Executive Master of Business Administration (Singapore) · electronics products. In 1982, Pertama Holdings was formed as an investment holding company and subsequently listed in the

U O B Financial and Management Accounting Module (07 02798) S t u d e n t I D N o . 1 0 6 7 4 1 3

© 2013 Adrian Chow All rights reserved Page | 1

Executive Master of Business Administration

(Singapore)

A Financial Analysis of Pertama Holdings Limited

Financial Statements

Submitted in part fulfilment of the requirements for:

Financial and Management Accounting Module (07 02798)

Submitted to: Mrs. Anne Ullathorne

Submitted by: Student ID No. 1067413

Word Count: 3120 words

Submission date: 25th October 2009



EXECUTIVE SUMMARY

The purpose of this report lies in conducting an analysis of the financial activities of

Pertama Holdings Limited for determining its suitability for investment or trading partner

and appraising the impact of an accounting policy on Pertama reported results.

Evaluation was conducted between Pertama appraisal of its performance (Chairman’s

Report) with findings that was revealed or implied from its financial statements and

performance of its peers (Challenger Technologies Limited). Financial ratios were

selected for analysis of financial statements as mentioned by Atrill (2008.p.182.) on its

usefulness “when comparing the financial health of different business as differences may

exist between businesses in the scale of operations”.

IAS 2 was selected as the accounting policy due to the importance of inventories in a

retail entity.

Limiting factors that surface in this report include shortage of listed companies that

matches Pertama in the size of its finance and operations, different adoption of

accounting policies and reporting timing of annual report and non disclosures of sensitive

information which impact the validity of the findings.

The major findings indicate weaknesses in Pertama business that was not revealed in the

Chairman’s statement. Despite the identified shortcomings, the company strengths in key

areas justify recommendation for investment or trading partners.

Pertama accounting policy for inventories are closely aligned to IAS 2 regulations which

lend credence to the reliability and relevancy of its financial reports.



TABLE OF CONTENTS PAGE

Introduction 4

1.0 Profile of Pertama Holdings Limited 4

2.0 Analysis of Pertama Financial Statements for Year 2009 5

2.1 Profitability Ratios

2.2 Liquidity Ratios

2.3 Asset Management Ratios

2.4 Financial Structure Ratios

2.5 Investor Ratios

3.0 Comparative Appraisal of Pertama and Challenger Performance 8

3.1 Comparison of Profitability Ratios

3.2 Comparison of Liquidity Ratios

3.3 Comparison of Asset Management Ratios

3.4 Comparison of Financial Structure Ratios

3.5 Comparison of Investor Ratios

4.0 Evaluation of Pertama Chairman’s Statement for Year 2009 11

5.0 Recommendations 12

6.0 Appraisal of Pertama Accounting Policy for Inventories 13

7.0 Conclusion 14

References

Appendices



Introduction

Pertama Holdings Limited was selected for this report as it fulfil the requirements of the

assignment of being a public limited company listed in Singapore Exchange, availability

and accessibility of published financial reports, avenues for data gathering which assist in

the feasibility, reliability and validity of this report.

1.0 Profile of Pertama Holdings Limited

Pertama started as a partnership for undertaking retailing and wholesaling of consumer

electronics products. In 1982, Pertama Holdings was formed as an investment holding

company and subsequently listed in the Singapore Exchange in 1992.

In 1999, Pertama Holdings became a subsidiary of Harvey Norman Ossia (Asia) Pte

Ltd.which is a joint venture company between Australia listed Harvey Norman Hldgs Ltd

and Singapore listed Ossia Intl Ltd.

Over the years, Pertama has embarked on an expansion strategy that culminates in 2009

of a total of 14 stores within Singapore and 6 stores in Malaysia. The principal activities of

its subsidiaries lies in the reselling of consumer electronics, furniture and bedding

products from vendors of established brands i.e. Sony, Acer, Tempur to walk in

customers at its stores. Pertama also operates an advertising and property investment

subsidiary (Eastern Audio Pte Ltd) and has ceased its export and wholesaling business in

2008.

Pertama operate in a monopolistic market that is fragmented by “bigger” firms i.e. Best

Denki, Courts, Challenger and numerous sole proprietors in a extremely competitive

market due to sharing of similar supplier’s base, “price cutting ” and difficulties of securing

of customers loyalties (Annex C)

The state of local economy has direct impact on the growth and revenue generation of

firms in the retail industry (http://app.mti.gov.sg/default.asp?id=745#6) as seen in the

slump in retail performance since end 2008.

Pertama products display high income elasticity due to its “luxury and high pricing ”

perception and revenue generation is subjected to the level of consumer disposable

income.

http://app.mti.gov.sg/default.asp?id=745#6



The management of Pertama possess strong entrepreneur and retail operations

experience which is a valuable asset for enhancing competiveness in a dynamic market

environment.

2.0 Analysis of Pertama Financial Statements for Year 2009

According to Tony Davies & Tony Boczko (2006 p.136) ratio analysis may be used “to

provide cross-sectional analysis and inter-firm comparison…..…more objective way to aid

decision making”. The findings derived from the schedule of Pertama 2009 financial ratios

(Annex A 1.0) are categorised as follows:

2.1 Profitability Ratios

For 2009, Pertama saw a 10.6% ($376.41m from $420.95m) drop in revenue, gross profit

($25.56m from $32.16m) and gross profit margin (6.8% from 7.6% ) despite lower cost of

sales ($$350.85m to $388.78m). This indicate the poor trading conditions from the onset

of recession in Singapore (Annex D) which was worsen by the cessation of Pertama

export and wholesaling business.

The company show resilience in achieving 2.2% PBIT margin that was contributed from

lower administrative expenses ($10.53m from $12.42m), recovery of bad debts ($0.32m)

and government grant of $0.5m for Jobs Credit Scheme (source:

http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-

116738.html. Net profit shows a slight increase of $6.69m from $6.63m from lower tax

expense ($1.64 from $3.35m) and a reduction in corporate tax rate (17% from 18%).

Significantly, Pertama has been able to lower “cost drivers” of personnel expenses

($27.56m from $28.8m) that form a major component of retailer’s expenses given the

labour intensive nature of the industry. However, the doubling of allowance for inventory

obsolescence ($0.83m to $1.55m) raise concerns as it indicate possibilities of inventories

not meeting customer’s demands, slow turning of inventories or excessive amounts of

obsolete or damaged stocks.

Asset turnover has fallen to 3.6 times which indicate poor investment opportunities or lack

of management efficiency in employing its capital for revenue and profit generation.

This can be seen by the increase of cash and cash equivalents to $77.45m which form

over 50% of current assets and the drop in inventories ($55.68m to $48.98m) which

http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-116738.htmli

http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-116738.htmli



served as the main driver of revenue generation. Non engagement of the “cash hoard”

raise concern given the low interest (0.1% to 2.94%) being earned coupled with the

absence of long term debt payments.

ROCE drop from 9.7% to 8% while ROE stagnant at 6.4% due to fall PBIT and

insignificant increase of and net profit ($6.69m from $6.63m). The figures indicate that

past investments of opening new stores in Singapore and Malaysia have not translated

materially into higher revenue or profits.

2.2 Liquidity Ratios

Pertama maintain high liquidity ratios for 2009 (current ratio 2.9, acid ratio 1.9) which was

contributed by the increase in cash and cash equivalents and lowering of inventories

level. The contributing factors lies in the nature of its business: a) proportion of

inventories as current assets due to reselling activities b) strong cash generation from

operation activities due to the short lead time between sales of goods and collection of

payments.

However, there is low rationale for Pertama in maintaining “over liquidity” given the lack of

long term debts and continuing inflow of cash from operations. The “excessive” liquidity

should be engaged on higher yielding initiatives.

2.3 Asset Management Ratios

The 51 days of inventory turnover significantly exceed the stated settlement terms of

30days due to trade payables (note 12.). This implied delay between cash outflow for

purchase of goods and cash inflow from selling of goods which arise from slow movement

of purchased goods and considerable amount of obsolescence goods ($1.55m in 2009,

note 7.). In addition, Pertama is not capitalising on supplier’s capital through selling off

purchased stocks before settlement date. Slow inventory turn raise concerns as

inventories obsolete at a fast pace due to the short life cycle of consumer electronics

products which will require expense of “write down” for selling purpose.

There is an improvement for debtor turnover (4.2 days from 7.6 days) with the reduction

of trade debtors ($4.36m from $8.75m) and a fall in doubtful debts ($2.87m from $8.75m).

This indicates a prudent and stringent approach in credit allowance for trade debtors for



minimising surfacing of bad debts, which is a sound strategy given the current economic

climate.

Creditor’s turnover at 27 days remains within the company’s 30 days terms (note 12.)

which indicate prompt payment of creditors while maximising credit facilities of creditors.

