Full Report (FSA) - Copy

8/12/2019 Full Report (FSA) - Copy

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a. Background Information of Companies

Far East Holding Berhad (FEHB) was established in 1973 under the Companies Act,

1965 as a private limited company under Far East Holdings Sdn Bhd in Malaysia. Onthe 1980, Far East Holding Sdn Berhad was converted to a public company and it was

changed under the name Far East Holdings Sdn. Bhd. On 1986, it was converted to a

public company and its name was changed to its present form. The oil palm tree is

primary product of the companys strength and confidence intention to hold oil palm

tree in the future. In addition, the company present authorized share capital is RM

300000 comprising 3000000 ordinary share of RM 1.00 each. However, Far East

Holding Berhad made its debut on the Bursa Malaysia Securities Berhad to the public

offer for sale of 172 hundred thousand shares in 1990. On 1991, when its entire issued

and paid up share of 560 hundreds thousands were listed and quoted (Far East

Holdings, n.d.).

The principal of the subsidiaries of the company is oil palm plantation and palm oil

mill it has estates located at Pahang Tenggara, Pahang in West Malaysia. FEHB is

engaged in the cultivation and production of oil palms, production and sales of fresh

fruits bunches crude palm oil and palm kernel and involve in investment holding in

Malaysia. The headquarters of the company dedicated and committed to provide oil

palm plantation advisory and management services to all its estates. Besides that, the

company has established its operation to overseas and the company was success to

produced 302454 metric tons of fresh fruits bunches during the year ended 2009.

During the same period, the company subsidiaries were Dawn Oil Palm Plantation

Sdn Bhd, Radiant Apex Sdn Bhd, Kampung Aur Oil Palm Sdn Bhd, Far East Delima

Plantation Sdn Bhd and so on. Since Malaysia Oil Palm industry recorded recovery in

2002 despite a weak global economy occur. However, the future prospects of FEHB

has further expanded and planning to roughly about 140km from Kuantan and 19km

from Kuala Rompin Town. The good location of the region in addition to relatively

flat feature, high rainfall makes an ideal place to establish oil palm plantations and

export demand is forecast to further improve from higher world demand for edible oil.

(Far East Holdings, 2012)


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FEHB major shareholder are Lembaga Kemajuan Perusahaan Pertanian Negeri

Pahang (LKPP) with 25.18% share, Prosper Trading Sdn Bhd as a second largest

shareholder with 23.68% shares, Hikmat Elit Sdn Bhd as a third largest shareholder in

FEHB with 8.02% shares, lastly, LKPP Corporation Sdn Bhd with 5.96% shares. The

paid up capital of the company at 2012 is 141 hundreds thousands units of ordinary

share (Far East Holdings, 2010). On year 2007, EFHB completed acquisition

represent 14.50% equity interest in Prosper Plam Oil Mll Sdn Bhd from Lembaga

Kemajuan Perusahaan Pertanian Negeri Pahang. Far East Holdings Berhad had also

completed an acquisition of shares in Prosper Palm Oil Mill (PPOM) represent

10.70% of equity interest from Kampong Aur Oil Palm Company Sdn Berhad. As the

same time, it acquired Spectacular Potential Sdn Bhd (The Edge, 2013).

b. The Industry Analysis (Far East Holdings)

Porter five forces analysis is a framework for industry analysis and business strategy

development. It determines the competitive intensity and also the attractiveness of a

market. It is consist of five forces which are threat of new entrants, threat of substitute

products or services, bargaining power of suppliers, bargaining power of buyers and

intensity of competitive industry (WikiCFO, 2010).

Threat of new entrants

First of all, Far East Holding Berhad (FEHB) has a low threat of new entrants. It is

because of the higher barrier of entry for the new business company. For example,

initial capital investment is high. In such, FEHB has been established several decades

and possess huge property. By fully utilizing the property, FEHB can generate high

sales and obtain the highest market share in the plantation industry. In addition, brand

names of company are well known. Lastly, a low threat of new entrants makes an

industry more attractive and increases profit potential for the firms already competing

within that industry.


