Nestle is a taking company that provides nutrient, nutrition, wellness and health. At the same clip, Nestle is a well-known nutrient supplier company which creates merchandises such as MILO, NESCAFE to suits people ‘s day-to-day life style. Nestle Group started in 1867 by Henri Nestle whereby he started off with experimenting nutritionary nutrient addendums to get the better of infant mortality ( Nestle Malaysia, 2010 ) .
The company ‘s original concern was more on dietary nutrients for kids and milk, through amalgamations and acquisitions Nestle have a diversified scope of merchandises. Throughout the old ages, Nestle have been turning which leads them to go the largest nutrient supplier that provides 8500 trade names and 10,000 merchandises in over 80 states ( Nestle Malaysia, 2010 ) .
Background of Hong Leong Bank Berhad
Hong Leong Bank Berhad is a public listed company which trades with fiscal services. Hong Leong Bank started in 1905 in Kuching, Malaysia named under Kwong Lee Mortgage and Remittance Company and in 1934 it was merged with Kwong Lee Bank Ltd. The name was so renamed to MUI Bank in 1989. Afterlife in 1994, MUI Bank was acquired by Hong Leong Financial Group Berhad whereby this twelvemonth was the birth of Hong Leong Bank.
In 2004, Hong Leong Bank acquired finance company which is Hong Leong Finance Berhad. However, with experience and cognition in banking field leads Hong Leong Bank to derive strong market place and a well- celebrated concern franchise and trade name.
Subsequently, in 2011 Hong Leong Bank transforms themselves from bank into a banking group by unifying with EON Bank Group. Due to the amalgamation, the group has expanded their web by holding 329 subdivisions countrywide while besides own more than RM 145 billion in assets.
Corporate Goals of Nestle Malaysia Berhad
Corporate ends that have been achieved by Nestle in respects to fiscal direction includes Nestle in Malaysia have been executing good as the group manage to accomplish a turnover of RM 4.7 billion, which is 16.8 % higher as compared to last twelvemonth. The high gross was due to the group holding consistent dual figure growing in the domestic market and accomplishing strong gross revenues in export concerns. Export achieving dual figure growing which is 25 % of entire gross revenues as cargos to ASEAN representing more than half the sum as earlier investings in soluble javas and java cream pitchers benefited the growing chances.
Nestle besides manage to accomplish their corporate ends as the net income border before revenue enhancement manage to increase 30bps to make RM 558.8 million due to better soaking up of fixed costs and higher gross revenues. At the same clip, Nestle manage to achieve net net income of RM 456.3 million in the fiscal twelvemonth.
In the facet of dividend, Nestle board proposed RM 1.25 per portion as concluding net dividend topic blessing by the board. However, the board declared a entire net dividend of RM 1.80 per portion for the fiscal twelvemonth.
Investings that increase the wealth of the stockholders were made by puting in a new filling line and processing for chilled dairy, a new production line for wafer in Chembong, puting up a new noodles production line in East Malaysia, put ining a new java roaster, increasing the capacity for make fulling 3 in 1 packaging lines and in conclusion investing to increase the capacity of KIT KAT lines were made.
Future fiscal ends were clearly stated as Nestle have come out with programs in line with the Malayan economic system projected growing of 4 % -5 % . Besides, the company will take necessary steps to soften and extenuate the impacts on the company.
Stock Valuation Methods
There are two types of stocks ratings. The first type is determined by utilizing assorted types of gross revenues, hard currency flow or cardinal earning analysis. The 2nd type is describes how much the investor will desire to pay for the stocks or how much other investors are prepared to sell their stocks based on demand and supply. However, investors frequently change the methods of analysing the stocks and when they become more or less assured towards the hereafter of stocks which could impact the values being alteration over clip.
The first method of stocks rating is called cardinal rating. This refers to the rating method which investors use to warrant the stock monetary value. For illustration: rating attack is P/E ratio, where P/E= Price to net incomes ratio. The purpose of this rating is to give value towards the stock based on mensurable component utilizing statistics and historic ratios. This type of rating normally determines long- term stock monetary values.
The following method of stocks rating depends on demand and supply. When the monetary value of the stocks increases, more investors will desire to buy that stock. On the other manus, when monetary value of the stock is low, more investors will desire to sell off the stock. Therefore, it is hard to calculate utilizing this type of rating. At the same clip, this rating method normally drives stock market tendencies in the short term.
