Lion Industries Corporation Berhad Financial Statement Analysis

Lion Industries Corporation Berhad ( LICB ) was incorporated on 17 May 1924 as Sungai Way Dredging Limited under the Companies Enactment 1917. Subsequently, it changed its name to Sungei Way Dredging Berhad on 21 October 1991. LICB was listed on the Main Market of Bursa Malaysia Securities Berhad on 29 December 1973 and adopted its current name on 18 February 2003.

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LICB is involved in the fabrication of long steel merchandises, by Amsteel Mills Sdn Bhd ( AMSB ) and Antara Steel Mills Sdn Bhd ( Antara ) at three steel Millss. AMSB ‘s works located in Kelang, Selangor produces notes for turn overing into steel bars and wire rods while its works in Banting Selangor, set up in 2001 green goodss particular grade notes for turn overing into forte bars and wire rods for automotive parts, mattress and mechanical springs, turning parts, wire rods, wire ropes and other stringent applications. The 3rd factory operated by Antara in Pasir Gudang, Johor, was acquired in 2002 from Johor Corporation Bhd, and produces notes which are rolled into steel bars and light subdivisions such as angle bars, level bars and U-channels.

Lion Industries Corporation Berhad is engaged in investing retention and belongings development. The Company operates in five concern sections: steel, which is engaged in fabrication and selling of steel bars, wire rods, hot briquetted Fe, steel related merchandises and proviso of chartering services ; belongings development, which is engaged in belongings development and direction tyre, which is engaged in the industry and gross revenues of tyres and other related gum elastic merchandises ; edifice stuffs, which engaged in trading and distribution of edifice stuffs and other steel merchandises, and others, which is engaged in keeping, exchequer concern, fabrication and trading of lubricators, flicker stoppers, fictile constituents and automotive constituents, gross revenues and distribution of motor vehicles and proviso of transit services. Its subordinates include Amble Legacy Sdn Bhd, Crest Wonder Sdn Bhd, and JOPP Builders Sdn Bhd.

The steel bars, wire rods and subdivisions produced by LICB are used in the building, fiction and fabrication industries. Antara besides operates a Hot Briquetted Iron ( HBI ) works in Labuan utilizing the Midrex Technology from USA. Antara ‘s HBI is manufactured from high-purity Fe ore and is rated as among the universe best and supplied to steel Millss for Fe devising, steelmaking and foundry applications. In the belongings development sector, LICB is involved in belongings direction and residential development. Its joint-venture with the Eastern & A ; Oriental Group comprises a assorted incorporate development undertaking which includes three blocks of 28-storey serviced flats, with retail, nutrient and drink theme mercantile establishments located at the site of the former St Mary ‘s School in Kuala Lumpur.

Fiscal Statement Analysis

Fiscal statement analysis is known as accounting analysis which refers to an rating of company public presentation and place. Fiscal statement analysis is besides a judgmental procedure of placing fiscal strength and failings of the house by orderly set uping relationship between the points of the balance sheet and the net income and loss history.

The aims to fix fiscal statements are to run into the demand of external and internal users. Fiscal statements are besides prepared for determination devising intents through analysis and reading of it. Through fiscal statements analysis, company can pull off its ain public presentation from clip to clip. Besides that, the major benefit of fiscal statements analysis is give information and thought to investor to make up one’s mind about the investings of their financess in the specific company. Then, regulative governments like International Accounting Standards Board can guarantee whether the company is following accounting criterions. Furthermore, fiscal statements analysis can assist the authorities bureaus to analyze the sum of revenue enhancement due to the net income of company.

Following are the several types of fiscal statement analysis:

Horizontal and Vertical Analysis

Horizontal analysis or tendency analysis is defined as comparing fiscal informations of two or more old ages. Horizontal analysis is encouraged by demoing alterations between old ages in both RM and per centum signifier. Horizontal analysis of fiscal statements can besides be carried out by ciphering tendency per centums. Trend percentages province several old ages ‘ fiscal informations in footings of a basal twelvemonth.

