
2008
2009
2010
Page | 75
8000000
Industry
KL Kepong
6000000
4000000
2000000
0
2006
2007
2008
2009
2010
Page | 76
NET INCOME
2500000
2000000
IOI
Industry
1500000
KL Kepong
1000000
500000
0
2006
2007
2008
2009
2010
Interpretation: Net income for both companies is above industry and the trend is
the same. The trend is increasing from year 2006 until 2008 and there is major
declining in year 2009. In year 2010, the trend is rising again. From the line chart
above, we can see that the differences in net income between the two companies.
IOI net income is higher than KL Kepong and this is due to the size of the company.
As we have discussed earlier, IOI Company is a bigger company than KL Kepong
and it is one of the leading company in the industry. The production of goods and
the demand for IOI Company production is higher than KL Kepong and based on the
annual report of both companies, we found that the land area for plantation and
cultivation of palm oil for IOI is bigger than KL Kepong. That is the reason why the
company can generate more income than KL Kepong. Furthermore, IOI is able to
generate more income compared to other companies in industry because most of
the IOI capital structure is come through debt and enabled the company to acquire
more assets in order to increase their production and total income. By taking a lot of
debt also makes the company net income fluctuates greater compared to other
companies. This is because the net income of the company fluctuates in line with
the fluctuation of the interest rate.
Page | 77
TOTAL ASSETS
20000000
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
2006
IOI
Industry
KL Kepong
2007
2008
2009
2010
Interpretation: From the line chart above, we can see the difference of total assets
between IOI and KL Kepong and both companies total assets is above industry
average. As we can see, there is a huge differences between IOI and KL Kepong,
that is because the size and the life span of the company, is affecting the amount of
total assets that the company acquired. We can also see the percentage of changes
in total assets for both companies also different. From the trend above, the amount
of change in total assets of IOI is bigger than KL Kepong. This is because, IOI have
the large capital structure that majorly comes from debt financing enabling the
company to acquire more assets. Overall, both companies have the same trend
between years 2006 until 2010. In 2006 until 2008, both companys total assets are
increasing but there is slight decrease in 2009. This may due to the weak global
economy that caused price to decline significantly. Due to the global economic
recession, it also was resulting in high unemployment and low demand in plantation
sector. In 2010, the amount is increasing again as the economy is experiencing a
upward trend since the global economy has stable again.
Page | 78
1. Liquidity ratio
Liquidity ratio is calculated to measure the company abilities to meet their short term
obligations. Current ratio, quick ratio and net working capital is included in liquidity
ratio. This ratio shows the company efficiency in managing their short term
obligations by using the current assets that the company acquired.
CURRENT RATIO
6
5
IOI
Industry
KL Kepong
3
2
1
0
2006
2007
2008
2009
2010
Interpretation: Current ratio measures the company ability to pay their short term
obligations using their current assets. Higher current ratio is more preferable as it
indicates that the company is more liquid and did not have any problems in meeting
their short term obligations. From the line chart above, the current ratio of IOI is
above the industry average and the current ratio trend of IOI and industry average is
similar except for KL Kepong. There is slight increase between 2006 and 2007 and
the current ratio of IOI dropped from 5 times to 2.9 times in 2008. This is due to the
increasing current liabilities of the company and it is due to the massive increasing
amount in short term debt financing and inadequate amount of liquid assets in the
company as the company debt structure is high. In 2009, the current ratio of the
company rise due to the decreasing amount in short term financing. For the year
2010, there is a slight increase in the current ratio of the company from the previous
year. for KL Kepong, in 2007, the company current liabilities is decreasing and the
company current liabilities slightly decreasing further in 2008 but the trend is rising in
the year 2009 and 2010.
Page | 79
QUICK RATIO
4
3.5
3
IOI
2.5
Industry
KL Kepong
2
1.5
1
0.5
0
2006
2007
2008
2009
2010
Page | 80
IOI
4000000
Industry
KL Kepong
3000000
2000000
1000000
0
2006
2007
2008
2009
2010
Interpretation: Net working capital shows the difference in total current assets and
total current liabilities of the company. Positive amount indicates that the company is
able to meets their short term obligations and it is also indicates that the company is
liquid. Net working capital of the company is increasing from year 2006 till 2008.
However, in year 2009 there is a slight decrease in the companys net working
capital, but in the year of 2010, its net working capital bounce back to RM5 727 476.
Net working capital of KL Kepong on the other hand, shows a steady increasing
trend from the year 2006 till 2010. As comparison to the industry average, both
companies net working capital is better than the average. This indicates that, both
companies do not have any problem in meeting their short term obligation. Similarity
in the trend of NWC for IOI, KL Kepong, and the industry itself can be explain by the
core activities of these companies that is plantation and cultivation of palm oil, which
have less reliability on current liabilities.
Overall, liquidity ratios of IOI are stable although there is a decreasing trend in the
year 2008, which was caused by the global financial crisis that affects the industry
performance due to lower demand in the international market. Bear in mind that
Malaysian oil palm production support almost 50-percent worlds crude palm oil
demand.
115
We can conclude that IOI is able to meet its day to day operating
expenses and satisfy their short term obligations based on their current ratio, quick
ratio and net working capital. We also can conclude that the company has adequate
cash and other liquid assets to service its debt and operating needs efficiently.
115 MPOBs introduction speech by Mr. Jamil Sastrowordoyo
Page | 81
2. Leverage ratio
The leverages ratios measures the extent to which the firm uses debt to finance its
investment, how well the firm can meet its payment obligations and the financial risk
related to the financing used.
DEBT RATIO
0.4
0.35
0.3
IOI
0.25
Industry
KL Kepong
0.2
0.15
0.1
0.05
0
2006
2007
2008
2009
2010
Interpretations: Debt ratio is used to measure the percentage of total funds or total
debt provided by the creditors. Total debt includes current liabilities and long term
liabilities, therefore higher debt ratios indicate the firm has borrowed too much and
vice versa. As stated above, IOI movements showing high percentage between
Industry and KL Kepong which means that IOI has borrowed too much (debt) in
order to acquire their assets. From year 2006 to 2008, IOI record keeps increasing,
but then in 2008 to 2009 it becomes flat and at the end in year 2010, it decrease to
27.58%. Compared to Industry and KL Kepong, KL Kepong percentage is the
lowest, means that this company dependency to financial institution is low and might
be running business by using their own capital. IOI in 2009 shows highest debt ratio,
66.54%. The balanced of 33.46% represent the owners capital or equity.
