BM056-3-5.2-FMGT Individual Assignment Asian Pacific University

EXECUTIVE SUMMARY

This documentation provides two companies within Bursa Malaysia (KLSE), representing two different sectors. Holdings Berhad is a leading integrated consumer media entertainment group and is classified under the trading and serve sector. Sunway Berhad is engaged in two businesses: property and construction and is classified under the infrastructure sector.

Both companies financial sources/resource are obtained from Bank loans and shareholders. In addition, Astro and Sunway Berhad have a significant amount of debt however, Astro has a reduced debt amount as compared to Sunway, with Astro sitting on RM3671 million while Sunway sits on RM2.33 billion. Astro’s debt profile is categorized into three (3) main contributors; USD term loan, RM term loan and Finance lease.

It seems that Astro and Sunway have different challenges that are being faced. Astro’s operating expenses will peak in FY14 as the company focuses on reinvesting for growth. On the other hand, Sunway’s Group’s balance sheet is expected to weaken further as it gears up for property development and to build up its investment properties portfolio. Sunway Berhad’s debts are projected to rise between RM2.91 billion and RM3.30 billion in the next 1-2 years (according to RAM holdings Berhad 2012).

This documentation will included important figures and tables such as the company’s liabilities, Assets, debts profile, financial ratio’s, institutional shareholders, financial summary and total debts of each of the companies (Sunway and Astro Berhad).

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TABLE OF CONTENTS

Executive Summary...... 1

1.0 Introduction...... 3

1.1 Berhad...... 3

1.2 Sunway Holdings Berhad...... 3

2.0 Definitions...... 4

2.1 Capital Structure...... 4

2.2 Financial ratios...... 4

3.0 Financing sources Astro Malaysia Holdings Berhad...... 4

3.1 Capital structure...... 6

3.1.1 USD term loan...... 6

3.1.2 RM term loan...... 7

3.1.3 Finance lease...... 7

4.0 Financing sources for Sunway Berhad...... 8

4.1 Capital Structure...... 9

5.0 Evaluation of the financing sources between Astro Holdings Berhad and Sunway Berhad...10

5.1 Astro Holdings Berhad...... 10

5.2 Sunway Berhad...... 11

6.0 Conclusion...... 12

7.0 References...... 12

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1.0 INTRODUCTION

1.1 ASTRO MALAYSIA HOLDINGS BERHAD Astro Malaysia Holdings Berhad is a leading integrated consumer media entertainment group in Malaysia and Southeast Asia with operations in four (4) key areas of business, namely Pat-TV, Radio, Publications and Digital Media. Astro was founded in 1996 and is a company incorporated in Malaysia with its principal of business at the Administration Building of the All Asia Broadcast Centre, located in . According to Astro’s official website (2014) “Company Background”, the company has a customer base of 3.8 million residential customers or fifty five (55) percent penetration of Malaysian TV households.

With reference to Astro’s official website, the company offers 171 TV channels, including sixty eight (68) Astro-created and branded channels and 39 HD channels, delivered via Direct-To- Home satellite TV, IPTV and OTT platforms. Astro provides HD, 3D, PVR, VOD and IPTV services through Astro Beyond and Astro On-The-GO (Astro Holdings Berhad, 2014). According to “Astro Malaysia Holdings Berhad” by Cashbaa directory (2014), Astro was awarded the “brand of the year” by The People’s Choice awards which was awarded at Malaysia’s Putra Brand Awards 2012. The award in recognition of Astro’s efforts to exemplify innovation, quality and strong corporate social responsibilities.

1.2 SUNWAY HOLDINGS BERHAD Sunway Berhad (Sunway), previously Alpha Sunrise Sdn Bhd, is engaged in two businesses: property and construction. According to Sunway Holdings 2014, the Company’s supplementary business divisions include quarry and building materials, trading and manufacturing, hospitality, leisure, and healthcare. The Company is a unique purpose company formed for the acquisition of Sun City Business and the Sun Business.

