School of Architecture, Buildings and Design

Bachelor of Quantity Surveying

Financial Management Assignment

NAME STUDENT ID

SEW YUE LING 0327032

HONG LI VIAN 0327007

LEE LIN HUI 0322797

LIEU XUE QI 0327523

JACQUELYN VANESSA TEE 0320021

NICOLE THAIN HUEY WEI 0325697

1.0 Corporate Overview

KEN Holdings Berhad which is the leader’s in green building design in Malaysia. It was
founded in 1983 and is based in Kuala Lumpur, began as a specialist contractor providing
engineering services and have since grown to be the reputable property development company
it stands as today.
Ken Holdings is engaged in investment holding and the provision of management
services. The company operates through two segments: Construction and Property
Development. The Construction segment offers specialist engineering services, turnkey
contracts, building and civil and engineering works, land reclamation, dredging, marine and civil
engineering. The Property Development segment which drives major revenue engages in the
development of residential and commercial properties. The firm, through its subsidiaries, is
engaged in property holding, investment and development, specialist engineering services,
geotechnical, civil engineering and building works, land reclamation and marine engineering,
and property management. Ken Holdings solely operates in Malaysia.
The company's properties include KEN Bangsar, KEN Damansara Trilogy, KEN Aman
township and Menara KEN TTDI. The Company's subsidiaries include Ken Grouting Sdn. Bhd.,
Ken Projects Sdn. Bhd., Ken Property Sdn. Bhd., Ken JBCC Sdn. Bhd. and Sphere Supreme
Sdn. Bhd.

1.1 Vision and Mission

Vision
“Recognising our responsibilities as a developer and nation builder, we will aspire to deliver
sustainable, quality developments that exceed customers’ expectations”

Mission
1. We enhance shareholders’ value through sustainable resource management and sound
corporate governance that promotes steady earnings growth.
2. We are committed to delivering sustainable quality homes that are efficiently planned and
innovatively designed on schedule.
3. We embrace sustainable practices to preserve the environment for future generations.
4. We create learning opportunities and a conducive working environment that promote
teamwork and work life balance for sustainable job satisfaction.

Core values
1. We are hands-on and committed
We will accomplish, learn and coach effectively with our own hands-on experience. We will
commit ourselves at all times faithfully fulfilling our responsibilities as a developer to the
communities in which we operate.
2. We take pride in our work
We are proud of our KEN brand and we will keep our brand promise to constantly improve our
ability to contribute to our customers. We will be Careful, Mindful and Thoughtful in all things
that we do to fulfil our Vision Statement.
3. We are innovators and we create value
We will continually innovate and create value for our brand to achieve world class recognition.
4. We are part of the KEN Family
We will treat everyone in KEN as a family member and we will pool our abilities to accomplish
our shared goals. No matter how talented we are as individuals, without cooperation and family
spirit, we will be a company in name only.
5. We embrace sustainable practice – “Mottainai”
We must value the precious resources that we have and use them wisely, efficiently and
effectively. We will embrace sustainable practices and endeavours to create more value by
using lesser resources.
1.2 Subsidiary Company

No. Name of company Effective Principal activities

interest
(%)

1. Ken Grouting Sdn. Bhd. 100 Specialist engineering services,

turnkey contracts, building and
civil engineering works

2. Ken Projects Sdn. Bhd. 100 Investment holding

3. Ken Property Sdn. Bhd. 100 Property holding and investment

and property development

4. Ken Highlands Sdn. Bhd. 100 Investment holding

5. Kenergy Sdn. Bhd. 100 Dormant

6. Ken JBCC Sdn. Bhd. 100 Property development

7. Ken JBCC Holdings Sdn. Bhd. 100 Dormant

8. Ken Estate Sdn. Bhd. 100 Dormant

9. Ken City Sdn. Bhd. 100 Dormant

10. Ken Management Sdn. Bhd. 100 Dormant

11. Ken City JB Sdn. Bhd. 100 Dormant

12. Ken-Chec Sdn. Bhd. 100 Land reclamation, civil,

dredging, and marine
engineering

13. Ken JBCC Land Sdn. Bhd. 100 Dormant

14. Khidmat Tulin Sdn. Bhd. 100 Property holding and investment
and property development

15. T.B.S. Management Sdn. Bhd. 100 Property management services

16. Ken Rimba Sdn. Bhd. 100 Property development and

investment holding

17. Genesis Nature Sdn. Bhd. 100 Property management services

 18. Swift Frontiers Sdn. Bhd. 100 Property management services

19. Ken Link Sdn. Bhd. 100 Property development and

investment holding

20. Ken TTDI Sdn. Bhd. 100 Investment holding

21. Ken Capital Sdn. Bhd. 100 Dormant

22. Ken Estate Penang Sdn. Bhd. 100 Dormant

23. Ken Estate (Melaka) Sdn. Bhd. 100 Dormant

24. Ken Park Sdn. Bhd. 100 Car park management

25. Jewel Estate Sdn. Bhd. 100 Property management services

26. Ken Kelantan Land Sdn. Bhd. 100 Dormant

27. Ken Damansara Land Sdn. 100 Dormant

Bhd.

28. Wealthy Resort Sdn. Bhd. 55 Dormant

1.3 Board of Directors

01 Dato’ Tan Boon Kang - ​Group Executive Chairman
02 Tan Chek Siong -​​ Group Managing Director
03 YAM Dato’ Seri Syed Azni Ibni Almarhum Tuanku Syed Putra Jamalullail - ​Independent
Non-Executive Director
04 Tan Moon Hwa - ​Executive Director
05 Dato’ Ir. Dr. Ashaari bin Mohamad - ​Independent Non-Executive Director
06 Sha Thiam Lu - ​Independent Non-Executive Director

1.4 Shareholders

No. Name of Shareholders No. of shares held Percentage

(%)

1. Kencana Bahagia Sdn. Bhd. 64,549,638 35.99

2. SJ Sec Nominees (Tempatan) Sdn. Bhd. 20,425,724 11.39

- Budaya Dinamik Sdn. Bhd.

3. SJ Sec Nominees (Tempatan) Sdn. Bhd. 6,663,000 3.72

- Pledged Securities Account for Seloka
Aman Sdn. Bhd.

4. Tan Chek Siong 6,242,000 3.48

5. Tan Chek Een 6,000,000 3.35

6. Tan Chek Ying 6,000,000 3.35

7. Dato’ Tan Boon Kang 3,963,600 2.21

8. Tan Foo See 3,405,378 1.90

9. Kencana Bahagia Sdn. Bhd. 3,300,000 1.84

10. Teo Kwee Hock 3,132,500 1.75

11. Yeoh Phek Leng 3,060,000 1.71

12. Maybank Nominees (Tempatan) Sdn. Bhd. 2,640,000 1.47

- Pledged Securities Account for Tan Kian
Ling

13. CIMSEC Nominees (Tempatan) Sdn. Bhd. 2,500,000 1.39

- CIMB Bank for Tan Kian Ling
 14. To’ Puan Lau Pek Kuan 2,300,000 1.28

15. SJ Sec Nominees (Tempatan) Sdn. Bhd. 2,095,300 1.17

- Pledged Securities Account for Adat
Saga Sdn. Bhd.

