1.

HO HUP CONSTRUCTION COMPANY BERHAD 1.1. Ho Hup Construction Company Berhad (Ho Hup) is a Malaysia-based company engaged in foundation engineering, civil engineering, building contracting works and hire of plant and machinery. Ho Hup operates in three segments: construction, which is engaged in foundation and civil engineering, building contracting works and engineering, procurement, construction and commissioning of pipeline system; property development, which is engaged in the development of residential and commercial properties, and manufacturing, which is engaged in the manufacturing and distribution of ready-mixed concrete. Other business segment represents hire of plant and machinery. During the year ended December 31, 2009, Ho Hup completed 62 units of semi-detached and superlink terrace houses in Jalil Sutera Phases 5-7A. As of December 31, 2009, Ho Hup's subsidiaries were H2 Energy Corporation Sdn Bhd and Ho Hup Jaya Sdn Bhd, among others. In September 2011, the Company s subsidiary acquired Suria Jayajuta Sdn. Bhd. Ho Hup Construction Company Berhad, together with its subsidiaries, engages in foundation engineering, civil engineering, building contracting works, and hiring plant and machinery in Malaysia. It involves in the construction of highways, bridges, railways and mass rapid transits, water supply schemes, dams, sewage treatments, offshore marine structures, airport terminals, steel pipelines, reservoirs, sports complexes, complexes, schools, housing developments, and office buildings. The company s construction activities also include engineering, road works, earthworks, drainage works, building works, quarry operations, and oil and gas works. In addition, it engages in the development of residential and commercial properties; manufacture and distribution of ready-mixed concrete; and provision of management consulting services. The company was founded in 1960 and is headquartered in Kuala Lumpur, Malaysia.

1.2.

FINANCIAL RATIOS RATIOS Current Ratio Quick Ratio Inventory Turnover Average Collection Period (days) Total Assets Turnover Debt Ratio (%) Times Interest Earned Ratio Gross Profit Margin (%) Net Profit Margin (%) Return on Total Assets (%) Return on Common Equity (%) Earning Per Share (EPS) (%) 2008 0.35 0.32 -12.3 -86 0.31 93.1 -203.91 72.56 -54.1 19.38 -13.37 -0.57 2009 0.31 0.3 -12.4 -90 0.032 10.59 -21.14 82.54 -43.2 14.19 -34.01 -0.35 2010 0.29 0.29 -124 -80 0.31 113.2 -3.43 84.59 -20.7 6.44 -55.06 -0.14

2.

LIQUIDITY RATIOS 2.1. Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency. A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.

2.2.

Current ratios showed decreased trend from 2008 until 2010. These ratios started to drop in 2009 due to experienced recession in the 1Q until 3Q. This recession was the started in mid-2008 worldwide and Malaysia was one of the effected countries. Ho Hup had slightly decreased in their current assets by 13% compared in 2008 and 2010. Their current liabilities had increased by 23% compared to in 2008. Liquidity ratio refers to the company s ability to fulfil its short-term maturity claims or obligations. The Ho Hup s achievement in current ratio and quick ratio are much different compared with the AZRB and Mudajaya.

2.3.

2.4.

3.

ACTIVITY RATIOS 3.1. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Overall the activity ratios of Ho Hup including of the inventory turnover, average collection period and total asset turnover is quite low. Ho Hup is facing a problem with the account receivables as the collection period for the company is quite long compare to the others. Therefore, attention has to be given to the management of account receivables.

3.2.

4.

LEVERAGE RATIOS 4.1. Leverage ratio measures a company s level of debt funding and the ability of the company to fulfil its financial demands such as interest claim. Debt Ratio determines a ratio that indicates what proportion of debt a company has relative to its assets and it measures the percentage of total assets that are financed by debts. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. According to the findings, Ho Hup has quite high of debt ratio which shows that their company s project are financed by debts.

4.2.

4.3.

In 2008 included in property costs incurred during the previous financial year were interest costs amounting to RM622,000. During the current financial year, have been expended as active development has been interrupted over an extended period.

5.

PROFITABILITY RATIOS 5.1. Every firm is most concerned with its profitability. One of the most frequently used tools of financial ratio analysis is profitability ratios which are used to determine the company's bottom line. Profitability measures are important to company managers and owners alike. If a small business has outside investors who have put their own money into the company, the primary owner certainly has to show profitability to those equity investors. Profitability ratios show a company's overall efficiency and performance. We can divide profitability ratios into two types: margins and returns. Ratios that show margins represent the firm's ability to translate sales dollars into profits at various stages of measurement. Ratios that show returns represent the firm's ability to measure the overall efficiency of the firm in generating returns for its shareholders. The gross profit margin is satisfactory for Ho Hup but when it comes to net profit margin it become very low because of the high in expenditure including the the cost of of goods sold and the sales expenditures. Ho Hup incurred a net loss of RM13,629,661 during the year of 2008 and its current liabilities exceeded its current assets by RM11,379,044. This is due to the investment in subsidiaries in India, Mauritius, South Africa and Indonesia that has involved a lot of financial while starting all the projects.

