IJM Corp Bhd has secured two contracts in Sarawak valued at RM246.7 million.
It said on Wednesday, April 14 its unit IJM Construction Sdn Bhd had received two letters of acceptance of tender for the Sarawak Public Works Department.
The contracts were for two access roads to be build in Kapit, Sarawak. The first package involved earthwork, construction of three minor bridges, culverts, drains and pavement works for 20km of road for RM125.2 million.
The second package involved earthworks, rock excavation, construction of two minor bridges, culverts, drains and pavement works for 10.5km of road for RM121.5 million. Construction period for both packages is 24 months.
I still prefer IJM-WB. It is still come with a discount of around 2-3%, and gearing around 3.6. In fact, IJM-WB is one of the most discount warrant listed on KLSE. With more good news pouring in, IJM-WB should be able to maintain its upward momentum.
GOon
Good luck.
Showing posts with label IJM. Show all posts
Showing posts with label IJM. Show all posts
Wednesday, April 14, 2010
Friday, April 9, 2010
IJM: Buy, target price RM5.50
MAYBANK Investment Bank upgraded builder and property firm IJM Corp Bhd (3336) to a "buy" with a target price of RM5.50, saying near-term newsflow on potential awards could intensify in the months leading to the announcement of the 10th Malaysia Plan.
"Positive order flow momentum could trigger a further re-rating of the stock in our view," it said in a report yesterday.
It noted that IJM has also been aggressively bidding for contracts in India. The firm's recent lacklustre order flow in India was due to a deliberate decision by its management to cut back on tenders amid an environment of high operating costs, it said.
"(But) with the recent normalisation of building material prices and borrowing costs, we believe management will resume normal bidding for Indian jobs," it said in a report yesterday.
It noted that the outlook for the non-construction divisions remained positive also.
It forecast the construction division to only account for 12 per cent of IJM's 2011 earnings. It believes the property and building materials divisions would remain as the firm's main earnings contributors, accounting for 31 per cent and 30 per cent earnings respectively.
In Peninsular Malaysia, IJM is looking to tender for packages in major infrastructure projects such as the Pahang Selangor Water Transfer Project, the Low Cost Carrier Terminal project and the Klang Valley Light Rail extension, it said.
Previous posts regarding IJM:
http://cathoon.blogspot.com/2010/03/ijm-wb-up-14.html
http://cathoon.blogspot.com/2010/03/ijm-unit-wins-rm600mil-job.html
http://cathoon.blogspot.com/2009/01/ijm.html
"Positive order flow momentum could trigger a further re-rating of the stock in our view," it said in a report yesterday.
It noted that IJM has also been aggressively bidding for contracts in India. The firm's recent lacklustre order flow in India was due to a deliberate decision by its management to cut back on tenders amid an environment of high operating costs, it said.
"(But) with the recent normalisation of building material prices and borrowing costs, we believe management will resume normal bidding for Indian jobs," it said in a report yesterday.
It noted that the outlook for the non-construction divisions remained positive also.
It forecast the construction division to only account for 12 per cent of IJM's 2011 earnings. It believes the property and building materials divisions would remain as the firm's main earnings contributors, accounting for 31 per cent and 30 per cent earnings respectively.
In Peninsular Malaysia, IJM is looking to tender for packages in major infrastructure projects such as the Pahang Selangor Water Transfer Project, the Low Cost Carrier Terminal project and the Klang Valley Light Rail extension, it said.
Previous posts regarding IJM:
http://cathoon.blogspot.com/2010/03/ijm-wb-up-14.html
http://cathoon.blogspot.com/2010/03/ijm-unit-wins-rm600mil-job.html
http://cathoon.blogspot.com/2009/01/ijm.html
Thursday, April 8, 2010
IJM Corp price estimate lifted to RM5.50
IJM Corp, a Malaysian builder and property group, was raised to “buy” from “hold” at Maybank Investment Bank Bhd to reflect the prospects of building contracts in the country and India in the coming months.
