Download - Financial Analysis Done
Background of the Industry
The electrical & electronics (E&E) industry including consumer electronic is the leading
sector in Malaysia's manufacturing sector. Contributing to it was settling up of operations by
a number of European and Japanese companies such as Pensonic, Bosch, Philips, Grundig,
Matsushita and Sanyo to produce home appliances electronic products, This increased
significantly to the country's manufacturing output (31 per cent), exports (48.7 per cent) and
employment (33.7 per cent). Malaysia has risen to become one of Asia’s leading home
appliances manufacturers and also 20 largest export nations worldwide and is ranked 28th out
of 121 countries.
Malaysia’s electronics sector has also grown impressively, in 2010, a production volume is
worth total RM166.2 billion (US$55.8 billion), the exports constitute an important section of
the sales in this sector, exports amounted to RM249.8 billion (US$83.8 billion) and created
employment opportunities for 336,408 people. The major export destinations are Singapore,
Japan, China, India, Korea as well as the United States, Australia, the Netherlands and
Germany among others.
The home appliances industry was hit by the global financial crisis in 2009, with the weaker
global economic outlook, export growth and capital flows are expected to impact further in
2009. As global economic integration, the crisis has gradually affected the world, the demand
for E&E products in major markets had gone down rapidly. The market demand for home
appliances and electronics is expected to grow upward in Malaysia between 2009-2013. The
expected growth is a combined result of the growing population and disposable income,
together with a trend towards smaller households which may increase spending on home
appliances. The relatively young population in Malaysia is the main force behind the increase
in PC penetration and audio-video equipment.
Today, Malaysia's electronics industry has developed significant capacities and skills in the
manufacture has developed rapidly to become the largest industry within the manufacturing
sector and contributes significantly to the country’s exports of a wide range of home
appliances products.
Company Profile
PENSONIC was opened in 1965 when Keat Radio Co. Sdn Bhd was setup by Dato' Chew to
sell electrical appliances. Keat Radio Co. Sdn. Bhd. manufactures and distributes electrical
and electronic home appliances such as audio and visual items like portable radio cassette,
transistor radios, and black and white televisions. It is the Malaysia’s first electrical home
appliances brand and is a familiar household name. His initial setup Keat Radio Co. Sdn Bhd
has gained well profit to expand his first branch in 1974. The company which was set up by
Datuk Seri Chew Weng Khak, went into import, export and wholesaling of electronic and
electrical household appliances including audio and visual items.
The company has growing from strength to strengthen. Growing from a sole proprietorship
business known as Keat Radio and Electrical Co, to a big company today been incorporated
as an investment holding company to consolidate the various companies under the group.
This venture was presented with a golden opportunity to challenge his entrepreneurship when
he was appointed as the distribution agent of Japanese products. Dato' Chew came to realize
people are rely on using electronic product from oversea, seldom local factory are producing,
all products are imported. As Japanese made products were pricier, Dato' Chew decide
creating a local brand to counter the invasion of Japanese made product.In other to export,
import and distribution of electrical home appliances, Pensonic also manufactures and
markets its self-branded electrical home appliances.
The birth of Pensonic was conceived in 1982, the name PENSONIC was meaningfully
created by its founder, Dato' Seri Chew Weng Khak. PENSONIC was coined from two
different words: "PEN" for the Penang and "SONIC" for sound. PENSONIC means, "sound
from Penang". Pensonic has the distinctions being Malaysia’s first local made electric home
appliance to market.
As the first brand of "Made in Malaysia" electrical products registered in Malaysia, the
management group of Pensonic reduces the dependency on foreign suppliers, increasing the
local materials composition of PENSONIC products and eventually manufacturing them as
100% local made products. This will result in lower manufacturing cost and foreign exchange
saving for the government.
Besides that, Pensonic also produces electronic products under a their sub brand Cornell
Sales & Service Sdn Bhd and Kollektion Distribution Sdn Bhd. Cornell Sales & Service Sdn
Bhd, kitchen appliances such as stand fans, air-coolers, rice cookers, water kettles, irons,
tabletop ovens, induction cookers, microwave, pan grills, slow cookers . Wide variety of
products to suit all your household needs
Kollektion Distribution Sdn Bhd, established since 2002 is the sole distributor of four
international brands being Lebensstil Kollektion, Princess, General Electric and Gaggia.
