BWFN 5013: INVESTMENT ANALYSIS

GROUP: CREATING AND MANAGING A

PORTFOLIO

PREPARED TO: MR AFIRUDDIN TAPPA

PREPARED BY: SHAMINY GANESAN (824108)

SHARALA NAIR ACHUDAN (824269)
SHARMILA DEVI SUPPIAH (824090)
FITRI MAHARANI BINTI NURDI
(824425)

DATE OF SUBMISSION: 22 MARCH 2019

Table Of Contents

Title Pages
Berjaya Food Berhad 1-13
Dayang Enterprise Holdings Bhd 14-27
Weibo Corporation 28-38
Apple Inc 39-46
Microsoft Corporation 47-61
BERJAYA FOOD BERHAD

Company Background

Berjaya Food Berhad (“BFood”) was incorporated in Malaysia on 21 October 2009. It was
converted into a public limited company on 3 December 2009 and listed on The Main Market
of Bursa Malaysia Securities Berhad on 8 March 2011. Berjaya Roasters (M) Sdn Bhd
(“BRoasters”) was acquired as part of The Listing Scheme, and became a wholly-owned
subsidiary of BFood in January 2011.

On 19 July 2012, BFood completed the acquisition of 50% equity interest in Berjaya
Starbucks Coffee Company Sdn Bhd (“BStarbucks”). The remaining 50% equity interest was
held by Starbucks Coffee International, Inc (“SCI”). On 18 September 2014, BFood
completed the acquisition of 50% equity interest in BStarbucks not owned by BFood for a
total cash consideration of USD88,000,000 (equivalent to about RM279.52 million).

On 7 December 2012, BFood acquired 100% equity interest in Jollibean Foods Pte Ltd,
Singapore (“Jollibean Foods”) for a cash consideration of RM19.02 million. On 30 January
2018, the Company’s wholly-owned subsidiary, BFI completed the disposal of 5% equity
interest in Jollibean Foods to Mr Sydney Lawrance Quays for a cash consideration of
Singapore Dollar (“SGD”) 150,000 (equivalent to about RM445,020).

On 7 October 2013, BFI entered into a Joint Venture Cum Shareholders’ Agreement with
Deluxe Daily Food Sdn Bhd (“Deluxe”) for the subscription of 80% equity interest in Berjaya
Food Supreme Sdn Bhd, a Brunei Darussalam-incorporated company to undertake the
operations of “Starbucks Coffee” chain of cafes in Brunei Darussalam for a total cash
consideration of about BND2.40 million (or about RM6.20million). The remaining 20% was
subscribed by Deluxe.

1|Page
Corporate Structure

Top 10 Shareholders Information

No. Names of Shareholders No. of %

Ordinary
Shares Held

1 RHB Capital Nominees (Tempatan) Sdn Bhd 29,400,000 7.80

2 Maybank Nominees (Tempatan) Sdn Bhd 19,580,000 5.20

2|Page
 3 CIMB Group Nominees (Asing) Sdn. Bhd. 18,480,000 4.90

4 Maybank Nominees (Tempatan) Sdn Bhd 17,696,720 4.70

5 ABB Nominee (Tempatan) Sdn Bhd 16,400,000 4.35

6 Affin Hwang Nominees (Tempatan) Sdn. Bhd. 13,400,000 3.56

7 ABB Nominee (Tempatan) Sdn Bhd 13,333,333 3.54

8 Kumpulan Wang Persaraan (Diperbadankan) 12,633,000 3.35

9 CIMB Group Nominees (Tempatan) Sdn Bhd 12,300,000 3.26

10 Citigroup Nominees (Asing) Sdn Bhd 10,325,500 2.74

Economy Analysis

Global Economy

The global economy is expected to expand by 3.7% in the year 2018 and 2019 which is lower
than the earlier expected rate 3.9%. This is due to the uncertainties of policy with several
risks from the trade tension and outflow of capital from emerging economies. The global
growth have become less synchronised with mixed development in advance economy while
projection for emerging economies in developing Asia remain favourable. With the advanced
economies the US is expected to record a strong growth by pro-cyclical fiscal stimulus and
accommodative monetary policy.

The euro, UK and Japan are forecasted to expand at moderate rate. Major economy in euro
which is France and Germany are forecasted to expand moderately with the softer external
demand and growth in productivity. In UK growth is weighed down because of more barriers
to trade following Brexit, while Japan face decline labour force due to unfavourable
demographics.

3|Page
The growth in emerging economies particularly developing Asia is expected to remain steady
with the support from strong domestic demand led by India whereas China is expected to
expand marginally slower because of regulatory tightening in financial and property sectors.
On the other hand the fuel-exporting countries are expected to benefits from higher global oil
prices. Growth in the other emerging economies such as Latin America and the Caribbean is
forecasted to be lower due to dampening trade and investment activities and disruptions in the
financial markets. Investment and industrial activities expected to slower down due to trade
tensions. This will reduce the demand for capital and intermediate goods which contribute
significantly to global trade.

Global trade is projected to expand by 4.2% in the year 2018 and 4% in the year 2019 as
compared with 5.2% in the year 2017. The global growth is expected to growth downward
because of the tightening financial conditions, trade threats and risks of shifting towards
protectionism as well as geopolitical tensions.

Domestic Economy

Malaysian economy remains resilient in the near term considerable external and domestic
headwinds. Real GDP is projected to expand 4.8% and 4.9% in 2018 and 2019 respectively
which is supported mainly by domestic demand. Private sector expenditure, household
spending will remains as the main factor for the growth in GDP and also continuous increase
in employment and wages. Meanwhile private investment will be supported by new and
ongoing projects in the services and manufacturing sectors. Public expenditure is expected to
growth marginally in 2018 and 2019 due to lower capital outlays by public corporations.

From the supply side, the services sector is expected to remains as the largest contributor,
such as wholesale and retail trade, finance and insurance as well as information and
communication subsectors which is benefiting from steady consumer spending. The
manufacturing sector growth is primarily driven by continuous demand for environment &
ecology. Agriculture and mining sectors are expected to rebound in 2019 after recording a
marginal contraction in 2018 following an increase in the production of crude palm oil (CPO)
and liquefied natural gas (LNG). The construction sector is expected to growth moderately
following the near completion of infrastructure projects as well as property overhang,
particularly in the non-residential segment.

4|Page
Malaysia’s external position is projected to remains resilient in line with steady global
economic and trade performances. However exports are expected to moderate due to slower
global trade and investment activities. The current account surplus is expected to narrow
following widening deficits in the services and income accounts.

The monetary policy continues to be supportive of economic growth while ensuring price
stability. In 2019 the monetary policy will remain accommodative and considerations for
adjustments will depend on risks of domestic growth and inflation. The domestic financial
systems remain stable and supported by deep and liquid financial market. Meanwhile, the
domestic equity market is projected to continue recording gains despite external headwinds.
Islamic banking is expected to remains favourable given strong demand from both
households and businesses for Shariah-compliant financial products and services. Malaysia is
expected to maintain its position as a global leader in Islamic finance.

Industry Analysis

Growth Cycle of Industry

There are five stages in the product life cycle. The first stage is product development, second
stage is introduction, third stage is growth, fourth stage is maturity and the final stage is
decline.

5|Page
Product development stage: The phase of development of new idea for a product. It also a
pre-launched and early stage of any new product that passes through many research and tests.
The product is being developed and shape into the needs and interest of consumers. The
management of the company have to bear the pre-launched expenditure. The development
and research expenditure will become loss for the company if the product fails to meet
consumer’s expectations.

Introduction stage: The product is distributed and available for sale. A launching of new
product is very expensive for a company. The marketers will work hard to create sufficient
demand for the new product in the market. The company must approach customers and
encourage them to try their new product. There is no profit generated if the revenue the
company gain is equal to the research and development cost of the product at development
stage.

Growth stage: The growth stage provides company with a strong growth in terms of sales
volume and profit earned. The company will invest more in advertising and promotion of the
product. If competition increases the price of the product might decrease. Mostly the price
will remain same and the company will approach a new distribution channels to fulfil the
increasing demand.

Maturity stage: The product cost decreases due to learning curve and high production
volume. The company should maintain the market share that they have achieved and the
maintaining process is not easy for a company. Incentives should be given to marketing staff
to sell the products and compete with competitors. Any new competitors introduce almost
same products will affect the product pricing and profitability.

Decline stage: Decline stage is the last stage of a product life cycle. The product is getting
older and starts to shrink. One of the reasons for this situation is the saturated market due to
competitors, product with new features and more advanced. This situation is unavoidable but
the company still have many options. One of the options is upgrading the products by adding
new features and makes it more attractive for the customers. If possible harvest the product
and targeted at loyal customers.

6|Page
Competitive Position

Fast food restaurant is fast growing and the most notable developments in the Malaysia
foodservice industry. The fast food industry has grown at a rapid rate over the past 20 years
and most lovable by Malaysian regardless of age. In any special occasion fast food restaurant
will be the first choice of most Malaysian. Fast food has become a part of Malaysian culture
and plays an important role in the society. Even though there is continuous debate in western
countries about the fast food side effects the popularity of fast food among Malaysian cannot
be cancelled out. The fast food industry is believed to be benefiting from the current local
demographic trends, urbanization and changing lifestyles.

AmInvestment Bank Bhd have pointed out that BJFood’s first nine months of FY19
(9MFY19) net profit exceed the expections and the group’s earnings growth to 59% for FY19
forecast which is contributed by stellar Starbucks brand. The strong performance was
attributed to year-end festive promotions, school holidays and the Christmas season which
boosted both beverages and merchandise sales. ‘

With the enhancement of current technology such as Grabfood make the life easier for fast
food lovers. Berjaya Food also has implemented Grabfood services for fast food delivery.
Through Grabfood consumers can place order and make payment through Grabpay and the
food will be delivered to their doorstep. The customers no need to line up at fast food
restaurant instead they just wait for the Grabfood driver to deliver to them the fast food that
they ordered. Fast food industry rapid growing rate is influence by the enhancement of
technology such as Grabfood, Foodpanda and many more application which can be
downloaded from google play store in any smart phones.

The choices of fast food restaurant are strongly influenced by the restaurant’s cleanliness,
consistency of menu items and also the location. Berjaya food have been established with
good image and trusted by many customers. To be an outstanding fast food restaurant the
marketing strategies of the restaurant must have a sound understanding of consumer
perceptions and preferences and how they differ across different cultures such as displaying
health information of their food products.

7|Page
As the Consumer gets much health information they will have a good perception on Berjaya
Food for providing them health updates. At the same time, the marketing strategies must take
into consideration of the consumer interest and most importantly the message must clearly
communicate. They must make sure the marketing strategies reached to large number of
audiences.

In order to survive in the fast food industry, every restaurant of fast food must be able to
provide a good food and healthy with variety and upgraded menu of food. Research and
development must be carried out on the food that they are selling according to the current
market trend and needs. For example instead of selling hotdog the fast food restaurant can
conduct research and development on the menu and sell hotdog cheese or hotdog corn instead
of just hotdog in order to do attract more customers to their fast food restaurant.