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Threat of substitute products

Moreover, Far East Holding Berhad (FEHB) has a low threat of substitute products or

services. For instance, FEHB's main activities are cultivation of oil palm, productions

and sales of fresh fruit bunches, crude palm oil and palm kernel. Palm oil is a

substitution of other product and it is cheap substitute for butter because of its

nutritional benefits. Lastly, a low threat of substitute products makes an industry more

attractive and increases profit potential for the firms in the industry.

Bargaining power of suppliers

Furthermore, Far East Holding Berhad (FEHB) has a low bargaining power of

suppliers. It is because of the buyers are more concentrated than suppliers since

Malaysia is the world's second largest producer of palm oil in 2012. Buyers are price

sensitive and well educated regarding the product. Buyers also purchase product in

high volume and comprise large portion of supplier sales. Lastly, low supplier power

makes an industry more attractive and increases profit potential for the buyer.

Bargaining power of buyers

Besides that, Far East Holding Berhad (FEHB) has a low bargaining power of buyers

due to the buyers is less concentrated than sellers. The buyer is not price sensitive and

uneducated regarding the product. Buyer also purchases product in low volume and

comprise small portion of seller sales. Lastly, low buyer bargaining power makes an

industry more attractive and increases profit potential for the seller.

Competitive rivalry within an industry

Finally, Far East Holding Berhad (FEHB) has a low intensity of competitive industry.

It is because of the industry growth is fast while the fixed costs are low. Furthermore

the competitors are not strategically diverse and the brand loyalty does exist among

the customer in the early time. Another main factor is the exit barriers are low. It

require large amount of money to get the business started. FEHB gain a competitive

advantage in which the production of fresh fruit bunches are higher due mainly to


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better palms productivity, improved labour management and increase in mature area

from the replanting programme. Lastly, low intensity of rivalry makes an industry

more attractive and increases profit potential for the firms already competing within

that industry.

c. Assessment of the Management

Corporate Social Responsibility (CSR)

FEHB will continue to contribute positively to the sustainable development of the

economy and the community. As a socially responsible corporation, they put

emphasis on its CSR and will remain committed in its outcomes to institute

programmes that will protect the environment and care for the employee welfare and

the society at large besides building strong relationships with its business associates

(Far East Holdings, 2012).

Besides that, Zero-Burning that adopted by FEHB in its replanting programmes to

demonstrate its emphasis on environmental conservation. This policy is an effective

way for land clearing activities during replanting programme. At the same time, it will

augment soil fertility by replenishing organic matter and improving the soils physical

properties. The eco-friendly system of using barn owls preferred as a method of pest

management to reduce the rat population in the estates area (Far East Holdings, 2012).

FEHB also embarked on getting its operations under the Malaysian Palm Oil Board

(MPOB) Code of Practices. Currently, the groups mill, Kilang Kosfarm Sdn. Bhd.

And two of the FEHB estates namely Bukit Serok and Kampung Aur estates and its

oil palm nursery had been awarded with Certificate of Compliance to the Code of

Practice (Far East Holdings, 2012).

Nevertheless, FEHB introduced the importance of employees with the right skills,

capabilities and competencies as it moves forward. The company also provide the


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training programme and refresher courses to their employees to keep them follow up

the latest development in the industry (Far East Holdings, 2012).

Lastly, FEHB at the estate level has in place an Occupational Society and Health

Policy to use in the employee the values of preventive and safety measures in the

working environment of the company (Far East Holdings, 2012).

Corporate Structure

Source: Far East Holding Website


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Corporate Strategies

FEHB will continue to reinforce its standing in the oil palm industry and is confident

that the industry would remain stable despite the declining tread as compared to the

previous year. In the first quarter of 2013, the average CPO price was in region of RM

2300- RM 2400 per metric tone. CPO prices in 2013 are expected to be buoyant. The

overall fundamentals of the plantation industry would remain strong arising from

continuous strong demand of palm products. It is envisaged that the average CPO

price for the year 2013 would be in the range of RM 2300 to RM 2500 per metric tone.

Based on this optimism, the prospect of the company performing satisfactory in 2013

is bright (Far East Holdings, 2012).

Recruitment Process

Far East Holdings Berhad is a public listed company in Bursa Malaysia Securities

Bhds main board. Due to expansion, the company is more likely to invite an

ambitious and self-motivated individual to join and group with the company to make

it stronger. The applicant may apply for the company through online resume and

walk-in interview.

