AQ XXXXXXXXXXFINMDL INDIVIDUAL PROJECT Page 1 of 2 APU Level XXXXXXXXXXAsia Pacific University of Technology & Innovation 202208 This assignment is an individual assignment and is worth 30% of your...

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AQ066-3-3-FINMDL INDIVIDUAL PROJECT Page 1 of 2 APU Level 3 Asia Pacific University of Technology & Innovation 202208 This assignment is an individual assignment and is worth 30% of your total assessment. Your assignment must be type written and develop the excel model when necessary, using font Times New Roman size 12, 1.5 spacing, justified alignment, 1 inch margin on both sides. You are required to use APA Referencing Style. Cover page of the assignment must include name, student ID, and subject code. Submit before 12th September 2022 by 11.59pm. QUESTION 1 INITIAL PUBLIC OFFERING You can read this article: ‘MR DIY open books for Malaysia’s largest IPO in three years’ from The Star online dated 6th October, 2020 MR DIY opens books for Malaysia's largest IPO in three years | The Star An IPO, or Initial Public Offering, is a company's first introduction to the public market. They can be quiet affairs or major events depending on the company's profile. An IPO is the process by which a private company issues its first shares of stock for public sale. This is also known as "going public". Companies do not begin an IPO upon launch. While successful start-ups may go public eventually, it takes a firm time to establish the necessary business plan and market position. A milestone for any company is the issuance of publicly traded stock. While the motivations for an initial public offering are straightforward, the mechanism for doing so is complex. The going public process is an expensive consideration, and even more so for small cash strapped young companies. When a company is contemplating the IPO process of going public, it must consider the pros and cons involved in making that decision, coached by its IPO advisors. Additionally, there are new responsibilities involved when a private company becomes a publicly traded business. Although many benefits can ensue from going public and the related IPO services, the company directors and principals must critically judge all the options and impending tasks of becoming a public company a. Write an overview and the process of Initial Public Offering in Malaysia. (Hint : it is required to provide the role, steps and information from regulators to support your discussion) (10 marks) b. In reference to IPO, critically examine the performance of two companies in Bursa Malaysia which was listed more than 3 years using financial modeling, both companies should be in the same industry or competitors. (Hint: your answer should rationale, practical and it is required to use knowledge of financial analysis to add value on your analysis and recommendation) (40 marks) To attempt this assignment successfully, student need to display a wide range of financial analysis, financial modeling tools and required to apply knowledge learned throughout the https://www.thestar.com.my/business/business-news/2020/10/06/mr-diy-opens-books-for-malaysia039s-largest-ipo-in-three-years https://www.thestreet.com/investing/stocks/what-is-common-stock-14951101 AQ066-3-3-FINMDL INDIVIDUAL PROJECT Page 2 of 2 APU Level 3 Asia Pacific University of Technology & Innovation 202208 subject. Students are expected to provide an interactive interface and user friendly attributes to display in this model. Every question should be assessed critically and rationally. References from books, articles or academic journals are required and marks will be reducing if none of the conditions apply. Any enquiries in relations to the assignment should be put up one week before the submission. (Total = 50 marks) Table of Contents Part – a:2 Introduction:2 Overview of Markets:2 Requirements by Regulators:2 Quantitative requirements:2 Qualitative Requirements:2 Steps in the IPO Process in Malaysia2 Step 1: Pre-submission:3 Step 2: Post submission for Approval:3 Step 3: Post Approval:3 Step 4: Listing:3 Part – B3 Selection of two companies:3 IPO - Financial Modeling Framework:3 Market Data3 Financial Data4 Valuation4 Analysis:4 Market Data:4 Financial Data:4 Valuation:5 Conclusion:5 Recommendations:5 References6 Part – a: Introduction: Initial public offering (IPO) is a big step in any company’s business life cycle. The private companies tries to get register over country’s stock exchange to raise the equity funds from there potential shareholders. Overview of Markets: The securities markets in Malaysia are govern by three different bodies: Main Market, ACE market and LEAP market of Busra Securities Malaysia Berhad (Busra Securities). The requirements are little different to list on any of these three securities market but the primary regulation is common to govern the IPO in Malaysia is Capital Markets and Services Act 2007. Requirements by Regulators: Quantitative requirements: Any private company that wants to get listed on the Main Market, they need to pass the quantitative admission test criteria of profit test, Market capitalisation text and Infrastructure project corporation test. On the other hand, there is no minimum operating requirement to get listed on ACE and Leap Markets. Qualitative Requirements: The qualitative criteria comprises of appointing an Approved Adviser to assess the suitability for listing and have identifiable core business for LEAP markets. The Main and ACE qualitative criteria is bit strict as compare to LEAP, where companies should have core business and it should not be holdings in another business, along with that sufficient level of working capital for at least 12 months. Moreover, having a