COURSEWORK COMPONENT 1

1
Contents
Introduction ............................................................................................................................................. 3
1. Company Profile ................................................................................................................................. 3
1.1.HOCK SENG LEE BERHAD (HSL) ........................................................................................... 3
Introduction ..................................................................................................................................... 3
Business Activities and Development ............................................................................................. 3
Vision and Mission ......................................................................................................................... 3
Key Financial Highlights ................................................................................................................ 4
1.2MUHIBAH ENGINEERING (M) BERHAD ................................................................................ 4
Introduction ..................................................................................................................................... 4
Business Activities and Development ............................................................................................. 4
Vision and Mission ......................................................................................................................... 5
Key Financial Highlights ................................................................................................................ 5
2. Overview of the Construction Sector .................................................................................................. 5
2.1 Industry Analysis .......................................................................................................................... 6
2.2Malaysia Construction Sector Outlook for 2017 ........................................................................... 9
3. Financial Ratios .................................................................................................................................. 9
Capital Structure Analysis ................................................................................................................ 10
Profitability Analysis ........................................................................................................................ 12
Liquidity Analysis............................................................................................................................. 13
Market Performance.......................................................................................................................... 15
Efficiency analysis ............................................................................................................................ 16
4. Comparative Analysis ....................................................................................................................... 17
5. Recommendation .............................................................................................................................. 18
6. Conclusion ........................................................................................................................................ 19
References ............................................................................................................................................. 20

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Introduction
The financial analysis of business corporations is undertaken with the aim of
evaluating their current and future financial performance. In this context, the present report
has carried a comparative analysis of two Malaysian public listed companies operating in the
construction sector. The companies’ selected for the purpose are Hock Seng Lee Berhad and
Muhibah Engineering Berhard. In this regard, the report has discussed the profile of both the
companies and carried out industrial and financial analysis for evaluating the performance of
both the companies. The financial analysis is carried out through calculating the key financial
ratios of both the companies such as profitability, liquidity, efficiency, and capital structure
and market performance for the financial year of 2016. Also, the comparative analysis of the
performances of both the companies is carried out in order to identify the scope of
improvement in both the companies. At last, the report provides recommendations to both the
companies for improving their financial performances and also discusses the area of future
investigation.

1. Company Profile
1.1.HOCK SENG LEE BERHAD (HSL)
Introduction
The HSL was established in the year 1979 and was listed on Bursa Malaysia in the
year 1996. The company is involved in different types of civil engineering and construction
works that includes development of roads and towns, boring of tunnel and complex
infrastructure projects. It is a Malaysia based construction company that undertakes all the
construction projects involved in development of buildings and infrastructure (HOCK SENG
LEE BERHAD: Annual Report, 2016).

Business Activities and Development

The company operates through two main segments that are construction and property
development. The construction segments mainly undertake the projects in relation to civil
engineering through the principal unit of HSL Land Sdn Bhd’s. On the other hand, its
segment of property development is involved in construction of residential and commercial
properties through its wholly-owned subsidiary of Hock Seng Lee Construction Sendirian
Berhad. The company employs about 800 full time employees having technical expertise.
The company has achieved success through its land reclamation projects such as soil
improvement works, share protection, drainage and water reticulation activities (HOCK
SENG LEE BERHAD: Annual Report, 2016).

Vision and Mission

The company aims to provide attractive returns to its shareholders through adhering to
highest standards of corporate governance. The standards of corporate governance comply
with the Malaysian Code of Corporate Governance in order to promote the transparency and
accountability in its business operations (HOCK SENG LEE BERHAD: Annual Report,
2016).

