KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES,

INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA,

SEMESTER 2, 2018/2019

FINANCING PROPOSAL FOR NEW TOURISM AREA DEVELOPMENT BY ECO WORLD DEVELOPMENT
GROUP BERHAD AT LUMUT & PANGKOR ISLAND, PERAK.

ISF 2203 - ISLAMIC FINANCING MANAGEMENT

SECTION 1

LECTURER’S NAME : Dr. Fadhilah Abdullah Suhaimi

GROUP MEMBERS MATRIC NO

NUR IZZUANI BINTI ABDUL RAHMAN 1625720

SITI ZULAIKHA BINTI JUNAIDI 1622908

IKMAL NAJIHAH BINTI ABU 1628128

NURAIN BINTI ZAMANI 1712908

SITI FATIMAH BINTI YAHAYA 1718610

DATE OF SUBMISSION : 19 MARCH 2019

 TABLE OF CONTENT

NO CONTENT PAGE

1. EXECUTIVE SUMMARY 2

2. BACKGROUND OF THE COMPANY AND PROJECT 3-11

3. CREDIT EVALUATION 12-13

4. PROPOSED FINANCING PACKAGE/ STRUCTURE 14-17

5. STRENGTH AND WEAKNESS OF THE PROJECT 22

6. RECOMMENDATION 23

7. REFERENCES 24

8. APPENDIX

1
 EXECUTIVE SUMMARY

We are from Financing Department of Muamalat Bank has been assigned to evaluate and
propose a suitable financing structure for new tourism area development namely Eco Paradise
located at Lumut and Pangkor Island, Perak. The project is owned by Eco World
Development Group Berhad.

The important criteria we look as we evaluating the project proposed are the amount of
financing requested by the company, the potential customers that will use all the facilities provided
by each projects and the tourist attraction in the future. Also, associating with the amount proposed
by the company, we want to prevail people on the solid reasons why we want to finance the projects
and provide them with suitable contract and product.

The first project proposed by EcoWorld is 4 Star Resort which consist of 230 rooms, exclusive
dining restaurant, spa, gym, swimming pool. We decide to finance construction materials and
interior and furniture that will be imported from other countries with 70% and 80% of amount
financing requested respectively. For both of these we using Trade Finance-Murabaha Working
Capital Financing-i (MWCF-i), Accepted Bill-i (AB-i), Murabahah Outward Letter of Credit-i, Foreign
Inward Bills for Collection-i, Outward Bills for Collection-i, Shipping Guarantee (SG-i) and Bank
Guarantee (BG-i).

The second project is the construction of new modern jetty. For this project we planned to
finance 80% of RM 2 400 000 that amounted RM 2 040 000. Next project is upgrading the existing
jetty where we financed using Al-Istisna Project Financing-i same as previous project. The fourth
project company requested to finance is to buy a new ferry to increase their assets by using Hire
Purchase-i (MHP-i/AITAB).

The fifth project is Integrated Specialist Hospital mainly for Health Tourism purpose. This
project consist of 300 wards, 50 consultation specialist rooms, laboratories, pharmacy, operation
theatre and cafeteria. For the construction of hospital building and medical equipment, all the
materials are financed using Accepted Bill-I (AB-i) (Import/ Purchase).

Next project is residential area- 30 unit double storey Semi D house which we will finance
using Al-Istisna Project Financing-i. For the residential area- 2 blocks of 15-storey condominium
project proposed, we decided not to finance it for several reasons.

In addition, Eco World also proposed to finance two types of residential area that are 1 block
of 2 storeys building which consist of 20 unit shop/office lot and SME Halal Hub. Both projects will be
financed using Al Istisna’ project financing i.

Lastly, the project financing about Beautification of Pangkor Island Beach for tourism
purposes also being requested. We planned to finance this project under Al istisna’ project financing.
All other specific reasons of our opinion in proposing these types of financing contract will be discuss
further in this proposal.

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 BACKGROUND OF THE COMPANY AND PROJECT

In December 2013, Eco World Development Group Berhad changed its name that previously
known as Focal Aims Holding Berhad. Its headquarters located at Shah Alam, Selangor, Malaysia. The
company is owned by Tan Sri Abdul Rashid Bin Abdul Manaf and under his leadership, Eco World
Development Group Berhad had become one of the fastest growing companies now. As stated in its
annual report in 2014 and 2016, the company’s revenue increases greatly.

This Malaysian company involved in property development activities in Malaysia with three
main economic regions that are Klang Valley, Penang and Iskandar Malaysia. Each of three regions
develops different eco development projects. Also, this well known brand already reach out to
London, United Kingdom, and Sydney & Melbourne, Australia through Eco World International. As
example of projects in Australia, Eco World International established West Village, Yarra One.
Meanwhile in United Kingdom there are Embassy Garden, London City Island and Wardian London.

As they involved in eco property development, their commitment is to create and deliver the
best standard of their service and products for the customers by providing the unique and
innovative eco environment with safety and health guaranteed. Besides maintaining a good quality
of environment and health, they also establish a strong relationship with local and international
community along with their policy of maintaining Quality, Environment, Health, Safety and
Sustainability system.

Ever since 2014, Eco World Development Group Berhad managed to receive a strong
response to its projects that well known for implementing European styling for landscape. In 2018,
EcoWorld had received various achievement and recognition in term of management, human
resources, shareholder and developer.

In accordance with its vision of Creating Tomorrow & Beyond, no doubt that the brand of
Eco World will gain more recognition internationally and locally and also grow higher for the
upcoming years.

