1.1 Background 1.1.

1 NESTLE (M) BHD The Nestle Group is the worlds largest food manufacturer which headquartered in Switzerland, founded by Henri Nestle in 1866. It present in over 100 countries and had employs 276,000 people in the worldwide. The Nestle Group have around 480 factories in 86 countries and over 6,000 brands come with 10,000 products. It had considered as the worlds largest private nutrition research capability based in Switzerland and had RM6 billion investments annually on research and development. In 2007, The Nestle Malaysia had RM3.4 billion in turnover. It had around 6 sales offices and 7 factories whereby the head office is located at Selangor which is Petaling Jaya. 1.1.2 AIRASIA BERHAD AirAsia is a leading airline come with the widest route connectivity and have the largest customer base with the unmistakable tagline which is, Now Everyone Can Fly. Malaysia AirAsia was incorporated on the 20th December 1993. Currently, in Malaysia have around 3,474 of worker. AirAsia flies to over 100 routes across 11 countries in Asia. The vision of AirAsia is to be the largest low cost airline in Asia and serving the 3 billion people who are currently underserved with poor connectivity and high fares. The mission statement of AirAsia is to be the best company to work for whereby worker are treated as part of a big family and to create a globally recognized ASEAN Brand.

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1.2 Financial Goals 1.2.1 NESTLE (M) BHD In 2011, the Nestle Group had reported their sales of CHF are 83.6 billion and 7.5% for the organic growth. The Organic Growth had collected 3.9% of the real internal growth and pricing of 3.6%. The foreign exchange had a bad impact of 13.4%, and the divestitures and net of acquisitions had a further 4.2%, mainly Alcon. If does not include the impact of the sale of Alcon, sales will decrease by 4.8%. Nestle continued to develop in all country of the world, with 5.0% of organic growth in Europe, 6.4% in Americas and 13.1% in Asia, Africa and even Oceania. Nestle grew 13.3% in emerging market and 4.3% in the developed markets. Nestle also continued to build their capabilities which invest in few areas for future growth. The two partnerships of Nestle with Hsu Fu Chi and Yinlu will have deepened the engagement with the Chinese consumers. The dividend from the board proposed a dividend of CHF 1.95 per share in 2011, compared to 2010 which is CHF 1.85. For the financial position of Nestle, the net financial debt rise from CHF 3.9 billion to CHF 14.3 billion, determined by our completion of the share buyback, CHF 4.8 billion had invested in year 2011 such as investment in growing up milks and nestle professional, CHF 5.9 billion of dividend payment, CHF 4.8 billion of investment in capital expenditure and CHF 3.7 billion of acquisitions. Besides, Nestle had also established a number of joint ventures as well over the years for food and beverages, pharmaceutical activities and the later with LOreal.
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1.2.2 AIRASIA BERHAD AirAsia reported the record revenue of RM4.47 billion; it is an increase of 13% from the revenue of RM3.95 billion reported in year 2010. The operating profit had reported which are RM1.20 billion, increases 12% compare from an operating profit of the previous year which is RM1.07 billion. The core net income for the same period was RM880.78 million; it is an increase of 18% from a core net income from the previous year in 2010 which is RM749.32 million. AirAsia show an EBITDAR Margin of 41% AND EBIT Margin of 27% for the year ended in 31 December 2011. AirAsia Bhd surprised and shocked its shareholders when it announced that its an intention to pay a much higher dividend for the financial year ended in Dec 31, 2011. Hong Leong Investment Bank Research say that it was five cent dividend higher than the previous expectations of 2.6 cent (10% payout) and for year 2010 net dividend of 2.8 cent. It represents the dividends about 20% payout of AirAsia for year 2011 core earnings of 26 cent and believes that AirAsia has reached a stable and strong growth. Indonesia AirAsia is an associate corporation owned 49% by AirAsia Berhad. In 2011, the recorded revenue of Indonesia AirAsia is IDR901.8 billion. AACOE have a profit of RM4.3 million and it is joint venture companies which is integrated in Malaysia and is owned in equal shares by AirAsia BHD and CAE Inc. (REMARKS: The future of the Financial Goals is not really stated.)

