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Business Analysis of Glomac Berhard

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Introduction

Glomac Berhad has been engaged in property construction work and real estate’s business since 1988. The founders of the Glomac Berhad were two entrepreneurs namely Tan Sri Dato who is the current executive chairperson and Datuk Richard Fong who is the executive vice chairperson of the group. The company comprises of more than fifty-five subsidiaries, which involves nearly every organization, which is involved in every fields of the real estates in the businesses like property investment, construction, and car park management. In the early years, the company started with mixed development and by developing underdeveloped areas in Petaling Jaya, which is now a developed city as well. They built six to eight storey buildings ike Glomac Business Center, Kelana Business Center and the Kelana Centre Point that were well developed with proper car parking’s and elevators setting the Glomac company apart from others. In the growing years, the major achievement of the company was that it developed Saujana Utama a jungle and a plantation land into a major township with a population of 65,000 people. The commitments of the company are on sheer hard work, perseverance and the spirit of community. It has globalized the business and has done very well in the international market as well. The vision of the Glomac Berhad is improve the quality of the life by providing better places to live and increasing living standards and to be recognized and the mission was to provide better service, quality products and the value for money products.       

     

Review and report on the strengths, weaknesses, opportunities and threats of Glomac Berhad 

Every company has their individual strength and weakness. In this section, the key strength and weakness will be analyzed with their potential opportunities and threats. The below table shows the possible dimensions of the company:


Strengths
  • Skilled        Workforce
  • High Growth        Rate 
Weakness
  • Future        Productivity
Opportunities
  • Growth Rates        and profitability
  • Global Markets
  • New products        and Services
  • Venture        Capital
Threats
  • External        Business Risks

 Table 1: SWOT Analysis

Strengths:

  • Skilled Workforce: The skilled employees in the Glomac Berhad give them an superior edge in the market expansion (Dornean and Oanea, 2016). The percentage of skilled workforce is high so the better the employees and workforce the better the productivity.
  • High Growth Rate: The growth rate of the Glomac Berhad is immensely increasing which will help in widening the scope of the company in entering stock market. The organization has grown into a well established real estate organization and has also globalized which has increased the goodwill of the company in the global market (Hassan, et al. 2017).


Weakness:

  • Future Productivity: The future productivity of the company is uncertain because of the downgraded techniques used by the company, which in future will affect the productivity of the company in future and will make the productivity weak as well.


Opportunities:

  • Growth rates and profitability: By widening and expanding the business, the Glomac Berhad will be able to increase the growth rate and will be able to grow the profitability of the firm by incurring better revenues as well.      
  • Global Markets: The expansion of the organization in the global market will help the company to achieve success in the international market, which will help the company to increase the scope of the business (Ozturk and Acaravci, 2013).
  • New products and services: The Company can also increase the scope of the business by rendering new services and by introduction of producing new products to increase the revenue incurred by the company as well.
  • Venture capital: By having high growth rate the company will be able to invest in different new ventures and capitals. The company can provide venture capitals to smaller firms in order to gain market supremacy


Threats:

  • External business risk: The external business risk like pressure created by external stakeholders, financial institution, and government regulation remain a major threat towards the expansion of the firm. The economic condition of the market is also a threat to the organization. The economy of the country in which the company will invest will also affect the market position of the organization (Stockinger and Leitner-Hanetseder, 2014).    


Key financial analysis 

Profitabilityratios: Profitability ratios are one of the performance metrics of an organization. It helps the management of an organization in evaluating the ability of an organization to generate the maximum return against the expenses incurred and significant cost implications. 

