REVIEW OF THE FINANCIAL PERFORMANCE

Hup Seng Perusahaan Makanan ( M ) Sdn.Bhd has performed really strongly in our fiscal twelvemonth ended 31 December, 2008. Not merely the gross has surpassed the RM200 million grade for the first clip in HSIB ‘s history, net income before revenue enhancement hit a record high of RM21 million for the fiscal twelvemonth ended 31 December, 2008 increased from predating twelvemonth matching period of RM6 million by a brawny RM15 million or 250 % .

The Group ‘s record net income is respectable so, sing a challenging runing environment in which high cost force per unit areas are the order of the twenty-four hours in better portion of the twelvemonth. By maintaining close impulse with volatile motion of major stuff monetary values, the Group has quickly reacted with cost recovery exercises in February 2008 and once more in June 2008 to protect the border. Nevertheless, monetary values for most of the cardinal input stuffs were falling from historical high towards the terminal of 3rd one-fourth impacted by fright of planetary recession as a consequence of recognition crunch. The continued attempts to heighten operating efficiency within the Group have besides contributed greatly towards the bottom line of the twelvemonth, best of all time achieved in the Group ‘s history.

Gross rose by 14 % to RM220 million as compared with predating twelvemonth matching period of RM193 million amid a lower production volume. The addition was mostly due to selected monetary value accommodations necessitated by the steep additions in natural stuff costs.

The Group has no adoptions and has a hard currency balance of RM21 million as at the terminal of the fiscal twelvemonth. Net plus per portion stood at RM2.10 and net incomes per portion ( EPS ) improved significantly from 7.9 sen in 2007 to 26.8 sen.

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Background

Hup Seng Perusahaan Makanan ( M ) Sdn. Bhd. , established in 1958, has been a family name synonymous with quality biscuit fabrication. Today, it is one of Malaysia ‘s prima biscuit makers with many accumulated outstanding accomplishments. Through uninterrupted upgrading, our merchandises have been honoured with legion awards worldwide, taging of import mileposts for the company ‘s history. In acknowledgment of Hup Seng ‘s rigorous quality direction system, the company was awarded the esteemed MS ISO 9002 Quality System Certification from SIRIM in 1995 and upgraded to MS ISO 9001:2000 Quality System Certification in 2003.

In 2005, the Prime Minister Dato ‘ Seri Abdullah Badawi awarded Hup Seng with the Industry Product Excellence Award ( Eminent Product Performance Award ) . Bing responsible to consumers and continuing Malayan nutrient prestigiousness internationally, strict nutrient safety and hygienic control schemes are employed to guarantee safety and hygiene of merchandises. In mid-2007, Hup Seng was accorded with the HACCP ( Hazard Analysis Critical Control Points ) and BRC ( British Retail Consortium ) Certification. This has educated consumers on nutrient safety and hygiene and at the same clip fostered their assurance in Hup Seng ‘s merchandises.

With an international market coverage that spans Asia, Africa, Oceania, Europe and North America, Hup Seng ‘s merchandises have captured the Black Marias of consumers, immature and old in many corners of the universe. Henceforth, Hup Seng shall go on to upgrade, better and make new extremums of excellence.



Accomplishment

The subordinate, Hup Seng Perusahaan Makanan ( M ) Sdn Bhd. , was accredited with the Certification of HACCP ( Hazard Analysis Critical Control Point ) and BRC ( British RetailConsortium ) in Year 2008.

Corporate SOCIAL RESPONSIBILITY

The Group recognizes the importance of a corporate civilization that emphasizes good corporate societal duty. The Group is committed to play its function as a caring corporate citizen. In line with this, the Group has taken inaugural in doing parts toward the local community, for cases contributions to assorted schools and associations. In the workplace, the Group places high importance on safety, wellness and employees development. For illustration, a commission associating to workplace safety is set up to advance consciousness of safety in workplace. Assorted athleticss activities were organized for healthy and balanced working life style for employees besides promoting networking and socialising between co-workers and equal.

OUTLOOK AND PROSPECTS

Malaysia economic enlargement disappeared in 4th one-fourth 2008 and it hardly remained above H2O with a negligible growing of 0.1 % that led a full twelvemonth growing of 4.6 % as compared to 6.3 % of 2007. The slower growing was due to the declining planetary economic system that had caused a important bead in the state ‘s exports. The planetary economic system is acquiring more critical and all marks indicate deeper and drawn-out recession. Any betterment will hinge on the province of development in the US and other bigger economic systems in the universe. The state ‘s grossdomestic merchandise prognosis for this twelvemonth has been revised downwards to between -1 % and 1 % , from 3.5 % earlier. The direction expects 2009 to be another really ambitious twelvemonth for the Group in position of turning planetary economic uncertainness. In this environment, the Group ‘s scheme remains focused on merchandise and service quality, unflawed operation and cost control. At the same clip, the Group will go on to look for ways to prolong its competitory place while staying focused on operational efficiency so that satisfactory consequences are achieved in the approaching twelvemonth.

