Eversendai Construction Company: Business Analysis Project Report

This report provides a detailed business analysis of Eversendai, a Malaysian construction company, comparing its financial performance with competitors like Muhibbah and Sunway. The analysis includes a comprehensive ratio analysis covering profitability, liquidity, financial health, and efficiency ratios from 2012 to 2016. Strategic analysis incorporates PESTLE and Porter's Five Forces models to assess the external environment and competitive landscape. The report evaluates key issues, operational aspects, and limitations of financial models, concluding with recommendations for Eversendai's success in the competitive construction market. The report uses tabular and graphical representations to display the data and offers interpretations of the trends and performance indicators of the company and its rivals.

Business Analysis Project

TABLE OF CONTENTS
1. INTRODUCTION.......................................................................................................................3
1.1 Purpose..................................................................................................................................3
1.2 Case analysis..........................................................................................................................3
1.3 Background of the organization.............................................................................................3
1.4 Key issues..............................................................................................................................3
1.5 Rationale behind the selection of company...........................................................................4
2.1 RATIO ANALYSIS..................................................................................................................4
2.1.1 Profitability ratio analysis...................................................................................................4
2.1.2 Liquidity ratio analysis.......................................................................................................7
2.1.3 Financial health: leverage ratio...........................................................................................9
2.1.4 Efficiency ratios................................................................................................................10
3. STRATEGIC ANALYSIS.........................................................................................................11
3.2 Competitive analysis............................................................................................................12
3.2.1 Porter five force analysis..................................................................................................12
3.2.2 New forces in construction industry.................................................................................14
3.3 Operations and organisation analysis..................................................................................14
3.4 Key success factors:.............................................................................................................14
3.5 Operations visibility:...........................................................................................................14
Balance score card.....................................................................................................................15
5.0 Limitation of financial models and conventional analysis..................................................16
5.2 Limitation of financial models in analysing the performance.............................................17
6.0 Conclusion...........................................................................................................................17
6.1 Recommendation.................................................................................................................17
REFERENCES..............................................................................................................................18

1. INTRODUCTION
1.1 Purpose
The main purpose behind carry out such study is to shed light on the financial health and
performance of Eversendai in against to the competitors like Muhibbah & Sunway. Besides this,
it will also provide deeper insight about the key issues and condition of external market. Further,
report will also depict about the manner in which financial models and conventions helps in
doing suitable analysis of business. It will also include the details about recommendation through
which Eversendai can attain success in the competitive business environment.
1.2 Case analysis
Eversendai is one of the leading organizations that is operated in the construction
industry of Malaysia. Portfolio of the company includes wide range of services such as long span
and roof structure, high rise building, plant & construction, oil & gas etc (Eversendai Malaysia,
2017). Further, Eversendai has expertise in including innovation aspect in construction project
through including composting infrastructure.
1.3 Background of the organization
Eversenadi is one of the leading business organizations of Malaysia which is known for
turnkey projects, oil & gas upstream & downstream as well as infrastructure and composite
structures. Company has employed 15000 people and having attractive portfolio of more than
300 accomplished projects over 14 different countries of the world. With the motive to maximize
the level of productivity and profitability Eversendai makes focus on safety, quality and client
satisfaction to a great extent (Eversendai Malaysia, 2017).
1.4 Key issues
To assess the issues and measure the level of competition following analysis has been
done:
Basis of difference Eversendai ( main
company)
Muhibbah (rival firm) Sunway group
Compliance with safety High Follow to the moderate Moderate

level
Adherence to quality High Moderate Moderate
Focus The main focus of the
organization is to meet
the client’s requirement
to a great extent.
It lays emphasis on the
maximization of
profitability.
Sunway group makes
focus on increasing the
level of profit margin
rather than client’s
satisfaction.
1.5 Rationale behind the selection of company
The main reasons behind the selection of Eversendai are that it was operated in the
construction industry of Malaysia from several years. Besides this, company is recognized for
the quality and safe projects offered by it to the customers. Hence, by analyzing the financials of
latest accounting years scholar would become able to present the fair solution of issue.
2.1 RATIO ANALYSIS
2.1.1 Profitability ratio analysis
Return on invested capital (in %)
Particulars 2012 2013 2014 2015 2016
Return on Invested Capital
%
Eversendai 13.93 4.12 4.03 4.43 -13.26
Muhibbah -10.73 9.41 6.99 5.74 8.47
Sunway 6.06 20.14 8.85 7.41 5.25

