Reputable Graduate Business School for a Sustainable Tomorrow

AGW 610: FINANCE AND ACCOUNTING FOR

MANAGEMENT

PROJECT: ECO WORLD DEVELOPMENT BERHAD

vs GLOMAC BERHAD

PREPARED BY:

NO NAME MATRIX NO.

1 FARAHZATUL SHIDA BT MOHD HARITH FADZELLAH

P-GSM0/15

2 MASYITAH BT RAZALI P-GSM0/14

3 NORIZANA BT JAMALUDDIN P-GSM0/15

4 NUR SYAFIQAH BT BOINAN P-GSM0/15

5 NURUL HUDA BT IBRAHIM P-GSM0/15

PREPARED FOR: PROF. DR. AZLAN AMRAN DATE OF SUBMISSION: 30 NOVEMBER 2015 SEMESTER: SEMESTER 1 ACADEMIC SESSION: 2015/2016

1.0 INTRODUCTION

The property development is one of the most risky , dynamic and challenging

business even though the industry has a very poor reputation for managing risk such

as many major project failed to meet the deadlines and in some cases which is no

buyers even the units has been complete . The concept of development has been

changed from time to time. Nowadays, most of the developers build the building

based on urban and metropolitan together with the green concept. The green

concept including ecology friendly which is one of the responsibility of the business

to the society and environment in order to achieve business sustainability.

Malaysia as a development country generates the income from food and

electronic manufacturer and also service and hospitality industry. The plants has

provide job opportunities and it slowly develop to be a city/town in that particular area

which has basic facilities such as clinics , schools , mosques , fields , roads ,

transportations system , shops , malls and securities ( fireman , policeman etc. ) .

Since population has been increased significantly, these scenarios will create the

demand and the supply for the property and the real estate.

1.1 PROPERTY DEVELOPMENT AND REAL ESTATE INDUSTRY IN

MALAYSIA

Malaysia has been involved in several Asian financial crisis which hit in 1997-

1998 and 2008, unfortunately Malaysia have been involved again in July 2015.

Malaysia as a development country has received too many impact according to this

situation especially in property development industry. The drastic drop of crude oil

and gas price and weakening of Malaysia Ringgit has drawn a mixed outlook on the

country‟s economy. Several big projects have been frozen, abandoned or the scale

has been reduced.

Before the Malaysia Ringgit has been weak, Malaysia has implemented

Goods and Services Tax (GST) in earlier April in order to avoid double taxation,

which is only the value added at each stage is taxable. Property development has

not been excluded from the implementation of GST. According to C H Williams

Talhar & Wong Sdn Bhd in 2015 Property Market Report, “the developer will charge

6% onto the purchaser and at the same time, he is allowed to claim tax rebates on

construction services. However, since developers are not required to make GST

payments for residential property sales, they are also not entitled to claim rebates.

Consequently all GST paid up to the residential development stage will be absorbed

as part of development costs. All GST costs will be passed on to the house

purchaser if the developer decides to maintain his historical gross margins or GST

costs could be partly absorbed if the developer decides accepts a lower gross

margin in order to maintain a more competitive price.” The same report has been

estimate that Total Construction Cost having increases about 3.97% after the GST

implementation.

Malaysia‟s property market faces an oversupply for 2014. The higher land

costs, construction material prices and labour costs plus the increased authority

requirements were the main factors behind the rise in property prices.

The drastic demand and supply for the property development and real estate

industry significantly happen in major city such as Kuala Lumpur, Pulau Pinang and

Johor Bahru. Malaysia is My Second Home which is a programme by Malaysia

government has penetrate the property development and real estate industry income

and profit.

2.0 COMPANIES’S BACKGROUND

2.1 GLOMAC BERHAD

Glomac traces its corporate history back to 1988, when the two entrepreneurs

and founders of the Group, Tan Sri Dato' FD Mansor, Group Executive Chairman

and Datuk Richard Fong, Group Executive Vice Chairman, joined forces to start

Glomac. The company is currently helmed by Datuk Seri FD Iskandar, Group

Managing Director / Chief Executive Officer. Today, Glomac Berhad comprises more

than 55 subsidiaries with involvement in every face of the real estate business

encompassing property development, property investment, construction, property

management and car park management. Glomac Berhad was listed on the Main

Board of Bursa Malaysia Securities Berhad on 13 June 2000.

Property development remains the core focus of the Group since its inception.

With this, it continues to affirm the Group's reputation as a responsible and visionary

property developer with its sold record of developing townships, residential,

commercial and mixed development properties. To-date, the Group has completed

more than a total sales value over RM4 billion. Moving forward, Glomac is entering

into a new phase of growth as it is in the midst of launching more than RM802 million

worth of property. As a long term player committed to escalating our presence in the

real estate market particularly focusing in the prime area of the Greater KL, where

the Group is well established. Glomac is continuously planning and designing new

projects for our existing landbank, and evaluating new landbank opportunities and

looking out for new opportunities in the country.

Glomac vision is to help improve the quality of life by providing a better place

to live or work in. By carrying out this vision, we want to be recognised by our

customers, shareholders and employees as a world-class property developer. In

order to achieve vision, Glomac mission as a caring and reliable property developer

is to deliver outstanding service, quality products and value for money for our

customers. Through dedication, innovation and passion, we are confident about our

ability to achieve these goals.

