Ratio Analysis of AEON

Based on the financial statements of AEON Co. (M) Berhad, the current ratio of a company is the most essential ratio that measures the company capability to meet its debt obligations. Unfortunately, AEON’s current ratio is decreasing over the year 2016 to 2017 which are 0.4 times to 0.34 times respectively.
This implied that the company management on liquidity position is not enough satisfaction. The current assets are insufficient during the year 2017 compare to year 2016. In addition, the receivables collection period of a company should be as shorter as it can because this indicates how many days would AEON collects from the receivables. Although the number of days is increasing from 8 days to 6 days but it is also a good collection period of AEON Berhad.
The period of times taken by Aeon Co. (M) Berhad to sell off their inventories would seem to be too long as it will be better for the company to sell off their inventories within 90 days. Aeon Co. (M) Berhad are not doing well as the average period of times taken for Aeon Co. (M) Berhad to sell of their inventories has been increase from 2016 to 2017 which are 91 days and 93 days respectively. The cash turnover in year 2017 is raising compare with the year 2016.

This indicates that the revenue of the company is increasing from RM 4,038,655,000 to RM 4,088,164,000 in year 2016 to 2017 respectively and it ratio is increasing from 42.0641x to 52.0162x. The negative working capital turnover of the company indicates that Aeon has to issue debt securities to the market or increase the number of product to be sold in order to meet its obligations. There is -3.0801x in year 2016 and -2.7480x in year 2017.
Moreover, the total asset turnover implies that the capabilities of AEON to manage its total assets in generating revenues. It is increasing from 0.9142x to 0.9271x in year 2016 to 2017 which show that how well AEON is utilizing the total assets to generate sales is getting better. Based on the total debt to equity ratio of Aeon Co. (M) Berhad, they are using too much of debts as a source of financing instead of equity which increase their risks of default.
As shown by the total debt to equity ratio of Aeon Co. (M) Berhad for the year 2016 and 2017 are 135.18% and 124.65% respectively. Return of assets for Aeon Co. (M) Berhad for the year 2016 and 2017 are 1.7% and 2.4% respectively which signals that Aeon Co. (M) Berhad are improving in utilizing their assets to generate higher profits.
According to the return on common equity made by Aeon Co. (M) Berhad to their shareholders is said to be low which are 4 % and 5.35% for the year 2016 and 2017 respectively. Since there is a little different between the year 2016 and 2017, it does not motivate investors to buy the company’s shares.
Besides that, the time interest earned for the AEON Co. (M) Berhad is from 4.9 times to 5.9 times in year 2016 to year 2017 respectively. The interest expense in year 2017 has increased from RM 36,964,000 to RM 40,749,000 compare with year 2016. As a result, AEON might able to cover it interest expenses in the use of income before interest expense and taxes compare in the year 2016.
Based on the gross profit margin of AEON Co. (M) Berhad, there is a raise of percentages which is from 4.49% to 5.88%. Gross profit margin indicates how much money is left over its revenues after the deduction of cost of goods sold. The gross profit margin of AEON Berhad is not healthy enough as the average range is around 20% to 30%. Net profit margin is the income after tax and interest expenses over its sales. The net profit margin of AEON Co. (M) Berhad is also increasing from 1.86% to 2.57%. The net income in year 2017 is RM 105,007,000 where RM 74,965,000 in year 2016.
As the result, it is good for AEON to have an increase on its net profit margin. The price-to-earnings ratio of AEON Co. (M) Berhad is decreasing from 0.4660x to 0.2871x in year 2016 to 2017 respectively. This indicates that how much investor is willing to pay for one dollar of earnings. The P/E ratio is decreasing implied that investors are expect lower earnings from AEON Co. (M) Berhad. The earnings yield of AEON Co. (M) Berhad in year 2016 is 2.1461x and in year 2017 is 3.4827x.
There is an increasing of earning yield of AEON. The dividend yields of AEON Co. (M) Berhad in year 2016 is 1.1335x whereas in year 2017 is 1.8624x. The increases of dividend yield in year 2017 are more attractive to the investors as it might have the growth potential on cost. The dividend payout rate in year 2016 is 52.82% and in year 2017 is 53.48%. There is an increase on dividend payout rate means the dividends pay to investors have increases.

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