FIVE-YEAR GROUP FINANCIAL HIGHLIGHTS

2004 2005 2006 2007 2008Fiscal twelvemonth ended 31 December RM'000 RM'000 RM'000 RM'000 RM'000 Turnover 186,482 180,968 188,338 193,115 220,329 Net income After Tax 6,564 5,098 6,807 4,757 16,071 Net Net incomes Per Share 11 sen 8.5 sen 11.3sen 7.9sen 26.8 sen

Board ofA Directors

Keh ( Kerk ) Chu Koh

Keh ( Kerk ) Chu Koh, Malaysian aged 66, is the Chairman of the Company. He became a member of the Board of Directors on 4 October, 1991 and was appointed as the Managing Director on 3

August, 2000. Subsequently, he is redesignated as Chairman on 1 February, 2003. He was the Deputy Managing Director of Hup Seng Perusahaan Makanan ( M ) Sdn. Bhd. ( “ HSPM ” ) on 13 October, 1974 and so the Managing Director of the same on 1 April, 1977. He was appointed as the Deputy Managing Director on 21 April, 1977 and later the Vice Chairman of Hup Seng Hoon Yong Brothers Sdn. Bhd. ( “ HSHY ” ) on 1 January, 1990. He is the brother of Kuo Choo Song and Kerk Chiew Siong, and uncle of Kerk Chian Tung, Teo Lee Teck and Kerk Kar Han. His household relationship with stockholders of HSB Group Sdn. Bhd. ( major stockholder of Hup Seng Industries Berhad ( “ HSIB ” ) ) is disclosed in page 12 of this Annual Report. He does non hold any struggle of involvement with the Company except for certain recurrent related party minutess of gross or trading nature that is necessary for daily operations of the Group. He has no strong beliefs for any offenses over the past 10 old ages. As one of the laminitiss of Hup Seng Co. , he has about 50 old ages of experience in the biscuits industry. He plans the Group ‘s strategic concern development and production development which includes the installing of assorted production installations in the Group ‘s mill and heads the research and development squad which researches new assortments of biscuits. He contributed in obtaining the Certification of HACCP ( Hazard Analysis Critical Control Point ) & A ; BRC ( British Retail Consortium ) for HSPM in twelvemonth 2008, to guarantee that merchandise safety and quality are in line with planetary criterion. He travels abroad extensively to maintain abreast with the latest developments in the biscuits fabrication industry and to measure new market chances for the Group.

Kerk Chiew Siong

Kerk Chiew Siong, Malaysian aged 56, became a member of the Board of Directors on 4 October, 1991 and was appointed as an Executive Director on 3 August, 2000. His place as Executive

Director was redesignated to Non-Executive Director on 1 February, 2003. On 17 August, 2006, he so became the Non-Executive Vice Chairman of the Company. He was appointed as the Director of HSPM on 12 March, 1981 and so as an Executive Director on 1 January, 1990 before being redesignated as Vice Chairman on 1 February, 2003. He was a Director of HSHY on 15 February, 1988 and so became the Deputy Managing Director of the same on 1 January, 1990 before being redesignated as Executive Director on 1 February, 2003. He is the brother of Kuo Choo Song and Keh ( Kerk ) Chu Koh, and uncle of Kerk Chian Tung, Teo Lee Teck and Kerk Kar Han. His household relationship with stockholders of HSB Group Sdn. Bhd. ( major stockholder ofA ( HSIB ) is disclosed in page 12 of this Annual Report. He does non hold any struggle of involvement with the Company except for certain recurrent related party minutess of gross or trading nature that is necessary for daily operations of the Group. He has no strong beliefs for any offenses over the past 10 old ages. He has more than 33 old ages of experience in the fabrication and selling of biscuits. As caput of the Quality Assurance and Business Development Department, he is responsible for inventing schemes for market development and researching the potencies of the Group ‘s merchandises in bing every bit good as new markets. He besides ensures the Group ‘s biscuits fabricating quality control system meets the MS ISO9001:2000 demands.