Kollektion focus on innovative products that are stylishly designed, staying close to the
company’s motto of Impeccable Living while meeting the ever changing and demanding
needs of modern consumers. Their core business is home kitchen appliances; refrigerators,
freezers, ovens, cooktops, ventilating hoods, washers and dryers. Kollektion also have small
household appliances such as toasters, coffee-makers, mixers, garment steamers, hairdryers,
espresso machines and more. All appliances under the flagship of Kollektion Distribution are
stylishly designed and durably built.
As Pensonic has powerful, creative team in their company, they have won various industry
awards for its product innovations, design and development. Among them – the National
Creativity & Innovation Award by the Malaysia Design Technology Centre for outstanding
brand building endeavours and the Malaysia Good Design Mark by the Malaysia Design
Council. It is also the first brand in Malaysia to be accorded the Brand Promotion Grant for
the export market.
On December 1995, Pensonic Holdings Bhd was successfully listed on the second board of
Bursa Malaysia. To rationalize the positioning of Pensonic, the essence of determination is
much reflected in what Dato' Chew has to say: "I created the brand 'PENSONIC' to ensure
that all the work put in by my " company especially my staff and workers would stay
permanently in the mind and the heart of the people and to ensure that Malaysian have one
brand in household appliances which we can call our own.
Business Line
Consumer electronics, PENSONIC HOLDINGS BERHAD, now with its subsidiaries is
principally engaged in the manufacturing, assembling, wholesaling and trading of electronic
and electrical products under the PENSONIC brand, and also two sub-brand Cornell Sales &
Service Sdn Bhd and Kollektion Distribution Sdn Bhd..
It offers housekeeping products comprising hair dryers, iron, washing machines, and vacuum
cleaners and cookers that comprise built-in hobs, commercial gas cookers, gas cookers,
portable gas cookers, and cooker hood.
Besides that, Pensonic also produce home appliances, such as food processors consisting of
BBQ grills, freezers, gas rice cookers, induction cookers, hand and stand mixers,
refrigerators, rice cookers, sandwich makers, and toasters.
The company also offers air conditioners, calculators, clock radios, mouse pads, trailing
sockets, and emergency lamps. Its audio and visual appliances include televisions, VCD and
DVD players, mobile digital theaters; and healthcare products consist of infrared ear
thermometers and portable blood pressure monitors. In addition, Pensonic also provide
services in trading and servicing parts of electrical and electronic appliances.
Board of Directors (2011, the latest)
Executive Chairman
Y.Bhg. Dato’ Seri Chew Weng Khak @ Chew Weng Kiak
Chew Chuon Jin serves as Pensonic Holdings Berhad's Executive Director and Managing
Director of the Pensonic Holdings Berhad Group. Mr. Chew is responsible for the product
development, brand building and marketing of Pensonic products in domestic and
international markets.
Managing Director
Mr. Chew Chuon Jin
Chew Chuon Jin serves as Pensonic Holdings Berhad's Executive Director and Managing
Director of the Pensonic Holdings Berhad Group. Mr. Chew is responsible for the product
development, brand building and marketing of Pensonic products in domestic and
international markets.
Executive Director
Mr. Chew Chuon Ghee
Chew Chuon Ghee serves as an In Charge of Project and Marketing operation of Pensonic
Holdings Bhd and is responsible for promoting its local and overseas business venture. Mr.
Chew joined Pensonic as Marketing Manager. He serves as an Executive Director of
Pensonic Holdings Berhad.
Non Executive Directors
Tan Sri Dato’ Seri Tan King Tai @ Tan Khoon Hai
En. Khairilanuar Bin Tun Abdul Rahman
Dato' Dr. Ku Abd Rahman Bin Ku Ismail
Secretary
Mr. Lee Hong Lim
Auditors
KPMG
Chartered Accountants
Non-Financial Report
Strength
In Malaysia, Pensonic Holding has sold their product to different hypermarket and
shop. The products which are sold by them are distributed at many locations in Malaysia.