Corporate Governance Statement

The Board of Director

The Board has the overall responsibility for corporate government, strategic direction,

formulation of policies and overseeing the investment and business of the company.

Name of Directors Meeting Attendance

YH Dato Kamaruddin bin Mohammed 8/8

YH Dato Md. Adnan bin Sulaiman 8/8

Mr Tee Kim Tee @ Tee Ching Tee 7/8


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d. Ratios Calculation

Ratios Year 2012 Year 2011 Year 2010

Return

On

Assets

(ROA)

=

()

= 9.6559

=

()

= 12.9623

=

()

= 10.2558


Net profit margin

=

= 20.6267

=

= 27.0711

=

= 21.2462


Current ratio

=

= 5.3096

5.31times

=

= 4.5735

4.57 times

=

= 4.2579

4.26 times


Total assets

turnover

=

= 0.3589

0.36 times

=

= 0.3978

0.40 times

=

= 0.3939

0.40 times


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Debt ratio

=

= 0.1421

0.14 times

=

= 0.1463

0.15 times

=

= 0.1449

0.14 times


Earnings per share

=

= RM 0.59687

RM 0.5969

=

= RM 0.86948

RM 0.8695

=

= RM 0.60462

RM 0.6046


Price earning ratio

()

=

= 12.5314

12.53

times

=

= 8.1656

8.17 times

=

= 11.4125

11.41

times


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Return on equity

=

()

= 7.7838

=

()

= 11.6378

=

()

= 8.7108


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e. Ratio Analysis

Return on Assets (ROA)

ROA of Far East Holdings Berhad


Return

On

Assets

(ROA)

= Net

Income

*

Total

Assets

=

()

= 9.6559

=

()

= 12.9623

=

()

= 10.2558

Based on the figure above, the return on assets (ROA) of Far East Holdings Berhad in

2012 is 9.66%, 12.96% in 2011 and 10.26% in 2010. We can see clearly there is an

increment of 2.7%in ROA from 2010 to 2011. However, there is a decline of 3.3%

in ROA from 2011 to 2012. Obviously, Far East Holdings Berhad has the highest

ROA in 2011 which is 12.96%, whereas it has the lowest ROA in 2012 which is only

9.66%.

10.26

12.96

9.66

0

2

4

6

8

10

12

14

2010 2011 2012

Percentage(%)

Year

Return on Assets (ROA)

Series1


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In 2011, it demonstrates Far East Holdings Berhad is very efficient and effective in

managing its investment in assets and utilizing its assets to maximize greater sales

volume as well as generate higher profit. It indicates that Far East Holdings Berhad

has RM0.1296for every ringgit of invested assets. Conversely, in 2010 and 2012, Far

East could only received RM0.1026 and RM0.0966 respectively for every ringgit

invested assets.

Net Profit Margin


=

= 20.6267

=

= 27.0711

=

= 21.2462

Based on the figure above, the net profit margin of Far East Holdings Berhad in 2010,

2011, 2012 is 21.25 %, 27.07 %, and 20.63 % respectively. There is an increment of

5.82%from 2010 to 2011. However, there is a decline of 6.44%from 2011 to 2012.

21.25

27.07

20.63

0

5

10

15

20

25

30

2010 2011 2012

Pe

rcentage(%)

Year

Net Profit Margin

Series1


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In 2011, Far East Holdings Berhad experiences and possesses the highest net profit

margin among the 3 years. It indicates that Far East is very effective and efficient in

converting its revenue into actual profits.

Besides, we can consider in 2011, Far East Holdings Berhad has a good companys

policies, low cost structure, and also production efficiency which results in high net

profit margin. In 2010 and 2012, the net profit margin is slightly low as compared

with 2011 which is 21.25% and 20.63% respectively.

Current Ratio


=

= 5.3096

5.31times

=

= 4.5735

4.57 times

=

= 4.2579

4.26 times

Based on the figure above, Far East Holdings Berhad manages to achieve a gradual

increment in its current ratio from 2010 to 2012. It increases 0.31 timesfrom 2010 to

2011 and also 0.74 times from 2011 to 2012. It indicates that Far East has sufficient

resources (current assets) like cash in hand to pay its debtors over the next business

cycle.

