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. Astro 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). 1 BM056-3-5.2-FMGT Individual Assignment Asian Pacific University TABLE OF CONTENTS Executive Summary.........................................................................................................................1 1.0 Introduction................................................................................................................................3 1.1 Astro Malaysia Holdings 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 2 BM056-3-5.2-FMGT Individual Assignment Asian Pacific University 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 Technology Park Malaysia. 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: Kuala Lumpur) 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. 4 BM056-3-5.2-FMGT Individual Assignment Asian Pacific University 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. 5 BM056-3-5.2-FMGT Individual Assignment Asian Pacific University 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,