IFA Assignment

BBMF 2063 INVESTMENT AND FINANCIAL ANALYSISBACHELOR OF BUSINESS (HONS) FINANCE & INVESTMENTYEAR 2 SEMESTER 3COURSEWORK

CHEW CHIN LAP13WBR11861NICHOLAS TAN PENGXI13WBR10039VICTOR HO KAI SHENG13WBR12255YANG QI ONN13WBR10443

TUTORIAL GROUP:RFI 4DAY:WEDNESDAYTIME:4.00PMDATE OF SUBMISSION :16 JULY 2014

8

School of Business StudiesPlagiarism Statement

Read, complete and sign this statement to be submitted with your written work.We confirm that the submitted work are all our own and are in our own words.

Name (Block Letters)ID No.Signature

1.CHEW CHIN LAP

13WBR11861

2.NICHOLAS TAN PENGXI

13WBR10039

3.VICTOR HO KAI SHENG

13WBR12255

4.YANG QI ONN

13WBR10443

5.

6.

ProgrammeTutorial GroupDate

Group Member Appraisal Form This basis of this evaluation is your group members commitment to completing the assignment and to their regard for other members of the group. It should be based on the contribution given by each member and his or her involvement in this assignment. Group members should be appraised using the following basis:100% Group member attended all group meetings or if unable to attend, contacted the group in advance and came to an alternative arrangement that the majority of group members were happy with. Group member contributed to group discussion. Group member always offered to help or volunteered for tasks. Group member had assigned tasks completed on time.

50% Group member missed group meetings without making alternative arrangements with other group members. Group member assigned tasks were only partly completed or poorly completed. Group member did not contributed to the group effort or volunteer for tasks.

0% Group member attended few meetings and made no contribution to the assignment.

Name of student: CHEW CHIN LAPID: 13WBR11861Instructions: Place the name of each of the members in your group in the space provided below. Appraise each of the members in your group by circling one of the totals shown below (i.e. 100%, 50% or 0%)Group Member

1. NICHOLAS TAN PENGXI100% 50% 0%

2. VICTOR HO KAI SHENG100% 50% 0%

3. YANG QI ONN100% 50% 0%

4. 100% 50% 0%

5. 100% 50% 0%

6. 100% 50% 0%

Note: Failure to submit a Group Member Appraisal Form will result in a ZERO appraisal being recorded against your name.




Name of student: NICHOLAS TAN PENGXIID: 13WBR10039Instructions: Place the name of each of the members in your group in the space provided below. Appraise each of the members in your group by circling one of the totals shown below (i.e. 100%, 50% or 0%)Group Member

1. CHEW CHIN LAP100% 50% 0%


3. YANG QI ONN100% 50% 0%

4. 100% 50% 0%

5. 100% 50% 0%

6. 100% 50% 0%





Name of student: VICTOR HO KAI SHENGID: 13WBR12255Instructions: Place the name of each of the members in your group in the space provided below. Appraise each of the members in your group by circling one of the totals shown below (i.e. 100%, 50% or 0%)Group Member



3. YANG QI ONN100% 50% 0%

4. 100% 50% 0%

5. 100% 50% 0%

6. 100% 50% 0%





Name of student: YANG QI ONNID: 13WBR10443Instructions: Place the name of each of the members in your group in the space provided below. Appraise each of the members in your group by circling one of the totals shown below (i.e. 100%, 50% or 0%)Group Member




4. 100% 50% 0%

5. 100% 50% 0%

6. 100% 50% 0%


Coursework AssessmentASSESSMENT CRITERIAMARKSMAKS AWARDED

i) Background of the 2 companies.20%

ii) Correct calculation for the following: Yearly rate of return Standard deviation Portfolio return Portfolio risk10%10%10%10%