4.264.57

5.31

0

1

2

3

4

5

6

2010 2011 2012

Time(s)

Year

Current Ratio

Series1


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Besides, the figures extracted from the balance sheet of Far East, its current assets is

increasing gradually for the 3 consecutive years from 2010 to 2012 which is

RM148,927,812, RM227,351,691, and RM272,095,799 respectively.

It gives an idea to indicate that Far East is operating its business efficiently. The

increasing of its current ratio indicates that Far East is capable to pay its obligations

with its sufficient current assets and it does not have problems to pay back its debtors.

Total Assets Turnover


=

= 0.3589

0.36 times

=

= 0.3978

0.40 times

=

= 0.3939

0.40 times

Based on the figure above, Far East holdings Berhad maintains its total assets

turnover of 0.4 times from 2010 to 2011. However, it experiences a decline from 0.4

times to 0.36 times in 2012. It has been dropped for 0.04 timesfrom 2011 to 2012.

This slightly decline in total assets turnover of Far East Holdings Berhad is due to its

decline in sales and also increment of its total assets in 2012. In 2012, it indicates that

Far East Holdings Berhad is not using well its assets efficiently in generating sales. In

0.4 0.4

0.36

0.34

0.35

0.36

0.37

0.38

0.39

0.40.41

2010 2011 2012

Time(s)

Year

Total Assets Turnover

Series1


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2012, the drop in sales from RM479,254,327 to RM452,361,796 and increment in

total assets which results in lower total assets turnover.

Debt Ratio


=

= 0.1421

0.14 times

=

= 0.1463

0.15 times

=

= 0.1449

0.14 times

Based on the figure above, Far East Holdings Berhad has a low debt ratio which is

less than 1 which determines it has a good long-term solvency. Far East Holdings

Berhad has approximately the same debt ratio at the range of 0.14 to 0.15.In 2010 and 2012, its debt ratio is remained the same of 0.14 times, whereas its debt

ratio is slightly increased to 0.15 in 2011. It indicates Far East possesses a good

financial health and low risk in solvency. This low debt ratio also indicates that Far

East Holdings Berhad has low risk in its business operation. Therefore, Far East

Holdings Berhad is able to borrow loans easily due to its good financial health and

solvency.

0.14

0.15

0.14

0.134

0.136

0.1380.14

0.142

0.144

0.146

0.148

0.15

0.152

2010 2011 2012

Time(s)

Year

Debt Ratio

Series1


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Basic Earnings per Share


=

= RM 0.59687

RM 0.5969

=

= RM 0.86948

RM 0.8695

=

= RM 0.60462

RM 0.6046

Based on the figure above, Far East Holdings Berhad has the highest basic earnings

per share (EPS) in 2011 which has generated RM0.8695 to its shareholders. From

2010 to 2011, there is an increment of RM0.2649in EPS which from RM0.6046 to

RM0.8695. However, from 2011 to 2012, there is a decline of RM0.2726 in EPS

from RM0.8695 to RM0.5969.The earning power of Far East Holdings Berhad has improved in 2011, but it also has

declined in 2012. In general, Far East Holdings Berhad is still making profit and able

to generate approximately 60 cents to 90 centsper share to its shareholders among

the 3 years.

0.6046

0.8695

0.5969

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2010 2011 2012

RinggitMalaysia(RM)

Year

Series1


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Price-earnings ratio


() =

= 12.5314

12.53

times

=

= 8.1656

8.17 times

=

= 11.4125

11.41

times

Based on the figure above, Far East Holdings Berhad has the highest P/E ratio in 2012

which is 12.53 times. It is because its current market share price is the highest among

the 3 years which is RM7.48as compared to the year of 2010 and 2011. Moreover, in

2012, Far East Holdings Berhad has the lowest earnings per share of RM0.5969.

This high P/E ratio indicates the market and investors are willing to pay for theearnings of the company. In addition, it also represents that the market has good and

high expectations for the future of Far East Holdings Berhad. In the previous year of

2010, the P/E ratio is 11.41 times also can be considered as high. However, in 2011,

there is a decline of 3.24 times from 11.41 to 8.17 times. It is because in 2011 Far

East Holdings Berhad has the highest EPS of RM0.8695which is then results in low

P/E ratio.

