FE 1019

Introduction
This report was made to recap some of the key concepts in the chapter concerning about analyze an annual report of a company. This assignment is group assignment which is given by Ms Marilyn Kew and it was fulfilled to complete FE 1019 subject. In this assignment, we are asked to prepare an individual report to comment on the companys financial performance and position. In this assignment, we had analyzed Resort World BHD (A Member of Genting Group or Genting Berhad), a company which was founded by Tan Sri Lim Goh Tong in 1965. This group provides hospitality, entertainment and leisure services in Kuala Lumpur, Malaysia. This group owns Genting Highland resorts, Awana hotel chain, First World Hotel and Plaza, Genting Theme Park and 36 % of Star Cruises Limited. Based on World Travel Awards 2005, Genting Highland Resort consider as Worlds Leading Casino Resort and Asias Leading Casino Resort. The slogan of the group has knows as Genting-City of Entertainment. It has also known as a city that never sleeps in Malaysia. In Asia, Genting Group is well-known by the best managed multinationals, its strong management leadership, financial prudence and the investment. Currently, Genting group is leaded by Tan Sri Lim Kok Thay who is a chairman of the group. In the next page, we will explain more clearly about the financial in the group.

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FE 1019 1. Overall profitability and Efficiency In 2005, the ROCE in the company increase 6.24 % compare with the previous year. It is recognized by the increasing of the profit ability of the year 2005 which include the increasing of revenue and cost of sales. In the source of finance, the capital of the year and previous year are still the same figure. It shows that the shareholders had reinvested the same figure in the capital. However, there is the increasing of the figure of resources and long term liability. The increasing of PBIT is determined by their charge and credit activities. In the charge of the group, there is a decreasing of cost of expenses on 2005. In credit, there is also the increasing of net gain of dilution of Groups shareholding in GIPLC and other subsidiaries, net gain of the share investment in Stanley Leisure plc, additional compensation arising from acquisition of freehold land rental income form land and buildings and the gross dividends (Resort World BHD Annual report, 2005). In this year, the gross profit margin and net profit margin have increased about 3.06% from the previous year. It means that there is the increasing of sales and gross profit during the year. Therefore, the overall of the profitability in the year is increase. The assets turnover ration has grow from 0.51 to 0.607 during the year. This shows that the group is being more efficient during the year. The increasing of the ratio is generally due to the increasing of sales and the capital employed. The growing of sales is affected by the increase figure of the rendering of services that includes leisure and hospitality, rental and property management income (Resort World BHD Annual report, 2005). The other revenue comes from the increasing of the sales of the goods. They consist of the sales of paper and related products, properties and progressive sales on property development projects and crude oil. In capital employed, there is the growth of the source in finance. There is identified by the reinvested of the capital and the increasing of the resource and long term liability. Another factor is the subsidiaries from the shares to support the companys financial and efficiency. Thus, overall performance in 2005 is more efficient in utilizing its assets and resources in generating sales.

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FE 1019

Overall Profitability
70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%
RO C E ma rg in Ne (P tp BI rof T) it m ar gin (C OG Ne tp S) ro fit ma rg in (E xp Gr ) os sp ro fi t m ar gin

2005 2004

Efficiency

Ne t

pro

fit

2004 2005

2005 2004

2. Liquidity
Working Capital or Current Ratio The current ration is generated by the comparison of the current assets and current liability. There is a decreasing of the current ratio between the year compare with previous year. In 2005, the current ratio has reduced for 2%. It is affected by the declining of the current assets figure and the growth of the current liabilitys figure. The total amount of the current assets has decreased from 913,100 to 903,300. On the contrary, the amount of the current liability in 2005 has increased from 1,009,100 to 1,022,900 (Resort World BHD Annual report, 2005). Genting has expected it can -3

FE 1019 operate acceptably with a low current ratio because it carries large levels of inventory and the reason is a financial declining because of higher inventories. Therefore, it shows the amount of the current liability is greater than the current assets. Stock Turnover The stock turnover has increased from 3.71 times to 2.98 time during this year. In this year, the stocks can be held for 9 days and 3.71 times before it can be sold. It is determined by cost of goods sold and average stock. The cost of goods sold includes cost of inventories recognized as expense and cost of services and other than operating cost. The groups inventories use two methods which contain the inventories at cost and at net realizable value. Inventories at cost consist of: raw materials, stores and spares, food, beverages and other hotel supplies, produce stocks and finished goods and completed properties. The report shows that the total amount of the inventories at cost has increased from 309,700 to 349,000 in the year 2005. Similarly, the inventories at net realizable value which consist of completed properties have increased from 309,900 to 3491,100 (Resort World BHD Annual report, 2005). Debtors and Credit Turnover Debtors turnover has shorter period. In this year the debtors settle the debts for 6 days while in the previous year, the period was 8 days. Therefore, it brings advantage to the group. It is because it takes the shorter period to collect the debts from the debtors and easier to get back the cash. The credit turnover takes about the same period from the previous year. The company needs about 7 days to settle its debts to the creditors during these years. The liquidity of the group in this year does not face any problem. It is proven by the ability of the current assets to cover the current liability, the shorter period of the stock turnover, the same period of the credit turnover and the shorter period of the debtor turnover.

