Table of Contents

PART I: GROUP EFFORT ................................................................................................................................ 2

Introduction .............................................................................................................................................. 2
Time series performance analysis............................................................................................................. 4
Cross sectional performance analysis ....................................................................................................... 7
Appendix ................................................................................................................................................. 10
References .............................................................................................................................................. 34
Part II INDIVIDUAL EFFORT ........................................................................................................................ 38
1. HENG ZI BIN .................................................................................................................................... 38
Recommendation................................................................................................................................ 38
Conclusion and limitation ................................................................................................................... 40
Appendix ............................................................................................................................................. 42
References .......................................................................................................................................... 48
2. ENG WEI HONG............................................................................................................................... 49
Recommendation................................................................................................................................ 49
Conclusion ........................................................................................................................................... 51
Limitation ............................................................................................................................................ 52
References .......................................................................................................................................... 53
3. CHUA TECK FUNG ........................................................................................................................... 54
Recommendation................................................................................................................................ 54
Conclusion and Limitation................................................................................................................... 55
References .......................................................................................................................................... 56
4. SYLVIA TAY XINQI ........................................................................................................................... 57
Recommendation................................................................................................................................ 57
Conclusion and Limitation................................................................................................................... 59
Appendix ............................................................................................................................................. 60
References .......................................................................................................................................... 63
5. TAN JIA LE ....................................................................................................................................... 65
Recommendation................................................................................................................................ 65
Conclusion and limitation ................................................................................................................... 67
References .......................................................................................................................................... 68

1
PART I: GROUP EFFORT

Introduction

We had chosen Boilermech Holdings Berhad as our target company for Principal Finance
assignment. Boilermech Holdings Berhad is a company that publicly listed in Bursa Malaysia. We
get all the information from Bursa Malaysia website and also from Boilermech Holdings Berhad
official website (Appendix 1.0 and 1.1). The stock short name of Boilermech Holdings Berhad is
Boilerm and the stock code is 0168 (Appendix 2.0 and 2.1). Boilermech Holdings Berhad was
founded in September 2005 (Boilermech Group 2018). On 5th May 2011, Boilermech Holdings
Berhad had been listed in ACE Market of Bursa Malaysia. On the other hand on 4th December
2014, Boilermech Holdings Berhad had been transferred from the ACE Market to the Main Market
of Bursa Malaysia under Industrial Products sector by Bursa Malaysia Securities Berhad (4-traders
2018). In 2011, Boilermech Holdings Berhad incorporated with an authorized share capital of
RM100,000 comprising 1,000,000 ordinary shares of RM0.10 each, of which 20 ordinary shares
of RM0.10 each were subscribed for on the date of incorporation (Appendix 3.0 and 3.1).

Boilermech Holdings Berhad is a company that leads in Southeast Asia as a boiler for palm oil
industry and manufacturing boilers (Boilermech Group 2018). Other than that, Boilermech
Holdings Berhad also provide boiler repair and also refurbishment services for the users around
the world (Boilermech Group 2018). Furthermore, Boilermech not only involve in industrial
biomass boiler but also involve in power plant, water treatment, emission controls and oil recovery
technology (Boilermech Group 2018). In 2015, Boilermech commercializes innovative
Megasonic-enhanced oil recovery technology in the palm industry (Boilermech Group 2018). On
4th March 2011, Dr. Chia Song Kun was appointed as a Non-Independent Non-Executive
Chairman for Boilermech until today (Annual Report 2011, p. 8) (Annual Report 2017, p. 10).

The financial year for Boilermech Holdings Berhad is ended at 31st March 2017. The market capital
of Boilermech Holdings Berhad is worth RM394.74 million in the market (MalaysiaStock.Biz
2018) (Appendix 4.0 and 4.1). Furthermore, number of issued share of Boilermech Holdings
Berhad is 516.00 million (MalaysiaStock.Biz 2018) (Appendix 4.0 and 4.1). Boilermech Holdings
Berhad is having RM237,190,000 of revenue and RM23,120,000 of profit in 2017
(MalaysiaStock.Biz 2018) (Appendix 4.0 and 4.1). For the revenue in 2016 is RM260,109,000 and

2
RM30,718,000 of profit (MalaysiaStock.Biz 2018) (Appendix 5.0 and 5.1). The profit margin for
2017 and 2016 is 9.7% and 11.8% respectively (Appendix 5.0 and 5.1). This mean that in 2017,
Boilermech Holdings Berhad has a net income of RM0.097 of each dollar of total revenue earned.
As in 2016, Boilermech Holdings Berhad has a net income of RM0.118 for each dollar of total
revenue earned. The profit margin of had drop by 2.1% from 2017 to 2016. As we refer to the
dividend chart of Boilermech Holdings Berhad, the final dividend in 2017 and 2016 have the same
amount which is 1.50sen (Appendix 6.0 and 6.1). A final single tier dividend of 1.50sen per
ordinary share amounting to RM7,740,000 for the financial year ended 31st March 2017 (Appendix
6.2). Final single tier dividend of 1.50sen per ordinary share of RM0.10 each amounting to
RM7,740,000 for the financial year ended 31 March 2016 (Appendix 6.3).

3
Time series performance analysis

2017 Boilermech 2016 Boilermech

Quick Ratio 1.74 times 1.42 times
Days sales outstanding 82.42 days 131.30 days
Debt ratio 35.22% 43.26%
Net profit margin 10.06% 11.88%
P/E ratio 18.37 times 17 times
(Refer to appendix 9.0 – 9.4)

Comment on quick ratio:

Liquidity ratio is a ratio that shows whether Boilermech can settle the short-term liabilities
(MyAccountingCourse 2018). It also shows the relationship between current assets and current
liabilities. We had chosen quick ratio to measure Boilermech’s ability to settle their short-term
liabilities without rely on closing inventories. This is because inventory might take a longer time
to turn into cash (Accounting coach 2018). In 2017, for every RM1 of current liabilities,
Boilermech has RM1.74 worth of ‘current assets less inventories’. However, 2016 has a lower
quick ratio which is RM1.42 worth of current assets less inventories for every RM1 of current
liabilities in the business. Boilermech has a lower trade payable in 2017 with a difference of
RM12,691,183 compare to 2016 and also a lower short-term borrowing in 2017 with a difference
of RM14,781,304 compare to 2016 (Appendix 7.1.1). Both factors result in a lower current liability
in 2017. The higher quick ratio, the better the company’s liquidity position because Boilermech
can have more cash on hand to have more other investments (Kokemuller n.d.). Boilermech has a
higher quick ratio in 2017, which means Boilermech relies less on inventories to settle their short-
term liabilities compare to 2016. Liquidity of Boilermech has improved from 2016 to 2017.

Comment on day sales outstanding:

There is the ratio in assets management ratios, there are inventory turnover ratio, inventory
turnover days and day sales of outstanding. As we had shown in the table above, we had chosen

4
days sales of outstanding to show whether Boilermech is managing its assets effectively. In 2017,
Boilermech had taken 82.42 days in average to turnover its inventories in their business. Inversely,
in 2016, Boilermech takes 131.30 days in average to sell its inventories. In 2017, Boilermech has
a lower trade receivable than 2016, this may not damage the relationship between Boilermech and
customer because when Boilermech has a bigger number of trade receivable which made
Boilermech has to request for more customers’ payback. In other words, trade receivable is
correlate with Boilermech sales (Investing answer 2018). Day sales outstanding indicates the
number of days of a company to collect payment after sales has been made (Peavler 2018).
Boilermech takes a shorter time in 2017 to receive cash after making a sale compare to 2016.
However, shorter time for collect cash from trade receivables may affect the relationship between
the Boilermech and the customer, this is because Boilermech may have a strict credit control to
receive cash faster.