Vertical analysis is the process of fixing and showing common size statements. Common size statement is the analysis that shows the points looking in per centum signifier every bit good as in RM signifier. Key fiscal alterations and tendencies can be highlighted by the usage of common size statements.

Ratios Analysis

The ratios analysis is the most utile tool for readying of fiscal statement analysis. Ratio analysis is a statistical guideline by agencies of comparisons or steps relationship between two or assorted figures. Ratios can be found out by spliting one figure by another figure. Ratios besides show how one figure is related to another.

Horizontal and Vertical Analysis

Tendency Analysis

Year

2006

2007

2008

2009

2010

Gross ( RM ‘000 )

19,362

13,313

10,423

10,176

11,894

Percentage of Changes in Revenue ( % )

-45.44

-27.73

-2.43

14.44

Net income ( RM ‘000 )

8,006

7,089

7,054

5,933

8,170

Percentage of Changes in Profit ( % )

-12.94

-0.50

-18.89

27.38

Non-Current Assetss ( RM ‘000 )

425,779

308,848

261,240

287,202

283,576

Current Assets ( RM ‘000 )

1,313,118

1,379,910

1,225,981

1,165,170

1,138,535

Entire Asset ( RM ‘000 )

1,738,897

1,688,758

1,487,221

1,452,372

1,422,111

Non-Current Liabilities ( RM ‘000 )

87,169

82,302

73,752

69,865

135

Current Liabilities ( RM ‘000 )

574,129

509,064

300,355

261,570

294,929

Entire Liability ( RM ‘000 )

661,298

591,366

374,107

331,435

295,064

Net incomes per Share

RM ( sen )

( 1.30 )

30.44

119.01

( 39.04 )

50.67

The gross of the company is diminishing bit by bit since twelvemonth 2006 from RM 19.36 1000000s to RM 10.18 1000000s in the twelvemonth 2009. The gross has been increased by RM 1.7 1000000s in the twelvemonth 2010 compared to twelvemonth 2009. The per centum of alterations in gross is negative on the twelvemonth 2006 to 2009. Although the rate of gross is negative, the value of lessening is going smaller compared to anterior twelvemonth. The lessening of gross is due to the lessening in lease of the company. However, the gross in the twelvemonth 2010 increased due to the increase of dividend income from subordinate companies.

The net income of the company maintained at around RM 6-8 1000000s for the five old ages ended 2010. The per centum of net incomes is non stable for the recent five old ages. The per centum of alterations in net income is besides negative from the twelvemonth 2006 onwards. The company net income decreased enormously at the twelvemonth 2009 is because of the net alteration in stock lists. The company did non pull off good the stock lists in the company and hence caused the net income to diminish. However, the company still manages to increase the net income in the twelvemonth 2010.

The company entire assets are diminishing invariably with the per centum of around -2 % except for the twelvemonth 2008 which reached at -13.55 % . The company non-current assets are about 20 % of the entire assets in the company. The entire assets are diminishing from RM 1739 1000000s to RM 1422 1000000s in a really slow rate. The lessening in assets will non impact the ability of company to pay debt when it is due because the lessening in assets followed by the lessening in liabilities as good. The rate of lessening in entire assets is less than the rate of lessening in entire liabilities.

The company entire liabilities are diminishing tremendously with the per centum of around -12 % except for the twelvemonth 2008 which reached at -58.07 % . The company non-current liabilities are about 13 % of the entire liabilities in the company for the twelvemonth 2006 and 2007. This figure increased to around 20 % for the twelvemonth 2008 and 2009. This value so drops to 0.05 % in the twelvemonth 2010. The entire liabilities are diminishing from RM 661 1000000s to RM 295 1000000s in an mean rate. The lessening in liabilities is due to the company had paid up most of the debts and loans.

Ratios Analysis

LIQUIDITY RATIOS

Liquidity ratios measure the short term solvency of fiscal place of a house. These ratios are calculated to notice upon the short term paying capacity of a concern or the house ‘s ability to run into its current duties.