  • Return on invested capital: Return on invested capital is one of the significant measure of profitability of an organization that determines the ability of an organization to generate the maximum return in regards to the capital employed in the company. In other words, it actually represents the return, which an investment generates from the capital invested by the stakeholders of the organization (Lakshmi et al. 2016).
  • Net profit margin: The net profit margin of an organization implies the degree of revenue earned by an organization after meeting its payment obligations in a financial year. The net profit margin of an organization is actually the amount of net profit earned by an organization in relation to the net revenue during the year. 
  • Assets turnover ratio: It is one of the significant profitability ratios, hat measure the value of the sales of an organization in relatives to its total assets. It actually indicates the ability of an organization to generate the maximum sales revenue from the market by investing its assets in the business operations (Vogel, 2014)
  • Financial Leverage: Financial leverage helps the management of an organization in determining the financial health of an organization in the market. It represents the leverage or the amount of risk held by an organization in relation to its business operations. Notably, the more the financial leverage of an organization the more the amount of risk held by it (Kou et al. 2014).


Profitability ratios:
Particulars
2012
2013
2014
2015
2016

Net Profit margin
13.05
15.02
16.02
18.39
13.12

Asset turnover ratio
0.48
0.46
0.41
0.26
0.32

Return on invested capital 
13.38
12.59
8.28
7.19
6.45

Financial Leverage (Average)
2.12
2.01
1.93
1.99
1.99


https://lh6.googleusercontent.com/d9qRyKfz0Gi-Ci5Y_dfNiBNaFp5eZ3vVCDJ8HdpqnE3luVNAIZfFt4UWrbAV4N1FApVyFWVPOJh1Nlob5Q8y8OJvorgnakNGivsld92Eq9AHfbrIpsABb5IU2lzEYRnUXjHuNWHY

Figure 1: Profitability of Glomac Berhard for a period of five years

(Source: Self developed)


Liquidity ratios: Liquidity ratio: The liquid ratio is one of the measures of performance metrics of an organization. It determines the ability of an organization to meet its both short-term and long-term payment obligations. It represents the amount of liquid cash held by an organization a certain point of time (Stockinger and Leitner-Hanetseder, 2014)

  • Current ratio: The current ratio of the organization is measure of the liquidity held by the organization. It is one of the critical financial ratios that are used to determine the ability of an organization to meet its short and long-term payment obligations. 
  • Quick ratio: The Quick ratio is a measure of liquidity of an organization. It is one of the critical liquidity ratios that is used to measure the ability of an organization to pay off its immediate payment obligations. It is represented as ratio of quick assets held by an organization in relation to the total current liability (Stockinger and Leitner-Hanetseder, 2014).
Liquidity ratios:
Particulars
2012
2013
2014
2015
2016

Current ratio
2.22
2.78
2.14
1.48
1.32

Liquid ratio
1.54
1.37
1.11
0.78
0.6




Figure 1: Liquidity of Glomac Berhard for a period of five years

(Source: Self developed)


Efficiency ratios: The efficiency ratio is a measurement of operational efficiency of an organization that is used to determine the way a company uses its assets internally. In other words, it is a measurement of efficiency level of an organization in utilizing the assets held in order to generate income. 

  • Assets turnover ratio: It is one of the significant profitability ratios, hat measure the value of the sales of an organization in relatives to its total assets. It actually indicates the ability of an organization to generate the maximum sales revenue from the market by investing its assets in the business operations (Hassan et al. 2017). 
  • Inventory turnover ratio: The inventory turnover ratio is a measurement of the efficiency level of the organization that implies the ability of an organization to manage effectively the inventory in order to generate return. It actually measures the frequency an inventory is sold during a certain point of time. 


Efficiency ratios:
Particulars
2012
2013
2014
2015
2016

Asset turnover ratio
0.48
0.46
0.41
0.26
0.32

Inventory turnover ratio
6.1
5.3
4.97
3.15
3.65


Figure 1: Figure representing the operational efficiency of Glomac Berhard for a period of five years

(Source: Self developed)


Capital Structure of the organization: The capital structure of an organization helps the investors in determining the amount of debt and the amount of equity held by an organization. The capital structure of an organization determines the sources of funds used by an organization to carry on with its business operations. The capital structure of an organization usually comprises of debt capital and equity capital. In case the amount of debt capital held by an organization is more, the market risks for that organization tend to be increased (Jindrichovska and Kubíckova, 2014)