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2.1 Share Price 2.1.1 NESTLE (M) BHD Share Price

Date Jan 1,2009 Feb 2,2009 Mac 2, 2009 Apr 1,2009 May 1,2009 Jun 1,2009 July 1,2009 Aug 3,2009 Sep 1,2009 Oct 1,2009 Nov 2,2009 Dec 1,2009 Jan 1,2010 Feb 1,2010 Mac 1, 2010 Apr 1,2010 May 1,2010 Jun 1,2010 July 1,2010 Aug 1,2010 Sep 1,2010 Oct 1,2010 Nov 2,2010 Dec 1,2010 Jan 1,2011 Feb 1,2011 Mac 1, 2011 Apr 1,2011 May 1,2011 Jun 1,2011 July 1,2011 Aug 1,2011 Sep 1,2011 Oct 1,2011 Nov 2,2011 Dec 1,2011 Closing Price 27.5 27.75 29.5 29.75 30 31.25 32 34 34.5 33.18 32.54 33.1 33.06 33.9 34.14 35.12 34.3 35 38.8 39.98 42 43.8 43.4 43.34 44.7 45 46.8 47.98 47.78 47.2 47.1 48.9 47.98 50.4 51.9 56.2 Change of Price in month t 0 0.009090909 0.063063063 0.008474576 0.008403361 0.041666667 0.024 0.0625 0.014705882 -0.03826087 -0.019288728 0.017209588 -0.001208459 0.025408348 0.007079646 0.028705331 -0.023348519 0.020408163 0.108571429 0.030412371 0.050525263 0.042857143 -0.00913242 -0.001382488 0.031379788 0.006711409 0.04 0.025213675 -0.004168404 -0.01213897 -0.002118644 0.038216561 -0.018813906 0.050437682 0.029761905 0.082851638 Change of Price in month t+1 0.009090909 0.063063063 0.008474576 0.008403361 0.041666667 0.024 0.0625 0.014705882 -0.03826087 -0.019288728 0.017209588 -0.001208459 0.025408348 0.007079646 0.028705331 -0.023348519 0.020408163 0.108571429 0.030412371 0.050525263 0.042857143 -0.00913242 -0.001382488 0.031379788 0.006711409 0.04 0.025213675 -0.004168404 -0.01213897 -0.002118644 0.038216561 -0.018813906 0.050437682 0.029761905 0.082851638 -1

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2.1.2 AIRASIA BERHAD Share Price

Date Jan 1,2009 Feb 2,2009 Mac 2, 2009 Apr 1,2009 May 1,2009 Jun 1,2009 July 1,2009 Aug 3,2009 Sep 1,2009 Oct 1,2009 Nov 2,2009 Dec 1,2009 Jan 1,2010 Feb 1,2010 Mac 1, 2010 Apr 1,2010 May 1,2010 Jun 1,2010 July 1,2010 Aug 1,2010 Sep 1,2010 Oct 1,2010 Nov 2,2010 Dec 1,2010 Jan 1,2011 Feb 1,2011 Mac 1, 2011 Apr 1,2011 May 1,2011 Jun 1,2011 July 1,2011 Aug 1,2011 Sep 1,2011 Oct 1,2011 Nov 2,2011 Dec 1,2011 Closing Price 0.88 0.96 0.94 1.17 1.3 1.11 1.5 1.37 1.4 1.35 1.27 1.38 1.36 1.44 1.39 1.35 1.22 1.25 1.49 1.68 2.25 2.47 2.65 2.53 2.75 2.52 2.69 2.87 2.98 3.52 3.93 3.32 3.03 3.9 3.69 3.77 Change of Price in month t 0 0.090909091 -0.020833333 0.244680851 0.111111111 -0.146153846 0.351351351 -0.086666667 0.02189781 -0.035714286 -0.059259259 0.086614173 -0.014492754 0.058823529 -0.034722222 -0.028776978 -0.096296296 0.024590164 0.192 0.127516779 0.339285714 0.097777778 0.072874494 -0.045283019 0.086956522 -0.083636364 0.067460317 0.066914498 0.038327526 0.181208054 0.116477273 -0.155216285 -0.087349398 0.287128713 -0.053846154 0.021680217 Change of Price in month t+1 0.090909091 -0.020833333 0.244680851 0.111111111 -0.146153846 0.351351351 -0.086666667 0.02189781 -0.035714286 -0.059259259 0.086614173 -0.014492754 0.058823529 -0.034722222 -0.028776978 -0.096296296 0.024590164 0.192 0.127516779 0.339285714 0.097777778 0.072874494 -0.045283019 0.086956522 -0.083636364 0.067460317 0.066914498 0.038327526 0.181208054 0.116477273 -0.155216285 -0.087349398 0.287128713 -0.053846154 0.021680217 -1

