Revised version accounting assignment
- 1. SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN FOUNDATION IN NATURAL AND BUILT ENVIRONMENT(FNBE) SUBJECT: BASIC ACCOUNTING ( ACC 30205 ) LECTURER: MS.TAY SHIR MEN Student’s Name : Student’s ID Number : YIP XIAOJUNG 0323852 ALWIN NG KUN KET 0323596 CHIN KE NI 0324021 NG YEEN MUN 0323804
- 2. CONTENT CONTENTS PAGE Background Study ( LBS Bina ) 2 Recent Development ( LBS Bina ) 35 Profitability Ratio ( Year 2012 & 2013 ) 6 Stability Ratio ( Year 2012 & 2013 ) 7 Price Earning Ratio ( Year 2012 & 2013 ) 8 Share Price ( Current Share Price Year 2016) 9 Investment Recommendation 1013 Appendix 1423 Summary 24 References 25 1
- 3. BackGround Study ( LBS Bina ) LBS Bina Group Bhd. is a management and investment holding company, which engages in the property development business. It actually operates through the following segments such as : Property Development, Management & Investment, Trading & Others, Construction, and also Racing Circuit. The Property Development segment develops industrial, commercial properties and also residential. The Management & Investment segment focuses on investment holding and provision of management services. The Trading & Others segment involves in trading of building material, insurance agent, and selling of membership and covering insurance products. Moreover, the construction segment undertakes in the building, project planning and implementation contracting activities. The Racing Circuit segment develops and manages racing circuit. The company was founded on June 29, 2000 and is headquartered in Petaling Jaya, Malaysia. 2
- 4. Recent Development ( LBS Bina ) D’ Island Residence Corallia In year 2016, LBS Bina Group BHD. will be launching 10 wellappointed projects. The picture that shown above is one of the project in LBS Bina Group BHD. This project is a landed property which is also named as “ D’ Island Residence Corallia ”. It is measured at a generous 40ft x 80 ft, with a lofty 14feet ceiling and nestled within the idyllic D’ Island residence where gentle breeze blows over the cool and calm waters of landscaped lake, the gorgeous and capacious Corallia semidetached home provide all the settings in which lasting memories are created. In this project, the square size and also the features of each and every semidetached houses have already been fixed by LBS Bina Group BHD. Corallia D' Island Residence is located in Puchong, Selangor. The prices of every single semidetached houses are From RM1,630,900 RM2,126,900.In every semidetached houses, it will be consists of 5 bedrooms , 1 utility , and also 6 bathrooms. The gross built up of this building are 3,968 ft sq.ft , and also the total units of this projects are 86 units. The achievements of LBS Bina Group BHD. last year and upcoming plans in 2016 is that they are aiming RM1.2 billion in sales of year 2016 Nevertheless in this project , it is design for family or even big family who want to stay happily together. It have a lot of space inside each and everyone of this 3
- 5. semidetached houses, it is really sizable and also superior. ‘ Come home to a place, where memories echoes forever ’ BSP SKYPARK Another development in demand by LBS Bina Group BHD. is Barrington Square located in Jalan Saujana Putra, Bandar Saujana Putra, 42610 Jenjarom, Selangor, Malaysia. This BSP Skypark is a high rise residential cumcommercial development located in the budding township of Bandar Saujana Putra in Puchong.This township is relatively new and soon to be completed, with other projects in line to being developed by the same developer. In terms of amenities, there is a plan by the developer to be put in motion to provide for the tenants and residents. BSP SKypark has the ease of accessibility to several main highways, where KLIA is 4
- 6. only a 20minute drive away,while Putrajaya & Cyberjaya are only 15 minutes away. However there are a few setback to this development as it is still fairly new. Residents currently living within Bandar Saujana Putra complained about the weak mobile phone service an absence of maintained schools. The features of this projects are 3 bedrooms and 2 bathrooms in standard unit, Type C. The gross built up of this building (serviced residence) are 1,048 sq.ft. Moreover, in this project there are also several development details. The developer is under Utuh Sejagat Sdn Bhd, which the development land area are 21.14 acres and the land tenure are leasehold about 99 years . Moreover, about the facilities for the serviced residence, basically it is approximately 8 acres of overall development dedicated to facilities. It also have over 70 facilities organised into multi active and quiet zone. It separate dedicated jogging and also bicycle tracks totalling approximately 2.7km long too. It also have a 66,000 sq. ft clubhouse which spread over 4 levels. In this building, it have 8 different type of units layout to choose individuality by the buyers. It also have 3 tier security system in this building , so that residents can have a peace of mind to stay relaxable and happily. The CCTV monitored lift , podium lobby and also the car park are all with panic buttons. Last but not least , the expected date of completion are within 4 years and the launch price is from RM399,900.00. BSP 21 is a lifestylefocused development with over 70 amazing facilities. So now, get ready to live 21 hours of happiness. TYPES OF UNITS LAYOUTS 5