Thus, the product is easy to get by household or film. Other than selling, Pensonic Holding
also provides customer service and warranty claim. They had set up several service centers
among all the state of Malaysia.
As the first brand of "Made in Malaysia" electrical products registered in Malaysia,
the management of the PENSONIC group is looking at increasing the local materials
composition of PENSONIC products and eventually manufacturing them as 100% local
products. This would reduce the dependency on foreign suppliers; result in lower
manufacturing cost and foreign exchange saving for the government.
Pensonic Holding had the well-known at local market because their products have
standard quality assurance. The manufacture of Pensonic is passing by ISO 9002:2000
quality management system certificates. Hence, the quality of Pensonic products are reliable
and safety to consumer, either household or film user always choose the brand of Pensonic as
their electrical equipment.
The name PENSONIC was coined from two different words: "PEN" for the Penang
and "SONIC" for sound. PENSONIC means, "sound from Penang". Thus, it is easy to
memorize.
Weakness
Comparing with other larger manufacture electrical producer such as Sony, Toshiba,
Mitsubishi, Panasonic, Pensonic just start to contribute their business nearly 40 years. As an
end user view, people will feel like strangeness if they meet a newly brand. Most of the
companies are develop over hundred year and they have enough power, sufficient employees,
large capital to expand their business and improve their technology.
People will lose confident for Pensonic Holding and begin use other brands product.
This is a reason why Pensonic will face of a lot problem such as financial problem,
employees redundancy, and surplus inventory. The company needs a lot of time to rebuild
customer chain and obtain their confident.
The scale of Pensonic is not enough large, totals Pensonic workforce just about 400
employees. There are lacks of people with more competent at electrical manufacture and the
limited capital cannot purchase too many latest machines. These are the reason that Pensonic
Holding difficult to expand their business region to Austria, France, Germany, USA and other
western country.
In the worldwide market, most of the large manufacture electrical producers are from
advance country like Japan, and Korea. The engineering level manufacture electrical of
Pensonic is not better than other producer. Hence, this is the weakness of Pensonic.
Opportunity
Pensonic Holding has manufactured many type of electrical product such as food
processors, home appliances, health care, audio & application and health care. The different
type of product can satisfied every rank of customer.
For the time being, approximately 10% of the products are exported to Thailand, Sri
Lanka, Indonesia, Philippines, China, Hong Kong, UAE Dubai, Yemen, Egypt, Kuwait,
Jordan and Qatar. The remaining of the product are mainly sold in the local market. Thus,
Pensonic Holding has a lot of opportunity to expand their competitive power in this market.
Product price of Pensonic is cheaper relative with other electronic brand because it
produces by Malaysia and avoids paying the import fee. Thus, reduce the product price of
their product. It is more suitable for low income earners to buy their product. In the market,
there need the different price of product to selection by consumer and satisfied consumer
requirement.
Pensonic is the electric product produce by Malaysia and they sold in mostly
hypermarket and electronic shop. In Malaysia, Pensonic has the well-known rather than other
brand from China. This is a reason that Pensonic Holding obtain more selling opportunity in
local market.
Threats
In Malaysia, there don’t have too many places to set up factory and labor to support
them. Thus, Pensonic Holding cannot obtain the cheaper price in rented and lower labor cost
in Malaysia. This disadvantageous condition will decrease the competitive power of Pensonic
if compete with other electrical producer set up manufacture factory in China.
There are few large electrical manufacture producer same as Pensonic in worldwide
market such as Samsung, Sony, Toshiba, Mitsubishi, and Sharp, Panasonic. These companies
are competitor of Pensonic. Beside than that, Pensonic need to face of many China electrical
manufacture producer like Haier and LG. The threats of these companies will affect the sales
volume of Pensonic. Thus, Pensonic Holding need to reduce and control the quantity of
product, cannot be surplus and shortage. If the case of company faces of is the manufacture
product quantity surplus, company will remain the inventory in business. Otherwise the
company wills not enough product demand to the consumer.