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2.2 Scatter Graph 2.2.1 Nestle (M) Bhd Monthly Share Price Movement of NESTLE (M) Bhd for 3 Years
The Changes of Price in month t+1 (y)

The Change of Price in month t (x)

The scatter graph display the changes in the share price for NESTLE (M) Bhd for the existing month and the existing month +1. This is to analysis if they are a connection between previous month and this month price.

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2.2.2 AIRASIA BERHAD Monthly Share Price Movement of AIRASIA BERHAD for 3 Years

The Changes of Price in month t+1 (y)

The Changes of Price in month t (x)

The scatter graph display the changes in the share price for AIRASIA BERHAD for the existing month and the existing month +1. This is to analysis if they are a connection between previous month and this month price.

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2.3 Time Series Graph Share Price (y)

Monthly/Year (x) 2.3.1 NESTLE (M) BHD In relation to the share price movement of Nestle (M) Bhd which there is a positive relationship generally, except for the few months where there is no relationship. The graph show the growth is constant for the past three years. Therefore, this makes it easy to predict the future share price using the past data. The graph seems to be gradually increasing because Nestle is the world largest food manufacturer. It had over 10,000 of products which can shows that the company is doing well in food manufacturer. Actually, everyone can see their products easily in a hypermarket and their product are already well known and popular which everyone aware about this company.
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Share Price (y)

Monthly/Year (x) 2.3.2 AIRASIA BERHAD In relation to the share price movement of AIRASIA BERHAD which shows that there are no relationships between the share price changes in month t+1 and month t. It would be difficult to predict the future price of shares based on the past because of the fluctuation. It seems to be sharply increasing and gradually decrease sometimes because of the promotion marketing strategy. Example, in July 2010, it sharply increases because AirAsia launch a promotion which everyone can fly comes with the lowest price as low from RM1. Therefore, the profit gains and will increase during that promotion period.

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Unfortunately, sometimes the share price movement will decrease gradually because most of the people who wish to travel had already bought the ticket because of the cheaper price, so it is common sense that the share price movement will decrease gradually sometimes. Anyway, this is a very good marketing strategy promotion in airline industry businesses. 2.4 Efficient Markets Hypothesis The Efficient Market Hypothesis grows in the year of 1960 by the PH.D Dissertation of Eugene Fama (Gary Karz, CFA 2012). It had make the argument that in an active or dynamic market that involved many smart investors, securities will be correctly priced and will show or reflect all the available information. For example, if a market does efficiency, there is no information or even analysis can be estimated to result in the out performance of an appropriate target. An efficient market can be definite as a market whereby there is a big numbers of profits maximize aggressively competing with each other and trying to calculate the future market values of an individual of securities. Fama had also declare that the Efficient Market Hypothesis theory states that in several given time, the prices of the market by now reflect all known information, by the way it also change fast to reflect the new information. Hence, there is no one possibly will outperform the market which using the same information that had already available to all the investors aside from due to their luck.

