The Report Of Financial Analysis Finance Essay

Nestle is formed resulted from the emerging of two companies – Nestle and Anglo-Swiss Milk Company. Nestles central office is located in the Swiss town of Vevey and employed around 330 000 people in over 150 states and have 461 mills or operations in 83 states.

In 1912, Nestle entered Malaysia as the Anglo-Swiss Condensed Milk Company in Penang. Afterward, Nestle started to turn and spread out their concern to Kuala Lumpur in twelvemonth 1939 and opened its first mill in Petaling Jaya since 1962. Currently, Nestle Malaysia set up its caput office in Mutiara Damansara and manufactures its merchandises in 7 mills located in Malaysia.

In 13 December 1989, the company was successfully listed itself on the KLSE now known as Bursa Malaysia Berhad. Today, Nestle Malaysia has employed more than 5000 people and industries every bit good as markets more than 300 Halal merchandises in Malaysia.

1.02: Public Bank Berhad

The Public Bank was set up in 1966, by Tan Sri Dato ‘ Sri Dr. Teh Hong Piow which is the laminitis and president for the company and conceived it as a bank for the populace.

From a one subdivision beginning, the Public Bank Group has easy expanded to go a prime banking group in Malaysia, with abroad market presence in China, Hong Kong, Sri Lanka, Cambodia, Vietnam and Laos.

Year by twelvemonth, the Public Bank Group managed to develop into a full service fiscal services group, differ from last clip which merely supplying retail and commercial banking services. Today, the group supplying a broad scope of services covering all type of banking services, portion broking, legal guardian and campaigner services, gross revenues and direction of unit trust financess, bancassurance and general insurance merchandises.

Presently, the Public Bank Group is the 3rd largest banking group in Malaysia and ranked figure six by plus size in Southeast Asia as at the terminal of September 2011. The group presently has a sum of 401 subdivisions and employed over 17,500 employees. At the terminal of 2011, the group has a entire assets of RM249 billion.

Since 1967, Public Bank Group was publically listed on the Main Board of Bursa Malaysia and go the largest non-government-linked corporation in Malaya by market capitalization as at the terminal of 2011, which stood at RM47 billion.

1.1 – Corporate Goals

1.11: Nestle ( Malaysia ) Berhad

Corporate ends which have been achieved in 2011 by Nestle in respects to fiscal direction would include accomplishing a turnover of RM4.7 billion, 16.8 % higher than the same period in 2010. Nestle managed to better its net income border before revenue enhancement by 30 bits per seconds to make RM558.8 million, while net net income stood at RM456.3 million with an implicit in level border.

The strong growing in demand from the domestic and export markets has lifting the overall production of Nestle by about 10 % . Furthermore, the sustained economic growing of neighboring states has encouraging export activities where exports gross revenues in 2011 has saw volume growing of 18 % to inter-market. Export gross revenues represent 25 % of entire gross revenues in the twelvemonth. These ends were achieved by cutting the waste and increase efficiencies across the whole value concatenation through ongoing Nestle Continuos Excellence ( NCE ) enterprise.

Throughout the twelvemonth, Nestle continued to do capital investing and betterment towards its production line. During the twelvemonth, Nestle has invested a new processing and filling line for Chilled Dairy, a new wafer production line in Chembong, a new noodle production line in East Malaysia, put ining a new java roaster, increasing the filling capacity for 3in1 packing line and increasing the capacity of the KIT KAT lines. All of these attempts by Nestle are aims to run into future higher production demand.

In footings of dividend payments, for 2011, Nestle recommended a concluding net dividend of RM1.25 per portion. Besides, Nestle has giving a entire net dividend proposed and declared for the fiscal twelvemonth of RM1.80 per portion, which correspond to an addition of 9.1 % compared to 2010 ‘s dividend.

For future fiscal end, Nestle continued to concentrate on invention and renovation their merchandises every bit good as farther publicity of nutrition diets and healthy life style in the line as they aimed to capitalize on the positive domestic demand.

