1. Provide a brief overview of the firms and industry sector.

REX INDUSTRY BERHAD

Rex Industry Berhad is a Malaysia-based company principally which is engaged in investment

holding activities. Rex is incorporated since 1972 and has marketed the products across the

world. The Company through its subsidiaries is primarily engaged in the manufacture and

distribution of canned food, frozen food and drinks.

The Company’s wholly owned subsidiaries include Rex Canning Co Sdn Bhd, Rex

Trading Sdn Bhd, and P.T Rex Canning. Rex Canning Co Sdn Bhd is manufactures and

exports canned food and drinks and investment holding. This subsidiary is a major food and

beverage manufacturer in Malaysia. Its products include sea food, meat and vegetable

products. Besides that, Rex Trading Sdn Bhd., which trades canned food, drinks and shelf

stable convenience food, and P.T. Rex Canning, which manufactures and exports canned food.

Rex Industry Berhad concerned more on foods and beverages which is HALAL. Rex

Industry Berhad involved in internal business which they marketed their products across the

world. To provide high quality product, Rex Company hired expert in sourcing raw materials

to ensure that it met the internal standard. Rex Company also attempts to fulfil client’s needs

and demand in order to attract more customers.

FRASER & NEAVE HOLDINGS BHD (F&NHB)

Fraser & Neave Holdings Bhd (F&NHB) is amongst the region’s oldest and most established

food and beverage companies with its brands enjoying the distinction of being a market leader

and household name in many categories. F&NHB Group is a syariah compliant company listed

on Bursa Malaysia’s Main Board with an annual turnover in excess of RM 4 billion from its

core business in the manufacture, sale and marketing of beverages and dairy products.

Their business operation is organized according to products and services, namely Food

& Beverages Malaysia (F&B Malaysia) which encompass both Soft Drinks and Dairies

Malaysia business; Food and Beverages Thailand (F&B Thailand); and Property and others.

F&NHB operates in Malaysia, Brunei, Thailand and Indochina, and is a subsidiary of Fraser

and Neave, Limited.

The diversity of their product range and geographical operations, the strong distribution

network and market resilience built over a century of experience, and the commitment of our

2,600-strong workforce are what distinguish F&N in delivering sustainable performance and

growth, in harmony with the well-being of communities and the environment, to meet their

consumer’s present and future expectations.

Both of our chosen company (REX INDUSTRY BERHAD and FRASER & NEAVE

HOLDINGS BHD) is from consumer goods sector. The consumer goods sector is a category

of stocks and companies that relate to items purchased by individuals and households rather

than by manufacturers and industries. These companies make and sell products that are

intended for direct use by the buyers for their own use and enjoyment. This sector includes

companies involved with food production, packaged goods, clothing, beverages, automobiles,

and electronics. For this two company, they are producing product of foods and beverages.

Many companies in the consumer goods sector rely heavily on advertising and brand

differentiation. Performance in the consumer goods sector depends heavily on consumer

behaviour. Developing new flavours, fashions, and styles and marketing them to consumers is

a priority.

2. Provide an overview of the valuation model used in the analysis

In this analysis, we are using the discounted cash flow model as the valuation model for this

two chosen company. Discounted cash flow (DCF) is a valuation method used to estimate the

value of an investment based on its future cash flows. DCF analysis attempts to figure out the

value of an investment today, based on projections of how much money it will generate in

the future. This applies to both financial investments for investors and for business owners

looking to make changes to their businesses, such as purchasing new equipment.

The purpose of DCF analysis is to estimate the money an investor would receive from

an investment, adjusted for the time value of money. The time value of money assumes that a

dollar today is worth more than a dollar tomorrow because it can be invested. As such, a DCF
analysis is appropriate in any situation where a person is paying money in the present with

expectations of receiving more money in the future.

DCF analysis finds the present value of expected future cash flows using a discount rate.

Investors can use the concept of the present value of money to determine whether future cash

flows of an investment or project are equal to or greater than the value of the initial investment.

If the value calculated through DCF is higher than the current cost of the investment, the

opportunity should be considered.

In order to conduct a DCF analysis, an investor must make estimates about future cash

flows and the ending value of the investment, equipment, or other asset. The investor must also

determine an appropriate discount rate for the DCF model, which will vary depending on the

project or investment under consideration. If the investor cannot access the future cash flows, or

the project is very complex, DCF will not have much value and alternative models should be

employed.