Credit Proposal

To the approach of ABC Berhad

I. SHORT INFORMATION OF APPROACH

Creditor Bank Date FEBRUARY 21, 2010.

Sector Agriculture industry Product Credit / Financing the working capital
Company ABC Berhad Specialist of
credit Bannapov Feruzbek (805873)
Sum of approach RM 20.0 million
department
Aim To support business expansion (matric #)

II. INFORMATION ABOUT BORROWER

2.1. Information about Company

Name of Company: ABC Berhad (change of name from ABC Sdn. Bhd. to ABC Berhad on conversion)
Address: Malaysia
Incorporated: On 06.07.1973 in Malaysia, converted to public company on 21.08.1973
The company carries on the business of producing and processing and
Principal activities:
natural rubber on its plantations.
Presence of the license: • No information given
Authorized Capital – RM 1,000,000,000
Companies capitals: Paid-Up-Capital – RM 712,516,128
Market capital – RM 5,664,503,218

The company principal activity is producing and processing natural rubber on its plantations. The company has been in
the business for more than 30 years and has matured over the years. The company started off as a small business
venture and eventually obtained listing on the Main Board of Bursa Malaysia.

2.2. Owners and the management team.

Name Position Shares % Remarks

Lead the management team. Founder of
Mr Lee Ah Kian Chairman/CEO 47% the company and ample experience in
this field.
Executive Sibling of CEO. Oversees the
Mr Lee Ah Keong 47% production operations and has many
Director years of hands-on experience
Oversees the administration works
Yap Eng Young Director 3%
including the finance.
Technical expertise. Assisting the ED in
Lim Lee Seong Director 2% managing the daily operational of the
plantations

III. BANKING RELATIONSHIPS AND BACKGROUND OF CREDIT HISTORY

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 ABC Berhad has maintained banking relationship with bank for the past 10 years, conduct so

far satisfactory, no records of default. Their interest rate so far has been very fine within the range of

bank.

IV. EXISTING BUSINESS OF THE BORROWER

 The list of existing fixed assets

Items A/C Note SEP-2005 SEP-2004 SEP-2003

Freehold Land and Building - 287 749 000 283 699 000 237 673 000
Leasehold Land and Building – Short - 0 0 0
Leasehold Land and Building – Long - 163 470 000 209 165 000 190 601 000
Buildings - 234 831 000 159 818 000 156 059 000
Plant and machinery - 393 741 000 403 857 000 332 326 000
Machinery, equipment & vehicles - 0 76 302 000 0
Motor vehicles - 27 342 000 0 0
Furniture, fittings & equipment - 77 745 000 0 0
Assets in progress - 0 0 0
Others - 1 088 778 000 1 050 743 000 1 075 671 000

 Specification of realizing products:

Natural rubber.

 Primary suppliers:
The company has established good relationship with suppliers. Bulk of their plantation cost is attributed

by the cost of the fertilizers. Around 70% of these fertilizers are sourced from overseas, whilst the balance

from the local market. As such, the company is very much exposed to the foreign exchange fluctuations.

 Primary buyers:
Their buyers are meanwhile comprises both local and export market on equal basis. Their buyers are

primarily established giant companies who are focusing on the quality products. ABC is very much reliance

on their ability to produce high quality products and the long established rapport with these clients proven

this.