According to “Sunway BHD (SWB: ) by Bloomberg Businessweek (2014), in its construction business, the Company offers designing and building services in the field of

3 BM056-3-5.2-FMGT Individual Assignment Asian Pacific University building construction, civil engineering, infrastructure, mechanical and electrical engineering, machinery and site equipment rental, precast, foundation and piling, and stone materials.

Among the company’s top construction projects are the 800-acre Bandar Sunway resort near Kuala Lumpur and the Kajang SILK highway in central Malaysia. The company’s operates throughout the Asia) Pacific region and the Middle East. Sunway Holdings merged with affiliate Sunway City in 2001. The combined company is controlled by chairman Jeffery Cheah.

2.0 DEFINITIONS

2.1 CAPITAL STRUCTURE According to Investopedia (2014), capital structure is defined as a mix of a company’s long term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.

2.2 FINANCIAL RATIOS According to Business Dictionary (2014), financial ratios are defined as a financial analysis comparison in which certain financial statement items are divided by one another to reveal their logical interrelationships.

3.0 FINANCING SOURCES ASTRO MALAYSIA HOLDINGS BERHAD

Most of Astro’s financial resources are obtained from its shareholders and Bank loans. According to “Institutional Shareholders” by markets (2014), Astro has numerous institutional shareholders. Figure 1.0 shows the Institutional shareholders of Astro. Permodalan Nasional Bhd holds the majority of Shares with the Employees Provident Fund holding the least shares as show in figure 1.0.

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Figure 1.0 (Astro’s Institutional Shareholders

Source: Markets.ft (2014)

According to Astro’s official website (2012) “Astro double digit revenue growth”, in 2010, Astro generated a total revenue of RM3107 million. Its TV segment contributes to RM2959 millions of Astro’s total revenues and RM106 million from its Radio segment, with a remaining RM27 million and RM16 million from its Publishing and Digital Services Segment respectively. A total of RM3525 million was generated in 2011, with its TV segment contributing to RM3372 millions of its total revenue and RM104 million from its Radio segment. Astro’s Publishing and Digital Services segment contributed to RM33 million and RM16 million. In the year 2012, Astro generated RM 3907 million in revenues, whereby, RM3759 million came from its TV segment, RM117 million from its Radio Segment, and RM28 million from its publishing segment with the remaining RM3 million from Astro’s Digital Services segment.

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3.1 CAPITAL STRUCTURE Astro‘s total debt is recorded at RM3, 671 million. The breakdown of the Total borrowing of RM3671 million is RM667 mil, 2000 mil and RM1042 mil for finance lease, term loan in ringgit and term loan in USD. Nonetheless, part of the IPO proceeds (RM500mil) will be used to pay down debts. Figure 2.0 shows Astro’s total Debt profile. Figure 3.0 Shows Astro’s Group balance sheet overview.

Figure 2.0 (Astro’s debt profile) Source: Astro (2nd quarter FY14 results) 2013

3.1.1 USD term loan  Us dollar term loan of USD330mn swapped into ringgit (RM1.0bn)  10 year tenor  Back ended amortization schedule, with average life of 7 years  Fully hedged at exchange rate of USD/RM3.0189

3.1.2 RM term loan  Ringgit term loan of RM2.01bn, fully drawn on 10 June 2011. RM510mn of RM2.01 bn was repaid on November 2012, leaving a balance of RM1.5 bn.

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 Additional RM500mn was drawn down in 2012(additional RM500mn was still undrawn but left to voluntarily lapse on November 2012).  Balance outstanding of RM2.0bn has final maturity date of May 2021  Back ended amortisation schedule, with average life of 7 years

3.1.3 Finance lease  Payment arrangement for the remaining contractual years have been redenominated into Ringgit at USD/RM3.0445.  Effective interest rate; 6.2% and 12% p.a  Average life: 15 years.