Current Ratio

The intent of the current ratio is to mensurate the company ‘s ability to run into as short-run fiscal duties out of its current assets. It should hold sufficient liquid resources to run into all current liabilities. High current ratios are needed for companies that have trouble adoption on short term notice.

Formula: Current Ratio =

Table for Lion Industries Corporation Bhd

Lion Industries Corporation Bhd

Year

2006

2007

2008

2009

Current Assets ( RM’000 )

1,313,118

1.379,910

1,275,981

1,165,170

Current Liabilities ( RM’000 )

574,129

509,064

300,355

261,570

Current Ratio

2.287

2.711

4.082

4.455

Average

3.479

Current ratio of Lion Industries Corporation Bhd shows the addition in twelvemonth 2006 to twelvemonth 2009, from 2.287 to 4.455 and lessening in twelvemonth 2010 to 3.86. From current ratio in twelvemonth 2006 to twelvemonth 2009, it shows that the ability to pay short term debt is increasing from twelvemonth to twelvemonth. But for the twelvemonth 2010, it besides shows that the ability of company to pay of short term debt has decrease. Average current ratio for this company is 3.479, for every RM1 of short term debt it has RM3.479 of current plus to pay for them.

ASSET MANAGEMENT/TURNOVER RATIOS

Activity/Turnover ratios are calculated to mensurate the efficiency with which the resources of a house have been employed and supply information about direction ‘s ability to command disbursals and to gain a return on the resources committed to the concern.

Entire Asset Employee turnover

Entire plus turnover analysis is the sum of gross revenues generated for every ringgit ‘s worth of assets. It is calculated by spliting gross revenues in ringgits by assets in ringgits. It measures a house ‘s efficiency at utilizing its assets in bring forthing gross revenues or gross. It besides indicates pricing scheme where companies with low net income borders tend to hold high plus turnover, while those with high net income borders have low plus turnover.

Formula: Assetss Turnover =

2.1 Table for Lion Industries Corporation Bhd

Lion Industries Corporation Bhd

Year

2006

2007

2008

2009

Gross saless ( RM’000 )

19,362

13,313

10,423

10,176

Entire Assets ( RM’000 )

1,739,445

1,688,758

1,478,221

1,452,372

Assetss Turnover ( times )

0.011

0.0079

0.0066

0.0069

Average ( times )

0.00814

We can see that the entire plus turnover ratio of Lion Industries Corporation Bhd has been diminishing from 0.011 times in 2006 to 0.0066 times in 2008, so increase to 0.0083 times in 2010. Although the company is non efficient in bring forthing gross revenues or gross in 2006 and 2007, but the company has better its efficiency to derive gross revenues or gross by utilizing its plus in 2008 to 2010. It is a good mark for stockholder to put in this company.

Inventory Employee turnover

A ratio demoing how many times a company ‘s stock list is sold and replaced over a period.

Formula: Inventory Turnover =

3.1 Table for Lion Industries Corporation Bhd

Lion Industries Corporation Bhd

Year

2006

2007

2008

2009

Gross saless ( RM’000 )

19,362

13,313

10,423

10,176

Inventory ( RM’000 )

43

43

43

43

Inventory Employee turnover

450.28

309.61

242.4

236.65

Average

303.11

Inventory turnover of the company has been diminishing numerously from 450.28 in twelvemonth 2006 to 236.65 in twelvemonth 2009 and increase 39.96 from twelvemonth 2009 to twelvemonth 2010. Average inventory turnover of Lion Industries Corporation Bhd is 303.11. This indicates the company is efficiency in the merchandise line or selling attempt.

PROFITABILITY RATIOS

Profitability ratios measure the consequences of concern operations or overall public presentation, effectivity of the house, direction ‘s ability to command disbursals and to gain a return on the resources committed to the concern.

