The analysis of Maxis Communication Berhad is according to the profitability ratios. The profitability ratios include gross profit margin, operating profit margin, net profit margin, operating return on assets and return on equity.
First, gross profit margin ratio keeps increasing from 2008 to 2011. The table shows that the lower gross profit margin ratio in 2008 is 18.11 and higher is 68.60 in 2011. This gross profit margin ratio is related to the revenue and cost of goods sold. A low gross profit margin ratio in 2008, it is because Maxis Company has a low amount of the revenue to pay for the operating expense or spend a lot in the cost of sales. Based on the annual report, the cost of sales in 2008 is RM 5,883, 650 and the revenue is RM7, 184,440. In 2011, gross profit margin is 68.60 this is because Maxis Company has a high amount of revenue and spends less in cost of sales. Based on the annual report in 2011, revenue is RM8, 799,921 and interconnects expenses, Universal service provision contribution and other direct cost of sales is RM2, 762,978. The higher of gross profit margin ratio is good for the company because it show that efficiency a business.
Next, operating profit margin ratio keeps increasing from 2008 to 2011. The lower operating profit margin is 4.45 in 2008 and higher is 37.70 in 2010. This operating profit margin ratio is related to the both of the cost of goods sold and selling expense. Operating profit margin ratio is because of the cost of goods sold and selling expenses. In 2008, operating profit margin was higher in operating costs and reduction in revenue. Thus, a high operating profit margin in 2010 which is 37.70 means that the Maxis Company has a good of cost controls increasing faster than the costs. The higher operating profit margin ratio is better for the company because it shows that the company can keeps its costs under control.
Besides that, net profit margin ratio also keeps increasing from 2008 to 2011. In 2008, profit margin ratio is negative which is -1.41 and in 2011 is the higher which is 28.76. This net profit margin is related to after all the expenses have been paid. In 2008, net profit margin is -1.41 is because not enough revenue and the gross profit margin is so low which is 18.11. In 2011 is a higher net profit margin because Maxis Company have extra authority item and also have extra capacity.
2008
2009
2010
2011
RM' 000
RM' 000
RM' 000
RM' 000
LIQUIDITY RATIOS
Current Ratio
1.45
0.64
0.63
0.42
Acid Test Ratio
1.38
0.60
0.55
0.39
Average Collection Period
37.85
35.73
30.66
30.90
Accounts Receivable Turnover
16.45
9.63
9.47
10.26
Inventory Turnover
280.13
34.38
13.81
25.06
CAPITAL STRUCTURE RATIOS
Total debt to equity
1.06
0.99
1.10
1.22
Time Interest Earned
0.16
0.06
0.02
0.03
ASSET UTILIZATION RATIOS
Cash Turnover
6.97
7.38
8.60
8.53
Accounts Receivable Turnover
9.51
10.08
11.74
11.65
Inventory Turnover
49.16
38.32
24.70
23.08
Total Asset Turnover
0.50
0.53
0.62
0.62
MARKET VALUE RATIOS
Price/Earnings Ratio
-363.40
25.87
23.03
20.93
Market-to-Book Ratio
5.98
0.59
0.61
0.65
The liquidity ratio of the Maxis Company is quite good in 2008. In 2008, Maxis Company current ratio is 1.45 means over 1 is good for the company. Maxis Company gives a clean bill of health in 2008. For every ringgit in current liabilities, there is 1.45 in the current assets. Based on annual report, in 2008 current asset is RM 1,723,854 and current liabilities are RM RM1, 185,760. We can see that the current asset is more than the current liabilities in 2008, so the company is enough resources to pay the bills. It is because in 2008, current asset of inventories decrease that is RM 21,003 and receivable, deposits and prepayment also decrease RM436, 856. But the cash and cash equivalents was increase RM1, 196,967. The current asset can cover the current liabilities is because decrease in provisions for liabilities and charges and also payables and accruals. The provision for liabilities and charges is RM 14, 415 and payable and accrual is RM 933,522. Thus, the current liability of taxation is 0 in 2008.
But in 2011, current ratio is less than 1 means that not well in the short term. For every ringgit in current liabilities, there is 0.42 in the current assets. Maxis Company not enough sufficient for current assets to pay the current liabilities. Based on the annual report, in 2011 the current asset is RM 1,835,675 and current liabilities are RM 4,385, 865. We can see that the current liability in 2008 is RM 1, 185,760 but in 2011 the liabilities is higher than before which is RM 4,385,865. It is because in 2011, the current asset increase because of inventories and receivables, deposits and prepayment was increase. The inventory is RM 110, 249 and receivables, deposits and prepayment is RM 858,011. The current asset cannot cover the current liabilities because increase in provisions for liabilities and charges, payables and accruals, borrowings and taxation. The provision for liabilities and charges is RM 64, 465, payables and accruals is RM 2,828,255. Besides, there also have borrowings and taxation in 2011. The borrowing is RM1, 463,950 and taxation is RM5, 735.
Next, inventory turnover is quite strong in 2008 compared to previous years. In 2008, the inventory turnover is 280.13 it is because the low inventories. In 2008, the inventory is RM 21, 003. Based on annual report, inventories which comprise telecommunications are stated at the lower of cost and net realisable value. Cost includes the actual cost of materials and incidentals in bringing the inventories to their present location and condition are is determined on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. In 2010, the inventory turnover is 13.81 it is because the Maxis Company is overstocking and unable to sell their stock. The annual report state that the inventory in 2010 is increase to RM214, 098. Based on the notes of the financial statement state that the group reversed RM1,165,000 (2010: RM7,826,000) in respect of part of an inventory write down that was not required subsequently as the Group was able to utilise those inventories.
Besides that, the price earnings ratio of Maxis Company is strong in market value ratios in 2009 that is 25.87. The price earnings ratio is affected by the inflation. In 2009, earning per share for profit attributable to the equity holders of the company is 27.25 sen and price earnings ratio is 25.87, so investor is willing to pay 25 times to the company's earnings. The attributable to equity holders of the company is RM 8,945,107. Based on the annual report, it represents issued and fully paid ordinary shares of RM1.00 of Maxis Mobile Services Sdn Bhd. Also represents issued and fully paid ordinary share of RM0.10 of Maxis Berhad. But in 2008, price earnings ratio is -363.40. It is because the earnings per share for profit attributable to the equity holders basic is -1.94 sen and attributable to equity holders of the company is RM1, 524,234.