The share price estimate was increased to RM5.50 from RM4.50 in Kuala Lumpur trading, Maybank said in a report today.
Previous posts regarding IJM:
http://cathoon.blogspot.com/2010/03/ijm-wb-up-14.html
http://cathoon.blogspot.com/2010/03/ijm-unit-wins-rm600mil-job.html
http://cathoon.blogspot.com/2009/01/ijm.html
The share price estimate was increased to RM5.50 from RM4.50 in Kuala Lumpur trading, Maybank said in a report today.
Previous posts regarding IJM:
http://cathoon.blogspot.com/2010/03/ijm-wb-up-14.html
http://cathoon.blogspot.com/2010/03/ijm-unit-wins-rm600mil-job.html
http://cathoon.blogspot.com/2009/01/ijm.html
Thursday, March 25, 2010
IJM-WB up 14%
Macquarie Equities Research reiterated its buy call on IJM and raised the target price to RM6.00 from RM5.50 following a review of the company's prospects.
IJM is one of the broker's top picks in Malaysia, saying that the firm will be a key beneficiary of infrastructure spending, both domestically and in international markets such as India and the Middle East.
Potential catalyst to IJM's share price could be the award of the Besraya extension job in fourth quarter this financial year, new construction wins and successful property launches.
"We see IJM as a beneficiary of India's aggressive road spending plans, given its track record. Recent press reports indicate the Indian government's plans for US$50 billion (US$1 = RM3.41) worth of road projects over the next two years.
"Any potential wins in India are positive for the company and would add to IJM's existing orderbook of RM4.4 billion. In total, we have assumed RM1 billion worth of new jobs in financial year 2010 and RM2 billion in financial year 2011," Macquarie said in a January 22 report.
In addition to potentially clinching key domestic projects via its construction division, IJM's building materials division, ICP (Industrial Concrete Product), may also benefit from the increased construction activity, it noted.
IJM-WB (warrant) up 14% since I last talked about it last Saturday. What makes it more interesting is IJM-WB still comes with a discount of 3.6%. It is trading at RM1.17. With a gearing of 4.06, it should moves up another 14% (3.6% X 4.06) or RM0.16 to RM1.33 to eat up all the discount. It still has another 148 days before it expires. Sooner or later, the discount has to be realized.
GOon
Potential catalyst to IJM's share price could be the award of the Besraya extension job in fourth quarter this financial year, new construction wins and successful property launches.
"We see IJM as a beneficiary of India's aggressive road spending plans, given its track record. Recent press reports indicate the Indian government's plans for US$50 billion (US$1 = RM3.41) worth of road projects over the next two years.
"Any potential wins in India are positive for the company and would add to IJM's existing orderbook of RM4.4 billion. In total, we have assumed RM1 billion worth of new jobs in financial year 2010 and RM2 billion in financial year 2011," Macquarie said in a January 22 report.
In addition to potentially clinching key domestic projects via its construction division, IJM's building materials division, ICP (Industrial Concrete Product), may also benefit from the increased construction activity, it noted.
IJM-WB (warrant) up 14% since I last talked about it last Saturday. What makes it more interesting is IJM-WB still comes with a discount of 3.6%. It is trading at RM1.17. With a gearing of 4.06, it should moves up another 14% (3.6% X 4.06) or RM0.16 to RM1.33 to eat up all the discount. It still has another 148 days before it expires. Sooner or later, the discount has to be realized.
GOon
Thursday, November 26, 2009
Bumiputera contractors: A wasteful national mission to date
By Koon Yew Yin
Wednesday, 18 November 2009 07:54
Centre for Policy Initiatives
It is an indictment of our system that IJM is able to compete internationally for contracts but yet is required to work as a sub-contractor to Bumiputera companies on the North-South Highway in Malaysia.
On Oct 25, 2009 our Second Finance Minister Ahmad Husni Mohamad Hanadzlah said that government has vowed to cut down on wasteful spending to lower its budget deficit and all major public projects must go through the open tender system.