Comment on debt ratio:

Debt management ratio is a ratio that shows whether if Boilermech manage its debt effectively.
We had chosen debt ratio to compare the year 2017 and 2016 for our target company. Debt ratio
helps to measure how effective Boilermech is managing its debts, meaning the ability of
Boilermech to use its assets to settle its liabilities (MyAccountingCourse 2018). Boilermech
Holdings Berhad. In 2017, 35% of Boilermech’s total assets are financed by using debt including
short-term and long-term debt. However, in 2016 43.26% of Boilermech’s total assets are financed
using debt. While a higher debt ratio means that the company is poor in managing their debts and
more risky because most of its assets are financed using debt (Debitoor n.d.). As we had counted
above, the debt ratio of Boilermech in 2017 is lower than 2016 (35% < 43.26%). This means that
Boilermech’s debt management is better in 2017 compared with 2016. Boilermech uses cash that
receive back from the trade receivable to pay off the debts. Since, we had mentioned before at days
sales outstanding, in 2017 takes 82.42 days to collect back the cash which is faster than in 2016
takes 131.30 days. This is because trade receivable is also one of the current asset (Bragg 2018).
So, this may indicates that in 2017, Boilermech will be easier to borrow money. This is because
the total liabilities and total assets of Boilermech in 2017 is lower than 2016, so we will get a lower
debt ratio in 2017 (Appendix 7.1.0 and 7.1.1).

5
Comment on net profit margin:

The net profit margin of Boilermech in year 2017 is 10.06%, showing that it can convert 10.06%
of its total revenue into net profit after taking into account all the expenses incurred including
selling and marketing expenses, administrative expenses, other expenses, finance costs and taxes.
By comparing to its net profit margin in year 2016 which is 11.88%, we can find out there is a fall
in this ratio. There are 8.81% falls in revenues in year 2017 to 2016from 2016 to 2017
(RM260,108,771 in year 2016 and RM237,189,948 in year 2017) because there is a significant fall
in the contract revenue earned by Boilermech from RM255,012,170 in year 2016 to
RM214,401,314 in year 2017 (Boilermech 2017). Declining in revenue and net income were
mainly caused strong US Dollar against regional currencies that led to slower demand for
Boilermech (Boilermech Holdings Bhd 2017). This is mainly due to lower contribution from its
bio-energy segment in year 2016 and 2017. In a filing with Bursa Malaysia, Boilermech showed
there was decreasing in revenue which mainly due to lower contribution from its bio-energy
segment, as a result of lower sales orders (The Edge Market 2018).

Comment on P/E ratio:

We had chosen price earnings that shows how much dollars an investor is willing to contribute
into an investment to receive one dollar of that company’s earnings (TheMotleyFool n.d.). Price
earnings ratio is determining by the dividing of price per share of Boilermech by Boilermech’s
earnings per share (Williams 2011). Boilermech shares are currently selling for 18.37 times and
17 times of its earnings in 2017 and 2016 respectively. Boilermech has a higher P/E ratio in 2017,
which means in 2017 Boilermech’s investors expect higher earnings in the future (Zacks
Investment Research n.d.).Boilermech has 0.046 of earning per share in 2017, and 0.060 of earning
per share in 2016 which Boilermech has a lower earnings per share in 2017. This is because in
2017, Boilermech has a lower share price than 2016, this may due to economic problem, inflation.
This is because inflation will lower the customers’ purchasing power and this may decrease
Boilermech revenue which result in a lower share price (Quora 2018). Furthermore, a higher sale
and a higher earnings growth rates also may increase the P/E ratio. In 2017, investors of
Boilermech are more willing to invest into the company this is because a higher P/E ratio can
increase the share price and it may also increase earnings per share.

6
Cross sectional performance analysis

2017 Boilermech 2017 A-Rank

Quick ratio 1.74 times 1.04 times
Days sales outstanding 82.42 days 30.43 days
Debt ratio 35% 30%
Net profit margin 10.06% 3.63%
P/E ratio 18.37 times 7.97 times
(Refer to appendix 10.0 – 10.4)

Comment on Quick Ratio:

For liquidity, our target company which is Boilermech have 1.74 times of quick ratio. However,
for A-Rank have 1.04 times of quick ratio. That means Boilermech has better financial
performance in order to pay off the current debt compare to A-Rank. For Boilermech, every RM1
current liabilities, it has RM1.74 worth of current assets less inventory while for A-Rank every
RM1 current liabilities, it has RM1.04 worth of current assets less inventory. This may due to
Boilermech has a lower inventory than A-Rank’s inventory which has a difference of
RM33,439,986 (Appendix 7.1.0 and Appendix 8.1.0). In 2017, Boilermech has an amount of
RM29,149,435 of inventory while A-Rank has a inventory of RM62,589,421 as a higher inventory
may also bring disadvantage to the company, because the company may need to use a higher cost
to manage and purchase of the inventory (Appendix 7.1.0 and Appendix 8.1.0).

Comment on Days Sales Outstanding:

For asset management, our target company, Boilermech takes 82.25 days of days sales outstanding
However, for A-Rank takes 30.43 days of days sales outstanding. That means Boilermech takes
longer time to collect the amounts due from its trade debtors compared to A-Rank. This is because
A-Rank’s financial statement has added in the other receivable with trade receivable (Appendix
8.1.0) so the receivable amounts are more than Boilermech receivable amounts and revenue of A-
Rank is more than Boilermech which will also affect the time taken to receive the cash from trade

7
payable. Our target company, Boilermech not only focus in industrial biomass boiler, but also
focus in power plant, water treatment, emission control, oil recovery technology and lastly repair
and refurbishment works (Boilermech Group 2018). Inversely, our benchmark A-Rank Berhad
only involve in one sector which is manufacturing and marketing of aluminum billets (A-Rank
Berhad 2018). As a result, Boilermech will have a bigger number of trade receivable than A-Rank.
Thus, Boilermech indicates inefficiency of the company in debt collection.

Comment on debt ratio:

For debt management, our target company, Boilermech have 35% of debt ratio. However, for A-
Rank have 30% of debt ratio. For Boilermech, 35% of the firm’s total asset are financed using debt.
For A-Rank 30% of the firm’s total assets are financed using debt. So Boilermerh in 2017 is higher
than A-Rank in 2017(35% > 30%). That means Boilermech has difficulty to raise a loan compared
to A-Rank. High leverage are considered company with ratio of liability and bring more risky for
creditors (Course 2018). This is because Boilermech own payable too much money compared to
A-Rank although total asset for Boilermech more than A-Rank. We can refer to the annual report
A-Rank current liability is only from Malaysia segment (Appendix 11.1) but for Boilermerch
current liability from 3 segment which is Bio-energy system, water treatment and others (Appendix
11.0). Thus, Boilermech has worse the company’s debt control and management compared to A-
Rank but low debt ratio may make the company not growth at all because the company does not
borrow money to expand the business.

