The Malaysia Construction Companies Finance Essay

Nowadays, one of the Malaysia building companies, Ho Hup buildings Berhad is one of the best and largest companies in building sector which have besides take topographic point as being one of the subscriber for authorities income every twelvemonth. Ho Hup building was established in twelvemonth 1960 by Mr Low Chee with name Ho Hup building Berhad. Ho Hup building is a building company with licence and was certified by the ISO 9001:2000 ( Provision of Construction Management and Services for Building and Civil Engineering Works ) . No affair undertakings from authorities or private sectors, Ho Hup building Berhad implements it by following the ISO criterion. Ho Hup building Berhad is a public listed company in Kuala Lumpur Stock Exchange which besides called as Bursa Saham Malaysia under the building sector.

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The primary activities of Ho Hup building Berhad include a comprehensive scope of competency in edifice, civil technology, specialised intelligent edifice, trading, and related service. Ho Hup building Berhad has wider experiences in building sector through its 100 per centum of entirely owned subordinate company ( Ho Hup building company Berhad ) . Ho Hup building company Berhad ‘s primary service activities include edifice building, earthworks, technology, railroad, H2O intervention workss, main road and works, constructing plants, athleticss composites, Bridgess, dikes, steel grapevines, prey operation, reservoirs, drainage plants, fabrication and oil & A ; gas works, foundation every bit good as technology ( commendation ) .

Ho Hup building Berhad non merely well-established in Malaysia, it besides extended its concern activities into other states around the universe. Ho Hup building Berhad has its subordinates which called Ho Hup building ( Thailand ) Limited company operate in Thailand, Shanghai San Ho Hup Pile Co. Ltd in China, Madagascar Malaysia Equipment Rental & A ; Madagascar Malaysia Construction Company and Ho Hup Construction ( Madagascar ) SARL in Madagascar, Ho Hup Construction Company ( India ) Private Limited operated in India, Ho Hup Corporation ( Mauritius ) Ltd in Mauritius and Ho Hup corporation ( South Africa ) in South Africa Pty Ltd. Besides, PT Halford Citra is one of the subordinate company of Ho Hup building in abroad.

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A inquiry is sing why Ho Hup building Berhad and its subordinate companies have the best of the comment and its accomplishment is better than other building companies in this sector? It is because Ho Hup building Berhad ‘s building undertakings are implemented with its company ‘s professional work moralss and frequent close monitoring, by the onsite and offsite direction squad, to maintain trailing of the work-in-progress and standard quality control, machinery care and demand ensures the successful completion of each and every undertaking it undertakes. Employees of Ho Hup building Berhad be trained to completed their occupations by following their company ‘s mission that is “ choice driven ” . With the company ‘s mission, every undertaking is completed by following the codification of moralss. That is the ground why undertakings done by Ho Hup building Berhad gained repute for its company and Ho Hup building Berhad are recognized by public and industry rivals. Besides that, Ho Hup building Berhad from twelvemonth to old ages obtained award and certificate acknowledgment from certain sections and leaders. The obtained awards are the grounds to turn out that Ho Hup building Berhad are making good to carry through clients ‘ demand and at the same clip, it caring the society needs every bit good.

Beside than mission of company, benchmark of Ho Hup building Berhad is “ the life style of life ” for clients who purchase the belongings from Ho Hup building Berhad.

Ho Hup building Berhad and its subordinate companies been completed many successful and celebrated undertaking such as Kuala Lumpur International Airport, LRT railroads and mass rapid theodolite, national athletics complex Malaysia and so on. Their successful undertakings are those public good known undertaking.

