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GROUP MEMBER’S NAME
219349 NURUL SYAFIQAH BINTI ABDUL RAHIM
219662 NORASEKIN BINTI NASRI
219767 NUR ATHIRAH BINTI MOHD RANI
220585 MOHD SALAHUDDIN BIN SHAHRUN
221582 SITI JAMALIAH BINTI MOHD DAUD
Background
~Founded on 1980~Listed on Bursa Malaysia : 1982
~Malaysia and Indonesia (joint
ventures)~Collaborated with
DuPont
~Founder: Dato’Seri Di Raja Tan Sri Mohd
Zahidi bin Hj Zainuddin
~Main activities : oil palm plantation.
~operating segment :Plantation, property,
biotechnology
~Exported to more than 150 countries including China, European Union, Pakistan, India, United Stated, Egypt
and Japan
Sources of Financial Risk
Liquidity Risk
Will occur when the
company may not be able to
meet short term financial
demands.
Market Risk:Also called systematic risk ,risk that
movements in the level of currencies exposure, interest rate instruments, commodities and stocks or equity,
Credit Risk: Debtors failed to pay interest or not able to pay the principal according to
the terms that have been specified in a credit agreement.
Operational Risk:Company
have make some failure in systems
and processes in the
operation4 Risk
1. Liquidity Risk
~Earlier warning that
involve counterparty
into the experience emergency demand for
fund that are too large to make when
the time out.
Minimise mismatch financial assets and liabilities.
~ company not faced risk by borrowing. But can be seen
through total capital(sum of total equity and total
debt)
~Maintaining good level of cash and
cash equivalents appropriate to expected
cash flow and
operating environmen
t.
Using prudent liquidity risk
management
Cont’d
Financial asset 2010 2011 2012 2013 2014
Total equity 659,445 927,094 764,572 647,722 709,386
Total debt 13,838 16,013 22,137 21,131 19,444
Total capital 673,283 943,107 786,709 668,853 728,830
(To know value of financial health)~ Total equity higher than total debt.
~ Financial in good condition : enough cash to cover debt.
~ Company used equity (long term) : raise capital from shareholder.
Higher total capital compare than others year.
If deficit:1. Borrow capital
from creditors.2. Issues shares
2. Credit Risk
• Genting faced the higher probability for credit risk is from amounts due to– subsidiaries – income fund – cash & cash equivalents– deposit with banks and other financial institution.
• Does not hold any colleteral from creditors
External risk (exposed to the weather and climate conditions)malaysia face heavy flooding espicially at Coast East
region at the end of 2014 (November – December)
Month Palm Oil Production (Million
Tonnes)
Changes in production
November 2014 1.75 -
December 2014 1.4 -20%
3. Operational Risk
News paper cutting..
Legal Risk ( 2 collective agreement)Collaboration with Dupon
Joint venture in Indonesia
1. Commodity Price ExposureTable : Palm Oil Prices in Malaysian Ringgit
(Sources : World Bank)
Month Price Change
Oct 2010 2,899.61 -
Feb 2011 3,801.50 0.27%
Jun 2011 3,259.74 -5.37%
Oct 2011 2,871.57 -6.66%
Feb 2012 3,169.18 -0.20%
Jun 2012 2,948.91 -7.62%
Oct 2012 2,348.56 -13.32%
Feb 2013 2,454.82 3.99%
Jun 2013 2,402.72 4.33%
Oct 2013 2,424.16 2.83%
Feb 2014 2,685.65 5.68%
Jun 2014 2,441.38 -5.54%
Oct 2014 2,200.55 4.08%
Feb-15 2,280.18 -0.96%
Jun-15 2,267.38 4.63%
oct-15 2,268.64 8.92%
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Oct-15
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
Palm Oil Prices
Price (RM)M
alay
sian
Ring
git p
er M
etric
Ton
4. Market Risk
2. Market Volatility
graph: Levered and Unlvered Beta of Genting Plantations Berhad (Source from Infinancial 2015)
1-Year 2-Year 3-Year 5-Year
Levered beta 0.91 0.91 0.99 0.820000000000001
Unlevered beta 0.93 0.92 1 0.830000000000001
0.10.30.50.70.91.1
Levered and Unlevered
Beta
Levered : refer to as equity beta (with financial leverage)
Unlevered : beta of a company without any debt
Levered beta = 0.91 + 0.91 + 0.99 + 0.82 / 4= 0.91
Unlevered beta = 0.93 + 0.92 + 1.00 + 0.83 / 4 = 0.92
The beta is very close to 1
3. Global crisis– market risk are exposed to the global crisis (sub-
prime asset) (begining at mid 2007)– the global crisis impact the Malaysia through the
rapid decrease in global demand on trade, production and investment activities in the domestic economy.
