CORPORATE FINANCIAL STRATEGIES

BFN 3104
FINANCE PROJECT
SECTION B02

PREPARED FOR: DR. CHAN KOK THIM

PREPARED BY:
Names
NUR AWATIF IZANIE BT MOHD NOOR
NATASHA EZRINA BT MOHD KASWAN
YASHEEKA BT ISHAK
NUR SALINA BT YUSOFF

Students ID

ECONOMIC VALUE ADDED (EVA)

The Economic Value Added (EVA) is a measure that enables managers to see whether
they are earning an acceptable return. The EVA of the company is just a measure of the
incremental return that the investment earns over the market rate of return. In simple terms, it
can be stated that EVA measures the profitability net of cost of capital. EVA can be taken as
the net operating profit minus an applicable charge for the opportunity cost of all the capital
invested in an enterprise. As such, EVA is an estimate of true economic profit or the amount
by which earnings exceed or fall short of the required minimum rate of return that
shareholder and lenders could get by investing in other securities of comparable risk. It is a
value based financial performance measure, an investment decision tool and a performance
measure reflecting the absolute amount of shareholder value. It is computed as the product of
the excess return made on an investment and the capital invested. The EVA is the net
operating profit minus a charge for the opportunity cost of all capital invested in a project.
Thus, it is an estimation of true economic profit. The idea behind EVA is that shareholder
must earn a return that compensates their risks. In other word, equity capital has to earn at
least the same return as similar risky investments in equity markets. It means that wealth is
created when the company earns more than the cost of investing or the cost of running the
business. The concept of shareholders value is that a company creates value only for its
shareholders when the returns it achieves on its capital is greater than its opportunity. In
addition, when compensation is based on EVA, the goals of employees and managers are
associated with the goals of the entire company. Proponents of EVA have made following
principles claims about EVA. EVA helps in reducing Agency conflict and improve decision
making (Costigan & Lovata, 2002; Biddle et al.1999 ). EVA is more strongly associated with
stock return than other measures. (Maditinos et al., 2006; Lehen and Makhija,1997). EVA
Improves Stock Performance (Ferguson et al., 2005). EVA adds more informational content
in explaining stock returns (Erasmus, 2008; Chen and Dodd, 1997; Kim,2006; Palliam,
2006). EVA and Market Value are correlated (Lefkowitz, 1999; OByrne, 1996; Uyemura,
1996; Peterson and Peterson, 1996).
Calculation of EVA
EVA = Operating Profit Cost of Capital Employed
Or
EVA = Operating Profit (Capital Employed x Weighted Average Cost of Capital)

The equation show that EVA is depends on:

1) The firms net operating profit after taxes (NOPAT)
2) Its total capital invested to generate net income
3) Its weighted average cost of the capital (WACC)
The EVA is known as economic profit and is derived after subtracting the cost of
capital employed. A positive EVA indicates that the operating profit is sufficient to cover the
total cost of capital. The EVA provides management tool for investors and corporate
managers to identify whether value has been created or not for any business and investments.
NOPAT is a measure of the operating profit of an organization. From the income statement,
operating income (EBIT) is sales less cost of sales and less selling, general and
administrative expenses. Then, EBIT is less taxes in order to obtain NOPAT. The EVA is
obtained by subtracting cost of capital from NOPAT. In real world, not many businesses
realize their true cost of capital, which means that they probably do not know if their
company is increasing in value each year. There are two basic types of capital which is
borrowed and equity. The cost of borrowed capital is the interest rate charged by the
bondholders and the banks. The equity capital is provided by the shareholders. An investors
expected rate of return on an investment is equal to the risk free rate plus the market price for
the risk that is assumed with the investment. The relationship between expected return and
risk is measured by comparing a company to the market.
The next step, the study calculates the capital that is being used by the property
corporations from the economist point of view. Accounting profits is differing from the
economic profits. Under generally accepted accounting principles, most companies appear to
be profitable. However, many actually destroy shareholder wealth because they earn less
than the full cost of capital. In this study, capital employed is basically the long term funds
employed in a business. It is from the ordinary shareholders and from long term liabilities.
Hence, it is the effective amount of money actually being used in a business, regardless of
whether it is from the owners or creditors or banks. Since capital employed is net worth, the
formula is total assets less liabilities.

