Write a report on on the Arab Tech Constructions L.L.C in the United Arab Emirates.
The present report focuses on the Arab Tech Constructions L.L.C in the United Arab Emirates. It is one of the major constructions companies, which is very much committed on building ever-lasting impressions on its customers. It aims to expand by using its resource capabilities and its degree of expertise in construction of high-rise residential buildings, industrial constructions projects, airport development, entertain complex and commercial communities (Arabtecuae.com, 2016).
The current report emphasis on the residential construction Plot based on the “Najmat Abu Dhabi on Reem Island” where a residential high rise is being constructed. The report further explains the viability of cost of investing in residential construction project along with the analysis of other financial tools such as “Internal Rate of Return”, “Net Present Value”, “Profitability Index”, “Operating Cash Flows”, “Projected Income and Expenses” and the “Payback Period” of the investment made.
Descriptions of Project:
“Reem Island” project is a 24 storey high-rise residential plot with stylish building designs aiming to provide a luxurious living experience to its dwellers. The project spreads across 66,000 square meters (Arabtecuae.com, 2016). The yet to be constructed residential high-rise is beautifully situated adjacent to Marina Bay waterfront. The towers of the project comprises of three-basement floor along with two podium levels in order to accomplish a height of over 100 meters (Arabtecuae.com, 2016). The residential plot will consist of more than 200 spacious apartments with a mix of one, two and three bedroom, kitchen and dining room (Arabtecuae.com, 2016).
Financial Analysis of Arab Tech Constructions L.L.C
According to the reports obtained after conducting the financial analysis of the projects undertaken the initial amount of investment was $3,000,000. A cash flow analysis is conducted to analysis the viability of the project for the long run. The anticipated amount of sales revenue that will be generated from this project will be approximately $2,000,000. The sales revenue has been forecasted on the parameters of 10 financial years. In the subsequent financial year the sales revenue is projected at $2,200,000 and the trend is on the upward rising parameters. The sum total of the discounted cash flow statement stood at $12,827,217.
In the final year of revenue projections it can be noticed that the projected sales revenue is forecasted around $4,715,895. In addition to this, the payback period is estimated on the parameters of 10 years (Arabtecuae.com, 2016). The annual cash flow for the initial year is projected around $1,301,136. The payback period for the current construction project undertaken by the Arab Tech L.L.C is 1.24 which means that the amount of investment made can be recovered in the subsequent year of investment. Profitability index for the current project shows 4.275 which highlights that Arab Tech Construction is approximately yielding 42% of profit on the completion of construction. It is estimated that on the completion of this project the sum of investment made can be recovered within three financial years (Arabtecuae.com, 2016).
The project is assumed to yield growth at a rate of 10% annually with the required rate of return being estimated at 10%. The PV factor for the first year is projected to be around 0.91 and in the subsequent year it is projected around 0.83 (Arabtecuae.com, 2016). After conducting the cost benefit analysis the internal rate of return is estimated around 15%. On the other hand, the net present value shows a sum of $1,692,286.
Projected Revenues and Expenses:
The operational cost in the project implementation phase consists of the salaries and wages of the workforce which includes a sum of $725,000. The cost of plant and equipments employed in this project consists of $625,000. The gross total cost of operations includes $1,926,000 (Arabtecuae.com, 2016).
On the other hand, the revenues generated from this project during the constructions were 405,000 which included the amount generated from revenue receipts along with the federal cost of investment. The final cost of operations derived after the deducting the revenues obtained are $1,521,000 (Arabtecuae.com, 2016).
Discussion and recommendations:
The report gives a detailed overview of the company’s constructions affairs. It is to be noted that all the available data and financial information is presented in a comprehensive and accessible format. The report consists of the estimations of cost of investment in the residential construction along with the annual forecast of the net cash inflows. The report also describes the profitability index in order to facilitate direct competitive benefit between the Arab Tech Holdings and its numerous competitors. Therefore, this report provides a clear and precise understanding of Arab Tech Constructions L.L.C position in the Engineering and construction service industry.
The report contains the in depth information of the internal affairs of the business environment of Arab Tech Constructions L.L.C regarding the data of the owners, senior executives, locations, subsidiaries and the constructions details of plot at marina bay. Another part of the report describes the microenvironment factors that are used to carry out in order to identify the several business elements, which is favourable and unfavourable in terms of accomplishing its objectives. In addition to this, the report identifies and outlines the main financial and investment aspects pertaining to the cash flow after tax, profitability, margin analysis and companies initial cost of investment.
Note discussing about the profitability index of this report is that the construction project at marina bay involves a profit margin of 42%, which represents that the project is profitable in the end and hence, the initial cost of investment will be recovered during the span of 10 years with Net Present Value of $9,827,217.
• It is evident that the prices of constructions materials and components are higher in the region of Marina Bay. It is advised that Arab Tech L.L.C employ strategic investments in order to make optimum utilisation of the available resources.
• It is recommended that the new workers must be provided with the tools in order to encounter the areas of safety since the construction project involves construction of high rise. Enabling the use of scaffolding and crane can reduce the hazard on work for Arab Tech Constructions L.L.C.
• Arab Tech L.L.C must employ supervisor and site managers to conduct a detailed review of the constructions site by paying more focus on the possible hazardous sides.
• It is recommended for Arab Tech L.L.C that it must employ vigorous marketing and sales promotion strategies to combat its current set of competitors.
• Arab Tech L.L.C is one of the reputed brands in U.A.E under the banner of construction, so it is recommended that it can take into the considerations of building designs for older aged populations. Such recommendations can attract those sets of customers by considerably not jeopardising its current set of young customers.
Construction companies like Arab Tech L.L.C learns a lot from the combinations of internal elements of the organisation with the external elements of the market, which illustrates a stark picture of the organisation to where it belongs during any moment of time (Sevkli et al., 2012). Arab Tech L.L.C found the microenvironment elements especially critical, as the necessity to anticipate the effects of evolving economic conditions and existence of new competitors to sponsor expensive projects. Below listed is the detailed analysis on the microenvironment factors of Arab Tech L.L.C.
Arabtecuae.com,. (2016). Arabtec Construction L.L.C. Arabtecuae.com. Retrieved 20 July 2016, from https://www.arabtecuae.com/
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