QUESTION 1 (26 MARKS)

Awana Corporation has RM100 million of portfolio. Some of the portfolio has been invested in few capitals market. You as an analyst in the company has been responsible for the company funds and investment and to ensure the company wealth increased and growth. Every year the company has forecast on the return for the investment for each securities the company invested.

Now you are collected few data and valuable information for the company to invest. The first one, you found that Hartalega Berhad has issued for 20 years bond and has been issued for last 10 years. The interest is paid annually at the coupon rate of 6% and yield-to-maturity is 7%. Currently, the market price is RM115.00.

The second one, is Kuang Plantation Berhad is the main manufacturer of Crude Palm Oil (CPO) in Malaysia. Its market price now is RM125/share. This company has declared last year dividend of RM3.75/share at a growth rate of dividend 7% and Kuangs beta is 1.1

The third opportunity is PharmaMedical Bhd and this company has established since 2010 and the company is producing healthcare products. This company has expected to pay dividend next year of RM2.50/share and currently the market price is RM35/share. The growth rate of dividend of the company is 8% and its beta is 0.8.

Currently, the risk-free rate is 3.8% and the expected market return is 12%.

Required:

1. Calculate the value of the Hartalega bond, Kuang Plantation and PharmaMedical.

(10 marks)

2. If you want to diversified the company portfolio, which securities as (a) you should invest? Justify.

(6 marks)

c. Between Kuang Plantation and PharmaMedical, which is more risky? Your assessment shall be supported by fundamental analysis such as by macro analysis, industry analysis and/or company analysis.

(10 marks)