Page | 82
IOI
0.5
Industry
KL Kepong
0.4
0.3
0.2
0.1
0
2006
2007
2008
2009
2010
Interpretation: Debt to equity ratio shows the proportion of the debt and equity the
company is using in their capital structure. Higher ratio shows that the company is
able to financing their day to day operations and expanding expenses but too high
ratio shows that the company may have high financial risk as the company failed to
pay their interest in debt financing. The IOI debt to equity ratio can be can be
considered as low in 2006 and 2007. It means that most of the company capital is
comes from their common stock holders thus required a low amount of debt to
finance their day to day operations. As the company was hit by the financial crisis in
2008, the requirement of financing is getting higher in order to overcome the crisis.
Thus the amount of long term debt is raising in order to meets the company
financing requirement. In 2009 and 2010, the ratio is on declining trend. As the
company has recovered from the crisis, and the financing requirement is low, the
amount of debt is decreasing and the company has fully meets certain amounts of
their short term obligations but the company still have the obligations for their long
term financing as the maturity period for long term financing is even longer than the
short term financing.
compared to industry and KL Kepong. This is because most of the company capital
structure is come through debt in order to operate in large quantity so that it can
remains as the leading company in the industry. Lower ratio is preferable because it
shows the financial risk faced by the company if they were unable to meets their
long term debt. IOI debt to equity ratio is higher than industry except in 2006, where
industry ratio is exceeding IOI. KL Kepong can be considered having a low debt to
equity ratio and investors may choose to invest in KL Kepong to avoid financial risk.
Page | 83
IOI
25
Industry
KL Kepong
20
15
10
5
0
2006
2007
2008
2009
2010
Interpretation: Times interest earned is used to show the ability of the company to
meet its fixed interest payment and the amount of debt that the company is liable to
settle. Although the IOI times interest earned is below the industry average, it is still
stable and it indicates that the company long term debt had been well managed.
From year 2006 until 2008, IOI times interest earned is on an increasing trend and
in year 2009 and 2010, the amount is declining. From the information on the
company income statement, it shows that the company interest payment on long
term debt is increasing but the company operating income also experiencing the
increasing trend. Thus, the company is still able to meets their interest payment on
long term debt although the amounts is increasing is over years. For KL Kepong,
their times interest earned are above the industry average. This is because their
operating profits growth is bigger than their interest expenses.
Overall, leverage ratio shows that the IOI capital structure is mainly comes from debt
as the ratios shows that IOI trend is higher than KL Kepong and industry average. It
indicates that the company is relying on debt financing to finance their day to day
operations. It is good in term of expanding as the company is able to expand more
trough the large capital they acquired but the company also may face higher
financial risk. This is because if the company did not meet their debt financing
obligations the company can be declared bankrupt. For KL Kepong, the company
risk is lower but the company cannot expanding their operations as the capital they
gained trough shareholders is not enough to financing their expanding expenses.
However IOI managed to meets their debt financing as the times interest earned
Page | 84
shows that the company did not have any problems to pay their debt financing
obligations.
3. Profitability ratio
The profitability ratios measure the combined effects of liquidity, asset management
and debt management on overall operating results of the firm. It relates to the firms
ability to satisfy the firm goal to maximize the owners wealth, to attract new capital
and to grow over time.
0.3
Industry
0.25
KL Kepong
0.2
0.15
0.1
0.05
0
2006
2007
2008
2009
2010
Interpretation: This ratio is used to measure the firms ability to control cost of
goods sold relative to its sales revenue, the relative contribution margin from sales.
A high gross profit is a sign of good management in the company inventories. This is
because; a high gross profit margin indicates that the company is able to fully utilize
their resources thus reducing the cost of production. As we can see above, IOI gross
profit margin is from the year 2006 to 2010 below KL Kepong gross profit margin
except in year 2009 whereby IOI gross profit margins is higher than KL Kepong. KL
Kepong has gain more profit than IOI. For industry, the amount stated is much better
than IOI and KL Kepong. A gross margin may increase due to any of the following
factors 1) Higher sales prices, cost of goods sold remaining constant 2) lower cost
of cost of goods sold, sales prices remaining constant.
Page | 85
0.2
Industry
KL Kepong
0.15
0.1
0.05
0
2006
2007
2008
2009
2010
Interpretation: Operating profit margin also known as basic earning power ratio.
Operating Profit Margin is used to measures the productivity of assets in providing
returns for both stockholders. As we can see from the above graph, from 2006
to 2010, there was little change noted by the IOI. It could be argued that the
trends happened at the company were flat, no increase or decrease. This means
that the productivity of assets produced by the IOI is the same. In contrast to the IOI,
KL Kepong experienced fluctuating trends. Look at the years 2006 to 2008, an
increase while in 2009, however, of depreciation and bounce back in 2010. As
for industry, there were increasing trend from year 2006 to 2007. But then the
figures is decreasing from year 2008 and continues to 2009 and bounce back in
2010 for KL Kepong.
Page | 86
0.15
KL Kepong
0.1
0.05
0
2006
2007
2008
2009
2010
Interpretations: Net profit margin is used to measures the after tax profit per ringgit
of sales after deducting all expenses including interest and taxes. Besides, the
ability for the firm to get higher returns indicates a better growth prospect, and
therefore higher margin is preferable. A firm with high net profit margin are
assume as having advantageous position to continue running in long term to
survive in the face of falling selling prices, rising cost of production or declining
demand for the product. For example, IOI company in 2006 having upward trends
but down too much in 2009 then bounce back in 2010. In year 2008, the economy
is having a major financial crisis that resulted in increased in interest rate. Since IOI
financial structure is mainly comes from debt financing, this will reduce the company
net profit as it has to pay a higher interest payment. That is the reason why the
company net profit in 2009 fluctuate higher that the industry and KL Kepong.
However this company net profit margin is still above KL Kepong. Compared
to
KL Kepong, there is upward movement in the year 2006, but then fall in 2009 a
little, but in this year KL Kepong has overcome IOI net profit margin. In 2010, KL
Kepong faced downward trends that
company with low net profit margin, it is difficult to withstand with these adversities.