The main proportion of payables lies in stocks purchases from vendors for reselling

purpose. Pertama ability to pay within the defined trading terms increase its credit

worthiness, good suppliers relationship while adding strength during company

endeavours for trading terms or marketing support with suppliers.

2.4 Financial Structure Ratios

Pertama has no gearing and debt to equity ratios as it’s has been maintaining net cash

position in recent years. The lack of gearing cushions the company from downturns of

business cycle such as the present recession. The company has no long term debt and

investment has been self financed from its equity without a need for external borrowings

and financial risks.

The company cash flow remain healthy and has increased to 2.75 from 1.38 from lower

inventories and trade payables level which reduce the outflow of cash as it operate a

“cash business” with inventories that is being financed by vendor’s capital (30 days

payment period) with low trade debtors due to the COD (cash on delivery) terms for

customer’s purchase.

Pertama free cash flow has grown significantly to $20.69 from $7.24m due to higher cash

inflow from operations activities and lower cash outflow for investing activities ($2.18m

from $6.43m).

2.5 Investor Ratios

Earnings per share (EPS) have dropped due to lower profit available for shareholders

($6.69m from $7.37m). PE ratio has no significant changes at 8.9 due to low changes in

EPS coupled with non fluctuations of shares prices.

Pertama shares are thinly traded as only 11.16% of ordinary shares are held by public

investors (statistics of shareholdings 2009 annual report) with the balance being hold by

company and investment institutions which minimise drastic share price movements.



Despite a token improvement in net profit, Pertama has increased its dividend to

shareholders for a dividend yield of 9.7% against 8.4% in 2008 which arises from the

financial strength of the company, low liabilities and nil long term debts.

There is a slight drop in earnings yield to 1.1% from 12.1% due to lower EPS. However,

earnings yield is more attractive when compared alternative investment avenues such as

treasury bonds and bank interest.

3.0 Comparative Appraisal of Pertama and Challenger Performance

Gibson (1998 p.202.) point out “the analysis of an entity’s financial statements is more

meaningful if the results are compared with industry averages and with results of

competitors.”

Given the absence of exact entities that mirrors Pertama business profile such as size of

operation and products mixture; Challenger Technologies is selected for comparative

purpose as it shares sufficient similarities for higher validation.

However, the presence of different accounting policies such as valuation of inventories

(FIFO and weighted average) and differing reporting period (June and December) raise

reliability and distortion issues should 2009 be used for appraisal.

Hence, trend analysis is adopted as Aidan and Robin (2006 p.265) acknowledge it “made

the results easier to understand and interpret” of trends of both companies over 2006 to

2008 (2008 as base) on a “like to like” basis given similar operating timing.

The interpretations of findings from the schedules of ratios (Annex A 1.1 to A 1.5) are

elaborated as follows:

3.1 Comparison of Profitability Ratios

Both companies saw a trend of growing revenues due to expansion of retail business and

positive “filter effect” on retail trade from Singapore economic growth prior to the onset of

recession in end 2008 (Annex E).



Pertama out-performed Challenger in gross profit generation, however profit margin yield

is lower which may be contributed to the different product mix as Challenger do not sell

furniture and beddings and different business strategy such as focusing on high margin

products and avoidance of “price cutting” by Challenger ( Annex C).

Pertama post lower asset turnover as it conserve its capital in cash and cash equivalents

which form 50% of its current assets. The company focus on expansion of its retail

business without any investment in other non-related business unlike Challenger which

incur higher risk through deploying its working capital in quoted shares, acquisition of

non-core business of Incall Systems Pte Ltd, electronic signage services which has

translated to revenue of $3.58m in 2008 (source: note 5.&16. Challenger Technologies

Limited.2008 Annual Report p. 59. p. 68.).

From 2006 to 2008, Challenger has achieved higher ROCE against Pertama which

indicates its efficiency in engaging capital on sound investment opportunities for yields in

profits and revenues generation. Similarly, it’s higher ROE ratios demonstrate

management aptitude in leveraging on equity for maximising returns on shareholder’s

investment in the company without incurring debts from external borrowings.

3.2 Comparison of Liquidity Ratios

Pertama has relatively high liquidity level as compared to Challenger from its trend of it’s

“cash hoarding’ while maintaining low inventories and liabilities level unlike Challenger

trend of increasing inventories that correspond with increase of stores.

3.3 Comparison of Asset Management Ratios

Unlike Challenger, Pertama has seen an unhealthy trend of increasing days of its

inventory turnover which has exceeded its payment terms of 30days for purchased

goods. Products being sold by both companies have very short life cycle due to constant

introductions of newer models that were communicated to consumers through mass

media for selling objectives.

Goods that remained in the company after payment incur opportunity and economic costs

of “marked down “which will impact negatively on returns on capital, cash flow and profit

position of the company.



Pertama has improved significantly on its debtor’s turnover 7.6 days (2008) from 36 days

(2006) which translate to effective credit management and minimising of “equity leakage”

from non collection of debts.

Unlike Challenger, Pertama has been a good paymaster for suppliers, exceeding

payment due date for suppliers may erode both reputation and financial confidence of a

company as delays in payments will increase supplier’s debtors turnover ratios.

3.4 Comparison of Financial Structure Ratios

Both companies cash receipts have consistently exceed cash payments resulting in

positive cash flow while meeting all financial obligations. The lack of long term debts

lessen cash outflows resulting in good solvency level and permits both companies to

“self-finance” investments such as opening of new stores without occurring financial risks

from external borrowing.

In addition, both companies’ positive free cash have sustained their ability for good

dividends payout and gradual building of high cash reserves provide capital for

investment opportunities.

3.5 Comparison of Investor Ratios

Pertama has out-performed Challenger in EPS as it has not diluted shareholders “value”

by increasing its share base through issue of warrants as performed by Challenger in

2007 and 2008 (note 13.Challenger 2008 annual report p.64.).

Both companies’ shares are thinly traded due to low percentage being hold by public

investors (Pertama at 11.16%, Challenger at 21.94%) and generally are inactive shares

that do not display wide swings in price resulting in PE ratios range of 6% to 11% over

2006 to 2008.

Challenger pays out higher annual dividends per share due to the company distribution of

accumulated retained earnings to shareholders. In 2007 and 2008, dividends payout

exceeded net profit from operations ($7.3m: $7.1m, $5.5m: $5.3m) while growth in equity

arises from issuance of shares (Challenger 2008 annual report p.35.).



Over 3 years, Pertama mean earnings yield of 10.4% is relatively close to Challenger

mean yield of $13% when discounting the upsurges of its shares prices in 2006 and

2007.

In addition, Pertama was able to achieve this figure without diluting its share’s base and

equity. Both companies figures have out-perform yield from other investment institutions

such as treasury bills and bank deposits.

Pertama performance is on par with Challenger in liquidity, investors and financial

structure ratios. However, Pertama conservative approach in employing its capital has

lowered its ability for earnings and profit expansion. The company needs to review its

asset management strategies such as improving inventory turnover, ROCE for greater

efficiency of its substantial capital base.

4.0 Evaluation of Pertama Chairman’s Statement for Year 2009

The context of Pertama Chairman’s statement centered on the company adoption of a

“cautious approach” in business operations due to the negative implications of current

economic woes.

The statement provides superficial analysis of Pertama business for 2009 without detailed

qualitative reviews of weaknesses that have surfaced in this report.

Pertama has been badly affected by economic conditions both in Singapore and Malaysia

due to over emphasis on retailing activities.

The cessation of export business and lack of alternatives measures for its replacement,

nil cushioning of bad trading conditions from alternate business options will subject the

growth and profitability of Pertama to unpredictable health of the Singapore economy.

Gain in net profit lies from reduced tax expense and losses in Malaysia’s operations were

not disclosed (note 31.). Concrete reasons and plans for accumulation of $77.4m cash

hoard currently earning minimal interest was not provided which implied poor capital

management by the company.



Measures for overcoming continuing weaknesses of profit margin, PBIT, ROE, ROCE,

inventory turnover was not forthcoming in the statement. There was no comparison done

against competitors and industry results for validation of performance.

Pertama can afford move away from the “cautious stance” being adopted by companies

due to sound financial strength, nil long term debts, high liquidity level by seeking

opportunities in a recession period where “cash is king” for maximising returns for

shareholders and lowering of company vulnerabilities in a low growth competitive retail

industry.

5.0 Recommendations

Aidan and Robin (2006 p.247 – 248) claim lenders may be “sub-divided into…short- term

creditors, medium-term lenders and long term lenders”. Here, trading partners of

Prertama serve as “lenders of capital” through supplying goods on credit terms.

These lenders undertake financial risks in trading with Pertama and their key interest lies

in a) risk factor b) financial strength c) profitability and growth of trading d) solvency of the

company.

From the findings of this report, Pertama is recommended as a trading partner as its

business model is that of a “cash generating” company with sound financial strength,

continuing profitability of operations and good paymaster records. The nature of its

business being retailing requires constant supply of goods for reselling and its substantial

sales and expansion plans portend good growth of trading opportunities.

