FINANCIAL REVIEW - MyFinB · (6) Rate of Cost Growth (%) 47.07% N.A (3) Profit Before Tax Growth...

Report Sections:

1. Disclaimer p2

2. Financial Statements p3

3. Cashflow Statements p4

4. Enhanced Ratios p5

5. Key Findings p6

6. Cause-and-Effect Analysis p7

7. Corporate Developments p8

8. Liquidity Insights p9

9. Working Capital Analysis p10

10. Equity Market Indicators p11

11. Peer Comparisons p12

12. Sensitivity Analysis p13

13. Credit Risk Checklist (Phase 1 - 4) p14 - 17

14. Recommendations for the Business p18

15. Reference I - Financial Ratios Explanation p19

16. Reference II - How to Use the Report p20

Company: NEURO NADI GLOBAL SDN. BHD

Date of Report: 28 June 2019

Industry: Education

Currency: RM

Latest FY: 2018

Country: Malaysia

FINANCIALREVIEW(ULTIMATE +)

Copyright ©2019, MyFinB. No parts of this publication may be copied, duplicated or distributed without the consent of MyFinB.

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Copyright 2019 © MyFinB Holdings Pte Ltd Page 2 of 21

INCOME STATEMENT

BALANCE SHEET

RM 2018 2017 %Chg

FINANCIAL STATEMENTS

Gross Profit 14,919 14,295 4.4%

Operating Expenses (10,088) (9,513) -6.0%

Sales 17,532 16,711 4.9%

Cost of Sales (2,613) (2,416) -8.1%

Finance Cost (345) (260) -33.1%

Others Income / (Expense) 3,986 2,231 78.7%

Operating Profits 4,831 4,782 1.0%

Depreciation (2,340) (2,239) -4.5%

Profit After Tax 5,430 3,831 41.8%

RM 2018 2017 %Chg

Profit Before Tax 6,132 4,515 35.8%

Taxation (701) (684) -2.5%

Trade Debtors 3,803 3,827 -0.6%

Stocks 397 352 12.8%

Current Assets 5,981 5,918 1.1%

Cash 525 534 -1.7%

Property, Plant & Equipment 11,801 11,893 -0.8%

Other Investments 30,472 30,484 0.0%

Other CA 1,256 1,205 4.2%

Fixed Assets 42,273 42,376 -0.2%

Trade Creditors 399 3,591 -88.9%

Overdrafts - - N.A

Total Assets 48,254 48,294 -0.1%

Current Liabilities 8,293 9,272 -10.6%

Long Term Liabilities 10,307 10,809 -4.6%

Loans - 31 -100.0%

Short Term Loans 672 2,068 -67.5%

Other Current Liabilities 7,222 3,613 99.9%

Equity / Reserves 29,654 28,214 5.1%

Total Liabilities and Capital 48,254 48,295 -0.1%

Other Long Term Liabilities 10,307 10,778 -4.4%

Total Liabilities 18,600 20,081 -7.4%


Currency: RM % Change

Operating Activities:

35.8%

Adjustments

4.5%

N.A

Interest expenses / (income) 32.7%

Loss / (Gain) on foreign exchange, net N.A

Share of loss of associates -11.4%

Writebacks N.A

Reversal N.A

Others 16877.2%

Operating profit before working capital changes 2.2%

145.8%

-65.3%

N.A

N.A

-18.2%

N.A

N.A

-0.5%

Cash generated from operations 6.7%

Income tax paid -27.1%

12.1%

Investing Activities:

-59.0%

3.9%

Addition in Intangible Assets 335.7%

164.0%

-59.6%

Financing Activities:

7.8%

8.3%

8.0%

59.1%

849.9%

-107.0%

Effect of exchange rate changes in cash and cash equivalents -106.7%

Cash and cash equivalents at beginning of financial year 15.6%

-1.7%

Depreciation, Amortisation and Impairment $2,340 $2,239

Loss / (Gain) on disposal $0 $0

CASHFLOW STATEMENTS

2018 2017

Profit for the year $6,132 $4,515

Trade receivables -$195 -$562

Other receivables, deposits and prepayments $0 $0

Advances to suppliers $0

Trade payables $77 $94

$0 $0

Inventories -$59 -$24

$0 $0

-$1,935 -$11

$5,094 $4,985

-$1,787 -$2,017

$0 $0

Net Cash From Financing Activities -$4,009 -$422

Others -$11,020 -$6,926

Interest Paid -$380 -$351

$0

Net Cash From Operating Activities $5,955 $5,315

$0 $0

$345 $260

Other payables and accruals

Due to related party (trade)

Others

Interest received $16 $39

$61

Dividends -$5 -$5

Others

$6,563 $6,149

Purchase of Property, Plant and Equipment -$2,349 -$2,261

Net Cash From Investing Activities

Increase in Borrowings

Net (decrease) / increase in cash and cash

equivalents

$0 $0

$1,647 $1,656

-$1,951 -$4,832

$7,397 $6,860

Cash and cash equivalents at end of financial year $525 $534

-$608 -$834

-$4 $60

$1,506 -$2,352

-$4

$534 $462

-$1,124 -$258


% change

Profitability Ratio

-3.7%

35.1%

N.A

N.A

N.A

N.A

N.A

(8) Return on Assets Growth (%) N.A

41.9%

N.A

9.9%

5.0%

-7.0%

4.9%

13.0%

11.0%

9.9%

-68.0%

-69.5%

(20) Current Liability Ratio (%) -10.5%

(21) Total Liabilities-to-Equity Ratio (%) -11.9%

29.2%

(23) Total Liabilities Growth vs Sales Growth (%) N.A

-4.9%

0.31% N.A

17.19% 19.20%

Activity Ratio

(15) Current Ratio (x) 0.72 0.64

(17) Cash Ratio (x) 0.06 0.06

(16) Quick Ratio (x)