Comment on net profit margin:

By comparing the net profit margin of the target company, Boilermech and the benchmark
company, A-Rank in year 2017 with the industry product, Boilermech shows that it is better than
A-Rank in terms of generating profits. For the year ended 31 March 2017, Boilermech generated
a profit after tax of RM23,858,191, which is higher than A-Rank. On the other hand, A-Rank is
not performing well in generating profits as it has a total of RM16,511,116 in year 2017
(Boilermech 2017). As a result, Boilermech is a better company in terms of profitability because
of its high revenues, net profit and well managed costs and expenses in year 2017. On the other

8
hand, A-Rank is a weaker company in term of profitability comparing to Boilermech. Therefore,
A-Rank was not profitable enough because of their high cost of sales, operating expenses and
finance costs.

Comment on P/E ratio:

For market value, our target company, Boilermech have 18.37 times of P/E ratio. However, for A-
Rank have 7.97 times of P/E ratio. For Boilermech, the firm’s shares are currently selling for 18.37
times of its earnings. For A-Rank, the firm’s shares are currently selling for 7.97 times of its
earnings. A higher P/E ratio of Boilermech in 2017 is because Boilermech diagnoses a high growth
in the market and offer higher return so the investors are willing to pay more (Josephson 2016).
However, a lower P/E ratio in A-Rank means that A-Rank investors are paying less of company
earnings (Josephson 2016). However, Boilermech has some lower earnings per share than A-Rank
in 2017. Some higher earnings per share ratio will attract more investors to invest because some
higher earnings per share ratio means that the company is more profitable and the investors may
receive more profits (Accounting course 2018).

(2486 words)

9
Appendix

Appendix 1.0: Official website of Boilermech Holdings Berhad (Heng 2018).

Appendix 1.1: Bursa Malaysia Website for Main Market of Bursa Malaysia under Industrial
Products (Heng 2018).
10
Appendix 2.0: Stock short name and stock code of Boilermech Holdings Berhad (Heng 2018).

Appendix 2.1: Stock short name and stock code of Boilermech Holdings Berhad (Heng 2018).

Appendix 3.0: Issued shares and debentures of Boilermech Holdings Berhad in 2011 (Heng
2018).

11
Appendix 3.1: Issued shares and debentures of Boilermech Holdings Berhad in 2011 (Heng
2018).

12
Appendix 4.0: Financial information of Boilermech Holdings Berhad (Heng 2018).

Appendix 4.1: Financial information of Boilermech Holdings Berhad (Heng 2018).

13
Appendix 5.0: Picture shows that 5 years revenue and profit trend of Boilermech Holdings
Berhad (Heng 2018).

Appendix 5.1: Table shows that 5 years revenue and profit trend of Boilermech Holdings Berhad
(Heng 2018).

14
Appendix 6.0: Picture shows that the dividend chart of Boilermech Holdings Berhad (Heng
2018).

Appendix 6.1: The chart above shows that the dividend chart of Boilermech Holdings Berhad
(Heng 2018).

15
Appendix 6.2: The picture above show the final dividend of Boilermech Holdings Berhad for the
financial year ended 31st March 2017 (Heng 2018).

Appendix 6.3: The picture above show the final dividend of Boilermech Holdings Berhad for the
financial year ended 31st March 2016 (Heng 2018).

16
Appendix 7.0: Statement of Profit or Loss of Boilermech Holdings Berhad for the financial year
ended 31st March 2017 (Sylvia 2018).

17
Appendix 7.1.0: Statement of Financial Position of Boilermech Holdings Berhad as at 31st March
2017 (Sylvia 2018).

18
Appendix 7.1.1: Statement of Financial Position of Boilermech Holdings Berhad as at 31st March
2017 (Sylvia 2018).

19
Appendix 8.0.0: Statement of Profit or Loss of A-Rank Berhad for the financial year ended 31st
July 2017 (Sylvia 2018).

20
Appendix 8.0.1: Statement of Profit or Loss of A-Rank Berhad for the financial year ended 31st
July 2017 (Sylvia 2018).

21
Appendix 8.1.0: Statement of Financial Position of A-Rank Berhad as at 31st July 2017 (Sylvia
2018).

22
Appendix 8.1.1: Statement of Financial Position of A-Rank Berhad as at 31st July 2017 (Sylvia
2018).

23
Liquidity Ratio

2017 ratio for Boilermech 2016 ratio for Boilermech

Current assets − inventories Current assets − inventories

Quick Ratio = Quick Ratio =
current liabilities current liabilities

182,241,652 − 29,149,435 204,697,946 − 31,862,140

= =
88,009,958 121,847,947

=1.74 times = 1.42 times

Appendix 9.0: Quick ratio of Boilermech Holdings Berhad in 2017 and 2016 (Sylvia 2018).

Asset Management Ratio

2017 ratio for Boilermech 2016 ratio for Boilermech

Day sales outstanding (DSO)(In days) Day sales outstanding (DSO)(In days)
Receiveable Receiveable
= =
Annual sales Annual sales
× No. of days in a year × No. of days in a year

53,557,068 93,567,457
= × 365 days = × 365 days
237,189,948 260,108,771

= 82.42days = 131.30days

Appendix 9.1: Day sales outstanding of Boilermech Holdings Berhad in 2017 and 2016 (Sylvia
2018).

24
Debt Management Ratio

2017 ratio for Boilermech 2016ratio for Boilermech

Total liabilities Total liabilities

Debt Ratio = Debt Ratio =
Total assets Total assets
96,194,189 129,366,413
= =
273,132,597 298,988,939

= 0.3521 or 35.21% = 0.4326 or 43.26%

Appendix 9.2: Debt ratio of Boilermech Holdings Berhad in 2017 and 2016 (Sylvia 2018).

Profitability Ratio

2017 ratio for Boilermech 2016 ratio for Boilermech

Net profit margin Net profit margin

Net profit after tax Net profit after tax
= × 100% = × 100%
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

23,858,191 30,889,292
= × 100% = × 100%
237,189,948 260,108,771

= 10.06% = 11.88%

Appendix 9.3: Net profit margin of Boilermech Holdings Berhad in 2017 and 2016 (Sylvia
2018).

25
Market Value Ratio

2017 ratio for Boilermech 2016 ratio for Boilermech

Earning per share Earning per share

profit after tax profit after tax
= =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

23,858,191 30,899,292
= =
516,000,000 516,000,000

= 0.046 = 0.06

𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

P/E ratio (in times) = P/E ratio (in times) =
Earning per share Earning per share

0.845 1.020
= =
0.05 0.06

= 18.37times = 17 times

Appendix 9.4: P/E ratio of Boilermech Holdings Berhad in 2017 and 2016 (Sylvia 2018).

26
Liquidity ratio

2017 Ratio Boilermech Holding BHD 2017 ratio A-Rank Berhad

Current assets − inventories Current assets − inventories

Quick Ratio = Quick Ratio =
current liabilities current liabilities

182,241,652 − 29,149,435 108,309,737 − 62,589,421

= =
88,009,958 44,088,539

=1.74 times = 1.04 times

Appendix 10.0: Quick ratio of Boilermech Holdings Berhad and A-Rank Berhad in 2017 (Sylvia
2018).

Asset management ratio

2017 Ratio Boilermech Holding BHD 2017 ratio A-Rank berhad

Day sales outstanding (DSO)(In days) Day sales outstanding (DSO)(In days)
Receiveable Receiveable
= =
𝐴𝑛𝑛𝑢𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝐴𝑛𝑛𝑢𝑎𝑙 𝑠𝑎𝑙𝑒𝑠
× 𝑁𝑜. 𝑜𝑓 𝑑𝑎𝑦𝑠 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟 × 𝑁𝑜. 𝑜𝑓 𝑑𝑎𝑦𝑠 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟

53,557,068 37,968,656
= × 365 𝑑𝑎𝑦𝑠 = × 365 days
237,189,948 455,467,054

= 82.42𝑑𝑎𝑦𝑠 = 30.43d𝑎𝑦𝑠

Appendix 10.1: Day sales outstanding of Boilermech Holdings Berhad and A-Rank Berhad in
2017 (Sylvia 2018).

