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CHAIRMAN’S DELIVERING MSM MANAGEMENT DISCUSSION GROUP FINANCIAL
STATEMENT VALUE OVERVIEW & ANALYSIS REPORT

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020

4 FINANCIAL RISK MANAGEMENT (CONTINUED)

(b) Capital risk management policies
The Group’s and Company’s primary objectives on capital management policies are to safeguard the Group’s and
Company’s ability to maintain healthy capital ratios to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group and Company manage its capital structure and make adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group and Company may adjust the dividend payment to
shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or
172 processes during the financial year ended 31 December 2020 and 31 December 2019.
The Group considers its debts and equity attributable to owners of the Company as capital and monitor capital using
MSM MALAYSIA HOLDINGS BERHAD Annual Report 2020
gearing ratio. This ratio is calculated as net debt divided by total capital of the Group and Company. Net debt is calculated
as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated statement of financial
position), lease liabilities and loan due to a related company less deposits, cash and bank balances. At Company level,
net debt also includes loan due to a subsidiary. Total capital is calculated as ‘equity attributable to owners of the
Company as shown in the consolidated statement of financial position plus the net debt of the Group and Company.
The gearing ratio analysis for the Group and the Company are as disclosed below:
Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Net debt 763,273 950,335 672,703 803,130
Equity attributable to owners of the Company 1,581,526 1,657,531 1,718,063 1,674,986
Total capital 2,344,799 2,607,866 2,390,766 2,478,116

Gearing ratio 33% 36% 28% 32%

The decrease in the Company’s gearing ratio in 2020 is due to full repayment of term loan and overall lower borrowings
level.
(c) Fair value estimation

Financial instruments that are measured in the statement of financial position at fair value are disclosed by the following
fair value measurement hierarchy:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
• Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices) (Level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).