EVA = NOPAT- (WACC)(Capital)

NOPAT = EBIT (1 - Tax rate)
Operating Capital = (Operating CA Operating CL) + Net Fixed Assets
Shell Refining Company
2010

2011

2012

2013

2014

10,195,808

11,117,280

15,124,473

14,531,187

14,147,229

0.75

0.75

0.75

0.75

0.75

NOPAT

7,646,856

8,337,960

11,343,354.75

Operating CA

2,501,464

2,723,975

2,539,352

10,898,390.2
5
2,721,381

10,610,421.7
5
1,613,736

Operating CL

838,218

1,332,448

714,160

1,191,440

728,131

Net Fixed

1,157,597

1,494,369

1,751,425

1,745,325

1,225,250

Assets
OPERATING

2,820,843

2,885,896

3,576,617

3,275,266

2,110,855

0.00

0.00

1.74

2.69

2.06

7,646,856

8,337,960

11,281,121.61

10,810,285.5
9

10,566,938.1
4

EBIT
(1-Tax Rate)

CAPITAL
WACC
EVA

The highest Economic Value Added (EVA) of Shell Refining Company for the five
years, which is from year 2010 to 2014, is in year 2012, where this company achieved
RM 11,281,121.61 with Weighted Average Cost Capital (WACC) 1.74%. A positive
EVA indicates that the operating profit is sufficient to cover the total cost of capital.
EVA is a critical driver of a company's stock performance. If EVA is positive but is
expected to become less positive, it is not giving a very good signal. Contrariwise, if a
company suffers negative EVA but is projected to rise into a positive territory, a good
buying signal is given. At this point of view, Shell Refining Company is considered as
a good company where the EVA is slightly increased from year 2010 to 2012.

Petronas Gas Berhad

EBIT
(1-Tax Rate)

2010
1,292,217
0.75

2011
1,262,383
0.75

2012
213,157
0.75

2013
226,689
0.75

2014
1,815,053
0.75

NOPAT
Operating CA

969,162.75
2,857,654

946,787.25
3,226,475

159,867.75
165,235

170,016.75
183,650

1,361,289.75
1,289,848

Operating CL

447,632

340,030

58,365

64,790

668,185

Net Fixed

7,643,253

7,008,302

300,844

330,114

11,970,629

Assets
OPERATING

10,053,275

9,894,747

407,714

448,974

12,592,292

4.68

0.00

6.91

10.49

12.83

498,669.48

946,787.25

131,694.71

122,919.38

-254,686.21

CAPITAL
WACC
EVA

The lowest Economic Value Added (EVA) for Petronas Gas Berhad for the five years,
which is from year 2010 to 2014, is in year 2014, where this company achieved RM
-254,686.21 with Weighted Average Cost Capital (WACC) 12.83%. A negative EVA

indicates that the operating profit is insufficient to cover the total cost of capital. EVA
is a critical driver of a company's stock performance. If EVA is negative but is
expected to become positive, it is giving a very good signal. Contrariwise, if a
company suffers positive EVA but is projected to fall into a negative territory, it is not
good buying signal is given as Petronas Gas Berhad, their EVA is considered falling
by years.

Tenaga Nasional Berhad

EBIT
(1-Tax Rate)