V. FINANCIAL ANALYSIS

The comparative financial analysis of borrower are done for three years.
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 Statement for Changes Densities
(+,-) (+,-)
Items of balance (+,-) (+,-)
in % in %
sheet SEP- SEP- SEP- from from SEP- SEP- (+.-)
from from
2003 2004 2005 SEP- SEP- 2004 2005 in %
SEP- SEP-
2003 2004
2003 2004
2,691,3 2,857,5 2,996,4 305,164 138,944 66.23 -
LONG TERM ASSETS 11% 5% 71%
33,000 53,000 97,000 ,000 ,000 % 4.60%
1,992,33 2,183,58 2,273,65 281,326, 90,072,0 54.13 50.25
Fixed asset 14% 4% -3.87%
0,000 4,000 6,000 000 00 % %
-
510,393, 467,688, 497,020, 29,332,0 11.59 10.99
Associated companies 13,373,0 -3% 6% -0.61%
000 000 000 00 % %
00
83,440,0 69,834,0 82,473,0 12,639,0
Investments -967,000 -1% 18% 1.73% 1.82% 0.09%
00 00 00 00
35,459,0 67,641,0 79,206,0 43,747,0 11,565,0
Intangible Assets 123% 17% 1.68% 1.75% 0.07%
00 00 00 00 00
- -
69,711,0 68,806,0 64,142,0
Other long term assets 5,569,00 4,664,00 -8% -7% 1.71% 1.42% -0.29%
00 00 00
0 0
1,046,7 1,176,7 1,527,9 481,156 351,163 29.17 33.77
CURRENT ASSETS 46% 30% 4.60%
89,000 82,000 45,000 ,000 ,000 % %
366,498, 427,921, 501,419, 134,921, 73,498,0 10.61 11.08
Stocks/Inventories 37% 17% 0.48%
000 000 000 000 00 % %
149,107, 207,701, 250,636, 101,529, 42,935,0
Trade debtors 68% 21% 5.15% 5.54% 0.39%
000 000 000 000 00
Cash and Bank 426,759, 409,686, 606,545, 179,786, 196,859, 10.15 13.41
42% 48% 3.25%
Balances 000 000 000 000 000 % %
Other debtors, Deposit 104,425, 131,474, 169,345, 64,920,0 37,871,0
62% 29% 3.26% 3.74% 0.48%
and Prepayment 000 000 000 00 00
3,738,1 4,034,3 4,524,4 786,320 490,107 100.0
TOTAL ASSETS 21% 12% 100%
22,000 35,000 42,000 ,000 ,000 0%
CURRENT 480,717 494,781 580,001 99,284, 85,220, 12.26 12.82
21% 17% 0.56%
LIABILITIES ,000 ,000 ,000 000 000 % %
88,471,0 106,415, 123,644, 17,944,0 17,229,0
Trade creditors 20% 16% 2.64% 2.73% 0.10%
00 000 000 00 00
-
112,854, 106,229, 139,358, 33,129,0
Short term loans 6,625,00 -6% 31% 2.63% 3.08% 0.45%
000 000 000 00
0
-
169,880, 165,304, 191,921, 26,617,0
Other current liabilities 4,576,00 -3% 16% 4.10% 4.24% 0.14%
000 000 000 00
0
109,512, 116,833, 125,078, 7,321,00 8,245,00
Minority interest 7% 7% 2.90% 2.76% -0.13%
000 000 000 0 0
LONG TERM 27,401, 47,566, 168,610 141,209 121,044
515% 254% 1.18% 3.73% 2.55%
LIABILITIES 000 000 ,000 ,000 ,000
1,461,00 18,129,0 19,305,0 17,844,0 1,176,00
Long term loans 1221% 6% 0.45% 0.43% -0.02%
0 00 00 00 0
Other long term 25,940,0 29,437,0 149,305, 123,365, 119,868,
476% 407% 0.73% 3.30% 2.57%
liabilities 00 00 000 000 000
508,118 542,347 748,611 240,493 206,264 47.33 38.03 13.44 16.55
TOTAL LIABILITIES 3.10%
,000 ,000 ,000 ,000 ,000 % % % %
SHAREHOLDERS' 3,230,0 3,491,9 3,775,8 545,827 283,843 16.90 86.56 83.45 -
8.13%
EQUITY 04,000 88,000 31,000 ,000 ,000 % % % 3.10%
712,516, 712,516, 712,516, 17.66 15.75
Ordinary share capital -1.91%
000 000 000 % %
1,225,70 1,264,14 3,063,31 1,837,60 1,799,17 31.33 67.71 36.37
Reserves 150% 142%
9,000 3,000 5,000 6,000 2,000 % % %
- - -
1,291,77 1,515,32 37.56
Retained Profits 1,291,779 1,515,329 -100% -100% 37.56
9,000 9,000 ,000 ,000
%
%
TOTAL LIABILITIES
AND 3,738,1 4,034,3 4,524,4 786,320 490,107 100.0
21% 12% 100%
STOCKHOLDERS' 22,000 35,000 42,000 ,000 ,000 0%
EQUITY
Statement for Changes Densities to proceeds
(+,-) (+,-)
Statement of (+,-) (+,-)
in % in %
PROFIT and LOSS SEP- SEP- SEP- from from SEP- SEP- (+.-)
from from
2003 2004 2005 SEP- SEP- 2004 2005 in %
SEP- SEP-
2003 2004
2003 2004
2,041,61 2,469,07 3,473,53 1,431,91 1,004,46
Revenue/Turnover 70% 41%
4,000 1,000 1,000 7,000 0,000
1,792,61 2,063,11 2,834,02 1,041,41 770,902, 83.56 81.59
(-)Cost of goods sold 58% 37% 1.97%
0,100 8,800 1,000 0,900 200 % %
Gross profit 249,003, 405,952, 639,510, 390,506, 233,557, 157% 58% 16.44 18.41 -1.97%

