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.