Gamuda Berhad is an engineering, property and infrastructure company in Malaysia. The group managing director, Datuk Lin Yun Ling and Tan Sri Datuk Ir Talha bin Haji Mohd Hashim. The company was incorporated on October 6, 1976 and was listed on the main board of Bursa Malaysia on 10 August 1992. Gamuda Berhad has about 1232 employees. Is the leading infrastructure and property developer with operations in Asia and the Middle East Regions. The group's main projects range from the construction of highways, airport runways, railways, tunnels, water treatment plants and dams, to infrastructure privatization and the development of new townships.
Gamuda berhad vision is deliver innovative world-class infrastructure and homes for our customers through our core businesses in infrastructure development and construction, operation and maintenance of public infrastructure concessions, and large-scale urban township development.
There is Gamuda berhad's vision which is innovation, responsible conduct, constant improvement and taking the long view. The innovation for Gamuda berhad mentions that, in their concepts, services, products and delivery system to provide viable solutions for their clients and customers. Responsible conduct is refers to their stakeholders, including their customers, employees, shareholders and the community and environment in which they operate. Constant improvement is refers to the improvement in their efficiency and relevance amidst the changing needs of their customers and markets. Taking the long view mentions that, in their business policies and actions to ensure that they have a sustainable future.
One of their first major project is the Shah Alam Expressway, a 34.5 km six lanes expressway stretches from the Sri Petaling interchange in Kuala Lumpur to the Pandamaran interchange in Klang. Gamuda is a leader in turnkey and Build-Operate-Transfer (B.O.T.) civil engineering infrastructure and township development, with projects and investments in South East and Far East Asia, Indochina, South Asia and the Middle East.Gamuda also is the lead shareholder in the 450MW Nam Theun 1 hydropower project located in central Laos, which would supply 2,000 GWh of hydroelectric power to the Electricity Generating Authority of Thailand.
On 6 June 2007, Gamuda announced to Bursa Malaysia that it had received a letter from the Economic Planning Unit of the Prime Minister's Department that the Malaysian government had agreed to Gamuda-MMC's proposal to implement the "Northern" section of the project on a private financing initiative basis. It added that negotiations on the formal agreement would begin as soon as possible. On December 14, 2007, Gamuda announced that it together with MMC had received a letter of acceptance dated 13 December 2007 wherein the Malaysian Government accepted the proposal by the Gamuda-MMC joint venture to carry out the Electrified Double Tracking Project from Ipoh to Padang Besar on a design and build basis for a lump sum price of RM12.485 billion. The works comprises the design and construction of the infrastructure and system works in respect of the project which is to be completed within 60 months from the commencement date. The project cost has escalated due to rise in oil prices and building materials and implemented as a construction contract with progressive payments, instead of private finance initiative envisioned earlier. The design and build contract between the joint venture company and the government of Malaysia is formally signed on July 25, 2008.
On July 8, 2008, the joint venture company has announced that electrification and power supply contract has been awarded to Balfour Beatty group with a contract value of GBP 160 million. Work is expected to start immediately and complete by January 2013. On the same day, the signaling and communication package has been awarded to Ansaldo STS. The contract is expected to be worth Euro 135 million.
The company was also the sponsor of the NTV7 television series Phua Chu Kang Sdn Bhd. Focusing on three core businesses in Engineering and Construction, Infrastructure Concessions and Property Development, we take pride in having delivered numerous large-scale civil infrastructure projects to-date; operate and maintain 230km of highways that serve more than two million road users each day; provide water supply to more than two million Klang Valley residents daily; and built more than 14,000 homes in our integrated lifestyle townships.
Besides constantly challenging the status quo to go beyond our boundaries in the developments, Gamuda endeavours to enrich the communities by positively changing the way people live and contribute to nation building through continuous education and training.
GAMUDA BERHAD'S BUSINESS LINE
Engineering and Construction
As the leading infrastructure developer in Malaysia, Gamuda has realised breakthrough engineering solutions for a multitude of infrastructure challenges locally and in various parts of the world with an aim to promote sustainable living. For almost four decades, Gamuda's hallmark of innovation, project management expertise and delivery consistency has earned us a sterling track record as the builder of choice for mega infrastructure projects. Having successfully undertaken more than 40 major civil engineering works, we are now on the verge of our next big chapter - the MRT, Mass Rapid Transit (Sungai Buloh - Kajang Line) - with the appointment as the Project Delivery Partner (PDP) by the Government and New Doha International Airport, Qatar.