11.41

8.17

12.53

0

2

4

6

8

10

12

14

2010 2011 2012

Time(s)

Year

Price-earnings Ratio

Series1


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Return on Equity (ROE)


=

()

= 7.7838

=

()

= 11.6378

=

()

= 8.7108

Based on the figure above, Far East Holdings Berhad has the highest return on equity

(ROE) of 11.64% in 2011. On the other hand, it has the lowest ROE of 7.78% in

2012. In 2010, its ROE is 8.71%.

The highest ROE of 11.64% in 2011 indicates Far East Holdings Berhad is having abetter utilization of the investment dollars from the investors to generate higher profits.

It is because in the year of 2011, Far East Holdings Berhad manages to generate very

high net profit of RM119,685,884. Whereas in 2010 and 2012, it could only generate

the net profit of RM82,437,962 and RM84,163,426 respectively.

It indicates Far East Holdings Berhad has generated RM0.1164 of net income for

every RM that has been invested by the investors in 2011. This high ROE tells the

investors of Far East Holdings Berhad their capital is effectively being reinvested or

8.71

11.64

7.78

0

2

4

6

8

10

12

14

2010 2011 2012

Percentage(%)

Year

Return on Equity

Series1


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utilized by a company in generating profits. However, in 2010 and 2012, it has

generated RM0.7778and RM0.0871respectively to its investors due to low net profit

generated. Therefore, in 2010 and 2012, investors could only receive RM0.7778 and

RM0.0871 of net income respectively for every RM that has been invested.

f. Cash Flow Statement Analysis

Cash Flow Inflow

Items

2012

(RM)

2011

(RM)

2010

(RM)

Receivables, deposits

and prepayments.

22,080,603 20,567,279 12,131,355

Payables 10,768,958 5,547,380 4,009,329

Dividend received 5,000,000 24,832,857 2,362,857

Table 6.1: Extract from Statement of Cash Flows:Cash Flow Inflow Items/Sources.

Cash Flow Outflow

Items

2012

(RM)

2011

(RM)

2010

(RM)

Income tax paid 25,249,848 29,245,071 15,769,475

Interest paid - 3,701 13,135

Investment in

subsidiaries

- - -

Repayments of

borrowing

24,836 5,059 18,582

Dividend paid 64,185,525 51,878,892 29,707,484

Table 6.2: Extract from Statement of Cash Flow:Cash Flow Outflow Items/Sources.

From the two tables shown above, there is an important source or item in cash inflow

and cash outflow of Far East Holding Berhad. The inflows of cash flow are increase

in receivables, deposits and prepayments, increase in payables, and decrease in

dividends received. While, the cash outflow are decrease in income tax paid, decrease

in interest paid, no investment in subsidiaries, increase in repayments of borrowing

and increase in dividends paid to shareholders. The purpose of cash flows is to know

the business liquidity even the revenue is increase does not means that company is

good in liquidity due to cash shortage.


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By comparing the cash flow statements of Far East Holding Berhad which ended in

31 December in year 2010, 2011, and 2012, we can see that the net cash flow of the

Group is decliningin year 2012. The summary of the net cash flow that affected by

its activities (operating, investing and financing) stated in year 2010 (RM 31,370,610),

2011 (RM 50,107,652) and 2012 (RM 23,303,318). From these figures, among these

three years is showing that there is fluctuation, where in year 2010 and 2011 shown

increasing in activities of net cash flows yet in year 2011 and 2010 shown decreasing

in activities of net cash flows. However, we can say that the year 2011 is the most

favorable year in terms of liquidity. But when it comes to year 2012, the cash flow has

dramatically declined as much as RM 26,804,334. Although the cash flow in year

2011 has been improved, but in overall it is still declining.

For cash flow generated from operating activities for these three years is 2010 (RM

70,424,908), 2011 (RM 56,268,220) and 2012 (RM 75,385,093). From the figure, we

can see that the most liquid between these three years is year 2012, while the least

liquid is year 2011. The most favourable for Far East Holding Berhad owes the most

liquid in year 2012, which enables to expand its businesses such as reinvest business,

repay debt, and so on. The primarily captures to its sales revenue, account receivables

and account payables. From the sales revenue, we can see that revenue is decreasing

from year 2011 (RM 479,254,327) to 2012 (RM 452,361,796) is RM 26,892,531.

