The Asset Management Service Provider Said its Gross Gearing Would Drop – Management Assignment Help

Assignment Task:

Task:

Part A (9 marks) Question 1

Based on the article below, if there is another round of unexpected drastic fall in the current commodity prices, suggest the possible implications of UEM Edgenta Bhd’s gearing situation on the company’s: (a) Current borrowings (4.5 marks) (b) additional borrowings in the near future (4.5 marks) UEM Edgenta’s gearing to reduce, plans to sell 61.2% in NZ-based subsidiary: PETALING JAYA: UEM Edgenta Bhd’s gearing is poised to drop by half after it announced plans to dispose of its 61.2% stake in New Zealand-based public-listed subsidiary, Opus International Consultants Ltd (OIC).

The asset management service provider said its gross gearing would drop to 0.4 times from 0.8 times after the corporate exercise is completed. The gearing is also inclusive of the drawdown of its RM300mil sukuk in April 2017, the company said in a statement. “The proposed disposal of OIC is an opportunity for UEM Edgenta to monetise its investments upfront at a healthy premium over the current market price,” it said. The buyer, which had expressed the intent to purchase, is Canadian company WSP Global Inc that is listed on the Toronto Stock Exchange. WSP provides management and consultancy services to the built and natural environment industries. UEM Edgenta’s managing director and chief executive officer Datuk Azmir Merican said in the statement the proceeds from the exercise would be used mainly to pare down its debts. “It will also provide UEM Edgenta with the financial resources and enable management to focus on driving as well as supporting the organic growth and operational excellence initiatives in our core sectors in healthcare, infrastructure and real estate in our key markets,” Azmir said. WSP will purchase the OIC stake with an all-cash consideration that is worth NZ$1.78 per OIC share, totalling NZ$263.2mil (RM823.6mil). “The offer of NZ$1.78 plus the NZ$0.07 dividend would represent cash proceeds to OIC shareholders of NZ$1.85 per OIC share (totalling NZ$273.6mil or RM856mil). “Gross proceeds to UEM Edgenta amount to NZ$167.4mil (about RM523.9mil) for its 61.2% equity stake in OIC,” it added. Extracted from The Star, Business News, 15 August 2017 Retrieved from: http://www.thestar.com.my/business/business-news/2017/08/15/uem-edgentasgearing-to-halve-after-stake-sale/

Part B (21 marks) You are in last semester of your studies. After the graduation, your team is determined to join one of the best companies of Malaysia. Now you have decided to do financial analysis before you start sending your job applications.

Requirement: Choose one industry, then select two companies of your choice. Your team is required to do financial statement analysis, which focuses on specific aspects of financial performance and financial position of both (selected) companies. Your analysis should contain the following: (a) Prepare the following ratio calculations (choose 7 ratios) based on the 2018 financial statements:

1. Gross profit,

2. Net profit margin,

3. Return on Assets,

4. Quick ratio,

5. Trade receivables collection period,

6. Trade payables payment period,

7. Debt to assets ratio,

8. Interest coverage,

9. Return on Equity,

10. Asset turnover ratio.