Infrastructure Concessions
Infrastructure development is one of the keystones that empower a nation's economic development and competitiveness. Realising Malaysia's strategic infrastructure blueprint has remained Gamuda's primary agenda in almost four decades, as part of our aim to facilitate the country's progression into one of the most sought-after investment destinations in the region. Renowned as a builder of high-demand and cost-efficient infrastructures, we pride ourselves in being instrumental in leading the development of a diverse range of privatised infrastructure projects ranging from intra-urban expressways and flood mitigation solutions to dams and water treatment plants. Such as highways and water supply.
Property Development
Gamuda Land, the distinctive property development arm of Gamuda, is synonymous with holistic lifestyle developments that uplift the quality of life of the communities we touch. Adopting great emphasis on superior infrastructure, ensure our townships are wholesome and sustainable in every sense of the word - economically, environmentally, and community wise. In our pursuit to design unrivalled living standards in all our developments, we undergo stringent workmanship assessment to benchmark our homes against the highest standards in structural integrity and craftsmanship.
Financial Ratio Analysis
Ratio
2010
(RM '000)
2011
(RM '000)
2012
(RM '000)
i) Current Ratio
= Current Assets
Current Liabilities
4,028,217
1,870,614
= 2.15x
4,545,632
2,166,435
= 2.10x
5,229,183
3,106,509
= 1.68x
ii) Acid-Test Ratio
= Current Assets-Inventory
Current Liabilities
4,028,217-79,738
1,870,614
= 2.11x
4,545,632-34,105
2,166,435
= 2.08x
5,229,183-66,481
3,106,509
= 1.66x
iii) Gross Profit Margin
= Gross Profit
Sales
2,394,566
2,455,143
= 97.53%
2,496,518
2,673,208
= 93.39%
2,965,344
3,087,003
= 96.06%
iv) Return on Assets(ROA)
= Net Income
Total Assets
_412,260_
6,733,561
= 6.12%
_544,524_
7,551,298
= 7.21%
_728,210_
8,498,928
= 8.57%
v) Return on Equity(ROE)
= Net Income
Common Equity
_412,260_
3,490,374
= 11.81%
_544,524_
3,886,906
= 14.01%
_728,210_
4,268,871
= 17.06%
vi) Account Receivable
Days
= Accounts Receivable
Average Daily Credit Sales
__1,432,816__
2,455,143/365
= 213.01 days
__1,701,738__
2,673,208/365
= 232.36 days
__1,637,715__
3,087,003/365
= 193.64 days
vii) Debt to Equity Ratio
= Total Liabilities
Common Equity
3,243,187
3,490,374
= 92.92%
3,664,392
3,886,906
= 94.28%
4,230,057
4,268,871
= 99.09%
viii) Times Interest Earned
Ratio
= Operating Income
Interest Expense
259,852
43,813
= 5.93x
380,874
58,779
= 6.48x
584,469
62,390
= 9.37x
ix) Operating Profit Margin
= Operating Income
Sales
_259,852_
2,455,143
= 10.58%
_380,874_
2,673,208
= 14.25%
_584,469_
3,087,003
= 18.93%
x) Inventory Turnover
= Cost of Goods Sold
Average Inventory
____60,577_____
(101,082+79,738)/2
= 0.67x
____176,690____
(79,738+34,105)/2
= 3.10x
____121,659____
(34,105+66,481)/2
= 2.42x
Ratio
RM
RM
RM
xi) Dividend Yield
= Dividend Per Share
Current Market Price
0.09
3.32
= 2.71%
0.113
2.88
= 3.92%
0.12
3.56
= 3.37%
xii)Earnings Per Share
(EPS)
= Profit after Taxes
Number of Shares
331,713,000_
2,025,888,000
= RM 0.16
432,945,000_
2,064,824,000
=RM 0.21
565,991,000_
2,079,413,000
= RM 0.27
xiii) Price Earnings Ratio
(P/E Ratio)
= Market Price per Share
Earnings per Share
______3.32_____
331,713,000/2,025,888,000
= 20.28x
_____2.88______
432,945,000/2,064,824,000
= 13.74x
______3.56_____
565,991,000/2,079,413,000
= 13.08x
Note:
2010
a) Gross profit
= Revenues - Cost of goods sold (Open inventory + Purchase - Closing inventories)
= 2,455,143,000 - [101,082,000 + (19,973,000 + 19,260,000) - 79,738,000]
= RM 2,394,566,000
2011
a) Gross profit
= Revenues - Cost of goods sold (Open inventory + Purchase - Closing inventories)
= 2,673,208,000 - [79,738,000 + (37,690,000 + 93,367,000) - 34,105,000]
= RM 2,496,518,000
2012
a) Gross profit
= Revenues - Cost of goods sold (Open inventory + Purchase - Closing inventories)
= 3,087,003,000 - [34,105,000 + (46,022,000 + 108,013,000) - 66,481,000]
= RM 2,965,344,000
Interpretation
According to the figures above, the current ratio had decreased over the three years. Although the current assets and current liabilities were increasing, the rate of change in current assets was smaller than the rate of change in current liabilities. That means the ability of current assets to cover current liabilities had became lesser. However, Gamuda Berhad was still able to repay its debts.