iii) Analysis on the portfolio selection of the two companies.20%

iv) Overall presentation and quality of work10%

v) Group Contribution (Based on Group Member Appraisal Form)10%

TOTAL MARKS100%

TABLE OF CONTENTS

TASK I9-14TASK II15TASK III16TASK IV17APPENDIX18-22REFERENCES23-24

TASK I

The three stocks we choose in our portfolio are Fraser and Neave Holdings Bhd, Sime Darby and PETRONAS Gas Bhd. Fraser and Neave Holdings BhdFraser and Neave Holdings Bhd (F&N 3689) is a company under consumer products industry in Bursa Malaysia. Established in 1883 by John Fraser and David Chalmers Neave, it is one of the oldest companies in Malaysia and its brand is well-recognised in local and oversea markets. The core business of the company includes manufacture, sale and marketing of soft drinks, dairies, non-carbonated beverages as well as property. Some significant milestones include, the pioneering and launching of the sweetened condensed filled milk in 1973, launching of a complete range of icecream products in 1974, the launch of 100 Plus isotonic drinks in 1984 , and the acquisition of Nestls canned milk business in Thailand and Malaysia in 2007. In year 2013, the profit after tax of the company has reached One of the very first products introduced by F&N was aerated water product. Today, F&N Beverages Marketing Sdn Bhd (FNBM), a subsidiary company under F&N, is Malaysias largest soft drinks manufacturer and distributor. FNBMs soft drinks portfolio consists of well-known brands such as 100PLUS, F&N Fun Flavours, F&N SEASONS, F&N Fruit Tree, F&N Ice Mountain and the newly-launched OISHI Green Tea. Meanwhile, another major core business by F&N is dairy products. Over the years, F&N Dairies (M) Sdn Bhd, another subsidiary company under F&N, has become the leader in the Sweetened Condensed Milk and Evaporated Milk market in Malaysia. Their product includes F&N, Tea Pot, Carnation, Ideal, Gold Coin, F&N Magnolia, Farmhouse, Sunkist and Fruit Tree Fresh. At the same time, F&N PROPERTIES SDN BHD is the subsidiary company that manages the land acquired and held by the company.Based on Chart 1, the Board of Directors of F&N consists of Tengku Syed Badarudin Jamalullail who is the chairman of F&N and he is independent and non executive director. There are total of seven non independent directors and two independent directors. This company is not really good governance as the number of independent directors are less than non-independent directors.

