1. Assignment: Financial Ratio Analysis
Subject: Basic Accounting (ACC30205)
Company: LTKM Berhad
Group members: Le Jia Nian (0319957)
Marco Leong Wong Ka Henn (0320026)
Chin Khang Wei (0320728)
Submission Date: 1st June 2015
2. Company Overview:
LTKM Berhad is a subsidiary of “Ladang Ternakan Kelang Management Sendirian Berhad”. It
is one of the Malaysia-based famous investment holding company and engaged in the provision
of management services. LTKM Berhad is based in Klang, Malaysia.
The Company is engaged in production and sales of eggs initially.Over the times until
present, the company expand and operates in three segments: production and sale of poultry
and related products, extraction and sale of sand and investment holding.
Core production and sale of poultry and related products segment is engaged in the
production, distribution and sales of chicken eggs, chickens and organic fertilizers for plantation,
gardening, or landscaping.
Their extraction and sale of sand segment is engaged in the mining, extracting and sale
of sand. In this segment, LTKM Berhad involved in production and processing of glass.
Whereas the investment holding segment is engaged in investment activities in quoted
and unquoted securities, as well as investment properties held by the Company on a long term
basis.
The Company’s brands of products include LTK Omega Plus, LTK Organic Selenium
Plus and LTK Bio-Fer. LTKM Berhad eggs export to Singapore and Hong Kong reputed by its
qualities to control the price floor.
4. Company’s History:
The passion for egg business has led the Tan family to establish a small scale farm for the
production of chicken eggs, which also led to the incorporation of Ladang Ternakan Kelang Sdn
Bhd that was held in 1976 by the three Tan brothers. From its humble beginning, the farm
initially operated on a small piece of 10-acre land in Kampung Jawa, Klang.
Over the years, the company has progressed to a sophisticated, highly automated farm in
Malacca spanning over 400 acres. A total of 1.8 million birds accommodate over 100
conventional and modern multi decker cages and closed house systems that produce over one
million eggs per day. The group has over 400 staff, of which 25% are foreign workers. A large
number of these employees are long serving and dedicated members of the management team
who synonymously developed and grew with the Group.
Steady growth, sustainable profitability and very prudent management define LTKM group
today. In anticipation of future development, the company will continue to tap into research and
development as well as emphasize on innovation that brings the company to new dimensions,
along with new opportunities. The journey continues until today.
Company’s Board Of Directors:
Ir. Kamarudin bin Md Derom (Chairman)
Datuk Tan Kok (Managing Director)
Datin Lim Hooi Tin (Non-Executing Director)
Ooi Chee Seng (Non-Executing Director)
Ravindran Markandu (Audit Head)
Company’s Value:
LTKM Berhad wants to uphold the highest standards of professionalism and corporate
governance to maximize the benefit of our stakeholders at all times.
● Integrity,
● Technical leadership,
● Cost efficiency and effectiveness,
● Teamwork, and
● Professional business ethics
5. Profitability Ratios 2013 2014 Interpretation
Return on Equity
(ROE)
9,575,297
(133,326,264 + 124,058,087) ÷ 2
× 100
=7.4%
28,262,534
(158,134,503 + 133,326,264)÷ 2
× 100
= 19.4%
During the period of 2013
to 2014, the return on
equity increase from
7.4% to 19.4%. The
owner is getting more
return from the business.
Net Profit Margin
(NPM)
9,575,297
154,830,563
× 100
=6.2%
28,262,534
178,063,772
× 100
=15.9%
Over the period of 2013
to 2014, net profit margin
rise from 6.2% to 15.9%.
The business abilityto
control its expenses is
better than lastyear.
Gross Profit Margin
(GPM)
17,501,191
154,830,563
× 100
=11.3%
38,542,547
178,063,772
× 100
=21.6%
During the period of 2013
to 2014, the gross profit
margin has increase from
11.3% to 21.6%.The
business abilityto control
its cost of good sold
expenses is better than
lastyear.
Selling Exp. Ratio
(SER)
(6,274,482)
154,830,563
× 100
=-4.05%
(6,189,479)
178,063,772
× 100
=-3.5%
During the period of 2013
to 2014, the selling
expenses ratio is
increased from -4.05% to
-3.5%. The business
ability to control its selling
is worse than lastyear.
General Exp Ratio
(GER)
(56,316)
154,830,563
× 100
=-0.04%
(676,519)
178,063,772
× 100
=-0.4%
Over the period of 2013
to 2014, the general
expenses ratio rise from -
0.04% to -0.4%. The
business abilityto control
the general expenses is
worse than lastyear.