2.2 ECO WORLD DEVELOPMENT GROUP BERHAD

Eco World Development Group Berhad is a public company listed on the Main

Market of Bursa Malaysia Securities Berhad which is principally involved in property

development.

The Company‟s projects are strategically located within matured and fast-growing

development corridors in the Klang Valley, Iskandar Malaysia and Penang. We have 12

projects under development in Malaysia spanning close to 5,000 acres which offer our

purchasers a wide array of products comprising affordable, upgrader and luxury homes,

integrated high-rise developments and green business parks. Through our associates, the

EcoWorld brand has also extended to the United Kingdom and Australia with several

exciting developments in London and Sydney lined up for launch in 2015.

The Company is helmed by some of the most well-known and respected industry

players who have transformed the Malaysian property landscape through their leadership of

ground-breaking, standard-setting and multiple award-winning developments. This wealth of

experience combined with the youthful energy and enthusiasm of our people powers Team

EcoWorld‟s efforts to scale ever greater heights as we seek to “Create Tomorrow and

Beyond” for the benefit of our customers, our shareholders and every stakeholder.

Eco World also have own vision where creating tomorrow and beyond. We

will achieve our vision trough a culture of excellent and teamwork by firstly creating

world class eco living in all our developments. Second mission is being a caring and

responsible organisation which actively contributes back to society. Third mission is

having a reputation for providing unmatched product and service quality to our

customer at all times. Fourth mission is leading with passion in the pursuit of

innovation and sustainability to crate enduring value. Fifth mission is delivering

exciting and consistent growth to our stakeholders and shareholders.

2.3 SIMILARITIES BETWEEN GLOMAC BERHAD AND ECO WORLD

DEVELOPMENT BERHAD

Both of this properties company maintain Green standard under corporate

social responsibility (CSR). Eco World Green Council has established an internal

rating tool to promote, inculcate and enforce practical, actionable and achievable

green solutions which is required to be adopted across all Eco World developments.

For example passive design features, maximisation of daylight into homes, water

efficiency, environmental protection, and improving indoor environment quality.

Glomac also making greener contribution begun to implement green friendly

initiatives such as a rain water harvesting systems for gardening and sewerage

purpose and planting of trees and building of footpaths alongside existing rivers and

lakes. As part to their efforts to sustain the green lungs created within townships, a

campaign title “Giving Life Back to Sri Saujana Lake Cleaning Project‟‟ was held in

December 2014 at the Group‟s township in Johor, Sri Saujana.

2.4 DIFFERENTIATES BETWEEN GLOMAC BERHAD AND ECO

WORLD DEVELOPMENT BERHAD

EcoWorld has launched the Eco World Foundation. The foundation serves as

the charitable arm of Ecoworld with a focus on helping underprivileged students

along their quest for education through the Eco World Student Aid Programmed

(SAP). The main objective of the SAP is to keep disadvantages students in school by

providing for their educational requirements. Currently, the programme caters to

more than 3,000 primary secondary and tertiary students through Malaysia.

Glomac more on sustaining community contributions for example launched

activity such as Kongsi Rasa, Kongsi Idea With Chef Liza (Sri Saujana, Johor),

Ramadhan Contribution To Rumah Aman, The Edge Kuala Lumpur Rat Race 2014,

Sponsorship Of Supermokh Restaging 2014, and also Contribution To The

Malaysian Press Institutes 2015 Night. The group also regularly contributes to the

funds of orphanages, and charitable events. Many of these are sustained efforts as

they believe in forging strong bonds with our chosen causes by maintaining a long

term commitment.

3.0 FINANCIAL STATEMENT ANALYSIS

3.1 INTRODUCTION

The success and failure of companies will be measured based on their

financial position performance. It is very important for the entire stakeholders and

shareholders of companies to take a look at their companies‟ financial position so as

to enable them to evaluate the company performance before making any investment

decision. So it is necessary to have a standardized method and criteria in evaluating

a company‟s performance in order to assist in the decision making process (Soon,

Mohammed, & Mostafa, 2014). There are a lot of methods that can be used in

determining companies‟ financial health, and one the most famous methods is the

Altman Z-Score (Zeni & Ameer, 2010). Besides that, financial ratios from balance

sheets and income statements have been used widely by financial analysts.

Financial ratios are an important tool of financial statements analysis. A ratio

is a mathematical number calculated as a reference to relationship of two or more

numbers and can be expressed as a fraction, proportion, percentage and a number

of times. Based on the financial ratio analysis, a company can evaluate and assess

their performance over a period of time. If the analysis shows a negative result, the

management must take a corrective action as to improve the company performance.

Besides that, financial ratio analysis enables the comparison of financial

performance between other companies in the same industry. So, by having this type

of analysis, a company can set a benchmark in that particular industry they belong

to. The financial ratio analysis will allow the management to assess their risk, in term

of their financial risk. A company that have a high debt ratio will be considered as a

high risk company, as they need to bear high financial commitment in the future. So

by knowing the current debt ratio of a company, the management would be able to

make better planning and decision in the future. The financial ratio analysis also will

be useful to other external parties, liked existing or potential investors. This group of

users will evaluate a company‟s financial performance before make any investment

decision. Other than that, creditors, lender or banker also will take a look at a

company financial performance before make any credit or loan decisions.

