case Study : From Saga to Proton

Topics: Automotive industry, Debt, Leverage Pages: 7 (2002 words) Published: April 15, 2014
ACC 4291




Question 1
From a financial analyst perspective, has the proton management done a good job? Based on the financial performance of PROTON from 2005 till 2009, our observation from a financial analysis perspective showed that Proton management has not done a good job as far as financial performance is concern. The Key Financial Indicators (KFIs) covers measurements such as basic earnings per share, net assets per share; dividend paid as well as retained earnings carried forward. At a glimpse, almost all the KPI of Proton shows decrement throughout the years. Basic earnings per share (EPS) fluctuated vastly from 2005 to 2009. Proton recorded highest basic earnings per share of 80.6 in 2005. However, it can be observed that Proton faced severe problems by making loss in the shares, EPS of -107.3 in 2007 and EPS of -54.9 in 2009. Besides that, there is also a report with regards the net assets per share (NAPS). This net asset indicates the price at which shares are bought and sold, and represents company’s value per share. Based on the information given, we can see that the NAPS of Proton had deteriorated from 2008 to 2009. The decreasing rate of dividend paid to the shareholders simply means company did not do very well. Dividend was not paid in 2008 as Proton needs to recover from the huge loss they held in 2007. Furthermore, the Balance Sheet displayed that the total assets owned by company decreased gradually from 2005 (RM 8, 830.9) to 2009 (RM 7,098.9). Other than that, increment in inventories indicates that sales order because higher inventory indicates poor sales resulting in higher cost to be incurred thus leads to the reduction in sales volume. In conclusion, we hold the believe that Proton management had performed badly as portrayed by its deteriorating overall performance graph between the period in low basic earnings per share, low net assets per share, lower dividend paid to shareholders, low retained earnings carried forward, low total assets and high inventories count for the year 2009.

Question 2
What characteristics should a foreign partner have that will enable maximum synergies? Synergy by definition means the interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects. To enable synergy, the foreign partner should be able to tackle Proton’s existing weakness. For instance, PROTON's major problem would be quality control. The public usually complaint about the overall poor quality vehicles by PROTON over the years which indirectly affecting the financial result of the company, when its sales dwindled tremendously and continuously losing market share and which subsequently eroded the profit margin of the company. Therefore, a foreign partner that is known for its excellent quality of products would be a leap to induce a positive perception of Proton among the consumers which can help boost its revenues. Next, a foreign partnership with expertise and economies of scale is necessary which can encourage the sustainability of Proton. Since it has registered net loss for 2007 and 2009 indicating high cost that could not be covered with sufficient revenue generation, it’s very much clear that Proton lacks the efficiency in managing the cost, which leads to overall loss. To overcome this problem PROTON will need a partner that can help shoulder the exorbitant costs. Also, a foreign partner well known for its good reputation would be critical in order to elevate the already weak reputation of Proton among consumers. PROTON lacks an engine or platform to expand into the SUV and MPV markets, or the 2.0-litre and above segments. PROTON may need to collaborate with a foreign partner much in the way BMW and PSA Peugeot-Citroen are working together to develop new engines and technologies....
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