Kuo Choo Song

Kuo Choo Song, Malaysian aged 77, is the Pull offing Director of the Company. He became a member of the Board of Directors on 4 October, 1991 and was appointed as the Executive Chairman of the Company on 3 August, 2000. Subsequently, he is redesignated as Managing Director in HSIB on 1 February, 2003. He had been a member of the Audit Committee until 12 December, 2007. He was appointed as the Managing Director of HSPM on 13 October, 1974 and as the Chairman of the same since 1 April, 1977. He was later redesignated as Vice Chairman of HSPM on 1 February, 2003. He has been the Chairman of HSHY since 21 April, 1977. He has over 50 old ages of experience in the biscuits industry at direction and board degrees. He is one of the laminitiss of Hup Seng Co. which was established in 1958 and later became HSPM in 1974. He is the senior brother of Keh ( Kerk ) Chu Koh and Kerk Chiew Siong, and uncle of Kerk Chian Tung, Teo Lee Teck and Kerk Kar Han. His household relationship with stockholders of HSB Group Sdn. Bhd. ( major stockholder of HSIB ) is disclosed

in page 12 of this Annual Report. He does non hold any struggle of involvement with the Company except for certain recurrent related party minutess of gross or trading nature that is necessary for daily operations of the Group. He has no strong beliefs for any offenses over the past 10 old ages. His occupation duties include be aftering the Hup Seng Group ‘s concern development plans and stand foring the Group at assorted external maps.

Other are:Kerk Chian Tung( Executive Director ) ,Teo Lee Teck( Non-Executive Director ) ,Kerk Kar Han( Non-Executive Director ), Woon Chin Chan( Independent Non-Executive Director ) ,Norita Binti Ja’afar( Independent Non-Executive Director ) ,Mazrina Binti Arifin( Independent Non-Executive Director ) ,Raja Khairul Anuar Bin Raja Mokhtar( Non-Executive Director ) andWee Hoe Soon @ Gooi Hoe Soon( Alternate Director to Woon Chin Chan ) .

Distribution Network

Besides the domestic market, We besides export our merchandises to over 40 states in Asia, Europe, America, Africa, Mid-Asia & A ; etc.

We are proud of our record in constructing profitable and successful concern in the most demanding and competitory of international markets. Our challenge lies in pitching to run into the hereafter demands of the markets we serve.

PRICE/EARNINGS RATIO

The price/earnings ratio is a step of the monetary value paid for a portion comparative to the one-year net income or net income earned by the house per portion. In twelvemonth 2004, the price/earnings ratio for Hup Seng Industries Berhad is 0.13 times and additions by 0.05 times to 0.18 times in twelvemonth 2005. The price/earnings ratio decreases back to 0.13 times in twelvemonth 2006. However, the price/earnings ratio has been additions by 0.03 times once more to 0.16 times in 2007. In twelvemonth 2008, the price/earnings ratio lessenings aggressively by 0.12 times to 0.04 times merely. A higher price/earnings ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower price/earnings ratio.A Therefore, we notice that the stock in twelvemonth 2008 is the cheapest where the investor will pay less for each unit of net income.

PRICE/CASH FLOW RATIO

Price/cash flow ratio is a step of the market ‘s outlooks of a house ‘s future fiscal wellness. It is calculated by spliting the company ‘s market monetary value by the company ‘s operating hard currency flow per portion in the most recent financial twelvemonth. In twelvemonth 2004, the price/cash flow ratio for Hup Seng Industries Berhad is 18.90 times. During twelvemonth 2005, the price/cash flow additions by 1.65 times to 20.55 times. The ratio for 2006 is decreases by 0.95 times to 19.6 times. In twelvemonth 2007, the price/cash flow ratio is 13.21 times and lessenings by 3.66 times to 9.55 times in twelvemonth 2008. The lower a stock ‘s price/cash flow ratio, the better value that stock.

PRICE/ BOOK VALUE RATIO

The price/book value ratio is provides an appraisal of how investors view the house ‘s public presentation. It is calculated by spliting company ‘s market monetary value by the company ‘s stockholders ‘ equity per portion. Firms expected to gain high returns relative to their hazard typically sell at higher price/book value ratio multiples. In twelvemonth 2004, the price/book value ratio for Hup Seng Industries Berhad is 1.15 times and increases to 1.21 times by 0.06 times in twelvemonth 2005. It is decrease by 0.11 times to 1.1 times in twelvemonth 2006. Then, the price/book value ratio is decreases once more to 0.98 times in twelvemonth 2007. After that, it decreases once more to 0.87 times in twelvemonth 2008. The higher the ratio, the higher the premium the market is willing to pay for the company above its difficult assets.