(7) Cost / Sales Growth (%) 2.27% N.A

(4) Profit Margin Growth (%) 8.05% N.A

(5) Rate of Sales Growth (%) 43.44% N.A

(6) Rate of Cost Growth (%) 47.07% N.A

(3) Profit Before Tax Growth (%) 10.94% N.A

RATIO 2018 2017

ENHANCED RATIOS

30.97% 22.92%

(1) Operating Margin (%) 27.56% 28.61%

(2) Net Profit Margin (After Tax) (%)

(12) Sales to Total Assets (%) 36.33% 34.60%

(14) Asset Efficiency (%) 36.32% 34.62%

(13) Sales to Inventory (%) 4416.12% 4747.44%

0.52 0.47

Leverage Ratio

(18) Debt to Assets (%) 1.39% 4.35%

(24) Equity Multiplier (x) 1.63 1.71

(19) Debt-Equity (%) 2.27% 7.44%

62.72% 71.17%

-47.70% N.A

(22) Return on Shareholders' Equity (%) 20.68% 16.00%

(9) Return on Assets (After Tax) (%) 11.25%

Liquidity Ratio

(11) Cash to Current Liabilities (%) 6.33% 5.76%

(10 ) Asset Growth (%) 7.64% N.A

7.93%


FINANCIAL PERFORMANCE & OPERATIONS

SHAREHOLDER VALUE CREATION

RISK LEVELSModerate level of short-term creditors/financing relative to asset base - slight dependency on creditor financing in the

short-term. The firm's total liability exposure was somewhat high relative to its shareholder equity level during the

period. Shareholder's funds could be inadequate to cover all of the firm's obligations. Overall sales growth

overwhelmingly outpaced the firm's total liability growth during the period. The firm's mode of expansion had been

driven by sales management and resulted to a faster sales growth compared to liability growth. There was increasing

demand for the goods and services of the firm which resulted in a fairly high level of revenue growth. The very good

performance of the firm was as a result of an effective pricing model and appropriate market strategies during the

period.

Airtel uses funds to cut debt and shore up its balance sheet at a time when the broader Indian telecom industry is

grappling with a price war triggered by the entry of Reliance Jio Infocomm Ltd. The reoffered yield of 3.889 per cent

represents a spread of 105 basis points over 10-year US Treasuries. Comes under Singtel's S$10 billion euro medium

term note programme, received interest worth US$2.85 billion.

As at 31 March 2018, the Group’s net debt was S$9.8 billion, 5% lower than a year ago. The Group’s net cash inflow

from operating activities for the year grew strongly by 12% to S$5.96 billion. The increase was mainly driven by

working capital movements and lower tax payments. Total liabilities decreased on the reduction in borrowings and

the release of net deferred gains of S$1.10 billion on past sales of infrastructure assets to NetLink Trust following the

disposal of an effective interest of 75.2% in NetLink Trust in July 2017. In Australia, we committed another A$1

billion in networks to improve and expand mobile coverage in rural and regional Australia.

KEY FINDINGS

The firm experienced a fairly high level of revenue growth - with an increasing demand for its goods and services. The

firm's operating costs have risen significantly. It could be facing challenges to contain the costs arising from industry-

wide drivers. The cost of generating additional revenue was slightly higher compared to the previous year. Profit

levels remained modest relative to sales. May not be adequately attractive for shareholders who may demand for

higher margins. Small decline in profit margins was experienced where this could signify increasing competition and

operational costs during the period.

Competition affected India’s Bharti Airtel and Indonesia’s PT Telekomunikasi Selular, leading to a 6.6% decline in its

regional associates’ overall profits. Singtel faces pressure to cut costs and find new sources of revenue - competitor

StarHub Ltd last year cut about 12 percent of its workforce. Its underlying net profit fell 22 percent in the second-

quarter, hit by a stronger Singapore dollar and intense competition in India.

Singtel delivered a record profit of S$5.45 billion for the year just ended, with the successful IPO of NetLink

Trust.However, underlying earnings declined 8%, largely the result of a decline in Airtel’s India earnings and charges

from increased network investments and spectrum. Overall, earnings remain resilient and we have made solid

progress on our digital transformation. Our digital businesses are building new revenue streams with ICT and digital

now accounting for nearly 25% of revenue. Our cyber-related revenues totalled S$530 million in FY 2018. Operating

revenue was S$17.53 billion, 4.9% higher than FY 2017, while EBITDA rose 1.8% to S$5.09 billion reflecting strong

customer gains in Australia and first time contribution from Turn (acquired by Amobee in April 2017). In constant

currency terms, operating revenue and EBITDA increased by 4.7% and 1.5% respectively.

The shareholders attained moderately average returns based on their investments during the period. Firm's underlying

valuation would likely be subdued during the period. The shareholder equity level of the firm was somewhat low

compared to its total liability exposure during the period. If the firm's shareholder funds are overwhelmed by its

liability levels, it could be faced with valuation risk. There was an average profitability growth experienced by the firm,

compared to the previous year. Profit levels remained modest relative to sales. May not be adequately attractive for

shareholders who may demand for higher margins.

Airtel Africa Limited, a subsidiary of Bharti Airtel Limited, has announced its potential intention to undertake an initial

public offering for listing its equity shares on London Stock Exchange. Telecom operator, is keen to expand beyond its

traditional carrier services into areas such as digital marketing, cybersecurity, mobile payments and video streaming

to India, the Philippines and Indonesia. Bought roughly $525 million worth Bharti Airtel stock as part of the Indian

telecoms operator’s plan to raise $4.6 billion through shares and bonds.

The Board is of the view that a dividend of 17.5 cents is sustainable for the next two financial years. Thereafter,

barring unforeseen circumstances, the Group will continue with the payout ratio of 60 to 75% of underlying net profit.