Chart 1:Board of Directors of F&N

Sime DarbySime Darby BHD (SIME 4197) is a trading services company in Bursa Malaysia. The history of the company started in 1910, when Sime, Darby & Co was set up in Malacca by William Middleton Sime, Henry dEsterre Darby and Herbert Milford Darby. The very first business of the company was timber, preservatives and motor insurance. Today, Sime Darby is Malaysias leading diversified multinational with over 100,000 employees and interests in over 20 countries focusing on five core businesses namely plantation, property, industrial equipment, motors and energy & utilities, with healthcare as a growing business. Plantation business is a major strength of the company. Its subsidiary, Sime Darby Plantation is the world's largest producer of sustainable palm oil and is one of the worlds largest listed palm oil companies. The company grows oil palms in its estates, harvests and processes fresh fruit bunches (FFB) in its own mills and refineries, and crude palm oil (CPO) obtained is further refined into cooking oil and various other oils and fats products. Besides that, in the industrial field, Sime Darby Industrial, a subsidiary of the company, offers a comprehensive list of heavy equipment and services, ranging from the sales of new machines, engines or used equipment for rental through its chain of Car Rental Stores. Currently, it is the world's fifth largest Caterpillar dealer operating in 14 countries across Asia and Australasia, with more than 100 branches. Brands of associated heavy equipment carried by the company include Bucyrus, Case New Holland, Kubota, Terberg, Jacobson, Perkins and Omega. On the other hand, in motors industry, Sime Darby Motors is one of the major automotive industry and luxury marquees participants in Malaysia, Singapore, China, Australia and New Zealand, with business activities that vary from country to country, and includes importation, assembly, distribution and retail of vehicles. The Division represents various brands and luxury marquees ranging from BMW, Mini, Rolls-Royce, Porsche, Jaguar and Lamborghini, to Hyundai, Land Rover, Ford, Peugeot, Mitsubishi and Ssang Yong. In the property field, Sime Darby Property is an established integrated property group and one of the leading property developers in Malaysia. The core businesses of the company are property development, property investment and hospitality & leisure. It has built 10 townships in the Klang Valley and Negeri Sembilan, namely Ara Damansara, Subang Jaya, USJ Heights, Putra Heights, Bukit Jelutong, Bandar Bukit Raja, Denai Alam, Melawati, Nilai Impian and Planters Haven. On the other hand, Sime Darby also gets involved in energy and utilities industry. Under its subsidiary, Sime Darby Energy & Utilities, the company has its core businesses in Engineering & Technical Services, Trading Services, Power, Ports & Logistics and Water Management.Based on Chart 2, the Board of Directors of Sime Darby consists of Tan Sri Dato Abdul Ghani Othman who is the chairman of Sime Darby and he is independent and non executive director. There are total of six non independent directors, two independent directors and one senior independent director. This company have better governance compared to F&N as there is one senior director although the number of independent directors less than non- independent directors. Chart 2: Board of Directors of Sime DarbyPETRONAS Gas BhdPetronas Gas BHD (PETGAS 6033) is a company under the category of industrial products in Bursa Malaysia. Incorporated in 1983, the company is addressed as the Malaysias leading gas infrastructure and utilities company. Petronas has business associates such as MMC-SHAPADU Holdings and Tokyo Gas-Mitsui Holdings, as well as joint ventures with companies such as Linde Malaysia Sdb Bhd. and NRG Consortium (Sabah). Throughout the years, the companys business presence is all around the country. Petronas has four core operations, namely Gas Processing, Gas Transmission, Utilities and Regasification. Gas Processing and Gas Transmission are closely related with the former being responsible for processing natural gas piped from PETRONAS offshore fields while the latter is responsible for transporting the processed gas via the Peninsular Gas Utilisation (PGU) pipeline network to PETRONAS customers in Malaysia and Singapore. The Utilities plants supports the gas value chain by supplying industrial utilities to various petrochemical plants operating in Kertih, Terengganu and Gebeng, Pahang while liquefied natural gas (LNG) Regasification Terminal facilitates diversification of PGBs business portfolio into Regasification business to fulfil Malaysias gas demand.Based on Chart 3, the Board of Directors of Petronas consists of Datuk Manharlal Ratilal who is the chairman of Petronas and he is non-independent and non executive director. There are total of three non independent directors, three independent directors and one senior independent director. This company is a well governance as the number of independent directors more than non- independent directors.

Chart 3: Board of Directors PETRONAS Gas BhdTASK II

Yearly Stock PriceYearly Return

YearKLCI(F&N)(PetGas)(SIME)KLCI(F&N)(PetGas)(SIME)

2003710.72753.5157.23755.1833

2004855.53754.351677.11255.71670.2037489760.238027501-0.0172711570.102893891

2005900.681675.3791677.995836.0750.0527670230.2361164300.1241944930.062682216

2006965.66676.358.93336.13750.0721509080.1804802480.1172485670.010288066

20071324.6491677.487510.1041679.741670.3717457710.1791338580.1310634330.587236931

20081135.7891678.541679.945838.304167-0.1425736000.140790206-0.015670103-0.147562019

20091090.3441679.46759.7541677.4525-0.0400118270.108390244-0.019271052-0.102558956

20101379.3858312.958310.32338.431670.2650921380.3687175420.0583511320.131387678

20111508.8817.3512.57339.0250.0938781330.3389067520.2179528580.070369638

20121610.4118.596717.9759.63250.0672883200.0718539870.4296129370.067313019

20131746.047518.346721.10679.440830.084225446-0.0134432690.174223459-0.019897915

Average Yearly Return0.1028311290.1848973500.1200434570.076215255

Standard Deviation0.1394966070.1108712210.1299959300.189951596

TASK III

CorrelationPortfolio A (F&N and PetGas)

(F&N)(PetGas)

(F&N)1

(PetGas)0.8890282741

Portfolio B (F&N and SIME)

(F&N)(SIME)

(F&N)1

(SIME)0.8039434621

Portfolio C (PetGas and SIME)

(PetGas)(SIME)