Capital Structure:
Particulars
2012
2013
2014
2015
2016

Debt to Total Assets ratio
-
-
18.12
14.43
12.66




Figure 1: The Capital Structure of Glomac Berhard for a period of five years

(Source: Self developed)

Recommendation 

  • The Glomac Berhad company has been experiencing a stable condition in the market, It has incurred manageable amount of profit to continue their business and has has done well in the domestic circuit of real estates. In doing the financial analysis, it is found that the company has lacked in maintaining the same amount of the efficiency and has faced some problems. These are the recommendations on the pointed out problems that should be kept in consideration in order to start a business in the shareholding business (Dornean, Oanea, 2016).


  • The company has faced low values of their share in the market although it is seen that the company has not yet reached the stage of financial distress yet. By raising the debts, the company will be able to lower the overall risk associated with the share values and investment. The type’s debts that will be raised off will also indirectly affect the stock price of the organization. The debts that should be raised off in the secured debts that are the corporate bonds, which have low risk and low interest rates. The subordinate debts those are not collateral, which has very high rate interest and risk. By raising debts of the firm, the value of the equity shares will increase. The convertible and cumulative preferred shares with adjustable rates of dividends are likely to invite more customers and attract more investors. The demand of the stock will increase which will further help the Glomac Berhad to improve the value of their enterprise and stock. Selling of preference shares will also help the company to increase the stability and provide the company financial support. Through buy back of shares and selling of reference shares, the company will be able to collect more capital in the business (Chee, 2014). 


  • Organization restructuring is also a way to increase the value of the shares in the stock market. Restructuring requires valuing, prioritizing and evaluating the important assets of the organization. The Glomac Berhad has a number of various business divisions and business subunits. The organization should consider the most important assets that will increase the profitability of the company. If the business units of the organization and subunits perform well in the lower, level of the business the organization will develop as a whole, which will reflect determination of the organization. This will let the investors know about that the company has a will to grow and to improve the financial performance of the company, which will reward in getting higher demands of equities.


  • Stock repurchase has been used most commonly by the organization in order to increase the share price of the equities. Buy back of shares will help the company to gain more capital investment in the organization to get a financial stability. By this way, the company will try to show the investors that they believe in the growth of the organization and have control on the future performance. The organization will also show that the stocks are reliable and will do better in future (Hashim et al. 2015).


  • In the financial analysis, it is seen that the company’s net profit margins has been lowered since the year 2012. It shows that the company has efficiency in increasing the profitability and has failed to create demand for their product in the market. The stocks of the company are filed to create demand so the company should work on creating demand for both their product and shares. 


  • In every profit incurring organization, a part that profit is kept for the future investment so that the company can maintain and widen the scope of the business. After doing this the company divides the rest amount to the shareholders, which can have a better effect of the stock and share value. If the company will provide great amount to the investors on their investment it will attract new investors. 

By using all these ways, the Glomac Berhad can ensure that the share values increase and new investors are invited. A combination of these strategies will also help the company to evaluate on the crisis and to resolve the issues regarding low value of issue.                                          

Conclusion

From the following project, it has become very evident that Glomac Berhad have been doing well in the domestic real estate business but has not done weel in the share markets. The financial status shows that the company is unable to maintain its swift run in the market. Even though the company has globalized its market, it is important that company take proper control the business in stock market. The company has done well in the domestic circuit but is facing threats in the international. In the SWOT analysis, there are various strengths through, which the company can use to cover the business. The weaknesses have hindered the growth of the Glomac Berhad in the international market. There are various opportunities from, which the company can excel in the market and experience marketing advantages as well. 


The company shows real grit on capitalizing on those opportunities to excel in the future. There have been many recommendations that have been made in order to increase the share value of the company in the share market. Through the recommendations made for increasing the share it is very evident that company can use methods such as buy back of shares, selling preference share, revaluing the assets, which will be helpful for the company. By using all these methods, the company can easily assure a significant amount of growth rate in the share values. The company will easily overcome other threats in the market, as the company will attract new investors in the stock market.  


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