2010
22,346.70
0.75

2011
27,109.90
0.75

2012
27,372.80
0.75

2013
28,082.80
0.75

2014
32,354.50
0.75

NOPAT
Operating CA
Operating CL

16,760.03
15,994.50
5,276.9

20,332.43
12,622.20
5,585.6

20,529.60
18,457.20
5,771.3

21,062.10
19,647.80
6,614.4

24,265.88
16,132.10
7,973.5

Net Fixed

59,766.1

61,688.6

69,163.5

78,571.6

90,657.5

Assets
OPERATING

70,483.70

68,725.20

81,849.40

91,605

98,816.10

7.00

6.50

9.70

8.00

8.50

11,826.17

15,865.29

12,590.21

13,733.70

15,866.51

CAPITAL
WACC
EVA

The highest Economic Value Added (EVA) of Tenaga Nasional Berhad for the five
years, which is from year 2010 to 2014, is in year 2014, where this company achieved
RM 15,866.51 with Weighted Average Cost Capital (WACC) 8.50%. A positive EVA
means that the management has worked towards maximizing the shareholders wealth
and vice versa. Not only the positive EVA is enough, the trend must also be seen. If
the EVA of a firm is declining over a period of time, it may even go negative in the
coming future. Such trends would give better insight and not stand alone EVA figures.
The main advantage of using EVA as a metric for performance appraisal is that it
takes into consideration all the costs including the cost of equity capital, which is
ignored in normal accounting. With this EVA Model, economic profit can be
determined.

Maxis Berhad

EBIT
(1-Tax Rate)

2010
4,778,317
0.75

2011
5,088,425
0.75

2012
5,546,196
0.75

2013
5,607,534
0.75

2014
4,282,130
0.75

NOPAT
Operating CA
Operating CL

3,583,737.75
2,048,048
3,105,357

3,816,318.75
1,806,385
2,828,255

4,159,647
2,007,612
2,633,339

4,205,650.50
1,825,099
2,433,751

3,211,597.50
2,513,412
3,001,627

Net Fixed

16,122,371

16,154,844

15,760,137

15,477,427

15,531,479

Assets
OPERATING

15,065,062

15,132,974

15,134,410

14,868,772

15,043,254

CAPITAL
WACC
EVA

6.3

5.6

6.7

8.1

2,634,638.84

2,968,872.206

3,145,641.53

3,001,279.97

7.4
2,098,395.96

The highest Economic Value Added (EVA) of Maxis Berhad for the five years, which
is from year 2010 to 2014, is in year 2012, where this company achieved RM
3,145,641.53 with Weighted Average Cost Capital (WACC) 6.7%. A positive EVA

indicates that the operating profit is sufficient to cover the total cost of capital. EVA is
a critical driver of a company's stock performance. If EVA is positive but is expected
to become less positive, it is not giving a very good signal. Inversely, if a company
suffers negative EVA but is projected to rise into a positive territory, a good buying
signal is given.

Nestle (Malaysia) Berhad

EBIT
(1-Tax Rate)
NOPAT
Operating CA
Operating CL
Net Fixed
Assets
OPERATING

2010
3,517,393
0.75

2011
4,119,150
0.75

2012
3,727,771
0.75

2013
4,124,317
0.75

2014
3,952,376
0.75

2,638,044.75
783,525
623,269

3,089,362.50
1,014,888
878,321

2,795,828.25
839,907
872,045

3,093,237.75
926,017
1,022,999

2,964,282
890,335
1,170,240

994,812

987,259

1,064,466

1,158,747

1,409,946

1,155,068

1,123,826

1,032,328

1,061,765

1,130,041

3.79

4.40

7.5

9.05

9.05

2,594,267.67

3,039,914.16

2,718,403.65

2,997,148.02

1,941,594.90

CAPITAL
WACC
EVA

The lowest Economic Value Added (EVA) for Nestle (Malaysia) Berhad for the five years,
which is from year 2010 to 2014, is in year 2014, where this company achieved RM
1,941,594.90 with Weighted Average Cost Capital (WACC) 9.05%. A negative EVA indicates

that the operating profit is insufficient to cover the total cost of capital. EVA is a critical
driver of a company's stock performance. If EVA is negative but is expected to become
positive, it is giving a very good signal. Contrariwise, if a company suffers positive EVA but
is projected to fall into a negative territory, it is not good buying signal is given as Nestle
(Malaysia) Berhad, their EVA is considered falling by years.