2012 2013 2014 2015 2016
-15
-10
-5
0
5
10
15
20
25
Graph 3: Return on Invested Capital %
Eversendai
Muhibbah
Sunway
Percentage (%)
Interpretation: Tabular and graphical presentation clearly shows decreasing trend in the
level of Eversendai and Sunway groups ROI from 2012 to 2016. This is not good because it
shows company failed to develop suitable framework or financial policies. On the contrary to
this, Muhibba’s ROI moved from negative trend to the positive one. Thus, it can be presented
that profitability aspect of Eversendai is not good, in the financial year 2016, as compared to the
competitors such as Muhibbah and Sunway. Thus, Eversendai is required to make suitable
modifications in existing strategic framework as per market and competitors trend.
Net profit margin (in %)
Particulars 2012 2013 2014 2015 2016
Net Margin %
Eversendai 11.9 3.38 3.73 3.1 -17.62
Muhibbah -3.55 4.46 4.7 5.33 5.5
Sunway 17.34 7.21 15.47 14.07 16.34

2012 2013 2014 2015 2016
11.9
3.38 3.73 3.1
-17.62
-3.55
4.46 4.7 5.33 5.5
17.34
7.21
15.47 14.07 16.34
Graph 1: Net Margin %
Eversendai Muhibbah Sunway
Interpretation: By doing ratio analysis, it has been assessed that NP margin of
Eversendai declined from 11.9% to negative 17.62%. Thus, it can be presented that business
unit failed to exert effectual control on indirect and other expense level. On the other side, NP
ratio of Muhibbah engineering inclined from -3.55% to 5.5% at the end of 2016. Besides this, net
profit ratio of Sunway group accounts for 16.34% at the end of 2016. Thus, as compared to the
competitors net margin of Eversendai is poor.
Return on assets (in %)
Particulars 2012 2013 2014 2015 2016
Return on Assets %
Eversenda
i 8.38 2.01 1.99 2.37 -9.85
Muhibbah -3.26 3.15 2.82 2.56 2.76
Sunway 4.46 14.84 6.13 5.08 3.37

2012 2013 2014 2015 2016
-15
-10
-5
0
5
10
15
20
Graph 2: Return on Assets %
Eversendai
Muhibbah
Sunway
Percentage (%)
Interpretation: From graphical presentation, it can be depicted that ROA of Eversendai
was -13.26% respectively that is worst for the company. On the other side, from 2012 to 2016,
Muhibbah’s and Sunway’s group was fluctuated. It reflects that, as compared to rival firms,
Eversendai failed to generate suitable return through making use of assets.
2.1.2 Liquidity ratio analysis
Current ratio
Particulars 2012 2013 2014 2015 2016
Current Ratio
Eversendai 1.94 2.17 1.91 1.62 1.26
Muhibbah 0.96 1.02 0.99 1.05 1.09
Sunway 1.24 1.19 1.38 1.21 1.2

2012 2013 2014 2015 2016
0
0.5
1
1.5
2
2.5
Graph 4: Current Ratio
Eversendai
Muhibbah
Sunway
Ratio (CL: CA)
Interpretation: Graphical presentation shows that current ratio of all the selected
companies were fluctuated during the period of 5 years. In the year of 2016, current ratio of
Eversendai, Muhibbah and Sunway group implies for 1.26:1, 1.09:1 & 1.20:1 significantly. It
shows that over the competitors Eversendai has enough current assets for meeting obligations.
However, current ratio performance of the targeted company is less than the ideal ratio such as
2:1 (Babalola and Abiola, 2013). Thus, firm is required to make focus on maintaining current
assets in line with the ideal ratio to strengthen the liquidity position.
Quick ratio
Particulars 2012 2013 2014 2015 2016
Quick ratio
Eversendai 1.65 1.94 1.71 1.48 1.16
Muhibbah 0.86 0.89 0.86 0.91 0.98
Sunway 0.77 0.73 0.87 0.69 0.66