The Effect financial risk management based on financial performance
2010 2011 2012 2013 20140
10
20
30
40
50
60
7.22
10.3614.58
12.8
48.87
7.2
10.3414.53
12.78
48.84
6.498.61 8.35000000000001
7.86
12.03
Comparison Liquidity ratio and Financial performance
Current ratio(times)Quick ratio (times)ROA( %)
1. Liquidity Risk
2010 2011 2012 2013 20140
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
112,989 93,495 78,665 88,94128,468
654,151
923,453
757,550
642,480 670,554
Comparison Financial Liabilities (< 1 year) with cash and cash equivalents
Financial liabilities (RM '000)Cash and cash equivalents (RM '000)
2. Credit risk
2010 2011 2012 2013 20140
2
4
6
8
10
12
14
3.78 3.172.29 2.47 0.88
3.93 3.28 2.35 2.53
0.89
6.49
8.61 8.35000000000001 7.86
12.03
Comparison leverage ratio and financial performance
Debt ratio(%)Debt to equity (%)ROA(%)
3. 0perational Risk
Year Operating Income (Rm Billion)Spread Between Operating Income
And Mean2010 0.23 (0.11)2011 0.33 (0.01)2012 0.30 (0.04)2013 0.31 (0.03)2014 0.53 0.19
total operating income 1.70mean (X) 0.34
Variance = 0.0102Standard deviation =0.101Business risk =0.3 (lower risk )
2010 2011 2012 2013 2014
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
Business risk
operating income (RM billion)spread between operating income and meanmean(0.34)
4. Market RiskYear Consumer Price
Index (2010=100)
Jan-10 99.4Jul-10 100.0Jan-11 101.8Jul-11 103.4Jan-12 104.5Jul-12 104.8Jan-13 105.5Jul-13 106.9Jan-14 109.5Jul-14 110.3Jan-15 110.6Jul-15 11.3
(Source: Bank Negara Malaysia)
CPI
Jan-10
Jul-1
0Jan
-11Ju
l-11Jan
-12Ju
l-12Jan
-13Ju
l-13Jan
-14Ju
l-14Jan
-15Ju
l-15
90.0
95.0
100.0
105.0
110.0
115.0
120.0
Consumer Price Index 2010=100
Consumer Price Index 2010=100
• In other to manage their risk. Genting Plantation berhad has taken this three derivatives instrument which is:
– interest rate swaps, – interest rate capped libor-in-arrears swap – Forward Foreign Currency Exchange.
Genting Plantation Risk Management
• they should balance their integration of external control which is social, ethical economic and environment to make their risk or unexpected situation can be manage well .
• the cost of the risk can be occur if they do not take it seriously.• they have the sustainable palm oil certification. Like Carbon Certification
System and International Sustainability, encompassing ISCC EU.• Two of their Group`s oil palm estates in Malaysia already certified to Code
of Good Agriculture Practice which is Malaysian Palm Oil Board`s (MPOB).
• They also had been certified with the global standards for their environmental, safety, healthy and quality management systems. OHSAS18001:2007 Occupational Health and Safety management
System. ISO14001:2004 Environmental Management System ISO9001:2008 Quality Management Systems.
The Company Regulatory Standard
• they make their internal control and risk management with following the requirement under the Malaysia Code on Cooperate Governance (March 2012) for companies listed.
• They established a Risk and Business Continuity Management Committee (RBCMC).
• They adopt (CSA) Control Self-Assessment to formalize the risk management process.
• Genting Plantations BHD reporting their financial report with compliance to Financial Reporting Standard (FRS) 134: Interim Financial Reporting.
• 1 January 2014 they except for the adoption of new FRSs, amendments and IC Interpretations which is Amendments to FRS10, FRS12 and FRS127 is using for Investment entities, Amendments FRS 132 is for Offsetting Financial Disclosures for Non-Financial Assets, Amendments to FRS136 is for Novation of Derivatives and Continuation of Hedged Accounting. And last is IC interpretation 21, it is for Levies.
Cont..
Conclusion• recommendation and suggestion like, they should do the
cash flow forecasting that can help the company managing their future project well and can low the cost of the risk that can be occur.
• We also suggest them for investing in currency like doing hedged fund. This can helps them to reduce the losses while doing transaction internationally.
• Moreover, we also suggest them to invest in regions where the currency is pegged to the dollar. It is because they have lots of investments in foreign securities, to ensure they have investments in a basket of regions, rather than in just one region.