Amobee investment is showing green shoots, crossing S$1.1 billion in revenue as EBITDA turned positive for the first

time. Our long-term view on India’s prospects remains positive as we increased our effective stake in Airtel to 39.5%

last year. The associates’ pre-tax contributions declined 15% to S$2.46 billion on weaker earnings from Airtel India

and Telkomsel impacted by intense competition and mandated reduction in mobile termination charges in India, as

well as lower contribution from NetLink NBN Trust following the reduction in economic interest of 75.2% in July 2017.

The decline was partly mitigated by higher contribution from Intouch (acquired in November 2016).

From a top-line growth standpoint,

NEURO NADI GLOBAL SDN. BHD

registered higher revenues compared to

the previous period. Its profits improved

by 8.1% due to the surge in operational

expenses. Total costs grew at a faster

compared to sales, by 2.3%.

NEURO NADI GLOBAL SDN. BHD posted

ROE of 16.0% during the period, on the

back of equity of $29,654 (change of

5.1%) and profit of $5,430 (change of

41.8%.

Total liabilities decreased by 7.4% whilst

equity increased by 5.1%. Consequently,

debt to equity levels were manageable as

equity was sufficient to cover debt

obligations.

LOW GROWTH HIGH GROWTH

LOW ROE HIGH ROE

HIGH RISK LOW RISK


From a top-line growth standpoint, NEURO NADI GLOBAL SDN. BHD registered higher revenues compared to the previous period. Its profits

improved by 8.1% due to the surge in operational expenses. Total costs grew at a faster compared to sales, by 2.3%.

Revenue changes had been driven by the expansion of assets - NEURO NADI GLOBAL SDN. BHD increased its asset base by 7.6% with

recorded sales growth of 43.4%. In addition, ROA increased from 7.9% to 11.3% because of improvement in profits, likely due to the

increase in operational costs.

Competition affected India’s Bharti Airtel and Indonesia’s PT Telekomunikasi Selular, leading to a 6.6% decline in its regional associates’

overall profits. Singtel faces pressure to cut costs and find new sources of revenue - competitor StarHub Ltd last year cut about 12 percent

of its workforce. Its underlying net profit fell 22 percent in the second-quarter, hit by a stronger Singapore dollar and intense competition in

India.

Total liabilities decreased by 7.4% whilst equity increased by 5.1%. Consequently, debt to equity levels were manageable as equity was

sufficient to cover debt obligations.

Airtel uses funds to cut debt and shore up its balance sheet at a time when the broader Indian telecom industry is grappling with a price

war triggered by the entry of Reliance Jio Infocomm Ltd. The reoffered yield of 3.889 per cent represents a spread of 105 basis points over

10-year US Treasuries. Comes under Singtel's S$10 billion euro medium term note programme, received interest worth US$2.85 billion.

NEURO NADI GLOBAL SDN. BHD posted ROE of 16.0% during the period, on the back of equity of $29,654 (change of 5.1%) and profit of

$5,430 (change of 41.8%).

Airtel Africa Limited, a subsidiary of Bharti Airtel Limited, has announced its potential intention to undertake an initial public offering for

listing its equity shares on London Stock Exchange. Telecom operator, is keen to expand beyond its traditional carrier services into areas

such as digital marketing, cybersecurity, mobile payments and video streaming to India, the Philippines and Indonesia. Bought roughly $525

million worth Bharti Airtel stock as part of the Indian telecoms operator’s plan to raise $4.6 billion through shares and bonds.

CAUSE-AND-EFFECT ANALYSIS

47.1%

-2.3% 16.4% -4.3%

43.4% 7.6%

35.8%

SALES ASSETS

LIABILITIESEQUITYPROFIT MARGIN

GROWTH

COST GROWTH

LIABILITIES / EQUITY

60.3%

COSTS / SALES

2.3%

ROA

10.6%

PROFIT MARGIN

7.8%

ROE

17.0%

SALES / ASSETS

36.3%

LEGEND

Financial variable Ratios % Change YoY

PBT GROWTH (YoY)


BUSINESS PERFORMANCE & PRODUCTIVITY

Date

15/5/2019

14/5/2019

11/8/2018

SHAREHOLDERS VALUE

Date

29/5/2019

18/3/2019

3/7/2019

RISK & LIABILITIES

Date

3/7/2019

21/8/2018

Airtel raising a total of $4.6 billion

Airtel uses funds to cut debt and shore up its

balance sheet at a time when the broader Indian

telecom industry is grappling with a price war

triggered by the entry of Reliance Jio Infocomm

Ltd.

Liabilities/Equity

Singtel sells US$500m of 10-year bonds at

3.875% coupon; reoffered yield at 3.889%

The reoffered yield of 3.889 per cent represents

a spread of 105 basis points over 10-year US

Treasuries. Comes under Singtel's S$10 billion

euro medium term note programme, received

interest worth US$2.85 billion.

Liabilities/Equity

Singtel injects $525 mln in telco Airtel as

competition mounts in India

Bought roughly $525 million worth Bharti Airtel

stock as part of the Indian telecoms operator’s

plan to raise $4.6 billion through shares and

bonds.

Equity | Liabilities/Equity

Headline Key Causes Financial Variables

Singtel: Airtel Africa LSE IPO Registration

Document Submitted For Approval To The

UK Financial Conduct Authority.

Airtel Africa Limited, a subsidiary of Bharti Airtel

Limited, has announced its potential intention to

undertake an initial public offering for listing its

equity shares on London Stock Exchange.

Liabilities | Equity |

Liabilities/Equity

Singtel signs deal to expand mobile wallet

alliance to Japan

Telecom operator, is keen to expand beyond its

traditional carrier services into areas such as

digital marketing, cybersecurity, mobile

payments and video streaming to India, the

Philippines and Indonesia.