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FE 1019

Liquidity
Stock turnover 40 30 20 10 0 Current ratio Stock turnover Current ratio 2005 0.88 39.8 Current ratio 2,004 0.9 37.1 Stock turnover
8 7 6 5 Days 4 3 2 1 0 2005

Liquidity

Debtors turnover Credits turnover

2004 Year

3. Long-term Solvency Gearing ratio is measured from the long-term borrowing to the long-term capital structure of a business. Gearing ratio reveals decreasing in the level of gearing from 10.45% in 2004 to 2.31% in 2005. The reduction is due to a decreasing in borrowings for expansion of their business. Based on their financial statement, the long term borrowings have decreased from 580.7 to 137.6 during the year (Resort World BHD Annual report, 2005). As a result of the decreasing of the gearing ratio, the strong positive cash flow position of the Group specifies that the group should not have any problem in repaying the borrowing. High PE ratios are related with firms for which strong growth is predicted in the future. General performance of the company in 2005 is better than in 2004 as evidenced by an increase in net profit margin, stock turnover, credit turnover, cash and many other part of ratio analysis even though the company is also decrease in some ratio. The interest cover measures the amount of the profit available to cover interest payable (Atrill, P, McLaney, E, Harvey, D, 2002). The ratio show that it has increased radically from 12.17 times in 2004 to 36.17 times in 2005. The rising of the interest cover may due to the lower borrowings compares to last year. -5

FE 1019
Interest cover
Gear i ng r ati o

2005

14 12 10 8 6 4 2 0

2004

times

2005

2004

2005 year
2005 2004

2004

2005

2004

4. Investment Dividend cover refers to how many times over the profit could have pays the dividends (Wood, F, 1993). The dividend cover of the year still has almost the same figure from the previous year. There is 0.0000036 in 2005 while there is 0.0000034 in 2004. Based on the financial statement, the final dividend will be accrued as a liability upon approval by shareholders. For earning per share (EPS), it has increased by 88.7 compared to last year with the EPS of 69. The growth is revealed to the groups share worth more than previous year. Overall, Genting Berhad performance has been remarkable compared to last year. Furthermore, it was achieved in spite of the declining economic regionally in 2005.

Earning Per share

Dividend cover

0.00000365 0.0000036 0.00000355

2005

Cents

100 90 80 70 60 50 40 30 20 10 0

88.7 69 2005 2004

0.0000035 0.00000345 0.0000034 0.00000335 0.0000033 6/26/1905 year 6/27/1905 2004

2005 2004

2005 Year

2004

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FE 1019 Limitations of ratio analysis Ratio analysis is the analysis of accounts which are used to compare one figure with another figure. Ratio analysis helps the business in determine the position and performance of a company (Elliot, 2004). However, it only to make a less amount because they must manage and contribute the solution of what is right. Moreover, ratio analysis is able to identify areas that need to be improved or areas that offer the future potential. Besides that, it also helps external parties to make a decision such as investors to assess the profitability of the firm (Edwards L, 2006). Financial statements represent a description of the business. In fact, ratios are based on financial statements. Therefore, ratios will come into the limitations of the financial statement which consider as the conclusion of the accounting performance of the year. On the other hand, the ratio has just been able to reveal the past operation of business and can not reveal the future activities. However, by the general performance and the ratio, it may be predicted the future activities or the future action must be taken to run out the business. For example, the total sales, capital employed and profit figures may be useful in assessing changes in absolute size which occur over time or differences in scale between businesses. However, ratios can not provide this information (Net tom, 2005). There will also be some difficulty to compare a company which finances its fixed plant though rental, it does not show an asset, with a firm which purchases its own assets will be difficult. It proves that ratio can provide advices to the company or financials performance. Alternatively, they can not explain whether performance is true or false. Ratios involve the quantitative information for an informed analysis to be made. Short-term fluctuations are not identified by ratio analysis within a year in assets and liabilities because the appraisal is based on a balance sheet which gives the asset and liability value as at a point in time. As result of the used of these figures, a company can present a better view of liquidity as compared to that throughout the year (Atrill O, 2000). In addition, high inflation can affect the whole ratio analysis invalid. As a result, some ratios can be misleading information on a trend basis. Therefore, it needs to make adjustments for inflation or changes in fair values. The return on total assets which is affected by the current years revenue and expenses, measured in current dollars , but the -7

FE 1019 assets, which are affected in non-current and non-monetary, are measured in historic dollars. In conclusion, ratios are helpful in determine the financial performance to analyze the overall performance of the company. However, they can not be relied to predict all of the future actions which must be taken. It is because they only give the general idea and advices based on the historical performance. Many of the limitations may be reduced if a proper managed method of the firm comparison is introduced.

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FE 1019

BIBLIOGRAPHY

Diamond,M,A.,eds.(2000).Financial

Accounting

Reporting

and

Analysis,fifth

edition,Ohio,USA,South-Western College Publishing. Atrill,O, McLaney, E, Harvey, D2002, Accounting: An Introduction, Financial Times/ Prentice Hall, New York. Edwards L, Hoggett J. and Medlin J (2006) Financial Accounting,sixth edition, Milton, John Wiley and sons Australia, Ltd. NetTOM 2005, Transport Financial Analysis: Limitations of Ratios, Malawi College of Accounting, viewed 11th May 2007, < http://cbdd.wsu.edu/kewlcontent/cdoutput/TOM505/page26.htm> Elliott,B., and Elliott,J.,(2004).Financial Accounting and Reporting,eighth

edition,London,Prentice Hall International UK Limited.

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