Capital Budgeting Techniques
Capital Budgeting Techniques refers to a procedure that enables a company to find where, when and which undertaking to take up for investings. For illustration: to make up one’s mind whether puting in a belongings development undertaking or constructing a new mill is deserving prosecuting. However, the company needs to utilize capital budgeting techniques to measure which investing or undertaking will give the highest returns in a period of clip as the handiness of capital is usually limited when there are several undertakings available at the same clip ( Investopedia, 2012 ) . In this state of affairs, the company has to make up one’s mind whether accepting or rejecting an investing or undertaking by analysing the hard currency flows generated through the investing over a period of clip. Finally the company will choose the investing or undertaking that generates the highest value of hard currency flows which surpasses the cost of set abouting that investing.
Payback is the period determined by the old ages in order to retrieve the original cost of an investing. The payback period of a given undertaking or investing is an of import factor to find whether to set about the undertaking or investing. However, the usual determination regulation provinces that to accept undertaking or investing that gives the shortest payback period. On the other manus, longer payback period normally is non appropriate for investing places as long term undertaking might give higher hazard ( Investpedia, 2012 ) ( Appendix ) .
Discounted payback period refers as the figure of old ages needed to breakeven to acquire back the initial escape. Discounted payback period is similar to payback period whereby the lone difference is that payback period ignores clip value of money while discounted payback period considers clip value of money which discounts the hard currency influx from the undertaking.
The discounted payback period is calculated utilizing the present value ( PV ) of the hard currency flow ( CF ) whereby zero point starts as first twelvemonth. Therefore, the company needs to put an appropriate price reduction rate ( Accounting Explained, 2012 ) . Formula to cipher the discounted hard currency influx for each period: Discounted Cash Flow =
where, i = price reduction rate
n = the period that relates the hard currency influx
However, in this expression it is divided into two constituents which are existent hard currency flows and present value factor i.e. : Therefore, hard currency flows and present value is the merchandise of discounted hard currency flows ( Accounting Explained, 2012 ) . Discounted payback period uses the same method as ciphering simple payback period whereby the lone difference is that price reduction payback period uses discounted hard currency flows to cipher alternatively of utilizing existent hard currency flows.
Net Present Value ( NPV )
Net Present Value is a method used to find capital budgeting undertakings ( Block S. B. & A ; Hirt G.A. 2005 ) . Calculations for NPV are hard currency influxs for present value minus the hard currency escapes for present value. By utilizing the cost of capital as a price reduction rate ( Appendix ) .
NPV indicates the expected consequence of the undertaking towards the value of the house. The higher the price reduction factor the lower the value of money. Therefore, positive NPV in a undertaking shows that this undertaking adds value to the house. By following the NPV determination regulations, all independent undertakings which have a positive NPV should be accepted. However, in reciprocally sole undertakings, NPV with the highest positive sum should be selected ( Lane M.A. 2012 )
NPV is a method which uses relevant hard currency flow while this method gives consideration on the clip value of money. Therefore, when the clip value of money lessenings to a certain per centum, it is called price reduction factor or cost of capital.
Where, r = the price reduction factor per centum
n = clip
Discount Factor Formula =
Example of Net Present Value computations ( Appendix ) .
Internal Rate of Return ( IRR )
In capital budgeting analysis IRR is used to entree the feasibleness of an investing proposal. However, IRR will be the following surrogate techniques to Net Present Value ( NPV ) . The feasibleness of an investing is determined by the price reduction rate, which the NPV for all hard currency escapes ( cost ) with subsequent hard currency influxs for a specific undertaking is peers to zero.
The higher IRR than the needed rate return in an investing proposal means that it is more executable that the undertaking can be undertaken. In other words, the undertaking will be rejected when IRR is lower comparison to the needed rate of return of the undertaking. Whenever NPV is positive, IRR exceeds the cost of capital. This deduction is that undertaking can be undertaken and is a profitable investing. However, this instance is non applicable in reciprocally sole undertakings.
Example of Internal Rate of Return computations ( Appendix ) .
Differences in Security Valuation and Capital Budgeting
Capital budgeting is a method to compare, measure and choose which undertaking is deserving set abouting. Therefore, to see which undertaking to choose, the value of the undertaking which is measured under capital budgeting is decided by the company. For illustration: Shell Malaysia is puting RM 800 million for constructing Diesel processing works in Port Dickson, Malaysia. Hence, the determination to put RM 800 million value in the undertaking is made by the company ( Shell ) ( The Star Online, 2011 ) .
Security Valuation is a method to cipher theoretical value of the securities, it can demo whether the company is over or under valued. Securities can be classified under many classs such as bonds, unsecured bonds and portions. Therefore, for security rating the value depends on the market whereby the company can non find its value.
Future hard currency flows of dividends are used when make up one’s minding the values of securities. As these hard currency flows can non be determined by the company, the investors return on investing might be higher or lower. By implementing cost film editing steps to a certain extent, the company can command the hard currency flow used in the net nowadays value ( NPV ) computations