Net income Margin

Net income border is one of profitableness ratios. It is calculated as net income divided by grosss, or net net incomes divided by gross revenues. It measures how much out of every ringgit of gross revenues a company earns. A low net income border indicates a low border of safety: higher hazard that a diminution in gross revenues will wipe out net incomes and consequence in a net loss.

Formula: Net income Margin =

4.1 Table for Lion Industries Corporation Bhd

Lion Industries Corporation Bhd

Year

2006

2007

2008

2009

Net Income ( RM’000 )

7,840

7,089

7,054

5,933

Gross saless ( RM’000 )

19,362

13,313

10,423

10,176

Net income Margin

40.49 %

53.25 %

67.68 %

58.30 %

Average

57.68 %

Net income border of the company has increased from 40.49 % in 2006 to 67.68 % in 2008 and decreased to 58.30 % in 2009 follow by a addition 68.69 % in 2010. This indicates that Lion Industries Corporation Bhd is doing money as it show positive net income border.

Tax return on Assetss

Tax return on assets or return on investing measures the company ‘s ability to use its assets to make net incomes and index of how profitable a company is comparative to its entire assets and displayed as a per centum. Return on assets gives an thought as to how efficient direction is at utilizing its assets to bring forth net incomes and calculated by spliting a company ‘s one-year net incomes by its entire assets.

Formula: Tax return on Assets=

Table for Lion Industries Corporation Bhd

Lion Industries Corporation Bhd

Year

2006

2007

2008

2009

Net Income ( RM’000 )

7,840

7,089

7.054

5,933

Entire Assets ( RM’000 )

1,739,445

1,688,758

1,487,221

1,452,372

Tax return On Assetss

0.0045

0.0042

0.0047

0.0041

Average

0.00464

Lion Industries Corporation Bhd lessening in return on assets from 0.45 % ( 2006 ) to 0.42 % ( 2007 ) and increase to 0.47 % ( 2008 ) and lessening once more to 0.41 % ( 2009 ) and eventually increase to 0.57 % . The positive per centums of return on assets indicate that this company is efficient in utilizing assets to bring forth net income.

Tax return on Equity

The sum of net income returned as a per centum of stockholders equity. Return on equity measures a corporation ‘s profitableness by uncovering how much net income a company generates with the money stockholders have invested.

Formula: Tax return on Equity=

Table for Lion Industries Corporation Bhd

Lion Industries Corporation Bhd

Year

2006

2007

2008

2009

Net Income ( RM’000 )

7,840

7,089

7,054

5,933

Stockholders ‘ Equity ( RM’000 )

1,078,147

1,097,392

1,113,114

1,120,937

Tax return On Equity

0.73 %

0.65 %

0.63 %

0.53 %

Average

0.65 %

Tax return on equity Lion Industries Corporation Bhd show that lessening 0.2 % from 0.73 % in twelvemonth 2006 to 0.53 % in twelvemonth 2009 and for the twelvemonth 2010, it increase to 0.72 % . Average return on equity of Lion Industries Corporation Bhd is 0.65 % shows a positive public presentation and return on equity encourages make investing on this company. If the return on equity is high, so the stock monetary value will besides be given to be high, and actions that addition return on equity are likely to increase the stock monetary values.

Leverage RATIOS/LONG TERM SOLVENCY

Leverage ratios measure the grade of protection of providers of long term financess and can besides help in judging a house ‘s ability to raise extra debt and its capacity to pay its liabilities on clip. Long term solvency conveys a house ‘s ability to run into the involvement costs and payment agendas of its long term duties.

Debt Ratio

Debt ratio indicates what proportion of debt a company relation to its assets. The step gives an thought to the purchase of the company along with the possible hazards the company faces in term of its debt-load. A debt ratio of greater than 1 indicates that a company has more debt than assets and Used in concurrence with other steps of fiscal wellness, the debt ratio can assist investors find a company ‘s degree of hazard.

