STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

EPPA4143
ANALISIS PELAPORAN KEWANGAN
SEMESTER 9 2020/2021

FINANCIAL REPORT ANALYSIS

PREPARED BY:

TANAMATHY A/P CHANDRAN GA03041

PREPARED FOR:
Dr. Mohd Fairuz Bin Md Salleh
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

1.0 Introduction

1.1 Telecommunication Industry In Malaysia

For this financial statement analysis, we will look on how the statements of comprehensive
income and cash flow for telecommunication industries which is between Celcom Axiata
Berhad and Maxis Sdn Bhd. Company analysis is more to the services and goods offered
by the company. Usually the manufacturing companies are being analyzed based on the
quality of the products produced, however in services industry, the services is priority will be
considered by investors. Additionally, the analysis of the company includes the statements of
comprehensive income, statements of profit and loss analysis and cash flow analysis. In
order to know the best company solutions for the investor, the company annual report is the
best tool to use. As an investor we are here to find out the best company by comparing the
both statements of comprehensive income and cash flow of both company by relating
accounting policy each of the company.

Evolution of telecommunications

 In 1983, the data telecommunications system was introduced.

 In 1985, ATUR, the first wireless telephone system was introduced by Jabatan
Telekom Malaysia (JTM).
 In 1987, JTM was incorporated as Syarikat Telekom Malaysia Berhad (STMB) or
Telekom Malaysia (TM) following the National Corporatization Policy, which was
launched in the 1980s.
 In 1988, Celcom Sdn Bhd was founded under its name STM Cellular
Communications Sdn Bhd. It was the first to provide GSM based mobile services.
 In 1997, Telekom Malaysia introduced CDMA based mobile homeline services.
 In 2003, Celcom Axiata Berhad (formerly Celcom Sdn Bhd) became the first provider
to introduce video call based on 3G WCDMA technology.
 In 2008, Packet One Networks Sdn Bhd became the first provider to introduce
wireless WiMAX service on 802.16e spectrum technology.

In 2013, Maxis Berhad (formerly Maxis Sdn Bhd) became the first provider to introduce 4G
LTE mobile network before any other service provider. As of 2020, there are 8 operators
have been allocated licences to the band which is Celcom Axiata, DiGi Telecommunications,
Maxis Broadband, Packet One Networks, Puncak Semangat, REDtone, U Mobile and YTL
Communications.
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

1.2 Company Background

1.2.1 CELCOM AXIATA BERHAD

Established since 1988, Celcom, a member of the Axiata Group of Companies, is the first
mobile operator in Malaysia. Celcom offers the widest and most extensive 2G, 3G and 3.5G
coverage, serving 98% of populated areas, while it’s 4G covers 76% of population. Serving
9.7 million customers, Celcom believes that talent, innovation, operational excellence and
embracing digitization will be the key to create awesome customer experiences. Celcom is a
proud partner to 6 Mobile Virtual Network Operators (MVNO), offering roaming services in
197 countries via more than 462 network partners worldwide. Financially, Celcom boasts
being the only mobile operator to sustain 31 consecutive quarters of growth, and in 2013,
recorded RM8.0 billion in revenue, the highest in history. In an independent survey
conducted by Nielsen, Celcom ranked number one in Net Promoter Score (NPS) amongst
the big three operators in Malaysia, while complaint resolution performance has either met or
exceeded statutory requirements by MCMC.

1.2.2 MAXIS BERHAD

Established in 1995, Maxis was one of the first mobile communications providers in
Malaysia.The company is constantly revamping its business model and was one of the first
operators to introduce 4G services in 2013. Its 4G service reaches 15% of the Malaysian
population, making Maxis a market leader in this area. Maxis also offers cloud computing to
small and medium businesses. The company's 2G and 3G networks cover 95% and 83% of
the Malaysian population respectively. Maxis' CEO is Norwegian Morten Lundal, former
CEO of DiGi.Com, another Malaysian telecommunications company. He was also a top
executive at Vodafone, the U.K.'s leading mobile phone company. Maxis is more than 60%
controlled by Usaha Tegas, a private investment arm of Malaysian billionaire Ananda
Krishnan.
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

1.3 Objective of the Study

The main objective of this study is to perform financial statement analysis of Celcom
Axiata and Maxis Berhad. This study analysed two years of annual reports of both
companies from 2018 and 2019. The 2 companies was evaluated on its financial conditions,
cash flows and with accounting policy which is Celcom Axiata Group Berhad and Maxis
Group Berhad. The company was evaluated on its financial conditions, cash flows and with
accounting policy.

Parameters that involved in the evaluations are as below:

 Statements of comprehensive income

 Cash flow condition
 Compared with accounting policy

Statements of comprehensive income Comprehensive income is the variation in a

company's net assets from non-owner sources during a specific period. Comprehensive
income includes net income and unrealized income, such as unrealized gains or losses on
hedge/derivative financial instruments and foreign currency transaction gains or losses.
Comprehensive income provides a holistic view of a company's income not fully captured on
the income statement.

