Strategic and Financial Performance and Position of Gamuda Berhad, a Malaysian Engineering Company

Introduction

The economy of Malaysia has enjoyed a rapid growth over the last decade. Currently, the economic growth rate of Malaysia has an increasing trend. It is believed that this has been possible due to strengthened domestic demand, wage growth, market conditions for labor, and strengthened foreign demand for Malaysian commodities. In addition, according to Khan, Liew, and Ghazali (2014, p. 507), Malaysia has made great economic strides as a result of sound policies it established and adopted after the financial crisis experienced in Asia two decades ago. The company belongs to the Malaysian manufacturing sector. Jomo (2016, p. 127) notes that manufacturing sales has had a strong growth rate over the decades. The leading manufacturing products are electronics and electrical products, followed closely by plastic and rubber products and then fabricated metal products. Further, the researcher pinpoint that many people are directly engaged in the manufacturing sector and the number of employees in the Malaysian manufacturing sector has been on an increase annually. This paper seeks to carry out analysis of Malaysian's Gamuda Berhad engineering company's strategic and financial performance.

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Company Description

Gamuda Berhad Company is headquartered in Petaling Jaya, Malaysia. It is an investment holding corporation that majorly carries out civil engineering construction both locally and internationally. Gamuda Berhad has Property Development, Construction and Engineering, Club Operations, Expressway and Water Concessions segments. Its Construction and Engineering segment majorly encompasses highway and bridge construction, water treatment plants, railways, dams, and tunnels. In addition, Gamuda Berhad provides trading and general services linked to construction activities. On the other hand, Club Operations and Property Development segment of the company deals with the construction and development of commercial, residential, and club operations. It is also important to note that Expressway and Water Concessions segment manages water supply and trolling and management of highway operations. In addition, the company develops amusement parks, establishes theme parks, and maintains property. The company also supplies landscaping materials, road surfacing, golf club and township management. Furthermore, it manufactures building and precast systems.

SWOT Analysis

Gamuda Berhad performs a SWOT analysis which acts as its framework and strategic report of its operations. SWOT analysis show external and internal forces that affect the company in a positive or negative way. The strengths of the company include high revenue and profitability which allows for continuity of the business. Gamuda Berhad has well-organized sales and distribution networks which enables the realization of place and time utilities. It is also important to note that the company has a well distributed local or domestic market with a large market share. Additionally, the company has experienced business segments or units which deliver quality services to customers. The ramification for quality services is that it enables the company to attract more customers, thus enhancing customer loyalty. Finally, the manufacturing sector of Malaysia has barriers to new entrants. This eliminates chances of new competitions in the market (Isa et al. 2012, pp. 168-173). Despite these strengths, the company has a weakness which is detrimental to its growth and prosperity. Gamuda Berhad lacks a strong brand portfolio, a situation which causes confusion among its customers, which in turn leads to loss of customers to competitors. On the other hand, the company has opportunities that if it utilizes, it can be prosperous. To begin with, there is the availability of venture capital that it can acquire and use for growth and expansion. The next opportunity is the presence of a growing economy in Malaysia and other countries. This provides a good environment for corporate growth and improved living standards of Malaysia. Another opportunity is the constant increase in income level among Malaysians. This is instrumental in the growth of the company as it enables the customers to afford the services offered by Gamuda Berhad. Consequently, this creates a good avenue for the development and growth of the company. Lastly, there is a possibility of production of new services and products for the clientele which is good for the company as it enables product differentiation. However, the company suffers from one major threat: rising costs of acquiring raw materials. Table 1 below summarizes the SWOT analysis of Gamuda Berhad Company.

Strengths and Weaknesses

• High revenue and profitability
• Domestic market
• Existing sales and distribution networks
• Barriers to new entrants
• Experienced business units
  Brand portfolio

Opportunities and Threats

• New services and products
• Growing capital
• Constantly increasing income level
• Venture capital Increasing cost of raw materials
• Strategic Position, Historical Performance, and Future Prospects

Strategic Position

The strategic position gives more details about why customers should use Gamuda Berhad company's products and services. It also outlines what the company needs to do in order to outdo its competitors in the corporate world. The company applies its product development strategy; for instance, cement manufacturing, so as to effectively compete with rivals such as YTL which leads in the construction industry. It is imperative to note that Gamuda Berhad has already gained access to overseas markets such as Thailand, Vietnam, Qatar, and Bahrain. Furthermore, the company has more expansion and growth opportunities to countries such as Korea, China, and India among others.

