Table 1 and Table 2 show how the Latest 10 Years ROE of MAGNI and PRLEXUS were achieved based on DuPont Analysis respectively.
|
Year
|
2013
|
2012
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
2004
|
|
Net Profit Margin
|
6.3%
|
5.7%
|
3.9%
|
4.4%
|
3.0%
|
3.0%
|
2.1%
|
1.3%
|
1.1%
|
2.9%
|
|
Sales Turnover
|
2.08
|
2.22
|
2.10
|
1.95
|
2.17
|
1.97
|
1.20
|
0.95
|
0.94
|
0.84
|
|
Financial Leverage
|
1.31
|
1.29
|
1.35
|
1.31
|
1.32
|
1.34
|
1.37
|
1.19
|
1.20
|
1.29
|
|
ROE
|
17.3%
|
16.4%
|
11.0%
|
11.2%
|
8.5%
|
7.9%
|
3.6%
|
1.4%
|
1.3%
|
3.1%
|
Table 1: ROE for MAGNI
|
Year
|
2013
|
2012
|
2011
|
2010
|
2009
|
2008
|
2007
|
2006
|
2005
|
2004
|
|
Net Profit Margin
|
7.3%
|
5.4%
|
2.5%
|
2.5%
|
0.2%
|
-1.8%
|
-3.2%
|
-2.0%
|
-2.6%
|
-3.5%
|
|
Sales Turnover
|
2.05
|
2.09
|
1.93
|
1.59
|
2.01
|
2.13
|
1.90
|
1.68
|
1.65
|
1.40
|
|
Financial Leverage
|
1.42
|
1.40
|
1.79
|
1.78
|
2.13
|
2.31
|
2.59
|
2.40
|
2.25
|
2.24
|
|
ROE
|
21.1%
|
15.9%
|
8.6%
|
7.0%
|
0.8%
|
-8.8%
|
-15.9%
|
-7.9%
|
-9.6%
|
-11.1%
|
Table 2: ROE for PRLEXUS
It is clear from the table above that PRLEXUS has achieved a much
higher ROE of 21.1% compared to that of MAGNI of 17.3%. The higher ROE
of PRLEXUS was achieved with a relatively high income margin of 7.3%
compare to MAGNI – 6.3% and higher financial leverage (1.42 vs 1.31).
Both companies have a similar sales turnover of 2.0.
Figure 1: Trends of ROE of MAGNI and PRLEXUS
Based on the last 10 years results, the ROE for MAGNI is growing from
3.1% to 17.3% (CAGR 21%) while PRLEXUS’s ROE was in negative zone on the
first five year (2004-2008) and experience a very high growth on the
next 5 years - 2009 to 2013 (0.8% - 21.1%).
The growing of MAGNI’s ROE was achieved with growing Net Profit Margin
and Sales turn over while the financial leverage is maintained. This
show that MAGNI is not only improving its earning quality but in the
same time produce more product with the asset.
While, PRLEXUS’s able to increase its ROE by increasing the Net Profit
Margin and Sales turn over; and in the same time reducing the financial
leverage. PRLEXUS net profit margin is turning from red to green on
year 2009 and overtake MAGNI on year 2013.
MAGNI is a debt free company and it can increase the financial
leverage and improves its ROE. However, financial leverage is a double
edge sword it can hurt ROE badly in the bad times. And, high leverage
can make a company’s balance sheet unhealthy and become risky during
economy downturn.
From the above analysis, we can conclude that both companies is able
to create value for its shareholder and PRLEXUS latest financial year
ROE is much better than MAGNI. However, MAGNI presented a positive (and
it is growing) ROE and net profit margin on the pass 10 years but
PRLEXUS only turn to green 5 years ago. Furthermore, MAGNI is a debt
free company and it can further increase the ROE by using financial
leverage. In my own opinion, MAGNI provide a lower risk investment
option if compare to PRLEXUS.
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