In order to fulfil the requirement in this research project, the two companies

that had been chosen by us are Eco World and Glomac. There will be two scope of

financial ratios analysis done in this research project, which is internal comparison

and external comparison. The internal comparison is a financial ratio analysis done

for a particular company over a period of time, whereby the external comparison is a

financial ratio analysis done between different companies in a same industry.

Therefore, in this research project, the internal comparison of Eco World and Glomac

will be made for a period of two years, from 2013 to 2014. It compares present ratios

with past and future ratios in each of the selected companies. Then, the external

comparison will be based on the comparison of the average financial ratios between

these two companies in properties industry. This external comparison would be

useful in determining which company have a better financial ratio performance.

3.2 INTERNAL COMPARISONS OF FINANCIAL RATIOS OF GLOMAC

BERHAD AND ECO WORLD DEVELOPMENT BERHAD FOR YEAR

2013 AND 2014

Liquidity Ratio

It is a computation that is used to measure a company's ability to pay its short-

term debts. There are two common calculations that fall under the category of

liquidity ratios. One of the most common liquidity ratio used in financial statement

analysis is current ratio. The current ratio indicates the ability of a company to meet

its short-term obligation, whether a company has sufficient resources to repay its

debt over the next 12 months. This ratio will be a very important indicator in

determining whether the company would be able to pay back in response to credit

given to them. If a company has high a current ratio, it indicates that the company is

liquid and efficient in transforming its product into cash. Some of the possible causes

of low liquidity are holding too much stocks, poor debt collection system and poor

cash management. Thus, the current ratio is measured as:

Current Ratio = Current Assets

Current Liabilities

2013 2014

Eco World 2.05 2.56

Glomac 2.78 2.14

The above grafts show the liquidity ratio, namely as current ratio of both

companies. As what can be seen in the graft of the liquidity ratio of Eco World, there

is a significant increase in the current ratio for year 2013 and 2014. The current ratio

in 2013 was recorded as 2.05, while in 2014 as 2.56. This indicates that Eco World

has improved its liquidity ratio by having a more effective debt collection system and

cash control system. These significant differences might be due to an increase in

some current assets owned by this company.

Then, as what can be seen in the graft of the liquidity ratio of Glomac, there is

a significant difference in the ratio where the current ratio has dramatically

decreased in year 2014. The current ratio in 2013 was recorded as 2.78, while in

2014 as 2.14. This indicates that Glomac is more liquid and efficient in managing its

current assets and current liabilities in 2014. The decrease in the liquidity ratio was

due to an increase in the loan and amount due in the company‟s current liabilities,

which had lead to an increase in the company‟s obligation to fulfil all those short term

liabilities. So, in order to overcome this liquidity problem, Eco World should have to

enhance the amount of current assets, liked the amount of cash in hand or banks, by

having an effective and efficient debt collection system. Other than that, company

should try to adapt to an appropriate inventory control system, which requires a

company not holding unnecessary inventory in hand.

Efficiency Ratio

The efficiency ratios measure how effective the firm is managing its assets in

generating sales. These ratios will indicate whether the assets are too high, too low

or reasonable for the firm‟s current and projected operating levels. The two types of

efficiency ratios used in this research project are inventory turnover ratio and asset

turnover ratio.

The inventory turnover ratio is an efficiency ratio that shows how effectively

inventory is managed by comparing cost of goods sold with average inventory for a

period. This measures how many times average inventory is sold during a period.

The asset turnover ratio is an efficiency ratio that measures a company's

ability to generate sales from its assets by comparing net sales with average total

assets. In other words, this ratio shows how efficiently a company can use its assets

to generate sales. Efficiency ratio includes inventory turnover ratio, and asset

turnover ratio. Thus, the inventory turnover ratio and asset turnover ratios was

measures as:

Inventory Turnover Ratio = Cost of Goods Sold

Average Inventory

Asset Turnover Ratio = Net Sales

Average Total Assets

2013 2014

Eco World Inventory turnover ratio 5.46 4.28

Asset turnover ratio 0.64 0.43

Glomac Inventory turnover ratio 9.96 10.22

Asset turnover ratio 0.85 0.79

The above grafts show the efficiency ratios, namely as inventory turnover ratio

and asset turnover ratio of both companies. As what can be seen in the graft of the

efficiency ratios of Eco World, there are a slight decrease for both ratios, namely as

inventory turnover ratio and asset turnover ratio. The inventory turnover ratio was

recorded as 5.46 in 2013 and 4.28 in 2014. This indicates that the company‟s sales

had been reducing slightly in year 2014. Besides that, the decrease in this ratio was

also due to the improper stock control system which had lead to overstocking. Then,

the asset turnover ratio was recorded as 0.64 in 2013 and 0.43 in 2014. The

reduction in the asset turnover ratio was due to the decrease in sales and increase in

total assets value. The company had purchased new plant and equipment,

inventories and other receivables.

Then, as what can be seen in the graft of the efficiency ratios of Glomac,

there is a slight increase in inventory turnover ratio and decrease in total asset

turnover ratio. The inventory turnover ratio was recorded as 9.96 in 2013 and 10.22

in 2014. This increase has indicated that the company are more efficient in

managing their sales and inventories, where there is no overstocking problem. Then,

the total asset turnover ratio was recorded as 0.85 in 2013 and 0.79 in 2014. There

is a slight decrease in total asset turnover ratio that was due to a decrease of sales

and increase in total assets value.

