Question 1 Dato' Haji Abdul Rahman Abdullah, the director of Bina Darulaman Berhad is planning do due diligence of the company. Bina Darulaman Berhad principal activity includes the provision of management services and property development. The group has five business major business segments namely property development and investment which is the development of residential and commercial properties, quarrying and road paving work which includes granite quarry operator and civil engineering contractor, construction includes building and general contractor, operation of golf and hotel resort includes hotel operation and golf resort owner and operator and investment holding which includes provision of management services. In May 2021, Bina Darulaman Berhad has secured a RM431 million contract to upgrade the Pelubang water treatment plant in Alor Setar by the Kedah state government. The statement of cash flow for Bina Darulaman Berhad is as Exhibit 1.0 (in page 6). To make sure the smooth of the project, the director is planning to do a report on their cash flow. As a finance executive of Bina Darulaman Berhad, you are required to assist the director by preparing the following: a. Based on Bina Darulaman Berhad statement of cash flows, comment on the significant changes to the operating, investing and financing activities within the three years. (5 Marks) b. Compute the free cash flows of Bina Darulaman Berhad for year 2020, 2019 and 2018. Comment on Bina Darulaman Berhad use its free cash flow. (4 Marks) C. Compute the cash flow adequacy ratio of Bina Darulaman Berhad for year 2020. Comment on Bina Darulaman Berhad cash flow adequacy performance. (2 Marks) [Total: 11 Marks] 2018 RM'000 10,894 1,454 (98) (23,000) (308) 63 52 4,016 (6,927) BINA DARULAMAN BERHAD Statement of Cash Flows for the year ended 31 December 2020 2019 RM'000 RM'000 Cash flows from operating activities Loss before tax (5,142) (7,627) Adjustments for: Depreciation of property, plant and equipment 863 1,101 Gain on disposal of property, plant and equipment (137) Dividend income (10,000) (8,000) Interest income (1,858) (2,823) Interest expense 1,386 1,763 Impairment loss on advance to subsidiaries 5,272 Impairment loss on investment in subsidiaries 2,044 8,825 Operating loss before working capital changes (7,435) (6,898) Changes in working: Inventories 1,661 2,616 Trade and other receivables 1,576 15,956 Trade and other payables 2,116 (917) Cash (used in)/generated from operations (2,082) 10,757 Interest paid (1,386) (1,763) Tax (paid) / refunded (14) 85 Dividend received 8,000 Net cash (used in) / from operating activities (3,482) 17,079 Cash flows from investing activities Purchase of property, plant and equipment (131) (73) Proceeds from disposal of plant and equipment Proceeds from disposal of other investments 10,741 Purchase of other investments (662) Interest income received 1,858 2,823 Refund from/(advances to) subsidiaries 1,009 (8,481) Net cash from investing activities 2,074 5,315 Cash flows from financing activities Repayment of SUKUK (30,000) (20,000) Drawdown of term loan 29,500 Repayment of hire purchase liabilities (58) (265) Net cash used in financing activities (558) (20,265) Net (decrease increase in cash and bank balances (1,966) 2,129 Cash and bank balances at beginning of year 5,731 3,602 Cash and bank balances at end of year 3,765 5,731 (1,724) 6,535 (1,788) (3,904) (63) 55 23,000 19,088 (204) 196 305 (13,083) 308 (9,789) (22,572) (138) (138) (3,622) 7,224 3,602