Financial Performance of BJFood and competitors during financial year 2018

Financial BJFood Bornoil Oversea BJLand Kbunai BJToto

Revenue 5,660,58
(RM) 639,741,000 137,108,230 58,517,458 6,361,198 79,409,701 7

PBT 377,233
19,197,000 (1,589,165) (3,566,454) 69,852 31,593,232
(RM)
PAT 237,944
2 18,000 (5,897,919) (4,859,668) (118,188) 44,923,048
(RM)
T. Asset 2
(RM) 813,663,000 717,047,783 72,182,652 5,389,809 1,396,099,819 ,631,057

T. 1
Liabilities 426,474,000 32,451,996 12,996,520 2,307,595 522,686,684 ,844,660
(RM)
Market 1.3
Cap 565 million 240 million 30 million 1.4 Billion 462 Million Billion

Price 0.25
1.60 0.05 0.12 0.28 0.09
(RM)

8|Page
Fundamental Analysis

The table below is showing the financial performance of Berjaya Food from the year 2014 to
the year 2018.

Income Statement Dec’18 Dec 17 Dec 16 Dec 15 Dec 14

(RM’Mil)

Revenue 639,741 605,441 554,363 376,780 150,369

Profit/ (loss) Before 19,197 24,319 35,615 182,769 24,573

Taxation

Profit/ (Loss) after 2 18 6 ,332 17,542 171,099 20,113

taxation

Balance Sheet Dec’18 Dec 17 Dec 16 Dec 15 Dec 14

(RM’Mil)

Total Current 94,341 89,806 115,944 107,175 43,310

Asset

Total Non-Current 719,322 700,433 630,710 607,057 149,530

Asset

Total Assets 813,663 790,239 746,654 714,232 192,840

Short Term 141,758 130,667 62,331 4,431 5,931

Borrowing

Long Term 137,495 124,689 166,490 186,626 -

Borrowing

Total Debt 279,253 255,356 228,821 191,057 5,931

Total Equity 387,189 374,330 388,503 387,793 162,146

Cash Flows Dec’18 Dec 17 Dec 16 Dec 15 Dec 14

Statement
(RM’Mil)

Cash Flows from 63,302 75,093 42,613 68,049 10,626

operation

Cash flows from (49,469) (78,624) (51,357) (280,045) (12,848)

Investing Activities

9|Page
Cash flows from (6,163) (8,180) 8,551 225,403 2,015
Financing
Activities

Net Cash – Ending 28,782 21,256 33,354 33,362 19,639

Balance

Berjaya Food net income has increased from the year 2014 to the year 2015 and then
drastically decreased from the year 2016 to the year 2018. Even though their revenue for
respective years has increase gradually from the year 2014 to the year 2018. During the year
2018 the net income after tax which is RM218,000 is the lowest among other recorded net
income throughout the year 2014 to 2017. This may reflect the changes of ruling party and
the implementation of Service Sales Tax (SST) to replace Goods Service Tax (GST) during
the year 2018. Berjaya Food restaurant chains is improving and making more profits for the
first two months of 2019. The acceptance of public on Berjaya food restaurant chains has
increased steadily from the year 2014 to the year 2018. The increase in profit first two
months of 2019 is contributed by their Starbucks coffee and also Kenny Rogers Roasters. The
upgraded version of meals and combo food and variety of coffees also have help to boost
Berjaya Food performance and revenue gained.

The total debts of Berjaya Food are increasing from the year 2014 to the year 2018. Both
short term and long term borrowing is increasing. This showing that the company is using
short term and long term borrowing for their business expansions. Business expansion is a
process of seeking out of additional options to generate more profits. The company is
targeting a bigger group of customers by expanding their business. Customers play important
role in determining the success of Berjaya Food business in the long runs. The increase in
short term and long term borrowing will incur interest expense. The company have to bear
the interest expense. Interest expense is a non-operating expense shown on the income
statement of the company.

The total equity of Berjaya Food increase from the year 2014 to the year 2016 and it decrease
during the year 2017 and increase back in the year 2018. The company is using more equity
financing than debt financing. Equity financing is good for the company as it does not bring
any financial burden to the company. There is no monthly interest payment by using equity
financing and the company will have more capital to invest for the business growth.

10 | P a g e
Through equity financing the shareholders is entitle for the dividend. But if the company
doesn’t gain profit for the current year the payment of dividend can be brought forward to
next financial year as a cumulative figure.

Ratio Analysis of Berjaya Food

The table below showing the ratio analysis of Berjaya Food from the year 2014 to the year
2018

Ratio Dec 18 Dec 17 Dec 16 Dec 15 Dec 14

Analysis

Gross Profit 44.11% 43.51% 44.53% 44.87% 39.69%

Margin

Net Profit 0.03% 1.05% 3.16% 45.4% 13.38%

Margin

Current 0.34 0.32 0.64 0.84 1.70

Ratio

Debt Ratio 52.4% 52.6% 48% 45.7% 15.9%

(%)

Return on 0.03% 0.80% 2.35% 24% 10.4%

Asset (ROA)

Return on 0.06% 1.69% 4.52% 44.1% 12.4%

Equity
(ROE)

Earnings 0.31 3.05 5.66 54.41 8.58

Per Share

The current ratio is a liquidity ratio that measures a company’s ability to pay their short term
obligations which is less than a year. A ratio less than one indicate that the company may
have difficulty in meeting their short term obligations as their current liabilities exceed their
current assets. Berjaya food current ratio is less than one during the year 2017 and the year
2018. This shows that the company unable to meet their short term obligations.

11 | P a g e
Return on Asset (ROA) is a profitability ratio that indicates how much profit a company is
able to generate by using their assets. It’s also means that how efficient the company
management in generating profits from their economic resources. The higher is the
percentage the more efficient a company in using available resources in generating profits.
Berjaya Food, Return on Asset is very low during the year 2016 to the year 2018. This shows
that the company is not efficiently using their assets in generating profits from the company.

Return on Equity (ROE) is a ratio showing how efficient a company in using shareholder
fund in generating profits for the company. The higher is the percentage of the ratio the more
efficient is the company in using shareholder equity in generating profits. Berjaya Food,
Return on Equity is very low during the year 2016 to the year 2018. This indicates that the
company is not efficiently using shareholder funds to generate income for the company.
Shareholders may find it risky and doesn’t worth to invest in Berjaya Food.

The earnings per share of Berjaya Food are also very low during the year 2017 to the year
2018. The company will have difficulty in getting equity financing from shareholders. This is
because shareholders will gain less return from their investment in the Berjaya Food. The
existing shareholders and future shareholders will have doubt on the management of the
Berjaya Food in managing the company.

Technical Analysis

The technical analysis used in this assignment consists of moving average convergent and
divergent (MACD), relative strength index and moving average. The technical pattern of
technical analysis are support or resistant.

12 | P a g e
On 04/02/19, I bought 59,200 units of Berjaya Food shares at price of RM1.34 per share in
total of RM79,328. On 08/03/19 I sell off all the shares at RM1.48 for total proceeds of
RM87,616 and gain profits of RM8,288. The MACD is showing signal to sell at the end of
Feb 19. The RSI is showing signal to sell at the middle and end of Feb 19 and signal to buy at
the beginning of March 19.The moving average showing signal to sell at the end of Feb 19.
The support line at the end of Feb 19 and beginning of March 19 giving signal to buy the
shares.

13 | P a g e
DAYANG ENTERPRISE HOLDINGS BHD

Company Background

Dayang Enterprise Holdings Berhad (Dayang) (712243-U) is an investment holding company

that has three wholly owned subsidiaries under its wing which are Dayang Enterprise Sdn
Bhd (DESB) (61505-V), DESB Marine Services Sdn Bhd (DMSSB) and Fortune Triumph
Sdn Bhd (FTSB).

The company’s operations commenced with DESB in 1980 whose initial business was the
trading of hardware materials and supply of manpower for the offshore oil and gas industry.
Besides, this was expanded to include provisioning of maintenance services, fabrication
operations, hook-up and commissioning and charter of marine vessels.

This company has been awarded with numerous contracts including those by Petronas
Carigali, Sarawak Shell Berhad and ExxonMobil. In line with its emphasis on quality, DESB
was accredited with an MS ISO 9001:2015 Quality Management System certified by SIRIM
QAS International Sdn Bhd in June 2017.

In addition to that, Dayang Enterprise Holdings Berhad also received the Grand Award from
ExxonMobil and Petronas Carigali, as recognition of safety excellence in 2004. Since 2002,
Dayang Enterprise Holdings Berhad has been the annual recipient of Petronas Carigali
Certificate of Appreciation.

14 | P a g e
The strengths of this company are:

 Having approved license and registration by Petronas.

 Established track record.
 Experience in supporting diverse types of offshore structures.
 Economies of scale.
 Comprehensive In-House skills and expertise.
 High quality standards.
 Marine vessels.
 Full range of In-House equipments and tools.

The main services of Dayang Enterprise Holdings Berhad are provision of maintenance
services, subsidiary of this Company which is Dayang Enterprise Sdn Bhd (DESB)
undertakes the overall provision of maintenance services, which focuses on the following
areas:
 Maintenance of Topside structure
 Maintenance of pipes and valves and
 Electrical and instrumentation

The maintenance services are provided either on a routine or scheduled basis or during a
breakdown or emergency, in which case maintenance works are undertaken due to fault or
failure.

Besides, they provide fabric operations service. Fabrication generally refers to the valued-
added process of constructing structures out of various raw materials, primarily metal.
Dayang Enterprise Holdings Berhad undertakes engineering and fabrication services to meet
the needs of its customers including onshore fabrication for products such as pipe and valve
systems, skids and other steel structures such as hand rails and helideck extensions.
Furthermore, this Company have two fabrication yards cum warehouses name Labuan Yard
at Kampung Rancha-Rancha, Labuan, FT and Kemaman Yard at Kemaman Supply Base,
Kemaman, Terengganu.

The third services provided by them is hook up and commissioning, Dayang Enterprise
Holdings Berhad also undertakes the provision of hook-up and commissioning for steel
structures and electrical and instrumentation services as part of its supporting products and
services to the oil and gas industry.

15 | P a g e
On the other hand, some of the tasks related to hook-up and commissioning of electrical &
instrumentation includes electrical engineering, system design, equipment & system
procurement, wiring including laying of new wires & cables, panel installation & wiring and
testing & commissioning.

Charter of marine vessels also one of the services that provided by them, Dayang Enterprise
Holdings Berhad possesses its own marine vessels which are used to provide offshore
accommodation for its personnel as well as work area and equipment to facilitate the
provision of its supporting products and services.

The list of Dayang Enterprise Holdings Berhad sharholders:

16 | P a g e
17 | P a g e
Economic Analysis

Economic factors includes taxation rate, the stage of economy of country name, economic
performance of country name, exchange rate, interest rate, consumer disposable income,
labour market conditions, and inflation rate.

Economic Factors that Impact Dayang Enterprise is increasing liberalization of trade policy
of Malaysia which can help Dayang Enterprise to invest further into the regions which are so
far off limits to the firm. Besides, availability of core infrastructure in Malaysia over the
years lead the Malaysia government to increase the investment in developing core
infrastructure to facilitate and improve business environment. In order to that, Dayang
Enterprise can access the present infrastructure to drive growth in oil & gas sector in
Malaysia.