MARKET VALUE ADDED (MVA)

DIVIDEND GROWTH

Dividend growth is commonly been describe as an annualized percentage rate of

growth that a particular stock's dividend withstand over a period of time. The time period
included in the analysis can be of any interval desired, and is calculated by using the least
squares method, or by simply taking a simple annualized figure over the time period.
Dividend growth is an exceedingly important statistic for investors to focus on. And that is
why investors are always attracted to stocks which have high dividend yields.
The pace of the current size of the dividend is what often more important at which it
has been growing or shrinking. Growing dividends gives a sign of a healthy stock, one that
has been committed to its shareholders, and may also be an indication of more dividend
raises to come. When the dividend shrink or over-sized, it can be interpreted as a warning
sign of problems with the company, which perhaps the investor needs to dig a little deeper
into the companys financials to see what troubles there may be. The effect of a firms
dividend policy on the current price of its shares is matter of considerable importance, which
not only to the corporate officials who set the policy, but also to investors planning portfolios
and to economists who seeks to understand and appraise the functioning of the capital
markets. (Miller, 1961)
The fallen of the stocks share price, can be determined by the share price which had
big bonds and a big dividend, and also making the dividend to yield bigger, without an
increase in the actual dollar amount of the dividend. The dividend growth rate is the average
rate of growth a stocks dividend has experienced for a specific period of time. There is
countless time periods that can be used while using this model, but the time period used must
deliver a statistic that can help determine the benefit of owning a stock. In dividend growth
rate, a stock with a long history of dividend payments is estimable and does make the stock
more engaging. But a more recent history of both dividend payments and increases is a better
indicator of the stocks potential dividend payouts in the coming years.

SHELL REFINING COMPANY

YEAR
DIVIDEND

2010

2011

2012

2013

2014

(sen)

20.0

20.0

20.0

10.0

25.0

WACC = 2.06%
Compounded Annual Growth Rate for 5 financial years
CAGR =
=
= 0.0456
Dividend Growth Model
=
= 1,045.60
Dividend Yield
Dividend Yield =
=
= 0.06313 or 6.3131%
PETRONAS GAS BERHAD
YEAR
DIVIDEND

2010

2011

2012

2013

2014

(sen)

50.0

50.0

50.0

50.0

55.0

WACC = 3.67%

Compounded Annual Growth Rate for 5 financial years

CAGR =
=
= 0.0192 or 1.92%
Dividend Growth Model

=
= 320.32
Dividend Yield
Dividend Yield =
=
= 0.1033 or 10.33%
TENAGA NASIONAL BERHAD
YEAR
DIVIDEND

2010

2011

2012

2013

2014

(sen)

26.00

4.50

20.09

50.00

29.00

2013

2014

WACC = 8.50%
Compounded Annual Growth Rate for 5 financial years
CAGR =
=
= 0.0220 or 2.2%
Dividend Growth Model
=
= 470.44
Dividend Yield
Dividend Yield =
=
= 0.2530 or 25.30%
NESTLE (MALAYSIA) BERHAD
YEAR

2010

2011

2012

DIVIDEND
(sen)

165.00

180.00

210.00

235.00

235.00

WACC = 9.05%
Compounded Annual Growth Rate for 5 financial years
CAGR =
=
= 0.0732 or 7.32%
Dividend Growth Model

=
= 14,578.15
Dividend Yield
Dividend Yield =
=
= 3.430%
MAXIS BERHAD
YEAR
DIVIDEND

2010

2011

2012

2013

2014

(sen)

40.0

40.0

40.0

40.0

40.0

WACC = 7.40%
Compounded Annual Growth Rate for 5 financial years
CAGR =
=
=0
Dividend Growth Model