27
Debt management Ratio

2017 ratio Boilermech Holding BHD 2017 ratio A-Rank berhad

𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Debt Ratio = Debt Ratio =
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
96,194,189 49,275,239
= =
273,132,597 163,620,313

= 0.35 𝑜𝑟 35% = 0.30 or 30%

Appendix 10.2: Debt ratio of Boilermech Holdings Berhad and A-Rank Berhad in 2017 (Sylvia
2018).

Profitability ratio

2017 Ratio Boilermech Holding BHD 2017 ratio A-Rank berhad

Net profit margin Net profit margin

Net profit after tax Net profit after tax
= × 100% = × 100%
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

23,858,191 16,511,116
= × 100% = × 100%
237,189,948 455,467,054

= 10.06% = 3.63%

Appendix 10.3: Net profit margin of Boilermech Holdings Berhad and A-Rank Berhad in 2017
(Sylvia 2018).

28
Market Value Ratio

2017 Ratio Boilermech Holding BHD 2017 ratio A-Rank berhad

Earning per share Earning per share

profit after tax profit after tax
= =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
23,858,191
= 16,511,116
516,000,000 =
120,000,000
= 0.05
= 0.138

𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

P/E ratio (in times) = P/E ratio (in times) =
Earning per share Earning per share

0.845 1.10
= =
0.05 0.138

= 18.37 times = 7.97 times

Appendix 10.4: P/E ratio of Boilermech Holdings Berhad and A-Rank Berhad in 2017 (Sylvia
2018).

29
Appendix 10.4.1: The picture above shows the share price of Boilermech Holding BHD at 31
march 2016 and 31 march 2017 that find at yahoo finance (Sylvia 2018).

30
Appendix 10.4.2: The picture above shows the share price of A-Rank Berhad at 31 July 2017
that find at yahoo finance (Sylvia 2018).

31
Appendix 11.0: This picture above shown the different segment that sold by Boilermerch
Holding Berhad (Tan 2018).

32
Appendix 11.1: The picture above shown the different segment that sold by A-Rank Berhad (Tan
2018).

33
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4. Anon., 2011. Annual Report viewed 24 March 2018, <

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13. Anon., 2018. The Edge Market viewed 24 March 2018, <
http://www.theedgemarkets.com/article/boilermech-3q-net-profit-down-225-lower-revenue >

34
14. Anon., n.d. TheMotleyFool viewed 24 March 2018, < https://www.fool.com/knowledge-
center/the-relationship-between-pe-ratio-and-stock-price.aspx >

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Malaysia-Berhad-TRANSFER-FROM-THE-ACE-MARKET-TO-THE-MAIN-MARKET-
BOILERMECH-HOLDINGS-BERHAD--19479029/>

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<http://www.arank.com.my/about-us/>

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http://www.boilermech.com/about.html >

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https://www.investopedia.com/university/ratios/liquidity-measurement/ratio2.asp>

35
27. Investing answer.2018, Retrieved from account receivable, viewed 21 March 2018, <
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analysis/accounts-receivable-37>
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profit-margin-analysis/>
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34. Peavler, R., 2018. TheBalance viewed 24 March 2018, < https://www.thebalance.com/use-
asset-management-ratios-in-financial-ratio-analysis-393187>

35. Quora 2018, Retrieved from Inflation, viewed 25 March 2018, <
https://www.quora.com/How-does-inflation-affect-the-stock-market>

36. Steven Bragg. 2018, AccountingTools, viewed 22 March 2018, <

https://www.accountingtools.com/articles/what-are-trade-receivables.html>
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https://www.fool.com/knowledge-center/the-relationship-between-pe-ratio-and-stock-
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36
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outstanding/ >
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March 2018, < https://corporatefinanceinstitute.com/resources/knowledge/accounting/days-
sales-outstanding/>
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2018, < https://finance.zacks.com/influences-pricetoearnings-ratio-3474.html>

37
Part II INDIVIDUAL EFFORT

1. HENG ZI BIN

Recommendation
Organizational performance is mean by how well the organization is doing to achieve its mission,
vision and also goals (Mastering Strategic Management 2018). If the organization has a positive
performance, meaning that the organization is operate effectively (UKEssays 2018). The most
effective way to measure an organizational performance is by referring to the organization profits
and stock price to better understand how well the organization is performing in the market
(Mastering Strategic Management 2018).

In our assignment, we had chosen our target company from Bursa Malaysia which is Boilermech
Holdings Berhad. I had use the five ratios that we had shown above to measure the performance
of Boilermech. In my opinion, I think that Boilermech has a better performance. This is because
Boilermech has a higher quick ratio and net profit margin.. When a company has a higher quick
ratio means that the company has a better liquidity. In 2017, Boilermech and A-Rank has a 1.74
times and 1.04 times quick ratio (Appendix 1). Which mean Boilermech has a better liquidity
because they able to cover their short-term liabilities without rely on the inventories and also can
have more extra cash in hand to invest into new project. However, A-Rank also able to cover their
short-term liabilities but they do not have too much cash in hand compare to Boilermech.

Other than that, Boilermech has a higher net profit margin than A-Rank in 2017. Net profit margin
is the revenue that the organization earn after deducting all the tax. Which mean a higher net profit
may attract more investors to invest and this may result in a higher share price. In my opinion, I
think that investors will be more willing to invest into an organization that earn profit.

Inversely, the other three ratios for Boilermech which are days sales outstanding, debt ratio and
price earnings ratio have to be improve. Firstly, the days sales outstanding for Boilermech is lower
than A-Rank. A lower days sales outstanding mean that the organization takes a shorter time to
receive customers’ payback after making sales. I think that Boilermech takes a longer time to
receive customers’ payback is because Boilermech not only focus in one business aspect.
Boilermech can reduce their days sales outstanding by passing the invoices to customers as soon
as possible. This is because if customer get the invoice earlier, Boilermech may receive cash in a

38
shorter time (Growth Force 2018). Other than that, if Boilermech is having customer that always
use long period to payback, Boilermech should cut them off (Growth Force 2018).

Debt ratio is to measure whether the organization able to settle its short-term liabilities. In 2017
debt ratio for Boilermech and A-Rank is 0.35 times and 0.30 times respectively. Boilermech has a
higher ratio than A-Rank which mean Boilermech has a higher risk in operating the business. Apart
from that, it also mean that most of Boilermech’s assests are financed using debt instead of equity
(debitoor 2018). In order to reduce Boilermech debt ratio, Boilermech can increase their sales.
Furthermore, Boilermech also can sell some stock in the market which can increase business’s
cash inflow.

An investor is willing to invest into a share which has a higher price earnings ratio which can get
a higher return in future and cash flow (the balance n.d.). The P/E ratio for Boilermech and A-
Rank in 2017 is 18.37 times and 7.97 times respectively. A higher P/E ratio indicates the stock is
expensive to buy but it does not mean that it is the best to buy. However, Boilermech has a lower
earnings per share than A-Rank. I think that investor should consider for a higher earnings per
share when choosing which organization to invest. This is because a higher earnings per share
mean the company can generate more dividend for their investors (accounting tools 2017). In order
for Boilermech to improve their earnings per share, Boilermech can employ new marketing
strategies such as develop new products or diversify into a new market segments to increase their
sales while also can increase revenue (Nga 2016).