16. I-Wen Morsingh 1,687,000 0.94

17. To’ Puan Lau Pek Kuan 1,617,000 0.90

18. Tan Chee Koon 1,530,800 0.85

19. Liew Yoon Yee 1,436,000 0.80

20. Low Siew Choong @ Liew Siew Meng 1,265,500 0.71

21. Tan Moon Hwa 1,202,680 0.67

22. DB (Malaysia) Nominee (Tempatan) 1,131,700 0.63

Sendirian Berhad
- Exempt An for Bank of Singapore Limited

23. CIMSEC Nominees (Tempatan) Sdn. Bhd. 1,000,000 0.56

- CIMB Bank for Tan Kian Aik

24. UOB Kay Hian Nominees (Tempatan) 930,100 0.52

Sdn. Bhd.
- Pledged Securities Account for Teo Siew
Lai

25. Universal Trustee (Malaysia) Berhad 828,000 0.46

- TA Islamic Fund

26. Liew Yoon Yee 700,000 0.39

27. Lim Pay Kaon 700,000 0.39

28. Cartaban Nominees (Tempatan) Sdn. Bhd. 632,300 0.35

- AXA Affin General Insurance Berhad

29. Lau Chin Kok 623,000 0.35

30. Yeo Khee Huat 593,000 0.33

Table: List of Thirty Largest Shareholders (KEN Holdings Berhad Annual Report 2017)
2.0 Principal Activities

Before KEN became Malaysia’s 1st Green Developer, is was incorporated in 1980 as a
specialist contractor providing engineering services with a primary focus on grouting,
underpinning, guniting and structural repair works. Along the years, they continued building their
portfolio as it adds the design and installation of micropiles, pipe-jacking and geotechnical
services to its list of expertise. KEN also pioneered the use of soil nailing for slope protection
works in Malaysia.

In the 1990s, KEN obtained the PKK Class A status that enabled KEN to tender for and
undertake state and federal government projects of an unlimited size. KEN-CHEC Sdn Bhd was
also incorporated during that period of time. This partnership between KEN and the Chinese
Harbour Engineering Company (CHEC) was established to carry out marine and land
reclamation works.

After this partnership, things started to flourish even more for the company. The
company was awarded the RM127 million land reclamation project in Westport Malaysia in
1995. Not only that, in 1996 KEN was awarded a RM55 million turnkey project to construct the
Teacher’s Training College in Kangar on an area encompassing 89 acres of land in Perlis. KEN
Holdings was also listed on the second board of the Kuala Lumpur Stock Exchange.

Entering the year 2000, KEN Holdings through the incorporation of KEN Property made
its debut in the property development scene with the launch of KEN Damansara. KEN also
acquired a majority stake in Khidmat Tulin Sdn Bhd and undertook a 22-acre housing
development scheme known as KEN Aman where the group assisted the Selangor State
Government in rehousing 650 families in the Seri Kembangan area.

In the year 2009, KEN Property makes its mark as a pioneer and authority in the arena of green
buildings launching the country’s first BCA Green Mark Gold Plus Award building, KEN
Bangsar. KEN Bangsar gained a series of accolades including the prestigious FIABCI Malaysia
Property Award 2011: Sustainable Development Category.

As years passed, KEN Holdings continued making its mark as the country’s leading green
developer launching the country’s first green township in 2013, KEN Rimba. KEN Rimba Legian
Residences was awarded the BCA Green Mark Gold for the many key features that promote
sustainable living.

In the year 2016, the opening of Menara KEN TTDI introduces platinum-grade office spaces,
KEN Gallery, a performing arts theater, a rooftop pool, a sky bar, a gymnasium and a vast
variety of F&B outlets.

As for the most recent activity, The Platform was introduced in 2018 as a fully-integrated
performing arts centre comprising a 500-seat theatre and is suitable for large scale musicals
and concerts. The space is also conducive for corporate meetings, seminars, conferences and
private events.
3.0 Analysis of Revenue

Ken Holding Berhad owns few businesses which include construction, property
development, management fee and investment properties.

According to the data from FY2013 to FY2017 in annual reports, property development
segment of Ken Holding Berhad occupied most of the revenue in their businesses, which up to
99% from FY2013 to FY2016. In FY2017, the contributed revenue of property development
segment slightly dropped to 97%. However, property development was still their core business
as the revenue generated from it was up to 97% of the total revenue.

From the chart below, it is obvious that property development segment was showing an
uptrend from year FY2013 to FY2017. Therefore, this segment was considered growing stably
in the past few years. In FY2017, this segment brought in RM101,555,000 for the group which
was the highest in five years. It could be concluded that the management team know exactly
how to do well in this segment. Management fee performance was increasing from FY2013 to
FY2015. After that, it was decreasing from the peak until FY2017.

In FY2017, new businesses which are construction and investment properties were
included in the group. It could be seen that the group was trying to diversify their risk by
developing other businesses which it is a good start for the group. If property development
segment occupies too much of the revenue proportion, the revenue of the group would
decrease heavily when negative thing happens to the segment. In conclusion, since the group
has enough experience in developing property which has relation to construction and
investment properties, so there is a high possibility that the respective new businesses of the
group would be managed properly as well.
4.0 Evaluation of Current State
4.1 Current Size of the Market

Figure 4.1.1: Notes to the financial statement

Based on the figure shown above, it can be seen that the sources of revenue for the
Group mainly come from property development and investment properties. According to the
review done by Tan Chek Siong, for the property development segment, the Group Managing
Director of KEN Holdings Berhad, the revenue during the financial year of 2016 and 2017 was
mainly contributed by the new sales registered and higher progress billings from KEN Rimba
Condominium 1 (KRC1) project which located in Shah Alam. KEN Rimba Condominium 1 is just
a short distance away from KEN Rimba Commercial Centre and connected to the Padang Jawa
KTM Commuter Station. The take up rate of this project almost full at the year end of 2015,
there are very limited units of this high rise residential left. Other than KRC1 project, KEN Rimba
does provide a lot of amazing product of affordable home as it is a township of green
development with beautiful finishings and settings, landscaping and environment. KEN Rimba
Legian Residences was also fully sold out few months after it was launched. Buyers are eagerly
waiting for the launch of KEN Rimba Condominium 2. KEN Rimba achieved a big hit in the
market with its affordable prices and excellent track record.

Besides that, for investment properties part, they had launched the Menara KEN@TTDI
which is 13 storey high tower with approximately 3,600 to 28,000 square feet office spaces
comprises of art theatre, art gallery, chains of food and beverage outlets for sales and rent; this
office tower is a green building which has received platinum award-winning, it helps to bring
large amount of revenue to the company as it helps to attract lots of tenants which have an
approximate occupancy rate of 80% although it just opened to the market in just a few years.
TTDI is a hotspot for outsiders looking for authentic experiences, there are lots of trendy
restaurant and spot to hang out in TTDI in the recent years. There are also the construction of
TTDI MRT Station which link to commuters from all around Klang Valley to the neighbourhood,
this will further attract more crowd to TTDI. It is expected to provide a long term recurring
income of RM10 million yearly for the KEN group according to the said of group executive
chairman, Datuk Tan Boon Kang.

Both of these properties of KEN Holdings Bhd received lots of green development
awards like Multimedia Super Corridor (MSC) Cybercentre Status, GreenRE Platinum Award
and BCA Green Mark GOLD​PLUS Award, they aimed to develop and deliver homes which meet
the requirement of green building index at the same time which allow their buyers to live
comfortably. They have built green practices into our daily operations that include recycling and
keeping the carbon footprint to the minimum.