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2.4.1 Weak Efficient Market Hypothesis The Weak Efficient Market Hypothesis stated that all past market prices and data are totally reflected in the securities prices. This mean the future prices movement could not be predicted by using the past prices. It is very simple to explain that, the past data of the stock prices are not use in calculating the future stock price changes because everything is random in this kind of market, it should simply use as a buy and hold strategy. 2.4.2 Semi-Strong Efficient Market Hypothesis The Semi-Strong Efficient Market Hypothesis stated that all the information available in publicly and widely and fully reflected in the securities prices. Therefore, the fundamental analysis is of no use. Even the asset prices information are fully expose and available to all the publicly. Hence, only the investors come with the additional information can take advantages to this market. 2.4.3 Strong Efficient Market Hypothesis The Strong Efficient Market Hypothesis stated that all information is fully reflected and expose in the securities prices; even the insider information is of no use. In addition, the assets prices also fully display to the public and inside information are available. As a result, no one will be able to take advantage on the market in predicting prices because there is no data that can provide or give any additional value to all the investor.

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2.5 Random Walk Theory An additional theory that linked to the Efficient Market Hypothesis theory is the Random Walk theory, which declares that the prices of the financial markets change randomly and are not related and they are independent of each other. As a result, distinguish trends or patterns of the price changes in the market cannot be used to calculate the future value of the financial instruments. For example, Burton G Malkiel as known as an economist professor at Princeton University, he carries out a test which his student was given fifty dollars to do the hypothetical stock. The closing stock price for everyday was depending by a coin flip. If the answer was heads than the price will close a half point increase or higher, except if the result was tails then it will close a half point lower or decrease. Therefore, each time the price has a half and half which is fifty-fifty change of closing higher or lower compare to the previous day and the trends or cycles were determined by the tests. Burton takes the results in a graph and chart figure to a chartist. Then, a people who wish to calculate the future movements by seeking to figure out the previous patterns on the assumption that history tend to repeat itself. So, the chartist informs Burton that they needed immediately. After that, Burton say to him that it was based purely on the flipping coin, then the chartist was very depressed and dejected. Lastly, Burton dispute that this shows that the market and stocks can be just random as flipping a coin. This is because the markets are efficient, the share price of both the companies reflect all available information.
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3.1 Differences between Valuation of Securities and Capital Budgeting The securities are valued by looking into the market value. Hence, it does conclude by many aspect including demand and supply. When it comes to capital budgeting, the value of the projects is determined by the company who tender the project. The securities are also valued via the future cash flow, for example, the future dividend for the share valuation. Cash flow is applied to determine the value of securities, for example, shares and debentures. The future cash flow from dividends cannot be really calculated because it is not under the control of the company.. So, when it comes on capital budgeting, the future cash flows could be controlled by the company by using the method such as reducing the expenses or even cost cutting measures. The importance of capital budgeting can be understand from the reality that an unsound investment decision may prove to be serious to the very survival of concern. Example, large investment usually involves large investment of funds but typically there is a shortage of funds at every company. Therefore, the funds and resources are under controlled by the company. 3.2 Capital Budgeting Techniques Capital Budgeting is the way or process which a firm decides to choose which long term investment should be invested. Example for Capital Budgeting projects, a potential of long term investment are expected and estimated to generate cash flow over the several years. Therefore, the decision whether reject or accept is depend on the
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analysis of the cash flow generated by the project and its cost. There are three type of Capital Budgeting decision rules can be presented which is Payback Period, Net Present Value and Internal Rate Return. A Capital Budgeting decision should concern all of the projects cash flow, consider the time value of money and must always goes to the correct decision when choosing among the mutually exclusive projects. 3.2.1 Internal Rate Return IRR frequently used in capital budgeting it makes the NPV of all cash flow equal to zero. The higher the IRR of a project, the more advantage to take the project. Besides, IRR can also be compared against the current rates of return in the securities market. If a company cannot find any projects with IRR greater than the returns in the financial market, it may just simply choose to invest its retained earnings into the market. 3.2.2 Payback Period Payback Period means that the length of the time taken to recover the cost of investment. The payback period that given for the investment or a project is an important factor that shows whether to accept or reject the project. The payback period are calculated as:[Payback Period = Cost of the Project/Annual Cash Inflows] A good investment is the one with the shorter payback period. Example, XYZ Project costs $200,000 and is estimated to return $20,000 annually. Therefore, the payback period will be $200,000/$20,000 or 10 years. The problems for the payback
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period method are it ignores the benefits that happen after payback period; it does not measure the profitability and does not look into the time value of money. 3.2.3 Net Present Value Net Present Value is the differences between the present value of cash inflow and present value of cash outflow. It uses to analyze the profitability of a project or an investment. This analysis is very sensitive to the reliability of the future cash inflows that a project or an investment generate. Net Present Value can be calculated by using the tables or even spreadsheets, example Microsoft Excel. If the NPV had calculated and it is positive for the project, it means it should be accepted, but if is negative, the project should probably be rejected because the cash flow also will be negative.