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 900 200 000 100 800 % %
Administration 94,347,9 108,585, 149,159, 54,811,1 40,573,8
58% 37% 4.40% 4.29% 0.10%
expenses 00 200 000 00 00
154,656 297,367 490,351 335,695 192,984, 12.04 14.12
Operating profit 217% 65% 2.07%
,000 ,000 ,000 ,000 000 % %
Share of Profits of 32,418,0 49,752,0 78,560,0 46,142,0 28,808,0
142% 58% 2.02% 2.26% -0.25%
Associated Co. 00 00 00 00 00
-
80,515,0
(-)Exceptional Items 80,515,0 -100%
00
00
Earnings before 106,559 347,119 568,911 462,352 221,792, 14.06 16.38
434% 64% 2.32%
interest and taxes ,000 ,000 ,000 ,000 000 % %
15,522,0 14,471,0 17,739,0 2,217,00 3,268,00
(-)Interest expense 14% 23% 0.59% 0.51% -0.08%
00 00 00 0 0
91,037, 332,648 551,172 460,135 218,524, 13.47 15.87
Pretax income 505% 66% 2.40%
000 ,000 ,000 ,000 000 % %
29,837,0 59,449,0 156,484, 126,647, 97,035,0
(-) Taxation 424% 163% 2.41% 4.51% 2.10%
00 00 000 000 00
Net income(net 61,200, 273,199 394,688 333,488 121,489, 11.06 11.36
545% 44% 0.30%
profit after Tax) 000 ,000 ,000 ,000 000 % %
Preffered stock
dividends
Earnings available
61,200, 273,199 394,688 333,488 121,489, 11.06 11.36
for common 545% 44% 0.30%
000 ,000 ,000 ,000 000 % %
stockholders
76,700,0 76,678,0 102,237, 25,537,0 25,559,0
(-) Dividends 33% 33% 3.11% 2.94% 0.16%
00 00 000 00 00
- -
To retained 196,521 292,451 307,951 95,930,
15,500, 1987 49% 8% 8.42% 0.46%
earnings ,000 ,000 ,000 000
000 %