Sales | Profit margin | ROA |

Equity

Sales | Profit margin | ROA |

ROE

Cost growth | Cost/Sales

growth | Sales | Profit margin |

ROA | ROE

Profit margin | ROA | ROE

Headline Key Causes Financial Variables

CORPORATE DEVELOPMENTS

Headline

Regional competition takes bite out of

Singtel's Q1 profit

Singtel stumbles toward lowest profit in 16

years, faces cost pressure

Singtel Q2 underlying net profit drops 22 pct

Key Causes

Competition affected India’s Bharti Airtel and

Indonesia’s PT Telekomunikasi Selular, leading

to a 6.6% decline in its regional associates’

overall profits.

Singtel faces pressure to cut costs and find new

sources of revenue - competitor StarHub Ltd

last year cut about 12 percent of its workforce.

Its underlying net profit fell 22 percent in the

second-quarter, hit by a stronger Singapore

dollar and intense competition in India.

Financial Variables


Overall, the cashflow from investments

was negative, mainly due to an outflow in

purchases of property, plant and

equipments, and an outflow in addition in

intangible assets, at a value of $2,349 and

$1,124 respectively.

LIQUIDITY INSIGHTS

RM

Overall, the cashflow from finances was

negative, mainly due to an increase

position in borrowings. There was an

outflow of $5 coming from dividends, an

outflow of $380 from interest paid.

Overall, the cashflow from operations was

positive, mainly due to a profitable

position. There was an outflow of $195

coming from receivables, an inflow of $77

from payables and an outflow of $59 in

inventory.

Currency

CASHFLOW FROM OPERATIONS

CASHFLOW FROM FINANCING

CASHFLOW FROM INVESTMENTS

POSITIVE

NEGATIVE

NEGATIVE


HOW MUCH IS REQUIRED BY THE BUSINESS?

CREDIT TERMS (NO. OF DAYS) - 4 SCENARIOS 30 60 90 180

FUNDING AMOUNT REQUIRED (RM)

Accounts Receivables $ 25,421 $ 50,842 $ 76,263 $ 152,526

Inventory $ 15,253 $ 30,505 $ 45,758 $ 91,516

Accounts Payables $ 15,253 $ 30,505 $ 45,758 $ 91,516

Net Working Capital Requirement (Amount) $ 25,421 $ 50,842 $ 76,263 $ 152,526

RISK METRICS

Credit Score 7.1 Indicative Probability of Default 17.1%

Indicative Credit Migration (1-Tier Higher Risk) 14.6%

RECOMMENDED FINANCING AMOUNT

Indicative Recommended Credit Limit ($) Impact on L/E with additional financing

Net working capital requirement was tabulated based on an assumption of 30, 60, 90 and 180 credit terms and inventory days to turnaround the sales.

+ Accounts receivables = Credit days X Daily revenue

+ Inventory = Inventory days X Daily costs of sales

+ Accounts payables = Credit days X Daily costs of sales

98.23%

275.75%

Minimum

Maximum

$10,529

$63,171

Taking into account the overall credit score of 7.1 and its existing leverage, NEURO NADI GLOBAL SDN. BHD should only be

financed based on a minimum of $10,529, and up till $63,171. This needs to take into account other factors such as industry

and management risks, as well as factors to mitigate the risks and the financing structure to ringfence those said risks.

WORKING CAPITAL ANALYSIS

Based on four scenarios of operating cash cycle days, NEURO NADI GLOBAL SDN. BHD is estimated to have funding gaps of

between $25,421 and $152,526.

For every 30 days' of delay of conversion into cash, NEURO NADI GLOBAL SDN. BHD would require at least $25,421 for its

working capital needs.

Its last reported cashflow from operations was positive mainly due to a profitable position in profitability. No other sources of

funding are available. . .

(RM)

EXCELLENT GOOD MODERATE LOW

High Financial Strength Above Average Financial Strength Average Financial Strength Low Financial Strength

Greater than or equal to 10, less than or equal

to 12Greater than or equal to 7, less than 10 Greater than or equal to 4, less than 7 Less than 4, greater than or equal to 1


-

- -

-

59% -

6.3

2.66 0.00%

10.94% -

EQUITY MARKET INDICATORS

ATTRACTIVE VALUATION? NO FUNDAMENTALLY SOUND? YES

Fair Value

Price-to-Book Share Price

Company

Credit Score Peer Avg

Current Ratio Dividend Yield

Pre-Tax Profit Qterly Per Share

Was the company financially strong generally?

Did the company have free cashflow?

Did the company have buffer for its short-term obligations?

Was the P/E lower than its peers?

FALSE

Was the company worth less than its book value now?

Did the company pay dividends?

NO

YES

Were the profit levels growing?

Was the company undervalued?

YES

YES

NO

N.A N.AA value of its EPS x 8.1 that is below its share price suggests that it is overvalued (assuming it is not loss making).

A lower value indicates the company is trading below its original value and may indicate a "cheap" buy, but not necessarily all the time.

The credit score takes into account balance sheet and P&L of the company. A higher score indicates a stronger credit position.

The P/E indicates how much premium investors are willing to pay for each profit earned. A lower P/E indicates "less premium"

A higher current ratio indicatesa higher liquidity position but need to check the level of inventories and actual cash levels- in order to meet short-term dues.

A company that has been paying dividends suggests that the company is doing well and continues to be optimistic about the future.

A company that is showing consistent earnings growth indicates a positive outlook. A company that shows negative growth may indicate tougher times ahead.

FCF must be sufficiently positive because it signals a company's ability to pay debt, pay dividends, buy back stock and facilitate the growth of business.


BUSINESS PERFORMANCE

PEER ANALYSIS

COMPETITOR ANALYSIS

On a standalone basis, NEURO NADI GLOBAL SDN. BHD took on 3.6x more risk to generate every unit of return.