Relevant fiscal ratio

Debt to Equity Ratio

2008

Entire Liabilities/ Total Shareholder Equity

= RM 269,644,000/RM 18,769,000

= 14.36

2009

Entire Liabilities/ Total Shareholder Equity

= RM 259,030,000/ RM 15,679,000

= 16.52

2010

Entire Liabilities/ Total Shareholder Equity

= RM 239,488,000/ RM 29,112,000

= 8.23

Debt Ratio

2008

Entire Liabilities/Total Asset

RM 269,644,000/ RM 289,683,000

= 0.93

2009

Entire Liabilities/Total Asset

RM 259,030,000/ RM 244,444,000

= 1.059

2010

Entire Liabilities/Total Asset

RM239, 488,000/ RM 211,530,000

= 1.132

Every concern has its capital construction to assist house to bring forth difference beginnings of fund in order to widen their concerns. Capital construction defined as a mix of long term debt, specific short term debt, common equity and preferable equity.

Debt to equity ratio is a fiscal ratio used to bespeak what proportion of equity and debt the company is utilizing to finance its plus. Ho Hup building Berhad consolidate company debt to equity ratio in twelvemonth 2008 is about 14.36 % , this ratio show that consolidate company fiscal purchase is lower and under healthy degree. Following, in twelvemonth 2009, debt to equity ratio is about 16.52 % , there is some increasing from twelvemonth 2008 to twelvemonth 2009 due to consolidate company start to hold long term adoption in twelvemonth 2009 ( RM 5,037,000 ) and that is zero adoption in twelvemonth 2008 ( company one-year study 2009 note 30 ) . At the same clip, there is besides caused by the stockholder equity cut down from RM 18,769,000 to RM15, 769,000. In this phase, company still see is holding lower debt to equity ratio, because certain company among the market rivals are holding debt to equity ratio more than 50 % . Furthermore, there is 8.23 % of debt of equity ratio for twelvemonth 2010. During this twelvemonth, company decided non to hold any long term bank adoption and do refund for loan rule and involvement. This shows that Ho Hup Construction Berhad consolidate company have high hard currency flow to transport the debt even through much debt versus equity. A analysis found that when comparing the long term adoption from twelvemonth 2008 to twelvemonth 2010 that is Ho Hup Construction Berhad merely make borrowing on twelvemonth 2009 is caused by company have few under building undertakings that have to take 3years clip to finish. So company has to borrow from bank to guarantee hold sufficient fund to ongoing these undertaking until undertaking completed.

Beside than debt to equity ratio, debt ratio is another of import ratio to depict capital construction of Ho Hup Construction Berhad consolidate company. Consolidate company debt ratio is increasing from twelvemonth 2008 – 0.93 % to twelvemonth 2009 – 1.059 % and twelvemonth 2010 – 1.132 % .

That is non regulations say that debt ratio addition twelvemonth by twelvemonth is a negative impact towards their company capital construction. Sometimes, company debt ratio addition can be explained as the debt is necessary to run a undertaking in order to hike up company net income. Ho Hup Construction Berhad as a building company in Malaysia has to follow the authorities policies as company must accomplish minimal capital merely entitle to offer a authorities undertaking.

The relationship between equity and debt is defined as how much debt of company borrows to oppose with how much equity owned by stockholder. In this instance, the debt to equity ratio and debt ratio of Ho Hup Construction Berhad consolidate company are under healthy degree. Based on the ratio as calculated above showd that Ho Hup Construction Berhad consolidate company debt is invariably 3 old ages maintain at healthy criterion. Through the computation of the ratio, investor able to overview the fiscal position and investing policies of Ho Hup Construction Berhad consolidate company and so warrant the ratio are by and large with low volatility.

The Capital construction of Ho Hup building Berhad for twelvemonth 2008 hard currency flow statement shows that the loss before revenue enhancement is from RM 55, 919,000 diminishing to RM 33,387,000 during twelvemonth 2009. However, for twelvemonth 2010 is accomplishing RM16, 093,000. Cash flow statement shows that Ho Hup Construction Berhad able to command its cost and disbursals in order to derive more net income. However, the figure from amalgamate hard currency flow statement shows the uninterrupted of three old ages loss non necessary mean the company does non do net income for whole twelvemonth. In this instance, Ho Hup Construction Berhad is a building company which has much machinery, equipments, belongingss, workss for company to run their concern. Year by twelvemonth, all the machineries and equipments confronting depreciate on values. Furthermore, when some of the buildings completed, there will be some of the machineries and equipments to be written off or fain. As a decision for above statement, company might do net income for the twelvemonth, but when the twelvemonth terminal, depreciation of machinery and equipment are being included in the hard currency flow statement. So the figures of depreciation will overrule the net income of the company.