Page | 87
RETURN ON EQUITY
0.3
0.25
IOI
0.2
Industry
KL Kepong
0.15
0.1
0.05
0
2006
2007
2008
2009
2010
Page | 88
RETURN ON ASSET
0.14
0.12
0.1
IOI
Industry
0.08
KL Kepong
0.06
0.04
0.02
0
2006
2007
2008
2009
2010
Interpretation: Return on total asset is used to measure a firm overall return on all
of its assets investment. Return on assets indicates the productivity of assets in
producing revenues and the firm ability to control costs in its operation. Hence,
higher ratio is more desirable than lower ratio. Return on total asset for both
company and industry since 2005 to 2008 were having increasing trends however in
the year 2009, there is a primary declining in the year 2009. From 2006 to 2010,
IOIs return on asset shows a quite spectacular growth that consistently beat its
competitor and the industry itself. As for industry, the graph shows an increase in
the years 2006 to 2008. However, in 2009 there is a very drastic downward due to
the global financial crisis in 2008 and it is also faced by the IOI and KL Kepong. In
2010, it bounces back as normal.
Overall from the above chart we can say that among IOI, KL Kepong and Industry,
IOI profit is the highest. This indicates that, IOI productivity keep increasing over the
years. As we can see, the total amount sold in 2006 is reached to 6 million, then
move upward to 15 million in 2008. This showing that IOI assets management for its
is positive giving positive return. Therefore we can say that IOI position is much
stable compared to KL Kepong and industry.
Page | 89
4. Activity ratio
This set of ratios measures the effectiveness and efficiency of the firm in managing
its assets. It relates the payoff from investment in certain assets.
INVENTORY TURNOEVER
8
7
6
IOI
Industry
KL Kepong
4
3
2
1
0
2006
2007
2008
2009
2010
Page | 90
12
Industry
10
KL Kepong
8
6
4
2
0
2006
2007
2008
2009
2010
Page | 91
IOI
0.6
Industry
0.5
KL Kepong
0.4
0.3
0.2
0.1
0
2006
2007
2008
2009
2010
Page | 92
is the average of the industry players. So, changes in each industry player will affect
the industry performance.
Overall, IOI is still efficient in managing their assets to generate more sales. From
the ratio calculated above, although some of the ratio likes total asset turnover and
inventories turnover is below the KL Kepong trend, but the IOI is still can be
considered efficient in managing their assets. This is because compared to KL
Kepong, the IOI trend is low but compared to industry average, the IOI trend is still
above. It indicates that the company is still performing well compared to other
companies in the same industry.
SUSTAINABLE GROWTH
0.25
0.2
IOI
0.15
Industry
KL Kepong
0.1
0.05
0
2006
2007
2008
2009
2010
Interpretation: It is hard to explain the findings on the sustainable growth that has
been calculated. It is because the capital structure of the industry players is differed
according to the company policies. However, we found that the IOI sustainable
growth is higher than the KL Kepong because IOI capital structure is mainly comes
from the debt financing. The company may not paying dividends to their
shareholders as the company have obligations to meets their short term and long
term financing. This indicates that the company growth rate is higher because the
company is able to expanding their operations since they have large capital
structure. For KL Kepong, the company is being cautious as it does not rely much
on debt financing thus it will limit their operations as the company have small capital
structure. They just rely on the shareholders capital and retained earnings to
expand their operations. From the chart above also we can see that the company is
Page | 93
on a growing stage. Although the company is a long established company, they able
to grow by enter the new market or industry.
From the financial ratios above, we can conclude that IOI Corporation is doing well
although the company is having a downturn during 2009 that caused by the global
financial crisis. From the liquidity ratio, IOI is having adequate liquid assets to meets
their short term obligations. The liquidity ratio of IOI also high compared to KL
Kepong and industry average. From the leverage ratio, we can see that IOI is taking
a lot of debt to finance their operations and expenses. However, the company still
able to meets their obligations as a borrower and did not have any problems in
paying their interest. From the profitability ratio, we can conclude that IOI can
generate high income compared to other companies in the plantation sector.
However, the company have to pay a big amount of interest thus, reducing the
company ability to pay dividends to their shareholders. Lastly, from the activity ratio,
the company is efficient in managing and utilizing their assets to generate income.
Although the company activity ratio is lower than KL Kepong but compared to
industry average the performance of the company is higher. It means that the
company performance is higher compared to other companies in the industry.
The company growth rate also higher compared to KL Kepong. However, the
company may not be able to pay dividends to their common shareholders as the
company have to pay a large amount of interest. This is because the company
capital structure mainly comes from debt. But, the company can use the debt
financing to further expanding their operations thus increase the growth rate of the
company itself. It is profitable for investor in the long term investment horizon as the
company share prices will increase resulting from the growth effects.
Page | 94
5.3Market Ratio
KLCI INDEX
1600
1400
1200
1000
KLCI Index
800
Price Index
600
400
200
38
71
38 7
89
39 8
08
39 0
26
39 2
44
39 7
62
39 9
81
39 3
99
40 4
17
40 8
35
40 9
54
3
IOI COORPERATION
KL KEPONG
Close Price
4.61
21.3
+/-
-0.2
-1.8
13391
1536
PE Ratio
13.3
22.4
Dividend Yield
3.7
2.8
High
4.74
21.5
Low
4.61
21.22
0.35
0.95
Volume
Page | 95
Close Price refer to the last trading price recorded when the market closed on the
day. Whenever the closing price is up or down more than 5% than the previous
days, the entire listing for that stock is bold-faced. However, if you buy tomorrow
stock, it will not keep same because the price is always changing. IOI close price is
4.61 whereas KL Kepong shows 21.3, which are higher than IOI.
Volume is the amount shows the total number of shares traded of the day, it is listed
in hundreds. In order to get the right number traded, we must add "00" at the end of
the number listed. Based on table above, IOI Corporation Bhd has traded 1 339 100,
on the other side KL Kepong has traded 153 600. There is a huge distance of
amount traded between 2 companies.
Dividend yield is a ratio that shows how much a company pays out in dividends
each year relative to its share price. It is calculated by Annual Dividends per Share
divide by Price per Share. As we can see from above table, IOI Corporation Bhd pay
high dividend than KL Kepong. High-growth companies like IOI rarely offer dividends
because all of their profits are reinvested to help sustain higher-than-average
growth. This enable IOI to run in a long period compared to KL Kepong. Some of
company did not pay for dividend as IOI.
High and Low amount indicates the price range which is the stock has traded
throughout the day. In other meaning, these show the maximum and the minimum
prices that people have paid for the stock. Because IOI use stock split,
measurement, this enables public to buy their shares and this way is also used to
attract people to invest in their company. However KL Kepong amount is much
higher than IOI Corporation Bhd.
Earning per Shares formula is Net Income - Dividend on Preferred Stock divide by
Average Outstanding Shares. As usual IOI Corporation Bhd EPS are low than KL
Kepong. Two companies could generate the same EPS number; however one could
do so with less equity (investment), that is the company would be more efficient at
using its capital to generate more income than the other one. That is the different
between IOI and KL Kepong.