Historical Performance

The company has achieved much since its establishment in 1976. It has grown tremendously over the years and it is now one of the leading companies in construction and engineering field. It has successfully achieved this through leveraging creativity and seizing opportunities. The countless success for the company has enabled it to establish its presence in different countries such as Australia, India, Singapore, Vietnam, Taiwan, and so on. One notable achievement of Gamuda Berhad Company is the construction of the famous SMART (Stormwater Management and Road Tunnel) project that was completed in 2007 (Ismail, Izumi, and Shaw 2015, pp. 315-332). The project manages floods as well as relieving traffic in Kaula Lumpur. This project has been outstanding, making Gamuda Berhad win various awards and accolades.

The company has not only excelled in construction and engineering sector but also in real estate industry. For instance, through Gamuda Land, the company introduced Kota Kemuning, an integrated township development located in Malaysia's Klang Valley. Other historical achievements of Gamuda Berhad Company include Jade Hills, Gem Residences, Horizon Hills, and The Robertson. Furthermore, in Vietnam, the company has renovated and developed Yen So Park through its leading reputation and insurmountable experience. Another milestone project was the Gamuda Gardens Township which began in 2012 and has become the most preferred working and residential destination to most people since it has integrated state-of-the-art amenities such as tennis court, swimming pool, and restaurant.

Future Prospects

Gamuda Berhad Company eyes local job opportunities worth RM10 billion. These jobs comprise of water treatment plant dubbed Langat 2 at a cost of RM 1.5 billion, Line 2 tunneling package of Klang Valley valued at the cost of RM 4.5 billion. The company expects to undertake HSR project that it believes it will be awarded to it. It also expects to be awarded AssetsCo Contract by the end of 2018. In addition, the company stands a good chance of winning the PDP role.

Financial Analysis and Sustainability Matters

Liquidity

This is a financial analysis criterion that determines the company's ability to generate enough cash that covers cash expenses (Shi 2015, p.116). The ratio considered for liquidity analysis is current ratio. Current ratio determines the ability of a company to pay off current obligations from current assets. It is worthy to note that a value of current ratio that is less than 1 means that the company has inadequate resources to pay off current obligations while a ratio of 2 or more implies that the company is capable to pay off current obligations (Mohammed and Kim-Soon 2012, pp.1-11). Mathematically, the current ratio is given by:

Current ratio = current assetscurrent liabilities= 6,434,523,0002,566,587,000= 2.5070

Revenue growth

Revenue growth = revenue this period-revenue last periodrevenue last period={(3,211,403,000-2,121,899,000)/ 2,121,899,000}

= 0.5135

This shows that the revenue of the company has grown by half as compared with the previous year. This is a clear indication that the company is profitable and it is worth being invested in.

Sustainability Reports

Gamuda Berhad takes corporate social responsibility as part of its business activities. The company aims at caring for the communities it serves, protecting the environment, responsible for the welfare of its employees, and form a business partnership with other companies to deliver the best services to its customers (Nair and Wahh 2017, pp.37-55). The company highly regards the safety of its employees. It strives to improve working conditions of its workers by aiming at zero violation through monitoring, reviewing, and improving health and safety procedures. In addition, the company aims to achieve zero fatality by reducing or eliminating non-compliance cases as far as safety and health of workers are concerned.

The company advocates for environmental conservation. For this reason, Gamuda Berhad takes the 3R (Reuse, Reduce, and Recycle) approach in managing its construction materials (Ghazali and Zahid 2015, pp.417-421). Moreover, the company clears out its land site as well as maintaining biodiversity and ecosystem. It is important to note that the company has also established its footprint in the education sector in a bid to comply with the sustainability requirement. The company offers annual scholarship awards to young people to create their own potentials. The company has done this since 1996 and more than 200 Malaysians have benefited from this initiative.

The company provides an array of career guidance and training opportunities to its employees. This is aimed at providing the best workplace environment to the employees (Salawati, Hassan, and Sheung 2012, pp.1-12). The ramification for this is that the productivity of the employees is enhanced. The company has been involved in social and community development. For instance, it has in the past sponsored and promoted learning the English language among students in Malaysia, it has established plant operator school which has successfully trained more than 25,000 heavy machinery and plant operators (Yusoff and Lau 2016, pp.107-126).

Discussion and Recommendation

Based on the company's recent financial statement, the company is in a good financial position to pay its debts as well as to ensure prosperity. The current ratio calculated from the Gamuda Berhad's financial statement of 2017 gives a value of 2.5070. This value is a strong indication that the company is capable to pay off current obligations. On the other hand, revenue growth shows the profitability of the business. From the calculations, its value is 0.5135. The interpretation for this is that the current revenue of the company has grown by half compared to the previous revenue. T...