The continuing profitability contributes to high liquidity, substantial cash holdings and

absence of long term debts which will mitigate risk of non payments of supplied goods. In

addition, being a listed company that complies with Singapore Exchange requirements,

published reports of Pertama financial statements are readily available which will facilitate

trader’s measurement of its credit worthiness.

Pertama would be recommended for investors seeking attractive price shares that

provide stable dividend yields from a debt free, low risk company with strong financial



structure and conservative approach towards equity engagement. (Annex G). However,

speculative investors will be disappointed in “low fluctuations” of Pertama shares given its

thin trading and low amount of shares hold by public.

6.0 Appraisal of Pertama Accounting Policy for Inventories

IAS 2 (Annex H) deal with how an organization should value its inventories which give

credence for selecting Pertama accounting policy for inventories given its importance in

retailing and as noted by Tiffin (2004 p. 57.) “over (or under) valuing inventory affects the

balance sheet asset value...…also affects the related cost of sales, and thus profits by the

same amount.”

As per accruals concepts of recognizing costs as they are incurring, Pertama inventories

costs includes all costs in bringing the inventories to their present location, stated at the

lower of costs that are net of volume rebates and other inventory based incentives from

suppliers (notes 2.19.). Rebates are deducted from cost of inventory on goods that

remain unsold at end of financial year which will be reflected in the income statement

Atrill (2008 p. 54.) stressed “prudence convention requires the expected loss from future

sales be recognised immediately”. Allowance (note 3.) is made for Pertama deteriorated,

damaged, obsolete and slow-moving inventories for bringing the inventories to a saleable

condition for realising its net realisable value (NRV). Allowance is treated as an expense

in cost of sales of the income statement (note 7.) which will reduce net income and value

of inventories in the balance sheet.

Pertama determine its inventories though weighted average cost formula which according

to Aidan, Robin (2006 p. 129.) “made no assumption about the way in which goods flow

through the business and is more neutral”. Valuation method impact gross profit as cost

of sales will be different under different methods of inventory valuation. For example;

should Pertama adopt FIFO during period of inflation, its costs of goods will be lower as

the value of closing inventory is based on later purchases which will lift up gross profit for

the year and the higher costing purchases will be matched against the following year

revenues.



Pertama do not adopt this approach in “elevating” its profits due to adherence of the

consistency concept of uniformity of accounting treatment of items from one accounting

period to the next period.

Pertama inventories that are unsold at the end of the year is recognised as an asset and

carried forward under current assets in the balance sheet (note.7) in accordance to the

accruals and going concepts. The value of closing inventory is deducted from the cost of

sale in the income statement which will affect the gross profit margin that is reported for

the period, liquidity ratios and working capital of the business.

In addition, as per IAS 2, Pertama annual report disclose the accounting policies for

valuing its inventories, details of reversal of inventory write downs (note 3.) and amount of

inventories at NRV are classified in the relevant financial statements.

7.0 Conclusion

The analysis of Pertama financial statements surfaces weaknesses in its business

operations which do not dilute its attractiveness for investment or trading partner purpose.

The company demonstrates good accounting practices by abiding to accounting

treatment for valuing its inventories under IAS2 regulations.

Limiting factors identified is minimised through a review of Pertama non-financial

performance indicators as argue by Tony Davies and Tony Boczko (2006. pp. 172 – 173)

which “may give a more timely indication of the levels of performance achieved than do

financial ratios …..less susceptible to distortion”



References

1. Aidan Berry, Robin Jarvis. (2006) Accounting in a business context. 4th edn.

China: Cengage Learning. pp.109 –154.. pp.247-265.

2. Charles H. Gibson. (1998) Financial Statement Analysis. 7th edn. Ohio: South-

Western Publishing. pp. 202-207.

3. David Alexander, Anne Britton, Ann Jorissen. (2003) International Financial

Reporting and Analysis. 1st edn. Great Britain: Thomson Learning. pp. 121-145.

4. Pam Powell. Accounting, Analysis and Planning. Kent: Financial World Publishing.

ISBN 0-85297-614-3 pp. 227-251.

5. Peter Atrill, Eddie Mclaney. (2008) Accounting and Finance for Non – Specialist.

6th edn. London: Prentice Hall. p. 54 pp. 181 - 224.

6. Ralph Tiffin. (2004) The Complete Guide to International Financial Reporting

Standards Including IAS and Interpretation. London: Thorogood pp.57-61.

7. Robert Perks. (2007) financial accounting understanding and practice. 2nd edn.

Berkshire: McGraw-Hill. pp. 77-100.

8. Dr. Themin Suwardy, (2002) Financial Reporting in Singapore, Cases and

Readings. 2nd edn. Singapore: Pearson

9. Tony Davies, Tony Boczko. (2006) Principles of Accounting and Finance. 1st edn.

Berkshire: McGraw Hill. p.136 pp.

10. Pertama Holdings Limited. Annual Report 2009 pp. 1-73.

11. Challenger Technologies Limited . Annual Report pp. 1-112.

12. http://app.mti.gov.sg/default.asp?id=745#6

13. http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-

116738.html

14. http://www.business.gov.sg/EN/News/Sep2009/20090916singapore.htm

15. http://www.challenger.com.sg/

16. http://www.harveynorman.com.sg/

17. http://www.iasplus.com/dttpubs/pocket2009.pdf

18. http://www.inc.com/resources/retail/articles/200707/hurlbut.html

19. http://www.retailasiaonline.com/magazine/archive/2009/mag2009-01_story03.html

20. http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType=

ANN&symbol=PRTH.SI

21. http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType=

ANN&symbol=CHALbi.SI

22. http://www.theedgesingapore.com/component/content/8600.html?task=view

http://app.mti.gov.sg/default.asp?id=745#6

http://www.asiaone.com/print/Business/My%2BMoney/Opinion/Story/A1Story20090123-

http://www.business.gov.sg/EN/News/Sep2009/20090916singapore.htm

http://www.challenger.com.sg/

http://www.harveynorman.com.sg/

http://www.iasplus.com/dttpubs/pocket2009.pdf

http://www.inc.com/resources/retail/articles/200707/hurlbut.html

http://www.retailasiaonline.com/magazine/archive/2009/mag2009-01_story03.html

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType

http://www.theedgesingapore.com/component/content/8600.html?task=view



Appendices

A 1.0 Schedule of ratios calculations for Pertama Holdings Limited – Year end 30th June 2009

A 1.1 Schedule of comparative profitability ratio calculations for Pertama and Challenger (Year

2006 – 2009)

A 1.2 Schedule of comparative Liquidity ratios calculations for Pertama and Challenger (Year

2006 – 2009)

A1.3 Schedule of comparative Asset Management ratios calculations for Pertama and

Challenger (Year 2006 – 2009)

A 1.4 Schedule of comparative Financial Structure ratios calculations for Pertama and

Challenger (Year 2006 – 2009)

A 1.5 Schedule of comparative Investor ratios calculations for Pertama and Challenger (Year

2006 – 2009)

B Pertama Holdings Limited. Annual Report 2009 pp. 1-73

C Appendices C Commentary of retail business by Challenger Technologies Chairman

(THE EDGE SINGAPORE FEBRUARY 25, 2008)

D How are retailers in Singapore bearing up?

E Singapore Economic Indicators

F 1.0 Pertama Balance Sheet (Year 2006 to 2009)

F 1.1 Pertama Income Statement (Year 2006 to 2009)

F 1.2 Pertama Cash Flow Statement (Year 2006 to 2009)

F 1.3 Challenger Balance Sheet (Year 2006 to 2009

F 1.4 Challenger Income Statement (Year 2006 to 2009)

F 1.5 Challenger Cash Flow Statement (Year 2006 to 2009)

G Pertama Holdings: Undervalued retailer offers high dividend; recovery could spur growth

H IAS 2 (Inventories)



Appendix A 1.0. Schedule of ratios calculations for Pertama Holdings Limited – Year end 30th June 2009

NB Accounting Equation: Fixed assets + Current Assets – Current Liabilities = Ownership Interest + Long Term Loans