Earlier, the Auditor-General’s report for 2008 revealed continuing financial management weaknesses at every level of the government. Delays in project completion seem to be a perennial problem and the lack of oversight by various ministries and departments in the procurement of goods and services continue to cost the government hundreds of millions of ringgit.
These statements indicate perhaps that our Prime Minister Najib Razak may want to reverse his announcement on January 9 in Kuala Teregganu that the government would always look after Class F contractors. (Non- Bumiputeras cannot register as a Class F contractor).
The government had in fact already set aside RM900 million, which was RM300 million more than last year, for works to be undertaken by Class F contractors this year.
Producing competitive Bumiputera contractors
As reported on May 1, 2005, Malaysia had one contractor for every 614 persons. Most likely there are more contractors by now. This ratio is again likely to be amongst the highest in the world and is obviously costing the public a significant amount of money besides affecting our overall economic performance.
I would like to pose a few questions which may appear unkind or insensitive but nonetheless need to be asked.
Out of hundreds of high-rise buildings in Kuala Lumpur does anyone know of any Bumiputera contractor who has won any of the building contracts through an open competitive tender process? Out of hundreds of kilometers of highway in Malaysia, can any Bumiputera contractor who won any part of the highway contracts through open tender be identified?
The answer to the above questions unfortunately is in the negative. The evidence is that all the government’s well-intentioned efforts in trying to produce competitive Bumiputera contractors since 1957 have failed.
Why this has happened needs to be openly discussed rather than swept under the carpet. In this note, I share my experiences as a contractor and my knowledge of why Bumiputera contractors have failed in the past and what needs to be done by the government to correct this unhealthy situation.
Facts of life in the contracting business
Contracting is a very difficult business yet it is so easy to register as a contractor.
To register as a Class F contractor one has only to show that he has RM5,000. He does not even require a pass in Lower Certificate of Education (LCE). But it will take at least 10 years to learn how to overcome all the inherent difficulties and become competitive and efficient. Continuously giving out lucrative and over-priced contracts without open tenders will only make the recipients less competitive.
Secondly, studies have shown that there are more failures and bankruptcies in contracting than in any other business, and also almost all construction projects are NOT completed within the original scheduled time.
The delay will cost the contractor more and that is why you can often see uncompleted buildings and abandoned projects which have been undertaken by inefficient contractors. There are many reasons for this peculiar phenomenon.
1. Open tender system
Although this system is the best way to ensure completion of any project/contract at the lowest price, it is the most difficult obstacle any contractor has to face in the real competitive world. He must know his business very well and be efficient to face the open competition all the time. Like a good athlete, he has to keep fit and constantly be aware of the market conditions and his competitors.
There is a classic saying, ‘a cheap thing is not good and a good thing is not cheap’. But contractors always have to produce good work at the cheapest price.
In order to submit the cheapest tender, the contractor must be very optimistic in all his assumptions to get the cheapest rates. He must assume that he will not encounter any cash flow difficulties and that he will always get his progress payments on time to pay his creditors.
He must also assume that he will not encounter any difficulty in getting all the required materials on time to avoid any delay and also that there are ample workers for him to pick and choose from.
Furthermore, he must also assume that the heavens will be kind to him and he will not meet any inclement weather during construction. Invariably, many of these assumptions are proven wrong and thus completion delayed, and the infrastructure will cost more to complete than provided for in the contract.
2. The importance of teamwork
Teamwork is important in all business endeavours. It is more so in the contracting business. Every contractor must realise that his success is not going to be determined by his own knowledge, talent or abilities. It is going to be determined by his ability to develop a great team. Those who are closest to him will help determine the level of his success.
Every efficient contractor must have a reliable team comprising managers, sub-contractors, material suppliers, foremen and skilled workers. All the team players must cooperate with one another, bearing in mind that the main contractor’s survival depends on their contribution. Their main goal must be saving cost. If they cannot complete the contract within the tender price, all of them will also be affected.