4.1.2 Prospects for Future Growth

KEN Holdings Bhd believes that with their good reputation and values, the unique and
affordable high rated green developments will attract a lot of buyers especially those younger
working class and first time buyers. The group of KEN Holdings will emphasize on growing its
recurring income base. They planned to focus on completing their KRC1 project. At the same
time, they are working forward to achieve sustainable earnings for the Group by strengthening
its long term recurring income from the rental of office and commercial spaces of Menara KEN
TTDI as well as selling the remaining inventories of the Group which are all the completed
projects like KEN Rimba Jimbaran Residences, KEN Rimba Legian Residences and KEN
Bangsar. Not only that, they remain focus on achieving their long term goals and gained
reputation as a green developer for its commitments to sustainable development in order to
meet the international green building standards. KEN hope to encourage sustainable practices
in both residential and commercial spaces, in order to achieves these; they have managed to
build sustainable living into the lifestyles of their residents. The Group will continue to attract
property investors and companies while remain alert to the changes and policies in the property
market by reviewing the market conditions constantly. KEN Rimba is expected to further win
more awards in the coming years as construction of the projects continue.

4.1.3 Challenges Facing the Industry

 The property market of Malaysia is expected to remain weak in the first half year of 2018
with the oversupplied of properties such as high-end residential, office and retail. According to
National Property Information Centre (NAPIC), there were 130,690 units of complete
constructed and under construction properties in 2017 while focus only on the complete
constructed units, there are a total number of 34,532 units of unsold properties which worth
RM22.26 bil in the country for the first quarter of 2018; this has shown a rise of 55.72% in the
number of unsold units compared to last year. This is due to the ​stringent lending environment
from financial institutions, increasing cost of living and cautious consumer spending and hike in
interest rate.

As the banks continue to adopt more cautious lending policies and the high borrowing
costs for housing loan charged has caused the first time homebuyers to give up on purchasing
the house. Due to the increasing cost of living, many families of low income earning households
find that the properties in the market are not affordable. Therefore, to provide a unique and
affordable housing and residential development which meet the green building standard is one
of the major challenges facing the green development industry.
 Figure 4.3.1: 7 major challenges of green home development

The sustainable housing development concept in Malaysia is still quite new as there are
only few housing projects had implemented the concept. Sustainable practice are believed to
increase project cost as the material and system used are very costly which will then lead to
higher selling price. To keep the price of the green house in an affordable range to the public,
the only way is to reduce the selling price which will lead to a low profit for the company as the
cost of the project remain at a high level. The biggest challenge to green developers is to
produce right yet affordable price of green home to attract low-medium income people.

The majority of Malaysian still choose to buy conventional house instead of green home
since it is cheaper and people are refused to change their lifestyle. Other than that, the mentality
and awareness level of the public of Malaysia toward sustainability issues still low, they are lack
of the knowledge in green building concept. Lastly, lack of enforcement and incentives from
government is also one of the challenges facing by the green home developers.
5.0 Strength and Weakness

Strength

1. Brand recognition - KEN Holdings successfully built their own ‘empire’ from being a
contractor company that provides engineering services to now - a developer company.
KEN Holdings is now one of Malaysia’s leading green developers, earning their title
“Malaysia’s 1st Green Developer”.

2. Excellent quality and reliable services - As a testament to the Group’s conscientious

efforts towards developing sustainable environment, this world-class sustainable
corporate office tower with the intelligent building management system has been
awarded the BCA Green Mark Platinum Award on top of the coveted US Green Building
Council LEED Platinum Certificate and has obtained the Multimedia Super Corridor
(MSC) Cybercentre status.

3. Strong research and development team - The group took the initiative to set goals and
analyze the demands for properties. For KEN, they have recognised that demand for
properties will likely to remain subdued and therefore, the group will place emphasis on
growing its recurring income base. Despite the challenges in the coming year, they are
confident that it will remain resilient in its performance in 2018.

Weaknesses

1. High payables in the year 2017 as compared to the year 2016. Due to this matter, it has
caused the group to have a drastically low cash and cash equivalents at the end of the
financial year.
2. Focuses too much on developing in Klang Valley and Johor Bahru rather than urban
areas where it is much needed.
6.0 Strategic Plans

In 2017, the Malaysian property market remained soft with concerns on oversupply of
properties, stringent lending environment from financial institutions, hike in interest rates,
increasing cost of living and cautious consumer spending which led to the dampening of
demand and price of properties. Despite the challenging economic environment, the Group
achieved a commendable financial performance with higher revenue of RM104.2 million as
compared to RM92.8 million in the previous year on the back of higher sales and progressive
revenue recognition from the KEN Rimba Condominium 1 project in Shah Alam. The outlook of
the property market is expected to remain challenging with property cooling measures still in
place coupled with the recent rise in interest rates. However, KEN has maintained a steady
financial performance for the financial year ended 31 December 2017 attributed by the
Company’s strong branding, loyal customer following and the unique value propositions offered
by our properties.

Group managing director Sam Tan said the group’s long-term strategy was to build a
strong recurring income. Their corporate office tower, Menara KEN TTDI, situated within the
vicinity of Taman Tun Dr Ismail, Kuala Lumpur comprises Platinum Grade office suite, a
performing arts theatre, an art gallery, chains of food and beverage outlets, a gymnasium,
rooftop pool and sky bar. Menara KEN TTDI’s location strategically boasts a Kuala Lumpur
address, yet benefits from a location that experiences less traffic congestion compared to the
city centre. It is accessible via a comprehensive network of routes that link to major highways
such as the LDP, SPRINT Highway, NKVE Highway, MRR2 and Penchala Link leads to major
locations such as Petaling Jaya, Subang, Damansara and KL. Menara KEN TTDI has just been
awarded the MSC Malaysia Cybercentre Status by MSC Malaysia on 5th July 2017 which
provides 10 years tax privileges for qualified businesses. This office tower integrates the lifestyle
needs of today’s urbanites and corporate executives with various attractive facilities and
amenities which we believe will give us a competitive edge in securing more tenants in the near
future. As at 31 December 2017, the building has an occupancy rate approximately 30% and
the Group will continue to focus on a having broader tenant base of quality corporations with
long lease periods in the coming year to improve occupancy rate which in turn will translate to
long term earnings visibility. As part of their initiatives in promoting arts and culture, they have
also launched KEN Gallery in July 2017 within Menara KEN TTDI. The halls are available for
rent to any artists or members of the public who wish to host their own exhibitions. KEN's vision
was always about ‘’Developing Your Future and we see a future where culture plays a big role
in our lives and the lives of the nation we are building’’.

KRC1, is another addition to the KEN Rimba Township offering affordable green homes
to the market. Development progress of KRC1 is well on track for completion and handover in
Q1 2018. Despite the cautious consumer sentiment, the take up rate of this project remains
encouraging at more than 80% as at year end, demonstrating that quality green rated homes
offered at an affordable price provide a good value proposition. To create and promote healthy
lifestyles and sustainable living among KRC1 residents, recreational facilities and green
features were invested within the development. In preparation for the handover of vacant
possession, efforts were taken to prepare the Community Garden with a selection of herbs,
vegetables and fruits, a space where the residents can gather, engage in meaningful work and
grow fresh produce to share. Additionally, the Lake Sanctuary is an eco-friendly sanctuary
consisting of aquatic animals and it is designed to promote ecological awareness in adults and
children by having a place for nature play and self-discovery. For the KEN JBCC project in
Johor Bharu, Tan said Ken Holdings was a strategic partner to the Iskandar Regional
Development Authority, adding that it would be the first green integrated city in Iskandar
Malaysia. Meanwhile, its Kota Baru project, located next to the KB Mall, is a green-compliant
hotel and serviced suites, which also hailed as the equivalent of the iconic KLCC, it aims to
introduce a new standard of green living for the professionals and returning Kelantanese.