Page | 96
5.4
CAPM Analysis
4.95%
4.78%
4.46%
3.57%
3.11%
2.95%
2.20%
2.19
%
2.05%
1.97%
1.91%
1.84%
1.30%
SM
L Beta
1.01
1.22
1.41
1.03
Page | 97
1.32
1.5
IOI COORPERATION
KL KEPONG
Close price
4.61
21.3
+/-
-0.2
-1.8
13391
1536
PE Ratio
13.3
22.4
Dividend Yield
3.7
2.8
High
4.74
21.5
Low
4.61
21.22
0.35
0.95
volume
Figure 2
CAPM
2.5
2
1.5
1
0.5
CAPM
1.
5
1.
4
1.
3
1.
2
0
1.
10
00
00
1
00
00
00
00
01
RETURNS
BETA
Indicators
Page | 98
IOI
Genting Berhad
Rimbunan Sawit
KL Kepong
Sarawak Oil
Sarawak Plantation
Actual
CAPM
Beta
Performance
2.95
SWKPLT
0.012921
2.202463
1.010185
Overvalued
SWKOIL
0.049456
2.188757
1.028707
Undervalued
KLKPG
0.044597
2.050029
1.216177
Undervalued
RMBNN
0.03107
1.972197
1.321355
Undervalued
GNTG
0.047792
1.909461
1.406134
Undervalued
IOI
0.035731
1.840287
1.499613
Undervalued
Return
RF
From the capital asset pricing method, we can calculate whether the company is
undervalued or overvalued. Thus, from the information that is available, the investor
can decide which the best company to invest in and provides return that is related
with the risk involved. Share that is undervalued indicates that the actual return is
above the expected return of the investment and share that is overvalued indicates
that the company expected return is above actual return.
Figure 1 shows whether the company is undervalued or overvalued. We can say
that the IOI, Genting Berhad, Rimbunan Sawit, KL Kepong and Sarawak Oil
Page | 99
common stock is undervalued since their actual return is higher than the expected
return and it is advisable to the investors to buy these companies common stock.
For Sarawak Plantation common stock, the company common stock is overvalued
since the company expected return is higher than the actual return and it is
advisable to the investor to sell this company common stock.
Figure 2 shows that all the companies share is in equilibrium, means that the share
provides return associate with the risk that the investor have to face.
From the CAPM analysis, IOI actual return is 3.57% and KL Kepong actual return is
4.46%. From this analysis, we should choose KL Kepong since the return is higher
and the risk associated with the shares is lower compared to IOI.
CHAPTER 6
TECHNICAL ANALYSIS
6.1
Introduction
Technical analysis is the study of how securities prices behave and how to exploit
that information to make profits while avoiding losses. The technical style of trading
is opportunistic. Your immediate goal is to forecast the price of the security over
some future time horizon in order to buy or sell the security to make a cash profit.
The strength of technical analysis there is flexibility with regard to the underlying
instrument. Traders who specialize in currencies, stock, bond or commodities may
easily apply their technical expertise to other instrument.
6.2
SIGNAL: 5 day moving average is a short term moving average and 20 day moving
average is a medium term moving average. From the chart above, we can see that
5 day moving average respond quickly to the change in price and vice versa. As the
5 day moving average crossover the 20 day moving average, the price of the
company common stock is on a rising trend. As the 5 day moving average crossover
and below the 20 day moving average, the price of the company common stock is
on downward trend. At current, we can see the 5 day moving average is above the
20 day moving average. As this happen, it is advisable to investor to buy the share
now because the price will appreciate in future and we can sell it at a higher price.
Historically, there are 3 indicators of buying and selling the companys common
stock before during October until April. Buying indicators is when the short term
moving average cross over the medium short term average and selling signal is
Page | 101
when the medium short term average crossover the short term average. After that,
we can see that the companys common stock is on a sideway trend.
SIGNAL: 5 day moving average is a short term moving average and 20 day moving
average is a medium term moving average. From the chart above, we can see that
5 day moving average respond quickly to the change in price and vice versa. As the
5 day moving average crossover the 20 day moving average, the price of the
company common stock is on a rising trend. As the 5 day moving average crossover
and below the 20 day moving average, the price of the company common stock is
on downward trend. At current, the 5 day moving average is above the 20 day
moving average and it is advisable to the investor to buy the share now and sell it
later at a future date with a higher price. Historically, we can see that there are other
indicators of buying and selling on the chart above. Buying indicators is when the
short term moving average cross over the medium short term average and selling
signal is when the medium short term average crossover the short term average.
Page | 102
Based on the analysis, it is recommended for the investor to buy both shares. This is
because both companies show an increasing trend in price movements.
6.3
S
IGNAL: The moving average convergence divergence of IOI at current indicates
that investors should hold the companys common stock because the price is
already on a downward trend. This is because, at the moment, the trend of MACD is
below the equilibrium line. It indicates that the price of the share is on a downward
trend and the trend is predicted to move further below the equilibrium line in the
Page | 103
future. This will indicate that the companys common stock price will be on a
downward trend in the future. Furthermore, before the price moving downward, we
can see that on the chart, there are descending triangle pattern. We can conclude
that, the price will be on a downward trend after the pattern. Moreover, we can see
that the price of the share is on a downward trend from July until September. During
the period, investor may hold the investments and waits for other signal indicating of
buying or selling time.
This is
because the MACD trend is at the equilibrium line and will move above the
equilibrium line. This indicates that the companys common stock value will
appreciate in the future enabling the investor to make profits from capital gain.
Overall, during our study period, we can see that there is a signals indicating of
buying and selling. On early period of our study time horizon, we can see that there
is an upward channel pattern. When the MACD line crossover the equilibrium line on
Page | 104
upward trend, it indicates that the price will increase later and it signal the right time
to buy. When the MACD line crossover the equilibrium line on a downward trend, it
indicates the right time to sell as the price will decrease in the future. The decline in
price in after the upward channel pattern is caused by the double top pattern. At
current, we assume that the trend will be on an upward trend as there is a rising
wedge pattern. We can conclude that after the pattern appeared, it is a signal that
the price will be on an upward trend because the price will appreciate in value after
the pattern appeared.
From both analyses, it is recommended to the investor to invest in KL Kepong
shares compared to IOI. This is because KL Kepong shows an increasing trend
while IOI price movement show a downward trend.