Vodafone registered a liability to equity ratio of 112.2% (higher than NEURO NADI GLOBAL SDN. BHD), and ROE of 5.7% (lower

than NEURO NADI GLOBAL SDN. BHD).

Telstra Corp registered a liability to equity ratio of 185.5% (higher than NEURO NADI GLOBAL SDN. BHD), and ROE of 34.0%

(higher than NEURO NADI GLOBAL SDN. BHD).

Starhub registered a liability to equity ratio of 348.2% (higher than NEURO NADI GLOBAL SDN. BHD), and ROE of 41.8% (higher

than NEURO NADI GLOBAL SDN. BHD).

From a topline growth perspective, NEURO NADI GLOBAL SDN. BHD's sales fared better than the average of its peers; it grew

43.4% as compared to -2.2% (Vodafone), 0.0% (Telstra Corp), -2.0% (Starhub).

Meanwhile, comparing profit growth levels, NEURO NADI GLOBAL SDN. BHD's profits fared better than the average of its

peers; it grew by 8.1% as compared to 14.4% (Vodafone), -1.3% (Telstra Corp), -2.44% (Starhub).

NEURO NADI GLOBAL SDN. BHD was ranked 1st in terms of its sales growth and 2nd in terms of its profit growth as compared

to its peers.

NEURO NADI GLOBAL SDN. BHD's sales growth position was ahead by 45.67% against Vodafone, which was ranked last in

position.

NEURO NADI GLOBAL SDN. BHD's profit growth position was behind by 6.30% against Vodafone, which was ranked 1st in

position.

Company

Vodafone

Telstra Corp Starhub

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0% 50% 100% 150% 200% 250% 300% 350% 400%

Ret

urn

on

Equi

ty (

%)

Liability-to-Equity (%)

Peer Analysis: Risk Return (%)

Company

VodafoneTelstra Corp

Starhub

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Sal

es G

row

th (

%)

Profit Growth (%)

Peer Analysis: Business Performance


SENSITIVITY RATING 7.1

WHAT-IF ANALYSIS

RATING SHIFTS ANALYSIS

Overall, NEURO NADI GLOBAL SDN. BHD appeared to be generally able to withstand varying levels of hypothetical shocks to its financial

position. NEURO NADI GLOBAL SDN. BHD scored a rating of 7.1; suggesting that it had reasonably good ability to withstand balance sheet

stressors.

We applied the stress test on NEURO NADI GLOBAL SDN. BHD's revenue and costs to see how NEURO NADI GLOBAL SDN. BHD can cope

with worsening conditions and assess the impact on its overall profitability. It was also noted that costs grew at a faster compared to

sales, by 2.3%. Now what would happen to its margins if costs actually grew by 5% and 10% respectively?

Based on its most recent financial position, if there was a drop of 5% in its revenue position due to aggravating economic conditions; while

facing a 10% increase in overall costs, NEURO NADI GLOBAL SDN. BHD's overall profit margin would decline to -6.1% as a result. It was

observed that based on its financial results, NEURO NADI GLOBAL SDN. BHD registered a higher revenue compared to the previous period;

while its profits expanded by 41.8% due to a surge in operational expenses.

Other than potential macro factors, NEURO NADI GLOBAL SDN. BHD needs to watch the following risks listed below as it could impact its

margins further if not sufficiently addressed:

1. The firm's operating costs have risen significantly. It could be facing challenges to contain the costs arising from industry-wide drivers.

The firm may also be struggling to contain its administrative expenses.

2. The shareholder equity level of the firm was somewhat low compared to its total liability exposure during the period. If the firm's

shareholder funds are overwhelmed by its liability levels, it could be faced with valuation risk.

3. Moderate level of short-term creditors/financing relative to asset base - slight dependency on creditor financing in the short-term. The

firm’s liquidity risk may have risen compared to the previous year.

NB: For more factors please refer to the risk section found in the report.

MODERATE RISK HIGHLY SUSCEPTIBLE

Highly susceptible to even small

changes in financial variables



SENSITIVITY ANALYSIS

High ability to withstand balance sheet

stressors

Reasonably good ability to withstand

balance sheet stressors

Somewhat vulnerable to short term adverse

changes in financial & economic conditions

ROBUST INTACT

10.0% 7.5% 5.0% 0.0% -5.0% -7.5% -10.0%

-10.0% 29.68% 26.32% 23.08% 16.98% 11.38% 8.77% 6.28%

-7.5% 27.14% 23.84% 20.66% 14.68% 9.19% 6.64% 4.21%

-5.0% 24.61% 21.36% 18.24% 12.37% 7.00% 4.51% 2.13%

-2.5% 22.07% 18.88% 15.82% 10.06% 4.81% 2.37% 0.06%

0.0% 19.53% 16.40% 13.40% 7.76% 2.62% 0.24% -2.02%

2.5% 17.00% 13.92% 10.98% 5.45% 0.43% -1.89% -4.09%

5.0% 14.46% 11.44% 8.55% 3.15% -1.76% -4.03% -6.17%

7.5% 11.92% 8.97% 6.13% 0.84% -3.95% -6.16% -8.24%

10.0% 9.39% 6.49% 3.71% -1.47% -6.14% -8.29% -10.32%

IMPACT ON PROFIT MARGIN

19.97%

To

tal

Co

sts

Ch

an

ge

d B

y

15.24%

12.88%

14.12%

-2.5%

11.87%

9.62%

7.38%

2.88%

5.13%

17.61%

Total Sales Changed By

10.51%

2.5%

8.15%

5.79%

3.42%

0.63%

-1.62%

-3.87%1.06%


PHASE ONE (I)

CHECK

LIST

TARGET

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STATEMENTACTION PLAN

CREDIT RISK CHECKLIST

BUSINESS

PERFORMANCE

REPORT

(BPR)

The firm's operating

costs have risen

significantly. It could

be facing challenges

to contain the costs

arising from industry-

wide drivers.