= 540.54
Dividend Yield
Dividend Yield =
=
= 1.746%

SHELL REFINING COMPANY

At the end of year 2014, the price of stock, for Shell Refining Company is traded at RM
1,045.60, while the market price per share is traded at RM396.0. When the price of stock, is
higher than the market price, it results that the market price is undervalued, or in other words,
the stock is traded at a price below their intrinsic value. This may results that the stock is
worth to buy. Nevertheless, the dividend yield shows that the company has been paying out
their investors by 6.31% of dividend. When the dividend yield is in a lower value, it may
effects the stock share price to become higher which results to RM1,045.60.
PETRONAS GAS BERHAD
The price of stock, is traded at RM 320.32 at the end of year 2014 when the companys
WACC is 3.67% are used in the formula to gain the right value of the stock price. The
dividend yield of the company shows the value of 10% which gives impact to price of stock
when the yield is getting higher than the previous year. Petronas Gas Berhad had a price per
share of RM 532.40 which results the company stock to be overvalued. Since the price per
share gives a higher value then the price of stock, the stock is categorized as overvalued, and
it is declares as the type of stock that is not worth buying.
TENAGA NASIONAL BERHAD
With the WACC value of 8.50%, the price of stock, of the end of the year 2014 for the
company is RM470.44. When the interest rate is higher than the value of the yield, it may
results to a not attractive type of shares for buyers to buy. However, the results have shown
that the interest rate is lower than the yielded value, and the shares are considered an
attractive share in the market. The price per share is consider as undervalued when the value

of the price of stock, , is higher than the price of share which is RM 114.59. The dividend
yield of the company shows the value of 25.30% for each of the dividend paid out.
NESTLE (MALAYSIA) BERHAD
The price of stock, is traded at RM 14,578.15 at the end of year 2014 when the companys
WACC is 9.05% are used in the formula to gain the right value of the stock price. The
dividend yield of the company shows the value of 3.4% which gives impact to price of stock
when the yield is lower than the previous year. Nestle Berhad had a price per share of RM
68.50 which results the company stock to be undervalued. Since the price of stock gives a
higher value then the share price, the stock is categorized as undervalued, and it may declare
as worth buying stock.
MAXIS BERHAD
At the end of year 2014, the price of stock, for Maxis Berhad is traded at RM540.54, while
the market price per share is traded at RM22.90. When the price of stock is higher than the
market price, it results that the market price is undervalued. This may results that the stock is
worth to buy. Nevertheless, the dividend yield shows that the company has been paying out
their investors by 1.7% of dividend. When the dividend yield is in a lower value, it may
effects the stock share price to become higher which results to RM540.54.

FREE CASH FLOW (FCF)

In corporate finance, Free Cash Flow (FCF) is cash flow available for distribution among
all the securities holders of an organization. They include equity holders, debt holders, preferred
stock holders, convertible security holders, and so on. Free Cash Flow represents the cash that a
company is able to generate after setting aside the money that the company will require to
maintain or expand its asset base. It is basically a measure of the companys ability to generate the
cash flow necessary to maintain operations. It relies heavily on the state of the companys cash
generated from operations, which in turn is influenced by the companys net income.
Free Cash Flow is calculated most simply by subtracting the companys capital
expenditures from the operating cash flow. Capital expenditures are basically the costs related to

long-term improvements. They are expenses that provide for future benefits. There are typically
two common approaches to measuring a companys cash flow. Once all operating expenses and
taxes are paid, and once the company has made all of their necessary investments; the remaining
cash flow is free to then be distributed amongst the creditors and shareholders. On the other hand,
a statement of cash flows is also commonly used. This method focuses on identifying sources and
uses of cash that explain the change in a companys cash balance reported on their balance
sheets. Value does not necessarily equal Free Cash Flow, although a firm with high Free Cash
Flow is usually creating value for investors. Free Cash Flow depends also on the expected rate of
return on new investments that the company is making.
Free Cash Flow Calculation
There are three ways to do the free cash flow calculation.
i) Free Cash Flow = Sales Revenues - Operating Costs and Taxes - Required Investments in
Operating Capital
Sales revenues are taken from the income statement. Operating costs and taxes are also taken from
the income statement. Investments in new operating capital show up as increases in fixed assets on
the balance sheet.
ii) Free Cash Flow = Net Operating Profit after Taxes (NOPAT) Net Investment in Operating
Capital (NIiOC)
NOPAT is the same figure [Sales Revenue - Operating Costs and Taxes] as in the first free cash
flow calculation and net investment in operating capital is the same as the third term in the first
calculation or the increase in fixed assets on the balance sheet.
iii) Free Cash Flow = Net Operating Cash Flow - Capital Expenditures
Net Operating Cash Flow comes from the first section of the Statement of Cash Flows and Capital
Expenditures comes from the increase in fixed assets off the balance sheet.
All three methods of calculating free cash flow should yield the same answer as they just
approach the same information from different angles.
For this assignment we used second method of calculation for Free Cash Flow.
Free Cash Flow = Net Operating Profit after Taxes (NOPAT) Net Investment in Operating
Capital (NIiOC)
Step calculation before calculate Free Cash Flow