After comparing Ho Hup building Berhad 3 twelvemonth ‘s net income and loss, now is traveling frontward to gross net income border of the company for twelvemonth 2008 to twelvemonth 2010. In twelvemonth 2008, the gross net income border for amalgamate group is 22 % ( RM 20,371,000/RM 91,183,000 = 22 ) , while in twelvemonth 2009, gross net income border for amalgamate group is 18 % ( RM 14,619,000/RM 80,149,000 = 18 % ) , in twelvemonth 2010 gross net income border for amalgamate group besides maintain in 18 % ( RM 11,789,000/RM 65,123,000 = 18 % ) . In twelvemonth 2008, fiscal crisis happened around the universe including Asia, therefore, Ho Hup Construction Berhad consolidate company in oversea besides being influenced by the fiscal crisis. Lot of undertakings of consolidates companies in abroad facing capital and cost job due to downswing of economic sciences. The following twelvemonth after that, Ho Hup Construction Berhad has the ability to keep its gross net income border at 18 % for 2 old ages continuously by put to deathing new schemes and policy.

A company capital construction is the most of import point to find public presentation of company ; a healthy capital construction aid company to execute good on good clip, whereas in finance crisis clip still can take company to execute than market industries. Capital construction of company can act upon revenue enhancements, involvement payment and net incomes per portion of that company. Company can easy alter their capital construction from clip to clip for acquiring short term equity or long term equity to finance overall operations disbursals of company and acquiring growing in future.

Continue to next will analysis the operating and administrative disbursals for consolidate company of Ho Hup building Berhad from twelvemonth 2008 to twelvemonth 2010.

Administrative Expenses

2008 – RM 9,258,000

2009 – RM 29,490,000

2010 – RM 11,609,000

Figure above shows that consolidate company administrative disbursals are increasing twelvemonth by twelvemonth where from the figure from below, the operating disbursals is decrease more than half comparison in twelvemonth 2009 comparison with twelvemonth 2008. Whereas, in twelvemonth 2010, the operating disbursals is increased little but non much.

Operating Expenses

2008 – RM 65,267,000

2009 – RM 27,382,000

2010 – RM 37,683,000

Evaluation of the company capital construction and fiscal status

In order to measure the capital construction with the Ho Hup Construction Berhad consolidate company fiscal status, I will attach the ratio computation include liquidness ratio, plus direction ratio and profitableness ratio.

Liquidity ratio

The primary liquidness ratio is current ratio:

Year 2008

Current ratio = Current asset/Current liabilities

RM 137,083,000/ RM 269,602,000

= 0.508

Year 2009

Current ratio = Current asset/Current liabilities

RM 81, 478,000/RM 253,958,000

= 0.32

Year 2010

Current ratio = Current asset/Current liabilities

RM 70, 358,000/RM 239,436,000

= 0.29

Liquidity ratio shows the relationship of company hard currency and other current plus to its current liabilities. Ho Hup Construction Berhad consolidate company current liabilities consist of proviso for liquidated discovered amendss, adoption, trade payables and others payables include assorted collectible. The current ratio for 3 old ages as per above indicates that Ho Hup Construction Berhad consolidate company liquidness place is strong to back up the capital construction. If any fiscal crisis or trouble happens, Ho Hup Construction Berhad consolidate company able to transport the involvement alterations and pay off its debt as per contract in approaching twelvemonth.