List down the variable and fixed costs in the last 24 months

and evaluate the trends.

Distinguish between one-off and ongoing costs.

Obtain more information on the cost of materials / labour and

compare against previous levels.

Identify any capital and revenue expenditure of the firm -that

is linked to research and development costs.

Compare and measure marketing and business development

costs against the sales performance during the period.

SHAREHOLDER VALUE

REPORT (SVR)

The shareholder equity

level of the firm was

somewhat low

compared to its total

liability exposure

during the period. If

the firm's shareholder

funds are

overwhelmed by its

liability levels, it could

be faced with

valuation risk.

Discuss with management on the potential for leveraged

recapitalisation or debt restructuring in the business.

Determine whether the liability in the firm is short-term or long-

term and what it is costing the firm to maintain this level of debt

in the business.

Perform an analysis to determine whether the existing level of

debt is threatening the on-going nature of the firm and assess to

what extent its asset-liability management can be improved.

Determine whether the liability in the firm is short-term or long-

term and what it is the cost to the firm, to maintain this level of

debt in the business.

Examine the potential to restructure the firm in order to increase

the equity level in the business.

RISK AND LIABILITIES

REPORT (RLR)

There was increasing

demand for the

goods and services

of the firm which

resulted in a fairly

high level of revenue

growth. The very

good performance of

the firm was as a

result of an effective

pricing model and

appropriate market

strategies during the

period.

Examine to what extent price margins or debt acquisition was

responsible for the increased level of sales.

Develop an assessment of the firm to determine the extent to

which the sales growth has been driven by increased

liabilities. Analyse whether the sales growth experienced by the firm is

sustainable, or whether it was more of a short term

improvement. Determine whether the increased level of sales growth was a

result of a single client or contract.

Identify whether the firm's dominant position, can be

maintained through organic or non-organic means,

PRODUCTIVITY

REPORT (PRR)

There was a steady

increase in the value

of the firm's total

assets during the

period - could signify

a gradual build-up of

the firm's operations

during the period.

Establish management antecedents of the firm's expansion

plans if any.

Examine the firm's current level of resources in terms of its

current assets and how these are being deployed.

Evaluate historical trends of asset levels - both for fixed and

current levels.

Ascertain the use and functions of the asset types that were

acquired.


PHASE TWO (II)

CHECK

LIST

TARGET

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BUSINESS

PERFORMANCE

REPORT

(BPR)

Small decline in profit

margins was

experienced where

this could signify

increasing

competition and

operational costs

during the period.

Seek inputs if Management has formulated a business

strategy to improve margins for subsequent years.

Ascertain if there are going to be any improvements to be

made on the business model of the firm.

Check if there are concentration of customer base within its

revenue mix.

Check if there are limited product/service lines that may be

less relevant for the changing demographics or settings.

SHAREHOLDER VALUE

REPORT (SVR)

There was an average

profitability growth

experienced by the

firm, compared to the

previous year.

Determine whether the main reason for profits growth was

due to margins/sales management or leverage.

Ascertain the level of risks undertaken by the firm to generate

the current/recent profit growth.

Evaluate the sustainability of the performance in subsequent

years as this may be a one-off streak.

Examine whether there are single major client or large

contract that resulted in the strong performance.

Ascertain whether there are any possible mergers and

acquisitions or non-organic growth to maintain position.


REPORT (RLR)

Moderate level of

short-term

creditors/financing

relative to asset base

- slight dependency

on creditor financing

in the short-term.

Check cost of financing of creditors and impact on

profitability.

Examine the terms and penalties imposed by creditors, if any -

for longer-than-expected funding duration

Obtain and seek medium to long-term financing to extend

funding duration.

Explore equity option as part of long-term expansion plans.

Evaluate existing relationships with creditors and check for

existence of supplier concentration or related-party suppliers.

PRODUCTIVITY

REPORT (PRR)

The profitability

growth experienced

by the firm was

average, compared to

the previous year.

Examine to what extent price margins or debt acquisition was

responsible for the increased level of profits.

Assess to what extent was the increase in profitability,

generated by increased risks undertaken by the firm.

Analyse whether the profitability growth experienced by the

firm is sustainable, or whether it was more of a short term

improvement. Determine whether the increased level of profitability growth

was a result of a single client / contract.

Identify whether the firm's dominant position, can be

maintained through organic or non-organic means,


PHASE THREE (III)

CHECK

LIST

TARGET

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BUSINESS

PERFORMANCE

REPORT

(BPR)

The cost of

generating additional

revenue was slightly

higher compared to

the previous year.

Examine possibilities of structural drivers within the industry

and company that impact the revenue-cost structure of firm.

Determine the cost of marketing and sales operations over

the years relative to sales growth.

Obtain the supplier listings and analyse the relationships and

credit costs associated with each transaction.

Evaluate across the value chain of processing and delivering

goods/services within the firm.

SHAREHOLDER VALUE

REPORT (SVR)

Profit levels remained

modest relative to

sales. May not be

adequately attractive

for shareholders who

may demand for

higher margins.

Identify customer base of firm and review its growth rate over

the past few years.

Clarify any client retention programs adopted by the firm to

maintain client base.

Examine absolute profit figures and trace back at least 5

years to assess volatility levels.

Obtain management estimates of future profitability and

revenue projections.


REPORT (RLR)

Overall sales growth

overwhelmingly

outpaced the firm's

total liability growth

during the period. The

firm's mode of

expansion had been

driven by sales

management and

resulted to a faster

sales growth

compared to liability

growth.

Evaluate liability trends in past years and compare against

revenue.

Assess creditor payment policies and drawdown facilities to

have better understanding how the firm manages its

liabilities.Examine the firm's access to trade finance and long-term

financing facilities.