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Key Financial Highlights

(Source: https://www.hsl.com.my/PDF/HSLB-ar2016.pdf)

1.2MUHIBAH ENGINEERING (M) BERHAD

Introduction
The Muhibah Engineering Bhd. is a recognized Malaysian construction company
involved in carrying out oil and gas, marine, infrastructure, civil and structural engineering
contract works. It was established in the year 1972 and is based in Malaysia. The company is
publicly listed on Kuala Lumpur Stock Exchange (KLSE) and has also achieved ISO 9002
certification in the year 1995 in the construction fields (MUHIBAH ENGINEERING (M)
BERHAD: Annual Report, 2016).

Business Activities and Development

The company has achieved a strong position in the construction sector of Malaysia
owning to its quality maintenance and safety in every aspect of operations. It is estimated to
have annual revenue of about $10m. The company has a good brand reputation in Malaysia
and has successfully developed variety of infrastructure in the country such as oil and gas
terminals, marine ports, bridges and dams, airport terminals, facility support buildings,
concrete foundations and other construction works. The company has different business
segments for undertaking different types of construction projects such as infrastructure
construction segment, cranes segment, marine ship building and ship repair segment and
concession segment. The infrastructure segment is involved in carrying out construction
projects related to oil, gas, petrochemical engineering and other such related activities. In
addition to this, this segment is also involved in manufacturing of aluminum foils, carbonless
papers, and containers and also provides offshore leasing services (MUHIBAH
ENGINEERING (M) BERHAD: Annual Report, 2016).

The cranes segment designs, leases, manufactures, supplies and trades shipyard and
other heavy lifting equipment cranes such as hydraulic systems, material handling equipment
and many others. The marine ship building and ship repair segment designs and develops tug
boats, supply vessels, ships, motor vessels and spare parts. At last, the concession segment of

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the company is involved in privatization of international airports and also carries out many
road maintenance works. The company though providing quality services are recognized a
leader in Marine Construction since its establishment in the year 1972 (MUHIBAH
ENGINEERING (M) BERHAD: Annual Report, 2016).

Vision and Mission

The company strives to achieve a distinct brand image in both local and global market
through providing quality construction and engineering works (MUHIBAH ENGINEERING
(M) BERHAD: Annual Report, 2016).

Key Financial Highlights

(Source: MUHIBAH ENGINEERING (M) BERHAD Annual Report 2016)

2. Overview of the Construction Sector

The construction sector of Malaysia has a major role in the economic growth and
development of the country by contributing in revenue generation, capital employment and in
gross domestic product (GDP) production. The economy of Malaysia is recognized as
developing and as such the construction sector is playing a major role in improving the
economic efficiency of the country. The construction sector is largely contributing to
generating employment, improving the quality of life and leading to improved revenue
generation in the country (Liew et al., 2014). The construction sector of Malaysia has
contributed to an increase in about 3 to 5 per cent of the aggregate economy GDP in the last
two years. The Malaysia country has experienced a boom in the construction sector in the
year 1990 and since then has reported a significant growth in the respective industry in both
domestic and international market. The construction industry in Malaysia in early years
before its independence was recognized to be low-tech and was mainly a craft base industry.
The industry has achieved a significant growth in the recent years and is presently recognized
to be well established sector in Malaysia with the use of modern tools and technologies. The
use of advanced tools and equipments in present has lead to the success achieved by the

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construction industry in developing complex infrastructures such as commercial buildings,
bridges, tunnels, schools and hospitals (Geological Survey, 2012).

The output from construction sector in Australia has reported a tremendous increase
from 1991-1197 with the overall output reaching to about 19103 million. However, the
economic crisis that occurred in Asia in the year 1198 has caused a negative impact in the
construction sector output of Malaysia. The construction sector has reported a decrease in the
output with reporting it to about 5216 million between the periods of 1998-1999. However,
since then the construction sector of the country has received a continuous growth and is
presently attributed to be a major sector supporting its GDP. The construction industry is
recognized as one of the best performing sector in first half of 2016 and reported a growth of
8.9%. The government is implementing several measures for improving the growth of the
construction industry. The main reason for the strong growth realized by the construction
sector in Malaysia is due to increase in foreign investment that has caused rise in demand of
new commercial and residential property (Outlook and Policy in 2017, 2017). The growth
achieved by the industry till the recent years can be depicted through the graphical illustration
as:

(Source: http://www.thestar.com.my/business/business-news/2016/06/13/construction-sector-
to-keep-growing/)

2.1 Industry Analysis

The key macro-economic factors that help in assessing the performance of
construction industry of Malaysia are as follows:

 Unemployment: The unemployment rate in Malaysia has currently reported a decline

from 3.5 per cent to 3.3% in the current year of 2017. The average unemployment rate
in Malaysia is 3.28 per cent in the past few years. However, it has reported an all time

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 rise in the year 1999 to 4.5 per cent due to economy crisis but thereafter has
maintained a declining trend. This is because of the boom in the construction sector of
the country that has enhanced the revenue generation and increased the value of GDP
(International Monetary Fund, 2015). The growth in the employment rate with the
construction industry boom can be depicted as follows:

(Source: An Overview of the Construction Industry)

 Inflation rate: The inflation rate in Malaysia is reported to be about 0.9% that has
reported a significant increase in past few months due to rise in consumer prices. The
increase in consumer prices is driven by rise in prices for transport, water, electricity,
gas and other fuels. The Malaysia economy has however maintained a low inflation
rate after the occurrence of economy crisis due to tremendous positive growth realized
in the construction sector. The greater expansion of the private sector is leading to the
huge growth opportunities in the construction industry. The increasing demand of
residential buildings and complex infrastructure projects is supporting the huge
growth in the construction sector (Rafiq, 2013).

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 (Source:
https://www.dbs.com.sg/treasures/templatedata/article/generic/data/en/GR/082017/17082
2_economics_inflation_eases_in_malaysia.xml)

 Gross Domestic Product: The GDP of the country is reported to be 296.36 billion
dollar in the year 2016 and it represents 0.48 per cent of the overall economy of the
world. The gross domestic product is supported by the strong growth momentum of
the country driven by greater revenue generation of its construction, manufacturing
and mining sector. The construction sector is recognized to be the main contributor of
GDP growth in the country. It is estimated that construction sector amounts to about
9.9 per cent growth in the GDP value of the country followed by manufacturing,
agriculture and private consumption (International Monetary Fund, 2015).

(Source: An Overview of the Construction Industry)

(Source: http://www.theindependent.sg/malaysian-economy-is-more-stable-than-singapores-
says-barisan-nasional/)

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  Foreign Investment: The Malaysia is recognized to be one of the most popular
destinations for foreign investment among all the Southeast Asian countries. The FDI
inflows and strong human capital development is the main contributor of the
economic growth of the country. There is great involvement of foreign contractors in
the construction industry of Australia. The government has undertaken six foreign
construction projects and there is 120 foreign private projects undertaken by the
construction industry of the country (Rafiq, 2013).

(Source: http://www.todayonline.com/singapore/southeast-asia-attracts-more-foreign-direct-
investment-china-second-year)

2.2Malaysia Construction Sector Outlook for 2017

The construction sector of Malaysia is estimated to record impressive growth in the
future contest also with the rise in demand of developing large infrastructure in the country.
The economy of the country is reported to record an expansion of about 6% till the year 2020.
The growth in the construction industry is driven primarily by the private sector investment.
As such, the government has planned to implement various measures for increasing the
participation of the private sector in the economic growth of the country (Olanrewaju and
Abdul-Aziz, 2014). The growth in the construction industry is expected to remain resilient
with the implementation of major projects such as Iskandar Development Region (IDR),
Northern Corridor Economic Region (NCER), East Coast Economic Region (ECER) and
many others. The industry is expected to be dominated by private sector and therefore will
achieve sustainable growth by the continued demand of private construction projects in the
country. Thus, the construction industry is expected to record a growth of about 8.2 per cent
in the year 2017 with the positive growth to be realized in the Malaysian economy between
4.3%-4.8percent in the respective year (Outlook and Policy in 2017, 2017).