Asset direction ratio

Entire plus turnover ratio

Year 2008

Entire plus bend ratio = Gross saless ( Revenue ) /Total plus

RM 91,183,000 RM 289,683,000

= 0.31

Year 2009

Entire plus bend ratio = Gross saless ( Revenue ) / Entire plus

RM80, 149,000/RM 244,444,000

= 0.32

Year 2010

Entire plus bend ratio = Gross saless ( Revenue ) /Total plus

RM 65,123,000/RM 211,530,000

= 0.30

Entire plus direction ratio is use to find turnover rate of the full company plus. Ho Hup Construction Berhad consolidate company gross revenues volume for continues 3 old ages is maintained around the per centum invariably. Ho Hup Construction Berhad consolidate company should bring forth more gross revenues to increase company income together with dispose some plus from project side in order to cut down cost utilizing to finance plus. If gross revenues volume of company beads so the profitableness of company will drop every bit good.

Even though company can alter the construction of capital easy, there are some factors influences the capital construction besides. Business hazard is one of the chief factor to act upon capital construction of company. Business hazard can be a assortment among the industries and field. Ho Hup Construction Berhad chief activity is making building, so the chief factor of concern hazard is relevant to variableness of gaining and accretion of fixed cost. A building company has the possibility to bear more variableness concern hazard than others field, this is because Ho Hup Construction Berhad consolidate company in Malaysia are managing batch of authorities undertaking, there are many policies and ordinance altering from clip to clip that contractor demand to be follow. While, for consolidate company of Ho Hup Construction Berhad in oversea besides confronting assortment concern hazard like planetary currency different and multiple state regulations and ordinance. Accretion of fixed cost is another factor that act uponing the capital construction of company.

Other than concern hazard and accretion of fixed cost, runing purchase is act upon the capital construction by alteration in gross revenues volume, if high operating purchase, a small alteration on company gross revenues volume will do big alterations in operating income. Traveling frontward to following factor that influence the capital construction of company is cost and period of funding, unsecured bonds of company are cheaper method versus than equity portions as a tool for fiscal. Then short term loan or long term loan from bank or others institution find the hazard of adoption. Both of the points are impacting the capital construction from clip to clip.

Ho Hup Construction Berhad consolidates company hard currency flow is acquiring addition from twelvemonth 2008 to twelvemonth 2010. In twelvemonth 2008, economic downswing was happened around the universe. Bank Negara Malaysia adjusted the OPR rate by cut downing the rate. Due to Bank Negara Malaysia cut down OPR rate, most of the Bankss cut down the loaning involvement rate as good. On that clip, Ho Hup Construction Berhad consolidate company use a long term loan with lower involvement rate from bank. Refer to Ho Hup Construction Berhad consolidate company hard currency flow statement from twelvemonth 2008 to twelvemonth 2010 can cognize that company involvement paid addition from twelvemonth 2008 to twelvemonth 2010 prove that company paying the refund.

In twelvemonth 2007 authorities announced that RPGT revenue enhancements for belongings dispose been waive get downing from twelvemonth 2007 instantly. Then the value and market of belongings addition twelvemonth by twelvemonth. With the proclamation from authorities, Ho Hup Construction Berhad and its consolidate company take the chances to buy new belongingss from twelvemonth 2008 to twelvemonth 2009. At the same clip, the value of belongings goes up a batch, so company decided to dispose some belongingss which bought antecedently in order to derive net income on that.

Decision

As a decision, the capital construction for Ho Hup Construction Berhad subordinate or consolidate company can be seen it is fulfill industry criterion among the 3 old ages. Company ‘s debt versus equity is under fiscal healthy degree, hard currency flow of company is adequate to cover the hazard of borrowing involvement addition. Company take the fiscal status to use loan on lower involvement and able to do loan refund as per period of fiscal. Ho Hup Construction Berhad consolidate company are good managed in concern hazard either on Malaysia or abroad and besides really concern about fixed cost and operating cost disbursals. Ho Hup Construction Berhad consolidate Company is walking on the right manner to put to death aggressive schemes to turn up company gross revenues gross in order to derive more net income.

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