Furthermore, based on the economic performance of Malaysia we believe the economic

performance of Malaysia in 5 to 10 years will remain stable as the government expenditures
are in stable demand because of disposable income, and increasing investment into new
industries. Moreover, government intervention in the energy sector and in particular oil & gas
industry can impact the fortunes of the Dayang Enterprise in the Malaysia.

According to the economic cycles, the performance of Dayang Enterprise in Malaysia is

closely correlated to the economic performance of the Malaysia's economy. The growth in
last two decades is built upon increasing globalization and utilizing local resources to cater to
global markets. On the other hand, downward pressure on consumer spending will give
negative impact on consumer, for the instance even though the disposable income of
consumer has remain stable, the growing inequality in the society will negatively impact
customers sentiment and thus impact consumer spending behaviour.

Besides, Dayang Enterprise own approved license & registeration by Petronas, Dayang’s
wholly owned subsidiary, DESB is registered with Ministry of Finance and has a Petronas
approved license that enables it to provide supporting products and services for the oil and
gas industry. Dayang Enterprise having 25 years of oil and gas experience, so that it is
successfully established a track record that is associated with quality, reliability, technical
expertise as well as service excellence.

18 | P a g e
Furthermore, Dayang Enterprise provides supporting products and services, especially
maintenance services for a wide range of exploration and production platforms, and other
offshore structures. Dayang Enterprise also experience plus its track record serve as a distinct
competitive advantage when bidding for offshore contracts.

Dayang enjoys significant economies of scale, which serves as a competitive advantage when
bidding for new contracts, but at the same time able to maintain a high margin. This is
achieved through providing a wide range of supporting products and services, and servicing a
large number of offshore structures. In addition to that, Dayang Enterprise has in-house
expertise and skills to maintain most types of offshore structures and platforms and thus does
not rely on outsourcing and / or third party expertise.

Dayang Enterprise has eight vessels in operation and construction of another maintenance
and accommodation workboat. Dayang Enterprise believe that by having its own vessels,
They able to reduce its reliance on the supply of charter services from external parties and
allow the company to be more competitive in terms of pricing and costing when bidding for
contracts. Moreover, thye has a full range of in-house equipments and tools that allows it to
provide a prompt and consistent product and service quality, high efficiency and the ability to
undertake high volume work.

Industry Analysis

There are three main ways in which we can perform industry analysis, these are the
competitive forces model also known as Porter’s Forces, the broad factors analysis also
knows as PEST analysis and SWOT Analysis. As per my suggestion, the new investors at
Dayang Enterprise Holding Berhad can use Porter Five Forces as a strategic management tool
to do industry analysis. It will help the investors at Dayang Enterprise in mapping the various
competitive forces that are prevalent in oil & gas industry.

Dayang Enterprise can use porter five uses to help managers at Dayang Enterprise to
understand about rivalry among existing players in the oil & gas services & equipment,
bargaining power of buyers of Dayang Enterprise, bargaining power of suppliers of Dayang
Enterprise, threat of new entrants in the oil & gas services & equipment industry and threat of
substitute products and services in the oil & gas services & equipment industry.

19 | P a g e
The Porter Five Forces that determine the industry structure in oil & gas services are:

 Threat of new entrants in oil & gas industry – if there is strong threat of new
entrants in the oil & gas services industry then current players will be willing to earn
lower profits to reduce the threats from new players.
 Threat of substitute products and services in oil & gas services sector – If the
threat of substitute is high then Dayang Enterprise has to either continuously invest
into R&D or it risks losing out to disruptors in the industry.
 Rivalry among existing players in oil & gas industry – If competition is intense
then it becomes difficult for existing players such as Dayang Enterprise to earn
sustainable profits.
 Bargaining power of buyers of Dayang Enterprise and Energy sector – If the
buyers have strong bargaining power then them usually tend to drive price down thus
limiting the potential of the Dayang Enterprise to earn sustainable profits.
 Bargaining power of suppliers in oil & gas – If suppliers have strong bargaining
power then they will extract higher price from the Dayang Enterprise. It will impact
the potential of Dayang Enterprise to maintain above average profits in oil & gas
industry.

The Porter Five Forces analysis is important for Dayang Enterprise because the new investors
or clients can use Porter Five Forces model to analyse the competitiveness faced by Dayang
Enterprise in oil & gas industry. Porter five forces analysis of Dayang Enterprise will help in
understanding and providing solution to for nature & level of competition, and how Dayang
Enterprise can cope with competition. In addition to that, from outside various industries
seem extremely different but analysed closely these five forces determines the drivers of
profitability in each industry. Besides, investors also can Porter Five Forces to understand
key drivers of profitability of Dayang Enterprise in oil & gas industry.

The core objective of strategists and leaders at Dayang Enterprise is to help the organization
to build a sustainable competitive advantage and thwart competitive challenges from other
players in the oil & gas industry. There few steps in order to practice a good Porter Five
Forces:

20 | P a g e
Step 1-Defining relevant industry for Dayang Enterprise. For the example, Dayang
Enterprise does mostly its business in oil & gas industry.
Step 2 -Identify the competitors of Dayang Enterprise and group them based on the
segments within the energy industry.
Step 3- Assess the Porter Five Forces in relation to the oil & gas industry and assess which
forces are strong in oil & gas and which forces are weak.
Step 4 - Determine overall energy industry structure and test analysis for consistency.
Step 5- Analyse recent and future changes in each of the forces in the oil & gas industry.
This can help in predicting the trend in overall energy sector.
Step 6- Identify aspects of industry structure based on Porter Five Forces that might be
influenced by Dayang Enterprise competitors and new entrants in oil & gas industry.

Porter Five Forces framework can be used for developing strategies for Dayang Enterprise
Holding Bhd. Furthermore, to achieve above average profits compare to other players in oil
& gas industry in the long run, Dayang Enterprise needs to develop a sustainable competitive
advantage. On the other hand, oil & gas industry analysis using Porter Five Forces can help
Dayang Enterprise to map the various forces and identify spaces where Dayang Enterprise
can position itself. By doing Industry analysis using Porter Five Forces, Dayang Enterprise
can develop generic competitive strategies which are cost leadership, differentiation, cost
focus & differentiation focus.

Cost leadership

In cost leadership, Dayang Enterprise can set out to become the low cost producer in the oil
& gas industry. How it can become cost leader varies based on the Energy industry forces
and structure. In pursuing cost leadership strategy, company name can assess to pursuit of
economies of scale, proprietary technology, supply chain management options,
diversification of suppliers, preferential access to raw materials and other factors.

Differentiation

Dayang Enterprise can also pursue differentiation strategy based on the oil & gas industry
forces. In a differentiation strategy Dayang Enterprise can seek to be unique in the oil & gas
industry by providing a value proposition that is cherished by customers.

21 | P a g e
Besides, Dayang Enterprise can select one or more attributes in terms of products and
services those customers in the oil & gas values most. In addition to that, the goal is to seek
premium price because of differentiation and uniqueness of the offerings. Industry analysis of
oil & gas using Porter Five Forces can help Dayang Enterprise to avoid spaces that are
already over populated by the competitors.

Focus - cost focus & differentiation focus

The generic strategy of focus rests on the choice of competitive scope within the oil & gas
industry. Dayang Enterprise can select a segment or group of segment and tailor its strategy
to only serve it. Most organization follows one variant of focus strategy in real world.

Fundamental Analysis

Dayang Enterprise’s primary competitors include some of the most prominent oil & gas
companies in the industry. The examples of the competitors are Sapura Energy, T7 Global
Berhad, Malaysia Petroleum Resources Malaysia and Petra Energy Bhd.

Financial performance of three largest oil & gas Companies in Malaysia for financial year
ended 2017:

Sapura Energy Petra Energy T7 Global

Revenue ($ million) 661,410 8,597 184.140
Profit before tax 274,728 (17,910) (1,584,239)
($ million)
Profit after tax 276,050 (17,733) (1,638,791)
( $ million)
Total assets ($ million) 11,048,854 337,879 207,846,426
Total liabilities 1.968,381 2,407 34,314,819
($ million)
Total equities 9,880,473 335,472 173,531,607
($ million)
EPS 3.50 (14.34) 0.49

22 | P a g e
Financial performance of Dayang Enterprise Holdings Berhad from 2013 to 2017:

2017 2016 2015 2014 2013

(RM’000) (RM’000)
Income
Statement
Revenue 499,910 4,200 35,140,000 66,406,606 58,230,000
COGS 1,235 2,556 8,731,000 1,963,628 1,560,184
Net Income 456,234 (39,031) 11,393,736 63,992,150 57,682,111
Financial
Position
Total assets 1,257,186 1,255,524 1,268,547,009 604,374,488 445,329.296
Total liabilities 630,540 709,909 683,900,893 423,610 20,236,185
Total equities 636646 545,615 584,648,116 603,950,876 425,093,111
Cash Flow
Operating (2,826) 49,108 78,711,346 (11,552,203) (22,245,550)
Investing - - (741,460,228) 94,190,494 (68,872,024)
Financing (27,203) (10,402) 628,197,788 (48,848,789) 31,375,973
Ending balance - 26,855 56,894 18,277,568 52,828,662 19,039,160
cash

Dayang Enteprise Holding Bhd revenue was increased from the year 2013 to 2014 then
decreased by RM 31,266,606 on 2015 and decreased again by RM 30,940,000 on year 2016.
Its shows that Dayang Enterprise demands by their customers were very low for the past
three years from 2013 to 2015. Besides, the sales decline as there are many competitors
outside started trying to compete with Dayang Enterprise and trying to get their customers.
However, the sales increased back on 2017 by RM 495,710,000. Besides, the cost of sales or
manufactures was keep rise from 2013 to 2015 then dropped drastically by RM 6,175,000 on
2016 and RM 1,321,000 on 2017. As the sales keep increased from 2013 to 2014 the cost of
manufactures also increased, so in order to produce oil & gas services Dayang Enterprise
increased the costs for each of services. In addition to that, the net income was keep declined
from 2013 to 2016 and rise so hugely on 2017.

Besides, the totals assets own by Dayang Enterprise was keep increased every year from year
2013 to 2017 which is very good things for them because they can use the assets to pay off
the obligation. The large amount of current assets can easily convert into cash and pay off the
liabilities. Besides, large amount of assets that own by Dayang Enterprise shows how
efficient the company can produce profits by manage their assets in their daily to daily
business. The large amount of assets also can shows how much of profits can produce by the
assets that own by a Dayang Enterprise.

23 | P a g e
Furthermore, the total liabilities were declined from 2013 to 2014 and increased by RM
683,477,283 on 2015 which means Dayang Enterprise took borrowings or debt in order to run
their business. The total liabilities are lesser than total assets means that Dayang Enterprise
has enough capitals for their day to day operations even though the total liabilities increased
on 2016.

Microsoft’s ending balance of cash as 2017 remained healthy. The cash hold by Dayang
Enterprise was increased by drastically by RM 33,789,502 on 2014 then declined by RM 34,
601,094 on 2015. The decline was due to the lower cash flow from operating activities and
financing activities. On the other hand, the net cash was increased on 2016 which will help
Dayang Enterprise for their daily to daily business operations and pay off all the debts as
well.