First step: Net Operating Working Capital = Operating Current Assets Operating Current
Liabilities
Second step: Operating Capital = Net Operating Working Capital + Net Fixed Assets
Third Step: Net Investment in Operating Capital = Operating Capital Current Year Operating
Capital Previous Year
Fourth Step: Net Operating Profit after Taxes = Earnings before Interest & Tax (1 Tax rate)
Fifth Step: Free Cash Flow = Net Operating Profit after Taxes Net Investment in Operating
Capital

Shell Refining Company

2010 (RM)
OPERATING 2,501,464,000

2011 (RM)
2,723,975,000

CA

2012 (RM)
2,539,352,00

2013 (RM)
2,721,381,000

2014 (RM)
1,613,736,000

OPERATING

838,218,000

1,332,448,000

714,160,000

1,191,440,000

728,131,000

CL
OPERATING

2,820,843,000

2,885,896,000

3,576,617,00

3,275,266,000

2,110,855,000

1,494,369,000

0
1,751,425,00

1,745,325,000

1,225,250,000

CAPITAL
NET

1,157,597,000

FIXED

ASSETS
FREE

71,124,400,000

712,886,592,00

6,946,802,38

901,442,587,00

2010 (RM)
2,857,654,000

2011 (RM)
3,226,475,000

2012 (RM)
165,235,000

2013 (RM)
183,650,000

2014 (RM)
1,289,848,000

OPERATING

447,632,000

340,030,000

58,365,000

64,790,000

668,185,000

CL
OPERATING

10,053,275,000

9,894,747,000

407,714,000

448,974,000

12,592,292,000

CAPITAL
NET

7,643,253,000

7,008,302,000

300,844,000

330,114,000

11,970,629,000

CASH

490,610,282,000

FLOW

Petronas Gas Berhad

OPERATING
CA

FIXED

ASSETS
FREE

968,710,400,00

946,945,778,00

9,646,900,75

169,975,490,00

1,349,146,432,00

CASH
FLOW

Tenaga Nasional Berhad

2010 (RM)
15,994,500,000

2011 (RM)
12,622,200,000

2012 (RM)
18,457,200,000

2013 (RM)
19,647,800,000

2014 (RM)
16,132,100,000

OPERATING

5,276,900,000

5,585,600,000

5,771,300,000

6,614,400,000

7, ,973,500,000

CL
OPERATING

70,483,700,000

68,725,200,000

81,849,400,000

91,605,000,000

98,816,100,000

CAPITAL
NET

59,766,100,000

61,688,600,000

69,163,500,000

78,571,600,000

90,657,500,000

288,632,500,00

406,544,108,00

520,132,907,00

1,290,406,223,00

510,676,650,00

OPERATING
CA

FIXED
ASSETS
FREE
CASH
FLOW

Maxis Berhad
2010 (RM)
783,525,000

2011 (RM)
1,014,888,000

2012 (RM)
839,907,000

2013 (RM)
926,017,000

2014 (RM)
890,335,000

OPERATING

623,269,000

878,321,000

872,045,000

1,022,999,000

1,170,240,000

CL
OPERATING

1,155,068,000,

1,123,826,000

1,032,328,000

1,061,765,000

1,130,041,000

994,812,000

987,259,000

1,064,466,000

1,158,747,000

1,409,946,000

4,840,958,000

23,483,294,000

406,340,808,00

802,302,380,000

520,982,300,000

OPERATING
CA

CAPITAL
NET
FIXED
ASSETS
FREE
CASH
FLOW

Nestle (Malaysia) Berhad

2010 (RM)
783,525,000

2011 (RM)
1,014,888,000

2012 (RM)
839,907,000

2013 (RM)
926,017,000

2014 (RM)
890,335,000

OPERATING

623,269,000

878,321,000

872,045,000

1,022,999,000

1,170,240,000

CL
OPERATING

1,155,068,000,

1,123,826,000

1,032,328,000

1,061,765,000

1,130,041,000

994,812,000

987,259,000

1,064,466,000

1,158,747,000

1,409,946,000

58,975,827,000

67,457,435,000

11,074,506,000

8,472,300,000

3,523,905,000

OPERATING
CA

CAPITAL
NET
FIXED
ASSETS
FREE
CASH
FLOW

Shell Refining Company

From the table, Shell Refining Company has positive free cash flow for five years from 2010
2014. The positive free cash flow shows that their businesses and investments has more
revenue than bills. However, negative free cash flow is not necessarily indicate that the
company is bad. On 2013, the free cash flow shows the highest amount of money has left