Figure 3.0 (Astro’s Group balance sheet overview) Source: Astro (3rd quarter Fy14 results) 2013

4.0 FINANCING SOURCES FOR SUNWAY BERHAD

Sunway Berhad obtains its financial resources, or sources from its shareholders. Figure 4.0 shows Sunway’s Top institutional shareholders with GIC Pte Ltd. (investing Management) maintaining most of the shares (8.74%), while Singular Asset Management Sdn. Bhd obtains the

7 BM056-3-5.2-FMGT Individual Assignment Asian Pacific University least number of shares with 0.17% as shown on figure 4.0. 19.05 percent of shares are held by top holders. In addition, Sunway Berhad obtained its financial sources from both OCBC Bank Berhad and RHB Bank Berhad (loan).

Figure 4.0 (Sunway Institutional shareholders) Source: Markets.ft (2014)

According to “Sunway Group posts RM 1.5b in earnings in FY13” by The Star Online (2014), The Sunway Group announced earnings results for the year ended December 31, 2013. For the year, the company reported that net profit increased to RM1.5 billion from RM 438.8 million in the previous year. Its annual revenue rose to RM4.7 billion versus RM4.1 billion recorded in 2012. For the full financial year 2013, the company’s core net profit surged thirty eight (38) percent to RM 482.7 million from RM 350.7 million a year ago. The company’s strong financial results were due to improvement in performance recorded by all its business divisions, with the two (2) core businesses of property and construction leading the way.

4.1 CAPITAL STRUCTURE The Sunway’s Group’s CCR is constrained by its hefty debt burden and week debt coverage. Sunway Berhad’s total debts, according to “Ram Ratings reaffirms ratings of Sunway’s debt issue” by RAM Holdings Berhad (2012), as at end-September 2012, amounts to RM2.33 billion

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(includes RM912.25 million of debt to fund the cash portion of the offer). Translated into a moderately high gross gearing ratio of 0.78 times. Its net gearing ratio was more moderate at 0.49 times (figure 5.0 shows the gearing ratio), aided by the Group’s practice of maintaining a huge cash pile.

Figure 5.0 (Sound Balance Sheet) Source: Sunway Berhad 2013

The Group’s balance sheet is expected to weaken further as it gears up for property development and to build up its investment properties portfolio. Sunway Berhad’s debts are projected to rise between RM2.91 billion and RM3.30 billion in the next 1-2 years (according to RAM holdings Berhad 2012), resulting in high gear ratios of almost 1 time consequently, its operating cash flow debt coverage is expected to be slightly weak, ranging between 0,10 times and 0.14 times. The Group is also exposed to the cyclicality of the property and construction sectors, as well as the related risks including fluctuating input prices and keen competition. Its overseas operation also entail added risks given their different regulatory and operating environments. Figure 6.0 Shows Sunway Berhad’s Total Assets and Total Debt for the years 2010-2013.

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Figure 6.0 (Sunway’s Total assets and Total Debt) Source; Markets.ft (2014)

5.0 EVALUATION OF THE FINANCING SOURCES BETWEEN ASTRO HOLDINGS BERHAD AND SUNWAY BERHAD

5.1 ASTRO HOLDINGS BERHAD A significant milestone in the history of the company was achieved on 19 October 2012 as the company witnessed the successful completion of their IPO and the admission of their shares to the official list of the Main Market of the Bursa Securities. The IPO received strong demand from the investing community, both locally and outside Malaysia. The total proceeds from the IPO were approximately RM4.5 billion, of which the amount raised by Astro was approximately RM1.4 billion. Such an overwhelming response is a clear reflection of the investing community’s trust and confidence in the company. Figure 7.0 shows the financial summary of Astro.

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Figure 7.0 (financial summary of Astro) Source: 1-million-dollar-blog (2012)

Operating expenses for Astro will peak in FY14 as the company focuses on reinvesting for growth. Continuous investment in content offerings to provide an enriching experience for the company’s customers whilst managing content costs within 32-35 % of TV revenue. Increase in operating expenses, particularly STB depreciation, as well as selling, installation, distribution and logistics costs driven by higher Astro B.yond STB conversions.

5.2 SUNWAY BERHAD According to “RAM Ratings assigns A2/P1 ratings to Sunway’s proposed debt issues” (2013), Sunway’s a2/Stable/P1 ratings reflect the group’s solid business profile, underscored by its large- scale and vertically integrated business model, and its diversified revenue and earnings based. Figure 8.0 shows the rating of Sunway’s existing RM500 million CP/MTN facility.