2017 2016 2015 2014 2013

Profit 91% (9.29%) 32% 96% 99%
Margin
Current 0.09 0.53 0.75 2.15 3.54
ratio
Working (RM 576,164) (RM75,050) RM567,831,324 (RM13,644,843) 51,339,040
capital
Debt to 0.99 1.30 1.17 0.07 0.05
equity ratio
Return 36% 3% 8% 10% 13%
on assets
Return 72% 7% 2% 11% 14%
on equity

Profit margin called as return on sales ratio or gross profit ratio means percentage of sales left
over after paid all the expenses that paid by business. Dayang Enterprise profit margin rise
from year 2013 to 2014 which means they are efficient in converting all their sales into net
income. In 2015 the profit margin decreased to 32% of sales left over after paid all the
expenses and they also not so efficient in managing their sales in order to convert into net
income. In year 2017, the profit margin increased radically which means Dayang Enterprise
make more sales and the net income also become higher. The second ratio is current ratio,
this ratio measures efficiency of a company can pay off the short term liability by using the
current assets that owns by company.

24 | P a g e
According to the calculation, Dayang Enterprise current ratio keep declined from 2013 to
2017 which was from 3.54 times decreased to 0.09 times lesser than 1 which means Dayang
Enterprise having less amount of current assets that can easily convert into cash and able to
pay off the liabilities immediately. Furthermore Dayang Enterprise own large amount of non-
current assets than current assets in order to run their business in oil & gas.

In addition to that, net working capital determines the company can meet the obligations with
the current assets or not and also to determine of how much of deficiency and excess there is.
Dayang Enterprise working capital was decreased on year 2014 by RM 37,694,197 which
means the current liabilities exceed the current assets and the Company have no enough
capital for their day to day operations. Furthermore on 2015 the working capital extremely
increased by RM 554,186,481, which means on that particular year Dayang Enterprise have
enough capital for their business and the current assets also higher than current liabilities.

Then, Dayang Enterprise working keep declined from 2016 to 2017 so as the business in
more risky situations the assets cannot easily convert and not able to pay of the debts. Debt to
equity ratio is a ratio which helps to compare total debt to total equity. A higher debt to
equity ratio indicates that more creditor financing than investor financing. According to the
calculation Microsoft in more risky situation as the debt to equity ratio keep increased from
2013 to 2016. Meanwhile, Dayang Enterprise also in less financially stable because having
more creditors than investors and the investors don't wants to fund the business operation due
to lack of performance by Dayang Enterprise.

Return on assets means how efficient of a Company can produce profits by manage their
assets. According to the calculation, Dayang Enterprise not managing properly their assets in
order to produce profits from the year 2013 to 2016. Then the ratio increased by 33% in 2017
means Dayang Enterprise having high return on assets ratio on 2017 and wisely convert
money that used to purchase assets into profits. In addition to that, Return on equity means an
ability of a firm to generate profits from its shareholders investments in the company. This
ratio is very important for potential investors because they want to see how efficiently a
company will use their money to generate net income. According to calculation, Dayang
Enterprise having highest return on liquidity ratio on 2017 compare to the rest of years.

25 | P a g e
Besides, Dayang Enterprise also attracts more investors to invest into their Company as their
equities are wisely managing or using by Dayang Enterprise and it lead the investor’s trusts
on them.

Technical Analysis

For the fiscal year ended 31 December 2018, Dayang Enterprise Holdings Berhad revenues
increased 35% to RM937.6 Million. Net income totalled RM164.2 Million and the total. loss
of RM144.9 Million. Revenues reflect an increase in demand for the Company's products and
services due to favourable market conditions. Furthermore, net income reflects administration
expenses decrease of 9% to RM98.9 Million. Basic Earnings per Share excluding
extraordinary items increased from -RM0.15 to RM0.17. This is first impression that can lead
client or investor to buy the stocks of this Company.

SELL

BUY

SELL
BUY

SELL
BUY

Our first day trading day was started on 4 February 2019. Based on the technical chart
analysis, the price of the stock on 4 February 2019 is at RM 0.590 per unit. I suggested client
to buy the first 130,000 units of stock as the price is decreased from RM 0.595 to RM 0.590
per unit of stock which is a good time to buy stocks.

26 | P a g e
Furthermore, based on Moving average analysis the line is in rising trend channel, which a
good signal for investors to buy their first stocks. Besides, the candlestick chart changed the
colour from green to red which means its giving signal to buy stocks as it is in down trend
channel.

On the other hand, MACD also is in rising trend channel so it’s can be a good signal for
investor to buy their first unit of stock. Based on Relative Strength Index, it’s less than 70 and
started to decline which means the price is going to decreased so investor can buy more
stocks at this point with the hope that the price will increase in future drastically. After a
while, I decided not to take any risk by buying any stock as the price of the stocks keep
fluctuated and wait until the price go up in order to sell it off. On the last day of trading day
which is on 1 March 2019 I decided to sell it off all the stocks at the price of RM 1.18 per
unit with the difference of RM 0.59 from the cost of the stock at the beginning. In addition to
that, the Relative Strength Index is above 70 which mean it is a good signal to sell off the
stocks in order to get high profits. The MACD line is keep rise which means the price of the
stock keeps increasing day by day so on the last day of trading it’s giving a good signal to sell
off all the stocks. Furthermore, Moving Average analysis and candlestick chart also giving a
good signal to sell of the stocks on the last day of trading day. The price of the stock also
keeps bullish.

The total costs of this Dayang Enterprise Holdings Bhd are RM 76,700 while the total
proceeds are RM 159,300 and the total gains that investor can earn by investing under stocks
are RM 82,600. On the other hand, the Return on Investment for this stock is 1.08.

27 | P a g e
WEIBO CORPORATION

Company background

Weibo Corporation, incorporated in 2010, is a social media platform for people to create,
distribute and discover Chinese-language content. The Company provides ways for people
and organizations to publicly express themselves in real time, interact with others on a global
platform and stay connected with the world. The Company operates through two segments:
advertising and marketing services, and other services. The Company has a range of users,
including ordinary people, celebrities and other public figures, as well as organizations, such
as media outlets, businesses, government agencies and charities. The Company's product
categories include those for users, advertising and marketing customers and platform
partners.

Products for Users

The Company offers self-expression products that enable its users to express themselves on
its platform; social products to promote social interaction between users on its platform;
discovery products to help users discover content on its platform, and notifications to notify
users on Weibo account activities through short message service (SMS) or push notification
on their device. The Company offers third-party online games, including role playing games,
card games, strategy games and real life simulation games. Most Weibo games are offered for
free and certain games allow users to purchase virtual currency, known as Weibo Credit, to
redeem virtual items. Its very important person (VIP) membership offers its users certain
services and functions that are not available to regular users. With these additional functions,
VIP members can follow more users, have more ways to personalize their Pages, can send
voice feeds, enjoy more cloud storage, receive additional options to manage information flow
and followers, receive SMS notification of Weibo account activity and have access to games.
VIP membership is available through monthly or annual subscriptions. It has also developed
a suite of mobile applications, including Weibo Headlines, which aggregates news and
information from Weibo and other online sources, and Weibo Weather, a weather application
in China that features weather condition, particle matter index (PMI) and other information,
such as scenic photos from cities that the users selected to follow.

28 | P a g e
Products for Advertising and Marketing Customers

The Company seeks to provide advertising and marketing solutions to enable its customers to
promote their brands and conduct marketing activities. It provides its customers with
analytical tools to enable them to track and improve the effectiveness of their marketing
campaigns on its platform. Its advertising and marketing customers include accounts,
Alibaba/e-commerce merchants, small and medium-sized enterprises (SMEs) and individuals
that seek a spectrum of online advertising and marketing services ranging from brand
awareness to interest generation, sales conversion and loyalty marketing. It offers advertising
and marketing solutions, including social display advertisements and promoted marketing. Its
promoted marketing includes promoted feeds, promoted accounts and promoted trends.

Products for Platform Partners

The Company seeks to provide its platform partners with tools and application programming
interface (API) that customers can use to share their content to Weibo's platform, distribute
Weibo content across their properties and enhance their Websites and applications with
Weibo content, and to build social applications on Weibo or integrate their products with
Weibo. Weibo's platform partners include traditional and online media outlets, as well as
developers of games and other applications. Products offered for its platform partners include
Weibo Connect, which allows its platform partners to link their Websites and mobile
applications to its platform, enabling their users to share content to Weibo; Weibo Service,
which is open API that allows third-party developers to build applications to serve individual
and organization users; Weibo Credit, which allows its users to purchase in-game virtual
items and other types of fee-based services on Weibo and for its platform partners to receive
payment, and Weibo wallet, which enables individuals and businesses to hand out red
envelops to build active follower base.

The Company competes with Tencent, Netease, Sohu, Phoenix New Media, Twitter,
Instagram, Facebook, WhatsApp, Line, Kakao Talk, Snapchat, iQiyi, Youku Tudou, Bitauto,
Autohome, Meituan/Dianping, Qunar, Baidu, UC Web, Qihoo 360, Weixin/WeChat, QQ
Mobile, Qzone Mobile, Yixin, Laiwang, Douban, Baidu Post, Momo, Inke, In, Nice, Paipai,
Meipai and Jinritoutiao.

29 | P a g e
Shareholder information

Shareholders

Name Equities %

Alibaba Group Holding Ltd. (Investment Management) 9,000,000 7.42%

Harding Loevner LP 6,998,040 5.77%

Fisher Asset Management LLC 2,764,345 2.28%

Genesis Investment Management LLP 1,783,661 1.47%

The Vanguard Group, Inc. 1,738,502 1.43%

BlackRock Fund Advisors 1,707,911 1.41%

Wells Capital Management, Inc. 1,547,782 1.28%

Platinum Investment Management Ltd. 1,402,555 1.16%

SSgA Funds Management, Inc. 968,639 0.80%

William Blair Investment Management LLC 837,226 0.69%

Economic analysis

 Net revenues were $481.9 million, an increase of 28% year-over-year.

 Advertising and marketing revenues were $417.0 million, an increase of 25% year-
over-year.
 Value-added service ("VAS") revenues were $64.9 million, an increase of 44% year-
over-year.
 Net income attributable to Weibo was $166.5 million, an increase of 27% year-over-
year, and diluted net income per share was $0.73, compared to $0.58 for the same
period last year.
 Non-GAAP net income attributable to Weibo was $183.6 million, an increase of 26%
year-over-year, and non-GAAP diluted net income per share was $0.80, compared
to $0.64 for the same period last year.

30 | P a g e
  Monthly active users ("MAUs") were 462 million in December 2018, a net addition of
approximately 70 million users on year over year basis. Mobile MAUs represented
93% of MAUs.
 Average daily active users ("DAUs") were 200 million in December 2018, a net
addition of approximately 28 million users on year over year basis.

Fiscal Year 2018 Highlights

 Net revenues totaled $1.72 billion, an increase of 49% year-over-year.

 Advertising and marketing revenues were $1.50 billion, an increase of 50% year-
over-year.
 VAS revenues were $219.3 million, an increase of 43% year-over-year.
 Net income attributable to Weibo was $571.8 million, an increase of 62% year-over-
year, representing a net margin of 33%, compared to 31% in 2017. Diluted net income
per share was $2.52, compared to $1.56 in 2017.
 Non-GAAP net income attributable to Weibo was $624.2 million, an increase of 54%
year-over-year, representing a non-GAAP net margin of 36%, compared to 35% in
2017. Non-GAAP diluted net income per share was $2.73, compared to $1.80 in
2017.

