Investment Analysis Individual Assignment

A201 BWFN3013 INVESTMENT ANALYSIS
INDIVIDUAL ASSIGNMENT 1: Compare and Contrast the Potential

Outlook of Public-Listed Companies (MKH & UOA)
Submitted to:
DR. BADRU BAZEET OLAYEMI
Prepared by:
LIM SAU LOON (264080)
Submitted date
6 DECEMBER 2020
This study source was downloaded by 100000785863692 from CourseHero.com on 05-28-2022 13:25:25 GMT -05:00
https://www.coursehero.com/file/78970591/Investment-Analysis-Individual-Assignmentdocx/
Table of Contents
INTRODUCTION......................................................................................................................3
MKH Berhad’s Background...................................................................................................3
UOA Group’s Background.....................................................................................................4
Potential Outlook Comparison Between Two Companies.........................................................5
Financial Performance............................................................................................................5
Stock Performance..................................................................................................................6
Growth Opportunities.............................................................................................................7
Riskiness.................................................................................................................................8
Trailing PE & Future PE........................................................................................................9
Conclusion..................................................................................................................................9
INTRODUCTION
Investment is an asset or item that has been purchased in hope to generate income,
profit, or value appreciation in the future. Generally, any action that is taken in the hopes of
raising future revenue could be considered as an investment. In finance term, investments can
be made through any mechanism for generating revenue and profit, which include purchase
of bonds, stocks, or real estate property.
In this paper, we will focus on stocks. A stock is also known as equity, is a kind of
security that represents the ownership of a fraction of a company. This entitles the owner of
the stock to a proportion of the company’s assets and profits equal to how much stock they
own. Two public listed companies that I chose from Bursa Stock Exchange are MKH Berhad
and UOA Development Berhad. Both companies are in same industry of property
development.
I will be analysing these two companies by comparing the company’s potential

outlook including financial performance, stock performance, growth opportunities, riskiness
and other factors on their financial analyst reports. In the end of this paper, I will suggest
which stock would be preferrable to invest based on the outcome of the comparison.
MKH Berhad’s Background

Metro Kajang Holdings Berhad (“MKH”) is a diversified property developer that
established in 1979 based in Malaysia. The company’s business operates across the Klang
Valley, China and East Kalimantan, Indonesia. As the business continued growing, they had
expanded into building materials trading, property investment and furniture manufacturing,
and ventured into oil palm plantation in year 2008 after the recognition of sustainability of
crude palm oil in the long run.
MKH was originally incorporated as Srijang Bena Sdn Bhd, and in conjunction with
its public listing on the Main Market of Bursa Securities Malaysia in year 1995, the Group
then rebranded into Metro Kajang Holdings Berhad, and later on as MKH Berhad in year
2011. In year 2016, MKH has achieved its billion-ringgit revenue mark with the joint efforts
of over 4,000 employees, garnered a variety of industry-wide recognition for excellence in
company performance, property workmanship as well as estate management.
UOA Group’s Background
United Overseas Australia Group (“UOA”) is one of the leading property groups in
Malaysia. The Group was founded and listed on the Australian Stock Exchange (ASX) as
United Overseas Australia Ltd in 1987, UOA has focused on property development,
construction, property investment, and property management. Since 1989, the Group has
based its headquarters and business operations in Kuala Lumpur.
On 8 June 2011, UOA successfully listed its construction and development division,
UOA Development Bhd on the main market of Bursa Malaysia which placed the Group as
one of the largest listed property development companies by market capitalization in
Malaysia. The Group has a total land bank of approximately 100 acres with a potential
estimated Gross Development Value (GDV) of more than RM17 billion over the next 10
years, and it has a workforce of more than 2,100 personnel forward together to achieve their
goal of developing and investing in high quality properties.
Potential Outlook Comparison Between Two Companies
Financial Performance
MKH UOA
RM’000 RM’000
Revenue 623,520 650,489
Cost of Sales (414,236) (361,469)
Gross Profit 209,284 289,020
Net Profit After Tax 67,002 364,864
Total Comprehensive Income for the 65,145 364,914
Financial Year
Earnings Per Share 7.40 17.91
Table 1: Unaudited Condensed Consolidated Statement of Profit or Loss and Other
Comprehensive Income for Period Ended 30 September 2020
Gross Profit Net Profit