over after paid out all bills and expenses with RM 901,442,587,000 follow by year 2011 on
second highest and 2014 as third highest. During that year, the company generate more
revenue after 2010, where the free cash flow shows only RM 6,946,802,380. On 2010, it can
be in this situation when the company in attempt to help it grow larger.
Petronas Gas Berhad
Petronas Gas Berhad generate positive free cash flow within 2010 2014 too. It seems
Petronas generates highest revenue last year (RM 1,349,146,432,000) after two years of drop
in free cash flow which is on 2012 and 2013. It seems there are good business opportunities
at a good value and high rate of return that might cause to big spending on those two years.

While on 2010 and 2011, the amount of money generated was almost reaching the same
amount of 2014.
Tenaga Nasional Berhad
The steady growth from 2010 to 2013 indicate that Tenaga Nasional Berhad generated large
amount of revenue and the left overs cash increasing after it has paid all of its expenses
including investments. It shows that Tenaga Nasional Berhad financial health is very good.
However on 2014, there has been a declined half from the value on 2013 which is RM
510,676,650,000.
Maxis Berhad
Maxis left over amount of money are steadily increasing from 2010 to 2013 same as Tenaga
Nasional Berhad. It seems the company positive free cash flow can cover operations solely
from running the business. It also signify that the company is typically growing because of
positive financing cash flow from investors or lenders. However, on 2014 the amount that
falls from RM 802,302,380,000 to RM 520,982,300,000 indicates that it still in a good
financial health because of positive free cash flow.
Nestle (Malaysia) Berhad
Since operational cash flow is positive, Nestle (Malaysia) Berhad must generate positive
cash flow from its financing or investing activities. Even though the amount of money has
lessen for the past four years which is on 2011 to 2014, the company still generates financing
cash flow that comes from obtaining new debt, selling stock, retiring debt, or paying
dividends. It obtains investing cash flow from selling company assets, or from purchasing
equipment or property. Nestle (Malaysia) Berhad still a struggling companies that shows
positive free cash flow because of significant positive investing cash flow from the sale of
assets to cover operations and debt repayments.

REFERENCES
1. Dr. Anil K.S. International Journal of Economics and Finance, Economic Value
Added (EVA) - Literature Review and Relevant Issues.
2. Hani. 2008. Creating Wealth for Shareholders: Evaluating the Performance of the
Malaysia Property Companies Wan Mansor Wan Mahmood and Yahaya Norfarah.
3. M.H.Miller. and F. Modigliani. 1961. Dividend Policy, Growth, and The Valuation of
Shares. The Journal Business.
4. P. Maio and P.S.Clara. 2013. Dividend Yields, Dividend Growth, and Return
Predictability in the Cross-Section of Stocks. Hanken School of Economics.
5. H. Laura. 2012. Dividend Growth. The Conolly Report, Vol XXXV.
6. L. Joe. 2014. Calculating Intrinsic Value with The Dividend Growth Model. The
American Association of Individual Investors.
7. B. Tom. 2014. A General Free Cash Flow Theory of Capital Structure. Department
of Corporate Finance, Faculty of Finance and Accounting, University of Economics
Prague.
8.

COMPANIES:
1. PETRONAS GAS BERHAD
2. SHELL REFINING COMPANY (FEDERATION OF MALAYA) BERHAD
3. NESTLE (MALAYSIA) BERHAD
4. MAXIS BERHAD
5. TENAGA NASIONAL BHD