- 7. Profitability Ratio The following table shows the profitability ratio calculation and interpretation for LBS Bina Bhd. in the year 2012 and 2013. Profitability Ratios 2012 2013 Interpretation Return On Owners Equity Ratio: 00%Net Profit Owners equity × 1 00% 39,003,430 516,690,656.50 × 1 =7.55% 00%699,735,858 397,323,654 × 1 =56.78% ROE increases greatly from 7.55% in 2012 to 56.78% in 2013. Shows that the business is earning higher returns of capital in 2013. Net Profit Margin Ratio: 00%Net Sales Net Profit × 1 00%39,003,430 509,644,355 × 1 =7.65% 00%533,532,722 397,323,654 × 1 =74.47% NPM increases greatly from 7.65% in 2012 to 74.47% in 2013. This is due to a huge increase in net profit in 2013 compared to 2012. Gross Profit Margin Ratio: 00%Net Sales Gross Profit × 1 00%509,644,355 146,227,906 × 1 =28.69% 00%533,532,722 168,577,154 × 1 =31.60% GPM increases from 28.69% in 2012 to 31.60% in 2013. Shows an increase in efficiency of managing COGS and Net Sales in 2013 compared to 2012.. General Expense Ratio: 00%Net sales Total General Expenses × 1 00%67,470,147 509,644,355 × 1 =13.24% 00%85,596,945 533,532,722 × 1 =16.04% GER increases from 13,24% in 2012 to 16.04% in 2013. This shows that the general expenses spent in 2013 is higher than the general expenses spent in 2012. Financial Expense Ratio: 00%15,170,850 509,644,355 × 1 00%18,457,247 533,532,722 × 1 FER increases from 2.98% in 2012 to 3.46% in 2013. This shows that the 6
- 8. 00%Net Sales Total Financial Expenses × 1 =2.98% =3.46% financial expenses spent in 2013 is higher than the amount spent in 2012. Financial Stability Ratio The following table shows the profitability ratio calculation and interpretation for LBS Bina Bhd. in the year 2012 and 2013. Stability Ratio 2012 2013 Interpretation Working Capital Ratio: Total Current Assets Total Current Liabilities 520,720,661 927,829,389 =1.78 : 1 609,599,483 925,492,766 =1.52 : 1 In 2013, For every RM 1 in current liability, LBS Bina has RM 1.52 to pay for it. A huge drop from RM 1.78 in 2012 due to the increase in current liabilities. Total Debt Ratio: 00%Total Assets Total Liabillities × 1 00%908,176,834 1,435,008,317 × 1 =63.29% 00%2,009,812,670 1,137,172,437 × 1 =56.58% In year 2013, TDR is lower at 56.58% compared to 63.29% in 2012. The decrease in TDR is good for the business as business with TDR above 50% risk a higher chance of bankruptcy. Inventory Turnover Ratio: 65days 3 ÷ Stocks (average) Costs of goods sold 653 ÷ 363,416,449 15,721,777.5 =15.79 days 653 ÷ 18,084,313 364,955,568 =18.09 days There is a small increase in ITR from 15.79 days in 2012 to 18.09 days in 2013. This means the company is not able to market their batch of goods faster to pay off their liabilities. Interest Coverage Ratio: Interest Expenses Net profit + Interest Expenses 18,457,247 39,003,430+18,457,247 15,170,850 397,323,654+15,170,850 In 2013, LBS Bina has a huge increase in ICR and is able to pay off its interest rate by 27.19 times 7
- 9. =3.10 times =27.19 times compared to 27.19 times in 2012. This is due to the huge increase in net profit and the decrease in interest expenses. Price Earning Ratio ( P/E Ratio ) 2012 Basic earning per share: RM 0.097 Current share price: RM 0.84 P/E Ratio: = 8.66 timesRM 0.84 RM 0.097 Investors will have to wait 8.66 years to recoup investment 2013 Basic earning per share: RM 0.96 Current share price: RM 1.56 P/E Ratio: = 1.63 timesRM 0.96 RM 1.56 Investors will have to wait 1.63 years to recoup investment The P/E ratio measures how profitable a share is at the current time. In the year 2012, the P/E ratio is 8.66 times while in the year 2013 the P/E ratio is 1.63. This means that the share in 2013 is more profitable compared to the share in the year 2012. A P/E ratio of 8.66 indicates that a shareholder will need to wait for 8.66 years to recoup his investment. 8
- 10. Current Share Price (2016) Date Share Price (RM) 28th January 2015 1.35 29th January 2015 1.35 1st February 2015 1.35 2nd February 2015 1.36 Mean Share Price (1.35+1.35+1.35+1.36)/4 =1.353 9