In the new century, the electrical technology is change rapidly day by day, Pensonic
Holding need to continually research and development new technique. Other electrical
manufacture producers are the largest competitor in worldwide market. They will compete
their product quality and advanced technique.
Financial Analysis
1. Liquidity ratios
This ratio is also known as “return on capital employed” which is used to provide an
overall picture of profitability. It provides the information on whether the business is
able to pay its short-term debt at the correct time. It is essential that new customers to
be vetted before being allowed to trade on credit. The liquidity ratios are affected
most by the two aspects of liquidity which are the current ratio and the acid ratio.
i. Current ratio
It compares assets which will become liquid within approximately twelve months
with the liabilities which will be due by payment in the same period. It shows whether
there are sufficient short-term assets (cash) to meet the short-term liabilities.
Current ratio=Current Asset /Current Liabilities
Year Current Ratio
2006 119,419,315 /66,704,763=1.79 :1
2007 189,183,045/133,665,367=1.42:1
2008 199,893,721/145,882,074=1.37 :1
2009 173,754,674 /119,828,938=1.45 :1
2010 172,334,116 /119,278,976=1.44 :1
The higher the current ratio, the higher the ability of the company to meet the
currently maturing obligations. From the analysis of 5 financial years of Pensonic
Berhad, they have a normal performance which means they always have sufficient
short term assets to meet short term liabilities. The most satisfactory performance is in
2008.
ii. Acid test ratio
It also known as quick ratio. It shows that whether the business has sufficient liquid
resources to meet its current liabilities.
Acid test ratio=Current Assets−InventoryCurrent Liabilities
Year Acid Test Ratio
2006 119,419,315−56,022,37266,704,763
=0.95:1
2007 189,183,045−78,073,634133,665,367
=0.83 :1
2008 199,893,721−94,334,242145,882,074
=0.72 :1
2009 173,754,674−86,622,628119,828,938
=0.73 :1
2010 172,334,116−83,868,074119,278,976
=0.74 :1
The higher the acid test ratio, the higher the ability the company converts current
assets readily to cash to pay short term debt. The acid test ratio has decreased from
2006 to 2008, meaning that the Pensonic Berhad has a weaker liquidity position than
it had before. However, there is an increase in acid test ratio in 2009 but dropped a bit
in 2010.
2. Efficiency Ratio
i. Inventory turnover
Inventory turnover measures how efficient a business is at maintaining an appropriate
level of inventory. When it is not being as efficient as it used to be, or is being less
efficient than its competitors, this may indicate that control over inventory levels is
being undermined.
A reduction in inventory turnover can mean that the business is slowing down.
Inventory may be pilling up and not being sold. This could lead to a liquidity crisis, as
money may be being taken out of the bank simply to increase inventory which is not
then sold quickly enough.
inventory turnover= cost of salesaverage inventory
Year Inventory Turnover
2006 142,397,311[(55,634,393+56,022,372)÷2 ]
=2.55׿
2007 235,878,746[(56,022,372+78,073,634 )÷2]
=3.52׿
2008 260,803,235[(78,073,634+94,334,242)÷2]
=3.03׿
2009 222,627,288[(94,334,242+86,622,628)÷2]
=2.46׿
2010 251,326,315[(86,622,628+83,868,074)÷2 ]
=2.95׿
The value shown above is the ratio of company’s inventory is sold and replaced. A reduction
in inventory turnover can mean that the business is slowing down especially in the year of
2009. Maybe in year of 2009 company has the loss of business opportunities when facing a
problem obtaining enough inventories, or at the year 2007, which has the highest ratio,
company might having difficulty selling inventories, higher carrying costs and higher risk of
stocks becoming obsolete.
ii. Accounts receivable/sales ratio
The resources tied up in accounts receivable are an important ratio subject. Money
tied up unnecessarily in accounts receivable is unproductive money.
