Bloomberg - ARNK:MK
Yahoo - 7214 .kl
Webpage - https://www.arank.com.my/
Webpage - https://www.arank.com.my/
Sector : Industrial Products and Services
Sub Sector : Metals
Focus : Aluminium
Focus : Aluminium
Company
Profile:
ARANK is principally
involved in manufacturing and marketing of aluminium billets. ARANK is
currently the largest manufacturer and supplier of aluminium billets in
Malaysia and one of Asia’s leading suppliers of aluminium extrusion billets.
Revenue:
Below is the revenue and operating margin of ARANK.
5 Years Annualise Growth of Revenue
|
-0.21 %
|
10 Years Annualise Growth of Revenue
|
3.53 %
|
ARANK revenue had slow down for the past five year compare
to the previous 10 years. Despite lower revenue ARANK operating margin had
increase from around 2.5 % before 2016 to 3.5 % in 2019.
Nett
Profit
Bar Chart below shows ARANK nett profit from 2010 –
2019.
5 Years Annualise Growth of Nett
Profit
|
2.61 %
|
10 Years Annualise Growth of Nett
Profit
|
16.22 %
|
Year 2016 recorded the highest nett profit growth of
53 % mainly due to higher profit margin.
In 2017 ARANK had dispose 55 % of Hong Lee Group Sdn
Bhd with a total cash consideration of RM 2,105,400 which ARANK had acquired in
2013.
Assets
and Liabilities
ARANK asset grows over the period of 2010 to 2019.
Besides that it liabilities also reduced over the period.
Trade
Receivables
Prior 2014 there is no trade receivable past due.
ARANK impaired all their trade receivable past due. Between 2015 to 2019 ARANK
trade receivables past due is between 10% to 20 %.
Financial
Ratio
There would be few financial ratios to be look at
here:
1) Interest
Coverage Ratio (Green Bar Chart)
2) Cash
Ratio (Blue Line Chart)
3) Current
Ratio (Red Line Chart)
1) Interest
Coverage Ratio
Interest coverage ratio measure how
capable the company pay off the existing debt. With an interest coverage ratio
above one mean the earnings before interest & tax (EBIT) is able to pay of
the full amount of the financial cost of the year.
ARANK had interest coverage ratio more
than one for the past 10 years. In 2017 ARANK interest coverage ratio is at 35
which is the highest and drop to 12 in 2019.
2) Cash
Ratio
As cash is the most liquid assets
of the company, cash ratio is use to determine company ability to pay off short
term liabilities using cash. Cash ratio above one indicates that company able
to settle all current liabilities using available cash.
ARANK had low cash ratio from 2010
to 2018, however in 2019 the cash ratio is above 1 for the first time over the
last ten years.
3) Current
Ratio
Current ratio measures ability of
the company to pay off short term obligation (current liabilities). Current
ratio above one means the company able to pay off the current liabilities with
current asset.
Despite low cash ratio, ARANK
current ratio is above from 2011 onward.
Turnover in Days
Let
look into three types of turn over as follow:
1) Inventory
Turnover (Blue Line)
2) Trade
Receivables Turnover (Red Line)
3) Trade
Payable Turnover (Green Line)
1) Days
Sales of Inventory
10
Years Days Sales of Inventory Median (days) – 28.23
ARANK days sales of inventory had
increase from 26.55 days in 2010 to 44 day in 2018 before drop to 33. ARANK
inventories had took longer time to sell out compared to 2010.
10
Years Trade Receivable Turnover (Days) – 24.36
ARANK trade receivable turn over
had also increase from 10 days in 2010 to 24 days in 2019. ARANK took longer
time to collect back the debt.
10
Years Trade Payable Turnover (Days) – 4.33
ARANK had very low trade payable
turnover which means it pay it debtor 6 times faster than collect back from
creditors.
Per Share Analysis
1) Earnings
per share (sen) (Blue Bar)
2) Dividend
per share (sen) (Red Bar)
3) Net
total assets per share (Green Line)
1) Earnings
per share
Other thank year 2016 and year 2017
ARANK had quite consistence earning per share around 8 sen.
2) Dividends
per share
ARANK had consistence dividend per
year of 3 sen. ARANK had issue bonus shares twice over the past 10 years. 1:2
Bonus in year 2012 and 2:5 bonus in year 2019.
3) Net
total assets per share
There is a significant
drop in net asset per share in 2016 and 2017 due to impaired the goodwill of
Hong Lee Group Sdn Bhd in 2016 and disposal of Hong Lee Group Sdn Bhd in 2017.
Director’s Remuneration
Some
company paid high remuneration to director despite low profit. Let see how much
is ARANK director’s remuneration in comparison to staff fee and operating
profit.
There
is slightly higher director remuneration expense in 2016 and 2017 where the
nett profit of the companies is high.
Datuk
Leow Chong Hwa, major shareholder of ARANK is also major shareholder of LBALUM
and City Data Limited via his spouse.
ESOS and Warrant
Five
years ESOS from 27 August 2018 until 26 August 2023 are granted to the eligible
employees and director at 0.65.
As
of 31st July 2019 ARANK granted 10,492,400 options to eligible
director and employee. The option price had adjusted to 0.46 due to bonus issue
on 18 January 2019.
Material Ligation
ARANK
had no material ligation as of 30th April 2020.
Return on Equity
Return
of equity can be calculated through Du Point Analysis which uses:
- Net Profit Margin to measure operating efficiency, how much money gets out from its revenue
- Asset Turn Over to measure asset efficiency, how effective the company make use of its asset
- Equity Multiplier measure of financial leverage.
5 Years Return on Equity Average
|
12.08 %
|
10 Years Return on Equity Average
|
11.53 %
|
ARANK equity multiplier
had decrease over the period from 2010 to 2019. While asset turnover and net
profit margin remain almost constant except in 2016 and 2017 which see increase
in net profit margin which increase the return on equity to above 14 %.
Altman
Z Score
Companies with Altman Z
score < 1.8 is likely headed for bankruptcy while Z score > 3 is unlikely
headed for bankruptcy.
ARANK Altman Z-Score
above 3 hence unlikely to headed for bankruptcy.