KEN recognise that the property sentiment will continue to be challenging as it is

expected to remain lacklustre in 2018 with oversupplied position in certain sub-sector and as
such will remain prudent in the launching of new projects in the future. Nevertheless, they
believe that the Group’s unique offerings of affordable high rated green developments coupled
with the Group’s resonating brand and values will continue to appeal to buyers particularly from
the younger working class and first-time buyers. Given the slow growth operating environment,
we recognise that demand for properties will likely to remain subdued and therefore, they will
remain focused on completing their KRC1 project and look forward to achieving sustainable
earnings for the Group by strengthening its long term recurring income from the rental of office
and commercial spaces in Menara KEN TTDI as well as monetisation of the remaining
inventories of the Group. Despite the challenges in the coming year, the Group is confident that
it will remain resilient in its performance in 2018. KEN holdings berhad will continually innovate
and create value for their brand to achieve world class recognition.
7.0 Company’s Major Capital Investments and Major Sources of Funding

7.1 Major Capital Investments

Capital investment refers to funds invested in a firm or enterprise for the purpose of
furthering its business objectives. Capital investment may also refer to a firm's acquisition of
capital assets or fixed assets such as manufacturing plants and machinery that is expected to
be productive over many years.

In year 2015, KEN Holding Berhad has invested RM 26,185,000 in property, plant and
equipment. Property, plant and equipment includes freehold building, freehold land, leasehold
land, motor vehicles, site equipment, plant and machinery, office equipment, furniture and
fittings.
 Figure 7.1.1: Property, plant and equipment for the financial year ended 31 December 2015

Figure 7.1.2: Fixed assets for the financial year ended 31 December 2015

Figure 7.1.3: Cash flows from investing activities for the financial year ended 31 December 2015
 In year 2016, KEN Holding Berhad has invested RM 25,880,000 in property, plant and
equipment. Property, plant and equipment includes freehold building, freehold land, leasehold
land, motor vehicles, site equipment, plant and machinery, office equipment, furniture and
fittings.

Figure 7.1.4: Property, plant and equipment for the financial year ended 31 December 2016
 Figure 7.1.5: Fixed assets for the financial year ended 31 December 2016

Figure 7.1.6: Cash flows from investing activities for the financial year ended 31 December 2016

In year 2017, KEN Holding Berhad has invested RM 10,524,000 in property, plant and
equipment. Property, plant and equipment includes freehold building, freehold land, leasehold
land, motor vehicles, site equipment, plant and machinery, office equipment, furniture and
fittings.
Figure 7.1.7: Property, plant and equipment for the financial year ended 31 December 2017

Figure 7.1.8: Fixed assets for the financial year ended 31 December 2017
Figure 7.1.9: Cash flows from investing activities for the financial year ended 31 December 2017

7.2 Major sources of funding

Generally, there are two major sources of funds which are needed for its business
operations. They are internal sources of funds and external sources of funds. Internal sources of
funds include profit, depreciation and sales of assets of the company, whereas external sources
of funds are long term sources and short term sources.

In year 2015, the total internal sources of funds is RM 25,475,000 from profit. The total
external sources of funds is RM 197,758,000, while RM 95,860,00 from share capital and RM
101,898,000 from total liabilities.

Figure 7.2.1: Net profit for the financial year ended 31 December 2015
 Figure 7.2.2: Equity and liabilities for the financial year ended 31 December 2015

In year 2016, the total internal sources of funds is RM 27,726,000 from profit. The total
external sources of funds is RM 193,362,000, while RM 95,860,00 from share capital and RM
103,502,000 from total liabilities.

Figure 7.2.3: Net profit for the financial year ended 31 December 2016
 Figure 7.2.4: Equity and liabilities for the financial year ended 31 December 2016

In year 2017, the total internal sources of funds is RM 50,400,000 from profit. The total
external sources of funds is RM 153,461,000, while RM 95,860,00 from share capital and RM
57,601,000 from total liabilities.

Figure 7.2.5: Net profit for the financial year ended 31 December 2017
Figure 7.2.6: Equity and liabilities for the financial year ended 31 December 2017
8.0 Financial Condition

8.1 Liquidity

Ratio 2013 2014 2015 2016 2017

Current ratio 1.26 1.77 1.27 1.19 2.30

Quick ratio 0.58 0.69 0.62 0.42 0.72

Liquidity measures how easily the company can meet its short term financial
commitments like paying its bills by using its current assets. For example, unlike ​large assets
such as property, plant, and equipment, ​current assets like inventory and bonds are very liquid
as they can be converted to cash easily. However, the most liquid asset is cash. Other than
using current asset to meet the short term liabilities, cash is also very important to a company
when they want to ​expand its business and pay shareholders via dividends.​The more liquid a
company is, the the higher the possibility that the company can pay back to their creditors.

For KEN Holdings Bhd, both of its current ratio and quick ratio shows a similar trend over
the 5 years (2013 - 2017); where they rose up at year 2014 and continued to drop until it came
to 2017. The liquidity of the company is the best at year 2017 among the 5 years. Based on the
current ratio, the company is able to pay back its debt with its total current assets as the current
ratio exceed 1 for the years which means the value of their current assets are more than current
liabilities especially at year 2017, its current assets are 2.30 times more than its current liabilities
while it was the worst at year 2016 as the current ratio almost drop to 1.

By focusing on the quick ratio of their company, their current assets (excluding inventory)
are unable to cover their current liabilities as the ratio for the 5 years are all less than 1. This
means that the company do not have enough cash and money from trade receivable to pay its
debt when there is emergency happen. However, in summary, the liquidity of the company is
still at an acceptable level.
8.1.1 Current ratio

Figure 8.1.2 Quick Ratio for the year 2013 to 2017

Current ratio is a liquidity ratio that measures a company’s ability to pay short-term
obligations. To be enabled to identify it, the current ratio considers the current total assets of a
company relative to that company’s current total liabilities.

For the financial period from 2013 to 2014, the current ratio of Ken Holdings Berhad
increase from 1.26 to 1.77 but thereafter shows a two-year consecutive decrease in 2015 and
2016 with a ratio of 1.27 and 1.19 respectively. However, there is the highest ratio in this five
years which is 2.30 in 2017.

The decrease in 2015 is due to the increase of the current liabilities which the account
payable is increased. Besides, the decrease in 2016 is due to a drop in the value of current
assets which the property development cost is decreased.
8.1.2 Quick ratio

Figure 8.1.2 Quick Ratio for the year 2013 to 2017

The quick ratio is an indicator of a company’s short-term liquidity and measures a

company’s ability to meet its short-term financial liabilities with its most liquid assets. The quick
ratio is also known as the acid-test ratio. It compares the cash and current asset (minus
inventory) that can be converted into cash during the year with the liabilities that should be paid
within the year.

From the chart shown above, it shows that the quick ratio of KEN holding has increased
gradually except in the year 2016. In year 2013, the ratio is 0.31 increased to 0.35 in year 2014
and continue increase to 0.39 in year 2015. The number 0.39 in year 2015 means that a
company has RM0.39 of liquid assets available to cover each ringgit of current liabilities. This
increase shows that the company using its cash and current assets in paying off its current
liability is getting better in the following year.

However, the ratio has slightly dropped from 0.39 in year 2015 to 0.34 in year 2016. It
could be telling that the company’s sales are decreasing, having a hard time to collecting its
account receivables or perhaps the company is paying its bills too fast. Lastly, KEN holding
shows a big increase in ratio 0.53 in year 2017. The increase in quick ratio is due to the
decrease in current liabilities of KEN holding from year 2016 to 2017. This quick ratio of KEN
holding shows that this company did not have adequate current assets to cover near-term debt.
KEN holding is heavily rely on their inventory or other assets to pay its short-term liabilities. It
also causes concern with potential investors and creditors because of their short-term risks
8.2 Activity

Ratio 2013 2014 2015 2016 2017

Inventory turnover (times) 0.43 0.65 0.59 0.81 0.54

Average collection period 183.25 182.50 182.50 182.50 183.51

Average payment period 369.67 183.2 317.05 254.22 118.19

Total asset turnover 0.20 0.32 0.22 0.26 0.29

Activity ratios measure company sales per another asset account. Activity ratios measure the
efficiency of the company in using its resources. Since most companies invest heavily in
accounts receivable or inventory, these accounts are used in the denominator of the most
popular activity ratios.