3. Financial Ratios
The financial data has been extracted from company’s respective annual reports and
data that is needed to make analysis of the financial ratios has been provided below:

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 Financial Information of the both companies under analysis
All amount in Rm'000
Particulars Hock Seng Lee Muhibbah Engineering
Shareholder's Equity (Equity) RM704,149.00 RM1,380,536.00
Long Term Debt (Debts) RM14,341.00 RM143,314.00
Total Assets RM872,904.00 RM4,102,647.00
Operating Profit RM71,915.00 RM94,365.00
Net Profit RM56,458.00 RM160,955.00
Net Sales RM498,546.00 RM1,918,623.00
Current Assets RM547,951.00 RM2,816,332.00
Current Liabilities RM154,414.00 RM2,578,797.00
Inventory RM25,628.00 RM265,906.00
Quick Assets RM522,323.00 RM2,550,426.00
Debtors RM284,690.00 RM704,292.00

The financial analysis of both the companies is carried out through their ratio analysis
as follows:

Capital Structure Analysis

The capital structure analysis is carried out for evaluating the proportion of debt and
equity in the financial structure. The analysis is specifically aimed at examining the short and
long-term debt, preferred and common stock (Weygandt, Kieso and Kimmel, 2010). The
capital structure analysis is carried out by calculating debt-equity and debt ratio for both the
companies:

Ratio Analysis for year 2016

Capital Structure Analysis
Particulars Hock Seng Lee Muhibbah Engineering
Debt Equity Ratio 2.037% 10.381%
Debt Ratio 1.643% 3.493%

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 Capital Structure Analysis
10.381%
12.000%
10.000%
Percentage

8.000%
6.000% 3.493%
2.037% 1.643%
4.000%
2.000%
0.000%
Hock Seng Lee Muhibbah
Engineering
Debt Equity Ratio 2.037% 10.381%
Debt Ratio 1.643% 3.493%

Debt equity Ratio: The debt-equity ratio presents the proportion of total liabilities and total
equity in the capital structure of an entity (Weil, Schipper and Francis, 2013). It is calculated
by the use of following formula:

Debt Equity Ratio=Total Liabilities/Total Equity

HSL Debt-Equity Ratio:

Debt Equity Ratio=14,341.00/ 704,149.00

Debt Equity Ratio=2.037%

MEB Debt-Equity Ratio:

Debt Equity Ratio=143,314.00/ 1,380,536.00

Debt Equity Ratio=10.381%

The debt-equity ratio of MEB is greater than HSL and thus stating that MEB has
larger proportion of debt in the capital structure. However, it can be said that both the
companies have maintained an adequate proportion of debt and equity in their capital
structure that is indicative of their good financial position (Weil, Schipper and Francis, 2013).

Debt ratio: It depicts the overall proportion of assets of an entity that are raised through debt
and is calculated through the use of formula:

HSL Debt Ratio:

Debt Ratio=Total Liabilities/Total Assets

Debt Ratio=14,341.00/ 872,904

Debt Ratio=10.381%

MEB Debt Ratio:

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Debt Ratio=143,314.00/102,647

Debt Ratio=3.493%

The HSL debt ratio is greater as compared to that of MEB indicating larger proportion
of debt in the capital structure of HSL as compared to the overall assets. Thus, it is
recommended that HSL should emphasize on reducing its debt obligations as compared to
total assets.

Profitability Analysis
The profitability ratios examine the ability of a company to generate earnings in
comparison to its overall expenditure. The profitability analysis of both the companies is
carried out through calculating operating profit, net profit and return on equity ratio (Stickney
et al., 2009).