1.12: Public Bank Berhad

Corporate ends achieved by Public Bank Group in respects to fiscal direction would include an outstanding increased of 13.5 % in entire loans, with consists of increased in place mortgages by 16.9 % , rider vehicle hire purchase funding by 9.6 % and loans to SMEs by 13.8 % in twelvemonth 2011. Besides, during the twelvemonth, fixed sedimentations have increased by 9.1 % , nest eggs sedimentations by 7.4 % and current sedimentations by 12.9 % .

The group besides managed to accomplish net incomes before revenue enhancement disbursal and zakat of RM4.61 billion compared to RM4.08 billion in last twelvemonth. Furthermore, cost-to-income ratio of 29.8 % enabled the group to keep its top ranking in term of cost efficiency.

Undertakings to increase the wealth of the stockholders include the jointly with ING insurance which enable them to come in into household takaful concern in 2011. Furthermore, Public Bank Group continued to spread out its subdivision web in local and abroad. The Group presently has 83 subdivisions in Hong Kong, 23 subdivisions in Cambodia, 7 subdivisions in Vietnam, 3 subdivisions in Laos, 3 subdivisions in China, 1 subdivision in Sri Lanka and 3 representative offices in Shanghai, Shenyang and Taipei. Besides, they invested to a great extent in its superior service bringing criterions while at the same clip continued to spread out and heighten its web of ego service machines, strong gross revenues force every bit good as involvement banking and nomadic banking.

In term of dividend payments, for 2011, Public Bank Group has paid its first interim individual tier dividend cost RM700 million ( RM1.00 per portion ) on 17 August while on 30 January 2012, the Directors declared a 2nd interim individual tier dividend amounting to about RM980 million ( RM1.00 per portion ) to be paid and distributed to stockholders. The Directors do non urge any concluding dividend for the fiscal twelvemonth and these dividends have non reflected in the fiscal statements for the current fiscal twelvemonth. In add-on, the hard currency dividend payment will be accounted for in equity as a requisition of reserved net incomes during the fiscal twelvemonth stoping December 2012 upon declaration.

There are several ends set by Public Bank Group to accomplish in future. First, the group will concentrate on its organic growing schemes to turn both its retail loan and client sedimentations. Besides, the group will go on to continue nucleus client sedimentations to vouch that it continues to retain low support cost and a healthy and liquid balance sheet. At the same clip, Public Bank Group will maintain up its hazard direction criterions and patterns to do certain its strong plus equity will prolong and stay watchful to put on the line related with high family debt.

Besides that, the group continue to concentrate on turning its fee-based activities and sharply prosecute cross-selling enterprises every bit good as seek executable merchandise bundling chances. On the other manus, it besides focused on turning its abroad operations and lap chances from the encouraging economic chances of this part.

In add-on, the group will farther leverage on its PB trade name name franchise, efficient multiple bringing channels, strong gross revenues and selling force, broad distribution web and superior service bringing criterion. Besides, it aimed to speed up its attempts to better its client relationship direction and accomplish greater use of electronic payments.

Last, the Group continues to watch over any extra capital demands to be imposed by Bank Negara Malaysia and guarantee its capital degree in healthy status all the times every bit good as discover avenues for more capable direction of the overall liquidness conformity.

2.0 – Scatter and Time Series Graph of Monthly Share Price Motions

2.1: Nestle ( Malaysia ) Berhad

a ) Scatter Graph

B ) Time Series Graph

2.11: Analysis of Graph

By and large, that is a relationship between the portion monetary value of month Ts and month + t although there are some fluctuations. There is a steady growing shown in the graph for the past 3 old ages. It would be a small hard to foretell the hereafter motion in monetary value because of the fluctuation.

From the clip series graph, upward tendency in the portion monetary value of Nestle in the past 3 old ages indicates that there is a changeless growing of concern where the monetary value has been increased from RM32.54 in November of twelvemonth 2009 to RM65.48 in the same period 2011. ( refer to appendix ) Fluctuation happened might due to several factors which are impacting the planetary economic growing and plunging volatilities in trade good monetary values.

The positive relationship between the months as shown spread graph shows the finance director ‘s attempts of increasing the stockholders wealth is honoring.

2.2: Public Bank Berhad

a ) Scatter Graph

B ) Time Series Graph

2.21: Analysis of Graph

By and large, that is a relationship between the portion monetary value of month Ts and month + t although there are some fluctuations. There is a steady growing shown in the graph for the past 3 old ages. The portion monetary values in the hereafter could be predicted although non accurately because of the minor fluctuation.