2.0 STATEMENTS OF COMPREHENSIVE INCOME ANALYSIS

2.1 Tools and Analysis
Comprehensive Income or Statement of Comprehensive Income is a financial
performance statement that listed down all profit and loss and other
comprehensive income of entity for the period of time.It usually prepares and
presents monthly, quarterly, and annually. There are two main importance types
of income that contain in this statement which differentiate it from the income
statement. First, is realize profit or loss which is the actual profit or loss for the
period. And second is unrealized gain or loss which is the profit or loss as the
result of accounting mater. Statement of Comprehensive Income is the same as
Statement of Profit or Loss and Other Comprehensive Income. The name was
changed by IASB.
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

COMPARISONS

1) On horizontal analysis shown for Celcom Axiata Berhad Company (SOCI), there is a
decrease in its main revenue in customer post-paid, prepaid and device in 2019 is
only (27.3%) compared to 2018 (30.7%). Expenses shows an increase in horizontal
analysis in 2019 (114.16) compare to 2017 (100) and 2018 about (107.44) percent.
According to the operating revenue notes to the account Disaggregation of revenue
of the Group and the Company accounted for under MFRS 15 by timing of revenue
recognition. The core principle of MFRS 15 is that revenue is recognised when the
goods or services are transferred to the customer, at the transaction price. Revenue
is recognised in accordance with that core principle by applying a 5-step model as
identify contracts with customer, separate performance obligations in the contracts,
allocate the transaction price, recognise revenue when the performance obligation is
satisfied.
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

2) On horizontal analysis shown for Celcom Axiata Berhad Company (SOCI), there is
an increase in its main earnings before interest ,taxes depreciation and amortization
in customer post-paid, prepaid and device in 2019 is only (24.7%) compared to 2018
(22.9%). EBITDA shows an increase in horizontal analysis in 2019 compare to 2018.
Contract cost assets acquisition costs comprise mainly of sales commission paid to
dealers. Contract fulfillment cost comprise mainly of set-top boxes and routers. The
contract cost assets are expected to be amortised over twenty (20) to forty- three
(43) months accordingly with note to the accounting. Net book value of PPE of
certain subsidiaries pledged as security for borrowings as disclosed in Note 16(a)
and (e) to the financial statements. In the previous financial year, the Group reviewed
the estimated useful life of certain telecommunication network equipment of
subsidiaries. The revision was accounted for as a change in accounting estimate and
has increased the depreciation of the Group by RM1,457.7 million. In addition to the
above, the Group had further written off and impaired its property, plant and
equipment of RM345.4 million and RM 13.4 million respectively. In the previous
financial year, included in the net book value of telecommunication network
equipment of the Group was finance are leased assets amounting to RM 2,925.4
million. During the financial year, included in net book value of telecommunication
network equipment are assets that have been leased out by the Group
amounting to RM2,189.4 million.

3) On horizontal analysis shown in DIGI Company (SOFP) shows an increasing in total

asset in 2019 with (100.2) percent compare to 2018 (100.0) percent. Its accordingly
notes to the account.
4) On horizontal analysis shown in DIGI Company (SOFP) shows an increasing in total
liability and equity in 2019 with (100.55) percent compare to 2018 (100.06) percent.
Its accordingly notes to the account.
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

On horizontal analysis shown for Maxis Company (SOCI), there is an increase in its main
revenue in customer post-paid, prepaid and device in 2019 (101.79) compare to 2018 only
(100.47). Expenses shows an increase in horizontal analysis in 2019 (114.16) compare to
2018 about (107.44) percent.

Total Profit before tax also decreases in 2019 about (70.74) percent below and 2018 (82.31)
percent. By having a reduce in profit, it also reflects on earning per share in 2019 about
(68.07) percent which is lesser compare to 2018 (80.0). Based on notes to the accounting.
Management expects that approximately all of the transaction price allocated to the
unsatisfied performance obligations as at end of the financial year will be recognised as
revenue within the next 24 months (2018: 24 months).
Comparison Between Celcom Axiata Berhad and Maxis in Statement of
Comprehensive Income (SOCI) Horizontal Analysis.

