SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN

FOUNDATION IN NATURAL AND BUILT ENVIRONMENT

BASIC ACCOUNTING (ACC30205)

FINANCIAL RATIO ANALYSIS

COMPANY : LBS BINA GROUP BHD

LECTURER : MS. TAY SHIR MEN

GROUP MEMBERS : YAP CHOE HOONG (0323161)

YEONG POH LING (0323590)

NG JI YANN (0323713)

TEO CHIANG LOONG (0323762)

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TABLE OF CONTENT

NO. CONTENT PAGE

1 History of LBS BINA GROUP BERHAD 3

2 Recent Development 4

3 Profitability Ratio 5

4 Stability Ratio 7

5 Price Earning Ratio 9

6 Investment Recommendation 16

7 Appendix 18

8 References 22

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BRIEF BACKGROUND HISTORY of LBS BINA GROUP BERHAD

LBS Bina Group Bhd. is a management and investment holding company, which engages

in the property development business. It operates through the following segments:

Property Development, Management & Investment, Trading & Others, Construction,

and Racing Circuit. The Property Development segment develops residential, industrial

and commercial properties.

LBS Bina Group Bhd. have been around for more than 20 years, LBS Bina has built a

strong reputation for developing high quality properties all over Malaysia and

abroad.The history behind LBS Bina actually dates back longer than that when Datuk Lim

Bock Seng started a construction business in Petaling Jaya which would later grow to

become one of the most significant property developers in Malaysia.

LBS would then expand further in 1992 when it ventured into the property development

sector through the Jelapang Maju Light Industrial Park in Perak. That would be the

springboard to more projects as LBS continued to grow exponentially. Soon after, the

company was undertaking several large projects including its flagship projects like the

Taman Perindustrian Bukit Serdang Seksyen 14, Taman Pinggiran Putra and the very

popular Bandar Saujana Putra, which was a mega project.

Since then, LBS has continued to expand and grow where it is among the primary

players in the Malaysian market while it is expanding further outside the country into

China, seen as one of the most challenging markets in the world.

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RECENT DEVELOPMENT

Property developer LBS Bina Bhd is targeting to achieve sales worth RM1bil from 12 projects with a gross development value of RM1.7bil to be launched in 2015. These are mainly residential properties, priced at below RM500,000 a unit, located in in the Klang Valley, Pahang and Johor.

LBS Bina managing director Datuk Sri Lim Hock San is very confident that they can achieve RM1bil sales as Klang Valley project itself is expected to contribute revenue of RM700mil, whereas the remainder projects in Batu Pahat and Cameron Highlands could both contribute over RM300 mil at a media briefing.

For the current year, Lim pointed out that the properties to launch would comprise of both residential and commercial properties of 81% and 19% respectively, adding that more than half of the residential properties would be priced below RM500,000. Moreover, Lim noted that the company would be launching projects with a GDV of RM6 bil in the next three year in Selangor, Pahang and Johor comprising of both residential and commercial projects.

Moving forward, with relations to the recurring income for LBS Bina, Lim said the company’s plan to transform Zhuhai International Circuit in China into a tourism hub will start construction by 2016.

Concerning ML Global Bhd LBS Bina’s associate, Lim said the company’s restructuring plan aims to cut down wastages to increase profitability and is currently looking for more construction jobs.

PROFITABILITY RATIO

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The following table below shows the profitability ratio calculation and

interpretation for LBS from the year of 2012 to 2013.

Profitability

Ratios

2012 2013 Interpretation

Return on

Owner’s Equity

Ratio

(ROE)

39,003,430(506,549,830+526,831,483)÷2

= 7.5 %

397,323,654(526,831,483+872,640,233)÷2

= 56.8%

During the year of 2012 to

2013, ROE has increased

from 7.5% to 56.8% which

means that LBS is getting

more return from the capital

than last year.

Net Profit

Margin Ratio

(NPM)

39,003,430509,644,355

×100%= 7.7% 397,323,654533,532,722

×100%= 74.5% During the year of 2012 to

2013, NPM has increased

from 7.7% to 74.5% which

means that LBS is getting

better at controlling

expenses.

Gross Profit

Margin Ratio

(GPM)

146,227,906509,644,355

×100%

= 28.7%

168,577,154533,532,722

×100%

=31.6%

From 2012 to 2013, the

GMP for the company of

LBS has increased from

28.7% to 31.6%, which

means that LBS is getting

better for managing their

cost of goods sold.