Gross Margin Ratio = , Net Profit Margin Ratio =
Revenue Revenue
From table 1, the difference between both companies’ revenue is around RM26.97
million, the cost of sales of MKH was higher even it had lower revenue compare to UOA.
The gross margin ratio of MKH is 0.336, while UOA is 0.444. However, due to the losses on
foreign exchange translation differences, MKH’s profit further declined RM1.857 million.
The reason UOA has higher net profit than gross profit is because UOA earned RM114
million from fair value adjustment on investment properties, RM143.557 million on other
income and RM17.281 million on finance income. The net profit margin ratio of MKH is
only 0.107 compare to UOA’s 0.561, would considered as outperform the market and
earnings per share of both companies were 7.40 for MKH and 17.91 for UOA.
MKH UOA
RM’000 RM’000
Total Non-Current Assets 1,861,776 3,172,520
Total Current Assets 1,481,143 3,108,836
Total Assets 3,347,453 6,281,356
Total Non-Current Liabilities 694,937 52,015
Current Liabilities 928,922 656,693
Total Liabilities 1,623,859 708,708
Net Asset Per Share 2.83 2.53
Table 2: MKH’s and UOA’s Unaudited Condensed Consolidated Statement of Financial
Position As At 30 September 2020
Current Assets Total Liabilities

Current Ratio = , Debt Ratio = ,
Current Liabilities Total Assets
Net Profit Total Liabilities

Return on Asset Ratio = , Debt to Equity Ratio =
Total Asset Shareholder s ' Equity
As table shown, the total assets of UOA valued at RM6.281 billion almost double
compare to MKH’s RM3.347 billion. However, MKH has more than double of total liabilities
(RM1.623 billion) compare to UOA (RM708 million). The current ratio of MKH is 1.594,
which is healthy, while UOA is 4.734, which mean UOA did not efficiently using its short-
term financing facilities. For debt ratio, MKH considered as unhealthy since the ratio is
0.485, while UOA is only 0.113. The higher the debt ratio, the higher the risk for the
company will not generate enough cash flow to pay its debt. MKH’s debt to equity ratio is
considered too high (2.481), the company might not be able to earn enough income to pay its
debts since the cost of sales are also high. MKH’s return on asset ratio is only 0.0195 while
UOA’s is 0.0581. The lower ROA means that MKH needs more investment for profit, this
mean it is less favourable when compare to UOA, since UOA might not need to invest more
to get same return. On the other hand, MKH’s debt to equity ratio is 2.481, it means that
MKH uses debt to finance it growth compare to UOA (0.281) that do not fully utilize the
borrowing to gain the potential profit. The net asset per share of MKH (2.83) is higher than
UOA (2.53) is due to the shares issued by MKH was 587 million shares and UOA issued
2,125 million shares.
Stock Performance
MKH’s share price currently value at RM1.47 per share (27 November) with market
capitalization of RM862 million. The stock’s 52-week high was RM1.86 and 52-week low
was RM0.81, the difference between 52-week high and low were 129.6%. Since the price of a
share is RM1.47, it is slightly above the mid-point of 52-week high and low. The annual
dividend pay-out per shares is 0.04 or dividend yield of 2.7%, may considered as slightly
lower yield. The company’s return of equity (ROE) is also low with 3.6% since the investors
would prefer ROE around 10%. The annual revenue was around RM931 million. The
institutional ownership of MKH’s stocks is 2.2%, 1-month return at 21.5% and 17.6% for 3-
month return. The average score of the stock is 10 and is outperformed other real estate
operation group where the average is 5.4. Bursa Malaysia highlighted MKH currently as an
exclusive group that was awarded with highest score and recommend that investors should
buy the stock.
On the other hand, UOA’s stock currently valued at RM1.59 per share (27 November)
with market capitalization of RM3.4 billion. The stock’s 52-week high was RM2.15 and low
was RM1.38, the gap is 55.8% and the current price of the stock is slightly above its 52-week
low’s rate. The annual dividend pay-out is RM0.14 per share and dividend yield of 8.8%
which considered high yield. UOA’s ROE is 9.1% with annual revenue of RM878 million.
The institutional ownership of UOA’s stocks is 7.4%, 6.7% of 1-month return and -3% of 3-
month return. The average score of the stock is 8 which also perform better than other real
estate operations group with average of 5.4. Bursa Malaysia also recommend investors to buy
UOA’s stock.
Growth Opportunities
MKH is looking into the strong demand for properties in Kajang, because the young
population demography and increasing urbanization boost the demand of reasonably priced
properties in this area. Some properties projects that MKH is planning to develop in Kajang
are MKH City (shopping mall, hotel and office tower) and KAIZEN (406 units terrace villas).
Other than Kajang, MKH also develop projects in other valuable areas, for example TR2
Residence at Jalan Tun Razak, Kuala Lumpur, Nexus Taman Pertama (apartments) in Cheras,
and MKH World (serviced apartment, retail mall, shop offices and office towers) in Serdang.
These properties are the key projects that will lead the company to further grow and generate
more income for their shareholders.
The higher than expected crude palm oil prices will also lift the company’s earnings
substantially due to growing contribution from young trees, the upgrade of palm oil mil at
East Kalimantan estate by 14 June will also further improve the operational efficiency. The
market analysts are forecasting the earning growth of MKH in and expecting the profit will
continue to grow double digit next couple of years.
The biggest surprise from UOA Group is how well it has adapted to the changing
market conditions despite the company only concentrate in one geographical location. The
property market in 2020 has been far more challenging than 2019 when developers across the
board are suffering the low market demand due to COVID-19 pandemic. UOA’s landbank in
strategic locations in Sri Petaling, Bangsar South, Kuala Lumpur, Segambut and even
Australia. Despite focusing on the affordable price range, UOA Group will continue to enjoy
superior pre-tax margins of 40% to 50%. Some of the residence apartments under
construction that the Group are looking in are Aster Green Residence (Sri Petaling) and
Goodwood Residence
(Bangsar South).
Other than residence apartment, UOA has also moved into township development, for
example Invito Hotel & Residence (Bangsar South), Komune co-working space (Bangsar
South and KLCC), Komune Living & Wellness, the development houses a co-living hotel,
senior living facilities and medical wellness centre (Kuala Lumpur) United Point, a retail and
lifestyle centre (Segambut), and KL Digital City, Malaysia largest digital hub as 5G city with
commercial, retail, entertainment, residential, hospitality offering. The Group could also
invest in urban areas other than focusing only on Selangor and Kuala Lumpur, like Penang
and Johor.
Riskiness
The riskiness score for MKH is currently rated at 9, low risk and consistent in return.
The company score above the average of real estate operations group in Malaysia which only
6.2 in score. The risk score for the company in past 4 weeks moved between neutral and
positive in trend. On the days when the market is up, MKH tends to perform in-line with the
FTSE BURSA MALAYSIA COMPOSITE index, however, on days when the market is
down, the shares generally decrease by more than the index does. In the short term, MKH has
shown average correlation (>=0.2 and <0.4) with the FTES BURSA MALAYSIA
COMPOSITE index. The stock has shown high correlation (>=0.4) with the market in the
long term.
The riskiness score for UOA is currently rated at 10, the lowest risk compare to its
peers. The Group is the top scorer in riskiness since the stock moved positively in risk score
trend for the past 4-week moving average. On the days when the market is up, UOA tend to
lag the FTSE BURSA MALAYSIA COMPOSITE index and the stock generally performs in-
line with the index when the market is down. In both short-term and long-term periods, UOA
has shown average correlation (>0.2 and <0.4) with the FTSE BURSA MALAYSIA
COMPOSITE index. Thus, this stock would provide only average levels of diversification to
a portfolio similar to broader market.
Trailing PE & Future PE