4.0 References
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1) Gary Karz. CFA. (n. d) The Efficient Market Hypothesis & The Random Walk Theory: Investor Home, [Internet]. Available at: http://www.investorhome.com/emh.htm [Accessed on November 10th, 2012] 2) Rock Mathis. (n. d) Capital Budgeting: Corporate Finance Live, [Internet]. Available at: http://www.prenhall.com/divisions/bp/app/cfl/CB/CapitalBudgeting.html [Accessed on November 10th, 2012] 3) AirAsia.com. (n. d) AirAsia Annual Report 2007: Chairmans Statement, [Internet]. Available at: http://announcements.bursamalaysia.com/EDMS/subweb.nsf/all/6ADBB44523F7A5 A64825744400356BED/$File/AIRASIACover%20to%20Page %2043%20%282.8MB%29.pdf [Accessed on November 2nd, 2012] 4) Nestle.com. (2012) Nestle Share Value Report: Financial Statement, [Internet]. Available at: http://announcements.bursamalaysia.com/EDMS/subweb.nsf/all/18304389A8312560 4825741E00314296/$File/NESTLECreatingSharedValueReport&FinancialReport2007%20%282.1MB%29.pdf [Accessed on November 6th, 2012] 5) The Star. (17 May 2012) AirAsia surprises investors, [Internet]. Available at: http://biz.thestar.com.my/news/story.asp? file=/2012/5/17/business/11304538&sec=business [Accessed on November 3rd, 2012]
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6) Anon. (2011) AirAsia Reports 2011 Financial Results, [Internet]. Available at: http://www.asiatraveltips.com/news12/232-AirAsia.shtml [Accessed on November 3rd, 2012] 7) Finance.yahoo.com. (2012) AIRASIA BHD (5099.KL): Historical Prices, [Internet]. Available at: http://finance.yahoo.com/q/hp? s=5099.KL&a=00&b=1&c=2009&d=11&e=31&f=2011&g=m [Accessed on November 9th, 2012] 8) Finance.yahoo.com. (2012) NESTLE (M) BHD (4707.KL): Historical Prices, [Internet]. Available at: http://finance.yahoo.com/q/hp? s=4707.KL&a=00&b=1&c=2009&d=11&e=31&f=2011&g=m [Accessed on November 9th, 2012] 9) Wikipedia. (n. d) Random walk, [Internet]. Available at: http://en.wikipedia.org/wiki/Random_walk_theory [Accessed on November 15th, 2012] 10) Investopedia.com. (n. d) Payback Period, [Internet]. http://www.investopedia.com/terms/p/paybackperiod.asp#axzz1XOP2i8bO [Accessed on November 11th, 2012] http://www.academia.edu/1508051/AirAsia_The_Worlds_Lowest_Cost_Airline http://www.theedgemalaysia.com/in-the-financial-daily/187347-new-player-a-challengefor-airasia-mas.html
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http://www.themalaysianinsider.com/litee/malaysia/article/AirAsia-wins-award-formarket-leadership/ http://www.airasia.com/iwovresources/my/common/pdf/AirAsia/IR/AA_4Q09_Press_Release.pdf http://investvine.com/air-asia-founder-to-swallow-insurance-firms/ http://biz.thestar.com.my/news/story.asp? file=/2013/4/6/business/12934516&sec=business http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/annual-reportfinancials-2011.pdf

QuickMBA (2007), BCG Growth-Share Matrix, viewed 10 June 2010, <http://www.quickmba.com/strategy/matrix/bcg/>

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