Leverage Ratio

Companies are relying on a mixture of owners‟ equity and debt to finance their

operations. A leverage ratio is any one of several financial measurements that look

at how much capital comes in the form of debt (loans) or assesses the ability of a

company to meet financial obligations. This ratio will be useful in measuring the

company‟s leverage and the percentage of debt used by the company to finance

their assets. A lower debt to asset ratio will indicate that a company be less

depending on debt as compared to equity in financing its assets. The higher the debt

to asset ratio, the higher debt proportion in company‟s financing. Thus, a company

was more likely to face a high leverage due to high interest cost which will

subsequently increase the company‟s risk towards financial distress. This, the debt

to asset ratio is measured as:

Debt Ratio = Total Debt

Total Assets

2013 2014

Eco World 0.34 0.53

Glomac 0.47 0.45

The above grafts show the leverage ratio namely as debt ratio of both

companies. As what can be seen in the graft of the leverage ratio of Eco World,

there is a slight difference in the debt ratio for year 2013 and 2014. The debt ratio in

2013 was recorded as 0.34, while in 2014 as 0.53. The company has taking

additional loans in year 2014, which had resulted in an increase in debt ratio.

However, the company‟s debt ratio can still be consider relevant and moderate,

where, in 2014 the company approximately used 53% of debt to finance its assets,

and the remaining by using its equity.

Then, as what can be seen in the graft of the leverage ratio of Glomac, there

is a slight decrease in the debt ratio, where in 2013 it was recorded as 0.47 and in

2014 as 0.45. This slight reduction in the debt ratio was due to the settlement made

by company towards its long term liabilities. The company‟s debt ratio can still be

consider relevant and low, where, in 2014 the company approximately used 45% of

debt to finance its assets, and the remaining by using its equity.

Profitability Ratio

Ratios that used to assess a companies‟ ability to generate earnings as compared to

its expenses and other relevant costs incurred during a specific period time. For most of

these ratios, having a higher value relative to a competitors‟ ratio or the same ratio from a

previous period is indicative that the company is doing well. The commonly used profitability

ratios are net profit margin, return on asset and return on equity.

The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a

profitability ratio that measures the amount of net income earned with each dollar of sales

generated by comparing the net income and net sales of a company. In other words, the

profit margin ratio shows what percentage of sales are left over after all expenses are paid

by the business. Creditors and investors use this ratio to measure how effectively a company

can convert sales into net income. Investors want to make sure profits are high enough to

distribute dividends while creditors want to make sure the company has enough profits to

pay back its loans.

The second profitability ratio used in this research project is return on asset. This

ratio will be used to measure the level of earnings that are able to be generated from the

invested capital which is assets. Companies will usually fund their business operations by

using debt or equity. A higher return on asset ratio would be higher because it indicates that

a company is able to generate a higher profit on a smaller amount of invested capital.

The return on equity ratio or ROE is a profitability ratio that measures the

ability of a firm to generate profits from its shareholders investments in the company.

In other words, the return on equity ratio shows how much profit each dollar of

common stockholders' equity generates. Thus, the net profit margin, return on asset

and return on equity ratio are measured as:

Net Profit Margin = Net income available to common stockholders

Sales

Return on Assets = Net Income available to common stockholders

Total Assets

Return on Equity = Net income available to common stockholders

Common Equity

2013 2014

Eco World Net profit margin 0.16 0.05

Return on assets 0.05 0.01

Return on equity 0.08 0.02

Glomac Net profit margin 0.16 0.17

Return on assets 0.07 0.07

Return on equity 0.13 0.12

The above grafts show the profitability ratios, namely as net profit margin,

return on asset and return on equity of both companies. As what can be seen in the

graft of the profitability ratios of Eco World, there are downtrend in all of the

profitability ratios. In 2013, the net profit margin was recorded as 0.16 and 0.05 in

2014. This significant reduction in net profit margin was due to the reduction in

company‟s net earnings in that particular year. Besides that, the selling and

administrative expenses and administrative expenses had increase in 2014, which

had lead to a decrease in the net profit margin of Eco World. Then, the return on

asset had a slight reduction from year 2013 to 2014, where it had been recorded as

0.05 in 2013 and 0.01 in 2014. This reduction was also due to the downtrend of the

company‟s net earnings. The last profitability ratio, which is return on equity, has

shown a downtrend phenomenon also. This is where the return on equity was

recorded as 0.08 in 2013 and 0.2 in 2014. The reduction on return on equity was

consistence with the downtrend of the company‟s net earnings.

Then, as what can be seen in the graft of the profitability ratios of Glomac,

there are mixtrend in all of the profitability ratios. In 2013, the net profit margin was

recorded as 0.17 and 0.20 in 2014. Although company‟ net earnings had been

decrease in 2014, but the company manage to reduce the amount expenses spent

for that particular period of time. Then, the return on asset gives a constant value

from year 2013 to 2014, which is at 0.07. The last profitability ratio, which is return on

equity, has shown a downtrend phenomenon also, where the return on equity was

recorded as 0.13 in 2013 and 0.12 in 2014. The reduction on return on equity was

consistence with the downtrend of the company‟s net earnings.

