QUESTION 1 (70 MARKS)

Alisa, an analyst in a wealth management company and has joined with this company for almost 5 years. She has managed hundred customers worth RM20 billion. Some of her big clients including the financial institution relied and trusted on her ability managed their portfolios for years. Alliure Bhd has referred Alisa to manage its firm portfolio worth RM7 million. Alliure interested to invest 100,000 shares in Stock Aire and 50,000 shares in Stock Zellig for the long-term period as these both companies have performed for few years back.

Alisa has collected the data on both stocks from Bursa Malaysia as follows for her analysis:

		Stock Aire	Stock Zelig
State of Economy	Probability	Return (%)	Return (%)
Recession	0.3	13	25
Normal	0.5	8	12
Boom	0.2	5	-8

Stock Aire is a high-tech company and in ACE market has been listed in Bursa Malaysia for three years. When it was listed in secondary market, its priced was RM0.42 and has increased about 1300% in 3 years. Currently, Alliure is selling at RM6 each and the beta for Aire is 0.8 Alliure has 20 million shares of 50 cents par value. With the same number of shares outstanding, last years earnings per share was RM1.20. Due their rapid expansion, current net profit after taxes shown an increment of 20% from that of last years. The total amount of dividend declared is RM1.5 million. Its value of total assets is RM25 million and the firms stockholder equity is RM12 million.

Stock Zelig is one of the companies in a fast-moving consumer goods (FMCG) industry and has been listed in Main Board in Bursa Malaysia for 10 years. With its 300 million shares of RM2 par value issued and outstanding. The companys end of year profit after tax for last year was RM250 million and increase for 40% in this year. For this year the company has increased its dividend payout ratio from 30% to 40% to its shareholders. The ROA of the company is 50% and 20% from the last year. Currently, Zelig is selling at RM133 each and the beta is 1.1.

Currently, Malaysia Treasury bills shows at 3.6% and the expected market return is 12%.

Required:

1. Calculate expected return and standard deviation for both stocks.

(8 marks)

(CLO2:PLO6:C4)

2. Calculate the expected return portfolio and standard deviation for portfolio.

(8 marks)

(CLO2:PLO6:C6)

3. Calculate the beta portfolio. Analyse each of stocks and portfolio based on their riskiness.

(4 marks)

(CLO2:PLO6:C6)

4. Analyse both firm performances based on its company analysis as follows. Support with calculation (if any):

1. Earnings per share
2. Price earnings ratio
3. Dividend per share
4. ROE
5. ROA
6. Book value per share

(12 marks)

(CLO2:PLO6:C6)