General

Expenses Ratio

(GER)

67,470,147509,644,355×100%

= 13.2%

85,596,945533,532,722×100%

=16%

During the year of 2012 to

2013, GER has increases

from 13.2% to 16%, which

means that the company of

LBS is not getting better to

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manage their general

expenses.

Financial

Expenses Ratio

(FER)

18,457,247509,644,355×100%

= 3.6%

15,170,850533,532,722×100%

= 2.8%

During the year of 2012 to

2013, FER has decreased

from 3.6% to 2.8%, which

means that the company of

LBS is getting better to

manage their financial

expenses.

STABILITY RATIO

The following table below shows the stability ratio calculation and interpretation

for LBS from the year of 2012 to 2013.

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Stability Ratios

2012 2013 Interpretation

Working Capital Ratio

(WCR)

927,829,389520,720,661

= 1.782

= 1.78 : 1

925,492,766609,599,483

= 1.518

= 1.52 : 1

For every RM1 of current liability in the year 2013 ,the business , LBS Bina has 1.52 of current assets to pay for it . It has a lower ratio than 2012. However , a business should have a minimum of 2:1 of current assets to current liability to ensure that the business will not experience difficulty in repaying its current liabilities.

Total Debt Ratio

(TDR)

908,176,8341,435,008,317

×100%

= 63.3%

1,137,172,4372,009,812,670

×100%

= 56.6 %

For 2013, the total debt ratio is lower than 2012, having a total debt ratio of 56.6% and 63.3% respectively . As the total debt ratio is lower than in 2013, this results in a higher amount of owner’s equity . A business with total debt ratio that exceeds 50% would be considered as having higher risk of going bankrupt.

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Inventory Turnover Ratio

(ITR)

365 days

÷ 363,416,449(17,850,045+13,593,510)÷2

= 16 days

365 days

÷ 364,955,568(13,593,510+22,575,116)÷2

= 18 days

LBS Bina take 18 days in 2013 to sell one batch of goods more than 16 days in 2012 which means that LBS Bina in 2013 cannot generate more cash quickly to pay off its liabilities.

Interest Coverage Ratio

(ICR)

39,003,430+34,929,44034,929,440

= 2.1 times

397,323,654+27,216,79127,216,791

= 15.6 times

Interest coverage ratio for LBS Bina is higher in2013 ,15.6 times than 2012 ,2.1 times which means that LBS business has enough profits to pay its interest expenses 15.6 times. Therefore, to be safe , a business interest coverage ratio should never fall below 5 times.

PRICE EARNING RATIO ( P/E RATIO )

2012 ($)

CURRENT SHARE PRICEEARNING PER SHARE

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= 0.840.097

= 8.7 times

2013 ($)

CURRENT SHARE PRICEEARNING PER SHARE

= 1.560.9609

= 1.6 times

The price earning ratio measures how expensive a share is. The higher the price

earning ratio, the more expensive a share is. Based on the calculation, in the year

2012 of price earning ratio is 8.7 while in the year 2013 of price earning ratio is

1.6. This means that the share in 2013 is less expensive compared to the share in

the year of 2012. As a conclusion, the price earning ratio is 1.6 indicates that the

investor has to wait for 1.6 years to recoup his investment.

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INDEX FOR FTSE BURSA MALAYSIA ON 7 JULY 2015 & 13 JULY 2015

SHARED PRICE FOR LBS BINA GROUP ON 7 JULY 2015 & 13 JULY 2015

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INDEX FOR FTSE BURSA MALAYSIA ON 6 AUGUST 2015 & 1 SEPTEMBER 2015

SHARED PRICE FOR LBS BINA GROUP ON 6 AUGUST 2015 & 1 SEPTEMBER 2015

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INDEX FOR FTSE BURSA MALAYSIA ON 2 SEPTEMBER 2015 & 17 SEPTEMBER 2015

SHARED PRICE FOR LBS BINA GROUP ON 2 SEPTEMBER 2015 & 17 SEPTEMBER 2015

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7 July 15 - 13 July 15 Initial Final Change Percentage change/%

Shared Price 1.60 1.51 - 0.09 - 5.63

Index 1712.30 1716.11 3.81 0.22

6 Aug 15 - 1 Sept 15 Initial Final Change Percentage change/%

Shared Price 1.48 1.28 - 0.20 - 13.5

Index 1694.64 1609.21 - 85.43 - 5.04

2 Sept 15 - 17 Sept 15 Initial Final Change Percentage change/%

Shared Price 1.34 1.50 0.16 11.9

Index 1590.19 1681.54 91.35 5.74

*change = final - initial

*( change/initial ) x 100% = % change

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Graphs of shared price for LBS Bina Group and index for FTSE Bursa

Malaysia KLCI are shown and compared on the same day. Performance of LBS and

KLCI are then compared again with respect of 1 month time. This is to determine

whether to invest in that particular company or in an overall share market by

sorting out which has a higher percentage of performance. The performance of

both was put into comparison within a period of a year with 3 different points of

time.