3.2 EXTERNAL COMPARISON OF FINANCIAL RATIOS BETWEEN

GLOMAC BERHAD AND ECO WORLD DEVELOPMENT BERHAD

Liquidity ratio

Current ratio

Eco World 2.30

Glomac 2.46

The above chart shows the comparison of liquidity ratio, namely as current

ratio of both companies. As what can be seen in the above chart, Glomac is more

liquid as compared to Eco World. However, the liquidity ratios of both companies are

above the ideal ratio, which are two. So, it indicates that, both companies did not

have any liquidity problem, and they have the ability to meet its short term

obligations towards its creditors. Both companies are efficient in managing their cash

and have a high ability to meet its short term obligations over the next 12 months.

Efficiency ratio

Inventory turnover ratio Asset turnover

ratio

Eco World 4.86 0.54

Glomac 10.09 0.82

.

The above chart shows the comparison of efficiency ratios namely as,

inventory turnover ratio and asset turnover ratio of both companies. As what can be

seen in the above chart, Glomac have higher efficiency ratios as compared to Eco

World. This, it indicates that Glomac is more efficient in managing its assets to

generate sales. In order to cope with low efficiency ratio, the management of Eco

World need to have an effective inventory control system as to avoid overstocking.

Besides that, Eco World should avoid to purchase an idle asset which will not be

useful in the business production and operation.

Leverage ratio

Debt ratio

Eco World 0.44

Glomac 0.46

The above chart shows the comparison of leverage ratio, namely as debt ratio

of both companies. As what can be seen in the above chart, there was only a slight

differences in both ratios, where Eco World‟s debt ratio was recorded as 0.44 and

Glomac as 0.46. This has indicates that both companies had used less than 50% of

the debt in financing its assets. It‟s good for a company to have low debt ratio, as it

will help to reduce the risk of insolvency due to the inability to fulfil its financial

obligations towards the creditors.

Profitability ratio

Net profit margin Return on asset Return on equity

Eco World 0.11 0.03 0.05

Glomac 0.16 0.07 0.12

The above chart shows the comparison of profitability ratios, namely net profit

margin, return on asset and return on equity of both companies. As what can be

seen in the above chart, Glomac have better and higher profitability ratios as

compared to Eco World. This significant difference was due to the downtrend

phenomenon in the Eco World‟s net earnings in year 2014. So, in order to improve

these profitability ratios, Eco World‟s management should try improving the sales by

doing excessive promotion and minimizing the operating expenses.

4.0 CORPORATE GOVERNANCE

Corporate Governance refers to the way a corporation is governed. It is the

technique which is the company process and structure used to direct and manage

the business and affairs of the company towards enhancing business prosperity and

corporate accountability with the ultimate objective of realizing long term

shareholders value, whilst taking into account the interest of other stakeholders. In

can divided into three function, board of directors, internal control system and audit

committee.

4.1 BOARD OF DIRECTORS

4.1.1 SIMILARITIES

The Board and its Responsibilities

Both companies, Glomac Berhad and Eco World Development Group Berhad

has mentioned that the Board has the overall responsibilities for corporate

governance, strategic direction, formulation of policies, implementing an

appropriate system of risk management, ensuring the adequacy and integrity of

the companies‟ system of internal control and overseeing their investment and

business.

The Board Meeting and Supply of Information

Besides that, The Board meeting for both companies is held at least quarterly

to discuss and review the quarterly results of the companies for announcement to

BMSB, and annual meetings are held to discuss and approve the companies‟

annual budget and business plan. The Board also will held additional meeting if

there had necessary to discuss various corporate matters or business issues that

require the urgent decision of the Board. Both companies also had held five

board meetings during the financial year

In order to persistence their duties, The Board has access to the advice and

services of the Company Secretaries and may take independent professional

advice at the companies‟ expense as and when necessary. Then the removal of

Company Secretaries would be decided by the Board.

Board Committees

The Board delegates certain functions to committees namely Nomination

Committee and Remuneration Committee that can help to support and assist in

discharging its fiduciaries duties and responsibilities. The respective committees

report to the Board on matters considered and their recommendations. The

ultimate responsibility for the final decision on all matters however lies with the

Board.

Re-election of Directors

By performing re-election of Directors, the Board has to comply with

Company‟s Articles Association which all Directors who are appointed by the

Board are subjected to re-election by shareholders at the next Annual General

Meeting (AGM) following their appointment. All Directors are also to retire from

office and submit themselves for re-election at least once in every 3 years in

compliance with the Listing Requirement of BMSB and the Directors to retire in

each year shall be those who have been longest in office since their last election

as pursuant to Section 129 of Companies Act 1965.

4.1.2 DIFFERENCES

Table 1.0

DIFFERENT GLOMAC BERHAD

ECOWORLD

DEVELOPMENT GROUP

BERHAD

Composition of Board

of Directors

(3) Executive Director

(4)Independent Non-

Executive Directors

(3) Executive Directors

(3) Independent Non-

Executive Directors

Nomination Committee

and Remuneration

Committee

Consists exclusively of

(3) independent Non-

Executive Directors

Comprised (3) members

of all the independent

Non-Executive Directors

Re-election of Directors AOA provides 1/3 of

directors subjected to

retirement by rotation at

every AGM at least once

every 3years.

AOA provide director

shall retire at least in

every 3years and are

eligible to offer

themselves for re-election

at the AGM.

4.2 AUDIT COMMITTEES

4.2.1 SIMILARITIES

Chairman

The Chairman of the Audit Committee shall be elected by the members of the

Audit Committee and shall be an independent Non-Executive Directors. This is

important to balance up the Board structure and give independent view and

judgment in the Board decision making.