For the fourth quarter of 2018, Weibo's total net revenues were $481.9 million, an increase of
28% compared to $377.4 million for the same period last year.

Advertising and marketing revenues for the fourth quarter of 2018 were $417.0 million, an
increase of 25% compared to $332.3 million for the same period last year, primarily driven
by an increase of $91.5 million, or 31% growth in advertising and marketing revenues from
small & medium-sized enterprises ("SMEs") and key accounts.

VAS revenues for the fourth quarter of 2018 were $64.9 million, an increase of 44% year-
over-year compared to $45.1 million for the same period last year, mainly attributable to the
incremental revenues from the newly acquired live broadcasting business in the fourth quarter
2018.

31 | P a g e
Costs and expenses for the fourth quarter of 2018 totaled $298.8 million, compared to $232.2
million for the same period last year. Other than the inclusion of marketing expenses related
to barter transactions under the new revenue guidance as illustrated below, the increase in
costs and expenses was primarily due to the incremental costs of revenue share incurred by
the newly acquired live broadcasting business as well as the increase in personnel related
costs and expenses. Non-GAAP costs and expenses were $295.5 million, compared to $220.0
million for the same period last year.

Income from operations for the fourth quarter of 2018 was $183.0 million, compared
to $145.3 million for the same period last year. Non-GAAP income from operations
was $186.4 million, compared to $157.5 million for the same period last year.

Non-operating loss for the fourth quarter of 2018 was $1.9 million, compared to a non-
operating income of $1.7 million for the same period last year, mainly resulted from the
impairment on investments of $12.3 million for the fourth quarter of 2018.

Income tax expenses were $14.9 million, compared to $17.0 million for the same period last
year.

Net income attributable to Weibo for the fourth quarter of 2018 was $166.5 million,
compared to $131.0 million for the same period last year. Diluted net income per share
attributable to Weibo for the fourth quarter of 2018 was $0.73, compared to $0.58 for the
same period last year. Non-GAAP net income attributable to Weibo for the fourth quarter of
2018 was $183.6 million, compared to $146.0 million for the same period last year. Non-
GAAP diluted net income per share attributable to Weibo for the fourth quarter of 2018
was $0.80, compared to $0.64 for the same period last year.

As of December 31, 2018, Weibo's cash, cash equivalents and short-term investments
totaled $1.83 billion. For the fourth quarter of 2018, cash provided by operating activities
was $164.0 million, capital expenditures totaled $10.4 million, and depreciation and
amortization expenses amounted to $5.8 million.

32 | P a g e
Fiscal Year 2018 Financial Results

For fiscal year 2018, Weibo's total net revenues were $1.72 billion, an increase of 49%
compared to $1.15 billion in 2017.

Advertising and marketing revenues for 2018 were $1.50 billion, an increase of 50%
compared to $996.7 million in 2017. Advertising and marketing revenues from SMEs and
key accounts were $1.38 billion, an increase of 51% compared to $912.1 million for 2017,
while advertising and marketing revenues from Alibaba was $117.7 million, compared
to $84.7 million for 2017.

VAS revenues for 2018 were $219.3 million, an increase of 43% compared to $153.3
million for 2017. The increase was mainly attributable to the growth in membership revenues
and revenues from the live broadcasting business.

Costs and expenses for 2018 totaled $1.11 billion, compared to $742.5 million for 2017.
Other than the inclusion of marketing expense related to barter transactions under the new
revenue guidance as illustrated below, the increase in costs and expenses was primarily
resulted from the increase of sales and marketing expenses for user acquisition and channel
investment, as well as the increase in personnel related costs and expenses. Non-GAAP costs
and expenses were $1.06 billion, compared to $693.8 million for 2017.

Income from operations for 2018 was $609.3 million, compared to $407.6 million for 2017.
Non-GAAP income from operations was $662.2 million, compared to $456.2 million for
2017.

Non-operating income for 2018 was $59.6 million, compared to $9.6 million in 2017, mainly
resulted from the increase in interest income and fair value change of investments.

Income tax expenses were $96.2 million, compared to $66.7 million for the same period last
year. The increase was mainly attributable to higher profits generated in the fiscal year 2018.

Net income attributable to Weibo for 2018 was $571.8 million, compared to $352.6
million in 2017. Diluted net income per share attributable to Weibo for 2018 was $2.52,
compared to $1.56 in 2017. Non-GAAP net income attributable to Weibo for 2018

33 | P a g e
was $624.2 million, compared to $405.7 million in 2017. Non-GAAP diluted net income per
share attributable to Weibo for 2018 was $2.73, compared to $1.80 in 2017.

Industry analysis

At the moment, the debt-to-equity of Weibo Corporation (NASDAQ:WB) is high, standing at

73.79, a figure that is higher than the 34.18 average recorded by the industry. This means that
the company is currently holding a debt level at 883.11 M. WB shares have a strong debt-to-
equity ratio but their quick ratio which reads 4.00 is strong and might cause problems for
them later in the future. Even though there was a rise of +42.62% in revenue, the company
failed to succeed in outperforming the industry average of 19.08%. For the most recent
quarter, the net income has jumped by +62.14%. This strength in their income has affected
them and thus increased their earnings to $175.98 M. The 72.50% yoy growth of WB’s
revenue has gone up that of the industry average by 16.52%. For the past 12 months, Weibo
Corporation revenue has gone up by 55.98%. The sustained growth in their revenue has
helped boost their earnings per share.

In the fiscal year 2018, Weibo Corporation overcame its bottom line by hitting earning $1.57
per share compared to the $0.48 in 2017. The 12-month return on equity has significantly
fallen to 24.86 in comparison to the same data for other companies in the same industry. This
shows that there is a major weakness within the organization over the past one year.
Comparing them to other companies in the industry and the overall Technology sector, the
industry average is 17.87 while 13.93 is of the sector.WB total operating cash flow had
jumped to $116.14 billion compared to $85.53 billion in the same quarter last year. Also,
looking at the price to cash flow of the company and the industry average, the 105.97 ratio of
the stock is higher than the industry’s 30.44. Weibo Corporation (NASDAQ:WB) has a price-
to-earnings ratio of 115.44 which is higher than the 41.41 industry average at the moment. In
addition to their unfavorable P/E ratio, Weibo Corporation has maintained a gross margin of
77.35. This shows whether the company has what it takes to effectively turn the revenue into
profit. The company’s ROA is 17.35 when compared to 10.50 for the stocks operating in the
same industry. This can be attributed to the strength recorded in the net income produced by
total assets. Comparing it to other companies in the sector, Weibo Corporation ROE is above
13.93 that of both the sector average.

34 | P a g e
 The operating profit margin for Weibo Corporation (WB) is 29.73%, a figure which is
considered to be strong. It has gone 10.47 from the 0.18 over the past 5 years. In addition to
this, their operating margin is 19.26 higher than the industry average.

The net profit margin which stood at -4.01 on average in the past 5 years has jumped to 23.02
in the last 12 months. Added to that, this ratio has surpassed the industry net margin that
stands at 3.43.

Analysts meanwhile rate Weibo Corporation (NASDAQ:WB) as a buy. Still some above
discussed indicators of the $15.82B company show strength while others show weakness.
There is little evidence at the moment to justify the expectation of the WB shares to either
perform positively or negatively when compared to other stocks. The primary strengths of
Weibo Corporation can be witnessed in its increased revenue, growing earnings per share,
higher return on equity, increased operating cash and high net margin. Subsequently,
financial analysis has also identified some weak areas that include high debt, relatively high
P/E ratio, lower return on assets and low net margin.

Fundamental analysis

Financial Performance of WEIBO CORP from 2013 to 2017

(Values in U.S. Thousands)

NEXT 12-2017 12-2016 12-2015 12-2014 12-2013

Sales 1,150,054 655,800 477,891 334,172 188,313

Cost Of Goods 231,255 171,231 141,960 83,599 59,891

Gross Profit 918,799 484,569 335,931 250,573 128,422

Operating Expenses 511,500 343,820 299,388 273,275 187,921

Operating Income $M 407,554 140,980 37,503 -22,103 -58,608

Other Income 9,557 -31,000 -723 -42,237 17,944

Pre-Tax Income 417,111 109,980 36,780 -64,340 -40,664

Income Tax 66,746 4,316 2,591 1,128 271

Net Income Continuous 350,365 105,664 34,189 -65,468 -40,935

35 | P a g e
Ratio analysis

Annual Income Statement (values in 000's)

Period Ending: 12/D31/2017 12/31/2016 12/31/2015 12/31/2014
Liquidity Ratios
Current Ratio 422% 215% 239% 436%
Quick Ratio 422% 215% 239% 436%
Cash Ratio 370% 142% 161% 334%
Profitability Ratios
Gross Margin 80% 74% 70% 75%
Operating Margin 35% 21% 8% 7%
Pre-Tax Margin 36% 17% 8% 19%
Profit Margin 31% 16% 7% 20%
Pre-Tax ROE 35% 15% 6% 12%
After Tax ROE 30% 14% 6% 12%

Technical analysis

36 | P a g e
Relative strength chart

This technical indicator compares the relative strength or weakness of a stock. It measures the
magnitude of rise or fall in stock price movements. 77.35 is the RSI value of WB stock.

Moving average

Moving averages show the average price of WB stock over a set time period and help traders
see the overall trend by smoothening out the daily variation in price movement. The 20 day
moving average of $61.78 is above the last closing price of $72.07.

Weibo Corp Moving Average Convergence Divergence or MACD

37 | P a g e
Two important concepts with respect to moving average convergence divergence or MACD
are: crossovers and divergence. When the MACD rises above the signal line, it typically
indicates a bullish trend and most likely the stock prices will go up. The Weibo Corp MACD
indicator can be used to identify bullish and bearish trends for the stock.

38 | P a g e
APPLE INC

Company background

Apple, Inc., is one of the major providers of consumer electronics, personal computers, and
related software with Samsung and Sony. The consumer electronics and information
technology industries have roots in early popularity and the spread of basic household goods
beginning in the early 20th century. The establishment of many public and private radio
stations in the 1920s survived most urbanization in the United States.

Apple designs, manufactures, and markets mobile communications and media devices,
personal computers, and mobile digital music players to consumers and businesses around the
globe for small businesses, businesses, intermediaries, education, and enterprise customers.
The company also sells related third party software, services, accessories, solutions, and
digital content and applications. It offers iPhone, a line of smartphones; iPad, multi-purpose
tablet; and Macs, desktop lines and mobile personal computers. The company also provides
iLife, a user-oriented digital lifestyle software suite; iWork, an integrated productivity suite
that helps users create, present and publish documents, presentations, and spreadsheets; and
other application software, such as Final Cut Pro, Logic Pro X, and FileMaker Pro.

History

Apple, Inc., was founded on April 1, 1976. Led by Steve Jobs, Ronald Wayne, and Steven
Wozniak. Though Wayne quickly exited the company, the success of the Apple I personal
computer kit quickly catapulted the company into the spotlight. Incorporated on January 3,
1977, the major products of Apple Apple II and the included business software acquired a
place as industry standard for spreadsheet automation and documentation at workplace.

