Bernas is the largest partner for paddy and rice manufacturing industry in Malaysia by involving themselves with activities from extraction of paddy to distribution to the consumers. In other words, Bernas is a big organization which helps the local farmers to sell their rice. Knowing that rice is essential to our daily consumption especially in South East Asia countries, Bernas is playing a big role to ensure the supply of rice is sufficient locally and internationally. As the sole largest partner in Malaysia, Bernas faces no competition within the market. Also, barriers of entry is high as Bernas network is huge enough that it actually controls the Malaysia rice supplies. Without these CE, the company will find it hard to survive. If capital is managed efficiently, future earnings are expected to strive as rice manufacturing industry is set to survive permanently on the ground of monopoly.
As a partner, Bernas need to fork out a lot of capital in order to provide warehouse services as well as infrastructure to smoothen the distribution process of the rice to the consumers. However, the amount spend is gigantic which can be valued to 70 million of capital expenditure annually. In unfortunate event such as flood and drought, productivity will be deeply affected where facilities such as processing factory and warehouses will be left idle and thus wastage of capital.
Based on the ten years cash flow, it is merely staying above positive level. We can see that it fluctuated a lot throughout the years. Both ratios are also not up to satisfactory level where it fails to show the competency of the company in managing their assets and capital. Although the industry possesses a lot of potential, however, poor management of capital fails to maximize the value of the company.
Stock: BERNAS[S] Code: 6866
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