Financial Exp. Ratio
(FER)
(1,241,970)
154,830,563
× 100
=-0.8%
(1,194,060)
178,063,772
× 100
=-0.67%
During the period of 2013
to 2014, the financial
expenses ratio is rise
from -0.8% to -0.67%.
The business abilityto
control its financial
expenses is worse than
lastyear.
6. Stability Ratios 2013 2014 Interpretation
Working Capital 59,089,052
24,638,111
=2.4 : 1
64,069,372
35,482,099
× 100
=1.8 : 1
Over the period,the
business working capital
has decreased from
2.4:1 to 1.8:1. The
business abilityto pay
current liabilities is worse.
In addition,it satisfied the
minimum 2:1 ratio.
Total Debt 43,379,534
176,705,798
× 100
=24.6%
47,215,434
205,349,937
× 100
= 23%
Over the period,the total
debt has decreased from
24.6% to 23%.The
business total debthas
decreased.However,it
satisfied the maximum
50% limit..
Stock Turnover 365
÷
137,329,372
(12,753,072+11,603,549)÷2
=32.4 days
365÷
139,521,315
(17,500,317 + 12,753,072)÷2
= 39.6 days
During the period of 2013
to 2014, the stock
turnover has increased
from 32.4 days to 39.6
days. This proof that the
business abilityto sell its
goods slower than last
year.
Debtor Turnover 365
÷
77,415,282
(12,002,645+ 10,947,818) ÷ 2
=54.1 days
365
÷
89,031,886
(11,600,253+ 12,002,645) ÷ 2
=48.4 days
During the period of 2013
to 2014, the debtor
turnover has decreased
from 54.1 days to 48.4
days . The business is
taking less time to collect
its debts.
Interest Coverage 1,241,970+ 9,575,297
1,241,970
=8.7 times
1,191,060+ 28,262,534
1,191,060
=24.7 times
During the period of 2013
to 2014, the interest
coverage has increased
from 8.7 times to 24.7
times.The ability for the
business to pay its interest
coverage is better.
However, the business
should never fell below 5
times.
7. Price/Earning (P/E)Ratio
Last done of LTKM Berhad at 30 May 2015 : RM 6.550
Earning per share of LTKM Berhad : RM0.64
P/E Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑠ℎ𝑎𝑟𝑒 𝑝𝑟𝑖𝑐𝑒
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝑖𝑛 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑡𝑖𝑚𝑒)
=
6.550
0.65
=10.1
Interpretation: According to the financial report of LTKM Berhad at the year 2014, the earning
per share is RM 0.60. By using the formula to calculate P/E ratio as shown above, the outcome
is 10.1 times. This means that the share price of LTKM Berhad is 6.550. If an investor
purchases the share of LTKM Berhad, he will have to take 10 years to recoup his investment.
InvestmentRecommendation
8. Based on the profitability ratios calculated over the year 2013 to 2014, the company has
exhibited good profitability, as shown in the profitability ratio analysis.
First of all, the Return on Equity (ROE) has vastly increased to 19.4% compared to the
result on 2013 is only 7.4%. Hence, the business is getting more return from the business.
Besides, Net Profit Margin (NPM) is also obviously rise from 6.2% to 15.9%. This shows that the
company control their expenses well. There is a big difference on Gross Profit Margin (GPM)
which is 10.3% more than year 2013. Although the selling expenses, general expenses and
financial expenses not much difference over the years and no fluctuate performance.
On the other hand as for stability ratio, even though he debtor turnover is increased from
54.1% to 48.1% but business does has some flaw on their ability to pay current liabilities is
worse than year 2013 and not satisfied the minimum 2:1 ratio. Moreover, the business total debt
had slightly decrease to 23% from 24.6% and also satisfied the maximum 50% limit. As for the
stock turnover, the business is taking 3.2 days more to sell their goods. For the interest
coverage, the business hugely pump up to 24.7 times compared to last year, it is only 8.7 times
although the business have not fell below 5 times.
The last done today is RM6.550. In January 2015, it only reaches on the price RM4.20, it
shows a great performance within this half year. In my opinion, due to the business core on egg
supply and it is always the demand exist and also with the performance of this company, this
company is worth to invest in. But 10.1 to recoup an investment is quite a long period. If the
company decide to split their share into half which is 3.275 and the earning per share remain, it
only takes about 5.05 years to recoup it. Then, i would recommend investor to invest in to this
company.