2012 2013 2014 2015 2016
0
0.5
1
1.5
2
2.5
Graph 5: Quick Ratio
Eversendai Muhibbah Sunway
Muhibbah
Sunway
Ratio (CL: CA)
Interpretation: From financial statement analysis, it has been found that quick ratio of
Eversendai was within the range of 1.16:1 to 1.94:1 from 2012 to 2016. On the other side, quick
ratio of Muhibbah and Sunway group at the end of financial year 2016 was 1.09:1 & 1.20:1
respectively. Thus, it can be depicted that all such companies have enough quick assets that can
be converted into cash for meeting the obligations as compared to standard ratio such as .5:1.
Thus, it can be said that firm should make focus on investing money in other profitable activities
which in turn aid in the growth and success of firm (Robinson and et.al., 2015).
2.1.3 Financial health: leverage ratio
Particulars 2012 2013 2014 2015 2016
Financial Leverage
Eversendai 1.89 2.09 2.19 2.39 3.43
Muhibbah 6.24 4.71 4.86 4.34 4.2
Sunway 2.51 2.08 2.17 2.44 2.51

2012 2013 2014 2015 2016
0
1
2
3
4
5
6
7
Graph 6: Financial Leverage
Eversendai
Muhibbah
Sunway
Ratio (Debt to Capital)
2.1.4 Efficiency ratios
Days sales outstanding ratio
Particulars 2012 2013 2014 2015 2016
Days Sales Outstanding
Eversendai 191.38 155.45 229.89 239.42 349.5
Muhibbah 101.11 187.96 243.95 317.11 214.21
Sunway 124.98 86.97 92.04 111.83 121.21
2014 2015 2016
0
50
100
150
200
250
300
350
400
Graph 7: Days Sales Outstanding
Eversendai
Muhibbah
Sunway
No. of days
Inventory turnover ratio (in days)

Particulars 2012 2013 2014 2015 2016
Inventory Days
Eversendai 77.07 70.46 58.91 37.22 43.11
Muhibbah 31.91 43.97 60.31 79.24 61.97
Sunway 99.25 71.75 70.22 77.43 81.31
2012 2013 2014 2015 2016
0
20
40
60
80
100
120
Graph 8: Inventory Days
Eversendai
Muhibbah
Sunway
No. of Days
Interpretation: The above depicted table shows that inventory turnover ratio of
Eversendai, Muhibbah & Sunway was 43.11, 61.97 & 81.31 days at the end of 2016. Thus, it can
be presented that efficiency of the rival firms is good as compared to Eversendai. Thus, company
should make assessment of its existing strategies and do changes in the same for getting the
desired level of outcome.
3. STRATEGIC ANALYSIS
3.1.1 PESTLE analysis
 Political factors: High corruption related activities and growing level of political crisis
may influence the smooth functioning or activities of construction sector.
 Economical factors: In the recent years, high level of decrease has been noted down in
the prices of crude oil from USD $42.56 to USD $10. This in turn may result into rise in
the consumer price index and inflation rate. Hence, such inflationary trend will closely
influence the purchasing power of customers.

 Social factors: Now, individuals make more focus on living luxurious and quality life.
Further, population level is also increasing in Malaysia with the very high pace. By
considering such trend, it can be presented that there is an opportunity for construction
sector to provide customers with innovative building and generate high margin.
 Technological factors: In the recent times, firms that are involved in the construction
projects lay high level of emphasis on using latest technologies. It includes 3D BIM
modelling, energy saving buildings and integrated mobile technology and information etc
which in turn provides high level of assistance in carry out activities more effectually.
 Legal factors: In Malaysia, for creating distinct image in the mind of target market and
others Eversendai is required to comply with Competition Act 2010, Data protection Act
2010, Construction industry payment and adjudication etc (Weisheng and et.al., 2013). In
addition to this, firm is also needed to follow all the acts that are related to the aspect of
employment when developing policy framework.
 Environmental factors: From assessment, it has been identified that there are several
issues which are facing by Malaysia regarding deforestation and pollution. Activities
which are performed by the individuals in construction industry may result into high
pollution (ANDREI and PRISECARU, 2014). Thus, Eversendai is required to perform all
the activities in an eco-friendly manner that contributes in the green environment.
3.2 Competitive analysis
3.2.1 Porter five force analysis
Porters five force model is one of the best way to analyse the external environment so that
factors which are impacting the organisation can be identified.
The buyer power
The bargaining power of buyer is one of the most dependent factor as it is not easy to find out
that buyer power is strong always or weak. Hence it can be stated that buyer power is fluctuated.
Further the developer who have large portion of their business in markets with weaker buyer
bargaining power will obviously lead to higher return.
Supplier power