3. Construction material pricing
There was no material price escalation clause in the conditions of contract before I became the Secretary General of the Master Builders Association. During the unprecedented oil crisis, building material prices shot through the roof. As a result, many contractors could not complete their contracts for schools and other projects. After several appeals the Public Works Department (PWD), now known as Jabatan Kerja Raya (JKR), eventually allowed only cement and steel for price variation reimbursement.
This was only a partial solution as hundreds of other items were excluded.
Without a protective price fluctuation clause for the other items, contractors are exposed to risk. At the same time, knowing that they have to undercut their competitors during the tender process, contractors would normally under-price to achieve the lowest tender. Invariably, most materials would increase in price due to inflation and other reasons. Contractors require many years of experience to be able to anticipate such price changes and to make adequate provisions for them whilst at the same time not overpricing their tenders and losing the bid.
4. No contract is exactly the same
No two high-rise buildings in KL are the same.
Construction of a building, a bridge or a stadium is always akin to making a prototype. The process is much more difficult than manufacturing any product where there is repetition. For example in making cars, the first prototype and the initial few cars may be more difficult to make but once everyone gets used to the routine, the manufacturing process will normally proceed smoothly.
However, in the construction of buildings or any civil engineering works, there is very little repetitive work. Every construction site is different and most of the people involved have never worked together before.
On top of this, there may also be inexperienced supervisory staff that can create a lot of difficulties for the contractors. Invariably, by the time all parties get used to the routine, the scheduled time is over.
5. Financing
Most contractors do not have sufficient capital to finance their undertakings.
Contractors generally do not have fixed assets like most manufacturers. They usually do not have land and buildings but, instead, they have construction equipment. Unfortunately, banks do not accept these moving assets as collateral for a loan. Without bank financing, contractors will obviously find it more difficult to undertake their business.
Beginning at the bottom: The key to success
I have provided some insight into why contracting is not a business that is as easy or profitable as it is commonly perceived to be.
There are other factors explaining why or how some of the most successful tycoons associated with the building or construction industry have managed to get where they are.
Firstly, it should be noted that the majority of listed companies were started by Chinese merchants most of whom incidentally did not have tertiary education. For example, Lim Goh Tong of Genting began his working career as a scrap iron dealer and a contractor; and Yeoh Tiong Lay of YTL Corp. started off as a small contractor.
Generally, Bumiputeras are not interested in working long hours in managing small businesses earning marginal profit. Because of the NEP, many have hopes of securing permits or concessions for big deals so that they can become instant millionaires. There are relatively few Bumiputeras involved in small and medium-scale enterprises (SMEs).
More Bumiputeras should follow the humble footsteps of the Chinese to become traders and merchants for building materials and similar goods. The business skill they can learn from these humble beginnings will carry them a long way. I am very sure some of them will eventually become good contractors and successful businessmen if they learn the trade at the bottom and not try to parachute into the contracting business.
The importance of skilled workers
Although there are already many Bumiputera engineers unable to find employment, most of the universities are still producing more and more engineers every year. But without a sufficiently skilled workforce, all the engineers in the world would not be able to complete a single project.
There are so few Bumiputera construction foremen, carpenters and other skilled workers. If you were to go into any building construction site, you would see the truth of what I am saying. How many Malay carpenters have you seen in KL?
Without skilled Bumiputera workers, it would be more difficult for Bumiputera contractors to succeed. In fact, most of the Chinese contractors started as apprentices and rose from the bottom to become successful contractors. More Bumiputeras should be encouraged to work as apprentices in construction sites. This is a necessary good practice to produce really good Bumiputera contractors.
The role of trade schools
There should be more trade schools and more Bumiputeras should be encouraged to learn construction skills like carpentry, welding, plumbing, bricklaying, etc. Very soon, skilled tradesmen will be able to earn more than degree holders as is the case in Australia or England.