Year 2009 ($’000): 14,320 + 136,826 – 47,227 = 103,919

Year 2008 ($’000): 17,002 + 133,834 – 47539 = 103,297

RATIOS

FORMULA USED

FINANCIAL YEAR 2009 $’000 DETAIL OF CALCULATION

FINANCIAL YEAR 2008 $’000 DETAIL OF CALCULATION

PROFITABILITY RATIOS

Gross Profit

Revenue minus Cost of sales

376,413 – 350,853 = 25,560

420,953 – 388,784 = 32,169

Gross Profit Margin

Gross profit X 100% Revenue

25,560 X 100% = 6.8%

376,413

32,169 X 100% = 7.6%

420,953

PBIT Margin

Operating profit X 100% Revenue

8,345 X 100% = 2.2%

376,413

9,987 X 100% = 2.4%

420,953

Asset Turnover

Sales (or turnover) = number of times Capital employed

376,413 = 3.6 times

151,146 – 47,227

420,953 = 4.1 times

150,836 – 47,539

ROCE

Profit before interest and tax X 100% Capital employed

8,345 X 100% = 8%

151,146 – 47,227

9.987 X 100% = 9.7%

150,836 – 47,539

ROE

Profit after tax X 100% Net assets

6,699 X 100% = 6.4%

103,919

6,636 X 100% = 6.4%

103,297

LIQUIDITY RATIOS

Current Ratio

Current assets : Current liabilities

136,826 : 47,227 = 2.9 to 1

133,834 : 47,539 = 2.8 to 1



Quick Ratio

Current assets less stock : Current liabilities

87,838 : 47,227 = 1.9 to 1

78,145 : 47,539 = 1.6 to 1

ASSET MANAGEMENT RATIOS

Inventory Turnover

Average inventory X 365 days = number days of stocks Cost of sales

48,988 X 365 days = 51 days

350,853

55,689 X 365 days = 52 days

388,784

Debtor (Receivables) Turnover

Debtors X 365 days = x days outstanding Sales

4,368 X 365 days = 4.2 days

376,413

8,754 X 365 days = 7.6 days

420,953

Creditors (Payables) Turnover

Trade payables X 365 days = days of creditors unpaid Cost of sales

26,073 X 365 days = 27 days

350,853

24,807 X 365 days = 23 days

388,784

FINANCIAL STRUCTURE

Gearing

Prior charge capital ……. Total capital employed

0

0

Debt to equity

Debt X 100% Equity

0 0

Cash flow

Cash from operations Operating profit

22,921 = 2.75

8,345

13,772 = 1.38

9,987

Free cash flow

Operating cash from operation – Capital expenditure

22,921 – 2,230 = 20,691

13,772 – 6,530 = 7,242

INVESTOR RATIOS

Market price of share

25.0 cents (at 22

nd h June 2009)

25.5 cents (at 20

th June 2008)

EPS

Profit available for shareholders

6,699 = 2.80cents

7,373 = 3.08 cents



Number of shares issued

239,117

239,117

PE ratio

Market price of share EPS

25.0 cents = 8.9

2.80 cents

25.5 cents = 8.3

3.08 cents

Dividend yield

Annual dividend per share Market price of share

5811 / 239117 = 9.7%

25.0 cents

5109 / 239117 = 8.4%

25.5 cents

Earnings yield

EPS Market price of share

2.80 cents = 11.2%

25.0 cents

3.08 cents = 12.1%

25.5 cents

Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73

Share Price: http://www.reuters.com/finance/stocks/chart?symbol=PRTH.SI



Appendix A1.1 Schedule of comparative Profitability ratios calculations for Pertama and Challenger (Year 2006 – 2009)

Company Formula used Year 2008 ($’000) Year 2007 ($’000) Year 2006 ($’000) Pertama Gross profit


421 – 388.8 = 32.2

409.1 – 373 = 36.1

396.2–361.2 = 34.9

Challenger Gross profit


168 – 133 = 35

136.1–107.6 = 28.5

92.3 – 73.7 = 18.6

Pertama Gross profit margin


32.2 / 421 X 100% = 7.6%

36.1 / 409.1 X 100% = 8.8%

34.9 / 396.2 X 100% = 8.8%

Challenger Gross profit margin


35 / 168 X 100% = 20.8%

28.5 / 136.1 X 100% = 20.9%

18.6 / 92.3 X 100% = 20.2%

Pertama PBIT margin


10 / 421 X 100% = 2.4%

13.6 / 409.1 X 100% = 3.3%

11.9 / 396.2 X 100% = 3.0%

Challenger PBIT margin


7.2 / 168 X 100% = 4.3%

8.8 / 136.1 X 100% = 6.5%

6.1 / 92.3 X 100% = 6.6%

Pertama Asset turnover

Sales or turnover Capital employed

421 / (150.8 -47.5) = 4.1 times

409.1 / (161.1 -57.6) = 4.1 times

396.2 / (132.8 -38.5) = 4.2 times

Challenger Asset turnover

Sales or turnover Capital employed

168 / (46.7 -23.9) = 7.4 times

136.1 / (38.7 -16.4) = 6.1 times

92.3 / (26.5 -12.0) = 7.7 times

Pertama ROCE

PBIT X 100% Capital employed

10 / (150.8 -47.5) X 100% = 9.7%

13.6 / (161.1 -57.6) X 100% = 13.1 %

11.9 / (132.8 -38.5) X 100%= 12.6%

Challenger ROCE

PBIT X 100% Capital employed

7.2 / (46.7- 23.9) = 31.6%

8.8 / (38.7 -16.4) = 39.4%

6.1 / (26.5 -12.0) = 42.1%

Pertama ROE


6.6 / (150.8 -47.5) X 100% = 6.4%

10.4 / (161.1 -58.3) X 100% = 10.1 %

9.3 / (132.8 -38.5) X 100%= 9.9%

Challenger ROE


5.3 / (46.7- 24.7) = 24.1%

7.1 / (38.7 -16.8) = 32.4%

4.5 / (26.5 -12.5) = 32.1%

Data Source: Pertama Holdings Limited. Annual Report 2009 pp. 1-73, Challenger Technologies Limited . Annual Report pp. 1-112



Appendix A1.2 Schedule of comparative Liquidity ratios calculations for Pertama and Challenger (Year 2006 – 2009)

Company

Formula used

Year 2008 ($’000)

Year 2007 ($’000)

Year 2006 ($’000)

Pertama Current ratio


133.8 : 47.5 = 2.8 : 1

145.3 : 57.6 = 2.5 : 1

121.9 : 38.5 = 3.2 : 1

Challenger Current Ratio


39.6 : 23.9 = 1.6 : 1

32.9 : 16.4 = 2.0 : 1

22.2 : 12.0 = 1.8 : 1

Pertama Quick ratio


78.1 : 47.5 = 1.6 : 1

100 : 57.6 = 1.7 : 1

82.3 : 38.5 = 2.1 : 1

Challenger Quick ratio


30.4 : 23.9 = 1.3 : 1

24.7 : 16.4 = 1.5 : 1

15.0 : 12.0 = 1.3 : 1




Appendix A1.3 Schedule of comparative Asset Management ratios calculations for Pertama and Challenger (Year 2006 – 2009)

Company

Formula used

Year 2008 ($’000)

Year 2007 ($’000)

Year 2006 ($’000)

Pertama Inventory turnover

Average inventory divide cost of sales times 365 days

55.7 / 388.8 X 365 = 52 days

45.3 / 373.6 X 365 = 44 days

39.6 / 361.3 X 365 = 40 days

Challenger Inventory turnover

Average inventory divide cost of sales times 365 days

9.2 / 133.0 X 365 = 25 days

8.2 / 107.6 X 365 = 28 days

7.2 / 73.7 X 365 = 36 days

Pertama debtors turnover

Trade debtors divide by revenue times 365 days

8.8 / 421 X 365 = 7.6 days

32.8 / 409.1 X 365 = 29.3 days

32.9 / 396.2 X 365 = 30.3 days

Challenger debtors turnover

Trade debtors divide by revenue times 365 days

5.3 / 168 X 365 = 11.5 days

4.4 / 136.1 X 365 = 11.8 days

3.5 / 92.3 X 365 = 13.8 days

Pertama creditors turnover

Trade payables divide by revenue times 365 days

24.8 / 421 X 365 = 21.5 days

32.0 / 409.1 X 365 = 28.6 days

21.8 / 396.2 X 365 = 20.08 days

Challenger creditors turnover

Trade payables divide by revenue times 365 days

18.6 / 168 X 365 = 40.4 days

12.2 / 136.1 X 365 = 32.7 days

9.0 / 92.3 X 365 = 35.6 days




Appendix A1.4 Schedule of comparative Financial Structure ratios calculations for Pertama and Challenger (Year 2006 – 2009)

Company

Formula used

Year 2008 ($’000)

Year 2007 ($’000)

Year 2006 ($’000) Pertama Gearing


0

0

0

Challenger Gearing


0

0

0

Pertama Debt to equity

Debt X 100% Equity

0

0

0

Challenger Debt to equity

Debt X 100% Equity

0

0

0

Pertama Cash Flow

cash from operation divide operating profit

13.8 / 10 = 1.38

27.7 / 13.6 = 2.04

10.9 / 11.9 = 0.92

Challenger Cash Flow

cash from operation divide operating profit

14.6 / 7.2 = 2.02

10.7 / 8.8 = 1.22

8.4 / 6.1 = 1.38

Pertama Free cash flow

cash from operation minus capital expense

$13.8m -$6.5m =$7.3m

$27.7m -$8.5m =$19.2m

$10.9m -$2.8m =$8.1m

Challenger Free cash flow

cash from operation minus capital expense

$14.6m -$2.4m =$12.2m

$10.7m -$3.1m =$7.6m

$8.4m -$2.9m =$5.5m




Appendix A1.5 Schedule of comparative Investor ratios calculations for Pertama and Challenger (Year 2006 – 2009)

