Financial Ratios and Popular Holdings

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Course Instructor
Professor Goh Beng Wee

Team Members
Ng Si Yong
Lo Yeow Fong
Charissa Sim
Yik Jia Qi
Ong Shu Fang

Analysis of Popular Holdings Limited
Financial Accounting Term Project

(for OBHR 001 – Leadership and Teambuilding)

Executive Summary
Popular Holdings is a main board listed company in Singapore. It was incorporated in Singapore on 5 October 1996 as a private company under Popular Holdings Limited and the principal activity is that of an investment holding. Popular Holdings has many subsidiary companies and most of them are engaged in diverse activities such as retail and publishing, e-Learning and recently, property development.

Focus on Strong Fundamentals and Innovation
Over the years, Popular Holding started out from a bookstore and expanded to an investment holding company with diverse footholds in different businesses. It was able to achieve a dominant position in the book retail business as it continuously changed its business models to adapt to the times. In the 1970s, Popular Holdings positioned itself as the only bilingual bookstore chain in Singapore and it later brought the same concept to Malaysia. Then, Popular Holdings recognized the potential of suburban areas, and started opening new stores. It is one of the most successful book retail and publishing businesses.

Concern for Growth
Popular Holdings has been experiencing margin compression for its retail business. Also while Popular Holdings has tried to invest in other areas such as property in FY 2006, the recent financial turmoil in FY 2008 has caused Popular Land, a subsidiary, unable to sell off its up market residential properties in Singapore. This is a cause for concern because Popular Holdings has borrowed heavily to finance its purchase and development of the properties. If it still cannot sell off its properties in the long run, it may run into cash flow problems and this may affect its future growth negatively. The bleak economy in the coming years does not bode well for the company’s operations as the retail and distributions sector may also be hit.

Increased Risk
Popular Holdings has been borrowing heavily to fund its property developments. This has led to a decline in its ability to repay its liabilities. This is evidenced from the decline in TIE ratio as well as increase in debt ratio. This translates into increased risk for investors as there is increased likelihood of the company winding up due to inability to repay its debts.

Hold for Popular Holdings
The short term prospects for Holdings are quite bleak. However, it does have strong fundamentals and an experienced management. There is much uncertainty over the long term prospects of the company. Much would depend on the steps taken by management to address the problems it faces. It is also unknown whether the company’s foray into property development will ultimately be successful or not. Thus we call for a hold on the stock and to observe its performance and actions taken over the next few months.

Contents Page

1.Overview of Company5
1.1Primary Operating Activities and Geographic Coverage5 1.1.1Primary Activities of the Company
1.1.2Most Profitable Activities
1.2Dividend Payout Ratio5
1.3Corporate Governance6
1.3.1 Primary Function of the Board

2.Industry Overview7
2.1 Economy Outlook7
2.2 Industry Outlook7

3.Income Statement8
3.1.1Revenue According to Business Segments
3.1.2Revenue According to Geographical Segments
3.1.3Revenue Recognition Policy

4.1Current Assets11
4.1.1 Cash Ratio
4.1.2Asset Turnover
4.1.3Return on Ordinary Equity
4.1.4Return on Total Assets
4.2.1Inventory Turnover...
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