The government should build more trade schools and not hesitate to offer scholarships to Bumiputeras to be trained in these trade schools. Presently, the construction industry is not short of engineers but it is very short of skilled workers and supervisors. If more Bumiputeras are properly trained in various crafts and blue collar skills, some of them will go on to become good contractors.
Time and more time
They say Rome was not built in a day. It is easier to produce engineers, doctors and other professionals than to produce efficient and competitive contractors who do not need government financial aid. Just giving out lucrative contracts to Bumiputeras is not the answer; in fact it is counter-productive as it simply makes them more inefficient and less competitive.
IJM Corporation Bhd has taken more than 40 years to attain a competitive level of competence. The record shows that IJM has secured on competitive tenders five toll road concessions in India. Three are currently in operation and two are under construction. The total length of the roads exceeds 1,000 kilometres, longer than our North-South Highway.
In addition, IJM completed a toll bridge in Kolkata and sold its interest for RM65 million profit after a short period of three years. IJM is also a very reputable LRT builder, having to date completed 15km of the elevated sections of the New Delhi Metro and it was recently awarded another 8km.
Based on open competitive tender, IJM won the contract to build the tallest building, a prominent future landmark for the Delhi Municipality, in New Delhi.
It is an indictment of our system that IJM is able to compete internationally for contracts but yet is required to work as a sub-contractor to Bumiputera companies on the North-South Highway in our own country.
Conclusion: Half-baked contractors are not in our national interest
Contracting is one of the most, if not the most, difficult business and it takes a very long time to produce competent contractors.
It is very dangerous to quickly produce half-baked ones as they will soon find themselves in financial difficulties and require bailouts. The bankruptcy record shows that a large number of debtors are Bumiputera contractors with many of them unable to pay back the loans given by government-controlled financial institutions.
The government must change its methods and policies which have proven unworkable. There is no urgency in producing more Bumiputera contractors as many of the key industries e.g. the banks, plantations, motor vehicles, taxis, rice etc are already under the control of Bumiputeras.
Our government must not be narrowly communalistic and should make use of all the groups, irrespective of race, that are more efficient in the contracting business.
Giving out contracts without a full tender process is akin to corruption. I urge the government to stop this corrupt practice and to utilize the savings from these enormous sums to implement the options suggested above.
Note on the Author
I am a 76-year-old chartered civil engineer and one of the founders of the three larger construction companies listed in Bursa Malaysia. These are Gamuda Bhd, Mudajaya Group Bhd, and IJM Corporation Bhd.
I was a member of the Board of Engineers, Malaysia for three terms. I was also on the Sirim Board responsible in writing the Malaysian standard specifications for cement and concrete. In addition, I was the Secretary General of Master Builders Association, Malaysia for nine years.
These days, I am completely retired. My intention in writing this article is honourable. Many people may not like reading what I have written and the truth may be difficult to accept. Nevertheless, this is my considered analysis for the benefit of my country, the Bumiputera contractors and the construction industry.
http://blog.limkitsiang.com/2009/11/25/bumiputera-contractors-a-wasteful-national-mission-to-date/#more-6708
Wednesday, 18 November 2009 07:54
Centre for Policy Initiatives
It is an indictment of our system that IJM is able to compete internationally for contracts but yet is required to work as a sub-contractor to Bumiputera companies on the North-South Highway in Malaysia.
On Oct 25, 2009 our Second Finance Minister Ahmad Husni Mohamad Hanadzlah said that government has vowed to cut down on wasteful spending to lower its budget deficit and all major public projects must go through the open tender system.
Earlier, the Auditor-General’s report for 2008 revealed continuing financial management weaknesses at every level of the government. Delays in project completion seem to be a perennial problem and the lack of oversight by various ministries and departments in the procurement of goods and services continue to cost the government hundreds of millions of ringgit.
These statements indicate perhaps that our Prime Minister Najib Razak may want to reverse his announcement on January 9 in Kuala Teregganu that the government would always look after Class F contractors. (Non- Bumiputeras cannot register as a Class F contractor).