Company

Formula used

Year 2008 ($’000)

Year 2007($’000)

Year 2006 ($’000)

Pertama EPS

Profit available for shareholders Number of shares issued

3.10 cents

4.40 cents

3.90 cents

Challenger EPS

Profit available for shareholders Number of shares issued

2.40 cents

3.60 cents

2.50 cents

Pertama profit for shareholder

$7.4m

$10.6m

$9.3m

Challenger profit for shareholder

$5.3m

$7.1m

$4.5m

Pertama basic average shares

239.12

239.12m

239.12m

Challenger basic average shares

221.83

195.43

177.78

Pertama Share pricing at end of trading month (June )

25.5 cents

49.0 cents

39.0 cents

Pertama PE ratio


8.22

11.14

10.0

Challenger Share pricing at end of trading month (June)

26.50 cents

22.0 cents

18.0 cents



Challenger PE ratio


11.04

6.11

7.2

Pertama gross dividend – common stocks

5.1

4.8

3.1

Pertama dividend yield


2.4 = 9.4%

25.5

2.0 = 4.08%

49.0

1.3 = 3.33%

39.0

Challenger gross dividends – common stocks

5.5

7.3

4.0

Challenger dividend yield


2.4 = 9.1%

26.50

3.3 = 15%

22.0

2.2 = 12.22%

18.0

Pertama earnings yield


3.10 = 12.16%

25.5

4.40 = 8.98%

49.0

3.90 = 10.0%

39.0

Challenger earnings yield


2.40 = 9.06%

26.5

3.60 = 16.36%

22.0

2.50 = 13.89%

18.0


Pertama Share Price: http://www.reuters.com/finance/stocks/chart?symbol=PRTH.SI

Challenger Share Price: http://www.reuters.com/finance/stocks/chart?symbol=CHALbi.SI



Appendix C Commentary of retail business by Challenger Technologies Chairman (THE EDGE SINGAPORE FEBRUARY 25, 2008)



Appendix D How are retailers in Singapore bearing up?

Magazines Archives - 2009 January

How are retailers in Singapore bearing up? Story 3 - Focus

Unusually early festive sales and heightening competition signal tough times ahead for Singapore’s recession-hit retail sector. But retailers are seeing this as an opportunity for differentiation. Jolene Klassen finds out how some players are bracing themselves for the downturn.

A year ago, Singapore’s retail industry was riding high on the back of record tourist arrivals, with new attractions such as the Singapore Flyer observation wheel and the country’s inaugural Formula One Grand Prix night races being big draws.

The economy, then enjoying the decade’s lowest unemployment rate, was abuzz with activity as new mall projects were announced amid much anticipation over the citystate’s two integrated resorts under construction.

But, as the global financial downturn rippled through markets across the globe late last year, Singapore’s economy took a downward turn, with pensive government forecasts, which do not appear to be lifting anytime soon.

Visitor numbers last October fell by 8.1% from the year before while retail sales dipped by 3.6% year on year. According to a Nielsen study, the consumer sentiment in 2008 had also stumbled 10 points to 92 in a second double-digit drop for the year.

Predictably, the mood on the streets turned noticeably sombre last festive year-end. Even the colourful lights and Christmas trees did little to spread cheer, as consumers began to “squirrel away whatever spare cash they have”, says Lau Chuen Wei, executive director of Singapore Retailers Association (SRA).

“At the moment, with all this gloom and doom, people are just afraid to spend,” she observes.

Recessionary effects began to be felt in the shops when, for the first time last year, “retailers [came] up with offers and discounts a whole month before Christmas, doing their utmost to appeal to their customers and give them value buys”, says Lau.

Calling this a “rarity”, she explains that “retailers get their highest yields” from the period leading to Christmas right through to the New Year. This is one of two major peaks in Singapore’s retail cycle, the other being the Great Singapore Sale, Lau points out.

It seems the dreary outlook for the retail industry set in only in the latter part of 2008. Earlier, the industry was still enjoying the spillover effects of a 2007 that had “ended on a very high note”, before “news of the slowdown started creeping in around the middle of last year”, she says. The industry did not feel the effects of the global crisis until end-September to early-October. “All in all, we’ve had a pretty good nine months or so.”

Despite the slowdown, one perennial concern has remained little changed. “Rentals have been escalating,” Lau laments. “Even now, with the economic crisis, they have still not come down. The rate of increase has perhaps slowed somewhat, but has [yet to see] a downward trend.”

“The landlords will tell you that it’s a matter of market forces — ‘if the supply is there, the natural thing is that rentals will come down’. But, historically, we have not seen that happen.”

Real-estate specialist CB Richard Ellis’ latest ranking names Singapore the 17th most expensive shopping location globally, and sixth in the Asia- Pacific. The country’s rate of rental increases is the 22nd fastest in the world, with rents along Orchard Road going for US$455psf annually.

Another real-estate consultancy, Cushman & Wakefield, has also credited events like the launch of the ingapore Flyer and the three-day Formula One races for the spike in tourist arrivals, sustaining international retailers’ business and driving rentals. The number of tourists for the period the races were held had increased 30% over the same period last year.

With the spate of new malls coming up across the island-state at a time of poor economic outlook, it has been speculated that landlords may be compelled to lower their rents. But SRA’s Lau remains sceptical, maintaining that high retail rentals have been an issue among tenants “for the longest time”.

She encourages retailers to continue building their brands while standing their ground concerning rentals. “Maybe, in the current economic situation, the time has come for retailers — having taken more than they can stomach because their margins just would not let them push on any further — to have the upper hand [in rental negotiation],” she says.



Mall projects still on Despite the anticipation of a protracted slowdown, a number of new malls are slated to come on stream this year. Along Orchard Road alone, four developments are set to open, led by Far East Organization’s Orchard Central in the first quarter, followed in mid-2009 by ION Orchard, a joint venture between CapitaLand and Sun Hung Kai Properties, and Lend Lease Retail’s 313@Somerset at year-end, while The Meritus Mandarin Hotel’s Mandarin Gallery, now being revamped, is scheduled for completion this October.

On the city outskirts, City Development Ltd also aims to open City Square Mall, the country’s first ecomall, by the end of the year. Farther away in the heartlands, refurbishments and asset- nhancement projects are breathing new life into suburban properties. Wendy Low, general manager of Frasers Centrepoint Ltd, reveals: “Aside from the newlycompleted Northpoint extension [in Yishun], we will be completing assetenhancement works at the current Northpoint by early [next] quarter. The Frasers entrepoint Malls group will also be unveiling YewTee Point [this quarter] and a mall in Bedok in 2010.”

Unfazed by the number of new players, Low believes these new malls will “keep the industry on its toes” to the benefit of consumers. “Landlords and retailers will be challenged to work very closely to roll out more unique mall and retail concepts.

Shoppers will have more variety and hence choices. Furthermore, we have witnessed the growing popularity of suburban shopping destinations. Retailers have stretched themselves [to offer] differing concepts at the malls,” she adds.

This “makes for some good news”, bringing more excitement to the scene, Lau says, averring that differentiation remains the key to success in what is becoming an even more challenging

retail landscape. “Some [mall owners] are also saying that they will be bringing in foreign brands that have never been in Singapore before,” she reveals.

However, attempts at mall positioning are only the beginning of differentiation, as Lau warns: “At the end of the day, if landlords cannot get the tenants that ... match [their] niche, they will end up taking anybody who is ready to pay the rent to fill up that space.” This could result in “copycat” malls, which will reduce their appeal to shoppers.

Expansion continues, along with investment in training and technology Dubbing tourist dollars the “icing on the retail cake”, retailers have not forgotten that the bulk of their sales is generated by the domestic market.

In order to keep local consumer confidence from waning further, and at a time when other companies are retrenching staff to stay afloat, homegrown retail group NTUC FairPrice has announced that it plans to train and retrain its employees as well as proceed with the opening of two new stores — this in addition to its third hypermarket, opened last December at Jurong Point.

“The government has always pushed for training and re-training,” Lau acknowledges. Recently, the Singapore government has set aside S$600 million (US$406.43 million) for employers’ staff-training schemes. On top of that, the government has earmarked S$2.3 billion in loans for over 120,000 local companies to tide them over until after the recession.

Foreign retail groups, too, are taking the slowdown in stride and forging ahead. Isetan Scotts is sprucing up its men’s section to introduce labels by Mango and Croquis, while sportswear brand Nike opened its first 8,000sqf South-east Asian flagship duplex store at Wisma Atria last November. Meanwhile, technology providers are anticipating a busy year ahead for the retail industry, says Peter Robilliard, solution director, Asia-Pacific and Japan, Torex Retail Holdings Limited, a retail-solutions provider.“More and more retailers in Singapore are adopting global Tier-1 solutions. As these retailers become more competitive, they look at systems that can help run their business [with] more information to help them make better decisions quicker,” Robilliard reveals.