From the table above, the inventory turnover for KEN Holdings Sdn Bhd has fluctuated from
2013 to 2017. While the average collection period do not have a big changes from 2013 to
2017. For the average payment period, it went down during year 2014, increased during year
2015 and continually decreased from 2016 to 2017, it show an unstable cash flow of the
company. The total asset turnover for the company also fluctuated from 2013 to 2017. In short,
the activity of this company show an unstable situation which means the company is not
optimistic which the c​ompany’s working capital usage is not efficiency.
8.2.1 Inventory Turnover

Figure 8.2.1 Inventory turnover for year 2013 to 2017

Inventory turnover is a ratio showing how many times the company is turning over its
inventory during the year which mean the liquidity of a firm’s inventory. It is comparing by using
the cost of goods sold and average inventories.

The graph above represents the inventory turnover for KEN Holdings Berhad. It has
gone up and down from year 2013 to year 2017. The ratio increased from 0.43 times in year
2013 to 0.65 times in year 2014. During year 2013, the inventory selling is 0.43 times per year
means the company sells its inventory every 848.84 days. While during year 2014, the inventory
selling is 0.65 times per year means the company sells its inventory every 561.54 days. The
ratio dropped from 0.65 times in year 2014 to 0.59 times in year 2015. During year 2015, the
inventory selling is 0.59 times per year means the company sells its inventory every 618.64
days. The ratio increased from 0.59 times in year 2015 to 0.81 times in year 2016. During year
2016, the inventory selling is 0.81 times per year means the company sells its inventory every
450.62 days. The ratio dropped from 0.81 times in year 2016 to 0.54 times in year 2017. During
year 2017, the inventory selling is 0.54 times per year means the company sells its inventory
every 675.59 days.

Inventory turnover provides insight as to whether a company is managing its stock

properly. It also shows whether a company’s sales and purchasing departments are in sync.
The higher the inventory turnover, the better since a high inventory turnover typically means a
company is selling goods very quickly and that there’s demand for their product. Year 2013,
2014 and 2016 are in high inventory turnover. Low inventory turnover, on the other hand, would
likely indicate weaker sales and declining demand for a company’s products. For the low
inventory turnover is during year 2015 and 2017.
8.2.2 Average Collection Period

Figure 8.2.3 Average Payment Period for the year 2013 to 2017

Average Collection Period is the average number of days taken to collect the firm’s
receivables. The average period is an important component of the cash conversion cycle. The
average payment period is used to determine the effectiveness of the company to pay its
creditors.

The average collection period is decreased in 2014 from 183.25 days to 182.50 days.
The average collection period of the firm has remained consistent throughout the three financial
years whereas the average payment period has fluctuated from 2014 to 2016. This is a good
sign because a lower period is more favorable than a higher one. However, in 2017, the
average collection period is increased to 183.51 days.

In conclusion, from the financial year 2013 to 2017, the shorter payment period indicates
that the firm’s creditworthiness is reliable as they are able to service their debts within a shorter
period of time.
8.2.3 Average Payment Period

Figure 8.2.3 Average Payment Period for the year 2013 to 2017

Average payment period is used to examine how fast a company can repay its debt to
the debtors. It defined as the average number of days a firm takes to pay off credit purchase. As
the average payment period increases, cash should increase as well, but working capital
remains the same.

From the chart above, we can see that KEN holdings took 369.67 days in Year 2013 to
pay debt to its debtors but dropped till 183.2 days in year 2014. However, the average payment
period rise up till 317.05 days, it could be means that the firm is paying its suppliers more slowly,
and may be an indicator of worsening financial condition.

Most firms will try to decrease the average payment period to keep their big suppliers
happy and possibly take advantage of trade discounts. In year 2016, the number of days have
decreased till 254.22 days from year 2016, and continually decreased till 118.19 days in year
2017. It shows that the ability to repay the debt by KEN holding is getting better since year 2015
to Year 2016 and Year 2017. A shorter payment period means that the company is paying their
debits promptly. Average payment period also indicates the creditworthiness of the company.
But a very short payment period may be an indication that the company is not taking full
advantage of the credit terms allowed by suppliers.
8.2.4 Total Asset Turnover

Figure 8.2.4: Total assets turnover for the year 2013 to 2017

The total asset turnover measures how efficiently a firm is using its assets in generating
sales. It is computed by dividing total sales by total assets for a given period.
From year 2013 to year 2014, it grew from RM 0.20 to RM 0.32. The number RM 0.32
means that the company is generating RM 0.32 in sales for every RM1 invested in assets.
Generally, the higher the total asset turnover ratio, the better the company is performing, since
higher ratios imply that the company is generating more revenue per ringgit of assets. The total
asset turnover decreased in year 2015 which indicates that the company’s assets are losing
their ability to generate sales. Thus, the company is not performing well in 2015. But in year
2016, the total asset turnover slightly increased RM 0.03 from year 2015.
It is important for the company to keep track and improve their asset turnover ratio at
regular intervals since this ratio helps to measure how productive the business is and how much
revenue is generated from its investment in the assets.
8.3 Debt

Ratio 2013 2014 2015 2016 2017

Debt ratio (%) 34.30 24.84 30.53 28.85 16.10

Times interest earned 108.26 230.20 303.92 351.85 537.32

Fixed payment coverage 3.74 3.95 3.53 4.63 7.16

ratio

The debt ratio of the firm is decreasing over the years which implies that the firm has
reduced its reliance on debt to finance its assets but instead funding the business
through equity. The times interest earned of the firm has increased from year 2013 to
2017 which indicates that the financial ability of the firm in generating a sufficient
amount of operating income available to service its interest payments have been
unstable. Generally, a ratio of less than 2.5 is considered a higher risk for bankruptcy or
default. However, the times interest earned of KEN Holdings shows a good financial
health of having a ratio that is higher than 2.5 throughout the year as the firm can still
afford to pay for its interest payment. Besides, the fixed payment coverage ratio of the
firm has also been fluctuating from 2013 to 2017 such that the firm ability in meeting all
of its fixed-payment obligations has been inconsistent. This also means that the firm has
been inconsistent in generating sufficient income to service the fixed cost of the
business.
8.3.1 Debt Ratio

Figure 8.3.1: Debt ratio for the year 2013 to 2017

Debt ratio is the total debt to total assets of a company; it is a measure of the company’s
assets that are financed by debt, rather than equity. The higher the debt ratio, the more
leveraged a company is, which also implicates the greater financial risk a company is facing.
Leverage here means the borrowing capital that a company uses to fund the long term
investment to generate return on the capital. However, a high debt ratio doesn’t mean that a
company is not doing well because as long as the debt ratio doesn’t exceed 100%, the total
liabilities are still coverable by the total assets.

For KEN Holdings Bhd, the debt ratio is considered within a healthy range as they did
not exceed 100% from year 2013 to 2017; the debt ratio increased from 24.8% to 30.5% in the
year 2015 but overall the graph above shows a reducing trend from year 2013 to 2017. The fall
of debt ratio in year 2014 is due to the decrease in the trade and other payables as the total
assets did not differ much. This means that KEN Holdings Bhd had cleared approximately 37%
of their debt owing to their suppliers in 2014. Although the total assets in 2015 increase at a rate
of 18% but the total liabilities also increase at a higher rate of 44 %, therefore, the overall debt
ratio of year 2015 increased.