The government had in fact already set aside RM900 million, which was RM300 million more than last year, for works to be undertaken by Class F contractors this year.
Producing competitive Bumiputera contractors
As reported on May 1, 2005, Malaysia had one contractor for every 614 persons. Most likely there are more contractors by now. This ratio is again likely to be amongst the highest in the world and is obviously costing the public a significant amount of money besides affecting our overall economic performance.
I would like to pose a few questions which may appear unkind or insensitive but nonetheless need to be asked.
Out of hundreds of high-rise buildings in Kuala Lumpur does anyone know of any Bumiputera contractor who has won any of the building contracts through an open competitive tender process? Out of hundreds of kilometers of highway in Malaysia, can any Bumiputera contractor who won any part of the highway contracts through open tender be identified?
The answer to the above questions unfortunately is in the negative. The evidence is that all the government’s well-intentioned efforts in trying to produce competitive Bumiputera contractors since 1957 have failed.
Why this has happened needs to be openly discussed rather than swept under the carpet. In this note, I share my experiences as a contractor and my knowledge of why Bumiputera contractors have failed in the past and what needs to be done by the government to correct this unhealthy situation.
Facts of life in the contracting business
Contracting is a very difficult business yet it is so easy to register as a contractor.
To register as a Class F contractor one has only to show that he has RM5,000. He does not even require a pass in Lower Certificate of Education (LCE). But it will take at least 10 years to learn how to overcome all the inherent difficulties and become competitive and efficient. Continuously giving out lucrative and over-priced contracts without open tenders will only make the recipients less competitive.
Secondly, studies have shown that there are more failures and bankruptcies in contracting than in any other business, and also almost all construction projects are NOT completed within the original scheduled time.
The delay will cost the contractor more and that is why you can often see uncompleted buildings and abandoned projects which have been undertaken by inefficient contractors. There are many reasons for this peculiar phenomenon.
1. Open tender system
Although this system is the best way to ensure completion of any project/contract at the lowest price, it is the most difficult obstacle any contractor has to face in the real competitive world. He must know his business very well and be efficient to face the open competition all the time. Like a good athlete, he has to keep fit and constantly be aware of the market conditions and his competitors.
There is a classic saying, ‘a cheap thing is not good and a good thing is not cheap’. But contractors always have to produce good work at the cheapest price.
In order to submit the cheapest tender, the contractor must be very optimistic in all his assumptions to get the cheapest rates. He must assume that he will not encounter any cash flow difficulties and that he will always get his progress payments on time to pay his creditors.
He must also assume that he will not encounter any difficulty in getting all the required materials on time to avoid any delay and also that there are ample workers for him to pick and choose from.
Furthermore, he must also assume that the heavens will be kind to him and he will not meet any inclement weather during construction. Invariably, many of these assumptions are proven wrong and thus completion delayed, and the infrastructure will cost more to complete than provided for in the contract.
2. The importance of teamwork
Teamwork is important in all business endeavours. It is more so in the contracting business. Every contractor must realise that his success is not going to be determined by his own knowledge, talent or abilities. It is going to be determined by his ability to develop a great team. Those who are closest to him will help determine the level of his success.
Every efficient contractor must have a reliable team comprising managers, sub-contractors, material suppliers, foremen and skilled workers. All the team players must cooperate with one another, bearing in mind that the main contractor’s survival depends on their contribution. Their main goal must be saving cost. If they cannot complete the contract within the tender price, all of them will also be affected.
3. Construction material pricing
There was no material price escalation clause in the conditions of contract before I became the Secretary General of the Master Builders Association. During the unprecedented oil crisis, building material prices shot through the roof. As a result, many contractors could not complete their contracts for schools and other projects. After several appeals the Public Works Department (PWD), now known as Jabatan Kerja Raya (JKR), eventually allowed only cement and steel for price variation reimbursement.
This was only a partial solution as hundreds of other items were excluded.