There is a little upward tendency in the portion monetary value of Public Bank Group which indicates that the Group is turning easy for the past three old ages where its portion monetary value has been increased to RM15.50 compared to RM10.88 in 2009. ( refer to appendix ) In 2008 and 2009, banking industry become more ambitious due to the economic crisis and hence caused the portion monetary value unstable. However, Public Bank Group has insulated from the impact and started to turn when Malaysia ‘s economic has easy recovered in twelvemonth 2010.

The positive correlativity between the months as shown in the spread graph shows that banking industry has bit by bit recover from the impact of economic crisis in twelvemonth 2008 and 2009.

2.3: Efficient Markets

The construct of efficient market hypothesis ( EMH ) suggests that “ an efficient market impounds new information into monetary values rapidly and without prejudice, ” ( Bowman, 1994, p2 ) . It is cardinal importance to the accounting field for finding of the directors ‘ public presentation and the effectivity of holding to the full disclosed fiscal statements. Information revelation is the cardinal demands in an efficient stock market in order to correctly value the company ‘s portions where they must supply sufficient information in a timely mode allow the market to make so. As Malkiel suggests, “ when information arises, the intelligence spreads really rapidly and is incorporated into the monetary values of securities without hold. ” ( Malkiel, 2003, p3 ) Having a to the full disclosed fiscal statement sing the current and prospect state of affairs of the company will allow a more precise rating of the company ‘s portion because information accelerates the procedure of returning monetary value to the true just value.

2.31: Weak Efficient Market Hypothesis

The weak signifier of EMH says that future stock monetary values are unable to foretell on the footing of past stock monetary values. It is a shooting aimed straight at proficient analysis. If past stock monetary values are useless to assist in predict hereafter monetary values, there ‘s no point in seeking to acknowledge forms in stock charts.

2.32: Semi-Strong Efficient Market Hypothesis

The semi-strong signifier of EMH says that future monetary values are unable to foretell utilizing any published information. It is a shooting aimed at cardinal analysis. If all published information is already reflected in a stock ‘s monetary value, so there ‘s nil more to be gained from looking at fiscal statements.

2.33: Strong Efficient Market Hypothesis

The strong signifier of EMH says that everything that is predictable – even unpublished information has already been reflected in present monetary values. Person would derive nil even if there are some inside information and could lawfully merchandise based upon it.

2.34: Random Walk Hypothesis

The random walk hypothesis of the early 1960s was an empirical consequence. Research workers had concluded that the monetary values in stock market behaved like geometric random walks based on time-series analyses of past monetary values. This goes against the pattern of proficient analysis, proposing the prognostic monetary value forms technicians divined from monetary value charts were lone figments of their imaginativeness.

Consequence from the Graph

In relation to the portion monetary value motion of Nestle ( Malaysia ) Bhd and Public Bank Berhad which seems to be mounting at a steady gait, shows that the market is efficient because it reflects the available information sing the growing of the concern over the past few old ages.

3.0 – Concept of Security Valuation and Capital Budgeting

3.1: Stock Valuation Methods

There are two types of stock ratings. One is a value created utilizing some type of hard currency flow, gross revenues or cardinal net incomes analysis while the another value is dictated by how much an investor is willing to pay and sell for a peculiar portion of stock. In another significance is by supply and demand. Both of these values are altering over clip, affected by how investors analyze the stocks and their assurance degree on the hereafter of stocks.

The indispensable rating is the rating that people use to apologize stocks monetary values. The most regular illustration of this type of rating methodological analysis is Price to Net incomes Ratio ( P/E ratio ) . This signifier of rating is based on statistics and historic ratios and purposes to delegate value to a stock based on mensurable properties. Furthermore, this signifier of rating is classically what drives long-run stock monetary values.

Stockss can be valued in another manner based on supply and demand. The more demand in the stock, the higher its monetary value will be. On the other manus, the more supply in the stock, the lower the monetary value will be. This signifier of rating is really difficult to be cognizant of or predict, and it frequently drives the short-run stock market tendencies.