(PetGas)1

(SIME)0.7329167291

Portfolio Return and RiskPortfolio Return, E(r)Portfolio Risk,

Portfolio A (F&N and PetGas)0.1524704030.117066387

Portfolio B (F&N and SIME)0.1305563020.143384449

Portfolio C (PetGas and SIME)0.0981293560.149311989

TASK IV

Based on the findings in Task II, KLCI has an average yearly return of 10.2831% from year 2003 to 2013. The average yearly returns of F&N, PetGas and SIME are 18.4897%, 12.0043% and 7.6215% and the standard deviation is 0.1108, 0.13 and 0.19 respectively. The average yearly return for each company highly depends on their business nature and standard deviation is use as a measurement of risk. F&N has the highest average yearly return with lowest risk mainly because its a defensive stock as its beverage business will less affected by the market itself. For SIME, it has the lowest average yearly return with highest risk because of its plantation business which exposed to a lot of market risk. PetGas which has the average yearly return and risk among three portfolio. A two securities portfolio is formed with the chosen companies. The portfolio A consists of F&N and PetGas, portfolio B consists of F&N and SIME , and the portfolio C consists of PetGas and SIME. Both companies in every portfolio are invested equally.In order to calculate portfolio risk, correlation of the companies in the portfolio is needed. The correlation coefficient shows the relationship of the stocks in each portfolio. According to findings in Task 3, companies in each portfolio have strongly positive relationship. The correlation of portfolio A, B and C are 0.8890, 0.8038 and 0.7392 respectively. After finding out the correlation of the companies in every portfolio, it is use to calculate the portfolio risk. The portfolio risk of portfolio A, B and C are 0.1171, 0.1434 and 0.1493 respectively. The portfolio risk for all portfolios are consider low as the standard deviation of all portfolios is less than one.The portfolio return for portfolio A, B and C are 15.2470%, 13.0556% and 9.8129% respectively. Among the portfolios, portfolio A has the highest portfolio return because the average yearly returns of F&N and PetGas are the highest among the three stocks. High average yearly return of a single company will definitely pull up the portfolio return. For portfolio C has the lowest portfolio return because the average yearly return of PetGas and SIME are lowest among the three stocks. With all of the calculation, we have decided to choose portfolio A because it provides the highest portfolio return with lower portfolio risk compared to portfolio B and C. This is the optimal portfolio among the three portfolios. (1536 words in total)

APPENDIX

Appendix 1 : Monthly stock price of chosen companies and KLCI indexDateKLCI(F&N)(PetGas)(SIME)