Main Objective

Both companies have similar main objective. The Audit Committee is to assist

the Board of Directors in meeting its responsibilities relating to accounting and

reporting practices of the Company and its subsidiary companies.

Authority

The Audit Committee shall be necessary and reasonable for the Company to

perform its duties, in accordance with procedures to be determined by the Board

of Directors and at the cost of the Company. They have authority on to

investigate any activities within its terms of reference, to seek any information it

requires from any employees and all employees are directed to co-operate with

any requests made by Audit Committee and to obtain outside legal or other

independent professional advice and to secure the attendance of outsiders with

relevant experience and expertise if it considers this necessary.

Meeting

The Audit Committee for both of companies have similar frequency of meeting

that they shall meet at least 4 times a year. The Audit Committee shall meet at

least twice during the financial year with the external auditors and internal

auditors without presence of the Executive Board members, other directors and

employees of the Group.

4.2.2 DIFFERENCES

TABLE 1.1

DIFFERENT GLOMAC BERHAD

ECOWORLD

DEVELOPMENT GROUP

BERHAD

Composition of the

Audit Committee

Compromise three (3)

independent Non-

Executive Directors

Compromise three (4)

Non-Executive Directors

4.3 INTERNAL CONTROL

Pursuant to paragraph 15.26(b) of the Main Market Listing Requirement of

Bursa Malaysia Securities Berhad, the Board of Directors for both companies, are

pleased to provide the following statement on the state of internal control of the

Group for the financial year, which has been prepared in accordance with the

“Statement on Internal Control Guidance for Directors of public Listed Companies”

issued by Bursa Securities.

Based on The Malaysian Code on Corporate Governance stipulates that the

Board of Directors („The Board‟) of listed companies should maintain a sound system

of internal control to safeguard shareholders‟ investments and Group‟s assets. In

dealing with its stewardship responsibilities, the Board of Directors recognises that

effective risk management is an integral part of good business management

practice.

The internal control systems of the Glomac Berhad are established by the

existing of the Audit Committee which empowered to seek assurance on the

adequacy and integrity of the internal control system. They establish the procedure

and policies that will implement by every part of their business such as the

procedures and the policies in determination of the product quality, the policy in

recruit the employees. While for Eco World Development Group Berhad, the internal

audit function of the Group was outsourced to KPMG Management & Risk

Consulting Sdn Bhd, an independent professional services firm which reported

directly to the Audit Committee.

5.0 CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility can be defined as continuing commitment by

business to behave ethically and contribute to economic development while

improving the quality of life of the workforce and their families as well as of the local

community and society at large. Meaning that, an organization or a business will not

only considering in making profit to maximize shareholder wealth but by taking into

consideration to maximize stakeholder wealth as a whole by providing economic

development to the community. It respects cultural differences and finds the

business opportunities in building the skills of employee and the community. By

implementing corporate social responsibility, some cost will be incurred by the

company that does not give back financial benefit to the company, but it can promote

positive social and environmental change. Corporate Social Responsibility is about

business giving back to society. Social responsibility becomes an integral part of the

wealth creation process which if managed properly should enhance the

competitiveness of business and maximize the value of wealth creation to society.

In Annual Report of 2013 and 2014, both of companies have voluntary

disclosure their Corporate Social Responsibility (CSR) on their annual report.

Eco World Development Group Berhad

During the financial year of 2013, no activities were conducted by the Group in

relation to Corporate Social Responsibility. However the Group has time to time

contributed to humanitarian causes through donations and sponsorship..

However Eco World Foundation was launched in September 2014 to fulfil the

company‟s responsibilities towards uplifting the lot of the less privileged members of

society. The Foundation serves as the charitable arm of Eco World with a focus on

helping underprivileged students along their quest for education through the Eco

World Student Aid Programme (SAP).

With an annual budget of RM5 million, the main objective of the SAP is to keep

disadvantaged students in school by providing for their educational requirements.

Currently, the programme caters to more than 3,000 primary, secondary and tertiary

students throughout Malaysia.

Other activities which will be undertaken as part of the programme include

annual UPSR Motivational Camps to prepare Standard 6 students for their

examinations. The Foundation will also organise annual UPSR Excellence Awards

Ceremony where top scorers, deserving teachers and outstanding schools are

recognised at a grand awards dinner. Students who do well in their UPSR

examinations are eligible to apply for continuation of support through to secondary

education and subsequently to tertiary level as well. The SAP includes 21 tertiary

students currently in local institutions of higher learning.

Glomac Berhad

In order to enhance corporate social responsibility to all their stakeholders the

following areas such as workplace, marketplace, community, and environment also

have been identified by Glomac Berhad. Various activities were organized by the

Group in both Financial Years, 2013 and 2014.

Annually, significant resources are invested by the Group in various training

programmes to meet the needs and requirements of workforce in various fields.

Comprehensive training and development courses focusing on quality leadership,

teamwork and effective performance are provided to employees at all levels to

further enhance their capabilities and knowledge. Attention was given to the

professional and personal development of the employees as this is important for the

growth of the Group and as well as to the business. The employees also benefit from

comprehensive medical benefits including the provision of insurance coverage under

hospitalisation and surgical, group term life and personal accident. On May 2014,

Glomac Berhad had introduced Employee Share Scheme (ESS) for eligible

employees and directors as a way of appreciating and recognizing their contributions

towards the Group.