Based on the first few points chosen which are on the 7th July 15 and 13th July,

the shared price for LBS shows a decrease of 0.09, with a percentage decrease of 5.63%.

For the index, it shows an increase of 3.81, with a percentage increase of 0.22%. Hence,

the performance of the company for these points are worse than the share market.

Based on the second few points chosen which are on the 6th August 15 and 1st

September 15, the shared price for LBS shows a decrease of 0.2, with a percentage

decrease of 13.5%. For the index, it shows a decrease of 85.43, with a percentage

decrease of 5.04%. Hence, the performance of the company for these points are still

worse than the share market.

Based on the third and last few points chosen which are on the2nd September 15

and 17th September 15, the shared price for LBS shows an increase of 0.16, with a

percentage increase of 11.9%. For the index, it shows an increase of 91.35, with a

percentage increase of 5.74. Hence, the performance of the company for these points

are improved and better than the share market.

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By viewing the comparison of LBS and KLCI, LBS is showing a more consistent

drop pattern in an overall overview. At times, the drops are very drastic. Due to the

more negative value of change in LBS compared to KLCI (in the calculation), LBS is not

recommended to be invested in.

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INVESTMENT RECOMMENDATION

With reference to LBS Bina Group’s profitability ratios from year 2012 to 2013,

the Return on Equity Ratio (ROE) and Net Profit Margin Ratio (NPM) have increased

significantly. Besides that, the Gross Profit Margin Ratio has also improved and all these

are showing a positive sign as the group is making more money. However, General

Expenses Ratio (GER) and Financial Expenses Ratio (FER) should also be considered. For

LBS Bina Group, the GER shows a small increment which means a small increment in

expenses but FER has a slight decrease which means decreased expenses. All these are

an indication of positive overall profit for the business.

Moving on to stability ratios from year 2012 to 2013, the Working Capital Ratio

(WCR) is not showing a very good positive sign where it decreased from 1.78 : 1 to 1.52 :

1 and also not satisfying 2:1 ratio, meaning that is has lower current assets to pay off its

current liabilities in year 2013. The Total Debt Ratio has decreased from 63.3% to 56.6%

but it has exceeded 50% and it has a risk of facing bankruptcy.

Other than that, the Inventory Turnover Ratio (ITR) has increased to a short 2

days from 16 days to 18 days to generate the cash but the Interest Coverage Ratio (ICR)

has shown a great improvement in gaining profits to cover the interest, which should

not fall below 5 times.

As for Price Earning Ratio, it has improved dramatically from 8.7 times to 1.6

times in year 2013, meaning that it is less expensive to purchase a share and takes a

shorter period of time of 1.6 years to recoup the investment instead of 8.7 years. Any

P/E Ratio lesser than 15 is considered cheap.

In terms of profitability, LBS Bina Group has improved in gaining revenue and

profit. However, the company has a mild difficulty to pay off its current liabilities with its

current assets and there is a risk that the company might face bankruptcy but also, the

Total Debt Ratio has shown a promising decrease. I would not recommend investing in

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that year, 2013, as the company has the tendency to go bankrupt and still facing

difficulty in paying off its current liabilities which means it is not financially stable even

though it is showing gains in profit.

Based on the graphs in recent year 2015, LBS Bina Group’s performance is

progressively deteriorating and is worse than KLCI. At some points, the performance of

LBS drops when KLCI climbs. Hence, LBS is not recommended to be invested in based on

the graph in year 2015.

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APPENDIXE

Statements of Financial Position (2012)

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Statements of Comprehensive Income (2012)

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Statements of Financial Position (2013)

20

Statements of Comprehensive Income (2013)

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References

LBS Bina Group Berhad Annual Report (2012) .Retrieved from 28th January 2016 ,from

http://www.lbs.com.my/investor-relations/financial-reports/2012/

LBS Bina Group Berhad Annual Report (2013). Retrieved from 28th January 2016 ,from

http://www.lbs.com.my/investor-relations/financial-reports/2013/

LBS Bina Group Berhad Website , Accessed 2nd February 2016 ,from

http://www.lbs.com.my/

Brief history of LBS BINA Group Berhad

http://www.home.com.my/article/lbs-bina-group-berhad

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