By 2013, Apple has become one of the best and most popular consumer electronics providers
on the market. The introduction of new technology innovations to the market has driven
growth, with CEA expecting an increase of thirty-five billion sales from smartphones alone
(2013). Consequently, the consumer electronics industry is an important and important sector
in the US economy, with Apple alone using 80,000 individuals, and creating jobs for more
than 600,000 in the United States specifically (Apple, 2013).

39 | P a g e
Economic Analysis

Apple Inc. fiscal and monetary policy

Aggregate demand (AD) is a macroeconomic concept that represents the volume of demand
for goods and services in the economy. This value is often used as a measure of economic
growth. Both fiscal and monetary policies may affect aggregate demand as they may affect
the factors used to suppose: consumer spending on goods and services, investment
expenditure on business capital goods, government spending on goods and public services,
exports, and import.

Fiscal policy affects aggregate demand through changes in government spending and
taxation. Those factors influence employment and household income, which then impact
consumer spending and investment.

Monetary policy has an impact on money supply in the economy, which affects interest rates
and inflation rates. It also affects business expansion, net exports, employment, debt costs,
and relative cost of consumption rather than savings-all directly or indirectly impacting on
aggregate demand.

Apple's fiscal and monetary base is centered around the key concepts of competitive pricing
based on areas specifically in the industry. It is not a company that tries to shrink its
competitors; Instead, Apple is focused on providing products to customers who are often
returned for business and upgrades. Fiscal policy, the federal government policy has been
offering growth opportunities in recent years, given the expansion and assurance of federal
aid to the consumer lending industry ensuring adequate credit guarantees to consumers.
Basically, the change in government's monetary policy to stimulate further growth has given
the impression of lending to more individuals, allowing for the purchase of relatively high
priced products at Apple. Thus, government policy has played an important role in
establishing fiscal opportunities for sustainable growth.

In addition, there are other external factors affecting Apple's product prices such as
government intervention, competition, market and demand. Explanation of competition,
market factors and demand has been given above except government intervention.

40 | P a g e
According to Bloomberg news reports, the US government has banned Android in the US
market during a patent war between Apple and Samsung companies. Some media reports
state that the US government is part of an Apple company in conflict with the Samsung
company. The results of the Apple company that achieved victory in the patent case have
given Samsung companies suffered a huge loss. This can be seen as a good news to Apple
companies when they see their most threatening competitors to get a heavy strike. It also
affects the sales revenue of iPhones and iPads in the US market. There is a statement that
iPhone demand has a slight increase in 2012.

In this way, the US government performs additional taxes on Apple companies for
environmental charges to reduce unnecessary rubbish from electronic devices made during
production procedures. The US Environmental Protection Department declares that there are
3 million tonnes of waste of electrical and electronic equipment disposed of every year. This
is the reason why taxes have added every piece of electronic devices to every firm in the US.
In addition, the price of Apple products in other European and Asian countries is also
different. This is because, the governments of other countries will impose additional foreign
taxes to protect their own domestic firms. It raises prices for every Apple product and that is
why the price of apple products sells higher than United States.

Industry Analysis

Growth Cycle of Industry

Industry Life Cycle refers to the five stages an industry goes through: Introduction, Growth,
Shakeout, Maturity, Decline, Snack Time.

41 | P a g e
Introduction: In this phase the strategic objective is to achieve market acceptance and future
growth of seed. In this product innovation ranking is maximum. The same strategy to achieve
the objectives at this stage is to start and leverage the network effect. Network impact refers
to the positive effect that the user of a product or service has the value of the product for
other users.

Growth: At this stage of the life cycle, market growth rates accelerate. Industrial standards
are often set at this stage. Standard is an agreed settlement of a set of familiar engineering and
design features. This may appear under competition or be charged under the government or
other standard setting agency. Once the standard has been established, competition is moving
from product innovation to processing innovation. The innovation process refers to new ways
to produce existing products or deliver existing services more efficiently.

Shakeout: Throughout this cycle stage, the decline in growth rates and firms began to
compete directly with each other for market share, rather than catching a part of the growing
pie. The rugby firms were forced out of the industry. Profit scraping and only the strongest
and most efficient firms survive as competition is increasing in the industry as firms start to
cut prices and offer more services to get more market share. The importance of the process of
innovation improvement while the importance of decreasing product innovation.

Maturity: This is the level of technology accepted by the public. It can cause the market to
reach the point of saturation where the competitor has been trapped. And revenue slows
because your technology becomes a commodity. For example; every year Apple, Samsung
and HTC are refreshing their flagship devices to attract more sales and maintain their income
levels.

Decline: Here's what everyone is worried about. The inevitable decline. Or more precisely at
the death stage. This is a stage where we will see a decrease in sales or the appearance of
replacement technology. Here you will come to a point that does not return, where further
development is unprofitable. For example, the Nokia Symbian mobile operating system is a
creamy plant for many years, so Google and Apple enter the market with Android and iOS
respectively. The technology life cycle represents the business part of the matter here. But
consumers cannot be ignored either. After all, their willingness to use new technology that
will determine your success.

42 | P a g e
Competitive Position

The advantages of Apple's competitiveness revolve around the establishment and its brand
superiority. The company is now recognized as one of the most influential and the best
companies in the world today. In addition, the uniqueness of its products provides
competitive advantages that other companies have not been able to compete for years.
Likewise, the company provides free services to its users at least two years after they buy the
device. Users can go for maintenance at different Apple stores and make sure their devices
work.

Dynamics of the personal computer industry seems to be problematic for Apple. With
technology changing, it has become mandatory for technology companies to invest in
improving their products and ensuring that they are up-to-date. However, this may be a
challenge for Apple because its products are not compatible with other products in the
industry. For example, it's hard for an individual to transfer music from mac to a regular
computer. As a result, this makes them much less compared to other computers on the
market.

Apple is the first company to introduce personal computers to the technology world.
However, due to the inevitable changes in its management and the significant difference in
the direction that the company needs to take, it results in its competitive advantage to other
companies in the computer industry including Gateway, Dell, and Microsoft. Over the years,
the company has been trying to restore its position in the market with limited success.
However, at this time, Apple has set up a dedicated market by selling to high end customers
and providing better service than its competitors. It does this by creating your own computer
hardware and software.

Apple sets rates for other companies when it introduces a touchscreen mobile phone.
However, other companies explore the same technology and create a competitive
environment for the company. Moreover, they can defeat Apple by providing their products
at cheaper prices compared to the Apple iPhone. However, Apple pays compensation for a
high price by providing exceptional customer service and offers free maintenance on all
mobile devices for their customers after purchase. By doing so, the company can maintain its
customer base.

43 | P a g e
The introduction of iPod into the multimedia market is a revolutionary creation that makes
great profit for the company. The IPod changes how people listen to music and are positively
accepted by the community. Although the company may have been competing from other
companies in the industry, it has successfully established and maintained its position as a
leading company associated with mobile music players. The media player industry has
proven successful for Apple and it is one of the key competitive advantages for other
companies.

Fundamental Analysis

Now let’s turn to look at profitability: with a current Operating Margin for Apple Inc.
[AAPL] sitting at 26.73% and its Gross Margin at 38.27%, this company’s Net Margin is
now 22.40%. These measurements indicate that Apple Inc. [AAPL] is generating
considerably more profit, after expenses are accounted for, compared to its market peers.

This company’s Return on Total Capital is 30.14, and its Return on Invested Capital has
reached 27.55%. Its Return on Equity is 49.36, and its Return on Assets is 16.07. These
metrics all suggest that Apple Inc. is doing well at using the money it earns to generate
returns.

Turning to investigate this organization’s capital structure, Apple Inc. [AAPL] has generated
a Total Debt to Total Equity ratio of 106.85. Similarly, its Total Debt to Total Capital is
51.66, while its Total Debt to Total Assets stands at 31.30. Looking toward the future, this
publicly-traded company’s Long-Term Debt to Equity is 87.48, and its Long-Term Debt to
Total Capital is 42.29. This company is not leveraging its assets to take on debt, which stunts
its growth and limits the ROI for investors.

This company’s Enterprise Value to EBITDA is 11.52 and its Total Debt to EBITDA Value
is 1.42. The Enterprise Value to Sales for this firm is now 3.30, and its Total Debt to
Enterprise Value stands at 0.10. Apple Inc. [AAPL] has a Price to Book Ratio of 10.02, a
Price to Cash Flow Ratio of 14.58 and P/E Ratio of 14.95. These metrics all suggest that
Apple Inc. is more likely to generate a positive ROI.

44 | P a g e
This company’s Receivables Turnover is 6.28 and its Total Asset Turnover is 0.72. This
publicly-traded organization’s liquidity data is also interesting: its Quick Ratio is 1.09 and its
Current Ratio is 1.12. This company, considering these metrics, has a healthy ratio between
its short-term liquid assets and its short-term liabilities, making it a less risky investment.

Apple Inc. [AAPL] has 4.74B shares outstanding, amounting to a total market cap of
$877.61B. Its stock price has been found in the range of 142.00 to 233.47. This stock’s Beta
value is currently 1.12, which indicates that it is more volatile that the wider market. This
stock’s Relative Strength Index (RSI) is at 77. This RSI score is good, suggesting this stock is
overbought.

Shares of Apple Inc. [AAPL], overall, appear to be a solid investment option, with Wall
Street analysts expecting its price to rise considerably in the next 12 months. This company
generates high value from the labor resources and other capital it has available, and while it
has heavy Long-Term Debt to Equity, the majority of the metrics point to this investment
being highly attractive.

Technical Analysis

Apple Inc. rose 1.30% on the last trading day, up from $ 183.73 to $ 186.12, and has now
gained 7 consecutive days. It's not always that stocks manage to earn so many days in a row
and fall for a day or two should be expected. Prices have risen in the last 7 days and increased
by 6.37% over the last 2 weeks. Turnover increased in recent days along with the price,
which is a positive technical sign, and, overall, 15:48 million shares traded the previous day.
In total, 39.02 million shares were bought and sold for about $ 7 261.66 million.

The closing price at the end of the last trading day (Friday, March 15, 2019) from AAPL
stock is $ 186.12. This is 1.3% more than trading days before Thursday, March 14, 2019. All
day stocks fluctuated 1.95% from low day at $ 183.74 to high day $ 187.33.

Moving average

Apple Inc. is located at the top of the trend of broad and strong improvement over the short
term, and this will usually provide excellent sales opportunity for short-term traders in
response back to the bottom of the expected trend. The breakdown of the top trending line at
$ 187.59 will show a higher rate of increase.

45 | P a g e
Given the current short-term trend, stocks are expected to increase 19.66% over the next 3
months and, with the probability of 90% holding between $ 200.26 and $ 224.48 at the end of
this period.

Signaling

Only positive signals in the charts today. Apple Inc. holds buy signals from both short and
long term. In addition, there is a general purchase signal from the relationship between the
two signals where the short-term average is above the long-term average. On the correction
below there will be some support from the line at $ 179.54 and $ 172.03. A break below any
of these levels will issue a sell signal. Purchase signals were removed from the bottom of the
pivot on Thursday, March 07, 2019, which showed a further increase until a new top pivot
was found. Volume is rising at a price. This is considered a good technical signal.