However, its receivables and payables are increasing as it is shown in table 6.1, which

it cause net cash flow from operating activities of year 2012 increasing to RM

75,385,093. In other words, the trend of fluctuation profitability for Far East Holding

Berhad and this could effects its cash flow. As it will affects the cash flow unstable

from year to year. Based on year 2012, the cash flow generated from operating

activities for next year will be unknown, as there is a decrease in profitability is not

certainly results in a decrease in cash flow. Meanwhile, the current ratio is actually

improving among these three years, which means that the liquidity of the company is

improving.

Next, according to the cash flow generated from investing activities, the most liquid

financial year is year 2011 (RM 25,044,960), follows by 2012 (RM 1,610,480) and


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then 2010 (-RM 10,398,508). In year 2012, Far East Holding Berhad had purchased

some investments because its amount is increased for RM 705,732, from 2011 ( RM

294,268) and 2012 (RM 1,000,000). Therefore, its cash flow generated from investing

activities is declining from year 2011 to 2012. The reason was the company invested

its hectares in matured area and immature area (replanting), the amount of

hectares 2012 (16,218 matured area and 2,648 immature area) is increasing compared

to hectares 2011 (15,049 matured area and 2,528 immature area).

Furthermore, by using investing activities generated cash flows together with the ratio

analysis, we can forecast that the company is in high level of risk in year 2012, which

it can lead to high return for investment. It is because the price-earnings ratio is to

know how expensive of its stock to determine its risk level. Besides, the returns on

assets is decreasing from 2011 (12.96%) to 2012 (9.66%), where the company will

purchase less in property, land and equipment. Therefore, it may increase its cash

flow generated from investing activities for next year and its long-term assets.

For the cash flow generated by financing activities, the most liquid financial year is

year 2012 (-RM 53,692,255), follows by 2011 (-RM 31,205,528) and then 2010 (-RM

28,655,610). This shows that, there is operation consistently trend of the figure which

the higher the better, where it can benefits Far East Holding Berhad to repurchase its

shares, dividend payment in cash, bonus dividend payment and more. This is the

prove which we can see that in the dividend paid to shareholders is increasing each

year from year 2010 to 2012, which are RM 29,707,484, RM 51,878,892 and RM

64,185,525 respectively.

Moreover, by using financing activities generated cash flows together with the ratio

analysis, we can forecast that the company will likely to decrease of financing

activities generated cash flows for next year. It is because the debt ratio for 2012 is

0.14 times. For example of high debt ratio, when the debt ratio was increased in year

2011, which is 0.15 times, that affects generated the payable of the year 2012

amounted RM 10,768,958. This can explain why the payables amount was increasing

from year 2011 (RM 5,547,380) to 2012 (RM 10,768,958). Since the debt ratio in

2012 (0.14 times) lesser than year 2011 (0.15 times), it shows that next year payable


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amount will be lesser as the cash flow generated by financing activities will be lesser

as well.

g. Common-size Income Statement (Horizontal)

Far East Holdings Berhad Income Statements

2012

(RM)

2011

(RM)

2010

(RM)

Revenue 452,361,796 479,254,327 436,016,498

Other operatingincome

3,240,636 3,370,042 6,536,218

Amortization of

investment held to

maturity

713,662 1,493,423 1,421,631

Gain on financial

asset at fair value

through profit and

loss

847,815 445,672 1,738,796

Effect on

consolidating

subsidiary previously

under winding

petition

230,400 - -

Amortization of

amount due from

subsidiary

- - -

Loss on initial

recognition of

amount due

- - -

Staff costs (10,288,034) (11,821,891) (8,625,091)

Changes in inventory 1,140,617 6,610,882 (5,933,499)

Finished goods (122,829,140) (128,959,645) (128,444,139)


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purchased

Raw material

purchased

(125,773,019) (161,952,105) (142,433,943)

Production cess (875,164) (889,216) (950,709)

Carriage outwards (3,555,883) (3,344,632) (3,726,918)

Upkeep, repair and

maintenance of

assets

(2,690,697) (2,502,887) (2,770,932)

Utilities and fuel (889,602) (1,420,499) (1,857,917)

Depreciation (10,811,124) (9,583,868) (7,018,734)

Upkeep and

cultivation

(36,615,836) (26,871,289) (23,083,366)

Harvesting (17,162,085) (11,341,667) (11,754,710)