Formula: Debt Ratio =

7.1 Table for Lion Industries Corporation Bhd

Lion Industries Corporation Bhd

Year

2006

2007

2008

2009

Entire Liabilities ( RM’000 )

661,298

591,366

374,107

331,435

Entire Assets ( RM’000 )

1,739,445

1,688,758

1,478,221

1,452,372

Debt Ratio

0.38

0.35

0.25

0.23

Average

0.284

For the Lion Industries Corporation Bhd, it shows a tendency of bit by bit lessening in the debt ratio from 0.38 in 2006 to 0.21 in 2010, which means that the proportion of entire debt comparison to the entire plus is diminishing each twelvemonth. In term of investing, the investor will confident to the company since they have more assets than debt.

Summary of the Analysis

From the tendency analysis above, we can see that the company gross and net income was decreased from the twelvemonth 2006 to 2009 but increased on twelvemonth 2010. Following, we see that the entire assets and the entire liability decreased quickly from the twelvemonth 2006 to 2010. On the other manus, from the ratio analysis, we can see from current ratio in twelvemonth 2006 to twelvemonth 2009, it shows that the ability to pay short term debt is increasing from twelvemonth to twelvemonth. But for the twelvemonth 2010, it besides shows that the ability of company to pay of short term debt has decrease. Meanwhile, on the plus management/turnover ratios, it can be seen that it is a good mark for stockholder to put in this company and it is indicates the company is efficiency in the merchandise line or selling attempt. Besides, the positive per centums of return on assets indicate that this company is efficient in utilizing assets to bring forth net income and besides the return on equity actions that increase return on equity are likely to increase the stock monetary values. Furthermore, in term of investing, the investor will confident to the company since they have more assets than debt.

Fiscal Strengths and Weaknesses

When calculating fiscal relationships, a good indicant of the company ‘s fiscal strengths and failings becomes clear. Analyzing these ratios over clip provides some positions as to how efficaciously and efficiency the concern is being operated. Fiscal strengths include improved productiveness, improved gross revenues and improved profitableness.

Research indicates that the company utilizing strategic direction constructs which are more profitable and successful than others that do non utilizing. Companies utilizing strategic direction constructs show of import betterment in grosss, profitableness, and productiveness compared to other houses that without any systematic planning activities. By utilizing good strategic direction, the company is successful better their grosss, assets and net income in recent twelvemonth. High executing steadfast tend to utilize systematic planning for readying to face future fluctuations in their external and internal environments. By looking to the decrease of the liabilities from twelvemonth to twelvemonth, it demoing that Lion Industries Corporation Bhd is good in manage their debt and have adequate hard currency or net income to refund the liabilities. Firms with be aftering systems more closely similar to strategic direction constructs by and large represent superior long-run fiscal public presentation relation to their companies. High executing house seem to do more informed determinations that include good expectancy of both short and long term affects. The good direction of Lion Industries Corporation Bhd can give readying for the company to confront any hazard in future. Therefore, they can impute good public presentation to unmanageable factors such as hapless economic system, technological alteration, or foreign competition.

Non-financial Strengths and Weaknesses

Non- fiscal Benefits include increased employee productiveness, improved apprehension of rivals ‘ schemes, greater consciousness of external menaces, apprehension of public presentation wages relationships, better job turning away and lesser opposition to alter.

Besides assisting the company to avoid fiscal shorten, strategic direction offers another touchable benefit, that is an bucked up consciousness of external menaces, an improved apprehension of rivals ‘ schemes, increased employee productiveness, reduced opposition to alter, and besides a clearer apprehension of public presentation wages relationships. This shows on the grosss and net income of the company on twelvemonth 2009 and 2010. Following, interaction among directors at all divisional or functional degrees of the company can be promoted by strategic direction because it helps to promote the job bar capablenesss of the company. Furthermore, effectual interaction among the company ‘s directors and employees can assist better merchandise or service, and acknowledging their parts by fostering employees, sharing organisational aims with employees and authorising them. In add-on to authorising directors and employees, strategic direction frequently brings order and subject to an otherwise floundering of the company. Besides, it can be the beginning of an efficient and effectual managerial system. Last, strategic direction may regenerate assurance in the current concern scheme or give information for disciplinary actions and provides a footing demand for placing and apologizing the alteration to all directors and employees of the company and it helps them position alteration as an chance instead than a menace.