Ratio Analysis for year 2016

Profitability Analysis
Particulars Hock Seng Lee Muhibbah Engineering
Operating Profit Ratio 14.42% 4.92%
Net Profit Ratio 11.32% 8.39%
Return on Equity 8.02% 11.66%

Profitability Analysis

16.00%
14.00%
12.00%
Percentage

10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Operating Net Profit Return on
Profit Ratio Ratio Equity
Hock Seng Lee 14.42% 11.32% 8.02%
Muhibbah Engineering 4.92% 8.39% 11.66%

Operating Profit: The operating profit ratio depicts the profits realized by an entity from its
daily operational activities. The formula for calculating the operating profit is as follows:

Operating Profit=Operating Income/Net Sales

HSL Operating Profit:

Operating Profit= 71,915.00/ 498,546.00

Operating Profit=14.42%

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MEB Operating Profit:

Operating Profit= 94,365.00/1,918,623

Operating Profit=4.92%

Thus, it can be stated that HSL is realizing larger operating profit in comparison to
MEB and therefore MEB is recommended to improve its operating efficiency through
emphasizing on its pricing strategies.

Return on Equity (ROE): It measures the ability of an entity to generate profits from the
shareholder investments and is calculated through the use of following formula:

Return on Equity=Net Profit after tax/Average Equity

HSL ROE

Return on Equity=56458/ 704149

Return on Equity=8.02

MEB ROE

ROE= 160955/ 1380536

ROE=11.66

As such, it can be stated that ROE of MEB is better in comparison to that of HSL.
This indicates that MEB is providing greater return to shareholders as compared to HSL.

Liquidity Analysis
The liquidity analysis of a company determines its ability to meet the financial
obligations and is assessed for both HSL and MEB through computation of current and quick
ratio.

Ratio Analysis for year 2016

Liquidity Analysis
Particulars Hock Seng Lee Muhibbah Engineering
Current Ratio 3.55 1.09
Quick ratio 3.38 0.99

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 Liquidity Analysis

4.00
3.50
3.00
In Times

2.50
2.00
1.50
1.00
0.50
0.00
Hock Seng Lee Muhibbah Engineering
Current Ratio 3.55 1.09
Quick ratio 3.38 0.99

Current Ratio: The current ratio measures the ability of a company to meet its short and long-
term obligations by assessing the total assets of an entity in comparison to its overall
liabilities (Weygandt, Kieso and Kimmel, 2010). The current ratio is calculated through the
use of following formula:

Current Ratio=Current Assets/Current Liabilities

Current Ratio of HSL

Current Ratio= 547951/ 154414

Current Ratio=3.55

Current Ratio of MEB

Current Ratio= 2816332/ 2578797

Current Ratio=1.09

Thus, it can be said that current ratio of HSL is greater than that of MEB and therefore
it can be said that liquidity position of HSL is better than MEB.

Quick Ratio: The ratio compares the liquid assets of an entity that are, cash, marketable
securities and accounts receivables to the overall current liabilities and is calculated through
the use of following formula (Stickney et al., 2009):

Quick Ratio=Quick Assets/Current Liabilities

Quick Ratio of HSL

Quick Ratio=522323/154414

Quick Ratio=3.38

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Quick Ratio of MEB

Quick Ratio=2550426/2578797

Quick Ratio=0.99

Thus, it can be said quick ratio of HSL is better than that of MEB and therefore it
possess greater ability to meet its short-tem obligations.

Market Performance
The market performance determines the behavior of securities of an entity in the
marketplace (Weil, Schipper and Francis, 2013). It is assessed through the calculation of EPS
and DPS for both the companies that are HSL and MEB.

Ratio Analysis for year 2016

Market Performance
Particulars Hock Seng Lee Muhibbah Engineering
EPS 0.10 0.22
DPS 0.02 0.05

Market Performance

0.25
0.20
0.15
In RM

0.10
0.05
0.00
Hock Seng Lee Muhibbah Engineering
EPS 0.10 0.22
DPS 0.02 0.05

Earning Per Share (EPS): It measures the overall earnings realized by a company in
comparison to the number of outstanding shares and is calculated though the use of formula:

EPS=Total Earnings/Number of outstanding shares

As depicted in the graph, the EPS of HSL is 0.10 while that of MEB is 0.22 and
therefore it can be stated that earnings realized by shareholders of MEB is greater in
comparison to that of HSL.