6.4
STOCHASTIC
The stochastic oscillator is momentum indicator that uses support and resistant. It
contains two lines, for the first line is the %K, which is essentially the raw measure
used to formulate the idea of momentum behind the oscillator. While, the second
line is %D, is simply a moving average of the %K. The %D line is considered to be
the more important of the two lines as it is seen to produce better signals. The
stochastic oscillator is plotted within a range of zero and how and signals
overbought conditions above 70 and oversold conditions below 30.
Page | 105
Page | 106
SIGNAL: Based on the above chart, on early September the price trends indicate an
increasing channel pattern that cause the price to move upwards. The investor is
advisable to buy the shares because the price is expected to increase further. Then,
at the end of December until January, the movement shows a Double Top pattern. It
will cause the price to move on a decreasing trend from January to the end of
February. In this case, the investor is advised to sell the shares because the price
will decrease. Besides, in March until the end of July the price movement indicates a
rising wedges pattern that will cause the price to move in an upward trend. At this
point, the investors are advised to buy the shares and sell it at a higher price later.
This will enable the investors to make profits from capital gain.
From both analyses, it is recommended to the investor to buy KL Kepong shares
because the price movement show an increasing trend while IOI shares show a
decreasing trend.
Page | 107
6.5
LINE
The most basic of the four charts is the line chart because it represents only the
closing the closing prices over the time frame. Line charts do not provide visual
information of the trading range for the individual points such as the high, low and
opening prices. However, the closing
important price in stock data compared to the high and low for the day and this is
why it is the only value used in line charts. Normally, chartist use line chart to
determine the price trend of the common stock. In order to determine the pattern,
chartist usually uses point and figure chart, candle stick chart or bar chart.
SIGNAL: The line chart above shows the trend of the companys common stock
over the five years period. As we can see from the line chart above, from 2006 until
the middle of 2007, the trend is drastically rising on a long term period. Then, the
companys common stock is on a downward trend until early 2008 and shows that
the trend is on a short term period. From early 2008 until late of 2009, the trend is
Page | 108
rising again and the trend becomes stagnant before it decrease again in early 2011.
It is advisable to the investor to hold their investment and waits until the trend is
rising again in future.
SIGNAL: The KL Kepong line chart also shows the trend of the companys common
stock.
From the year 2006 until late of 2007, we can see that the companys
common stock is on a rising trend. After that, the trend is decreasing on a short term
period. Later, the trend is drastically decreasing until early 2008. From the year 2008
until 2011 we can see that the line chart above shows that the companys common
stock is experiencing a long term upward trend. It is advisable to the investor to buy
the common stock as the trend is increasing for a long term period.
From both analyses, it is recommended to the investor to buy KL Kepong shares
because we can see that from the line chart above, we can see that KL Kepong is
on a rising trend. For IOI Company the share is on a decreasing trend.
Page | 109
6.6
CANDLESTICK CHART
The candlestick charts are closely related to bar chart. The structure of the
candlestick also consists of four major price; high, low, open, and close. At the most
basic level, candlestick chart are easier to view than bar chart. In addition,
candlestick chart provide particular trading signal. The body of the candlestick bar
chart is formed by the opening and closing price.
SI
GNAL: Based on the chart above, it shows that the price in the early September
started with the shares price being closed lower than the opening price, the body is
in shading pattern indicates that the price is on a downward trend, with the opening
price at the top and the closing price at the bottom. On November, the movement
shows a pattern that is known as Double Top. Based on this pattern, the price trend
is expected to decrease. Next, in the early of April, the price has break through the
support level that will cause the price to move further decline. The investors should
sell the share before the price is going to decrease. At current, the investor is advice
to sell the share because the trend shows a repeated trend and it is expected that
price will decrease in the future.
Page | 110
SIGNAL: Early September shows that the shares are traded at a lower price, and
then the trend shows a bullish trend during the next month. Investor is advised to
buy the share during the middle of September because the price is expected to rise
later. It turn out the price movement is on an upward trend at the beginning of
September to the end of December. While, in the early of January the movement
shows a Double Top pattern. For the investors who have the companys share they
should sell their share because the price is expected to decline. In contrast, if the
investors who want to buy the shares, they should wait until the price decrease at a
lower price. Next, at the end of February the future price might be on an upward
trend again because of the previous pattern. Currently, at the September the shares
closed higher than the opening price, indicates that the volume of trading is
increasing. It is advisable to the investor to buy the shares now because it is
expected that the price will increase in future repeating a previous trend.
From both analyses, it is recommended to the investor to invest in the KL Kepong
shares because the price shows an increasing trend compared to IOI Company that
is on a decreasing trend.
Page | 111
6.7
SIGNAL: From the above chart, 20 day moving averages refer to a short term
moving average whereas 50 day moving averages refer to long term moving
average. So that, from the above chart whenever there is a sign (cross between the
lines) this will give sign whether to buy, sell or hold. When long term moving average
is above the short term moving average, price will on a downward trend. So, it is
advisable to investor to sell the shares before the crossover. Moreover, the price has
penetrated the support line and we can conclude that the price will move on a
downward trend. At the buying signal, we can see that the long term moving
average is below short term moving average. So, the price of the common stock is
on an upward trend. At the selling signal, short term moving average is below long
term moving average. We can say that, the price will decrease in the future. At
current, investors should hold the investments and waits for the future trends and
patterns, whether it is a selling signal or buying signal. This is because, at current,
long term moving average is above short term moving average, and indicates that
the price is on a downward trend.
Page | 112
SIGNAL: From the above chart, we can say at the beginning the price is on an
increasing trend which is investors are advice to buy. At the selling signal, short term
moving average line is below long term moving average. At the selling point in
February, it is advisable for investor that has the shares, to sell. Whenever this
happen, it is preferable for investor to sell the shares before the crossover because
the price will move on a downward trend after the crossover. In contrast, when short
term moving average is above long term moving average, it is a buying signal
because the price will move on an upward trend. At current, the price is on a
downward trend because the long term moving average above the short term
moving average and it is suggested to sell. Lastly, at the end, the price is saying will
increased in future because it is expected that the short term moving average will
crossover the long term moving average on an upward trend, result in the increasing
in price trend. It is suggested to investors to buy the share because the price will
increase in future enable them to make profits from capital gain.
From both analyses, we strongly suggest that KL Kepong shares are better than IOI.
It is because the price of KL Kepong share will appreciate later in the future
according to the trend that is available. For IOI the price is moving on a decreasing
trend and it is not profitable for the investor to invest in the IOI share.