Accountsreceivable /sales ratio=accounts receivablesales
Length of time adebtor takes ¿ pay=365×(Accounts receivable/ sales ratio)
Year Accounts receivable/sales ratio Length of time a debtor takes to pay
2006 38,822,147 /187,296,457=1 :4.82365×
14.82
=76days
2007 73,404,535/302,103,558=1: 4.12365×
14.12
=89days
2008 68,163,306 /321,600,670=1 :4.72365×
14.72
=77days
2009 59,884,399/279,288,331=1: 4.66365×
14.66
=78days
2010 63,207,259 /303,776,169=1: 4.81365×
14.81
=76days
As the ratio of accounts receivable to sales is smaller, the length of time a debtor takes to pay
is longer, and vice versa.
iii. Accounts payable/purchases ratio
Accountsreceivable / purchasesratio=accounts receivablepurchases
As in balance sheet there is not value of purchase. Hence, we assumed that:
Cost of Sales = Opening inventories + Purchase – Closing inventories
So, Purchase = Cost of Sales + Closing Inventories- Opening inventories
Length of time company pay ¿creditor=365×(Accounts receivable / purchases ratio)
Year Accounts payable/purchases ratio Length of time company pay to creditor
2006 13,075,682/142,785,290=¿1:10.92 365×1
10.92=33days
2007 42,701,226 /257,929,648=1 :6.04365×
16.04
=60days
2008 42,313,176 /277,063,843=1 :6.55365×
16.55
=56days
2009 32,004,464 /214,915,674=1:6.72365×
16.72
=54days
2010 29,492,485 /248,571,761=1:8.43365×
18.43
=43days
As the ratio of accounts payable to purchases is smaller, Length of time company pay to
creditor is shorter, and vice versa.
3. Shareholder Ratios
The ratios include earnings per share (EPS), price/earnings ratio (P/E), dividend yield,
dividend cover.
i. Earnings per share (EPS)
It used to compare one year’s earnings with another year’s.
Earnings per share(EPS)= Net profit after interest∧tax∧preference dividendsNumber of ordinary shares issued
Year Earnings per share (RM)
2006 3,280,864 /92,620,000=0.03542
2007 573,421/92,620,000=0.00619
2008 2,461,893/92,620,000=0.02658
2009 2,229,535/92,620,000=0.02407
2010 3,347,504 /92,620,000=0.03614
In viewing the EPS of Pensonic Berhad, the earnings of the company in 2007 is the
lowest compared with the other years. However, Pensonic Berhad have an moderate
result as profit available for shareholder do not have much more changes except for
the year 2007.
ii. Price/ earnings ratio (P/E)
The greater the ratio, the greater the demand for the share.
Price /Earnings ratio= Market price per shareEarnings per share
Year Price/ earnings ratio
2006 -
2007 -
2008 -
2009 -
2010 -
iii. Dividend yield
It measures the real rate of return of a share.
Dividend yield=Gross dividend per shareMarket price per share
Year Dividend yield
2006 -
2007 -
2008 -
2009 -
2010 -
iv. Dividend cover
It measures the proportion of net profit available to pay dividends. It expresses the
ability for a company to pay ordinary dividends to shareholders out of profits earned.
Dividend cover = Net profit after tax and preference dividends
Ordinary dividends paid and proposed
Year Dividend Cover
2006 3,280,364 /1,333,728=2.46׿
2007 573,421/1,667,160=0.34׿
2008 2,461,893/1,690,315=1.46׿
2009 2,229,535/868,313=2.57׿
2010 3,347,504 /868,307=3.86׿
The higher the dividend cover, the better the ability to maintain dividends if profit
drop. In viewing of the 5 financial years’ dividend cover, there is a significant decrease in
2007 which means that Pensonic Berhad facing a problem of no dividend cover. After the
year of 2007, the dividend cover has increased from 2008 to 2010 which means Pensonic
berhad has a satisfy performance in maintain their dividend.
