Tuesday, June 15, 2010

Construction Business Illusion


June 15, 2010, page B7

NAZA Group of Companies plans to grow its construction arm and take it overseas to bid for high margin building and infrastructure projects, said NAZA TTDI Sdn Bhd Group MD S.M. Faliq S.M. Nasimuddin.

Faliq said construction is more challenging as compared with automotive and property development and he is far more confident that his construction division will grow in time to come.

"We have the key people in the company. There is a lot that our construction arm can do," Faliq said.

Is construction business so lucrative and profitable? Go asked those contractors ...

Are international construction projects giving high margins as compared to local projects? Go ask those contractors who have the years of experience; go interview these companies: WCT, UEM, Gamuda, LCL, Peremba, Bina Puri, IJM, Mudajaya, Mancon, Pilecon & Suncon.

Case studies:

WCT suffered massively when the RM4.6 billion Nad Al Sheba Dubai Racecourse project in Dubai was terminated. The project is a JV between WCT and Arabtec, an Emirates-based construction company. It was awarded as a build-only contract from Meydan for the construction of main building works, external works and infrastructure works in September 2007.

UEM suffered massively in it's Qatar Highways - Salwa International Road - 1st Phase project. Qatar PWO is seeking QR878,318,972.06 (which is approx. RM850 million) from UEM.

Gamuda and Peremba suffered similar fate. Pelangi Bhd and Kuok Group suffered losses in Phillipines. There were many many more unreported cases of international project catastrophes. And, you may also like to do some research of other international contractors who reeled the roller-coaster of project disasters, companies such as: Daewoo Construction, Keang Nam, Takenaka, Kamugai, Hazama-Gumi, Obayashi, etc.

Oh, we should not forget about Sime Darby Engineering's RM1.3b losses in Qatar Oil and Bakun cost overrun (Read here: Dato Salleh's Brickwall and Big Dog's Scandal )

In 1998 we saw the demise of super construction giants such as Pilecon Bhd, Promet, Ekran and Ting Pek King, Soh Chee Wen and his group of companies, Soo Tian Chai and his group of companies such as Mancon Bhd, Anson Perdana Bhd, Robert Chuan and his Eden Bhd and Sriwani Bhd, Cygal Bhd, Bestworld, Esprit Bhd and many other 1st Board 2nd Board listed companies.

So, is construction business high margin lucrative business? Is construction business challenging or illusory? I've been in this industry for 30 years, working with more than 10 giant corporations building houses, roads and infrastructures. I am still involved in this industry in a consulting capacity. BTW, there is no such thing as 10% profit margin for contractors; maybe, if you are lucky you'll get 3%. Oh, if you get direct-negotiated non-competitive projects such as Design-Built or Cost-Plus Contracts you may have better margin; but the caveat is - you need strong cable and is a part of the oligarchy.

So, Mr. Fariq, I know you got a good team and a good management team; but project management is far beyond being good and hardworking. It is beyond crunching numbers and construction management. It is Project Management and Process Management - a competency that is still illusory and badly understood. There are just too many false prophets in the field of Project Management.


Anonymous said...

The new convention centre will bungkus the whole naza group.

Better sell their shares masa analyst pushing their shares ...

moo_t said...

Naza is smart, they are given risk free Bolehland (TM)project from BN government, which will bail out ANY CRONIES with country coffers.
The 10th Malaysia plan pork-barrel just too juicy.

Even more interesting, despite the most powerful country in the world, the White House maintenance and renovation fees are cheaper than BOLEHAND (TM) budget overrun place.

And that give a good hints to those with $trong connection.

sinkeh said...

false prophets have sweet but fork tongues. they say thing that bosses love to hear, collect their commissions when deals are done and are nowhere to be found when disaster strikes...

Sammy said...

Young and brash...inexperienced as well..wat you expect?

Anonymous said...

f**k ! if u give blind APs ,I also claimt I hav good team, don't shit ! sure die, if u go outside BOLEHLAND

Anonymous said...

Build another palace la.. very profitable, >100%!!! & don't need pay the worker too, MACC will only look for small fish.. Main con say sub con, sub con say sub sub con, sub sub con say agent, agent say sub agent, sub agent say Muthu.. tomorrow they will catch Muthu for not paying salary like the jet engine theft thing...