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Dividend per Share (DPS): It measures the income paid as dividends by an entity in
comparison to the overall income realized and is calculated through the use of following
formula (Stickney et al., 2009):

DPS=Total Dividend Paid/Total Shares Outstanding

Às depicted in the above table, the DPS ratio of HSL is 0.02 and that of MEB is 0.05
thus greater than that of HSL. Thus, it can be said that dividends paid by MEB to its
shareholders is greater than that of HSL. The market performance of MEB can be regarded
better in comparison to that of HSL through the analysis of EPS and DPS ratios of both the
companies.

Efficiency analysis
The efficiency analysis determines the ability of a company to use its assets and
liabilities effectively (Gibson, 2010). It is determined through the calculation of asset
turnover ratio and debtor turnover ratio for both the companies of HSL and MEB.

Ratio Analysis for year 2016

Efficiency Analysis
Particulars Hock Seng Lee Muhibbah Engineering
Asset Turnover Ratio 0.57 0.47
Debtor turnover ratio 1.75 2.72

Efficiency Analysis

3.00
2.50
2.00
In Times

1.50
1.00
0.50
0.00
Hock Seng Lee Muhibbah
Engineering
Asset Turnover Ratio 0.57 0.47
Debtor turnover ratio 1.75 2.72

Asset Turnover Ratio: It measures the ability of a company to generate sales from its asset
base and is calculated through the use of following formula:

Asset Turnover Ratio=Net Sales/Average Total Assets

Asset Turnover Ratio of HSL

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Asset Turnover Ratio= 498546/ 872904

Asset Turnover Ratio=0.57

Asset Turnover Ratio of MEB

Asset Turnover Ratio= 1918623/ 4102647

Asset Turnover Ratio=0.47

Debtor Turnover Ratio: It measures the credit sales realized by an entity in comparison to the
overall sales revenue and is calculated through the formula:

Debtor Turnover Ratio=Net Sales/Average Accounts Receivables (Ernst and Häcker, 2012)

As depicted in the above table, the debtor turnover ratio of HSL is 1.75 while that of
MEB is 2.72. Thus, MEB has better ability of collecting its accounts receivables. As inferred
from efficiency analysis, both the companies have effectively uses its assets and liabilities for
achieving internal growth.

4. Comparative Analysis
The comparative analysis for both the companies is carried out through the analysis of
the following three factors:

Segmentation Analysis

HOCK SENG LEE BERHAD (HSL) MUHIBAH ENGINEERING (M) BERHAD

(Business Segments) (Business Segments)

Construction Segment Infrastructure Construction segment

Property Development Segment (HOCK Cranes Segment
SENG LEE BERHAD: Annual Report,
2016).
Marine Ship Building and Ship Repair
segment
Concession segment (MUHIBAH
ENGINEERING (M) BERHAD: Annual
Report, 2016).

Land Bank Analysis

HOCK SENG LEE BERHAD (HSL) MUHIBAH ENGINEERING (M) BERHAD

Wholly-owned subsidiary of Public listed Its not a subsidiary and conducts its
company naMEB Hock Seng Lee Berhad activities on an international level as a
main company
Member of SHEDA (Sarawak Housing MEB has acquired 500 acres of land in
and Real Estate Developers Association) Kuantan for expanding its maritime and

17
 fabrication capacity

Recognized for its innovation, design and Involved in development of complex

quality services infrastructures such as airline facilities,
shipbuilding and fabrication works

Acquired strategic land bank in the year Entered into an agreement with Perbadanan
2000 (Hock Seng Lee Group Properties, Setiausaha Kerajaan Pahang for the land
2016). purchase (Muhibbah acquires land for
Kuantan Maritime Hub, 2016).