  Celcom Axiata (RM,000) Maxis(‘mil)

  2019 2018 2019 2018

Revenue 1,078,
071 3,527,637 9,313 9,192
Horizontal 99.32 102.94 101.79 100.47
Maxis have shown better performance in revenue to achieve (101.79)
Decision percent which is higher and Axiata Celcom only manages to get
(99.32) percent performance
Cost Material & 1,43 1,543,
traffic expenses 4,390 003 2,483 3,010
Horizontal 94.70 101.87 79.69 96.60
Maxis have better performance in costing expenses that are lower on
Decision 2019 about 79.69 compare to 2017 than Axiata Celcom are only lower
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

94.70 compare to 2017

Total Expenses
4,405,037 4,447,669 7,277 6,823
Horizontal 101.15 102.12 116.04 108.80
Axiata have lower in total expenses only 101.15 in 2019 compare
Decision 2018.
Profit before tax 1,89 2,079,
2,321 442 2,036 2,369
Horizontal 95.31 104.74 70.74 82.31
Celcom Axiata have highest percentage in profit before tax compare to
Decision Maxis. This is show Axiata are more efficient to gain profit than Maxis.
Earnings per 18.4 19.8 19.4 22.8
share
attributable to
owners of the
parent (sen per
share)
Horizontal 96.84 104.21 68.07 80.00
Decision Axiata have high Earning per share percent compare to Maxis

2.1.1 Operating Cash Flow to current Liabilities

Operating Cash Flow to current Liabilities = Cash Flow from Operation / Current Liabilities

MAXIS BERHAD CELCOM AXIATA BERHAD

2019 2018 2019 2018

Item
Cash flow from/used in 4,106,372 3,476,918 5,583,914 5,648,243
operating activities
Current Liabilities (RM'000) 4,183,248 3,660,444 10,558,99 8,040,911
3
Cash Flow from operations 0.98 0.95 0.53 0.7
to current liabilities

The Operating Cash Flow ratio is used to analysis the cash flow of the Group. It shows how
the cash flow in and out from the company. In flow of cash enable the Group to pay their bills
and liabilities. It measures the Group liquidity in short run as it related to reimburse their
short term obligations. From the table, the ratio is constant from year 2019 and 2018. Maxis
Berhad is still able to turn sales into cash.
Meanwhile , Celcom Axiata Berhad shows a decreasing movement for the cash flow from
operating activities from year 2019 and 2018 . The poor ratio indicates that the group is
facing an uphill task to increase their operation cash flow ratio to meet short-term liabilities
and to raise its liquidity for the uses of funding the business's other operations . Less
STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

flexibility is given when the cash flow is low to finance the strategies in use for adapting the
market changes .

5.0 SUGGESTIONS FOR IMPROVEMENT AND CONCLUSION

5.1 Suggestions for improvement

Both Maxis Berhad and Celcom Axiata Berhad have the financial statistics showing why they
are strong competitors in the telecommunication industry . In an industry that attracts
potential customers by offering the latest service at cheapest price , Maxis Berhad needs an
increase their amount of research and development to develop a new scheme . Maxis
Berhad has to combined competitors strenght into new scheme . It would be wise for Maxis
Berhad to focus on precise areas where they have a strong competency and to be unique
among the telco consumers . Maxis Berhad can extend their service to rural area especially
to police and military quarters which got more potential consumers because usually the
quarters is near to the rural areas and a quarters contains at least 80 families and it can
reach 200 – 300 families depends on location . These location basically use Celcom
coverage . Maxis Berhad also can use new university or new university hostel as their new
location for internet coverage . All these locations is under federal government land and the
rental fees is expensive . Also , the federal government does not want to bear any fees if
anything happen to the telco coverage material . But Maxis can give a try just like Celcom
Axiata Berhad does because they have to come out with their new business strategy . At the
moment , the amount of increased funds used on marketing , general and administrative has
not equally translated into higher sales revenue .
Maxis Berhad's profitability and liquidity performance are quite strong , but need to improve
their operating performance . If they are able to increase their profit margins within their
operating performance , it will give a higher net income and possibly increase asset
utilization . Maxis also can reduce the debt if they are consistence in improving their
operating performance .
Celcom Axiata Berhad's area of improvement is with its collection period . Currently , the
collection period is too long and is causing Celcom Axiata Berhad to use its working capital
funds to clear the account payable . Celcom Axiata Berhad also can reduce the liability
which is growth in big amaount within a year . Celcom Axiata Berhad also making losses in
2014 and if the company continues in making losses for five times in a row , there is high
possibility that the company would be classified as PN17 issuer in the future . The company
has to looking into formulating a plan to regularise its financial condition .

3.2 Conclusion and recommendation for investment

STATEMENTS OF COMPREHENSIVE INCOME FOR CELCOM AXIATA BERHAD AND MAXIS BERHAD

One of the better ways to determine a company's direction financially is to look at the last
few years of their performance and see where they physically placed their priorities . Both
companies' are strong and healthy investments for potential investors . Selling , general and
administrative will have a minor increase explained through the increased volume of sales .
Research and development will increase as Maxis Berhad works to increase their ability to
compete with other major competitors such as Celcom , DiGi and Umobile to bring ahead of
the curve innovation to the market for consumers . Net income will increase with projected
sales volume up , largely credited to an improving economy and consumers spending again .
After reviewing their company strategies and recent year's financial statements and ratios , it
is believed that Maxis Berhad would be a better investment with its larger coverage 2G , 3G
and 4G LTE service , brand name , lower operating expenses , larger net incomes , higher
sales volumes and better growth potential in the long run .