For the marketplace, Glomac Berhad maintains an active and open channel of

communication to ensure transparency of the Group‟s performance and position.

Their Executive Directors regularly reach out to engage with the investing community

via visits to project sites, small group meetings, luncheons and participating in road

shows and investor conferences. Every year, the Group holds an Annual General

Meeting followed by a media press conference to provide its shareholders with the

Group‟s financial performance and the latest corporate and property developments

of the Group.

Relationship with the communities was maintained by the Group to ensure

they actively involved in diverse community events. Several events were organized

in 2013 and 2014 to recognize and appreciate the customers, as well as uplift the

community with value added activities as follows:

1) Contribution to Rumah Aman

Glomac annually contributes to the Rumah Aman orphanage during the

month of Ramadhan. During this event, the children received sports attire,

gifts and green packets. Glomac also contributed RM1.55 million to Rumah

Aman. The contribution was handed over by Glomac Berhad‟s Group

Executive Chairman, Tan Sri Dato‟ Mohamed Mansor to the Founder of

Rumah Aman, Mr Rehman Dakri. In 2014, Glomac gave a second home to

Rumah Aman located at Sungai Buloh Country Resort and was known as

Rumah Aman 2. The new home allows them to house more than 80 children

compared to the first home that only can house about 30 childrens.

2) The Edge – Bursa Malaysia Kuala Lumpur Rat Race

Glomac has been participating in this annual event for 12 consecutive years

as this is another platform for Glomac to help the less fortunate while at the

same time encouraging their employees to devote their personal time and

energy to a healthy and worthy cause.

3) The New Straits Times School Sponsorship Programme

Started from 2007 till 2013, Glomac was collaborated with The New Straits

Times Press Berhad in providing newspapers to the primary and secondary

schools within their township development of Bandar Saujana Utama, Sungai

Buloh – namely Sekolah Kebangsaan Saujana Utama and Sekolah

Menengah Saujana Utama. The objective of this contribution is to improve

and empower the students‟ command of the English language through regular

reading of one of the main newspapers in Malaysia.

4) Contribution to National Press Club Annual dinner and Permata Seni

Musical

Furthering its support of the national media and journalistic responsibility in

building stronger communities, Glomac contributed to Malam Wartawan

Malaysia 2013 and 2014 organised by the Malaysian Press Institute. Permata

Seni is an education programme aimed at developingthe artistic talents of

Malaysian children. The musical was organised to raise funds to be

channeled towards children in need worldwide.

5) Cooking Workshop and Family Day in Glomac Township

Cooking workshop was held in Bandar Saujana Utama and this full day event

was a collaborative effort with Celebrity Chef, Chef Liza to help Glomac build

and foster relationship with the residents. Family Day was held in Saujana

Rawang to show their appreciation and provide opportunities for Glomac staff

to interact with the residents.

6.0 ENVIROMENTAL ISSUES

Eco World Development Group Berhad and Glomac Berhad have

successfully implemented all their activities related to the environmental issues as to

show they are concerned in preservation and conservation in environment. All their

activities are tabulate in the table below.

ECO WORLD GROUP BERHAD GLOMAC BERHAD

The EcoWorld Green Council has

established an internal rating tool to

promote, inculcate and enforce practical,

actionable and achievable green solutions

which is required to be adopted across all

EcoWorld developments.

Glomac has actively preserve the beauty

of natural surroundings, promote lush

greenery within township environment

and as well as utilise environmentally

friendly materials for the developments.

Environmentally – friendly practices

The Ecoworld Green Standard has been

practice as follows:

1. Passive design features - Local climate

conditions are taken into account in order

to maintain comfortable indoor

temperature.

2. Maximisation of daylight into homes –

Homes are designed to let in light without

heat and glare.

3. Water efficiency – Rainwater harvesting

can help reduce the potable water

consumption.

4. Environmental protection – Mature trees

are carefully identified in the new project

areas.

Environmentally – friendly practices

As one of the nation‟s leading developers,

the company seek to reduce their impact

on the environment by implemented

several initiatives as follows:

1. Monitoring and reducing carbon

footprint, waste, electricity consumption,

emissions and environmental risk. Reuse

paper and recycle waste.

2. Planting trees and building attractive

lake-front footpaths.

3. Established a rain water harvesting

system for gardening and sewerage

purposes in one of their township

developments.

5. Improving indoor environment quality-

Using low VOC paints and other certified

eco-friendly materials.

REFERENCES

C H Williams Talhar & Wong Sdn Bhd. (2015). Kuala Lumpur. Retrieved from

http://www.wtw.com.my/en/latest-release/market-report/market-report-2015.html

Rider Levett Bucknall. (2015). Kuala Lumpur. Retrieved from http://rlb.com/wp-

content/uploads/2015/01/malaysia-report-december-14.pdf

Soon, Ng Kim, Mohammed, Ali Abusalah Elmabrok, & Mostafa, Mousa Rahil. (2014).

Using Altman's Z-Score Model to Predict the Financial Hardship of Companies 81

Listed In the Trading Services Sector of Malaysian Stock Exchange. Australian

Journal of Basic and Applied Sciences, 8(6), 379-384.

Zeni, Syahida Binti Md, & Ameer, Rashid. (2010). Turnaround prediction of

distressed companies: evidence from Malaysia. Journal of Financial Reporting and

Accounting, 8(2), 143-159.