Support & Resistance

The stock holds RSI14 at 77 and is currently being overbought at RSI. This does not have to
be a sales signal because many stocks can go long, and hard while being overbought on RSI.
Therefore, it is important to assess stock history as it may inform you about RSI sensitivity.

On the downside, the stock gained support just below today's level from the cumulative total
at $ 156.83 and $ 150.73. There is a natural risk involved when the stock is testing the
support level, because if these breaks, the stock will then fall to the next level of support. In
this case, Apple Inc. got support just below today's level at $ 156.83. If this is broken, then
the next support from the cumulative amount will reach $ 150.73 and $ 142.1

46 | P a g e
Microsoft Corporation

Company background

Microsoft Corporation, incorporated on September 22, 1993, is a technology company. The

Company develops, licenses, and supports a range of software products, services and devices.
Besides, the Company's involved in productivity and business Processes, intelligent cloud
and more personal computing. The Company's products include operating systems, cross-
device productivity applications, server applications, business solution applications, desktop
and server management tools, software development tools, video games, and training and
certification of computer system integrators and developers. Furthermore, Microsoft also
designs, manufactures, and sells devices, including personal computers (PCs), tablets, gaming
and entertainment consoles, phones, other intelligent devices, and related accessories, that
integrate with its cloud-based offerings. It offers an array of services, including cloud-based
solutions that provide customers with software, services, platforms, and content, and it
provides solution support and consulting services. It also delivers online advertising to a
global audience.

Productivity and Business Processes

The Company's Productivity and Business Processes segment consists of products and
services in its portfolio of productivity, communication, and information services, spanning a
variety of devices and platforms. This segment primarily comprises Office Commercial,
including volume licensing and subscriptions to Office 365 commercial for products and
services, such as Office, Exchange, SharePoint, and Skype for Business and related Client
Access Licenses (CALs); Office Consumer, including Office sold through retail or through
an Office 365 consumer subscription, and Office Consumer Services, including Skype,
Outlook.com and OneDrive, and Dynamics business solutions, including Dynamics ERP
products, Dynamics CRM on-premises, and Dynamics CRM Online. In addition to that,
Microsoft is designed to manage personal, team, and organizational productivity through a
range of products and services. Office 365 is its cloud-based service that provides access to
Office plus other productivity services. Skype is designed to connect friends, family, clients,
and colleagues through a variety of devices. The Company competes with Adobe Systems,
Apple, Cisco Systems, Facebook, Google, IBM, Oracle, SAP, Infor, The Sage Group,
NetSuite and Salesforce.com.

47 | P a g e
Intelligent Cloud

The company's intelligent cloud segment consists of its public, private, and hybrid server
products and cloud services. this segment primarily comprises server products and cloud
services, including sql server, windows server, visual studio, system center, and related calls,
as well as azure, and enterprise services, including premier support services and Microsoft
consulting services. Besides, its server products are designed to make information technology
(IT) professionals, developers, and their systems productive and efficient. Server software is
integrated server infrastructure and middleware designed to support software applications
built on the windows Server operating system. This includes the server platform, database,
business intelligence, storage, management and operations, virtualization, service-oriented
architecture platform, security, and identity software. It also licenses standalone and software
development lifecycle tools for software architects, developers, testers and project managers.
CALs provide access rights to certain server products, including SQL server and windows
server, and revenue is reported along with the associated server product. On the other hand,
Azure is a scalable cloud platform with computing, networking, storage, database, and
management, along with advanced services, such as analytics, and solutions, such as
Enterprise Mobility Suite. Azure includes a platform that helps developers build, deploy, and
manage enterprise, mobile, Web, and Internet of Things applications, for any platform or
device. Azure enables customers to devote more resources to development and use of
applications that benefit their organizations, rather than managing on-premises hardware and
software. The Company competes with Hewlett-Packard, IBM, Oracle, Red Hat, CA
Technologies, Apache, Linux, MySQL, PHP, SAP, BMC, VMware, Adobe, Ruby on Rails,
Amazon, Google and Salesforce.com.

More Personal Computing

The Company's more personal computing segment consists of products and services geared
towards harmonizing the interests of end users, developers, and IT professionals across
screens of all sizes. This segment primarily comprises windows, including windows OEM
licensing (windows OEM) and other non-volume licensing of the windows operating system,
volume licensing of the windows operating system, patent licensing, windows embedded,
MSN display advertising and windows phone licensing, devices, including Microsoft surface
(surface), phones, and PC accessories, gaming, including Xbox hardware, Xbox Live,

48 | P a g e
comprising transactions, subscriptions, and advertising; video games, and third-party video
game royalties, and search advertising. The Company designs, manufactures, and sells
devices, such as surface, phones, and other intelligent devices, as well as PC accessories. Its
devices are designed to enable people and organizations to connect to the people and content
using integrated Microsoft services and Windows. Surface is designed to help organizations,
students, and consumers to be more productive. Its gaming platform is designed to provide a
variety of entertainment through the use of its devices, peripherals, applications, online
services, and content. It offers Xbox 360 and Xbox One. The Company competes with
Amazon, Apple, Google, Sony, Nintendo, Electronic Arts, Activision Blizzard and Facebook.

Economic policy

Governments regulation fiscal and monetary policy.

The government has two important roles to play in the national economy. The first is the
"role of protection" that aims to protect individual personal property from invasion by others.
The important role of the government is to contribute to economic stability, especially
through fiscal and monetary policy. First, we will look at the role of government protector
and then we will analyze recent fiscal and monetary trends. We focus our analysis on the US
government because first of all, it is Microsoft's original state and secondly, it affects directly
or indirectly to the world government policy. The government protection function is
important for Microsoft. As previously mentioned, the company spends most of its resources
in research and development projects, so intellectual property rights are critical to Microsoft's
operations, as it protects the company from illegal copying.

In addition, another government protection function is to ensure that the market operates
efficiently by prohibiting monopolies or cartels. As such, Microsoft is under the supervision
and legislative authority of a local (US) and foreign (eg EU). As a result, Microsoft has many
court issues to handle. The first clash took part in 1990 where the US Federal Trade
Commission accused Microsoft of potentially associating with IBM. Since then, Microsoft
has faced many different court cases against anti-competitive behaviour.

49 | P a g e
One of the most influential cases occurred in 2004 when the EU Commission took antitrust
lawsuit against Microsoft because of its dominance in the market, which sentenced the
company to US $ 613 million and forced him to disclose certain product information. In the
analysis of financial statements, we will face the financial feeling of the prohibition.

Fiscal Policy

Fiscal policy is the use of government and tax expenditure policies to generate stimulus
output, employment and aggregate demand for the economy during the recession (fiscal
policy explanation). On the other hand, when the economy is at its peak, the government can
reduce spending and increase taxes to prevent economic growth to avoid inflation (a tight
monetary policy). While the overall trend of the Federal Federal budget deficit tends to
increase (the amount of spending exceeds its total revenue), there is a period with a deficit of
the decline pattern.

More specifically there was a huge increase in government debt between 2001 and 2004
(9/11 incidents and dot-com ruptures) due to mass military spending in war and tax
deductions. Between 2005 and 2007, the federal government tried to reduce the budget deficit
by increasing taxes. However during the period between 2008 and 2010 (financial crisis), the
federal government began to cut taxes and increase spending in the bailout package to
stimulate the economy. From a Microsoft perspective, a great extraordinary federal debt can
be a risk factor for future economic instability (a potential debt crisis like some Euro zone
experts). However in the short term, this may indicate potential opportunities to increase
consumer spending and recovery from a recession, which may increase demand for Microsoft
products. More specifically there was a huge increase in government debt between 2001 and
2004 (9/11 events and dot-com blasts) due to mass military spending in war and tax cuts.
Between 2005 and 2007, the federal government tried to reduce the budget deficit by
increasing taxes. However during the period between 2008 and 2010 (financial crisis), the
federal government began to cut taxes and increase spending in the bailout package to
stimulate the economy. From a Microsoft perspective, a great extraordinary federal debt can
be a risk factor for future economic instability (a potential debt crisis like some Euro zone
experts). However in the short term, this may indicate potential opportunities to increase
consumer spending and recovery from a recession, which may increase demand for Microsoft
products.

50 | P a g e
Monetary Policy

Monetary policy can be defined by the actions of the US Federal Reserve (Central Bank of
the United States) in determining the size and rate of money supply growth.

Due to the sluggish recovery of the US economy from the 2008 financial crisis, the Federal
Reserve is trying to spur growth and reduce unemployment with monetary explanation. To
achieve that, the Federal Reserve has recently launched a quantitative easing. This monetary
monetary policy tool aims to maintain interest rates at a low level by purchasing a USD $
75bn long T-long bill.

The explanation of monetary policy means increasing the money supply in the economy. This
will lower interest rates. As noted in the macroeconomic analysis, low interest rates
encourage private consumption and investment and it will also depreciate the US dollar.
Therefore, clearing monetary policy can benefit Microsoft by increasing consumer spending
(higher demand for software systems) and increasing private investment, resulting in more
Microsoft business users. Furthermore, exports of companies can be increased due to US $
depreciation. However, in the long run high inflation could be a negative consequence of high
money supply that could damage the economy and the company as well.

51 | P a g e
Industry Analysis

Growth Cycle of Industry

There are five stages in the product life cycle. The first stage is product development, second
stage is introduction, third stage is growth, fourth stage is maturity and the final stage is
decline.

Stage One
The first stage of business growth cycle is product development. At this stage the business is
being created, planned and established. Many things can go wrong a good business planning
is important in product development stage. The product is being developed to meet
customer’s interest and preference. The development and research expenditure will become
loss for the company if the product fails to meet consumer’s expectations.

Stage Two
The second stage of business growth cycle is introduction. In the introduction stage the
product is being introduced to the market. The product is assigned a brand name and
introduce at a lower price to get customers attention to try the new product. The product may
be distributed to the market where the demand is higher. The product will be promoted in
various ways to create the product awareness. There is no profit generated if the revenue the
company gain is equal to the research and development cost of the product at development
stage.

52 | P a g e
Stage Three
The third stage of business growth cycle is growth. During the growth stage the sales of the
product are at much higher level. When the demand is higher the price can be increased
temporarily. There are more distributions of products in the market to meet larger customers
demand. Promotions and advertising take place in order to attract more customers for the new
product. If competition increases the price of the product might decrease. Mostly the price
will remain same and the company will approach a new distribution channels to fulfil the
increasing demand.

Stage Four
The fourth stage of business growth cycle is maturity. During the maturity stage the profits
earned from the product will increase. The advertising costs can be reduced at this stage and
steps are taken to enhance the products so that the new product can be competitive with other
products in the markets. The company should maintain the market share that they have
achieved and the maintaining process is not easy for a company.

Stage Five
The fifth stage of business growth cycle is decline. In the decline stage the product is losing
their potential in the market due to tough competition with other competitor products. At this
stage the cost of the product usually will be reduced. One of the reasons for this situation is
the saturated market due to competitors, product with new features and more advanced. This
situation is unavoidable but the company still have many options. One of the options is
upgrading the products by adding new features and makes it more attractive for the
customers.

Competitive Position
Microsoft has implemented diverse strategies in order to stand outstanding in the
technological industry. These strategies are diversified which is depending on the goals and
include both internal and external. The following are some of the main competitive
advantages that Microsoft has implemented.