The debt ratio in 2016 reduced slightly with the increase in the current assets as they
had purchased more inventories in that year while the total liabilities remain at the same level as
year 2015. Lastly, the debt ratio decrease dramatically to 16.1% in year 2017 due to the same
reason happened in year 2015 which the company’s trade payables decreased from
RM80,826,000 to RM32,688,000 in year 2017.
8.3.2 Times Interest Earned

Figure 8.3.2: Times interest earned for the year 2013 to 2017

Times Interest Earned (TIE) is a metric used to measure a company’s ability to

meet its debt obligations. The formula is calculated by taking a company’s earnings
before interest and taxes (EBIT) and dividing it by the total interest payable on bonds
and other contractual debt.

From the chart above, the TIE of Ken Holding Berhad is increased every year.
Higher time interest earned ratio is a signal of financial health and it shows that the
company has effective operations to meet the interest payment. It means that Ken
Holding Berhad is able to pay its interest payment. In 2017, the company meets the
highest times interest earned since the profit from operation is the highest compared to
other years.
8.3.4 Fixed Payment Coverage Ratio

Figure 8.3.4 Fixed payment coverage ratio for year 2013 to 2017

The fixed payment coverage ratio is a ​financial ratio that measures a firm’s ability to pay
all of its fixed charges or expenses with its income before interest and income taxes. It is
calculated using the earnings before tax and interest plus the fixed charge before tax and
divided by the fixed charge before tax and interest plus the interest.

The graph above shows the fixed payment coverage ratio for year 2013 to 2017. The
ratio increased slightly from year 2013 to 2014 and decreased slightly from year 2014 to 2015.
On the other hand, the ratio increased dramatically from year 2015 to 2017. The ratio increased
from 3.74 in year 2013 to 3.95 in year 2014. ​During year 2013, the company income is 3.74
times greater than his interest and lease payments. While during year 2014, the company
income is 3.95 times greater than his interest and lease payments. ​The ratio decreased from
3.95 in year 2014 to 3.53 in year 2015. ​During year 2015, the company income is 3.53 times
greater than his interest and lease payments. ​The ratio increased gradually from 3.53 in year
2015 to 4.63 in year 2016 and to 7.16 in year 2017. ​During year 2016, the company income is
4.63 times greater than his interest and lease payments. While during year 2017, the company
income is 7.16 times greater than his interest and lease payments.

Lenders look at the fixed charge coverage ratio to understand the amount of cash flow a
company has for debt repayment. If the ratio is low, lenders see it as bad news for a company
looking to take on additional debt because any dropped in earning could be dire. If the ratio is
high, it indicates the company is more efficient and more profitable and may be looking to
borrow for growth rather than to compensate for a bad period. Higher fixed cost ratios indicate
that a business is healthy and further investment or loans are less risky. Lower ratios indicate
weakness and an income insufficient to meet the business' monthly bills. Obviously, the higher
the ratio, the better. From the data above, year 2013, 2014, 2016 and 2017 show a higher fixed
cost ratio while year 2015 show a lower fixed cost ratio.
8.4 Profitability

Ratio 2013 2014 2015 2016 2017

Gross profit margin 64.33 60.68 54.35 46.80 65.93

Operating profit margin (%) 50.87 47.88 42.50 39.48 60.44

Net profit margin (%) 50.92 48.02 42.97 39.94 60.33

Return on total assets (%) 7.48 11.30 6.99 7.76 14.09

Return on common equity 18.05 14.94 10.06 10.91 39.08

(%)

Earnings per share (EPS) 0.23 0.18 0.12 0.15 0.28

Profitability is closely related to profit – but with one key difference. While profit is an
absolute amount, profitability is a relative one. It is the metric used to determine the scope of a
company's profit in relation to the size of the business. Profitability is a measurement of
efficiency and ultimately its success or failure. Profitability can further be defined as the ability of
a business to produce a return on an investment based on its resources in comparison with an
alternative investment​. Although a company can realize a profit, this does not necessarily mean
that the company is profitable.

For the financial period from 2013 to 2016, the firm has a declining performance on the
gross profit margin, operating profit margin, net profit margin, return on common equity and
earning per share. However, all of the ratio mentioned in the table are substantially increase in
2017. The effectiveness of the firm’s overall management in generating profit with its available
assets is reduced, meanwhile the firm is also generating less profit and dividend for their
investors over the years.
8.4.1 Gross Profit Margin

Figure 8.4.1: Gross Profit Margin for the last 5 Financial Years

Gross profit margin measures the percentage of each sales dollar remaining after the
firm has paid for its goods. It is calculated by dividing gross profits by revenues. Normally, more
efficient or higher premium companies see higher profit margins.

From the graph above, the gross profit margin has decreased gradually since the year
2013 all the way to 2016. But in 2017, it took a turn and saw a drastic increase in gross profit
margin. It was 64.33% in year 2013 and dropped to 2016% in year 46.80%, but rose back up in
year 2017 to 65.93%. Since the company’s gross profit margin is fluctuating, it may look for
process that allow it to cut labour costs or for suppliers who offer lower costs on materials.
Alternatively, it may decide to increase prices to boost revenue.
8.4.2 Operating Profit Margin

Figure 8.4.2: Operating Profit Margin for the year 2013 to 2017

Operating profit is calculated as a percentage of the sales in operating profit margin, it is

used to measure the profitability of a company. Operating profit is the amount of income left
over after deducting the cost of goods sold and operating expenses from the sales. the
operating expenses including the wages for employees and also the day-to-day expenses
incurred in the normal course of business like carriage outwards, advertising fees, electricity and
etc. The higher the operating margin indicates that more profit a company’s core business is
earning.

As shown in the figure above, the operating profit margin of KEN Holdings Bhd
continued to decrease from year 2013 until it comes to year 2017 which rises dramatically in
one year time. It has fallen by 3% from year 2013 to 2014; this may be due to the greater
increase of the property development costs as compared to the property development revenue
after a horizontal analysis is carried out between year 2013 and 2014. The same situation
occurred from the following year 2014 to 2016, the operating profit margin decrease at the rate
of 3 to 5% each year. In the year 2015, the operating expenses did not change much compared
to year 2014 but the revenue decreased from RM90,688,000 to RM 73,789,000, this has
caused the operating profit margin to decrease to 42.5%. While for the year 2016, both of the
distribution and administrative expenses did reduce slightly and the revenue also increase to
RM92,492,000, the drop in the operating profit margin is due to the rise in the cost of sales
which is the property development costs. The increase of RM 11,392,000 in revenue together
with the decrease of RM14,024,000 has lead to the huge increment of 21% from year 2016 to
2017.
8.4.3 Net Profit Margin

Figure 8.4.3: Net Profit Margin for the Last 5 Financial Years

Net profit margin measures the percentage of each sales dollar remaining after all costs
and expenses, including interest, taxes, and preferred stock dividends, have been deducted.
The equation to calculate net profit margin is dividing net profit by revenues. By tracking
increases and decreases in net profit margin, a business can assess whether current practices
are working or not.

The net profit margin falls under the range of 39.94% - 60.33% from year 2013 to year
2017. It has dropped every year from year 2013 to year 2016 gradually. Fortunately in the year
2017, KEN Holdings sees an increase by 20.39% as compared to the year 2016. The higher the
net profit margin, the more efficient the firm converts its sales revenues into net profit.
8.4.4 Return on Total Assets

Figure 8.4.4 Return on total assets for the year 2013 to 2017

The return on total assets (ROTA) is a ratio that measures a company's earnings before
interest and taxes (EBIT) against its total net assets. The ratio is considered to be an indicator
of how effectively a company can manage its assets to generate earnings before contractual
obligations must be paid.