Obtain insights on the firm's expansion plans and financing

strategies.

Ascertain the extent the firm relies on internal financing to

expand or manage its working capital needs.

PRODUCTIVITY

REPORT (PRR)

The assets have

generated above

average profit growth

for the firm over the

period.

Establish understanding of how the acquired assets formed

part of the expansion plans of the firm.

Check their rates of revenue and profitability arising from the

rapid asset expansion trends experienced by firm.

Ascertain the types of assets being acquired; trade versus

non-trade.

Evaluate whether the acquired assets are part of a horizontal

or vertical types of expansion.


PHASE FOUR (IV)

CHECK

LIST

TARGET

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BUSINESS

PERFORMANCE

REPORT

(BPR)

The firm experienced

a fairly high level of

revenue growth - with

an increasing

demand for its goods

and services.

Determine whether the main reason for sales growth was due

to margins/sales management or leverage.

Ascertain the level of risks undertaken by the firm to generate

the current/recent sales growth.

Evaluate the sustainability of the performance in subsequent

years as this may be a one-off streak.

Examine whether there are single major client or large

contract that resulted in the strong performance.

Ascertain whether there are any possible mergers and

acquisitions or non-organic growth to maintain position.

SHAREHOLDER VALUE

REPORT (SVR)

The shareholders

attained moderately

average returns

based on their

investments during

the period. Firm's

underlying valuation

would likely be

subdued during the

period.

Ascertain whether the losses are due to structural or cyclical

(seasonal) effects.

Further examine the relevance and demand of the firm's

products in the marketplace.

Obtain listings of key clients and ascertain whether any

pullout from any of its customers that caused the decline.

Assess whether there have been structural downward

changes in pricing expectations from customers.

Gather past performance data and future estimates on

pipelines and orders for a longer trend analysis.


REPORT (RLR)

The firm's total

liability exposure was

somewhat high

relative to its

shareholder equity

level during the

period. Shareholder's

funds could be

inadequate to cover

all of the firm's

obligations.

Discuss with management on liability restructuring plans, if

any.

Gain more insights into the liability duration structure and

cost of financing for firm.

Assess going concern of firm and establish if the firm can

improve its asset-liability management.

Discuss with management on liability restructuring plans, if

any.

Evaluate any existing plans to boost equity position into the

firm.

PRODUCTIVITY

REPORT (PRR)

The capacity of the

firm's assets to

generate profits was

exceptionally strong.

It was more than able

to utilise its assets to

generate very high

levels of profitability.

Gain insights on how the assets contribute to the profitability

growth of the firm during the period.

Check with management for any risks associated with rapid

expansion of profits relative to assets.

Evaluate whether the acquired assets are part of a horizontal

or vertical types of expansion.

Need to check the quality of earnings through its customer

profile for sustainability and concentration.

Ascertain the extent of and rationale for inter-company

transactions, if any and its impact on overall profitability.


RECOMMENDATIONS FOR THE BUSINESS

To reduce variable costs without impacting your business adversely: 1) find a lower-cost supplier for

your company's product 2) scrutinize your products or services and cut down on those that are least

profitable while investing more on those products that are the most lucrative 3) cut down on

fluctuating costs like advertising and employee salaries first before targeting fixed costs like the

rent and utilities.

You should consider reducing the threat of high debt through 1) increasing sales revenues and

profitability by raising prices, reducing costs or increasing sales to pay off existing debt 2)

restructuring liabilities by agreeing on longer or scheduled payment terms with suppliers; replacing

existing loans with loans that have a lower interest rate or secured ones (replacing unsecured loans)

to reduce the interest rate; deferring tax liabilities 3) restructuring assets by selling unnecessary

assets, converting necessary assets into liabilities or use investments or cash to pay off loans 4)

raising more capital by finding more investors, eg venture capitalists; issuing more shares to current

investors or obtaining grants.

Retain high sales growth by 1) reviewing pricing strategies - find out what your competition is

charging and raise or lower your prices based on your goals. 2) expanding distribution channels –

explore new distribution channels to boost sales and revenue 3) diversifying your offerings - add

new products and services to create exponential growth; identify new opportunities within your

niche or replace old products with new ones 4) developing relationships – propose partnership with

a complementary company and develop cross promotions; acquire other businesses (competitors)

or expand internationally.

Improve your return on assets by 1) reducing asset costs - reduce inventory costs by managing the

levels of inventory to reflect your sales expectations; reduce equipment costs by selling idle fixed

assets or leasing equipment instead of buying a piece of equipment that may sit idle if your needs

change 2) increasing revenues - improve customer service or explore market segments you have not

sold to previously 3) reducing expenses - watch for excessive payroll expenses, rising materials

supplies and shipping costs that increase; reduce the number of employees you need by improving

productivity; reduce the cost of materials by renegotiating with suppliers or finding new suppliers.


"BEAR" RATINGS

DESCRIPTION METHODOLOGY

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Measures Return on Equity, Debt-to-Equity,

Profit before Tax Growth, Profit Margin for

latest year

Understand the efficiency and effectiveness

of investments

Indicates how much funds are used for

expansion/ secure new markets

Return on Equity (Pre-tax): Profit before Tax / Shareholders fund

Total Liabilities-to-Equity Ratio: Total Liabilities / Shareholder Fund

Profit before Tax Growth: (Profit before Tax (Current year) - PBT (previous year)) / Profit before Tax (previous year)

Profit Margin (After Tax): Profit after Tax / Sales

Measures current liability, liability-to-equity,

total liabilities growth and rate of sales

growth of the business

Determines the direction in which the

business is heading

Identify types of financing plans of the

business Indicates the level of risk exposure

and leverage faced by the business

Current Liabilities Ratio: Current Liabilities / Total Assets

Total Liabilities-to-Equity Ratio: Total Liabilities / Shareholder Funds

Total Liabilities Growth vs Sales Growth: ((Liabilities (Current year) – Liabilities (Previous year)) / Liabilities (Previous year)) - ((Sales (Current year) – Sales (Previous year) / Sales (Previous Year))