5.2.

5.3.

5.4.

6.

COMMON SIZE AND INDEXED 2008 2009 100.0% -81.8% 18.2% 18.2% -15.5% -55.5% -34.5% -7.1% 0.0% -41.7% -1.6% -43.3% 2010 100.0% -81.9% 18.1% 44.7% -17.8% -57.9% -12.9% -11.8% 0.0% -24.7% 3.8% -20.9%

Operating revenue Cost of sales Gross Profit Other operating revenue Administrative costs Other operating costs Profit from operatings Finance costs Share of results of associated companies Profit before taxation Taxation Profit for the year Table 3: Common Size Income Statement

100.0% -77.7% 22.3% 4.8% -10.2% -71.6% -54.6% -7.1% 0.4% -61.3% -0.3% -61.6%

Source: Ho Hup Annual Report from 2008-2010

2008 Operating revenue Direct operating costs Gross Profit Other operating revenue Administrative costs Other operating costs Profit from operatings Finance costs Share of results of associated companies Profit before taxation Taxation Profit for the year
Table 4: Indexed Income Statement

2009 87.9% 100.4% 56.4% 331.5% 133.9% 68.1% 62.6% 87.4% -6.0% 66.3% 536.5% 68.5%

2010 71.4% 81.7% 45.5% 661.4% 125.4% 57.7% 19.0% 118.3% 6.0% 31.9% -1004.5% 27.0%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Source: Ho Hup Annual Report from 2008-2010

Common Size Balance Sheet ASSETS Non-current assets Property, plant and equipment Prepaid land lease payments Investment property Land held for property development Investments in associated companies Current assets Inventories Land and property development costs Trade receivables Other receivables Amount owing by associated companies Tax recoverable Fixed deposits with licensed banks Cash and bank balances Non-current assets held for sale TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital Reserves Accumulated losses Equity attributable to equity of the parent Non-controlling interest Minority interest Total Equity Liabilities Non-current liabilities Bank borrowings Deferred taxation 35.21% -28.73% 41.73% 1.91% -50.06% -6.41% 0.49% 0.00% -5.93% 48.22% 2.29% -64.28% -13.76% 0.55% 0.00% -13.22% 2008 2009 2010

10.49% 0.08% 0.59% 41.52% 0.00% 52.68% 0.28% 10.72% 28.16% 4.51% 0.00% 0.00% 0.00% 3.65% 47.32% 0.00% 100.00%

9.32% 0.09% 0.00% 49.45% 0.01% 58.87% 0.22% 0.87% 13.21% 11.85% 0.15% 0.00% 0.73% 6.31% 33.33% 7.80% 100.00%

5.53% 0.00% 0.00% 57.89% 0.00% 63.42% 0.09% 0.81% 10.71% 15.00% 0.00% 0.01% 0.34% 6.31% 33.26% 3.32% 100.00%

6.48% 0.00% 0.44% 6.92%

0.00% 0.01% 0.01%

2.06% 0.01% 2.07%

0.00% 0.02% 0.02%

Current liabilities Provision for liquidated ascertained damages Trade payables Other payables Amount owing to an associated companies Hire purchase payables Bank overdrafts/short-term Tax liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

7.96% 28.97% 17.67% 0.00% 0.00% 36.08% 2.39% 93.07% 93.08% 100.00%

8.14% 31.47% 20.58% 0.90% 0.14% 38.83% 3.80% 103.85% 105.93% 100.00%

8.00% 36.94% 25.72% 1.04% 0.05% 39.98% 1.46% 113.19% 113.22% 100.00%

Indexed Balance Sheet ASSETS Non-current assets Property, plant and equipment Prepaid land lease payments Investment property Land held for property development Investments in associated companies Current assets Inventories Land and property development costs Trade receivables Other receivables Amount owing by associated companies Tax recoverable Fixed deposits with licensed banks Cash and bank balances Non-current assets held for sale TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 0.00% 0.00% 0.00% 100.00% 100.00% 0.00% 100.00% 65.38% 6.84% 39.59% 221.46% #DIV/0! 0.00% #DIV/0! 145.79% 59.44% #DIV/0! 84.38% 24.07% 5.52% 27.78% 242.64% #DIV/0! #DIV/0! #DIV/0! 126.05% 51.33% #DIV/0! 73.02% 2008 2009 2010

