Corporate Finance and Analysis of Petronas Gas Berhad Company

RUNNIGN HEAD: Corporate Finance 1
Name of the student
Topic- Corporate finance and analysis
University Name-

Corporate Finance 2
Table of Contents
Introduction...........................................................................................................................................2
Brief description of company.............................................................................................................3
Group structure of Petronas Gas Berhad Compan............................................................................3
Stakeholder’s wealth maximization.......................................................................................................4
Importance of wealth maximization..................................................................................................4
Risk minimization model....................................................................................................................4
Analysis of Stakeholders model.........................................................................................................5
Importance of stakeholders...............................................................................................................7
Problems of reconciling the two models...........................................................................................7
Sources of finance available..................................................................................................................8
Possible consideration was undertaken by management.....................................................................9
Discussion of weighted average cost of capital and computation of the same...............................10
Implication of higher weighted average cost of capital on the investment decision.......................11
The main problem which may arise while computing weighted average cost of capital in general
firms................................................................................................................................................12
Problem which may arise while computing weighted average cost of capital................................12
Recommendation................................................................................................................................13
Conclusion...........................................................................................................................................14
References...........................................................................................................................................15

Corporate Finance 3
Introduction
With the changes in economic and complex business structure, each and every
organization has been using financial analysis tools to evaluate the financial performance,
availability of the sources of finance and use of capital budgeting tools. In this report,
Petronas Gas Berhad Company has been taken into consideration. This is the natural gas
distribution company which has been running its business on a domestic and international
level. This report has been prepared to evaluate the objective of Petronas Gas Berhad
Company related to wealth maximization and source of external finance available for the
company. In addition to this, weighted average cost of capital and other capital budgeting
technique has also been used to evaluate the available project for the company. This report
emphasizes upon the financial analysis for the effective welfare of stakeholders, raise funds
from the external sources and evaluating the same by using a weighted average cost of
capital.

Corporate Finance 4
Brief description of company
The Petronas Gas Berhad Company is natural gas distribution company headquartered
in Malaysia. It has several subsidiaries- Kimanis power sdn. Bhd. It was incorporated in 1983
and was listed on the main market of Bursa Malaysia security stock exchange. This company
has the strong brand image in market. Initially the company was wholly owned subsidiary of
Petronas and the biggest oil selling company in Malaysia. The company is performing well in
the oil and petroleum industry. However, the sales revenue of the company has increased to
MYR 4.58 billion in 2016 which is 5% higher than the last four year data. The gross income
of the company has also increased to MYR 2.07Billion in 2016. This amount reflects that
company has been performing well in the market and increasing the return on capital
employed in determined approach.
Source: (Yahoo finance, 2018)
Group structure of Petronas Gas Berhad Compan
It is a listed company in which CEO and managers take all the important decisions of
the organization. It is observed that company has been following decentralized business
functioning in which all the decisions are taken by the process manager and line mangers
(Hörisch, Freeman and Schaltegger, 2014).