The enhanced ratings of Tranches 1 and 2 reflect unconditional and irrevocable bank guarantees Figure 8.0 Rating of Sunway’s existing RM500 million CP/MTN facility extended by OCBC Bank Berhad and RHB Bank Berhad. Sunway’s A2/p1 ratings reflect its Source: RAM Holdings Berhad 2013 solid business position, underpinned by its large-scale and vertically-integrated business model.

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The Group’s profile is further supported by its strong branded and established standing in the property and construction sectors. Sunway’s unbilled property sales stood at a robust RM2.41 billion as at end-September 2012, while the successful replenishment of some RM1.7 billion of jobs in 2012 and has boosted its outstanding construction order book to a high of RM3.18 billion. These will provide revenue and earnings support over the next 2-3 years. In addition, Sunway enjoys a stable stream of dividend income and management fees through its associate stake in Sunway Real Estate investment Trust, which will continue to provide it with diversity and stability of earnings and cash flow.

6.0 CONCLUSION

It can be seen while comparing the two companies (Sunway and Astro), that Astro holds the least totaled debts compared to Sunway Berhad, in this case, Astro seems to be more stable with its financial positions. It seems, that the public or investor community is pleased with the accomplishments of Astro. Both these companies have created a strong image within the market and have gained the hearts of consumers. It seems that both companies have a strong capital structure with Sunway being able to enjoy diversity and stability of earnings and cash flow while Astro receives strong demand from the investing community, both locally and outside Malaysia.

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7.0 REFERENCES

Astro (2013) Astro annual report 2013, Available at: http://www.astromalaysia.com.my/Portals/39/pdf/AMH-AR13-ENG.pdf (Accessed: 2 November 2014)

Sunway Berhad (2012) Sunway Berhad Annual Report, Available at: http://ir.chartnexus.com/sunway/doc/ar2012.pdf (Accessed: 2 November 2014) haymarket (2014) ASTRO MALAYSIA HOLDINGS BERHAD, Available at: http://www.casbaadirectory.com/regional/regional-mvpd-dth/astro-malaysia- holdings-berhad-s-783-c-19.html (Accessed: 2 November 2014)

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Astro (2014) Company Background, Available at: http://www.astromalaysia.com.my/AboutUs.aspx (Accessed: 4 November 2014)

Bloomberg Businessweek (2014) Sunway Bhd (SWB:Kuala Lumpur), Available at: http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp? ticker=SWB:MK (Accessed: 4 November 2014) markets.ft (2014) Astro Malaysia Holdings Bhd: Institutional shareholders, Available at: http://markets.ft.com/research/Markets/Tearsheets/Business-profile? s=ASTRO:KLS (Accessed: 5 November 2014)

Astro (2013) ASTRO DOUBLE DIGIT REVENUE GROWTH; PAYS DIVIDENDS, Available at: http://www.astro.com.my/mediaroom/articles/art_12410.html (Accessed: 5 November 2014)

The Star publications (2014) Sunway Group posts RM1.5b in earnings in FY13, Available at: http://www.thestar.com.my/Business/Business- News/2014/02/27/Sunway-Group-posts-RM1pt5b-in-earnings-in-FY13/ (Accessed: 7 November 2014)

Astro (2013) 3rd quarter FY14 results, Available at: http://www.astromalaysia.com.my/Portals/39/pdf/AMH-3QFY14-analyst-presentation- UPLOAD.pdf

TAM Holdings Berhad (2013) RAM Ratings assigns A2/P1 ratings to Sunway’s proposed debt issue, Available at: http://www.ram.com.my/pressReleaseView.aspx? ID=696a6945-3ea0-4fad-b5f3-7f4a745a5385 (Accessed: 9 November 2014)

Astro (2013) 2nd quarter FY14 results, Available at: http://www.astromalaysia.com.my/Portals/39/pdf/AMH-2QFY14-analyst-presentation- UPLOAD.pdf (Accessed: 7 November 2014)

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