Shailer, Greg. An Introduction to Corporate Governance in Australia, Pearson

Education Australia, Sydney, 2004

Jump up ^ The Corporate Governance of Iconic Executives, 87 Notre Dame Law

Review 351 (2011), available at: http://ssrn.com/abstract=2040922

Jump up to: a b c d "OECD Principles of Corporate Governance, 2004". OECD.

Retrieved 2013-05-18.

The Initiative Defining Corporate Social Responsibility,retrieved from

http://www.harvard.edu

APPENDIX

ECO WORLD DEVELOPMENT BERHAD vs GLOMAC BERHAD

RATIO

ECO WORLD GLOMAC

2013 2014 2013 2014

CURRENT ASSETS 186,533,538 379,462,065 940,756,537 988,557,536

CURRENT LIABILITIES 91,104,398 148,264,563 338,114,807 461,037,606

COGS 108,034,011 106,078,676 471,800,810 459,046,036

INVENTORY 39,570,490 49,561,521 94,763,251 89,859,369

AVERAGE INVENTORY 19,785,245 24,780,761 47,381,626 44,929,685

SALES 156,325,502 148,395,395 680,933,511 676,661,153

TOTAL ASSETS 489,229,331 686,856,296 1,596,153,770 1,711,864,812

AVERAGE TOTAL ASSETS 244,614,666 343,428,148 798,076,885 855,932,406

TOTAL DEBT 168,007,337 360,995,411 757,963,698 775,496,357

NET INCOME 24,267,813 7,178,010 108,257,310 112,888,223

EQUITY 321,221,994 325,860,885 838,190,072 936,368,455

INTERNAL COMPARISON

CURRENT ASSETS 186,533,538 379,462,065 940,756,537 988,557,536

CURRENT LIABILITIES 91,104,398 148,264,563 338,114,807 461,037,606

COGS 108,034,011 106078676 471800810 459046036

AVERAGE INVENTORY 19,785,245 24780761 47381626 44929685

NET SALES 156325502 148,395,395 680,933,511 676,661,153

AVERAGE TOTAL ASSETS 244614666 343428148 798076885 855932406

TOTAL DEBTS 168,007,337 360,995,411 757,963,698 775,496,357

TOTAL ASSETS 489,229,331 686,856,296 1,596,153,770 1,711,864,812

NET INCOME 24,267,813 7,178,010 108,257,310 112,888,223

SALES 156,325,502 148,395,395 680,933,511 676,661,153

NET INCOME 24,267,813 7,178,010 108,257,310 112,888,223

TOTAL ASSETS 489,229,331 686,856,296 1,596,153,770 1,711,864,812

NET INCOME 24,267,813 7,178,010 108,257,310 112,888,223

COMMON EQUITY 321,221,994 325,860,885 838,190,072 936,368,455

ASSET TURNOVER RATIO

DEBT RATIO

NET PROFIT MARGIN

RETURN ON ASSETS

RETURN ON EQUITY

0.34 0.53 0.47 0.45

0.64 0.43 0.85 0.79

0.08 0.02

GLOMAC

5.46

CURRENT RATIO

INVENTORY TURNOVER RATIO

RATIO DESCRIPTIONECO WORLD

20142013 2014

2.05 2.56 2.78 2.14

2013

4.28 9.96 10.22

0.13 0.12

0.16 0.05 0.16 0.17

0.05 0.01 0.07 0.07

EXTERNAL C0MPARISON

CURRENT ASSETS 186,533,538 379,462,065 940,756,537 988,557,536

CURRENT LIABILITIES 91,104,398 148,264,563 338,114,807 461,037,606

COGS 108,034,011 106078676 471800810 459046036

AVERAGE INVENTORY 19,785,245 24780761 47381626 44929685

NET SALES 156325502 148395395 680933511 676661153

AVERAGE TOTAL SALES 244614666 343428148 798076885 855932406

TOTAL DEBTS 168,007,337 360,995,411 757,963,698 775,496,357

TOTAL ASSETS 489,229,331 686,856,296 1,596,153,770 1,711,864,812

NET INCOME 24,267,813 7,178,010 108,257,310 112,888,223

SALES 156,325,502 148,395,395 680,933,511 676,661,153

NET INCOME 24,267,813 7,178,010 108,257,310 112,888,223

TOTAL ASSETS 489,229,331 686,856,296 1,596,153,770 1,711,864,812

NET INCOME 24,267,813 7,178,010 108,257,310 112,888,223

COMMON EQUITY 321,221,994 325,860,885 838,190,072 936,368,455

0.07

0.05 0.12

2.46

0.43 0.46

0.10 0.16

10.09

0.82

RETURN ON ASSETS 0.05 0.01 0.07 0.070.03

RETURN ON EQUITY 0.08 0.02 0.13 0.12

DEBT RATIO 0.34 0.53 0.47 0.45

NET PROFIT MARGIN 0.16 0.05 0.16 0.17

CURRENT RATIO 2.05 2.56 2.78 2.142.30

INVENTORY TURNOVER RATIO 5.46

ASSET TURNOVER RATIO

RATIO DESCRIPTIONECO WORLD GLOMAC

2013 2014 2013 2014AVERAGE AVERAGE

4.28

0.64 0.43

9.96 10.22

0.85 0.790.54

4.87