Page | 113
Page | 114
CHAPTER 7
CONCLUSIONS AND RECOMMENDATIONS
7.1
CONCLUSION
Page | 115
7.2
RECOMMENDATION
Our group has comes with several recommendations for the potential
Page | 116
CHAPTER 8
APPENDIX
Countries
Norway
Australia
New Zealand
United States
Ireland
Liechtenstein
Netherlands
Canada
Sweden
10
Germany
11
Japan
12
South Korea
Ecuador
Nigeria
Philippines
Armenia
Costa Rica
Tunisia
Peru
Brazil
Croatia
Turkey
Hungary
India
Morocco
Estonia
Uruguay
Cambodia
Jamaica
Mexico
Vietnam
Page | 117
Tanzania
Guinea Bissau
Malawi
Yemen
Ethiopia
Somalia
Burundi
Niger
Sierra
Leone
Madagasc
ar
Zambia
Myanmar
Cambodia
Malaysia
Indonesia
Vietnam
Thailand
Singapore
Philippines
Laos
2006
4.865678181
3.084851516
2744013
0.244294386
0.413625431
7.428906987
0.138107013
0.306480156
0.173932201
0.139840697
0.082592352
7.867798352
3.197434226
0.598031557
0.072127205
6109668
843788
4041883
10216297
2007
5.06443281
3.527646835
4659417
0.266975247
0.469212552
11.30129676
0.165547771
0.296646485
0.183787688
0.191504664
0.108963421
7.636812555
3.460815449
0.658199264
0.191504664
8952727
1482104
6097102
13601849
2008
3.112073895
1.925258205
5089908
0.346638959
0.710746803
13.89591207
0.152170191
0.270035006
0.182509898
0.265943987
0.12970378
9.299188553
3.665077922
0.852359972
0.157100618
14665369
2231632
10482559
17205605
2009
4.703696193
3.049622911
4730183
0.348655446
0.665492572
11.16463133
0.067361991
0.302805854
0.17739335
0.117838824
0.061736448
11.5687821
4.70941201
0.916487879
0.060970803
14600474
983517
9948647
15930897
2010
4.997864074
3.648949418
5727476
0.27583527
0.4430818
8.55098704
0.162295078
0.2578092
0.170116277
0.188833657
0.117556132
11.48509305
4.697244659
0.724335781
0.129677878
12542962
2035661
9077430
17316502
116 http://en.wikipedia.org/wiki/List_of_ASEAN_countries_by_GDP_%28nominal%29
Page | 118
2006
2.614981145
1.546757737
1134928
0.066312926
0.083878378
34.82124516
0.111378375
0.327851436
0.126379464
0.097050227
0.076726383
6.905380579
3.333809781
0.688880435
0.097050227
3916649
436230
2502671
5685528
2007
2.107386403
1.210859124
1232541
0.151725385
0.215653704
21.54309748
0.136978116
0.323634119
0.153631276
0.141115373
0.099283174
6.382313343
3.269713615
0.724810481
0.061227639
5067627
694154
3262687
6991658
2008
2.069747481
1.291919557
1713713
0.209309713
0.321438466
20.90652648
0.132475709
0.303436797
0.170862684
0.187942087
0.122381446
8.962397617
4.227096682
0.923802908
0.08244758
7855425
1040653
5267233
8503356
2009
2.564448025
1.836685298
1945546
0.203636443
0.310640789
12.50578022
0.091990337
0.292069246
0.129163445
0.108714771
0.071266524
7.345825882
4.981089338
0.774717499
0.033105023
6658308
612500
4508110
8594498
2010
2.673853257
1.653937149
2125335
0.184489947
0.280873223
20.58856035
0.135147583
0.292102022
0.160162315
0.168577121
0.110728904
9.524157424
3.915673499
0.819318417
0.088774003
7490626
1012340
5070852
9142509
2006
2007
2008
2009
Page | 119
2010
Current Ratio
2.815772228
3.405296381
2.939032607
3.407455529
3.162563349
Quick Ratio
1.924385979
2.625379874
2.147770128
2.608038644
2.509399875
730599.5
1129417.667
1307906.5
1297255.667
1458865.167
Debt Ratio
0.217940947
0.19536211
0.232091142
0.239332271
0.194744929
Debt-to-Equity Ratio
0.493212132
0.368263006
0.553122265
0.540823086
0.380425448
Time-interest Earned
10.21073114
14.63975989
12.6284556
8.606500876
575.5525901
0.214574038
0.223752935
0.205358425
0.146905381
0.185618399
0.333659954
0.400788364
0.371000956
0.326341685
0.360556561
0.188693975
0.26928077
0.259732808
0.203825679
0.25258498
ROE
0.119436194
0.179173397
0.23416013
0.112182647
0.130840863
ROA
0.076074137
0.11342335
0.123804886
0.065717871
0.081926583
ARTO
8.081489134
12.17533019
16.01465214
12.6735705
10.94169815
INTO
4.726769553
5.862600623
4.531749345
6.91125686
5.639903476
TATO
0.404751329
0.555987872
0.659830046
0.553737194
0.487301433
Sustainable Growth
0.102040709
0.147192499
0.181627532
0.08426261
0.101335306
Sales
1837678.5
2626275.667
4119089.167
3832511.333
3718241.333
Net Income
259631.8333
452885.3333
646153
330755.6667
599541.5
1181417.833
1693246
2810530.833
2569192
2550822
Total Asset
3211808.667
4100297.5
5065553.5
4956433.167
5603904.667
Page | 120
TYPE
WC06026
WC05350
WC01001
WC01051
WC01100
WC01101
WC01151
WC01149
WC01150
WC01250
WC01251
WC01255
WC01266
WC01251
WC01266
WC01255
WC01201
WC01084
WC01253
WC01254
WC01401
WC01451
WC01401
WC01451
DESCRIPTIO
N
2006
2007
2008
2009
2010
NATION
30/6/2006
30/6/2007
30/6/2008
30/6/2009
30/6/2010
6109668
8952727
14665369
14600474
12542962
4041883
6097102
10482559
9948647
9077430
1872492
2655795
3960163
4421109
3233691
492148
547797
593033
587885
559852
195293
199830
222647
230718
231841
29157
12725
12508