Earnings per 544.92 44.47

0.09 0.38 0.55 0.47 0.17
share(EPS) % %
Dividends per 33.29 33.33
0.11 0.11 0.14 0.04 0.04
share(DPS) % %
Price per share 7.95
Statement for Changes
(+,-) (+,-)
FINANCIAL RATIO ANALYSIS SEP- SEP- SEP- from from
2003 2004 2005 SEP- SEP-
2003 2004
Current Liquidity Ratio 2.18 2.38 2.63 0.46 0.26
0
Quick Liquidity Ratio 1.42 1.51 1.77 0.26
.35
Inventory turnover 4.89 4.82 5.65
0.76 0.83
5,593, 6,764, 9,516, 3,92 2,75
Average daily sales
463 578 523 3,060 1,945
Average collection period (in days) 26.66 30.70 26.34 -0.32 -4.37
3,929, 4,521, 6,211, 2,28 1,68
Average daily purchases
008 904 553 2,544 9,649
Average payment period (in days) 51.24 47.03 42.34 -8.90 -4.68
0
Fixed asset turnover 1.02 1.13 1.53 0.50
.40
Total asset turnover 0.55 0.61 0.77 0.22 0.16
13.59 13.44 16.55
Debt Ratio 2.95% 3.10%
% % %
Assets-to-equity-multiplier 5.25 5.66 6.35 1.10 0.69
Times interest earned 6.87 23.99 32.07 25.21 8.08
12.20 16.44 18.41
Gross profit margin 6.21% 1.97%
% % %
12.04 14.12
Operating profit margin 7.58% 6.54% 2.07%
% %
11.06 11.36
Net profit margin 3.00% 8.37% 0.30%
% %
Earnings per share 0.09 0.38 0.55 0.47 0.17
Return on total assets 1.64% 6.77% 8.72% 7.09% 1.95%
38.34 55.39 46.80 17.05
Return on common equity 8.59%
% % % %
Price/earnings (P/E) ratio 14.35
Book value per share 1.00 1.00 1.00
Market/book (M/B) ratio 7.95

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 As a result of the analysis may be noted that:

Initially, first table is providing balances sheet of three years with different percentage changing among

three years 2003, 2004 and 2005, where we can find percentages are increase or decrease depending a kind

of items such as long term of asset , which it involved fixed asset, associated companies and intangible asset

are increased , while other items within long term asset are decreasing, also the current asset been relatively

decreased from 46% to 30% in 2003 to 2004,while it jumped up in 2005 around 33,7%, generally number

of total asset are increasing over years. For other side from balance sheet, exactly its call total liabilities and

stockholder equity, we can find many variables and changing in the capital structure of ABC Berhad as

following:

The total liabilities are indicates to ability of our company to carry a loan as long term and percentage of

changing, where we finding from table has been relatively increasingly year by year as well as stockholder’s

equity also has been increasing year by year as relatively like amount of liabilities, that’s because to situation

of ABC Berhad as improving it activities , where it was issued new shares with increasing price of shares

which ABC Berhad has been achieve high return from both it capital structure and capital budgeting.

Third table is titled financial ratios analysis, within this table has many ratios, all of them has rules and

formulas, which each ratio has benefit and it’ can describe situation of ABC Berhad from many sections

such as Operating Profitability, Efficiency, Internal Liquidity and debt, According to our percentages of

ratios from the table, we can analyze this data to information and show variables and changing of different

ratios among three years as following:

1- Current and quick Ratios:

which included two ratios from liquidty of ABC Berhad, where both of percentages ratios are improving

over year , it’s mean ABC Berhad has good liquidity .

2- Average daily sales:

Average daily sales of the company is groving very fast. It increased from RM 5 593 463 per day in 2003 to

RM 9 516 523 per day in 2005. It means the increase was 70%.

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3- Average daily purchases:

Average daily purchases of the company is also groving very fast. It increased from RM 3 929 008 per day

in 2003 to RM 6 211 553 per day in 2005. It means the increase was RM 2 282 544.

4- Average collection period (in days):

Average collection period of ABC Berhad increased to 4 days from 2003 and it was 31 days in 2004, but in

2005 it decreased to 5 days and the average collection period of company was 26 days.

5- Average payment period (in days):

Average collection period of ABC Berhad decreased to 4 days from 2003 and it was 47 days in 2004, and it

continued to decreasing in 2005 and it became 42 days. It means the company is trying to pay its debts on

time.

6- Gross Profit Margin:

After calculated the profitability ratio, we can see the profit margin ratio (PM) is 12,20% in 2003 , 16,44%

in 2004and 18,41% in 2005, we can see profit margin was high percentage increasing in the period between

2003to 2004 then profit lower increasing in 2005 if we compareing between period, we can see difference

rate of increase between them .