Without a protective price fluctuation clause for the other items, contractors are exposed to risk. At the same time, knowing that they have to undercut their competitors during the tender process, contractors would normally under-price to achieve the lowest tender. Invariably, most materials would increase in price due to inflation and other reasons. Contractors require many years of experience to be able to anticipate such price changes and to make adequate provisions for them whilst at the same time not overpricing their tenders and losing the bid.
4. No contract is exactly the same
No two high-rise buildings in KL are the same.
Construction of a building, a bridge or a stadium is always akin to making a prototype. The process is much more difficult than manufacturing any product where there is repetition. For example in making cars, the first prototype and the initial few cars may be more difficult to make but once everyone gets used to the routine, the manufacturing process will normally proceed smoothly.
However, in the construction of buildings or any civil engineering works, there is very little repetitive work. Every construction site is different and most of the people involved have never worked together before.
On top of this, there may also be inexperienced supervisory staff that can create a lot of difficulties for the contractors. Invariably, by the time all parties get used to the routine, the scheduled time is over.
5. Financing
Most contractors do not have sufficient capital to finance their undertakings.
Contractors generally do not have fixed assets like most manufacturers. They usually do not have land and buildings but, instead, they have construction equipment. Unfortunately, banks do not accept these moving assets as collateral for a loan. Without bank financing, contractors will obviously find it more difficult to undertake their business.
Beginning at the bottom: The key to success
I have provided some insight into why contracting is not a business that is as easy or profitable as it is commonly perceived to be.
There are other factors explaining why or how some of the most successful tycoons associated with the building or construction industry have managed to get where they are.
Firstly, it should be noted that the majority of listed companies were started by Chinese merchants most of whom incidentally did not have tertiary education. For example, Lim Goh Tong of Genting began his working career as a scrap iron dealer and a contractor; and Yeoh Tiong Lay of YTL Corp. started off as a small contractor.
Generally, Bumiputeras are not interested in working long hours in managing small businesses earning marginal profit. Because of the NEP, many have hopes of securing permits or concessions for big deals so that they can become instant millionaires. There are relatively few Bumiputeras involved in small and medium-scale enterprises (SMEs).
More Bumiputeras should follow the humble footsteps of the Chinese to become traders and merchants for building materials and similar goods. The business skill they can learn from these humble beginnings will carry them a long way. I am very sure some of them will eventually become good contractors and successful businessmen if they learn the trade at the bottom and not try to parachute into the contracting business.
The importance of skilled workers
Although there are already many Bumiputera engineers unable to find employment, most of the universities are still producing more and more engineers every year. But without a sufficiently skilled workforce, all the engineers in the world would not be able to complete a single project.
There are so few Bumiputera construction foremen, carpenters and other skilled workers. If you were to go into any building construction site, you would see the truth of what I am saying. How many Malay carpenters have you seen in KL?
Without skilled Bumiputera workers, it would be more difficult for Bumiputera contractors to succeed. In fact, most of the Chinese contractors started as apprentices and rose from the bottom to become successful contractors. More Bumiputeras should be encouraged to work as apprentices in construction sites. This is a necessary good practice to produce really good Bumiputera contractors.
The role of trade schools
There should be more trade schools and more Bumiputeras should be encouraged to learn construction skills like carpentry, welding, plumbing, bricklaying, etc. Very soon, skilled tradesmen will be able to earn more than degree holders as is the case in Australia or England.
The government should build more trade schools and not hesitate to offer scholarships to Bumiputeras to be trained in these trade schools. Presently, the construction industry is not short of engineers but it is very short of skilled workers and supervisors. If more Bumiputeras are properly trained in various crafts and blue collar skills, some of them will go on to become good contractors.
Time and more time
They say Rome was not built in a day. It is easier to produce engineers, doctors and other professionals than to produce efficient and competitive contractors who do not need government financial aid. Just giving out lucrative contracts to Bumiputeras is not the answer; in fact it is counter-productive as it simply makes them more inefficient and less competitive.