12930
13318
1062668
1645401
2676575
2590027
2133762
136515
144874
191790
231419
235352
6530
720
826
566
14182
20012
39680
68035
60346
47214
136515
144874
191790
231419
235352
20012
39680
68035
60346
47214
6530
720
826
566
14182
18327
16553
29900
21408
2415
540911
607655
698158
698190
670942
285
118984
31091
25903
12858
22419
15184
36531
1125421
1953757
3049066
1798548
2462387
196158
340109
683010
486943
1125421
1953757
3049066
1798548
2462387
196158
340109
683010
486943
485517
DATE OF
FISCAL
YEAR END
NET SALES
OR
REVENUES
COST OF
GOODS
SOLD(EXCL
DEPRECIATI
ON)
GROSS
INCOME
SELLING,
GENERAL &
ADMINISTRA
TIVE
EXPENSES
DEPRECIATI
ON,
DEPLETION
AND
AMORTIZATI
ON
AMORTIZATI
ON OF
INTANGIBLE
S
AMORTIZATI
ON OF
DEFERRED
CHARGES
OPERATING
INCOME
INTEREST
EXPENSE
ON DEBT
INTEREST
CAPITALIZE
D
NONOPERATING
INTEREST
INCOME
INTEREST
EXPENSE
ON DEBT
NONOPERATING
INTEREST
INCOME
INTEREST
CAPITALIZE
D
RESEARCH
&
DEVELOPME
NT
SALARIES
AND
BENEFITS
EXPENSES
EXTRAORDI
NARY
CREDIT PRETAX
EXTRAORDI
NARY
CHARGE PRETAX
PRETAX
INCOME
INCOME
TAXES
PRETAX
INCOME
INCOME
TAXES
MINORITY
485517
Page | 121
TYPE
WC06026
WC05350
WC02501
WC02649
WC02101
WC02201
WC02101
WC02001
WC02051
WC02001
WC02201
WC02999
WC03040
WC03051
WC03101
WC03151
WC03251
DESCRIPTIO
N
NATION
DATE OF
FISCAL
YEAR END
PROPERTY,
PLANT AND
EQUIPMENT
- NET
TOTAL
INTANGIBLE
OTHER
ASSETS NET
INVENTORIE
S - TOTAL
CURRENT
ASSETS TOTAL
INVENTORIE
S - TOTAL
CASH &
SHORT
TERM
INVESTMEN
TS
RECEIVABLE
S(NET)
CASH &
SHORT
TERM
INVESTMEN
TS
CURRENT
ASSETS TOTAL
TOTAL
ASSETS
ACCOUNTS
PAYABLE
SHORT
TERM DEBT
& CURRENT
PORTION OF
LONG TERM
DEBT
CURRENT
LIABILITIES TOTAL
WORKING
CAPITAL
LONG TERM
2006
2007
2008
2009
2010
########
########
########
########
########
6068853
5289554
5446537
5435808
5517578
415830
510661
514136
513830
513830
1264102
1761753
2860119
2112503
1932501
3453853
5805805
7499818
6007335
7160110
1264102
1761753
2860119
2112503
1932501
1230370
2735195
2895934
2464175
3881696
776541
1172312
1577059
1262058
1092108
1230370
2735195
2895934
2464175
3881696
3453853
5805805
7499818
6007335
7160110
10216297
13601849
17205605
15930897
17316502
243674
393035
622609
470776
422349
161553
249694
1096955
199091
428221
709840
1146388
2409910
1277152
1432634
2744013
4659417
5089908
4730183
5727476
2334231
3381663
4867178
5355303
4348281
Page | 122
DEBT
WC03255
TOTAL DEBT
2495784
3631357
5964133
5554394
4776502
WC03255
TOTAL DEBT
2495784
3631357
5964133
5554394
4776502
1230370
2735195
2895934
2464175
3881696
335496
423864
495843
469982
438208
746984
856954
965117
426156
289292
605267
625881
613788
624680
667552
6033923
7739258
8391361
8346290
10780181
605267
625881
613788
624680
667552
6033923
7739258
8391361
8346290
10780181
WC02001
WC03263
WC03426
WC03480
WC03501
WC03480
WC03501
CASH &
SHORT
TERM
INVESTMEN
TS
DEFERRED
TAXES
MINORITY
INTEREST
COMMON
STOCK
COMMON
EQUITY
COMMON
STOCK
COMMON
EQUITY
WC01051
WC01100
WC01101
WC01151
WC01149
WC01150
WC01250
WC01251
WC01255
WC01266
DESCRIPTIO
N
NATION
DATE OF
FISCAL
YEAR END
NET SALES
OR
REVENUES
COST OF
GOODS
SOLD (EXCL
DEPRECIATI
ON)
GROSS
INCOME
SELLING,
GENERAL &
ADMINISTRA
TIVE
EXPENSES
DEPRECIATI
ON,
DEPLETION
AND
AMORTIZATI
ON
AMORTIZATI
ON OF
INTANGIBLE
S
AMORTIZATI
ON OF
DEFERRED
CHARGES
OPERATING
INCOME
INTEREST
EXPENSE
ON DEBT
INTEREST
CAPITALIZE
D
NONOPERATING
INTEREST
2006
2007
2008
2009
2010
########
########
########
########
########
3916649
5067627
7855425
6658308
7490626
2502671
3262687
5267233
4508110
5070852
1284079
1640057
2383625
1944687
2188027
707041
753290
791537
823689
834171
129899
164883
204567
205511
231747
1433
2889
4271
3978
3695
4096
5903
6883
7242
494984
778546
1342199
860010
1199716
14215
36139
64200
68769
58271
16299
NA
NA
25159
24178
Page | 123
INCOME
WC01251
WC01266
WC01255
WC01201
WC01084
WC01253
WC01254
WC01401
WC01451
WC01401
WC01451
WC01501
WC01601
WC01701
WC01551
WC01701
WC18192
WC18191
WC18198
WC01706
INTEREST
EXPENSE
ON DEBT
NONOPERATING
INTEREST
INCOME
INTEREST
CAPITALIZE
D
RESEARCH
&
DEVELOPME
NT
SALARIES
AND
BENEFITS
EXPENSES
EXTRAORDI
NARY
CREDIT PRETAX
EXTRAORDI
NARY
CHARGE PRETAX
PRETAX
INCOME
INCOME
TAXES
PRETAX
INCOME
INCOME
TAXES
MINORITY
INTEREST
EXTRA
ITEMS &
GAIN/LOSS
SALE OF
ASSETS
PREFERRED
DIVIDEND
REQUIREME
NTS
NET INCOME
BEFORE
EXTRA
ITEMS/PREF
ERRED
DIVIDENDS
PREFERRED
DIVIDEND
REQUIREME
NTS
DIVIDENDS
PROVIDED
FOR OR
PAID COMMON
EARNINGS
BEFORE
INTEREST
AND TAXES
(EBIT)
EBIT &
DEPRECIATI
ON
NET INCOME
USED TO
CALCULATE
BASIC
EARNINGS
PER SHARE
14215
36139
64200
68769
58271
16299
NA
NA
25159
24178
6589
6970
10451
12088
12156
500275
605395
646687
651486
694241
15500
110400
14645
8971
194733
65212
12756
570494
854559
1403249
852807
1345431
148568
172009
355976
244751
315562
570494
854559