Rate of Sales Growth: (Sales (Current year) - Sales (previous year)) / Sales (previous

year)

Indicates the performance of assets

Provides an overview on how the assets are

being utilized and liabilities are managed

Portrays the interrelation between assets

efficiency and the profitability of the

business

Return on Assets Growth: (Profit after tax / Total Assets (current year)) - (Profit after

tax / Total Assets (previous year))

Return on Assets: Profit after tax / Total asset

Profit Before Tax Growth: (Profit before tax (current year) - Profit before tax (previous year)) / Profit before tax (previous year)

Asset Growth: (Total Assets (Current year) – Total Assets (previous year)) / Total

Assets (previous year)

Measures sales, expenses and profitability

of the business

Assess suitability for investment purposes

Evaluates sustainability for generation of

future inflows

Identification of ways to improve current

performance

Rate of Sales Growth: (Sales (Current year) - Sales (previous year)) / Sales (previous

year)

Rate of Cost Growth: (Cost (Current year) - Cost (previous year)) / Cost (previous

year)

Cost/Sales Growth: Cost / Sales (Current year) - Cost / Sales (Previous year)

Profit Margin (After Tax): Profit after Tax / Sales

Profit Margin Growth: (Profit after tax / sales (Current year)) - (Profit after Tax /

Sales (previous year))

FINANCIAL RATIO EXPLANATION

BLACK (B) EMARALD (E) AMBER (A) RED (R)

High Intrinsic Value Above Average Intrinsic Value Average Intrinsic Value Low Intrinsic Value



The Financial Scores are the result of conducting the regression analysis of more than 100,000 companies since 1992 and have been validated/back

tested against credit downgrades, defaults, corporate actions and significants shifts in the economic cycles: by countries and industry groups.


PRACTICAL USES

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The rating scores published by MyFinB are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. Accordingly, any user of

scores issued by MyFinB should not rely on any such scores or other opinion issued by MyFinB in making any investment decision. Scores are based on information received by MyFinB. MyFinB has established policies and

procedures to maintain the confidentiality of non-public information received during the scoring process. This report may not be reproduced in whole or in part in any form or manner whatsoever. This report is forwarded to the

Subscriber in strict confidence for use by the Subscriber as one factor in connection with rating and other business decisions. The report may contain information compiled from information which MyFinB does not control and

which has not been verified unless indicated in this report. Whilst every endeavor is made to ensure that the information provided is updated and correct, MyFinB disclaims any liability for any damage or loss that may be caused as

a result of any error or omission arising out of or in any way related to the contents of this report. Certain figures in the financial statements may have been adjusted for analytical classification purposes in accordance with the

methodology and research processes.

HOW TO USE THE REPORTS (Illustration)

If you are an investor or thinking of partnering with this company, the factors listed here could assist you in

the decision whether to invest in a company or consider partnering with them via joint ventures.

For creditors and debt financiers, you would want to have a good understanding of whether this company’s

business performance is sustainable to generate future inflows to pay existing and/or future obligations.

Existing and even potential new shareholders should use this report to find out how much the profits are

being generated and how these are being achieved.

It is also to gauge the adequacy of returns to shareholders who may come into the firm at different period of

time.

Users could have a closer look at how internal reserves are used for expansion, new funds being raised to

secure new markets/clients and how much dividends could be paid out to manage its ROE levels.

Financiers such as bank and private lenders should use this report under two circumstances:

1. At the point of lending

2. Upon lending, they can get a sense of how the balance sheet risks may evolve based on ascertaining their

risk appetite at the onset.

The effects of ascertaining risk appetite usually come at a later stage; and it is a powerful indicator to

determine where the firm is heading and how it is going to finance its plans

Financiers with vested interests in the firm are required to know the performance of assets that have been

invested by the firm.

The asset structure of the firm is a good indicator of how resourceful or efficient management has been in

order to generate profits for the period; and to what extent this has been achieved.


Company: Advancecon Holdings BerhadDate of Report: 23/11/2018Industry: Building Construction

MyFinB Group is an award-winning fintech company that specializes in AI -Natural Language Generation (NLG) since 2016.

One of MyFinB's (MFB) core missions is to help financial institutions enhancetheir speed, accuracy and competencies in analyzing large amounts offinancial and business data in the areas of business financing, commercialunderwriting, financial reviews and due diligence as well as active portfoliomonitoring.

MFB helps process various data types and use AI to turn them intomanagement reports to detect and classify risks, develop strategies forbusiness growth and rationalize operations.

MFB works with regulators, institutions and practitioners to build the capacityof financial professionals in AI, Big Data and Analytics.

CONTACT US

MyFinB (M) Sdn. Bhd.Level 13A, Menara Tokio Marine 189 Jalan

Tun Razak, Hampshire Park, 50450 Kuala Lumpur, Malaysia

MyFinB Holdings Pte. Ltd.6 Raffles Boulevard,

Marina Square #03-308, Singapore 039594

Tel : (65) 6932 2658

URL: www.MyFinB.com | Email: [email protected]: MyFinB | Twitter: @MyFinBGroup

MyFinB.com Inc.Werqwise, 149 NewMontgomery St, 4th

Floor, San Francisco, CA 94105, USA

MyFinB IndiaSoftware TechnologyParks of India MNNIT

Campus, Lucknow Road,Allahabad Uttar Pradesh,

India 211004

MyFinB ChinaRaffles City Changning No.

1193, Changning Road Office Tower 3, 22nd

Floor, Changning District, Shanghai 200051

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