CASE 2

living by numbers
Value creation or profit?
Abdul

Kudus Abdul Muthalib 0930395

Nurfazlina Mohd Jaffar
1029088
Yazlin Mohamed Yusof
0920890

Synopsis

MarineCorp(1992) -maritime solutions provider

for Suria group of companies

Wholly-owned subsidiary by Suria

Two subsidiaries ( Green Port Sdn Bhd & Sungai

Emas Sdn Bhd)

Regulate and enforce conformance to its policy

on maritime activities

Vessel inspection and vetting was the major

business

Provide marine consulting services to Suria and

its related contractors

Established strategic alliances with Marine

Dept, Ministry of Transport

Subsidiaries
Greenport and Sungai Emas
Major activities include pilotage & marine
support, emergency response, port
management & operations, navigational
safety and marine services
Greenports tangible assets financed through
Surias funds no fixed repayment terms
MarineCorp and Sungai Emas accumulate
cash balances from net cash inflow
Sungai Emas operated the port facilities
owned by Surias associated companies
involving crude oil processing

Main Issues
ISSUE 1: Adopting VBM

Conflict between President of Suria and Hafiz

Performance of company linked to
performance evaluation and appraisal of
employees
Value of a company measured by economic
earnings = profit earned in excess of
investors expected return
Positive economic earning value created
Negative economic earning value destroyed
MarineCorp and its subsidiaries registered net
profit after tax but somehow the companys
actually destroying value based on EE

ISSUE 2 : Pressure from GM of GreenPort

on dredging maintenance cost
major

expenditure (25m) - dredging of navigation

channel for vessels to enter into and exit from portcrucial since vessels were prevented from entering port

It

has been estimated maintenance dredging required

once every 3 5 years interval

Anita

(GM) proposes to amortize the dredging cost as it

is significant, thus improving the profit of the company
and achieve the KPI of employees

Hafiz

opposed saying it should be expensed in the

financial year incurred

ISSUE 3: Pressure from GM of MarineCorp on

dividend payments
Hafiz

recommended on paying dividends to

shareholders of MarineCorp cash position will
continue to gain strength from future net cash inflows

Lee

Chong Way (GM) opposed Hafizs recommendation

The

cash resources of MarineCorp and Sungai Emas

would be used to generating interest income on fund
investment

Lee

Chong Way would prefer to focus on improving the

profit since market analysis worldwide look for profits
in their evaluation and ranking of companies

Protagonist -> Hafiz Hashim ( CFO) of MarineCorp

companys financial performance was linked to the
investment made by its equity and debt holders
profits would be compared with investments
expected return based on company COC @ 10%
DILLEMA whether to use economic earnings as
required by group OR profits as practiced by
MarineCorp?
Ranking of the three companies in terms of financial
performance
Suggestions on how to improve organization
performance
Pressure from GMs of Green Port and MarineCorp

Ranking of companies based on

financial performance ( net PAT )
Greenpor
t

MarineCo
rp
Sungai
Emas

Economic

Earnings

NOPAT (WACC x Avg Invested

Capital)
GreenPor
t
Economi
c
earnings

Sungai
Emas

MarineCo
rp

5,030,56 14,274,6
14,588,2
3
11
32

Ranking of companies based on

financial performance ( using EE )
MarineCo
rp
Sungai
Emas
Greenpor
t

THANK YOU