The three-year trend analysis for acid-test ratio appeared to be downwards. After the least liquid of the current asset had been subtracted, the change in current liabilities was still greater than the change in the remaining current assets. This indicates that the solvency had decreased from the year of 2010 to 2012.
It is obvious that the effectiveness of Gamuda Berhad at generating revenue in excess of its cost of goods sold was the highest in year 2010. According to the data above, both amount of sale and gross profit were increasing. Initially, Gamuda Berhad had used more sales to generate lower gross profit. However, the company was able to reduce the cost of goods sold in the following year. Additional gross profit could be generated more effectively by using lesser sales.
The percentage of return on assets for Gamuda Berhad was changing in an increasing rate for three years. Gamuda Berhad use more and more total assets to generate net income. In year 2012, the company had the highest total assets and net income. This shows that the company was very effective in using their total assets to generate more net income.
Referring to the figures shown in the table, the amount of common equity and net income were increasing as well. Gamuda Berhad has a highest total equity and net income in year 2012. This means that Gamuda Berhad had actually did very well in generating more and more profit to pay back to its equity providers such as shareholders.
The account receivable days fluctuated within these three years. The amount of credit sales had increased but yet the debts were still able to be collected. In year 2012, the period of time to collect debts was the shortest. This indicates that Gamuda Berhad was getting more and more efficient in collecting its debts from year 2011 to 2012. The average time that Gamuda Berhad takes to collect debts was around 6 to 7 months time.
From the calculation, we know that the debts to equity ratio were becoming higher and higher. Gamuda Berhad had the highest debts to equity ratio in the year 2012. Its total liabilities increased more than its common equity and got the highest ratio. It had been aggressive in financing its growth on its debts. It could cause the volatile earnings to become the additional interest expenses.
Gamuda Berhad had a bad debt in its company. The result of time interest earned ratio was getting higher and higher, thus it paid off the huge debt with its earnings. It earned the highest operating income in year 2012 and got the highest ratio. Gamuda Berhad might face the problem of paying the interest payment to its debt holders. The company was yielding greater returns by investing its earnings into other projects.
Gamuda Berhad increased a few sales on its business but its operating income was becoming higher and higher as shows in the operating profit margin. So it got the higher operating profit margin than previous years of its business. It means that it earned more dollars on its sales. Gamuda Berhad earned better profits for its shareholders. In year 2012, the company earned the best operating profit margin.
From the table, it means that Gamuda Berhad had the highest inventory turnover between year 2011 and 2012. Its inventory turnover increased in year 2010, but it decreased in year 2012. The cost of goods sold decreased a little bit but the average inventory was maintained at the same amount. So the ratio in year 2012 was less than year 2011. It means that company reached the poor sales in that year.
According to the calculation, Gamuda Berhad had the highest percentage of dividend yield in year 2011. Its dividend per share increased more and more, but its market price on that time was not like that. The current market price decreased in year 2011 and it increased much in year 2012. The cash flow that Gamuda Berhad gained for each dollar invested in an equity position was the highest.
The earnings per share of Gamuda Berhad had increased in the past 3 years. It had reached its highest value in the year 2012. The company's profits after taxes increased higher and higher but the number of shares was only a few. The company earned the highest profits in year 2012 and shareholders could get the higher interests.