From the chart above, it shows that the percentage of return on total assets of KEN
holding has increased from 7.48% in year 2013 to 11.30% in year 2014. However, it decreased
to 6.99% in year 2015. Thus, in year 2016, the percentage of ROTA slightly increase to 7.76
which is better than last year. 7.76% in year 2016 means that the company produces RM 1 of
profit for every Rm 13.16 it has invested in its assets. Lastly, it shows a steep increase of
14.09% in year 2017 from year 2016. It could be say that the company has increased the
production or selling price which increased the revenues by finding cheaper sources for the
materials needed to produce goods for sale lowers the cost of good solds.

Since company assets’ sole purpose is to generate revenues and produce profits, this
ratio helps both management and investors see how well the company can convert its
investments in assets into profits.
8.4.5 Return on Common Equity

Return on common equity (ROE) is the amount of net income returned as a percentage
of shareholders equity. It measures a corporation’s profitability by revealing how much profit a
company generates with the money shareholders have invested.

From the graph above, KEN Holdings sees a decrease of ROE from year 2013 at 18.05% to
year 2015 at 10.06%. The reasons may be the company issues common shares or reduces its
dividend payments during a particular reporting period, resulting in increased equity and leads
to a lower ROE. Conversely, if the company buys back its stock or increases its dividend
payments, average equity would fall and ROE would rise. Fortunately starting in the year 2016,
there is a rise in ROE for KEN Holdings. It rose by 0.85% from the year 2015, putting the year
2016 with 10.91% ROE, and rose again to 39.08% in the year 2017.
8.4.6 Earnings Per Share

Figure 8.4.6 Earnings per share for the year 2013 to 2017

Earnings per share measures the amount of money that the shareholders earned per
share of outstanding stock. In the other words, EPS is the net profit available for paying
dividends to the ordinary shareholders is used. A higher earnings per share means that the
company is profitable and the company has profits to dividend to the shareholders.

As shown in the chart above, the earnings per share of KEN Holding is consider
profitable as it continued increasing from year 2013 to year 2017. The earnings per share of
KEN Holdings is RM 0.23 in year 2013 and decreased to RM 0.18 in year 2014. The EPS
dropped 5 cents which is RM 0.13 in year 2015 and it slightly increased back to RM 0.15 in year
2016. Then, KEN’s earnings per share increased to RM 0.28 in year 2017.
8.5 Market Performance

Ratio 2013 2014 2015 2016 2017

Price to earnings ratio 5.48 5.56 8.92 6.53 3.32

Price to book ratio 1.55 1.05 0.69 0.73 1.16

Market performance is the effectiveness of a company in a ​market or industry in utilizing

economic resource to their maximum efficiency and to the ultimate benefit of consumers.The
market value ratios gives investors a better sense of the value of the company and the
management’s past performance and future prospects.

The price per earning ratio of KEN holding’s were considered high in the past few years
but lower in 2017, it seems that the investors were not willing to pay more to buy their shares, it
could be the investors have lost confidence and have lower expectations towards the growth on
the earnings of the company. However, the price to book ratio still remained healthy, as the ratio
in 2017 is greater than 1. It indicates that the shares are more valuable than what the
shareholders originally paid, KEN holdings is perceived as having better growth prospects
relative to its risk.
8.5.1 Price-to-Earnings Ratio

Figure 8.5.1 Price to earnings ratio for the year 2013 to 2017

The price earnings ratio calculates the number of times the price being paid for the
shares on the market exceeds the earning per share. It points out how much an investor is
willing to pay for a stock based on its current earnings.

In the year 2013, the investors are willing to pay 5.48 times for every ringgit of earnings
for the share of KEN Holdings Bhd. The price earnings ratio for year 2014 did not change much
as compared to 2013. When it comes to year 2015, the figure suddenly increased to 8.92 times,
this indicates the investors were willing to pay more to buy their shares in that year. However, it
decreased gradually from year 2015 to year 2017, which the price earnings ratio for the year
2016 and 2017 is 6.53 times and 3.32 times respectively.

A higher price earnings ratio shows that the company will have positive future
performance and investors have higher expectations towards the growth on the earnings of the
company.
8.5.2 Price-to-Book Ratio

Figure 8.5.2 Price to Book Ratio for the year 2013 to 2017

The price-to-book ratio measures a company's market price in relation to its book value. The
ratio denotes how much equity investors are paying for each dollar in net assets. For this
reason, it can be useful for finding value stocks. It is especially useful when valuing companies
that are composed of mostly liquid assets, such as finance, investment, insurance, and banking
firms.

From the graph above, the price to book ratio from year 2013 to 2017 has decreased
from 1.55:1 to 1.16:1. The ratio in year 2013 is 1.55 decreased to 1.05 in year 2014. The ratio
then declining to 0.69 in year 2015 but it slightly increased to 0.73 in year 2016. In year 2017,
the ratio increased back up to 1.16.

The P/B ratio compares the share price with the bank’s underlying financial condition. A
low P/B ratio may actually be because of problems with the company’s business model,
whereas high P/B ratio could be due to optimism about the future potential of a company’s
business model.
9.0 Conclusion and Recommendations

KEN Holdings began in the 1980s as a specialist contractor providing engineering

services and have since grown to be the reputable property development company it stands as
today. KEN is notable for their dedication to detail and quality as it continues to make its mark
steadily as leaders in green building design, as well as earning the title ‘Malaysia’s 1st Green
Developer’.

Just like any other company there is out there, it wasn’t all sunshines and rainbows for
KEN Holdings. Based on the study on their annual report from the year 2013 until the year
2017, KEN Holdings was initially gaining cash flow every year since 2013 but unfortunately
faced a decrease in cash flow in the year 2016 and an even drastic decrease in the year 2017.
There are a few sectors that can be changed to this company in order to prevent this from
happening in the future.

The observation made is that KEN Holdings cash flow decrease in the year 2016 and
2017 is mainly due to its imbalanced liabilities to its assets or revenue. Cash flow problem in
that year could be reduced if lease some assets to cover their operating expenses and also
some liabilities in that year. Through the observation, it is noticeable that KEN Holdings focuses
too much on developing in Klang Valley and Johor Bahru rather than urban areas. They could
be saving a cost of rocket high land prices and competition if they were to put a little more
development in more rural areas.

A way to counter the issue regarding the decrease in cash flow would be reducing their
operating expenses to produce more net income and stimulate earning per share. Despite
facing decrease in cash flow over the recent years, they still had good years where their cash
flow shot up such as in the year 2013, 2014, and 2015. Therefore, we would still recommend
investors to invest in MK Land Holdings Berhad.
References
Appendices

Current ratio
= Current Assets / Current Liabilities

Ratio 2013 2014

Current ratio (RM 98,417,000 / RM (RM 94,345,000 / RM

77,895,000) = 1.22 53,312,000) = 1.77

Ratio 2015 2016

Current ratio (RM 108,532,000 / RM (RM 36,945,000 / RM 103,

84,375,000) = 1.27 041,000) = 1.19

Ratio 2017

Current ratio (RM 62,867,000 / RM

95,354,000) = 2.30

Quick ratio
=(Total Assets- Inventories/Current Liabilities)

Ratio 2013 2014

Quick ratio [(RM98,417,000-RM52,893,0 [(RM94,345,000-RM57,756,0

00)-77,895,000] = 0.58 00)-53,312,000] = 0.69

Ratio 2015 2016

Quick ratio [(RM108,532,000-RM56,338, [(RM103,041,000-RM66,522,

000)-84,375,000] = 0.62 000)-86,744,000] = 0.42

Ratio 2017

Quick ratio [(RM95,354,000-RM65,447,0

00)-41,410,000] = 0.72
Inventory turnover

=(Cost of goods sold / Inventory)