Mentality for the Future

The operating environment is expected to stay ambitious in position of the uncertainnesss environing at that place covey of the major advanced economic systems. Nevertheless, domestic steel demand is expected to be higher with the execution of assorted substructure undertakings. Traveling frontward, the Group will go on to put to death its programs and schemes to spread out its market presence and better production efficiency and productiveness.

Recommendations

Ratio of assets turnover is considered really low with the norm of 0.00814. This shows that the company needs to run for a long clip to derive back the cost of assets that used to bring forth gross revenues. Lion Industries Corporation Bhd should cut down the investing or loan that given to subordinate companies. The assets or hard currency should be usage to put in activities that can bring forth more gross revenues such as recruit more employees and construct more workss.

Average for the return on equity in Lion Industries Corporation Bhd is 0.65 % . The profitableness of each RM100 of investing is RM0.65. This indicates that the return can acquire from the investing is rather low. To better the return that can acquire from the company, it must bring forth more net incomes during the operation. The net income can be generated by puting more on the production and selling of the merchandise.

Lion Industries Corporation Bhd is recommended to put more on the production of the company. Since the company net income is consider low, the direction can actuate the employees to work hard in the company so that net income will increase and as a return, employees ‘ fillips and wages will be increased.

Besides, the company assets are consider high. This can be invest or get the industry company to increase the size of the company every bit good as to increase the gross revenues of the company. As a return, the company will be holding a large market portion in the steel production industry. This besides can forestall the big competition within the industry. By acquisition of related field company, Lion Industries Corporation Bhd can hold a better chance of future. This is chiefly because of the company will be more stable and holding a stronger fiscal place.

In the other manus, the direction of the company should affect in research and development procedure. This is a good investing in the long term facet for the company. The company can increase the quality of the merchandise and cut down the cost at the same clip. This can increase the net incomes of the company in long term. Research and development procedure can better the fiscal place of the company although it is a large investing that uses a big sum of money.

Decision

In decision, the Lion Industries Corporation Bhd is rather stable in the fiscal direction. All the ratios are considered as good ratios and indicate that the company can pull off the company in assorted facets really good. For illustration, the liquidness of the company is really good. The company can pull off to pay debt on clip. Besides, the net income of the company holding positive growing rate and have about 57 % net income borders. This shows that the company manages to gain net income with a moderate high rate. Although the rate of growing for the net income is slow, the company besides manages to gain positive income with the norm of RM 7.25 million per annum.

On the other manus, the company is besides good in pull offing the stock lists. The company can sell and replace the stock lists in a really short period, such as 1.2 yearss. Furthermore, the company is holding good purchase ratio. This indicates that the company manages to pay debt in long term. Since, the overall ratios of the company are turning really good, hence it can be said that the company is besides rather strong in their fiscal place.

The tendency analysis shows that the company keeping the net income and net incomes per portion is positive and with an norm of RM 0.032. Although the net income seems low, the company ‘s net income is increasing. Although the net income for the 2009 is low, the company manages to increase the net income at the twelvemonth 2010. This shows that the company is holding possible to increase the net income for the following few old ages. Furthermore, the negative net incomes per portion in the twelvemonth 2009 are chiefly due to the economic downswing in the universe.

Besides, on the facet of non-financial analysis the company productiveness is consider good and have a good direction in the company. This will ensue to the addition of production and lower cost. Hence, this can increase the net income of the company at the same clip.

Since the company is holding a positive growing, the company has a large potency in the hereafter chance. Hence, after analysing the ratios and tendency of the company, we would wish to urge investors to put in Lion Industries Corporation Bhd. This recommendation is done after taking consideration of the full ratio in the company and the non-financial analysis every bit good as the hereafter chance of the company.

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