Strategic Corporate Finance: Analysis of Axiata Group Berhad and Maxis Berhad

Strategic Corporate Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Part A..............................................................................................................................................3
Analysing the performance of the companies on the basis of Ratios..........................................3
Strategic Investment....................................................................................................................7
Corporate Governance.................................................................................................................7
CONCLUSION................................................................................................................................8
Part B.............................................................................................................................................8
1. Calculating the Weighted Average Cost of Capital (WACC) for J & J..................................8
2. Calculating the net present value and recommendations.......................................................10
3. Explaining the four different alternatives to cash dividend as the way of returning value to
the shareholders.........................................................................................................................11
REFERENCES................................................................................................................................1
APPENDICES.................................................................................................................................3

INTRODUCTION
Strategic corporate finance is concerned with managing the finances of the company with
the view to succeed by achieving the long term goals and objectives of the company and
maximization of the funds of the shareholders. This report will investigate the financial
performance of two companies namely, Axiata Group Berhad and Maxis Berhad operating in the
communication industry. Both the companies are listed companies on the FTSE Bursa Malaysia
KLCI Index. On the basis of ratio analysis, corporate governance and investment strategy a
report will be prepared for the Board of Directors through analysis and evaluation of the five-
year performance of both the companies.
Axiata Group Berhad is popularly known as Axiata. The former name of company is TM
International Berhad. It is a Malaysia based MNC operating largely in Asia as
telecommunications conglomerate. One of the largest wireless carriers in Malaysia. Maxis
Berhad or Maxis Communications is a Malaysian service provider of communication services.
The company is one of the biggest and oldest company in telecommunications sector in
Malaysia.
MAIN BODY
Part A
Analysing the performance of the companies on the basis of Ratios
Liquidity Ratio
Liquidity Ratio calculates the ability of the company to make the payment for its debt
when they become due (Haralayya, 2022). This ratio tells the quickness of a company in
converting its current assets into cash so that the short term liabilities can be paid off on timely
basis.
2021 2020 2019 2018 2017
current ratio Axiata Group Berhad 0.61 0.69 0.39 0.67 0.65
MAXIS BERHAD 0.48 0.63 0.53 0.59 0.57
Quick Ratio Axiata Group Berhad 0.60 0.68 0.39 0.66 0.64
MAXIS BERHAD 0.43 0.57 0.50 0.55 0.37

The two liquidity ratios calculated are current ratio and quick ratio. The current ratio of
Axiata Group Berhad is 0.61 for the year 2021. The company had the lowest current ratio in the
year 2019. Expect year 2019 other four years shows little variations in the current ratio. The
company’s current ratio rises in year 2018 slightly as compared to the year 2017. The reason
behind weak current ratio in the year 2019 is low current assets with the company against the
comparatively high current liabilities as compared to the other years. On an average the current
ratio of the company indicates that the company has 0.6 current asset against each of its short
term liability (INTEGRATED ANNUAL REPORTS. 2022). Liquidity ratios shows the cash
available with the company to pay for its current liabilities. Quick assets are calculated by
subtracting the inventories from the current assets. The immediate cash available with the
company to pay for its 1RM of short term liabilities is 0.60RM in the current year.
The current and quick ratios of Maxis Berhad fell in the year 2021 in comparison to
2020. Company has RM0.63 and RM0.57 worth of current and quick assets respectively against
1RM of its current liabilities in the year 2020 that declined to 0.48RM of current and 0.43RM of
quick assets in the year 2021. On an average the company has RM0.5 of current assets against
each of its liabilities.
The liquidity of Axiata Group Berhad is better in comparison to Maxis Berhad. This
indicates the better availability of short term assets with the company Axiata as compared to
Maxis to pay for its current liabilities when they arise.
Profitability Ratio
Profitability ratio are used as a tool to determine the ability of business in generating
earnings (Choi and et.al., 2018). Various types of expenses are compared with the sales by the
company to determine the profitability of the company.
2021 2020 2019 2018 2017
Operating Profit
Ratio Axiata Group Berhad 14.74% 10.31% 17.59% -9.99% 12.29%
MAXIS BERHAD 41.55% 41.62% 40.60% 40.25% 48.63%
Net Profit Ratio Axiata Group Berhad 4.93% 2.58% 7.38% -20.83% 4.76%
MAXIS BERHAD 14.21% 15.41% 16.31% 19.36% 25.20%