7- Net Profit Margin:

The net profit margin of the company is increased in a high percentage in the period between 2003to 2004

then compare to 2005. It was 3.00% in 2003 and increased to 8.07% and became 11.06% in 2004. It

continued to increase in a lower persentage and it was 11.36% in 2005.

8- Return on assets and return on equity:

both of ratios are very important for knowing performance of ABC Berhad, Where ROA ratio remain higher

than that of the industry with the huge increase in 2004, this means that for every dollar of asset, ABC

generates more than 1, 64% of profit and has a possibility to use its asset to produce more earning, while

ROE ratio is a measure of how the stockholders fared during three years because benefiting shareholder is

the goal of the firm. ABC Berhad’s ROE has been increase during the period. Which means that the

company may issued new stocks or because the price of the share are increasing

9- Total asset Turnover:

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This ration gives us a real picture of the bad performances of the company during the three years where the

ration is still below 1. This means that recovering assets is not well done actually, and a dollar of assets is

just equalized with lesser than one dollars in terms of sales.

10- Debt Ratio:

The company’s debt ratio is increased in last three years from 13.59% in 2003 to 16.55% in 2005. But it still

means that the company is not in a big debt and the own money of company covers its debts 5 times.

11- Earnings per share:

The value of GPC’s earnings per share in 2005 is RM 0.55 . This figure represents the RM amount earned

on behalf of each share of common stock outstanding. This means that every simple RM of stockholders

earned 55 sen in 2005, and it rose to RM 0.55 in 2005 from RM 0.09 in 2003.

Balance sheet of Short Term Loans

A/C
Items SEP-2005 SEP-2004 SEP-2003
Note

Term Loans – Secured - 86 975 000 75 299 000 86 323 000

Term Loans – Unsecured - 27 540 000 4 590 000 6 793 000
Bank Overdrafts – Secured - 21 356 000 23 198 000 16 439 000
Bank Overdrafts – Unsecured - 3 227 000 2 952 000 3 182 000
Lease & Hire Purchase Creditors - 260 000 190 000 117 000
Total - 139 358 000 106 229 000 112 854 000

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 Dynamic of income in years 2003, 2004 and 2005 .

3,000.00

2,500.00

2,000.00
mln.RM

1,500.00 Cost of goods sold (CGS)

1,000.00

500.00

0.00
2003 2004 2005

Years

As seen from the above, the average monthly income:

of 2003 is – RM 170134500
of 2004 is – RM 205755917
of 2005 is – RM 289460917

400 VI. MARKET ANALYSIS

350
300
250
The global demand for rubber gloves has increased
200
Net income(net profit after Tax)
150 due to recent regulations on occupational safety. The
100
50 demand for rubber gloves is expected to grow by 10% per
0
2003 2004 2005
annum. At present though rubber gloves has not been

affected much from the global crisis, the smaller

manufacturers are facing stiff competition and higher

operational costs given the volatile latex prices over the past two years.

The strong growth partly reflects higher selling prices following the rise in natural gas and latex

prices in mid-2008. The demand for rubber gloves is increasing from India, China and Vietnam due to

increase in health and hygiene awareness. Currently, Malaysia exports rubber gloves to the US, European

Union, Latin America, China and India. Demand for lower-end powdered latex gloves is popular among

developing countries whose end-users are more cost-conscious. Powder-free latex and nitrile gloves are

preferred by developed countries namely the United States and Europe.

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 Malaysia is the largest worldwide exporter of rubber gloves whereas Thailand accounts for less than

half of the Malaysian market share. Malaysia’s strength is its productive labor. Each worker in the rubber

gloves industry in Malaysia is estimated to be nearly three times more productive compared to Thailand and

twice to Indonesian workers.