PRICE/SALES RATIO

The price/sales ratio is a rating metric for stocks. It used to find the value of a stock relation to its past public presentation. It may besides be used to find comparative rating of a sector or the market as a whole. It is calculated by spliting the company ‘s market monetary value by the company ‘s gross per portion in the most recent financial twelvemonth. The price/sales ratio of Hup Seng Industries Berhad for twelvemonth 2004 is 8.75 times. In twelvemonth 2005, it rises up to 9.79 times with additions by 1.04 times. In twelvemonth 2006, it decreases by 0.41 times to 9.38 times. After that, the price/sales ratio lessening aggressively by 2.54 times to 6.84 times in twelvemonth 2007 and decreases once more to 5.39 times in twelvemonth 2008. A low price/sales ratio is normally thought to be a better investing since the investor is paying less for each unit of gross revenues.

Prognosis For Year 2009

After we estimated for the growing of 7 % for twelvemonth 2009, we can do the prognosis market value for twelvemonth 2009. In twelvemonth 2009, we expect that the price/earnings ratio still maintain with 0.04 times which has the same times with twelvemonth 2008. As a consequence, the expected market value will diminish to RM1.10. Therefore, we expect the investors still paying less for each unit of net income, so the stock will go cheaper. For the price/cash flow ratio, we expect that it will diminish by 0.63 times to 8.92 times. As a consequence, the expected market value will diminish to RM1.10. Thus, the lower of stock ‘s price/cash flow ratio give the better value that stock in twelvemonth 2009. For the price/book value ratio, we estimate that it will diminish by 0.05 times to 0.82 times which will diminish to RM1.10 in the market value in twelvemonth 2009. So we estimate that it has the lower premium that market is willing to pay for Hup Seng above its difficult assets. For the price/sales ratio, we expect that it will diminish by 0.35 times to 5.04 times. As a consequence, the expected market value will diminish to RM1.10. Therefore, it seem that it will be a better investing chance in twelvemonth 2009 for investors.

Other Ratios Analysis Of Hup Seng Industries Berhad

2004 2005 2006 2007 2008Leverage Ratios: Interest Burden 1.00 times 1.00 times 1.00 times 1.00 times 1.00 times Leverage 1.01 times 1.01 times 1.01 times 1.01 times 1.01 times Compound Leverage Factor 1.01 times 1.01 times 1.01 times 1.01 times 1.01 times Liquidity Ratios: Current Ratio 36.73 times 14.03 times 13.46 times 14.55 times 16.72 times Quick Ratio 36.73 times 14.03 times 13.46 times 14.55 times 16.72 times Cash Ratio 36.28 times 13.99 times 13.39 times 14.47 times 16.69 times Profitability Ratios: Return On Assetss 9.57 % 9.25 % 8.59 % 11.35 % 13.39 % Return On Equity 6.87 % 6.08 % 6.17 % 8.32 % 9.97 % Profit border 77.43 % 75.74 % 73.89 % 79.97 % 81.92 %

Comparison With Competitor ( Hwa Tai Industries Berhad )

Hwa Tai Industries Berhad is our strong rival, so we compare our company with them through ratio analysis which are the ratio as table below:

Hup Seng Industries Berhad Hwa Tai Industries Berhad( Year 2008 ) ( Year 2008 ) Price/Earnings Ratio 0.04 times ( 1.12 ) times Price/Cash Flow Ratio 9.55 times ( 7.84 ) times Price/Book Value Ratio 0.87 times 1.28 times Price/Sales Ratio 5.39 times 0.33 times

Since Hwa Tai Industries Berhad has net loss, so we can non compare the price/earnings ratio of our company with it.

Harmonizing to statement of hard currency flow in Hwa Tai Industries Berhad, we notice that hard currency escape is more than hard currency influx which indicate negative in net hard currency flow. Therefore, we fail to do comparing among these two company.

A The higher the price/book value ratio, the higher the premium the market is willing to pay for the company above its difficult assets. A low ratio may signal a good investing chance, so Hup Seng Industries Berhad has a better investing chance to investors because the ratio is merely 0.87 times which is lower than Hwa Tai Industries Berhad that is 1.28 times of ratio.

The price/sales ratio is one of the tools that will assist investors find which class a stock is in and assist them to do an informed investing determination. The lower the price/sales ratio, the better the investing chance. Based on the tabular array above, it shows that Hwa Tai Industries Berhad has a better investing chance to investors because it has the lower price/sales ratio than Hup Seng Industries Berhad.

As a conclude, a smart investor will put in Hup Seng Industries Berhad to gain more net income because Hup Seng Industries Berhad has high net incomes per portion which will give investors higher return. Besides that, Hup Seng Industries Berhad besides has positive net hard currency flow which the hard currency influx is greater than the hard currency escape. As a consequence, the increasing of dependability of investors towards Hup Seng Industries Berhad will promote investors to put in this company.

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