Since we are looking into the share price movement in future, we must understand the
trailing Price-to-Earning (PE) and Forward PE for the stock. The Trailing PE and Forward PE
for MKH are 17.1 and 12.3, respectively. It means that the market estimate that the company
will continue to grow in earnings. For UOA, the Trailing PE is 8.6 and Forward PE is 9.1, it
means that in future either the stock price will continue to increase, or future earnings will
reduce. However, Future PE is just the estimation on future share price and earnings, it could
not predict the future perfectly.
Conclusion
In summary, both of the companies fit different investors. For investors who seek in
future growth and are patient should invest in MKH, MKH will continue to grow in future
since their products are more likely to be consume by young population. However, the
company might have the potential risk on short in cash flow due to the high debt, low
dividend yield also would not be the choice of investors who look in high return. Investors
who look for liquidity cash flow or higher return should invest in UOA, because UOA gain
more sustainable return for their shareholders and the Group are backed by highly valuable
assets with low debt ratio. In other words, both companies are good investment and will
provide sustainable return and are low in risk among the real estate sector in Malaysia.
Powered by TCPDF (www.tcpdf.org)

Investment Analysis Individual Assignment

Uploaded by

Copyright:

Available Formats

Investment Analysis Individual Assignment

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Investment Analysis Individual Assignment

Uploaded by

Copyright:

Available Formats

A201 BWFN3013 INVESTMENT ANALYSIS

INDIVIDUAL ASSIGNMENT 1: Compare and Contrast the Potential

DR. BADRU BAZEET OLAYEMI

LIM SAU LOON (264080)

MKH Berhad’s Background...................................................................................................3

UOA Group’s Background.....................................................................................................4

Potential Outlook Comparison Between Two Companies.........................................................5

Trailing PE & Future PE........................................................................................................9

I will be analysing these two companies by comparing the company’s potential

MKH Berhad’s Background

Gross Profit Net Profit

Current Assets Total Liabilities

Net Profit Total Liabilities

Trailing PE & Future PE

You might also like