Estate general

charges

(6,484,750) (5,094,382) (3,655,280)

Replanting expenses (9,415,250) (9,495,518) (7,514,418)

Diminution value of

investment in

associate

- - -

Impairment on

investment in

associate

- - -

Impairment loss for

other receivable

- (859,480) -

Other operating

expenses

(13,613,061) (14,071,959) (11,607,136)

Finance income 3,795,911 2,717,090 1,416,817

Finance cost - (3,071) (13,135)

Share of profit after

tax of equity

accounted associates

20,374,728 52,482,212 25,770, 272

Profit before tax 121,702,460 156,161,539 113,510,305

Tax expenses (28,394,995) (26,421,958) (20,873,315)

Profit for the year 93,307,465 129,739,581 92,636,990


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Far East Holdings Berhad Common-size Income Statements

(Change from base, 2010 is base year)

2012 2011 2010

Revenue 3.75 % 9.92% 100%

Other operating

income

-50.42% -48.44 % 100%

Amortization of

investment held to

maturity

-49.80% 5.05% 100%

Gain on financial

asset at fair value

through profit and

loss

-51.24% -74.37% 100%

Effect on

consolidating

subsidiary previously

under winding

petition

Amortization of

amount due from

subsidiary

Loss on initial

recognition of

amount due

Staff costs 19.28% 37.06% 100%

Changes in inventory 119.22% 211.42% 100%

Finished goods

purchased

0.40% 100%

Raw material

purchased

-11.69% 13.70% 100%

Production cess -7.95% -6.47% 100%

Carriage outwards 4.59% -10.26% 100%

Upkeep, repair and

maintenance of

-2.90% -9.67% 100%


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assets

Utilities and fuel -52.15% -23.54% 100%

Depreciation 54.03% 36.55% 100%

Upkeep and

cultivation

58.62% 16.41% 100%

Harvesting 46.00% 13.50% 100%

Estate general

charges

77.41% 39.37% 100%

Replanting expenses 25.30% 26.36% 100%

Diminution value of

investment in

associate

Impairment on

investment in

associate

Impairment loss for

other receivable

Other operating

expenses

17.28% 21.24% 100%

Finance income 167.92% 91.77% 100%

Finance cost -76.62% 100%

Share of profit after

tax of equity

accounted associates

-20.94% 103.65% 100%

Profit before tax 7.22% 37.57% 100%

Tax expenses 36.03% 26.58% 100%

Profit for the year 0.72% 40.05% 100%

Interpretation:

According to income statement of Far East Holdings Berhad from year 2010 to 2012,

we had realized that the revenue of the company in year 2010 to 2011 was increased

9.92%, and there was an increased 3.75% of revenue for year 2012. The main reason

cause the total revenue of Far East Holdings Berhad was increased because of the


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Groups excellent financial performance. The stronger performance was largely

attributable to improved as well as better production of fresh fruit bunches (FFB) and

higher palm oil prices. For year 2011, the Group achieved a higher average crude

palm oil (CPO) price of RM3, 118 per metric ton when compared to RM2, 538 per

metric ton for the previous year. For 2012, the revenue decline due mainly to the

decreased in CPO price of 3%. The CPO price for 2012 was recorded at RM3, 017 per

metric ton when compared to RM3, 118 per metric ton for the previous year.

Besides, the total operating expenses of the company to year 2011 was increased

21.24% over the preceding year. In year 2012, the total operating expenses of

company is kept increasing since 2010, it was increased 17.28%. The increasing for

the operating expenses of company was due to the increased of depreciation of

property, plants and equipment which have an increased of 36.55% in year 2011,

54.03% in year 2012. Moreover, it also caused by the staff costs for the company was

increased significantly with 37.06% in year 2011 and 19.28% in year 2012. The raw

material purchased also affect the increase of operating expenses. It increase 13.70%

in year 2011 and decrease 11.69% in year 2012. In relation, the operating expenses of

year 2012 slightly decrease compared to year 2011. The increasing operating

expenses of company are also caused by new planting and replanting. The replanting

expenses increase 26.36% in year 2011 and increase 25.30% in year 2012 compared

to year 2010. Furthermore, upkeep and cultivation, harvesting, and estate general

charges have an impact of the operating expenses.