39
Conclusion and limitation
In my point of view, I think that Boilermech Holdings Berhad has a better performance in overall
than A-Rank Berhad. This is because Boilermech had already achieved the vision and mission that
stated in their annual report since 2013 until today (Appendix 2.0 and 2.1). Today Boilermech is
the No.1 biomass boiler design and manufacturing company in Southeast Asia (Boilermech 2018).
Other than that, Boilermech’s mission is to create and share value with their stakeholders
(Boilermech 2018). Furthermore, Boilermech has a better liquidity, better profitability and higher
price-to-earnings ratio (Appendix 3).

Boilermech is more liquidity than A-Rank which mean Boilermech is more quickly to get cash on
hands. Where Boilermech can invest into a new project faster than A-Rank. Whereas, we can see
from the formula of quick ratio (Appendix 4), quick ratio uses current assets minus inventories
and divided by current liabilities. Current assets are assets that can be turn into cash in the short-
term period (Accounting Coach 2018). While current liabilities are liabilities that due within the
organization’s operating cycle (Accounting Coach 2018). Although, Boilermech and A-Rank also
have more than one times quick ratio, which mean these two organization also able to cover their
current liabilities with current assets without selling off any non-current assets
(MyAccountingCourse 2018) but Boilermech will be having more cash on hand.

Moreover, Boilermech is more profitable than A-Rank which mean Boilermech has more revenue
after deducting all the tax (Appendix 5). Organization with a higher net profit margin ratio would
be better because a higher net profit margin mean the organization is better able to survive in the
market.

Other than that, Boilermech has a higher price-to-earnings ratio (Appendix 3). Although higher
P/E ratio meaning the share price is more expensive but the investors are still willing to invest into
Boilermech because they believe Boilermech will have a good growth in the future.

Next, the limitations when completing this assignment is Boilermech Holdings Berhad only have
two years ratio analysis. Which mean it do not have a complete information for us. It only provide
two years ratio analysis which we are able to determine whether the organization is good or bad.
Our target company may be improve or decline in the future since the future is uncertain.

40
Secondly, Boilermech and A-Rank uses different accounting practice may have a different ratio
analysis. Where Boilermech has only ‘trade receivables’ and also got ‘other receivables, deposits
and prepayments’ but A-Rank has ‘trade receivable and other receivables’ (Appendix 6.0 and 6.1).
This confuse me to calculate for days sales outstanding ratio when doing ratio analysis. Lastly, our
group only take trade receivables from Boilermech, although it is incomparable but the effect is
insignificant.

Last but not least, the economic problem which is inflation also may affect the ratio analysis.
Boilermech recorded their assets in historical cost and held on the Statement of Financial Position.
Organization record their assets in historical cost is because it is reliable (My Accounting Course
2018 ). Inflation may misleading Boilermech and A-Rank’s Statement of Financial Position.
However, if the value of the monetary unit change, the prices will be change also. Then this will
bring many problems into the accounts.

(1208 words)

41
Appendix
Liquidity ratio

2017 Ratio Boilermech Holding BHD 2017 ratio A-Rank Berhad

Current assets − inventories Current assets − inventories

Quick Ratio = Quick Ratio =
current liabilities current liabilities

182,241,652 − 29,149,435 108,309,737 − 62,589,421

= =
88,009,958 44,088,539

=1.74 times = 1.04 times

Appendix 1: Quick ratio of Boilermech Holdings Berhad and A-Rank Berhad in 2017 (Sylvia
2018).

Appendix 2.0: Mission and vision of Boilermech Holdings Berhad stated in annual report 2013
(Heng 2018).

42
Appendix 2.1: Mission and vision of Boilermech Holdings Berhad stated in annual report 2017
(Heng 2018).

43
Cross sectional
2017 Boilermech 2017 A-Rank
Quick ratio 1.74 times 1.04 times
Days sales outstanding 82.42 days 30.43 days
Debt ratio 35% 30%
Net profit margin 10.06% 3.63%
P/E ratio 18.37 times 7.97 times
Appendix 3: Cross sectional analysis of Boilermech Holdings Berhad and A-Rank Berhad in
2017 (Heng 2018)

Liquidity ratio

2017 Ratio Boilermech Holding BHD 2017 ratio A-Rank Berhad

Current assets − inventories Current assets − inventories

Quick Ratio = Quick Ratio =
current liabilities current liabilities

182,241,652 − 29,149,435 108,309,737 − 62,589,421

= =
88,009,958 44,088,539

=1.74 times = 1.04 times

Appendix 4: Quick ratio of Boilermech Holdings Berhad and A-Rank Berhad in 2017 (Heng
2018).

44
Profitability ratio

2017 Ratio Boilermech Holding BHD 2017 ratio A-Rank berhad

Net profit margin Net profit margin

Net profit after tax Net profit after tax
= × 100% = × 100%
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

23,858,191 16,511,116
= × 100% = × 100%
237,189,948 455,467,054

= 10.06% = 3.63%

Appendix 5: Net profit margin of Boilermech Holdings Berhad and A-Rank Berhad in 2017
(Heng 2018).

45
Appendix 6.0: The picture above shows Boilermech has ‘trade receivables’ and ‘other
receivables, deposits and prepayments (Heng 2018).

46
Appendix 6.1: The picture above shows A-Rank has ‘trade and other receivables’ (Heng 2018).

47
References
1. Accounting Coach 2018, Retrieved from current liabilities definition, viewed 26 March
2018, <https://www.accountingcoach.com/terms/C/current-liabilities>
2. Accounting Coach 2018, Retrieved from what is current asset, viewed 26 March 2018,
<https://www.accountingcoach.com/blog/what-is-a-current-asset>
3. Accounting tools 2017 November 19, Retrieved from earnings per share, viewed 26 March
2018, <https://www.accountingtools.com/articles/2017/5/14/earnings-per-share-ratio-eps-
ratio>
4. Boilermech 2018, Retrieved from About Boilermech Group, viewed 26 March 2018,
<http://www.boilermech.com/about.html>
5. Debitoor 2018, Retrieved from debt ratio, viewed 26 March 2018,
<https://debitoor.com/dictionary/debt-ratio>
6. Growth Force 2018, Retrieved from tips to lower days sales outstanding, viewed 26 March
2018, <https://www.growthforce.com/blog/1989/uncategorized/improve-daily-sales-
outstanding/-0>
7. Mastering Strategic Management 2018, Retrieved from Assessing Organizational
Performance, viewed 26 March 2018,
<http://open.lib.umn.edu/strategicmanagement/chapter/2-3-assessing-organizational-
performance/>
8. My Accounting Course 2018, Retrieved from historical cost, viewed 26 March 2018,
<https://www.myaccountingcourse.com/accounting-principles/historical-cost-principle>
9. MyAccountingCourse 2018, Retrieved from Quick ratio, viewed 26 March 2018,
<https://www.myaccountingcourse.com/financial-ratios/quick-ratio>
10. Nga, L 2016 September 19, The Motley Fool. Retrieved from 3 ways a company can grow
its earnings per share, viewed 26 March 2018, <https://www.fool.sg/2016/09/19/the-3-
ways-a-company-can-grow-its-earnings-per-share/>
11. The balance n.d, Retrieved from what is p/e ratio? viewed 26 March
2018,<https://www.thebalance.com/normal-pe-ratio-stocks-2388545>
12. UKEssays 2018, Retrieved from What Might We Mean by Firm Performance, viewed 26
March 2018, <https://www.ukessays.com/essays/commerce/what-might-we-mean-by-
firm-performance-commerce-essay.php>

48
 2. ENG WEI HONG

Recommendation
After evaluating the financial performance of Boilermech and assessing to the non-financial
information, we suggest our client to invest in Boilermech. Our investment recommendation can
be supported by The research arm of AmInvestment Bank Bhd (AmInvestment) on 10 July 2017,
which strongly suggests investors to buy the share of Boilermech as it believed that its valuations
are stretched and the group’s earnings improvement are still in the early stage of recovery (MPIC
2017). Nevertheless, it identified that a number of its productive attributes consist of its range of
boilers with various grates and prices (MPIC 2017).