According to the table, Gamuda Berhad's price earnings ratio had decreased in the 3-year period. It indicates that the investors were willing to pay RM13.08 for RM1 of the earnings in year 2012. It was the least value in the past 3 years. It means that investors expected lower earnings growths in the future. It was not a good result for Gamuda Berhad.
Recommendations
Based on Gamuda Berhad's current ratio in the past 3 years, its ability to pay off its liabilities, also known as solvency, had decreased. Furthermore, its debts had increased in the 3-year period based on the debt to equity ratio. Therefore, it must try to reduce its rising debts, even though its ability to pay off its interest payment had increased in the 3 year period (based on the times interest ratio). Otherwise it will find itself in a financial crisis. As long as the debts are not paid off, the interests keep on increasing. To increase its solvency, it needs to increase its current assets. To do so, it can do some short-term investments, such as marketable securities and property purchases meant to be resold within one year, and collect money from its existing debtors to generate more cash for paying off its liabilities, thereby increasing its solvency. In addition, it should regularly collect money from its debtors to reduce the possibility of bad debts.
Shareholders legally own and have certain rights towards a company. They contribute to the company as its investors. Therefore, they have to be properly treated by the company through dividends paid to them, depending on the company's financial performance. In Gamuda Berhad's case, the investors were gradually getting unconfident its performance according to the price earnings ratio, as it is an indicator of the investor's attitudes towards its future prospects and risk. To bring the investors' confidence towards the company, it needs to boost its financial performance to increase its profits, indirectly satisfying the investors. It should invest more on sustainably profitable projects. On the other hand, it should reduce unnecessary expenses so that its profits increase. To do so, it should make some improvement on its financial management by hiring professional financial experts if necessary to strictly monitor every single expense made and acquire ideas for improvement from them. It needs to be efficient in completing its projects on time because excessive time needed before the completion increases the costs of the projects.
To further increase its revenues, Gamuda Berhad needs to increase its sales. As a property company, it can increase its sales by offering a variety of attractive properties, especially real estate, for its customers depending on their preferences as the real estate industry is increasingly thriving. Furthermore, more and more people prefer to buy land and houses then sell them as a form of investment due to the expectancy of higher prices in the future. Therefore, the current conditions of the real estate industry are an opportunity for it to increase its sales. It should carry out some publicity and advertising through mass media to introduce its newly developed real estate projects, such as industrial areas. Mega projects, such as highways and bridges, can also be considered only if the projects are estimated to be profitable. It can gain revenues from a mega project by making contracts with the owner of the project, such as the government (public project). In the contracting system, it gets paid once the project is done.
Good reputation and credibility are important for most companies, including Gamuda Berhad. To improve its reputation and credibility among its creditors, customers and the owners of the projects that it is involved in, it needs to complete the projects on time and pay off its debts as soon as possible. By doing so, its creditors will consider it their trustworthy debtor and it will incur less interest payments, its customers will have a good impression on its ability to get on schedule, and the projects' owners or authorities will choose it as their contractor for any possible projects in the future, thus gaining more potential profits. Sometimes it needs help from a public relations firm as public relations help the company gain positive attention from the public and the mass media, and even help it respond in a crisis regarding its reputation and credibility. Meaningful sentences attract people's attention. Therefore, it also needs help from mass communication experts with good writing and speaking skills to relay positive information to the public about its projects and its corporate image through mass media.
Gamuda Berhad needs to increase its inventory turns because the longer it holds its inventory (its properties), the higher the holding costs, such as insurance and maintenance on the inventory. Sometimes high rates of inventory turnover conversely indicate the inadequate inventory. Therefore, it should maintain its inventory on a sufficient level to fulfill the demand from the public. To increase the inventory turns, it needs to increase its marketing effort to increase the sales, offer more variants of properties to cater for more customers' preferences and sell them as soon as possible to avoid overstocking and product obsolescence, otherwise more of its properties will be abandoned. However, if the prices of land are expected to rise in the future, it shall hold its properties for sale in the future to gain higher revenues.
As a construction company, Gamuda Berhad needs trustworthy partners for construction materials, equipment and operational support as they help it reduce the costs of production and potentially make it a cost leader it the industry. Therefore, it shall negotiate with them to acquire the necessary stuff at lower prices and form partnerships with them. Furthermore, maintaining good relations with its partners is crucial for it to sustainably carry out its operations and achieve greater success in the future.
