Case Study: Hytex Intergrated Bhd

Hytex Intergrated Bhd is a public company that mainly produces and distributes printed garments in Malaysia and overseas. They also have around 40 concept stores all over Malaysia. Established in year 1981 as a silkscreen printing business, Hytex expands and became listed company in Bursa Malaysia on 9 November 2002. Hytex was listed under Practice Note 1 in August 2011 due to default in payments of interest of the loans stocks. Hytex later listed under Practice Note 17in June 2013 due to unaudited accounts for the financial year ended 31 March 2013, where the shareholders’ equity is less than half of the issued and paid-up share capital excluding treasury shares. This shows that Hytex is facing serious debts problem and losses until shareholders’

This will cause local companies can’t offer a competitive price in the low price international market. The insufficient raw material in Malaysia cause local companies have to import from overseas which unbeneficial to pricing strategy and expose in risk of fluctuation currency rate. The highly dependent on foreign workers due to high Malaysia labour cost create some consequences. The companies have to follow the law about foreign labour set by government, for example the duration foreign workers stay in Malaysia is limited. This will force those companies to retrain new workers which will not support in R&D program and increase the efficiency of a company. Therefore, the failure in managing production cost in Malaysia or outsourcingare consider main factors that will bring a company towards failure. Hytex might be one of the victims. Last but not least, being satisfied in doing sub contract manufacturing for international brands is a fatal management mind-set faces in this industry. As we can see, Hytex only emphasize in manufacturing garments for international famous brands instead of trying to invent new fabric or make own local brand. The unwillingness to improve and venture the unknown cause the garment manufacturing falls as a sunset business in Malaysia. Therefore, in order to bring Hytex business back to life, they have to stop putting sub contract manufacturing as their main business.

This shows that they face serious inventory piling up problems that will further incur difficulties in selling out old fashioned garments and high storage costs. Besides, the operating return on assets for year 2012 and 2013 is -0.923% and 7.43%. This shows that their assets are not fully utilized. This might be due to reduce on production. The debt ratio for year 2012 and 2013 is 79.94% and 84.97% which shows that most more than half of the assets is financed by debts, not equity. Hytex will have to pay high interest expenses that generated from loans used to acquire assets. Besides, Hytex’s times interest earned for year 2012 and 2013 is -0.22 times and 1.435 times. In year 2012, Hytex was unable to cover the interest expense and principles. In year 2013, Hytex only able to cover the interest expense but also at the edge of defaulting payment. The EPS for year 2012 and 2013 is -34.43 sen per share and -13.54 sen per share, both years are negative. Shareholders have to bare the losses the company faces. Besides, the P/E ratio for year 2012 and 2013 is -0.004 times and -0.028 times which shows that investors loss confidence on the profitability of