In order to improve company’s performance, Boilermech has to improve company’s revenue

sources by developing strategies such as introducing new products and specializing in expanding
the growing production lines to new markets or new market segments. Most of Boilermech’s
revenues are derived from Malaysia and Indonesia (The Edge Markets 2017). Hence, to improve
the company’s revenues in future, Boilermech should consider expanding its bioenergy segment’s
reach unconventional markets such as Thailand, Cambodia and others to reduce the reliance on
these traditional markets. Moreover, the performance of Malaysia’s oil palm industry was
impacted by the weather factors (Boilermech Holdings Berhad 2017). For example, the
continuation of dry weather conditions and below average rainfall brought about by El-Nino
weather phenomena will directly affect Boilermech’s operation and eventually lead to reduction
in revenue. Thus, it is very important for Boilermech to extend its business geographical areas and
derive its revenue from other countries other than Malaysia. We believe that Boilermech should
put in efforts in marketing its products in other unconventional markets to boost the company’s
revenues. Also, expansion through acquisition of other companies can bring synergy benefits to
Boilermech’s operation. We believe with the company’s vast experience, technical know-how and
strong business contacts within the palm oil industry, Boilermech can make careful acquisition
plan to benefit the company.

A company’s financial stability is the main concern by shareholder as it always raises capital over
private placement. Therefore, Boilermech should have the long term plan to further improve its
earnings, causing shareholder to feel more confident on its stock performance. To achieve this,
Boilermech should put in efforts and focus on product diversification and business diversification.

49
We understand that Boilermech ventured into the water treatment business through the acquisition
of a 60.2% equity interest in Teknologi Enviro-Kimia (M) Sdn Bhd (TEK) in March 2016 (The
Edge Markets 2017). Acquiring TEK has become a success and stepping stone for Boilermech as
it benefited from Malaysia Palm Oil Board’s (MPOB) requirement for every palm oil mill to have
a biogas system. Besides, the water treatment division was able to generate revenue for Boilermech.
Thus, we recommend Boilermech to make more fruitful acquisition of other companies to diversify
its business and revenue sources. A diversified business will reduce the risk of Boilermech’s over
reliance on palm oil industry and reduce the impacts on Boilermech’s revenue in the event that the
palm oil industry in Malaysia becomes sluggish.

50
Conclusion
Based on the financial ratios analysis, we can conclude that Boilermech shows good performance
in terms of liquidity, asset management, debt management, profitability and market value ratios.

Boilermech’s quick ratio performance is 1.42 times in year 2016 while 1.74 times in year 2017. It
indicates that Boilermech able to settle the short-term liabilities without relying on closing
inventories in year 2017 better than in year 2016. The higher quick ratio, the better the company’s
liquidity position because Boilermech can have more cash on hand.

Besides, Boilermech’s days sales of outstanding is 82 days in year 2016 while 131 days in year
2017. It indicates that the number of days of a company to collect payment after sales has been
made. This clearly shows that Boilermech takes a shorter time in year 2016 to receive payment
after sales have been made than in year 2017.

Boilermech’s debt ratio is 0.43 times in year 2016 while 0.35 times in year 2017. It indicates that
the ability of Boilermech to use its assets to settle its liabilities and debts. The higher debt ratio in
year 2016 means that the company is poor in managing their debts and more risky because the
company relying more on debt. Boilermech has improved in managing their debts in year 2017.

On the other hand, Boilermech’s net profit margin has decreased from 11.88% in year 2016 to
10.06% in year 2017. This could be due to the continuation of dry weather conditions and below
average rainfall brought about by El-Nino weather phenomena will directly affect Boilermech’s
operation and eventually lead to reduction in revenue.

At the same time, Boilermech reveals that it will continuously expand its business into
unconventional markets and diversify into other business segments to improve its revenue sources
and reduce its over-reliance on Malaysia and Indonesia markets. It has the long term plan to further
improve its earnings, causing investors to feel more confident on its stock performance.

51
Limitation
Ratio analysis explains relationships between past information while shareholders are more
concerned about current and future information. The company could use outdated information in
financial statement which is one of the limitations of financial ratio analysis. Since the financial
statements have outdated information, the company will not be indicating at a current position.
Besides, the balance sheet of finance position as known as company’s financial position, this will
not be shown for the whole of the year. For example, assume if a company has a business in the
year-end which is tally with a small business activity, the rate of the inventories which may present
a low amount in the balance sheet. Additionally, this ratio will calculate from the past financial
statements, therefore there are not indicators of the future and also the market environment and the
policies may not be remaining the same, as they are earlier.

From the perspective of Boilermech, the weaknesses of Boilermech is being exposed to forex risk
and fluctuation in against USD. The second weakness is that the palm oil business could be
affected by unfavourable economic conditions such as dry weather conditions and below average
rainfall brought about by El-Nino weather phenomena.

In brief, financial ratio analysis is still useful in assessing a company's financial performance.
Although with these benefits, there are still have limitations of financial ratios analysis. We need
to make the adjustments as necessary which can provide helpful insights for the internal and
external users to determine the company performances.

(1072 words)

52
References
1. The Edge Market, Boilermech Net Profit, viewed 13 February 2018,
<http://www.theedgemarkets.com/article/boilermech-3q-net-profit-down-225-lower-
revenue>
2. Boilermech, Boilermech Holdings Berhad, viewed 31 March 2017,
<http://www.boilermech.com/pdf/BOILERMECH-Annual-Report-2017.pdf>
3. MPIC, Boilermech a leading palm oil mill boiler, viewed 10 July
2017,<https://www.mpic.gov.my/mpic/index.php/en/media-mpic-vbi/mpic-in-the-
news/3169->
4. Boilermech Holdings Berhad, Bursa Mids, viewed 17 October
2017,<https://cdn1.i3investor.com/my/files/dfgs88n/2017/10/19/1506936057--
1250729670.pdf>
5. The Edge Market, Boilermech’s revenues from unconventional markets seen to increase,
viewed 19 October 2017,<http://www.theedgemarkets.com/article/boilermechs-revenues-
unconventional-markets-seen-increase>

53
 3. CHUA TECK FUNG

Recommendation
From this assignment, we have used cross sectional performance analysis and times series
performance analysis in order to measure the organization performance of our target company
which is Boilermech Holdings Berhad.