53 | P a g e
Microsoft human resource management is one of the competitive advantages of the company.
Microsoft carried out extraordinary recruitment process to recruit new staff of the company.
Talented employees are hired from diversified backgrounds in order to create the highly
multicultural workplace. Beside that Microsoft also conducted training for their staff in order
to improve their skills and knowledge. Microsoft believe that by creating right set of skills in
their employees through arranging training and development for their employees can actually
improve the productivity of the staff and also the company itself. Microsoft takes reviews and
evaluation seriously and employees have to go through performance appraisal and there are
incentives for employees who perform well and outstanding.

Strong brand equity is the major source of competitive advantage for Microsoft where it has
more than 40 years old business. Microsoft has brought variety of hardware and software
products to the market. The brand equity of Microsoft relies on the trust that they have
created and also the efficiency of their products. Microsoft also has created a strong and
reliable image as outstanding technology brand. Beside that many personal computers come
with an installed of standard Microsoft Window software

Microsoft also is a global business with offices around the world in several countries. The
corporate headquarters of Microsoft are located at Redmond, Washington. Microsoft also
owns other significant large facilities throughout the globe. Most significant properties
include R&D centres in India and China and DATA centres in Ireland, Singapore and
Netherlands. It also has offices in major countries like India, Australia, Canada, UK,
Germany, China and France.

Microsoft has a global distribution channel for their sales and distribution of its products and
services. They sells and distributes their products through OEMs (Other Equipment
Manufacturers), direct channels, distributors and resellers. Their global salesforce performs a
various tasks. They will connect with the major customers in the public and private sectors.
Beside that Microsoft has managed its global presence through a large sales and distribution
network. The global network of Microsoft has helped to understand customers and manage
their customer relationships better.

54 | P a g e
Microsoft also has expanded their product range in the recent years. The large product
portfolio of Microsoft includes hardware, software, gaming products, web based services and
cloud services. Microsoft is a leading name in the global IT industry. The several best selling
products including Windows OS and MS Office productivity suite. Windows OS is a leading
operating system used on millions of computing devices throughout the world. MS office is a
productivity suite including software like MS Word, MS Power point, MS excel, and several
more software that help professionals and businesses around the world to improve their
productivity.

Another important source of competitive advantage for Microsoft is its focus on innovation.
The company invests a large sum in the research and development. Microsoft is facing
competition from its competitors. Focus on research and innovation has helped the company
to improvement their earnings. Microsoft has expanded its product portfolio and is touching a
larger customer segment. The investment in R&D is among the highest for the Microsoft
company. Microsoft has improved the quality of its hardware, software and other products
and services a lot over time. It may be easy to generate a source of competitive advantage in
the tech industry but to retain it is a difficult task.

Customers have several options and Microsoft have to retain them. To retain the customers
for longer, Microsoft will manage several things apart from product quality and pricing.
Microsoft have a strong marketing strategy, great packages, global reach and must be able to
engage their customers. Microsoft also must regularly updates their software. Their usability
and availability have made Microsoft very popular. Beside that, Microsoft has offers a wide
range of computing products including hardware and software. These products address the
needs of a wide range of customers including private businesses, public organizations and
individual professionals. It offers some products that do not have many substitutes.

Microsoft’s pricing strategy is a critical point of differentiation and also a source of

advantage. Its both a business strategy and a unique advantage that Microsoft has achieved.
Prices are a critical part of business strategy. Managing the prices well helps to expand
customer base and grow customer loyalty. Microsoft has enjoyed heavy growth in the recent
years. Its fast growth is fuelled by its product quality as well as its pricing strategy. Microsoft
has created a large range of packages to meet the needs of several different groups of
customers.

55 | P a g e
Fundamental Analysis

Microsoft Corporation’s primary competitors include some of the most prominent technology
companies in the industry. The examples of the competitors are Apple, Google, IBM and
Oracle. Besides Microsoft is a diversified corporation that offers many types of products and
services, the company faces stiff competition in several key areas of the technology sector.

Financial performance of three largest technology Companies in World for financial year
ended 2017:

Apple Oracle IBM

Revenue ($ million) 229,234 37,728 79,139
Profit before tax 61,344 11,517 11,400
($ million)
Profit after tax 64,089 9,335 5,758
( $ million)
Total assets ($ million) 375,319 134,991 125,356
Total liabilities 241,273 80,745 107,631
($ million)
Total equities 134,047 54,246 17,725
($ million)
EPS 9.27 2.27 6.67

Financial performance of Microsoft from 2013 to 2017:

2017 2016 2015 2014 2013

($ million) ($ million) ($ million) ($ million) ($ million)
Income Statement
Revenue 89,950 85,320 93,580 86,833 77,849
COGS 34,261 32,780 33,038 26,934 20,249
Net Income 21,204 16,798 12,193 22,074 21,863
Financial Position
Total assets 241,086 193,694 176,223 172,384 142,431
Total liabilities 168,692 121,697 96,140 82,600 63,487
Total equities 72,394 71,997 80,083 89,784 142,431
Cash Flow
Operating 39,507 33,325 29,080 32,231 28,833
Investing (46,781) (23,950) (23,001) (18,833) (23,811)
Financing 8,408) (8,393) (9,080) (8,394) (8,148)
Ending balance - 7,663 6,510 5,595 8,669 3,804
cash

56 | P a g e
Microsoft revenue was increased from the year 2013 to 2015 then decreased by $ 8,260
million on 2016 and increase again by $ 4,630 million on year 2017. Its shows that Microsoft
demands by their customers were very high for the past three years from 2013 to 2015. After
2015, the sales decline as there are many competitors outside started to growing up and trying
to compete with Microsoft and trying to get their customers. However, the sales increased
back on 2017. Besides, the cost of sales or manufactures was keep rise from 2013 to 2015
then slightly dropped by $ 258 then its increased back on 2017. As the sales keep increased
the cost of manufactures also increased, so in order to produce quality products and services
Microsoft increased the costs for each of product and services. In addition to that, the net
income was keep fluctuate from 2013 to 2017.

Besides, the totals assets own by Microsoft was keep increased every year from year 2013 to
2017 which is very good things for them because they can use the assets to pay off the
obligation. The large amount of current assets can easily convert into cash and pay off the
liabilities. Besides, large amount of assets that own by Microsoft shows how efficient the
company can produce profits by manage their assets in their daily to daily business. The large
amount of assets also can shows how much of profits can produce by the assets that own by a
Microsoft. Furthermore, the total liabilities were declined from 2013 to 2016 and increased
by $ 46,995 million on 2017. The total liabilities are lesser than total assets means that
Microsoft has enough capitals for their day to day operations even though the total liabilities
increased on 2017.

Microsoft’s ending balance of cash as 2017 remained healthy. The cash hold by Microsoft
was increased by $ 4,865 million on 2014 then declined by $ 3,074 on 2015. The decline was
due to the lower cash flow from operating activities and financing activities. On the other
hand, the net cash was increased every year which will help Microsoft for their daily to daily
business operations and pay off all the debts as well.

2017 2016 2015 2014 2013

Profit Margin 23.57% 19.69% 13.02% 25.42% 28.08%
Current ratio 1.43 2.35 2.50 2.50 2.71
Working capital RM 95,324 RM 80,303 RM 74,854 RM 68,621 RM 64,049
Debt to equity 2.33 1.69 1.20 0.92 0.80
ratio
Return on assets 9% 9% 7% 13% 15%
Return on equity 29% 23% 15% 25% 28%

57 | P a g e
Profit margin called as return on sales ratio or gross profit ratio means percentage of sales left
over after paid all the expenses that paid by business. Microsoft profit margin declined from
year 2013 to 2015 which means they are not efficient in converting all their sales into net
income. In 2016 Microsoft converted 19.69% of their sales into profit and it’s increased by
3.88% in year 2107 which means Microsoft make more sales and the net income also become
higher. The second ratio is current ratio, this ratio measures efficiency of a company can pay
off the short term liability by using the current assets that owns by company. According to
the calculation, Microsoft current ratio keep declined from 2013 to 2017 which was from
2.71 times decreased to 1.43 times which means Microsoft having less amount of current
assets that can easily convert into cash and able to pay off the liabilities immediately.
Furthermore Microsoft own large amount of non-current assets than current assets.

In addition to that, net working capital determines the company can meet the obligations with
the current assets or not and also to determine of how much of deficiency and excess there is.
Microsoft working capital was increased every year which means the current assets exceed
the current liabilities and the Company have enough capital for their day to day operations.
Besides, as the assets can easily convert and able to pay of the debts the business is in less
risky. Debt to equity ratio is a ratio which helps to compare total debt to total equity. A
higher debt to equity ratio indicates that more creditor financing than investor financing.
According to the calculation Microsoft in more risky situation as the debt to equity ratio keep
increased from 2013 to 2017. Meanwhile, Microsoft also in less financially stable because
having more creditors than investors and the investors don't wants to fund the business
operation due to lack of performance by Microsoft.

Return on assets means how efficient of a Company can produce profits by manage their
assets. According to the calculation, Microsoft not managing properly their assets in order to
produce profits from the year 2013 to 2015. Then the ratio increased by 2% in 2016 and keep
consistent in 2017 means Microsoft having high return on assets ratio on both years and
wisely convert money that used to purchase assets into profits. In addition to that, Return on
equity means a ability of a firm to generate profits from its shareholders investments in the
company. This ratio is very important for potential investors because they want to see how
efficiently a company will use their money to generate net income. According to calculation,
According to the calculation, Microsoft having highest return on liquidity ratio on 2017
compare to the rest of years.

58 | P a g e
Besides, Microsoft also attracts more investors to invest into their Company as their equities
are wisely managing or using by Microsoft and it lead the investor’s trusts on Microsoft.

Technical analysis

59 | P a g e
Relative strength index

Moving average

There are many factors at play when looking to successfully conquer the stock market. New
investors have the tendency to become overwhelmed at the prospect of putting their hard
earned money to work. If the individual investor decides that they are going to be managing
their own money, they may be looking for a proper place to start. Investors might want to
start by clearly defining their own goals. Creating realistic and attainable goals can help get
the investor walking down the right path. As many experienced investors know, setting goals
and staying on track can be a big help for navigating the markets. As traders scan the equity
market, they may be using Simple Moving Averages to help figure out where a stock is
headed.

60 | P a g e
Moving averages help predict the price direction of MSFT stock based on certain triggers, but
with a lag, and form building blocks for other technical indicators like the MACD and
bollinger bands. A key factor that impacts moving averages is the lag factor. The 20 day
moving average of $111.18 is below the price of $117.52.

Microsoft Moving Average Convergence Divergence or MACD

The moving average convergence divergence or MACD is a technical indicator which helps
assess the stock price trend. Traders usually wait for a confirmed crossover signal before
entering into a trading position. Divergence implies that the current stock price trend could
come to an end, when the stock price diverges from MACD. The Microsoft MACD indicator
can be used to identify bullish and bearish trends for the stock.

Microsoft Relative Strength Index

This technical indicator compares the relative strength or weakness of a stock. It measures the
magnitude of rise or fall in stock price movements. The relative strength index of MSFT
stock is 70.9.

61 | P a g e