Maneesh Sah, marketing director, Asia-Pacific at Torex, adds that during recessionary times, retailers should focus not only on increasing sales by creating impulse buys, but also on sustaining customer$ loyalty to brands. “Retailers are not shying away from investing in technology, even in these times. It clearly means that, [far] from stopping their IT investments, retailers are using this downturn to implement technology, retain customers and increase customer loyalty,” Sah maintains, stressing the importance of using technology in the retail environment to further convert browsers into customers.

Lau affirms that, in terms of technology, Singapore is reputed for being a well-connected country. She adds: “To survive, retailers are by and large looking at what will contribute to the Industry players in Thailand now pin their 2009 retail-growth forecast at only 2%-3%, about half of the 4% expected to have een recorded for the year just ended. next dollar in sales and how they can contain costs.

“On the whole, a lot of Singaporeans still see shopping as ... more than just going out to buy something. It is a whole leisure activity to meet up with friends and be with the family. Just to trawl the shops, whether they buy or not, is something that Singaporeans still cling on to and enjoy doing.”

To view other stories, get a copy of Retail Asia. To subscribe, please download the subscription form from http://www.retailasiaonline.com/subscription.html

Source http://www.retailasiaonline.com/magazine/archive/2009/mag2009-01_story03.html

http://www.retailasiaonline.com/subscription.html



Appendix E Singapore Economic Indicators

Real Economic Growth

Share of GDP by Industry

Source: http://www.singstat.gov.sg/stats/charts/econ.html



Appendix F 1.0 Pertama Balance Sheet (Year 2006 to 2009)

Pertama Holdings Limited (PRTH.SI) (Stock Exchange of Singapore)

In Millions of Singapore Dollars

(except for per share items)

2009 2009-06-30

2008 2008-06-30

2007 2007-06-30

2006 2006-06-30

2005 2005-06-30 Restated

2006-06-30 Cash 36.4 37.7 36.4 9.6 7.7

Cash & Equivalents -- -- -- -- --

Short Term Investments 44.7 28.6 27.9 35.3 31.9

Cash and Short Term Investments 81.2 66.3 64.4 44.8 39.6

Accounts Receivable - Trade, Net 4.4 8.8 32.8 32.9 26.9

Notes Receivable - Short Term -- -- -- -- --

Receivables - Other 2.0 2.8 2.0 4.6 5.1

Total Receivables, Net 6.4 11.5 34.8 37.5 31.9

Total Inventory 49.0 55.7 45.3 39.6 51.1

Prepaid Expenses 0.2 0.3 0.9 -- --

Other Current Assets, Total -- -- -- -- --

Total Current Assets 136.8 133.8 145.3 121.9 122.7

Property/Plant/Equipment, Total - Gross 34.7 35.6 30.8 22.3 22.6

Accumulated Depreciation, Total (21.3) (19.2) (15.6) (12.5) (12.0)

Property/Plant/Equipment, Total - Net 13.4 16.4 15.2 9.8 10.6

Goodwill, Net -- -- -- -- --

Intangibles, Net -- -- -- -- --

Long Term Investments -- -- -- -- --

Note Receivable - Long Term -- -- -- -- --

Other Long Term Assets, Total 0.9 0.6 0.6 1.1 0.6

Other Assets, Total -- -- -- -- --

Total Assets 151.1 150.8 161.1 132.8 133.9

Accounts Payable 26.1 24.8 32.0 21.8 31.3

Payable/Accrued -- -- -- 13.3 10.9

Accrued Expenses 7.9 7.5 8.5 -- --

Notes Payable/Short Term Debt 0.0 0.0 0.0 0.0 0.0

Current Port. of LT Debt/Capital Leases -- -- -- -- --

Other Current liabilities, Total 13.3 15.3 17.1 3.4 2.9

Total Current Liabilities 47.2 47.5 57.6 38.5 45.2

Long Term Debt -- -- -- -- --

Capital Lease Obligations -- -- -- -- --

Total Long Term Debt 0.0 0.0 0.0 0.0 0.0

Total Debt 0.0 0.0 0.0 0.0 0.0

Deferred Income Tax -- -- -- -- --

Minority Interest 0.0 0.0 0.7 0.0 --

Other Liabilities, Total -- -- -- -- --

Total Liabilities 47.2 47.5 58.3 38.5 45.2

Redeemable Preferred Stock, Total -- -- -- -- --

Preferred Stock - Non Redeemable, Net -- -- -- -- --

Common Stock, Total 66.7 66.7 66.7 66.7 59.8

Additional Paid-In Capital 0.4 0.4 0.3 0.2 7.1

Retained Earnings (Accumulated Deficit) -- -- -- -- --

Treasury Stock - Common -- -- -- -- --

ESOP Debt Guarantee -- -- -- -- --

Unrealized Gain (Loss) 43.4 42.5 40.3 32.5 26.3

Other Equity, Total (6.6) (6.3) (4.5) (5.1) (4.4)

Total Equity 103.9 103.3 102.8 94.3 88.7

Total Liabilities & Shareholders' Equity 151.1 150.8 161.1 132.8 133.9

Shares Outs - Common Stock Primary Issue 239.12 239.12 239.12 239.12 239.12

Shares Outstanding - Common Issue 2 -- -- -- -- --



Total Common Shares Outstanding 239.12 239.12 239.12 239.12 239.12

Total Preferred Shares Outstanding -- -- -- -- --

DataSource:

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType=ANN&s

ymbol=PRTH.SI



Appendix F 1.1 Pertama Income Statement (Year 2006 to 2009)

Pertama Holdings Limited (PRTH.SI) (Stock Exchange of Singapore)

In Millions of Singapore Dollars (except for per share items)

2009 2009-06-30

Period Length 12 Months

2008 2008-06-30


2007 2007-06-30


2006 2006-06-30


2005 2005-06-30 Restated

2006-06-30 Period Length

12 Months

Revenue 376.4 421.0 409.1 396.2 393.3

Other Revenue, Total -- -- -- -- --

Total Revenue 376.4 421.0 409.1 396.2 393.3

Cost of Revenue, Total 350.9 388.8 373.0 361.3 355.2

Gross Profit 25.6 32.2 36.2 34.8 38.1

Selling/General/Admin. Expenses, Total 19.9 21.2 24.3 24.7 26.8

Research & Development -- -- -- -- --

Depreciation/Amortization -- -- -- -- --

Interest Expense, Net - Operating -- -- -- -- --

Interest/Investment Income - Operating (0.8) (1.4) (1.6) -- --

Interest Expense(Income) - Net Operating -- -- -- -- --

Unusual Expense (Income) -- -- -- -- --

Other Operating Expenses, Total (1.8) 2.5 (0.1) (1.8) (0.8)

Total Operating Expense 368.1 411.0 395.5 384.3 381.2

Operating Income 8.3 10.0 13.6 11.9 12.1

Interest Expense, Net Non-Operating -- -- -- -- --

Interest/Invest Income - Non-Operating -- -- -- -- --

Interest Income(Exp), Net Non-Operating -- -- -- -- --

Gain (Loss) on Sale of Assets -- -- -- -- --

Other, Net -- -- -- -- --

Net Income Before Taxes 8.3 10.0 13.6 11.9 12.1

Provision for Income Taxes 1.6 3.4 3.2 2.6 2.2

Net Income After Taxes 6.7 6.6 10.4 9.3 9.9

Minority Interest 0.0 0.7 0.2 0.0 --

Equity In Affiliates -- -- -- -- --

U.S. GAAP Adjustment -- -- -- -- --

Net Income Before Extra. Items 6.7 7.4 10.6 9.3 9.9

Accounting Change -- -- -- -- --

Discontinued Operations -- -- -- -- --

Extraordinary Item -- -- -- -- --

Tax on Extraordinary Items -- -- -- -- --

Net Income 6.7 7.4 10.6 9.3 9.9

Preferred Dividends -- -- -- -- --

General Partners' Distributions -- -- -- -- --

Miscellaneous Earnings Adjustment -- -- -- -- --

Pro Forma Adjustment -- -- -- -- --

Interest Adjustment - Primary EPS -- -- -- -- --

Income Available to Com Excl ExtraOrd 6.7 7.4 10.6 9.3 9.9

Income Available to Com Incl ExtraOrd 6.7 7.4 10.6 9.3 9.9

Basic Weighted Average Shares 239.12 239.12 239.12 239.12 239.12

Basic EPS Excluding Extraordinary Items 0.028 0.031 0.044 0.039 0.041

Basic EPS Including Extraordinary Items 0.028 0.031 0.044 0.039 0.041

Dilution Adjustment 0.0 0.0 0.0 -- --

Diluted Weighted Average Shares 239.12 239.88 239.47 239.12 239.12

Diluted EPS Excluding ExtraOrd Items 0.028 0.031 0.044 0.039 0.041

Diluted EPS Including ExtraOrd Items 0.028 0.031 0.044 0.039 0.041

DPS - Common Stock Primary Issue 0.021 0.024 0.020 0.013 0.014

Gross Dividends - Common Stock 5.8 5.1 4.8 3.1 2.2

Total Special Items 0.0 (0.1) 0.8 -- --

Normalized Income Before Taxes 8.4 9.9 14.4 11.9 12.1

Effect of Special Items on Income Taxes 0.0 (0.0) 0.2 -- --

Inc Tax Ex Impact of Sp Items 1.7 3.3 3.3 2.6 2.2

Normalized Income After Taxes 6.7 6.6 11.0 9.3 9.9

Normalized Inc. Avail to Com. 6.7 7.3 11.2 9.3 9.9

Basic Normalized EPS 0.028 0.031 0.047 0.039 0.041

Diluted Normalized EPS 0.028 0.031 0.047 0.039 0.041

DataSource:

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=CAS&perType=ANN&symbol=PRTH.SI



Appendix F 1.2 Pertama Cash Flow Statement (Year 2006 to 2009) Pertama Holdings Limited (PRTH.SI) (Stock Exchange of Singapore)


2009 2009-06-30


2008 2008-06-30


2007 2007-06-30


2006 2006-06-30


2005 2005-06-30

Reclassified 2006-06-30


Net Income/Starting Line 8.3 10.0 13.6 11.9 12.1

Depreciation/Depletion 5.1 5.1 3.6 3.3 2.8

Amortization -- -- -- -- --

Deferred Taxes -- -- -- -- --

Non-Cash Items 0.8 0.6 2.1 0.7 1.8

Changes in Working Capital 8.7 (1.8) 8.3 (4.9) 7.6

Cash from Operating Activities 22.9 13.8 27.7 10.9 24.2

Capital Expenditures (2.2) (6.5) (8.5) (2.8) (1.9)

Other Investing Cash Flow Items, Total 0.0 0.1 0.0 0.2 0.2

Cash from Investing Activities (2.2) (6.4) (8.5) (2.6) (1.7)

Financing Cash Flow Items -- -- -- -- --

Total Cash Dividends Paid (5.8) (5.1) (3.7) (3.1) (2.2)

Issuance (Retirement) of Stock, Net -- -- -- -- --

Issuance (Retirement) of Debt, Net -- -- -- -- --

Cash from Financing Activities (5.8) (5.1) (3.7) (3.1) (2.2)

Foreign Exchange Effects -- -- -- -- --

Net Change in Cash 14.9 2.2 15.5 5.2 20.3

DataSource:

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=CAS&perType=ANN&

symbol=PRTH.SI



Appendix F 1.3 Challenger Balance Sheet (Year 2006 to 2009)

Challenger Technologies Limited (CHALbi.SI) (Stock Exchange of Singapore)


2008 2008-12-31

2007 2007-12-31

2006 2006-12-31

2005 2005-12-31

2004 2004-12-31

Cash -- -- -- -- --

Cash & Equivalents 24.9 20.3 11.4 10.7 12.7

Short Term Investments -- -- -- -- --

Cash and Short Term Investments 24.9 20.3 11.4 10.7 12.7

Accounts Receivable - Trade, Net 1.7 2.7 2.5 1.7 2.0

Notes Receivable - Short Term -- -- -- -- --

Receivables - Other 3.6 1.7 1.1 0.5 0.4

Total Receivables, Net 5.3 4.4 3.5 2.2 2.4

Total Inventory 9.2 8.2 7.2 6.5 6.0

Prepaid Expenses 0.1 0.1 0.1 0.1 0.0

Other Current Assets, Total -- -- -- -- --

Total Current Assets 39.6 32.9 22.2 19.5 21.2

Property/Plant/Equipment, Total - Gross 10.7 8.1 5.7 4.3 4.3

Accumulated Depreciation, Total (6.0) (3.7) (2.5) (3.2) (3.1)

Property/Plant/Equipment, Total - Net 4.7 4.5 3.1 1.1 1.2

Goodwill, Net -- -- -- -- 0.0

Intangibles, Net -- -- -- -- --

Long Term Investments 2.5 1.3 1.2 0.0 0.3

Note Receivable - Long Term -- -- -- -- --

Other Long Term Assets, Total -- -- 0.0 0.0 0.0

Other Assets, Total -- -- -- -- --

Total Assets 46.7 38.7 26.5 20.6 22.7

Accounts Payable -- -- -- -- --

Payable/Accrued 18.6 12.2 9.0 5.6 6.0

Accrued Expenses -- -- -- -- --

Notes Payable/Short Term Debt 0.0 0.0 0.0 0.0 0.9

Current Port. of LT Debt/Capital Leases -- -- 0.0 0.0 0.0

Other Current liabilities, Total 5.2 4.2 3.0 1.3 1.0

Total Current Liabilities 23.9 16.4 12.0 6.9 7.9

Long Term Debt -- -- -- -- --

Capital Lease Obligations -- -- 0.0 0.0 0.1

Total Long Term Debt 0.0 0.0 0.0 0.0 0.1

Total Debt 0.0 0.0 0.0 0.1 1.0

Deferred Income Tax 0.2 0.2 0.2 0.1 0.1

Minority Interest 0.2 0.0 0.0 0.0 0.0

Other Liabilities, Total 0.4 0.3 0.3 0.0 --

Total Liabilities 24.7 16.8 12.5 7.1 8.1

Redeemable Preferred Stock, Total -- -- -- -- --

Preferred Stock - Non Redeemable, Net -- -- -- -- --

Common Stock, Total 18.6 16.1 11.3 6.1 6.1

Additional Paid-In Capital 0.0 0.0 0.0 5.2 5.2

Retained Earnings (Accumulated Deficit) 3.0 5.7 2.7 2.2 3.3

Treasury Stock - Common -- -- -- -- --

ESOP Debt Guarantee -- -- -- -- --

Unrealized Gain (Loss) 0.4 -- -- -- --

Other Equity, Total (0.0) (0.0) (0.0) (0.0) (0.0)

Total Equity 22.1 21.8 14.0 13.5 14.6

Total Liabilities & Shareholders' Equity 46.7 38.7 26.5 20.6 22.7

Shares Outs - Common Stock Primary Issue 228.57 203.20 177.78 177.78 177.78




Total Common Shares Outstanding 228.57 203.20 177.78 177.78 177.78

Total Preferred Shares Outstanding -- -- -- -- --

DataSource:

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType=ANN&s

ymbol=CHALbi.SI



Appendix F 1.4 Challenger Income Statement (Year 2006 to 2009)


In Millions of Singapore Dollars

(except for per share items)

2008 2008-12-31


2007 2007-12-31


2006 2006-12-31



2005 2005-12-31


2004 2004-12-31


Revenue 168.0 136.1 92.3 77.5 75.5

Other Revenue, Total -- -- -- -- --

Total Revenue 168.0 136.1 92.3 77.5 75.5

Cost of Revenue, Total 133.0 107.6 73.7 62.2 61.0

Gross Profit 35.0 28.5 18.6 15.3 14.5

Selling/General/Admin. Expenses, Total 20.5 17.0 10.8 9.4 4.9

Research & Development -- -- -- -- --

Depreciation/Amortization 2.3 1.8 0.6 0.4 0.5

Interest Expense, Net - Operating -- -- -- -- --

Interest/Investment Income - Operating 2.3 (0.4) (0.0) -- --

Interest Expense(Income) - Net Operating -- -- -- -- --

Unusual Expense (Income) 1.4 0.0 0.2 -- --

Other Operating Expenses, Total 1.9 1.8 1.6 0.9 5.7

Total Operating Expense 161.4 127.9 86.7 73.0 72.1

Operating Income 6.6 8.2 5.6 4.5 3.4

Interest Expense, Net Non-Operating (0.0) (0.0) (0.0) (0.3) (0.1)