4. Profitability ratios
i. Return on Shareholder’s Fund(ROSF)
It is used as a measure of the profit for the period which is available to the owner’s
stake in a business. The Return on Shareholder’s Fund ratio is therefore a measure of
profitability. This measure of profitability is calculated as:
Returnon Shareholder' s Fund (ROSF )=net profit after interest∧taxationcapital employed
x100
A high ROSF percentage indicates that a company is profitable and has more profit available
for shareholders
Year ROSF
2006 3,280,864[(89,058,989+90,968,561)÷2]
×100=3.64 %
2007 1,262,664[(90,968,561,+89,978,597)÷2]
×100=1.40 %
2008 1,135,741[(89,978,597+90,851,246)÷2]
×100=1.26 %
2009 2,177,215[(90,851,246+92,454,947)÷2]
×100=2.38 %
2010 3,168,730[(92,454,947+94,409,321)÷2]
×100=3.39 %
Higher ROSF percentage indicates that a company is profitable and has more profit available
for shareholders. For the return on shareholders’ fund, the year of 2006 had the highest
percentage, which means at that year, shareholders’ obtain more profit. While in year of
2007, which had the lowest percentage, company earned the least profit and shareholders’
had the lowest profit.
ii. Return on capital employed (ROCE)
This is one of the most important profitability ratios, as it encompasses all the other
ratios, and because an adequate return on capital employed is why people invest their
money in a business in the first place.
Limited companies
There is no universally agreed definition of return on capital employed for companies.
The main ones used are:
a. Return on capital employed sourced from ordinary shareholders
b. Return on capital employed sourced from all long-term suppliers of capital
return oncapital employed (ROCE )=net profit beforebefore interest∧taxationaverage share capital
×100
Year ROCE
2006 4,715,394[(99,171,493+102,938,946)÷2]
×100=4.67%
2007 7,307,230[(102,938,946+98,461,638)÷2]
×100=7.26 %
2008 2,413,829[(98,461,638+15,174,178)÷2]
×100=4.25 %
2009 3,792,245[(15,174,178+98,029,155)÷2]
×100=6.70%
2010 5,265,816[(98,029,155+100,893,798)÷2]
×100=5.29 %
The higher ROCE percentage, company get more profit. For return on capital employed,
there is the highest percentage at the year of 2007, which the company earned more profit at
that year and at the year of 2008 was the lowest profit earned.
iii. Gross profit as percentage of sales
This represents the amount of gross profit for every RM1.00 of sales revenue before
expenses were paid.
gross profit as percentageof sales= gross profitsales
×100
Year Gross profit as percentage of sales
2006 44,899,146187,296,457
×100=23.97 %
2007 66,244,812302,103,558
×100=21.93 %
2008 60,797,435321,600,670
×100=18.90 %
2009 56,661,043279,288,331
×100=20.29 %
2010 52,449,854303,676,169
×100=17.27 %
Sales and gross profit had increased but, as the gross profit percentage had fallen from year of
2006 to 2008, shows that the gross profit has fallen. Although there is an increase of gross
profit in 2007, but it drops continuously from year 2008 to 2010.
iv. Net profit as a percentage of sales
This represents the amount of gross profit for every RM1.00 of sales revenue after
expenses were paid.
net profit as percentage of sales=net profitsales
×100
Year Net profit as percentage of sales
2006 3,280,864187,296,457
×100=1.75 %
2007 1,262,664302,103,558
×100=0.42 %
2008 1,135,741321,600,670
×100=0.35 %
2009 2,177,215279,288,331
×100=0.78 %
2010 3,168,730303,676,169
×100=1.04 %
Sales and net profit had increased as the net profit percentage had increase from year of 2008
to 2010, shows that the net profit has increase.
5. Capital Structure Ratios
The relationship of equity shares to other forms of long-term financing can be extremely
important. Analysts are, therefore, keen to ascertain a ratio to express this relationship.
The equation as follows:
Long termloans+Preference sharesOrdinary sharecapital+Reserve+Preference shares+Long termliabilities
×100
Sometime this formula is abbreviated to:
Prior chargecapitalTotal capital
×100
Note: As the annual report did not provide preference shares, so we assume it as 0.