From cross sectional performance analysis, Boilermech’s performance is weaker in terms of day
sales outstanding, debt ratio and P/E ratio. In terms of day sales outstanding, Boilermech has a
poorer management of collecting their payment from their sales on credit. In my opinion,
Boilermech should reduce their credit sales and increase more cash sales instead. This can also
reduce the time for Boilermech to collect their credit sales payment and also more cash sales will
result in more cash in hand for the company for other uses such as investing other new projects.
Other than that, it also can help Boilermech avoiding bad debts.

In terms of debt ratio, Boilermech have managed their debt poorly compare to A-Rank. I think that
Boilermech should try to reduce their debts by clearing the debts as soon as possible. This is to not
only lower the risk in operating the business for the company, but also will improve the reputation
of the company. An improved in the reputation will bring more confidence for the investors to
invest in the company.

54
Conclusion and Limitation
As a conclusion, Boilermech has a better organization performance than A-Rank. This is because
Boilermech has a higher net profit margin and they can recover their short-term liabilities without
relying on their inventories. Boilermech also has a higher price earnings ratio which means
investors are more interest to invest on their company compare to A-Rank.

The limitations for this assignment is that there is no information or any news about incidents
happen in both companies. There is no any news or information of any incidents that happens
inside the company. Therefore, we can’t get to know about the projects that the company is doing
and thus don’t know the changes of the financial status of the company.

Other than that, inflation is also the limitation of this assignment. When time series performance
analysis is used, the past years financial statement of the company is used to compare with the
current year financial statement of the company. Inflation sometimes occurs in the time between
those two financial years. Thus, the profits will also get affected (Peavler 2018).

Lastly, the limitation for this assignment is quantitative measure. Ratio analysis is only shows the
data of the company. It cannot measure quality of the work by the company such as cannot tell
what is lacking or what is need to be corrected (Borad 2016). Therefore, the performance of the
company can’t be accurately measured.

(442 words)

55
References
1. Borad, S. B..2018, Limitation of ratio analysis, viewed 25 March 2018, <
https://efinancemanagement.com/financial-analysis/limitations-of-ratio-analysis >
2. Peavler, R,.2018, Limitation of ratio analysis, viewed 25 March 2018, <
https://www.thebalance.com/limitations-of-financial-ratio-analysis-393236 >

56
 4. SYLVIA TAY XINQI

Recommendation
From overall of the result, I think that our target company Boilermech Holding Berhad in 2017 is
better than A-Rank Berhad 2017 this can see from the calculation. From the calculate, we choose
5 types ratio to compare. So, can conclude that it has some improve for Boilermech Holding
Berhad. When have some improve means that the performance of the company also has improve
this may cause increase of the company reputation. When all the employees of an organization are
cooperation to work to achieve the best results with results being measured in terms of the value
we deliver to customers it means the high organization performance. (James 2018)

The ratio we choose from 5 aspects, which is liquidity, assets management, debt management,
profitability and market value ratio. From these 5 aspects, we choose 1 ratio to calculate from 1
aspect. From my perspective, I think Boilermech has a better performance. This is because when
compare this two-company quick ratio and net profit margin is higher than other company. In 2017,
Boilermech and A-Rank quick ratio is 1.74 time and 1.42 times respectively (Appendix 1.2). the
higher quick ratio means it have more better liquidity. Quick ratio is an indicator of most easily
available current valuable things to pay off (for only brief time) needed things (Anon. 2018). This
is because quick ratio is cut off the inventories to cover their short-term liabilities. It is well to
preserve this ratio controlled and managed (Anon. 2018 ). This also means that Boilermech have
more extra cash in hand and when have the extra cash it can be used into invest the new project.
Inversely, the A-Rank not have too much of cash in hand.

Not only that, Boilermech has a more higher net profit margin than A-Rank in 2017. The meaning
of net profit margin is the percentage of revenue left after all expenses have been removed from
sales (AccountingTools 2018). This means that when have a higher net profit will attract more
investors to invest it and it can increase reputation and share price. In my opinion, I think that
investor will want to invest the higher net profit one to earn the profit.

Besides, p/e ratio is means that how much the investors are willing to pay for every dollar of
earning. P/E ratio in 2017 for Boilermech and A-Rank is 18.37 times and 7.97 times
respectively. The p/e ratio higher is more better because it has high return and means that the
investors are paying a higher price for stock compared to earnings (Anon. 2018). In my opinion, I
think investor are willing to invest the high return company because it can earn more profit (Anon.

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2018). We cannot use this figure to 0decide this p/e ratio is best or worse, this may be deciding by
the investor or the company.

Inversely, Boilermech can improve in the days sales outstanding and debt ratio. First, the days
sales outstanding for Boilermech is less than A-Rank. Day’s sales outstanding in 2017 for
Boilermech and A-Rank is 82.42 days and 30.43 days respectively. A lower mean the customer’
use the shorter time to payback and can use it to make sales. So, the A-Rank is better than
Boilermech that’s why we can improve the days collect back money by using the ways such as
time billing we set a time that when the customer need to pay back (Growth Forde 2018).

Finally, debt ratio is the ratio that used to measures a firm’s total liabilities divide the total assets
and change in percentage. Debt ratio in 2017 for Boilermech and A-Rank is 0.35 times and 0.30
times respectively. Higher ratio means that have higher risk, this is because of when higher of debt
ratio is means borrow higher and don’t know willing to pay back or not. To decrease the debt ratio,
we can improve this by increase the credit limit or decrease the amount you owe (Anon. 2018).

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Conclusion and Limitation
In conclusion, from overall of the result the ratio analysis from 2 different company we can know
that many ratios our target company is worse compare to benchmark. Boilermech quick ratio, net
profit margin and P/E ratio is better than the A-Rank. From the calculation, 5 aspects 3 aspect of
Boilermech is better than A-Rank. So, I think that the Boilermech is better than A-Rank in overall
performance.

In my opinion, I think that if I was an investor I will invest a company that earn profit and will see
the company share price and other. When have a high p/e ratio, its means that has a high return, so
the investor may choose this to invest.

When we are doing this assignment, there are some limitation. The limitation for this assignment
is the annual report or the ratio we just only need to find for two years analysis. When we just only
find and compare for 2 years analysis, so that we cannot just used this to assume that this company
is better or worse. If we just use the analysis for 2 years to decide about that company is good or
not is not fair. For example, maybe the result in other years is better also so we cannot just use the
2 years analysis to decide.

Not only that, limitation of the assignment is you can know about the 2 of the company we search
that is not all in same feature or under same categories. For example, in our assignment our target
company Boilermech focus in difference product such as industrial biomass boiler, power plant,
water treatment, emission controls, oil recovery technology and repair and refurbishment work
(Media 2018). But for our benchmark A-Rank the company only focus on product aluminum
billets (Anon. 2018). Because of there are not 100% same categories, so the result analysis has
some difference or limitation.

The limitation of the assignment is the information is limited. For example, the days sales
outstanding need to use the trade receivable to do the calculation. For Boilermech, the annual
report statement of financial position the trade receivable and other receivable is separate
(appendix 1.0), but the A-Rank the trade receivable and other receivable in the annual report
statement of financial position are mixed together (appendix 1.1). As a result, this will affect the
ratio.

(1051 words)

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Appendix

Appendix 1.0: Statement of Financial Position of Boilermech Holdings Berhad as at 31st March
2017 (Sylvia 2018).

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Appendix 1.1: Statement of Financial Position of A-Rank Berhad as at 31st July 2017 (Sylvia
2018).