Interest/Invest Income - Non-Operating -- -- -- (0.1) 0.0

Interest Income(Exp), Net Non-Operating 0.6 0.6 0.4 0.4 0.4

Gain (Loss) on Sale of Assets -- -- -- -- --

Other, Net -- -- -- -- --

Net Income Before Taxes 7.2 8.8 6.1 4.6 3.7

Provision for Income Taxes 1.9 1.7 1.5 0.9 0.9

Net Income After Taxes 5.3 7.1 4.5 3.7 2.8

Minority Interest (0.1) 0.0 0.0 0.1 0.1

Equity In Affiliates -- -- -- -- --

U.S. GAAP Adjustment -- -- -- -- --

Net Income Before Extra. Items 5.3 7.1 4.5 3.8 2.9

Accounting Change -- -- -- -- --

Discontinued Operations -- -- -- -- --

Extraordinary Item -- -- -- -- --

Tax on Extraordinary Items -- -- -- -- --

Net Income 5.3 7.1 4.5 3.8 2.9

Preferred Dividends -- -- -- -- --

General Partners' Distributions -- -- -- -- --

Miscellaneous Earnings Adjustment -- -- -- -- --

Pro Forma Adjustment -- -- -- -- --

Interest Adjustment - Primary EPS -- -- -- -- --

Income Available to Com Excl ExtraOrd 5.3 7.1 4.5 3.8 2.9

Income Available to Com Incl ExtraOrd 5.3 7.1 4.5 3.8 2.9

Basic Weighted Average Shares 221.83 195.43 177.78 177.78 176.56

Basic EPS Excluding Extraordinary Items 0.024 0.036 0.025 0.021 0.016

Basic EPS Including Extraordinary Items 0.024 0.036 0.025 0.021 0.016

Dilution Adjustment -- 0.0 0.0 0.0 0.0

Diluted Weighted Average Shares 230.25 198.13 177.78 177.78 176.56

Diluted EPS Excluding ExtraOrd Items 0.023 0.036 0.025 0.021 0.016

Diluted EPS Including ExtraOrd Items 0.023 0.036 0.025 0.021 0.016

DPS - Common Stock Primary Issue 0.024 0.033 0.022 0.028 0.026

Gross Dividends - Common Stock 5.5 7.3 4.0 4.9 4.5

Total Special Items 2.8 0.1 0.2 0.0 0.0

Normalized Income Before Taxes 10.0 8.8 6.3 4.6 3.7

Effect of Special Items on Income Taxes 0.7 0.0 0.1 0.0 0.0

Inc Tax Ex Impact of Sp Items 2.6 1.7 1.6 0.9 0.9

Normalized Income After Taxes 7.4 7.1 4.7 3.7 2.8

Normalized Inc. Avail to Com. 7.4 7.1 4.7 3.8 2.9

Basic Normalized EPS 0.033 0.036 0.026 0.021 0.016

Diluted Normalized EPS 0.032 0.036 0.026 0.021 0.016

DataSource:

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=ANN&symbol=CHALbi.SI



Appendix F 1.5 Challenger Cash Flow Statement (Year 2006 to 2009)



2008 2008-12-31


2007 2007-12-31


2006 2006-12-31



2005 2005-12-31



2004 2004-12-31 Restated

2005-12-31 Period Length

12 Months

Net Income/Starting Line 7.2 8.8 6.1 3.7 2.8

Depreciation/Depletion 2.3 1.8 0.6 0.4 0.5

Amortization -- 0.0 0.0 0.0 0.0

Deferred Taxes -- -- -- -- --

Non-Cash Items 1.1 (0.6) (0.3) 0.7 1.1

Changes in Working Capital 4.0 0.8 1.9 (0.9) (1.3)

Cash from Operating Activities 14.6 10.7 8.4 3.9 3.2

Capital Expenditures (2.4) (3.1) (2.9) (0.4) (0.4)

Other Investing Cash Flow Items, Total (2.0) 0.6 (0.7) 0.2 (0.2)

Cash from Investing Activities (4.5) (2.6) (3.6) (0.2) (0.6)

Financing Cash Flow Items (0.0) (0.0) (0.0) 0.0 (0.8)

Total Cash Dividends Paid (8.0) (4.0) (4.0) (4.9) (0.9)

Issuance (Retirement) of Stock, Net 2.5 4.8 0.0 -- 7.4

Issuance (Retirement) of Debt, Net -- 0.0 (0.0) (0.3) 0.4

Cash from Financing Activities (5.5) 0.8 (4.0) (5.2) 6.1

Foreign Exchange Effects (0.0) 0.0 -- 0.0 (0.0)

Net Change in Cash 4.6 9.0 0.7 (1.5) 8.6

DataSource:

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=CAS&perType=ANN&

symbol=CHALbi.SI



Appendices G: Pertama Holdings: Undervalued retailer offers high dividend; recovery could spur growth

Pertama Holdings: Undervalued retailer offers high

dividend; recovery could spur growth

WRITTEN BY JOAN NG

MONDAY, 12 OCTOBER 2009 15:23

Shares of Pertama Holdings, operator of the electronics, appliances and furniture retailing chain Harvey

Norman, have outperformed the broad market this year, rising 67.3% to close at 38 cents last Thursday,

versus the Straits Times Index’s gain of 50.5%. And, the stock appears to have the potential to continue

delivering decent returns.

For starters, it appears to be attractively priced. At current levels, it is trading at 13.6 times its FY2009

earnings. The company also boasts a healthy balance sheet, with cash and cash equivalents of $77.5

million and zero debt, as at June 30. That cash pile is equivalent to 32.4 cents per share, just 14.7%

short of its current share price. Pertama’s net asset value is 43.5 cents per share. The company also pays

regular dividends. Last year, it paid out 2.45 cents per share, which works out to a yield of 6.4%, based

on its current share price. By comparison, the average yield of STI component stocks is about 3.3% now.

Pertama has been quietly building up its retailing business in Singapore and opening new stores in

Malaysia. It sells flat-screen televisions, laptops and netbooks, as well as furniture and bedding. And, the

company seems to have weathered the recession quite well. For the financial year to June 2009, its

revenue declined 10.6% to $376.4 million, while its earnings slipped 9.1% to $6.7 million. The primary

reason for the decline in revenue and earnings was the cessation of the company’s wholesale business,

according to a statement accompanying its financial results. Its core retailing business still managed to

deliver single-digit revenue growth, though, says Pertama’s managing director Angelo Augustus.

Image: Flat-screen TVs, which are increasingly more affordable, are selling well at Harvey Norman.

Credit: Samuel isaac Chua

The company has been expanding especially fast in Malaysia, where Augustus says “retail is growing very

nicely at a double-digit rate”.



Pertama has had a Harvey Norman store in Malaysia since 2003, but it began to expand rapidly in 2007,

opening five stores in two years. As a result of the initial cost of opening new stores and building up its

brand, Pertama’s Malaysian operations chalked up a pre-tax loss of $606,000 for FY2009. Augustus says

he is hopeful of the company breaking even in the current financial year. And, in the longer-term, he sees

its Malaysian operations helping to drive its growth, because of the country’s larger population and

plentiful retail space.

Source: Bloomberg

In Singapore, meanwhile, Pertama has ceased its unprofitable

export business, which resulted in profit before tax for this

segment rising 5.1% y-o-y, to $9 million from $8.5 million

previously. As Singapore’s economy recovers, Pertama’s sales

could get a lift. According to property consultancy DTZ, sales of

private homes here are likely to breach the record of 14,811

units sold in 2007. That could mean a flurry of shopping activity

by people wanting to furnish their new homes with appliances

like the latest flat-screen TV. On top of this, consumers who

held back on purchases last year because of the recession might soon have the confidence to begin

spending again. “Things like flat-screen TVs are also becoming more affordable and are now a must for

Singaporeans,” Augustus says.

Buying shares in Pertama is something of a challenge, though, because they are so tightly held. The

company’s parent in Australia, Harvey Norman Holdings, owns 60.7%. A further 17.3% is held by

London-listed Guinness Peat Group, an investment vehicle of New Zealand born businessman Sir

Ronald Brierley, who is known for tenaciously extracting value from his investments. Fund management

group Fidelity International holds 9.1%.

Investors in Pertama also face the risk of the company’s rental costs rising as an economic recovery takes

off. In 2007 and 2008, retail rents in Singapore surged as the economy crested, squeezing margins at

many retailers. A number of local Harvey Norman stores are located in malls that are part of the

CapitaLand group, which recently announced it would be spinning off its malls into a real-estate

investment trust. Also, there is the pressure of competition, which is particularly tough in the electronics

retail business, as price is often the major differentiator for consumers. Harvey Norman’s closest

competitors in Singapore are Best Denki and Courts, neither of which are listed.

Despite these potential stumbling blocks, however, shares in Pertama look like a bargain right now.

Patient investors can look forward to a steady dividend yield and the possibility of a steep re-rating, if it

succeeds in expanding in Malaysia and begins attracting analyst coverage.

Pertama Holdings: Undervalued retailer offers high dividend; recovery could spur growth

Monday, 12 October 2009 © 2009 - The Edge Singapore

Source http://www.theedgesingapore.com/component/content/8600.html?task=view

http://www.theedgesingapore.com/investing/investing-ideas/8600-pertama-holdings-undervalued-retailer-offers-high-dividend-recovery-could-spur-growth.html

http://www.theedgesingapore.com/



Appendix H IAS 2 (Inventories)

Source: http://www.iasplus.com/dttpubs/pocket2009.pdf

http://www.iasplus.com/dttpubs/pocket2009.pdf

Documents

Executive Master of Business Administration (Singapore) · electronics products. In 1982, Pertama Holdings was formed as an investment holding company and subsequently listed in the