Question

Permata Mutiara Holdings Berhad (Permata Group) is the holding company of the largest
independent investment bank in Malaysia. Established for more than 30 years, Permata is
a financial group in Malaysia with extensive experience in equity broking, investment
banking, listed derivatives, treasury, corporate advisory, Islamic banking, wealth
management and investment management. Permata Holdings Berhad was listed on the
Main Board of Bursa Malaysia Securities Berhad in 1998.
After graduation, you have successful join the company and been placed in Investment
Department as an Analyst Associate. As a business graduate, the management has trust
that you have an excellent knowledge and skills besides the capability you have shown
during the interview.
En Amir Dhalan, a Chief Finance Officer (CFO) have asking the Investment Department
to prepare a few tasks for him to present for the company business planning for five years.
You are one of the staff in the department has involve in these tasks. Mr Andrew Yap, the
Investment Manager has segregated the tasks to few people in the department. The tasks
have been given by Mr Andrew for you to accomplished as follows:

a) To evaluate the performance of the subsidiaries of Permata by providing the report
on the value of its stocks according to CAPM. You have to plot the Security Market
Line (SML) for all the stocks. The stocks are listed are:
i) Permata Mutiara Plantation
ii) Permata Mutiara Hotel
iii) Permata Mutiara Banking
iv) Permata Mutiara Unit Trust
v)Permata Mutiara Insurance

b)To evaluate the FIVE (5) stocks either they are optimal portfolio and best possible
risk and return according to Markowitz in Modern Theory (efficient frontier).

c)To evaluate all the FIVE (5) stocks according to the Discounted Dividend Model
(DDM) either by constant growth model and/or multiple growth model.

d)The group is considering to buy bonds from foreign countries. You have to
recommend TWO (2) countries after analyze according to the SWOT, the strength
and weakness of the firm, risk analysis and return. Besides, the main factor you
have to look at the bond rating.

e)The group also considering to buy Malaysia Government Securities and few stocks
either locally or globally. Before recommend, you need to analyze those stocks
according to your knowledge.

f) Analyze and evaluate the outcome from your valuation.

g) Recommend to the management and summarize your findings.

Answer 1

(a) EVALUATION OF PERFORMANCES OF SUBSIDIARY ON THE BASIC OF CAPM AND SML

securities market line is representation of capital assets market pricing model. it display the expected rate of return of an individual securities as a function of systematic, non diversifiable risk. the risk of an individual risky securities refelect the volatility of return from the sesurities rather than the return return of the market portfolio. the risk in these individuals risky sesutities reflects the systematick risk.

(b) OPTIMAL PORTFOLIO - BASED ON RISK AND RETURN

while we decide the optimum portfolio we not considerd the individuals secuties risk and returns. we considered the whole portfolios weighted risk and weighted riturn of portfolio. we choises the thoses securites those gives us weighted risk and weighted retun over and above our expected return.

(c)DIVIDEND DISCOUNT MODEL

dividend discount model is a method of valuing a company's stock price based on the theory that a stock is worth the sum of all of its future dividend payments, discounted back to their present value.

thus we considerd all the stock's and theire divedend. and discount the devidend on their present value. and considered the those stock which gives ue more devidend.