- 12. FTSE BURSA MALAYSIA KLCI INDEX JAN 2015JAN 2016 In order to figure out if an investment in LBS Bina is worth the risk, 3 points of time would be selected from the time period January 2015 to January 2016 to determine the performance of the business against the market. Our first point of the period is January 5, 2015, the current share price is Rm 1.65 and the KLCI Index is 1736.62. On February 5, 2015, the share price dropped to Rm 1.55 and the index increase to 1803.09. The decrease in share price is (1.551.65)/1.65 x 100% = 6.06%. While the index change is (1803.091736.62)/1736.62 x 100%= +3.83%. This concludes that the company performance is much worse than the market performance. Our second point is July 28, 2015. The current share price is Rm 1.48 and the index is 1699.70. On August 28, 2015, the market share price dropped to Rm 1.35 and the index also dropped to 1612.74. The share differences are as follows, (1.351.48)/1.48 x 100%= 8.78% while the index 11
- 13. change is (1612.741699.70)/1699.70 x 100%= 5.12%. This concludes the company performance is worse than the market performance. Our final point is September 1, 2015. The current share price is Rm 1.28 and the market index is 1609.21. On October 1,2015. The share price increased to 1.35 with the index also increasing to 1633.93. The increase of share price is (1.351.28)/1.28 x 100%= 5.47% and the increase in index is (1633.931609.21)/1609.21 x 100%= 1.54%. This point concludes that the company is able to perform better than the market after a financial hit. By comparing LBS Bina and the overall market, LBS Bina often suffer a large decrease in share prices compared to the market. Although LBS Bina is also able to recover slightly faster than the market after a financial hit. The bad drop is share prices throughout the period strongly advises against investing in LBS Bina. Investment Recommendation According to LBS Bina’s price earning ratio for the year 20122013, the increase of return of 1.63 times in 2013 from 8.66 times in 2012 would have lit up the eyes of many investors. LBS bina’s profitability ratio, the return on equity (ROE), net profit margin (NPM) and gross profit margin (GPM) has slightly improved and shown positive signs for the business. Although the expenses spent has increased from the year 2012 to the year 2013, the overall profit has indicated that the business is doing fairly well. However, LBS Bina’s ability to pay off its current liabilities had decreased from 1.78 to 1.52 and does not satisfy the 2:1 ratio of staying within the borderline of borrowing. Besides that, LBS Bina’s total debt ratio (TDR) showed that its total debt has decreased by 6.71% to 56.58 but it’s still considered high above the 50% which ensures that the business will 12
- 14. not have a risk of bankruptcy. Their stock turnover has taken a longer period of time so they are taking a longer time to generate more cash quickly, making the business to pay off its liabilities slower. On the other hand, LBS’s interest coverage ratio (ICR) has also shown a massive improvement in 2013 compared to 2012. In other words, the company has demonstrated a huge profitability and financial stability and its shares are available at to warrant an investment. An investor will only need to wait for a short period of time that is 1.63 years as of 2013 to recoup his investment. The company has shown good promise in terms of their growth in revenue. As such, LBS has proven to be a stable company. So, LBS’s share is worth to invest back then. However, In the following 2 years, after a sharp increase in 4 months to its highest market price of RM1.84 per share on 10 April 2014, the share price has fallen gradually throughout the rest of the remaining period reaching its lowest point on September 1st 2015. The comparison between the company and the market has also proven that LBS is not worth investing at the moment. Therefore, from the above analysis of Profitability Ratios, Financial Stability Ratios, Price Earning Ratios and Comparison to market Index, we can conclude that LBS used to be recommended to invest in but not recommended to invest in at this current period. 13
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- 26. Summary From this assignment, we have learnt many things. We have learnt the background of LBS Bina, the projects that they are undergoing and completed. It has been a really good opportunity to be able to do a research on such a company. We have also learnt how to put what we studied in class to calculate the various profitability ratio, financial stability ratio and price earning ratio. We have learnt how to interpret the meanings of the ratio and how to justify what the numbers mean. This assignment has teached us how to know if a share is profitable and whether we should invest in a company or not. I think that this will help us in the future when we need to do investments for ourselves. We have also put our knowledge that we gained from attending the classes into real world usage. This assignment helps us to fully understand the terms and meanings used in this module. 25