However, the operating income of Far East Holdings Berhad was declined

continuously from year 2010 to 2012. For year 2011, the total operating income of

company is declined 48.44% over than year 2010. In year 2011, the company had get

50.42% decline for their total operating income. It is due mainly gains on financial

asset at fair value through profit andloss. In year 2011, gain on financial asset at

fair value through profit and loss is decreased 74.37% based on the year 2010. For

year 2012, company had decreased 51.24% of gain on financial asset at fair value

through profit and loss compared to year 2010.

Lastly, profit for the year of Far Easy Holdings Berhad was increased continuously

from year 2010 to 2012. In year 2010, the profit for the year of the company was


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increased 40.05% based on the net profit of year 2010. For year 2011, company had

get 0.72% growth for their profit compared to year 2010 because of the higher

production. According to the company annual report, the Group recorded higher

production of FFB at 274,032 metric ton, an increase of 6% in year 2011 when

compared to 257,825 metric ton produced in 2010. For year 2012, the Group recorded

higher production of FFB at 316,153 metric ton, an increase of 15% when compared

to 274,032 metric ton produced in 2011. The higher production of FFB recorded was

due mainly to better palms productivity, improved labor management and increase in

mature area from the replanting program. Identically, it is caused by increasing of

company finance income, such as gain on disposal asset classified as held for sale,

gain of bargain purchase of a subsidiary and gain on deemed disposal of associate. In

such, finance income has an increasing of 91.77% in year 2011 and 167.92% in year

2012 while year 2010 is the base year.

h. Summary and Recommendations

Successful company that may outset the investment principles that will has an

investment proposal process consistency. Consistency is client should get the same

result regardless of their services and see a consultant and firm must giving advice

about security to client. For instance, firm will be receive compensation for giving

advice on learn in investment to manage portfolio security.

First of all, the advise to client whether invest in Far East Holding Berhad (FEHB),

we need to understand what statement of investment principal a common investor is

looking for in a company. The client always focus on return on investment, make suretheir worth make the decision on invest in your company, the company must show the

good performance to the client such as high in ROI value, the company would has a

future financial planned, when facing assets risk, allocate assets, choose manages and

review portfolio how the company going to solve the problem, the company to

constantly growing to meet the future competition, indicate the market share price

would be continue growth so whether investor can achieve the high return upon their

sales. These are the criterion to attract investors partially counted as return in a form

and encourage the investors to make a decision to invest in our company.


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From our studies, financial statement analysis lead invest high financial standing

company indicates strong power in generating profit and securing market performance

in good trend. Based on our analysis of financial statement in the above report, it

shows the investment value in Far East Holding Berhad (FEHB). From Far East

Holding Berhad (FEHB) perform analysis (part a to c) we conclude that Far East

Holding Berhad reasons seen by Porter five forces analysis is a framework for

industry analysis and business strategy development. It determines the competitive

intensity and also the attractiveness of a market. Far East Holding Berhad its good

companys policies, low cost structure and also production efficiency which results in

high net profit margin it gain support from the investor and business partners.

However, Far East Holding Berhad has a strong and positive brand image generate

tremendous value secure from its competitor and towards client.

Recommendations

We would suggest our potential investors to invest in our research company.

Based on the studied in this report generally had strong financial statements. After

examining the ratio analysis for example, liquidity ratio, debt management ratio,

efficiency ratio and profitability ratio of Far East Holdings Berhad. The reason is

the company fared better in current ratio, debt-to-equity ratio, trade debtor

collection period, asset turnover, stock turnover and gross profit margin. Several

recommendations on how to improve both companies financial performance

were discussed above. Besides, from the differences that have been

observed and analysed in the financial performance of Far East Holdings

Berhad in 2010, 2011 and 2012, we could reservedly assume that the company has

better future prospect in the industry. This is because the former showed relatively

stronger performance in 2011 than in 2010, as compared to the latter. One of the

most essential factors that investors look for when investing is the debt ratio and

good cash flow. The lower the debt ratio is better. A company with manageable

debt and good cash flow is worth getting to know better, regardless of how the

market is treating the stock. Based on the above analysis, it is obvious that Far East

Holdings Berhad has significantly lower debt-to-equity ratio. Therefore, we can

arguably assume that most investors will invest Far East Holdings Berhad.


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