Exports of Malaysian natural rubber in September 2009 contracted by 30.9 per cent to 47,291 tonnes

compared with August and dropped 43.3 per cent in the same month of 2008. Meanwhile, imports of natural

rubber in September this year gained 0.1 per cent over August and increased 54.4 per cent when compared

with the same month last year. Domestic consumption of natural rubber declined 8.9 per cent to 3,688

tonnes compared to August 2009 while it dipped 2.0 per cent against the same month in 2008. At the end of

September, natural rubber stock rose 3.3 per cent to 4,548 tonnes from August, but dropped 4.3 per cent

compared to the previous corresponding period. The average monthly price of latex concentrate rose 7.7 per

cent to 711.63 sen in September 2009 compared to August the same year. It was 25.8 per cent lower

compared with the previous corresponding month. Month-on-month, the total number of workers engaged

was down by 0.6 per cent, while year-on-year, a contraction of 6.9 per cent was recorded. In September, the

ratio of total production to total area tapped was 123.3 kilogrammes per hectare. Compared with August,

productivity increased 1.0 per cent, but declined by 6.6 per cent year-on-year.

“Malaysia: Rubber” covers natural vs. synthetic rubber. It looks at world data, gross domestic

product, planted hectarage on estates and smallholdings, supply and demand of natural rubber, employment,

the rubber products industry, regulatory bodies and trade events of the rubber industry in Malaysia.

It also covers the market trends and outlook, exports, imports, summary of natural rubber trends, price,

world forecast plus a comparative matrix and SWOT of the industry leading players: Top Glove Corporation

Bhd., Supermax Corporation Bhd. and Kossan Rubber Industries Bhd.

Determination of demand and market opportunities

The company seriously considered their potential and concluded that the implementation of this

project begins in a difficult economic period. The company, planning its activities, pays great attention to

the conditions of the project, which significantly changed over time.

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 Financial design, which are presented in the relevant section, are based on inflation expectations,

reducing the total demand, the emergence of new competitors.

Experience of the company in the market allows good estimates of the seasonal and cyclical

fluctuations in sales volumes for each product, in addition, subject to careful analysis and inventory, which

will be maximally optimized.

VII. RISK ANALYSIS AND MINIMIZATION OF THEM

Strong sides Weak sides & Risks

• Obtained listing on the Main Board of Bursa • Bulk of their plantation cost is attributed by the
Malaysia. cost of the fertilizers.
• Strong and experienced management. • The company is very much exposed to the
• The production operations are been centralized foreign exchange fluctuations.
on plantations side and are conducted in very
organized production lines.
• Quality control issues are crucial and been
treated as important as the rest of the production
process.
• The employees are mostly been trained to ensure
efficiency.
Opportunities Threats
• Increasing its market into the Middle East • Conquest of market by the competitors.
market. • Mirroring the world’s financial crises to
• Strengthening its presence within the South East purchasing ability of the clients(buyers)
Asian countries. • Unforeseen force-majeure circumstance
• Sales are expected to further increase by 20%. delectable.
• Sustained economic growth and political
stability.

VIII. CONCLUSION

The results of the calculations showed a stable economy of the proposed project, ensure the return of the
alleged loan and all interest due and payments.

The project has a positive rate of net income, the level of internal rate of return and the high value of
outstanding debt service ratio.

The project will at the expense of tax revenue to replenish the budget of the government during the
billing period.

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 All the above indicates the feasibility of the project.

By analyzing the activity of customer, out coming from financial stative of the borrower, I consider that
it is possible to distribute the credit in terms below:

Sum and currency of Credit: RM 20,000,000

Aim of credit: Financing the working capital to support business expansion
Interest rate: KLIBOR plus spread of 0.50% p.a.
Due date of credit: 12 months
Co terms and order of distributing the credit: Revolving credit line
Order of debt repayment: Monthly, by the equal repayments
Order of repayment the interests by credit: Monthly, on 25th
Commission for unused part of credit: 0.50% p.a.
Commission for consideration of the draft: Single commission for consideration in the amount of 0.1% of the
project
Preliminaries/fringes co terms: None

Income for a positive decision on interest income will be up to RM 800 000 and minimum RM 100 000,
on noninterest RM 20 000. So in a positive decision Bank gets profit at least RM 120 000.

The credit proposal drawn by 10 (ten) pages, the loss of one of them will lead to its invalidity.

Specialist of credit department _____________________ Bannapov Feruzbek

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