Bursa Malaysia - 7214
Bloomberg - ARNK:MK
Yahoo - 7214 .kl
Webpage - https://www.arank.com.my/
Webpage - https://www.arank.com.my/
Sector : Industrial Products and Services
Sub Sector : Metals
Focus : Aluminium
Focus : Aluminium
ARANK is principally involved in manufacturing and marketing of aluminium billets. ARANK is currently the largest manufacturer and supplier of aluminium billets in Malaysia and one of Asia’s leading suppliers of aluminium extrusion billets.
Below is the revenue and operating margin of ARANK.
5 Years Annualise Growth of Revenue
10 Years Annualise Growth of Revenue
ARANK revenue had slow down for the past five year compare to the previous 10 years. Despite lower revenue ARANK operating margin had increase from around 2.5 % before 2016 to 3.5 % in 2019.
Bar Chart below shows ARANK nett profit from 2010 – 2019.
5 Years Annualise Growth of Nett Profit
10 Years Annualise Growth of Nett Profit
Year 2016 recorded the highest nett profit growth of 53 % mainly due to higher profit margin.
In 2017 ARANK had dispose 55 % of Hong Lee Group Sdn Bhd with a total cash consideration of RM 2,105,400 which ARANK had acquired in 2013.
Assets and Liabilities
ARANK asset grows over the period of 2010 to 2019. Besides that it liabilities also reduced over the period.
Prior 2014 there is no trade receivable past due. ARANK impaired all their trade receivable past due. Between 2015 to 2019 ARANK trade receivables past due is between 10% to 20 %.
There would be few financial ratios to be look at here:
1) Interest Coverage Ratio (Green Bar Chart)
2) Cash Ratio (Blue Line Chart)
3) Current Ratio (Red Line Chart)
1) Interest Coverage Ratio
Interest coverage ratio measure how capable the company pay off the existing debt. With an interest coverage ratio above one mean the earnings before interest & tax (EBIT) is able to pay of the full amount of the financial cost of the year.
ARANK had interest coverage ratio more than one for the past 10 years. In 2017 ARANK interest coverage ratio is at 35 which is the highest and drop to 12 in 2019.
2) Cash Ratio
As cash is the most liquid assets of the company, cash ratio is use to determine company ability to pay off short term liabilities using cash. Cash ratio above one indicates that company able to settle all current liabilities using available cash.
ARANK had low cash ratio from 2010 to 2018, however in 2019 the cash ratio is above 1 for the first time over the last ten years.
3) Current Ratio
Current ratio measures ability of the company to pay off short term obligation (current liabilities). Current ratio above one means the company able to pay off the current liabilities with current asset.
Despite low cash ratio, ARANK current ratio is above from 2011 onward.
Turnover in Days
Let look into three types of turn over as follow:
1) Inventory Turnover (Blue Line)
2) Trade Receivables Turnover (Red Line)
3) Trade Payable Turnover (Green Line)
1) Days Sales of Inventory
10 Years Days Sales of Inventory Median (days) – 28.23
ARANK days sales of inventory had increase from 26.55 days in 2010 to 44 day in 2018 before drop to 33. ARANK inventories had took longer time to sell out compared to 2010.
2) Trade Receivable Turnover (Days)
10 Years Trade Receivable Turnover (Days) – 24.36
ARANK trade receivable turn over had also increase from 10 days in 2010 to 24 days in 2019. ARANK took longer time to collect back the debt.
3) Trade Payable Turnover (Days)
10 Years Trade Payable Turnover (Days) – 4.33
ARANK had very low trade payable turnover which means it pay it debtor 6 times faster than collect back from creditors.
Per Share Analysis
1) Earnings per share (sen) (Blue Bar)
2) Dividend per share (sen) (Red Bar)
3) Net total assets per share (Green Line)
1) Earnings per share
Other thank year 2016 and year 2017 ARANK had quite consistence earning per share around 8 sen.
2) Dividends per share
ARANK had consistence dividend per year of 3 sen. ARANK had issue bonus shares twice over the past 10 years. 1:2 Bonus in year 2012 and 2:5 bonus in year 2019.
3) Net total assets per share
There is a significant drop in net asset per share in 2016 and 2017 due to impaired the goodwill of Hong Lee Group Sdn Bhd in 2016 and disposal of Hong Lee Group Sdn Bhd in 2017.
Some company paid high remuneration to director despite low profit. Let see how much is ARANK director’s remuneration in comparison to staff fee and operating profit.
There is slightly higher director remuneration expense in 2016 and 2017 where the nett profit of the companies is high.
Datuk Leow Chong Hwa, major shareholder of ARANK is also major shareholder of LBALUM and City Data Limited via his spouse.
ESOS and Warrant
Five years ESOS from 27 August 2018 until 26 August 2023 are granted to the eligible employees and director at 0.65.
As of 31st July 2019 ARANK granted 10,492,400 options to eligible director and employee. The option price had adjusted to 0.46 due to bonus issue on 18 January 2019.
ARANK had no material ligation as of 30th April 2020.
Return on Equity
Return of equity can be calculated through Du Point Analysis which uses:
- Net Profit Margin to measure operating efficiency, how much money gets out from its revenue
- Asset Turn Over to measure asset efficiency, how effective the company make use of its asset
- Equity Multiplier measure of financial leverage.
5 Years Return on Equity Average
10 Years Return on Equity Average
ARANK equity multiplier had decrease over the period from 2010 to 2019. While asset turnover and net profit margin remain almost constant except in 2016 and 2017 which see increase in net profit margin which increase the return on equity to above 14 %.
Altman Z Score
Companies with Altman Z score < 1.8 is likely headed for bankruptcy while Z score > 3 is unlikely headed for bankruptcy.
ARANK Altman Z-Score above 3 hence unlikely to headed for bankruptcy.