Ratio 2013 2014

Inventory turnover RM 20,130,000 / [(RM RM 35,816,000 / [(RM

52,893,000 + RM 57,756,000 + RM
40,801,000) / 2] = 0.43X 52,893,000) / 2] = 0.65X

Ratio 2015 2016

Inventory turnover RM 33,900,000 / [(RM RM 49,526,000 / [(RM

56,338,000 + 66,522,000 + RM
RM57,756,000) / 2] = 0.59X 56,338,000) / 2] = 0.81X

Ratio 2017

Inventory turnover RM 35,502,000 / [(RM

65,447,000 + RM
66,522,000) / 2] = 0.54X

Average collection period

= (Account Receivable) / (Daily Credit Sales)

Days 2013 2014

Average collection (RM 15,353,000) / (RM (RM 6,505,000) / (RM 6,505,000

period 15,353,000 + RM 23,981,000- + RM 15,353,000- RM
RM 8,755,000) =183.25 days 8,848,000) =182.50 days

Days 2015 2016

Average collection (RM 14,462,000) / (RM (RM 12,076,000) / (RM

period 14,462,000 + RM 6,505,000+ 12,076,000 + RM 14,462,000-
RM 7,957,000) =182.50 days RM 2,386,000) =182.50 days
 Days 2017

Average collection (RM 17,819,000) / (RM

period 17,819,000 + RM 12,076,000+
RM 5,545,000) =183.51 days

Average payment period

= [(Account Payable x 365 days)/(Net credit purchase)]
*Net credit purchase= Cost of goods sold + Inventories

Days 2013 2014

Average payment (RM 73,957,000 x 365) / (RM (RM 46,966,000 x 365) / (RM
period 20,130,000 + RM52,893,000) 35,816,000 + RM 57,756,000)
=396.67 =183.20

Days 2015 2016

Average payment (RM 78,384,000 x 365) / (RM (RM80,826,000 x 365) / (RM

period 33,900,000 + RM56,338,000) 49,526,000 + RM 66,522,000)
=317.05 =254.22

Days 2017

Average payment (RM 32,688,000x 365) / (RM

period 35,502,000+ RM65,447,000)
=118.19

Total asset turnover

= Revenue / Total Asset

Ratio 2013 2014

Total asset turnover RM 55,828,000 / RM RM 91,082,000 / RM

279,476,000 = 0.20 282,781,000 = 0.32

Ratio 2015 2016

Total asset turnover RM 74,266,000 / RM RM 92,816,000 / RM

333,756,000 = 0.22 357,254,000 =0.26
 Ratio 2017

Total asset turnover RM 104,208,000 / RM

357,716,000 = 0.29

Debt ratio
= Total Liabilities / Total Asset
Ratio 2013 2014

Debt ratio = 95,858,000 / 279,476,000 = 70,251,000 / 282,781,000

=0.34 =0.25

Ratio 2015 2016

Debt ratio =101,898,000 / 333,756,000 =103,052,000 / 357,254,000

=0.31 =0.29

Ratio 2017

Debt ratio =57,601,000 / 357,716,000

=0.16
Times interest earned

= operating profit / interest expenses

Ratio 2013 2014

Times interest = (RM 28,401,000 / RM = (RM 43,609,000 / RM

earned 261,000) = 108.26 x 109,000) = 230.20 x

Ratio 2015 2016

Times interest = (RM 31,562,000 / RM =（RM 37,050,000 / RM

earned 105,000) = 303.92 x 205,000) =351.85 x

Ratio 2017

Times interest =(RM 62,984,000 / RM

earned 117,000)= 538.32 x

Fixed payment coverage ratio

=(EBIT + Fixed charge before tax) / (Fixed charge before tax + Interest)

Operating expenses = administrative expenses + distribution expenses

Ratio 2013 2014

Fixed payment (RM28,257,000 + RM (RM 43,739,000 + RM

coverage ratio 10,311,000) / (RM 10,311,000 + 14,807,000) / (RM 14,807,000 +
RM9,000) = 3.74 RM 8,000) = 3.95

Ratio 2015 2016

Fixed payment (RM 31,912,000 + RM (RM 36,945,000 + RM

coverage ratio 12,630,000) / (RM 12,630,000 + 10,175,000) / (RM 10,175,000 +
RM 2,155) = 3.53 RM 3,000) = 4.63

Ratio 2017

Fixed payment (RM 62,867,000 + RM

coverage ratio 10,197,000) / (RM 10,197,000 +
RM 1,000) = 7.16
Gross profit margin
= (gross profits / revenues) x 100%

Ratio 2013 2014 2015 2016 2017

Gross Profit (35,698,000 / (55,266,000 / (40,366,000 / (43,290,000 / (68,706,000 /

Margin 55,492,000) * 91,082,000) * 74,266,000) * 92,492,000) * 104,208,000) *
100 100 100 100 100
= 64.33 = 60.68 = 54.35 = 46.80 = 65.93

Operating profit margin

= (Operating profits / Sales)
Ratio 2013 2014

Operating profit 28,401,000 / 55,828,000 43,609,000 / 91,082,000

margin =0.51 =0.48

Ratio 2015 2016

Operating profit 31,562,000 / 74,266,000 36,648,000 / 92,816,000

margin =0.42 =0.39

Ratio 2017

Operating profit 62,984,000 / 104,208,000

margin =0.60

Net profit margin

= (net profit / revenue) x 100%

Ratio 2013 2014 2015 2016 2017

Net Profit (28,257,000 / (43,739,000 / (31,912,000 / (36,945,000 / (62,867,000 /

Margin 55,492,000) * 91,082,000) * 74,266,000) * 92,492,000) * 104,208,000) *
100 100 100 100 100
= 50.92 = 48.02 = 42.97 = 39.94 = 60.33
Return on total assets
=Earnings Available for stockholder/ Total assets

Ratio 2013 2014

Return on total assets RM 20,895,000 / RM RM 31,952,000 / RM

279,476,000 = 0.0747 282,781,000 = 0.1129

Ratio 2015 2016

Return on total assets RM 23,320,000 / RM RM 27,726,000 / RM

333,756,000 = 0.0698 357,254,000 =0.0776

Ratio 2017

Return on total assets RM 50,400,000 / RM

357,716,000 = 0.1408

Return on common equity

= ( profit of the year / total equity ) x 100%

Ratio 2013 2014 2015 2016 2017

Return on (20,895,000 / (31,721,000 / (23,320,000 / (27,726,000 / (50.400,000 /

common equity 115,771,000) * 212,260,000) * 231,858,000) * 254,202,000) * 128,968,000) *
100 100 100 100 100
= 18.05 = 14.94 = 10.06 = 10.91 = 39.08

Earnings per share

(data is given in report)

Price to earnings ratio

= (Market Price per Share / Earnings per Share)
Ratio 2013 2014
 Price/earnings ratio 126 / 23=5.48 100 / 18=5.56

Ratio 2015 2016

Price/earnings ratio 116 / 13=8.92 98 / 15=6.53

Ratio 2017

Price/earnings ratio 93 / 28=3.32

Price to book ratio

=Stock Price ÷ ​Book Value per share

Book Value per share = [total assets – liabilities] / outstanding share

Ratio Formula 2013

Price to Book Ratio Stock price / 23 / 14.84 = 1.55

Book Value per share

Ratio 2014 2015

Price to Book Ratio 18 / 17.15 = 1.05 13 / 18.73 = 0.69

Ratio 2016 2017

Price to Book Ratio 15 / 20.53 = 0.73 28 / 24.24 = 1.16