3.2: Capital Budgeting Techniques

Capital budgeting is a direction procedure which enables the direction to do determination on which, when and where to do a long-run investings. With the aid of Capital Budgeting Techniques, direction could able to make up one’s mind whether to accept or reject a peculiar undertaking by analyse on the cost required and hard currency flows generated by the undertaking over a period of clip. Management can make up one’s mind to choose the undertaking if the value of hard currency flows generated by the undertaking exceeds the cost of set abouting that undertaking.

a ) Discounted Payback Period Calculation

Discounted payback period is utilizing to acknowledge the clip frame needed to cover the initial cost of a undertaking based on its investing ‘s hard currency flows, discounted at undertaking ‘s cost of capital. For ciphering discounted payback period ( DPP ) , present value ( PV ) of each hard currency flow ( CF ) will be calculated, get downing from the first twelvemonth as nothing point and cumulated up to clip the initial cost of the undertaking being covered. The shorter the payback period, the better the undertaking.

For said intent, the direction is required to put a suited price reduction rate. The discounted hard currency flow ( DCF ) for each period is to be calculated utilizing this expression:

DCF = Actual Cash flows / [ 1 + I ] ^n

Where,

I is the price reduction rate ;

N is the period to which the hard currency flow belongs.

DCF is the merchandise of existent hard currency flows and PV factor as it consists of two constituents – existent hard currency flows and PV factor ( 1 / ( 1 + I ) ^n ) in this expression. While ciphering the process to cipher Discounted Payback Period is similar to the process that usage for ciphering simple payback period except that it use the discounted hard currency flows alternatively of existent hard currency flows.

B ) Internal Rate of Return

Internal Rate of Return is another of import technique used in Capital Budgeting Analysis to entree the capableness of an investing proposal. This is considered to be the most critical alternate to Net Present Value ( NPV ) . IRR is the needed rate that equates the NPV of an investing nothing. In other word, IRR can be explained as the price reduction rate at which the costs of investing equal to the benefits of the investing.

NPV and IRR methods enable direction to make up one’s mind either to accept or reject independent undertakings. The ground is that whenever NPV is positive, IRR must more than the cost of capital. However this is non accurate in instance of reciprocally sole undertakings.

degree Celsius ) Present Value of Multiple Cash Flows

Many instances come across where the present value of series of multiple hard currency flows has to be settled on. There are two ways to cipher present value of multiple hard currency flows. Either by price reduction back single hard currency flow at a clip, or merely cipher the present values separately and add them up.

3.3 – Differences between Capital Budgeting and Security Valuation

Stock rating constructs are similar with capital budgeting and besides can use in capital budgeting. However, it have somewhat different with capital budgeting. Alternatively of investors choosing stocks from those available in the stocks market, capital budgeting undertakings are created by the house itself. In other words, stock rating is controlled by the supply and demand in the market while capital budgeting is flexible and can pull strings by the direction, either to accept a undertaking or reject it. For illustration, a market analysis demoing that there is demand for the peculiar merchandise or service. If a important market is exists, the direction will so gauge the production cost to transport out the undertaking. If the undertaking is concludes that it can bring forth sufficient net income, it will be officially proposed and farther analysis will be conducted to verify if it will add value to the house.

The 2nd difference between stock rating and capital budgeting is the influence on the hard currency flow produced by investing. In stock market, investors will non make any influence on the hard currency flow produced by their investing as there is no straight involved of hard currency but capital budgeting will. In stock market, investors make investing based on their consideration on the hereafter of the stock. While capital budgeting is create by sing the hard currency flow after an investing have make. During the procedure, the dealing of hard currency when set abouting a undertaking will straight impact the determination of a trough either to accept or reject the undertaking. The director will normally take a undertaking which brings the maximal net income to the house.