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 Types of ratio Boilermech Holdings Berhad for 2017 A-Rank Berhad for 2017
Quick Ratio 1.74 times 1.04 times
Days Sales Outstanding 82.42 days 30.43 days
Debt Ratio 0.35 times 0.30 times
Net Profit Margin 10.06% 3.49%
P/E ratio 1.84 times 4.23 times
Appendix 1.2: Ratio comparision for cross sectional part. (Sylvia 2018).

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References

1. Anon 2018, Budgeting.thenest.com., viewed 25 March 2018, <

https://budgeting.thenest.com/investor-want-stock-high-low-p-e-ratio-30478.html>
2. Anon 2018, Accounting tools, viewed 25 March 2018, <
https://accountingexplained.com/financial/ratios/quick-ratio >
3. Anon 2018, Accounting tools, viewed 25 March 2018, <
https://www.accountingtools.com/articles/what-is-net-profit-margin.html>
4. Anon 2018, Arank, viewed 25 March 2018, < http://www.arank.com.my/products-
services/>
5. Anon 2018, eFinanceManagement., viewed 25 March 2018, <
https://efinancemanagement.com/financial-analysis/how-to-analyze-interpret-and-
improve-quick-ratio >
6. Anon 2018, Growth Forces, viewed 25 March 2018, <
https://www.growthforce.com/blog/1989/uncategorized/improve-daily-sales-
outstanding/-0 >
7. Anon 2018, Growth Forces., viewed 25 March 2018, <
https://www.growthforce.com/blog/1989/uncategorized/improve-daily-sales-
outstanding/-0 >
8. Anon 2018, Growth Forces., viewed 25 March 2018, <
https://www.growthforce.com/blog/1989/uncategorized/improve-daily-sales-
outstanding/-0>
9. Anon 2018, Pocket Sense, viewed 25 March 2018, < https://pocketsense.com/improve-
debt-ratio-4544408.html >
10. Anon 2018, Quora, viewed 25 March 2018, < https://www.quora.com/For-a-CEO-what-
are-the-major-factors-that-increase-the-PE-ratio-that-investors-are-willing-to-pay-for-a-
business >
11. Anon 2018, the balance, viewed 25 March 2018, < https://www.thebalance.com/normal-
pe-ratio-stocks-2388545 >
12. James, L. 2018, Growth.pitcher.com.au, viewed 25 March 2018, <
http://www.growth.pitcher.com.au/resources/articles/what-is-organisational-performance >

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13. Media, T. D.2018, Boilermech Group, viewed 25 March 2018, <
http://www.boilermech.com/products-solutions.html >

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 5. TAN JIA LE

Recommendation
In order to achieve the vision and mission of the company, there is need for Boilermerch to perform
well in 5 aspects which of liquidity, asset management, debt management, profitability and market
value in order to increase value with their shareholders and provide high quality to their customer.

To improve quick ratio, I recommend Boilermerch to sweep idle cash into an interest-bearing
account to generate extra income for the company. When the company required the money, they
may arrange to transfer the fund back to the company working account. This method enable the
company to earn interest and increase the quick ratio by keeping the cash in hand (Anon. 2018).
Although Boilermerch hads a better quick ratio in 2017 compared to benchmark, A-Rank.
Boilermerch also need to maintain the better quick ratio in order to let the stakeholders to secure
investment in the company. Stakeholders may refer the quick ratio to determine whether the
company facing liquidity problem.

Furthermore, for days sales outstanding, Boilermerch spent more time to collect back the money
which is 82.42 days compared to A-Rank which is 30.43 days. Thus, I recommend Boilermerch
offering cash discount to trade receivable to improve days sales outstanding. Cash discount will
motivate trade receivable to pay off the debts of the company within a specific time (Anon. 2018).
This is because cash discount will be reduced the actual amount for the purchase of the goods so
the customer eventually have the impression that they pay for a lesser amount and be more willing
to pay for the goods.

Besides that, according to the group part that we had calculate, I found that A-Rank has a better
management in debt of the company compared to Boilermerch. Hence, I recommend Boilermerch
could try to communicate with their suppliers or lenders (QuickBooks 2018). Once Boilermerch
ascertained certain funds in the company may be allocated to settle the outstanding debts of the
company. They may negotiate or have a discussion with the associate lenders to see whether they
can arranging a better repayment terms. Alternatively, Boilermerch may write a letter to the lenders
to explain the firm current financial situation and request for an extension period for debts
repayment (QuickBooks 2018). If not efforts taken to remedy this financial issue faced by the
company, there is a possibility suppliers and lenders would eventually blacklist them and ceased

65
business with them such as cut off all the supply goods thus will greatly affect the operation of the
company business.

For market value, Boilermerch has performed well in P/E ratio. This is because when comparing
Boilermerch to A-Rank, statistics indicates that there are many area that Boilermerch are perfectly
and there are no rooms for improvements. In order to maintain P/E ratio, Boilermerch needs to
increase the return on equity (ROE). That means ROE measures how much profit the company
generates with the money invested by ordinary shareholders. Higher ROE will attract many
investors eventually, share price increase and shareholders will enjoy capital gains. Moreover, they
also need to increase profit margin as profit margin increases, ROE will also increase. This is
because profit margin and ROE has a directly relationship (Wathen 2018).

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Conclusion and limitation
Last but not least, overall our target company, Boilermerch has performed well in financial report
2017 compared to benchmark, A-Rank. This is mainly due to Boilermerch only managed to
perform well in 3 aspects out of 5 aspects which are liquidity, profitability and market value of the
company. Thus I am of the opinion that with the limitation of this report, it is difficult to come to
a conclusion whether the company is doing good or bad. This is because we only had the chance
to analyse one a financial year of the company so it is difficult to identify which company is better
in terms. Apart from the above, Boilermerch and A-Rank started off on manufacturing industry
but it is worth nothing that Boilermerch specialize in biomass boiler for the palm oil industry
(Anon. 2018) while A-Rank is one of Asia’s leading suppliers of aluminium (Anon. 2018). Besides
that, inflationary effects not taken into consideration is one of the limitation of ratio analysis.
Financial records are made over a period of time. These records may not give a true picture because
effects of inflation are not taken into account while recording transactions. Assets purchased years
back are recorded at historical rates in the balance sheets. These rates may not have the same value
currently due to inflation. The value of inventory and depreciation may not have the same value
now as it had at the time it was recorded. Moreover, different in accounting practices will be one
of the limitation. Different companies may use different accounting practices. Inventory valuation
methods may differ and so can depreciation methods. As a results, comparing rations of such
companies may not depict a correct pictures.

(809 words)

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References
1. Anon 2018, eFinanceManagement.com, viewed 25 March 2018, <
https://efinancemanagement.com/financial-analysis/how-to-analyze-interpret-and-
improve-quick-ratio>
2. Anon 2018, AccountingCoach.com, viewed 25 March 2018,
<https://www.accountingcoach.com/blog/what-is-a-cash-discount>
3. 5 Quickbooks 2018, QuickBooks, viewed 25 March 2018, <
https://quickbooks.intuit.com/r/managing-debt/5-ways-to-reduce-small-business-debt/>

4. Jordan Wathen 2018, The Motley Fool, viewed 25 March 2018, <
https://www.fool.com/investing/general/2015/01/21/5-ways-to-improve-return-on-
equity.aspx>

5. Anon 2018, Boilermerch about, viewed 25 March 2018, <

http://www.boilermech.com/about>

6. Anon 2018, A-Rank about, viewed 25 March 2018, < http://www.arank.com.my/about-us/>

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