UNIVERSITI TEKNOLOGI MARA

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1 UNIVERSITI TEKNOLOGI MARA THE DEVELOPMENT OF A FINANCIAL MODEL TO PREDICT BUSINESS PERFORMANCE OF IBS CONSTRUCTION COMPANY BASED ON SELECTED FINANCIAL RATIOS NORAZUANIZA BT MOHD YUNUS Thesis submitted in fulfillment of the requirements for the degree of Master of Science Faculty of Civil Engineering April 2015

2 AUTHOR'S DECLARATION I declare that the work in this thesis was carried out in accordance with the regulations of Universiti Teknologi MARA. It is original and is the result of my own work, unless otherwise indicated or acknowledged as referenced work. This thesis has not been submitted to any other academic institution or non-academic institution for any degree or qualification I, hereby, acknow ledge that I have been supplied with the Academ ic Rules and Regulations for Post Graduate, Universiti Teknologi MARA, regulating the conduct of my study and research. N am e o f Student Student l.d. No Programme Faculty Thesis Title Norazuaniza Bt Mohd Yunus Master of Science (EC780) Civil Engineering The Development of a Financial Model to Predict Business Performance of IBS Construction Com pany Based on Selected Financial Ratios Signature of Student Date April 2015 u

3 ABSTRACT The utilization of Industrialized Building System (IBS) in the construction industry give benefits to the construction industry players which includes minimizing the employment of foreign labors, reduces the time and cost of the project, also contribute to the construction waste reduction. Though the government of Malaysia has given the incentives by exemption of levy equal to percent of total project cost if the contractor use up to 70 percent IBS component (especially for government building) in their project, there still poor participation from contractors to get engage in the IBS nature of business. Aware to the situation, this research presents the development of financial mathematical model to predict the business performance of the IBS construction company using the selected financial ratio. This study also introduced the work involved in the development of a model based on the financial parameters from the historical financial statement to help the construction company predict their business performance when they embrace the IBS project in the future. The parameters of the financial model are the selected financial ratios obtained from the financial statements gathered from thirty (30) IBS companies in Selangor. These financial statements collected from the annual accounting report spanning from 2006 until 2009 provided by the Companies Commission of Malaysia (CCM). Analysis using multiple linear regression to fit the selected financial ratios that form the model was done using the matrix solution of the Matlab software. The model is then validated with the actual com pany s business perform ance. IBS Construction Company or any interested parties could use the model to predict their own business performance as additional information for their decision making purposes.

4 ACKNOWLEDGEMENTS In the name of Allah S.W.T. the most gracious and most merciful, Lord of the universe, with His permission Alhamdullilah the study has been completed. Praise to Prophet Muhammad S.A.W., His companions and to those on the path as what He preached upon, might Allah Almighty keep us His blessing and tenders. I would like to express my gratitude to my main supervisor, Dr. Sulaiman Bin Abdul Malik for his supervision, advices, guidance, patience, support and encouragement to complete my thesis. I also want to take this opportunity to express deepest gratitude to my co-supervisor, Ir Dr. Abdul Halim Bin Abdul Ghani for his supervision, advices and sharing informative ideas during the preparation of my thesis report. I also would like to thank the Ministry of Higher Education (MOHE) and Research Management Institute of UiTM (RMI) for sponsoring my study. My special appreciation to all the staff of Faculty of Civil Engineering UiTM and Institute of Postgraduate Studies, (IPSiS) UiTM involved directly or indirectly for making my study a very great success nationally and internationally. I owe trem endous appreciation to my parents for their understanding and support in every way. A special thanks to my sibling and families which all the way gives me a hand every time when needed. My gratitude also goes to my colleagues who helped me and encouraged me. Thank you so much and may Allah S.W.T. the Almighty be with us all the time.

5 CHAPTER ONE INTRODUCTION This chapter provides an introduction to the understanding of the Industrialized Building System (IBS) that is applied in the construction industries together with the current issues and the implementation of IBS in Malaysia. On the way forward, the related concerned issues will be explained towards the problem facing in the IBS sectors. The justification of the study will be accentuated more in the background of the research, problem statement, research objectives and scope of work. From that, it will impart the readers to get the overview and gained a better understanding of this study. 1.1 BACKGROUND OF THE RESEARCH As has been introduced since early year 1960's with the foundation of two pilot projects located respectively at Jalan Pekeliling, Kuala Lumpur and Jalan Rifle, Pulau Pinang, the Industrialized Building System (IBS) is now being well known in Malaysian construction industry. The IBS pilot project was firstly commenced in 1964 that was held on 22.7 acres of land along Jalan Pekeliling. The development of 4 blocks of 4 storey flats and 7 blocks of 17 storeys flat was comprised about 3,000 units of low cost flats and 40 storey shop lots (Thanoon, 2003). By the adoption of IBS in construction project, it is proved to be a potential process which can give benefits to the improvement in construction quality, time and cost saving, safety and health, waste reduction and high productivity. At present, the implementation of IBS project either for the government or private sector was vastly encouraged by the Ministry of Housing and Local Government of Malaysia. (Kamar et al and Thanoon et al. 2003). IBS is basically can be illustrated as in which building components were produced in bulk either in the factory or on-site production with respect to the specification along with standard dimension and shape. It will next be transported to the construction site to be assembled according to the design plan to form a desire building. As reported by Warszawski (1999), one of the first implementation of pre-cast concrete components was 1