1403249
852807
1345431
148568
172009
355976
244751
315562
3756
20295
48852
30111
54930
436230
694154
1040653
612500
1012340
NA
392972
584133
425986
479234
584709
890698
1467449
921576
1403702
714608
1055581
1672016
1127087
1635449
436230
694154
1040653
612500
1012340
Page | 124
WC01705
WC01751
NET INCOME
USED TO
CALCULATE
DILUTED
EARNINGS
PER SHARE
NET INCOME
AVAILABLE
TO COMMON
NA
NA
1040653
612500
1012340
436230
694154
1040653
612500
1012340
WC07011
EMPLOYEES
25593
NA
25000
25000
25000
TYPE
DESCRIPTIO
N
2006
2007
2008
2009
2010
########
########
########
########
########
3132955
3477455
3993941
4259468
4471040
124376
309487
293596
328527
321939
750694
997851
1246064
905045
1295014
1837678
2345559
3315692
3189145
3395061
750694
997851
1246064
905045
1295014
460471
495634
1159705
1292481
1255105
567188
794011
876487
906407
786487
460471
495634
1159705
1292481
1255105
1837678
2345559
3315692
3189145
3395061
5685528
6991658
8503356
8594498
9142509
WC06026
WC05350
WC02501
WC02649
WC02101
WC02201
WC02101
WC02001
WC02051
WC02001
WC02201
WC02999
NATION
DATE OF
FISCAL
YEAR END
PROPERTY,
PLANT AND
EQUIPMENT
- NET
TOTAL
INTANGIBLE
OTHER
ASSETS NET
INVENTORIE
S - TOTAL
CURRENT
ASSETS TOTAL
INVENTORIE
S - TOTAL
CASH &
SHORT
TERM
INVESTMEN
TS
RECEIVABLE
S(NET)
CASH &
SHORT
TERM
INVESTMEN
TS
CURRENT
ASSETS TOTAL
TOTAL
ASSETS
Page | 125
WC03040
WC03051
WC03101
WC03151
WC03251
ACCOUNTS
PAYABLE
SHORT
TERM DEBT
& CURRENT
PORTION OF
LONG TERM
DEBT
CURRENT
LIABILITIES TOTAL
WORKING
CAPITAL
LONG TERM
DEBT
165885
254283
274028
281481
266075
278418
493919
858991
627427
579612
702750
1113018
1601979
1243599
1269726
1134928
1232541
1713713
1945546
2125335
98606
566893
920844
1122726
1107089
WC03255
TOTAL DEBT
377024
1060812
1779835
1750153
1686701
WC03255
TOTAL DEBT
377024
1060812
1779835
1750153
1686701
460471
495634
1159705
1292481
1255105
179679
183584
213390
241239
220967
168795
176159
202913
308760
320145
712516
1067505
1067505
1067505
1067505
4494889
4919053
5537094
5634009
6005204
712516
1067505
1067505
1067505
1067505
4494889
4919053
5537094
5634009
6005204
4762290
5662105
6660851
7065495
7432438
WC02001
WC03263
WC03426
WC03480
WC03501
WC03480
WC03501
WC03451
WC03998
CASH &
SHORT
TERM
INVESTMEN
TS
DEFERRED
TAXES
MINORITY
INTEREST
COMMON
STOCK
COMMON
EQUITY
COMMON
STOCK
COMMON
EQUITY
PREFERRED
STOCK
TOTAL
CAPITAL
CHAPTER 9
REFERENCES
http://en.wikipedia.org/wiki/Japan
http://www.economywatch.com/economicstatistics/Japan/GDP_Constant_Prices_National_C
urrency/
http://www.indexmundi.com/japan/economy_profile.html
http://www.nber.org/papers/w3737
2008, Annual Report Genting Berhad
2008, Annual Report IOI Corporation Berhad
2008, Annual Report IOI Corporation Berhad
2008, Annual Report Kuala Lumpur Kepong Berhad
2008, Annual Report Kuala Lumpur Kepong Berhad
2009, Annual Report Genting Berhad
2009, Annual Report Genting Berhad
Page | 126
Page | 127
http://www.almotamar.net/en/8221.htm
http://www.almotamar.net/en/8221.htm
http://www.aph.gov.au/house/committee/jfadt/india/indiach3.pdf
http://www.bmz.de/en/what_we_do/countries_regions/naher_osten_mittelmeer/marokko
/index.html
http://www.economywatch.com/world_economy/indonesia/economic-forecast.html
http://www.economywatch.com/world_economy/indonesia/structure-of-economy.html
http://www.gentingplantations.com/news/2006/index.htm
http://www.id.emb-japan.go.jp/birelEco_id.html
http://www.impactalliance.org/ev_en.php?ID=49126_201&ID2=DO_TOPIC
http://www.indexmundi.com/facts/japan/export-value-index
http://www.indexmundi.com/japan/economy_profile.html
http://www.indexmundi.com/morocco/economy_overview.html
http://www.indexmundi.com/south_korea/gdp_real_growth_rate.html
http://www.investopedia.com/terms/m/monetarypolicy.asp
http://www.magharebia.com/cocoon/awi/xhtml1/en_GB/features/awi/features/2008/09/22
/feature-02
http://www.mas.gov.sg/resource/eco_research/eco_dev_ana
/Recent_Economic_Developments.pdf
http://www.moroccobusinessnews.com/Content/Article.asp?idr=18&id=1299
http://www.nber.org/papers/w3737
http://www.state.gov/r/pa/ei/bgn/2798.htm#foreign
http://www.twnside.org.sg/title2/gtrends/gtrends227.htm
http://www.weforum.org/en/initiatives/gcp/Africa%20Competitiveness%20Report/index.htm
http://www.wikipedia/zambia
IOI chairman's passion for his oil palms . New Straits Times, 31st Oct 2009
IOI Company 2010 Annual Report
IOI Corp to buy out property arm. New Straits Times, 5th Feb 2009
IOI CORPORATION BACKGROUND
IOI gets SC nod to take unit private. New Straits Times, 25th Oct 2005
IOI to buy Aditya Birla's Pan Century for RM423 million. New Straits Times, 8th Dec 2006
JourneytoForever.com
KL Kepong Annual Report 2010
Page | 128
the
Francis.
www.wikipedia.org/malaysia
Page | 130