Appendix

Monthly Share Price of Companies from November 2009 to November 2012

a ) Nestle ( Malaysia ) Berhad

Date

Shutting Monetary value

Change of Price in mth T

Change of Price in mth T +1

2/11/2009

32.54

0

0.017209588

1/12/2009

33.10

0.017209588

-0.001208459

4/1/2010

33.06

-0.001208459

0.025408348

1/2/2010

33.90

0.025408348

0.007079646

1/3/2010

34.14

0.007079646

0.028705331

1/4/2010

35.12

0.028705331

-0.023348519

3/5/2010

34.30

-0.023348519

0.020408163

1/6/2010

35.00

0.020408163

0.108571429

1/7/2010

38.80

0.108571429

0.030412371

2/8/2010

39.98

0.030412371

0.050525263

1/9/2010

42.00

0.050525263

0.042857143

1/10/2010

43.80

0.042857143

-0.00913242

1/11/2010

43.40

-0.00913242

-0.001382488

1/12/2010

43.34

-0.001382488

0.031379788

3/1/2011

44.70

0.031379788

0.006711409

2/2/2011

45.00

0.006711409

0.04

1/3/2011

46.80

0.04

0.025213675

1/4/2011

47.98

0.025213675

-0.004168404

3/5/2011

47.78

-0.004168404

-0.01213897

1/6/2011

47.20

-0.01213897

-0.002118644

1/7/2011

47.10

-0.002118644

0.038216561

1/8/2011

48.90

0.038216561

-0.018813906

2/9/2011

47.98

-0.018813906

0.050437682

3/10/2011

50.40

0.050437682

0.029761905

2/11/2011

51.90

0.029761905

0.082851638

1/12/2011

56.20

0.082851638

-0.008896797

3/1/2012

55.70

-0.008896797

0.001795332

1/2/2012

55.80

0.001795332

0.003584229

1/3/2012

56.00

0.003584229

-0.0125

2/4/2012

55.30

-0.0125

-0.03761302

1/5/2012

53.22

-0.03761302

0.080420894

1/6/2012

57.50

0.080420894

0.043478261

2/7/2012

60.00

0.043478261

0.067

1/8/2012

64.02

0.067

-0.039362699

3/9/2012

61.50

-0.039362699

0.13300813

1/10/2012

69.68

0.13300813

-0.060275545

1/11/2012

65.48

-0.060275545

-1

B ) Public Bank Berhad

Date

Shutting Monetary value

Change of Price in mth T

Change of Price in mth T +1

2/11/2009

10.88

0

0.038602941

1/12/2009

11.30

0.038602941

0.051327434

4/1/2010

11.88

0.051327434

-0.065656566

2/2/2010

11.10

-0.065656566

0.048648649

1/3/2010

11.64

0.048648649

0.030927835

1/4/2010

12.00

0.030927835

-0.046666667

3/5/2010

11.44

-0.046666667

0.04020979

1/6/2010

11.90

0.04020979

0.021848739

1/7/2010

12.16

0.021848739

-0.009868421

2/8/2010

12.04

-0.009868421

0.043189369

1/9/2010

12.56

0.043189369

0.012738854

1/10/2010

12.72

0.012738854

0.006289308

1/11/2010

12.80

0.006289308

0.0171875

1/12/2010

13.02

0.0171875

0.02764977

3/1/2011

13.38

0.02764977

-0.025411061

2/2/2011

13.04

-0.025411061

0.006134969

1/3/2011

13.12

0.006134969

-0.00304878

1/4/2011

13.08

-0.00304878

0.013761468

3/5/2011

13.26

0.013761468

0.003016591

1/6/2011

13.30

0.003016591

0.010526316

1/7/2011

13.44

0.010526316

-0.02827381

1/8/2011

13.06

-0.02827381

-0.065849923

2/9/2011

12.20

-0.065849923

0.042622951

3/10/2011

12.72

0.042622951

-0.014150943

1/11/2011

12.54

-0.014150943

0.066985646

1/12/2011

13.38

0.066985646

0.011958146

3/1/2012

13.54

0.011958146

0.008862629

1/2/2012

13.66

0.008862629

-0.001464129

1/3/2012

13.64

-0.001464129

0.004398827

2/4/2012

13.70

0.004398827

0.004379562

1/5/2012

13.76

0.004379562

0

1/6/2012

13.76

0

0.043604651

2/7/2012

14.36

0.043604651

-0.002785515

1/8/2012

14.32

-0.002785515

0.004189944

3/9/2012

14.38

0.004189944

0.105702364

1/10/2012

15.90

0.105702364

-0.025157233

1/11/2012

15.50

-0.025157233

-1