2/12/20131866.9618.524.189.52

1/11/20131812.7218.2623.869.65

1/10/20131806.8518.6224.529.53

2/9/20131768.6218.6229.5

1/8/20131727.5818.3220.149.39

1/7/20131772.6218.320.849.48

3/6/20131773.5418.3220.99.58

2/5/20131769.2218.1221.249.42

1/4/20131717.6518.2419.729.44

1/3/20131671.6318.5199.27

4/2/20131637.6318.118.329.21

2/1/20131627.5518.2818.569.3

3/12/20121688.9518.0219.529.52

1/11/20121610.8318.5218.48.97

1/10/20121673.0719.819.69.78

3/9/20121636.6618.2199.8

1/8/20121646.1119.919.389.81

2/7/20121631.619.218.59.83

1/6/20121599.1518.06189.89

2/5/20121580.6717.8217.29.68

2/4/20121570.6119.0216.789.74

1/3/20121596.3318.8816.849.74

2/2/20121569.6517.916.89.69

3/1/20121521.2917.8415.689.14

1/12/20111530.7318.215.29.2

1/11/20111472.118.1613.29

3/10/20111491.891713.18.9

2/9/20111387.1316.512.988.44

1/8/20111447.2716.5413.228.79

1/7/20111548.8119.313.489.15

1/6/20111579.0719.413.229.23

3/5/20111558.2919.3811.329.19

1/4/20111534.9517.711.269.02

1/3/20111545.1315.6211.449.23

2/2/20111491.2515.411.288.96

3/1/20111519.941511.189.19

1/12/20101518.911511.18.8

1/11/20101485.231611.148.68

1/10/20101505.6614.4811.248.83

1/9/20101463.514.4610.98.5

2/8/20101422.4914.210.58.35

1/7/20101360.9214.38107.8

1/6/20101314.0212.569.898

3/5/20101285.0111.449.927.75

1/4/20101346.3810.789.978.78

1/3/20101320.5710.589.88.71

2/2/20101270.7810.629.658.45

4/1/20101259.16119.778.53

1/12/20091272.7810.69.878.97

2/11/20091259.1111.149.898.97

1/10/20091243.2310.69.788.89

1/9/20091202.0810.329.738.5

3/8/20091174.279.69.738.25

1/7/20091174.99.459.88.25

1/6/20091075.249.559.86.95

1/5/20091044.118.99.87.2

1/4/2009990.748.79.46.6

2/3/2009872.558.259.75.7

3/2/2009890.677.559.755.65

2/1/2009884.458.959.85.5

1/12/2008876.758.859.85.2

3/11/2008866.148.659.75.85

3/10/2008863.618.259.756.2

2/9/20081018.689.059.96.6

1/8/20081100.59.05106.8

1/7/20081163.098.99.87.9

2/6/20081186.5799.959.25

2/5/20081276.199.959.5

1/4/20081279.868.35109.6

3/3/20081247.527.85109.35

1/2/20081357.47.810.111.6

2/1/20081393.257.7510.411.8

3/12/20071445.037.9510.711.9

1/11/20071396.987.851111

1/10/20071413.657.711.211.2

3/9/20071336.38.0511.110.4

1/8/20071273.937.110.69.4

2/7/20071373.717.3510.910.1

1/6/20071354.387.3510.59.6

3/5/20071346.897.359.310

2/4/20071322.257.39.39.2

1/3/20071246.877.358.958.1

2/2/20071196.457.28.657.8

3/1/20071189.357.39.058.2

1/12/20061096.247.558.957.2

1/11/20061080.667.29.356.75

2/10/2006988.36.58.96.15

1/9/2006967.556.28.756

1/8/2006958.126.18.95.95

3/7/2006935.856.19.15.6

1/6/2006914.696.18.65.5

2/5/2006927.785.98.85.95

3/4/2006949.236.258.96.05

1/3/2006926.63696.1

3/2/2006928.946.196.2

3/1/2006914.016.28.956.2

1/12/2005899.796.29.36.15

2/11/2005896.135.8596.3

3/10/2005910.765.48.76.2

1/9/2005927.545.558.856.2

1/8/2005913.565.48.56.05

1/7/2005937.395.458.356.15

1/6/2005888.325.18.055.8

3/5/2005860.735.157.15.8

1/4/2005878.965.17.055.9

1/3/2005871.355.156.95.95

2/2/2005907.385.17.16

3/1/2005916.275.17.056.4

1/12/2004907.4357.16

1/11/2004917.194.97.36.05

1/10/2004861.144.4675.7

1/9/2004849.964.166.955.75

2/8/2004827.984.267.15.55

1/7/2004833.984.167.155.6

1/6/2004819.864.186.85.55

5/5/2004810.674.2275.4

1/4/2004838.214.26.555.4

1/3/2004901.854.27.86

4/2/2004879.244.367.256.1

2/1/2004818.944.127.355.5

1/12/2003793.9447.555.2

3/11/2003779.283.847.155.3

1/10/2003817.123.647.855.6

2/9/2003733.453.487.155.15

1/8/2003743.33.67.355.15

1/7/2003720.563.667.15.05

2/6/2003691.963.527.055.1

2/5/2003671.463.5475.1

1/4/2003630.373.247.055

3/3/2003635.723.147.255.2

5/2/2003646.83.275.1

2/1/2003664.773.327.355.25

Appendix 2 : Average yearly return and Standard Deviation

Appendix 3 : Portfolio return and riskPortfolio Return, E(r)Portfolio Risk,

Portfolio A (F&N and PetGas)=(0.5*M16)+(0.5*N16)=(((0.5^2)*(M17^2)+(0.5^2)*(N17^2)+(2*0.5*0.5*M17*N17*R7))^0.5)