positive cash flow from operations, no accumulated losses based on company’s approved financial statements, required by Main Market and ACE. Steps in the IPO Process in Malaysia The following are the steps required to register a private company in Main Market and ACE Market: Step 1: Pre-submission: This is the stage one includes appointment of advisers, stucturing the IPO, due diligence and internal control review, preparing the legal documents for submission and consultation with regulators and key stakeholders. Step 2: Post submission for Approval: The stage 2 required a formal public exposure for the prospects, which should indicated the impact of entity on the external enviroment and society at large. The regulators may have quieries and they have right to visit company primises to verfiy information provided in stage Step 3: Post Approval: After the approval it is required to appoint an Investor Relations (IR) officer, execution of underwriting agreement, registration and lodgement of the prospect and commencement of pre-marketing to ensure the successful launch of IPO with minimum under-writing costs. Step 4: Listing: This is the final step in listing and IPO, where entity launch its prospectus to the general public so they can be well aware about the future plans of the company, road shows and book building exercise to gain publicity in general public, allocation of shares to subscribers and listing on the Main or ACE Market of Busra Securities. This is the point where company actually offers there equity stakes to the general public against cash. Part – B Selection of two companies: This part includes the financial modeling of two holding companies Dolphin International Berhad and Aemulus Holding Berhad, both are competitors of a same industry and was registered together on Bursa Malaysia in the year 2015. The financial modeling will be conducted in relation to Initial Public offering (IPO) for both companies for the year 2020. IPO - Financial Modeling Framework: To conduct the financial modeling of both comparable companies in relation to IPO, the data will be analyzed in the following three main headings. Market Data A. Price B. Market Capitalisation C. EV Financial Data A. Sales B. EBITDA C. EBIT D. Earnings Valuation A. EV/Sales B. EV/EBITDA C. EV/EBIT D. P/E Analysis: The analysis for Dolphin International Berhad and Aemulus Holdings Berhad is conducted on the basis of comparable company analysis in relation to IPO. The analysis sub divided into Martket data, Financial Data and Valuation of companies. Market Data: The Ameulus Share price is 95% higher as compare to Dolphin International. The major reason is strong financial results of Ameulus from year 2015 up to now. The financial results of Amelus are slightly comparatively better than Dolphin International, otherwise both faces losses in their earnings in post COVID-19 period. The Amelus has 90% more market capitalization as compare to Dolphin International. This is due to higher appreciation in Aemulus shares as compare to Dolphin Internation. The Enterprise value of Amelus is almost 80% higher than the Dolphin International. This is due to better business opportunities exploitation by Aemulus as compare to Dolphin. Financial Data: The Aemulus manages to grow at a much faster pace as compare to Dolphin International. The Aemulus has more international presence and has lead to 56% higher sales and eventually higher profitability than Dolphin Internation. Although, Dolphin International is far more smaller in size than Aemulus but managers to give positive EBITDA whereas, Aemulus has negative EBITDA, EBIT and earnings. The Dolphin International smaller size and few number of shares lead them to survive easily in a post COVID-19 period. Valuation: The Dolphin International enterprise value to sales is 7 times and Aemulus has 15 times. The Aemulus has a far more higher EV to sales ratio than Dolphin due to stronger capital appreciation in market capitalisation. The Enterprise to EBITDA is -74 times as compare to Dolphin, due to sheer size and excessive cost burdens in post COVID-19 period, where decline in sales revenue and presence of fixed costs like depreciation and amortization lead to negative EV to EBITDA ratio. The EV to EBIT ratio is negative for both of the companies and Dolphin International has higher one with -77 times. This shows that Dolphin has higher proportion of operating and finance cost. The higher finance cost makes Dolphin company riskier as compare to Aemulus. The P/E ratio is negative for both companies which means that shareholders are loosing confidence in both companies due to their negative earnings. It will take time for both companies to recover from the impact of COVID-19 consequences. Conclusion: Overall, Dolphin Internation is much smaller company than Aemulus International and has less presence outside of Malaysia. The Dolphin International has higher costs and obligations whereas, Aemulus is struggling with higher burden of fixed costs. Recommendations: · The Aemulus holdings need to take significant steps to decrease their fixed costs speacially non cash expenses like amortization and depreciation to achieve positive earnings. · The Dolphin International need to find ways to hold investments in more productive and profitable companies with diversification in portfolio. · The Aemulus and Dolphin both should try to further increase their international presence to maximize profits and evetually higher shareholder wealth maximisation. · The negative price to earnings ratio is an alarming situation for both companies to take reactive steps to maintain shareholders confidence in companies. References Aemulus Holdings Berhad. (2020). A mulus mulus e e TM Aemulus Holdings