100.00% 100.00% 100.00% 100.00% 0.00% 100.00%

74.97% 96.92% 0.00% 100.51% #DIV/0! 94.30%

38.45% 0.00% 0.00% 101.83% #DIV/0! 87.91%

EQUITY AND LIABILITIES Equity Share capital Reserves Accumulated losses Equity attributable to equity of the parent Non-controlling interest Minority interest Total Equity Liabilities Non-current liabilities Bank borrowings Deferred taxation Current liabilities Provision for liquidated ascertained damages Trade payables Other payables Amount owing to an associated companies Hire purchase payables Bank overdrafts/short-term Tax liabilities Total liabilities TOTAL EQUITY AND LIABILITIES 100.00% 100.00% 0.00% 100.00% 0.00% 100.00% 100.00% 100.00% -5.62% #DIV/0! -83.54% #DIV/0! 0.00% -72.30% 100.00% -5.83% #DIV/0! -155.11% #DIV/0! 0.00% -139.52%

0.00% #DIV/0! 100.00% 83.33% 100.00% 12076.19% 100.00% 100.00% 100.00% 0.00% 0.00% 100.00% 100.00% 100.00% 100.00% 100.00% 86.35% 91.66% 98.27% #DIV/0! #DIV/0! 90.81% 134.08% 94.16% 96.03% 84.38%

#DIV/0! 123.81% 123.81% 73.41% 93.11% 106.30% #DIV/0! #DIV/0! 80.92% 44.61% 88.81% 88.82% 73.02%

6.1.

From common size and indexed for both incomes statement and balance sheet above, we can tell that Ho Hup had experienced financial problems in 2010. This due to the plant and machinery of the Group and of the Company with the amount of RM7.36 million , in 2009 RM18.34 million were previously seized by the state of Madagascar. Although the State of Madagascar has released these plant and machinery to the Company s branch in Madagascar the assets are currently idle.

7.

STRENGTH AND WEAKNESS 7.1. Thru our analysis, we found that AZRB weakness was their net profit margin was very low. This due to their investment being financed using loans. They needed to bear the interest cost (approximately at 3.03% per year) until the projects finished or they can cover the interest using interim payment. In either way, the interim monies still not enough to cover the administration cost (approximately at 6.83% per year). From the annual reports, AZRB had to make tough decision as they full write off of access costs associated in Al-Faisal University project totalling RM93.6 million in 2010. AZRB strength was their oil and gas division. For the past 3 years, this division had contributed of approximate at 80% to 86% of group revenue and approximate at 27% to 34% of group profit before taxes respectively. This division had act as life saver for AZRB financial performance. Having oil and gas in this group could balance their performance of other construction divisions. Construction industry seeks of huge capital investments and the cash inflow came periodically based on project progress. Referring to Table 1, most of the projects awarded to AZRB were government or GLC companies. This was a point of strength as they achieved to get government trust and confidence to handle several of projects such as ECER, ETP, GTP and RMK-10. AZRB also had received several awards since incorporated such as Bumiputera Award in 2010 by GABEM and Contractor Award Grade G7 by CIDB.

7.2.

1.3.

2. Year over year, Ho Hup Construction Co. Bhd has seen revenues shrink from 80.1M to 65.1M, though the company was able to grow net income from a loss of 34.5M to a smaller loss of 13.6M. A reduction in the percentage of sales devoted to income tax expense from 1.63% to -3.76% was a key component in the bottom line growth in the face of falling revenues.

3.

SUGGESTIONS AND RECOMMENDATIONS

3.1.

Based to our inadequate knowledge in financial literature, we have no suggestion as AZRB know well on how to react at any circumstances or any changes in their industry. In tough 2010, AZRB had strength their organization by invited in YBhg Tan Sri Lau Yin Pin as Independent NonExecutive Director, whose had extensive corporate experience which believed would enrich the group greatly. We would to suggest that AZRB must carefully analyse all incoming investment and also carefully carry out all the projects in order to reduce negligence and others act that may put AZRB in state of losses. In the early year of 2010 the share holders of Ho Hup call up the EGM and remove 7 directors including the deputy chairman Datuk Vincent Lye in solution to resolve the RM110,000 million of accumulated losses. The replacement is taken by Datuk Low Tuck Choy the former Ho Hup s MD.

3.2.

4.

CONCLUSIONS 10.1 Ho Hup need new management team to build up their performance and need fresh capital to revive its financial health. According to Low they need 60% capital reduction and smaller share placement. A renounceable one for four form rights issue of RM25.5 million irredeemable convertible preference shares (ICPS) in Ho Hup with two free each warrant for ICPS. The exercise expected to raise an initial RM25.5 million from the ICPS . The disposal of non-core land to raise more capital and to enter into jointventure development deals with other parties. The construction division will focus more on government. Contracts particularly infrastructure and building civil works. Rebranding and repositioning of the group s corporate image. Ho Hup moving into the development of premium project with high GDV in Klang Valley.