IJM Corporation Bhd has taken more than 40 years to attain a competitive level of competence. The record shows that IJM has secured on competitive tenders five toll road concessions in India. Three are currently in operation and two are under construction. The total length of the roads exceeds 1,000 kilometres, longer than our North-South Highway.
In addition, IJM completed a toll bridge in Kolkata and sold its interest for RM65 million profit after a short period of three years. IJM is also a very reputable LRT builder, having to date completed 15km of the elevated sections of the New Delhi Metro and it was recently awarded another 8km.
Based on open competitive tender, IJM won the contract to build the tallest building, a prominent future landmark for the Delhi Municipality, in New Delhi.
It is an indictment of our system that IJM is able to compete internationally for contracts but yet is required to work as a sub-contractor to Bumiputera companies on the North-South Highway in our own country.
Conclusion: Half-baked contractors are not in our national interest
Contracting is one of the most, if not the most, difficult business and it takes a very long time to produce competent contractors.
It is very dangerous to quickly produce half-baked ones as they will soon find themselves in financial difficulties and require bailouts. The bankruptcy record shows that a large number of debtors are Bumiputera contractors with many of them unable to pay back the loans given by government-controlled financial institutions.
The government must change its methods and policies which have proven unworkable. There is no urgency in producing more Bumiputera contractors as many of the key industries e.g. the banks, plantations, motor vehicles, taxis, rice etc are already under the control of Bumiputeras.
Our government must not be narrowly communalistic and should make use of all the groups, irrespective of race, that are more efficient in the contracting business.
Giving out contracts without a full tender process is akin to corruption. I urge the government to stop this corrupt practice and to utilize the savings from these enormous sums to implement the options suggested above.
Note on the Author
I am a 76-year-old chartered civil engineer and one of the founders of the three larger construction companies listed in Bursa Malaysia. These are Gamuda Bhd, Mudajaya Group Bhd, and IJM Corporation Bhd.
I was a member of the Board of Engineers, Malaysia for three terms. I was also on the Sirim Board responsible in writing the Malaysian standard specifications for cement and concrete. In addition, I was the Secretary General of Master Builders Association, Malaysia for nine years.
These days, I am completely retired. My intention in writing this article is honourable. Many people may not like reading what I have written and the truth may be difficult to accept. Nevertheless, this is my considered analysis for the benefit of my country, the Bumiputera contractors and the construction industry.
http://blog.limkitsiang.com/2009/11/25/bumiputera-contractors-a-wasteful-national-mission-to-date/#more-6708
Wednesday, November 25, 2009
MIDF expects 9.7pc IJM revenue growth
MIDF Research expects IJM Corp Bhd to post 9.7 per cent revenue growth year-on-year for the financial year 2010 on the back of strong billings on RM4.8 billion order book.
" We estimate the pre-tax profit margin in the 2010 financial year to be maintained at 11.5 per cent as cost pressure stabilises," it said in its research note today.
High material cost like steel, which peaked at RM4,000 a tonne, has since softened to around RM2,000 a tonne in the third quarter this year, which translated into healthier margins for construction players.
" We expect IJM Corp's financial year 2010 net profit to be at RM431.3 million, an improvement of 7.3 per cent year-on-year," MIDF Research said.
It said a stronger 2010 second half financial year is expected as IJM's RM4.8 billion order book will be enhanced by more projects announced under the second stimulus package. - Bernama
" We estimate the pre-tax profit margin in the 2010 financial year to be maintained at 11.5 per cent as cost pressure stabilises," it said in its research note today.
High material cost like steel, which peaked at RM4,000 a tonne, has since softened to around RM2,000 a tonne in the third quarter this year, which translated into healthier margins for construction players.
" We expect IJM Corp's financial year 2010 net profit to be at RM431.3 million, an improvement of 7.3 per cent year-on-year," MIDF Research said.
It said a stronger 2010 second half financial year is expected as IJM's RM4.8 billion order book will be enhanced by more projects announced under the second stimulus package. - Bernama
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