Portfolio B (F&N and SIME)=(0.5*M16)+(0.5*O16)=(((0.5^2)*(M17^2)+(0.5^2)*(O17^2)+(2*0.5*0.5*M17*O17*R12))^0.5)

Portfolio C (PetGas and SIME)=(0.5*N16)+(0.5*O16)=(((0.5^2)*(N17^2)+(0.5^2)*(O17^2)+(2*0.5*0.5*N17*O17*R17))^0.5)

REFERENCES

Fraser & Neave Holdings Bhd. 2014. Home. [ONLINE] Available at: http://www.fn.com.my/. [Accessed 3 July 2014]. Petronas. 2013. [ONLINE] Available at:http://www.petronasgas.com/Pages/default.aspx. [Accessed 3 July 2014]. Sime Darby. 2014.Sime Darby: Developing Sustainable Futures. [ONLINE] Available at:http://www.simedarby.com/default.aspx. [Accessed 3 July 2014]. Yahoo! Finance. 2014. 6033.KL: Summary for PETRONAS GAS BHD. [ONLINE] Available at:http://finance.yahoo.com/q;_ylt=Avwcx_kEP4iUlypdqTh.yA0nv7gF;_ylc=X1MDMjE0MjQ3ODk0OARfcgMyBGZyA3VoM19maW5hbmNlX3dlYl9ncwRmcjIDc2EtZ3AEZ3ByaWQDBG5fZ3BzAzgEb3JpZ2luA2ZpbmFuY2UueWFob28uY29tBHBvcwM1BHBxc3RyAwRxdWVyeQM2MDMzLktMLARzYWMDMQRzYW8DMQ--?p=http%3A%2F%2Ffinance.yahoo.com%2Fq%3Fs%3D6033.KL%26ql%3D0&type=2button&uhb=uhb2&fr=uh3_finance_vert_gs&s=6033.KL. [Accessed 3 July 2014]. Yahoo! Finance. 2014.3689.KL: Summary for FRASER & NEAVE HOLDINGS BHD [ONLINE] Available at:http://finance.yahoo.com/q;_ylt=Avwcx_kEP4iUlypdqTh.yA2iuYdG;_ylu=X3oDMTBxdGVyNzJxBHNlYwNVSCAzIERlc2t0b3AgU2VhcmNoIDEx;_ylg=X3oDMTBxYjBnaGR1BGxhbmcDZW4tVVMEcHQDMgR0ZXN0A2dzNTA0;_ylv=3;_ylc=X1MDMjE0MjQ3ODk0OARfcgMyBGZyA3VoM19maW5hbmNlX3dlYl9ncwRmcjIDc2EtZ3AEZ3ByaWQDBG5fZ3BzAzUEb3JpZ2luA2ZpbmFuY2UueWFob28uY29tBHBvcwMyBHBxc3RyAwRxdWVyeQMzNjg5LktMLARzYWMDMQRzYW8DMQ--?p=http%3A%2F%2Ffinance.yahoo.com%2Fq%3Fs%3D3689.KL%26ql%3D0&type=2button&uhb=uhb2&fr=uh3_finance_vert_gs&s=3689.KL. [Accessed 3 July 2014]. Yahoo! Finance. 2014.4197.KL: Summary for SIME DARBY BHD- Yahoo! Finance. [ONLINE] Available at:http://finance.yahoo.com/q;_ylt=Avwcx_kEP4iUlypdqTh.yA0nv7gF;_ylc=X1MDMjE0MjQ3ODk0OARfcgMyBGZyA3VoM19maW5hbmNlX3dlYl9ncwRmcjIDc2EtZ3AEZ3ByaWQDBG5fZ3BzAzUEb3JpZ2luA2ZpbmFuY2UueWFob28uY29tBHBvcwMyBHBxc3RyAwRxdWVyeQM0MTk3LktMLARzYWMDMQRzYW8DMQ--?p=http%3A%2F%2Ffinance.yahoo.com%2Fq%3Fs%3D4197.KL%26ql%3D0&type=2button&uhb=uhb2&fr=uh3_finance_vert_gs&s=4197.KL. [Accessed 3 July 2014].

IFA Assignment

Documents

Transcript of IFA Assignment