Project Analysis

HOCK SENG LEE BERHAD (HSL) MUHIBAH ENGINEERING (M) BERHAD

Kuching Centralised Wastewater Office Floor and car parking for Petronas
Management Project
Pan Borneo Highway Project Fabrication work for Ophir Development
Project
Petanque complex in Kuching Samalaju Port Development in Bintulu
Kuching’s sewerage Westport in Port Klang for
System (HOCK SENG LEE BERHAD: Northport (MUHIBAH ENGINEERING
Annual Report, 2016). (M) BERHAD: Annual Report, 2016).

The comparative analysis of HSL and MEB has presented an analysis of the business
segments, land bank and the current construction projects carried out by each of the company.
The analysis is presented in the table format for providing a clear demonstration of the
differences between the two major construction companies of Malaysia.

5. Recommendation
It can be said from the overall analysis of both the companies that MEB has strong
financial performance in comparison to HSL. The MEB operates on a large scale as
compared to HSL as indicated from the capital structure of both the companies. Also, the
MEB has greater profitability, liquidity, market performance and efficiency in comparison to
that of HSL. As such, the HSL is recommended to devise and implement a strategic aim of
promoting the expansion of its business segments for enhancing its competitiveness in the
construction sector of the country. It should aim to achieve foreign investment projects for
increasing its revenue output and thereby supporting the expansion plans of its business
segments (Raftery, 2004). In the basis of comparative analysis, it can be seen that HSL has
fewer business segments in comparison to MEB that operates diverse business segments. The
MEB has achieved recognition in both domestic and international markets owning to its
involvement in developing complex infrastructure such as ships, airports and fabrication

18
works. Also, it is currently involved in acquisition of two land projects as compared to only
one in HSL for enhancing its growth and development.

The construction sector overview for the year 2016 in Malaysia has indicated that the
industry is presently in a state of positive economic growth. This is due to larger demand of
infrastructure development in the country such as residential buildings, civil engineering
projects and specific trade sectors. The construction industry has experienced a boom in
Malaysia after the occurrence of economy crisis in year 2007. There is positive outlook for
the future growth of the industry supported by the macro-economic factors analysis of low
inflation rate, increasing GDP and foreign investment and easy availability of labor (Oxford
Business Group, 2009). The construction sector overview for the financial year 2017 has
indicated that the industry is estimated to record an economic growth of about 8% in the
coming financial year. As such, it is highly advised to HSL to invest considerably for
expanding its business segments in order to improve its competitive image in the global
market place (Palepu et al., 2007).

6. Conclusion
It can be stated from the overall analysis carried out in the report that construction
industry in Malaysia is presently in a state of positive growth and development. The main
reason for the continued growth and development of the industry is increasing demand of
construction works in the country for supporting its plan of expansion and development.
There is large scale development of residential buildings, complex infrastructure and civil
engineering works that will support the increasing output achieved by the construction sector
presently by the government of Malaysia. The positive outlook for the growth of the
construction sector has further supported the expansion plans of the construction companies
in the country. The lower inflation rate, increasing GDP, decreasing unemployment rate and
increasing foreign investment in the country also supports the continued growth and
development in the construction sector. The financial ratio analysis of two major companies
in the construction sector of the country, that are, HSL and MEB, has also reveled that both
the companies are at present in good financial position due to positive outlook of the industry.
The profitability, capital structure, liquidity, market performance and efficiency analysis of
HSL and MEB has revealed that both the companies are delivering good financial
performance that is expected to increase in the future financial year. The comparative
analysis of both the companies has revealed that MEB have larger business segments in
comparison to HSL and operates on a much bigger scale as compared to HSL. The MEB
operates both in domestic and international platform while HSL mainly operates on a
domestic scale. Thus, it can be stated that construction industry is Malaysia is a vital industry
and largely supports its economic growth and development.

19
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