Year 2006 2007 2008 2009 2010
Long-term
loans
6,864,798 4,965,513 4,235,596 3,410,199 3,947,522
Preference
shares
0 0 0 0 0
6,864,798 4,965,513 4,235,596 3,410,199 3,947,522
Ordinary
share capital
46,310,000 46,310,000 46,310,000 46,310,000 46,310,000
Reserves 44,658,561 43,668,597 44,541,246 46,144,947 48,596,277
Preference
shares
0 0 0 0 0
Long-term
liabilities
9,446,631 7,162,605 5,995,916 4,892,390 5,484,477
100,415,912 97,141,202 96,847,162 97,347,337 100,390,754
Capital
gearing ratio
(%)
6.8364 5.1116 4.3735 3.5031 3.9322
When a company with a high percentage gearing ratio is said to be high geared, whereas one
with a low percentage gearing ratio is said to be low geared.
Pensonic Holding Berhad has a low percentage gearing ratio with a range 3% to 7%.
This ratio means that in bad times most might be on going for ordinary shareholders after
payment of interest on the debt item and also preference dividends. In good time, however,
the ordinary shareholders will not satisfy with the lower return in company. People investing
in ordinary shares in a low geared company are having lower risk with their money than if
they had invested instead in a high geared company.
Recommendation
Pensonic Holdings has a lot of ways to improve their performance in the market. First
of all, since there are many competitors in the market such as SONY, HAIER, Pensonic
needs step up their game by hiring more qualified people at electrical manufacture and
purchase latest production machine that is available in the current market. This will help them
to increase production and less mistakes happens in the production line since more qualified
workers are employed. By this, the company needs to invest more capital.
Since Pensonic is quite new to the industry, they also need spend lot of capital to do
advertisement and publicize to increase the popularity among consumers. Pensonic also can
promote their product through ambassadors. Example artistes such as Amber Cheah, Alan
Yuan, Seon Lee to increase the popularity of the product. By this, it can attract more people
to buy their product as they may see famous people using it.
To increase their sales, they would need to expand their product to other countries
since there are not many places in Malaysia to build their company. Hence, the company
needs to hire people to spend time in research and development. With this, Pensonic may be
able to expand to other countries.
Pensonic management should decide to change the gearing of the company. At the
moment the company is having low gearing ratio which means lower risk investment for
investors. To increase gearing, Pensonic can do 3 main things which are by:
i. By issuing debentures
ii. By buying back ordinary share in issue
iii. By issuing new preference shares
Such changes will bring in high-risk buyers of ordinary instead of ordinary shareholders who
wish to minimize risk with low gearing ratio.
PENSONIC can also depend on its strong distribution-channel network with the
adoption of a multi-brand agency strategy to cut into different product types and different
market segregation which is not represented by the market presently. A multi-brand strategy
will enable the company to widen its revenue base through representation in the full spectrum
of the product and market segments in its industry.
This company should look into potential acquisitions and joint-ventures as long-term
growth strategies. These includes acquisitions of or joint-ventures with local as well as
foreign brands and corporation, which will provide a positive effect to the overall business of
the company in terms of revenue, profitability, market channels and operation efficiencies.
Conclusion
Many international prominent brands have downsized their manufacturing facilities for small
electrical home appliances due to historical cost-burden and the shift to higher-end consumer
electronics. However, for the small electrical home appliances category such as PENSONIC
Holdings, a substantial number of these international brands still have the continual need to
maintain their respective brand presence in the market or are not ready to forego their
respective substantial market share built over the many years. This provides a lot of
opportunities for the Group to capitalize on its widely recognized niche in the small electrical
home appliances category for further development of its ODM (Original Design
Manufacturer) / OEM (Original Equipment Manufacturer) businesses with such international
brands.
The company has recently, through its Hong Kong subsidiary Pensonic (HK)
Corporation Ltd., signed a Memorandum of Understanding with the University of Hong
Kong to cooperate and execute a research and development project named “The Study of
Carbon Fibers and Their Applications in Domestic Electrical Appliances”. Carbon fiber and
carbon-fiber based material have special characteristics as an electrical heating material, and
hence, there is a good market potential for it in a wide range of applications in electrical
home appliances. The company is also looking into the possibilities to produce innovative
applications of carbon fiber and carbon-fiber based material beyond the realm of electrical
home appliances. The ability to commercialize this research and development in the future
will provide bigger opportunity for high business growth for this company.