Proton

Topics: Automotive industry, Profit margin, Campro engine Pages: 10 (3085 words) Published: May 1, 2014
Summary
The auto industry in Malaysia is closely linked to the history of Perusahaan Automobile Nasional Berhad (PROTON). PROTON was incorporated on MAY 7, 1983 to manufacture, assemble and sell motor vehicles and related products, including accessories, spare parts and other components. Proton produced the country’s first car, the Proton SAGA and it was commercially launched on 9th July 1985 by the then Malaysian Prime Minister, Tun Dr. Mahathir Mohamad, the brains behind the national concept. Converted to a public company on 22nd November 1990, it was publicly listed on the Kuala Lumpur Stok Exchange (KLSE) in March 26, 1992. At present the model line-up comprised of SAGA, ISWARA, WIRA, SATRIA, PERDANA, PUTRA, SATRIA GTI, JUARA, WAJA, ARENA, GEN-2, SAVVY, SATRIA NEO, PERSONA and most recently the EXORA. The main plant in Shah Alam with an area of 862,000 sq. meter was originally designed for a capacity of 80,000 units per year. Hence, in 2009, Proton had took major step when its former Executive Director had expressed his intention to partner with the Naza Group of Companies (Naza) in buying Khazanah’s 42.74% stake in Proton via DRM-HICOM to remain competitive in automotive industry. At the end year 2009, the liberalisation measures announced by the Malaysian Minister of Trade and Industry in the National Automotive Policy on 28 October 2009 presented Proton with a crossroad situation – either built on past successes towards a bright future or suffer decline through decision against intense competition. Then, a multinational auto giant had sensed opportunity in PROTON and Malaysia and approached consultant, Charted Accountant Saiful Alawi, to review PROTON and have to recommend whether an investment and/or should be choose.

Question 1
From a financial analysis perspective, has the proton management done a good job?

Ratio
2005
2006
2007
2008
2009
Return On Asset
Net income
Total assets
4916.9
8830.9
= 0.56
4908.7
8312.8
= 0.59
4291.7
6946.8
= 0.62
4476.2
7293.3
= 0.61
4153.9
7098.9
= 0.59
Debt to equity
Total debt
Total shareholders’ equity
2970.7
5860.2
= 0.51

2442.2
5870.6
= 0.42
1716.2
5230.6
= 0.33
1872.1
5421.2
= 0.36
1997.3
5101.6
= 0.39
Net profit margin
Net income
Sales
4916.9
8483.3
= 0.58
4908.7
7796.9
= 0.63
4291.7
4687.3
= 0.92
4476.2
5621.6
= 0.80
4153.9
6486.6
= 0.64
Current ratio
Current assets
Current liability
5026.5
2210.0
= 2.27
4431.0
2341.1
= 1.89
3165.5
1533.8
= 2.06
3446.1
1639.2
= 2.1
3404.6
1883.6
= 1.81
Table 1

Analysis of table 1:
First of all, Return on investment (ROA) figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. Also to evaluate the efficiency of an investment or to compare the efficiency of a number of different investment. The higher the ROA number, the better, because the company is earning more money on less investment. As table above, we can analyzed there is an increased in the ROA of Proton from 0.56 in 2005 to 0.61 in 2008, however there is a slight declined in its ROA during 2009 to 0.59 Then, for Debt to equity ratio indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been good in financing its growth with debt and vice versa. Based on the above result, we can notice that there is a reduction in the amount of debt used to finance Protons’ operations. This may reduce the risk of bankruptcy against Proton. After that, profit margin is a tool of a company's pricing strategies and how well it controls costs. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin. Therefore, from the above calculation, we can observe that Proton has an increase in profit margin by 0.34 from 0.58 in 2005 to 0.92 in 2007....
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