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MANAGEMENT TEAM

Board of Directors

Founder & Non-Independent Non Executive Tan Sri Abdul Rashid

Director Bin Abdul Manaf

Non-Independent Non Executive Chairman Tan Sri Dato’ Sri

Liew Kee Sin

Non-Independent Non Executive Deputy Dato’ Leong Kok Wah

Chairman

Executive Director and President & Chief Dato’ Chang Khim Wah
Executive Officer

Executive Director and Chief Financial Officer Datuk Heah Kok Boon

Executive Directors Dato’ Voon Tin Yow

Liew Tian Xiong

Senior Independent Non-Executive Director Tang Kin Kheong

Independent Non-Executive Directors Dato’ Idrose Bin Mohamed

Dato’ Haji Obet Bin Tawil
Dato’ Noor Farida Binti
Mohd Ariffin
Low Mei Ling

Key Management

Deputy Chief Executive Officer Dato’ Sundarajoo A/L Somu

Divisional General Manager Datuk Hoe Mee Ling

Low Thiam Chin
Yap Yoke Ching
Phan Yan Chan
Ho Kwee Hong

Audit Committee Remuneration Committee

Tang Kin Kheong (Chairman) Dato’ Noor Farida Binti Mohd Ariffin
Dato’ Idrose Bin Mohamed (Chairperson)
Dato’ Noor Farida Binti Mohd Ariffin Dato’ Idrose Bin Mohamed
Low Mei Ling Tang Kin Kheong

Nomination Committee Whistleblowing Committee

Dato’ Idrose Bin Mohamed (Chairman) Dato’ Idrose Bin Mohamed
Tang Kin Kheong Dato’ Voon Tin Yow

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Dato’ Noor Farida Binti Mohd Ariffin Low Mei Ling
Dato’ Haji Obet Bin Tawil

Risk Management Committee

Dato’ Voon Tin Yow (Chairman)
Dato’ Sundarajoo A/L Somu
Datuk Hoe Mee Ling
Dato’ Soo Chan Fai
Lim Eng Tiong
Ong Yew Leng

FINANCIAL POSITION

STATEMENTS OF FINANCIAL POSITION AS AT 31 OCTOBER 2018

5
STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31
OCTOBER 2018

6
 BACKGROUND OF THE PROJECT

Perak is one of the largest states in Malaysia where it is the second largest in Malay
Peninsula. The famous Pangkor Island in Perak offers luxurious tourism place where people can
scuba-diving, snorkelling, and also fishing there.

Eco World Development Group Berhad had grab a good opportunity to develop a new
tourism area namely Eco Paradise at Lumut and Pangkor Island, Perak. The development area
involves 35 acres of mainland (Lumut) and 30 acres of the Pangkor Island. The project will start in
February 2019 and estimated to be completed within 3 years.

The first phase of development is to do site clearance as currently Pangkor Island is a small
Jungle. In 2 months, the process of clearance will be completed with total cost RM 900 000. Then
later the proposed development that consists of four- star hotel, jetty and access road from the jetty
to the resort can be proceed. Meanwhile, there are several commercial and residential projects will
be developed at Pangkor Island.

The details for proposed project development:

1) Resort (4 Star)

Pangkor Island had been popular destination with guests. Thus, this resort will attract more
people and tourists to come as it is constructed based on interactive design but at the same time,
maintain the traditional features of Pangkor Island. In other words, the customer can enjoy the
scenery of Pangkor Island here. This four-star resort will be consists of 230 rooms, exclusive dining
restaurant, spa, gym, swimming pool and many other conducive facilities. The development of this
resort will involve international trade because some of the raw materials needed must be imported
from other selected countries.

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2) Construction of New Modern Jetty

For the construction of new modern jetty, Eco World planned to build a different jetty with
other. They hope that the new jetty would bring in more tourists to the island to have a look
because it’s quite a unique design. Eco World wants the island to be a ‘destination of choice’,
occupationally and recreationally, for people around the globe. Besides, the new modern jetty can
accommodate a lot of people. Therefore, this project is economically viable for the investors.

3) Upgrading of existing jetty

The existing jetty at the mainland of Lumut Jetty is one of the features that has been a
tourist’s destination. However, as time goes by, it can no longer accommodate the number of people
which has been inconvenient. Plus, the operations that can be run over there also being limited with
the small space provided. Hence, Eco World Development Group Bhd decides to upgrade and
enlarge the size of the jetty to cater with the number of people so that it become more comfortable
and enable large operation capacity being managed. Being said that, the process of upgrading the
jetty would not take a long time where it is estimated to be completed in 15 months and most
importantly, it would not affecting the people from using the ferry services.

8
4) New Ferry

A new ferry is also required along with the development at Pangkor Island, as the place will
become a tourist destination within inside and outside Malaysia. This ferry will give the most
comfortable and unforgettable memories for the tourists. It also will provide additional trip for the
tourist to reach at the island.

5) Integrated Specialist Hospital (Health Tourism)

Healthcare is important for everyone. Without healthcare facilities such as hospital, the
development of an area will be uncompleted and it will give troublesome to the people. Thus, in
order to fulfilled the needs of Pangkor Island citizen, Eco World Development Group Berhad
proposed to develop Integrated Specialist Hospital which consists of 300 wards, 50 consultation
specialist rooms, laboratories, pharmacy, operation theatre and cafeteria.

6) Residential area – 30-unit double storey Semi D houses Facing the beach

9
 Eco World decides to build 30 units of double storey Semi D houses that facing the beach.
Building residential area at the developing town like Lumut is a great investment to the developer.
There will be many people choose to stay there when they find that the place has high potential to
give them good living by having stable economy. The development of that area will surely opens up
many new job opportunities and provides complete facilities for better lifestyle. Hence, people will
choose to buy assets like houses to ease them in the future.

7) Residential area – 2 blocks of 15-storey condominium next to the Semi D

The other project for residential area is 2 blocks of 15-storey condominium next to the Semi D
houses. It is also facing the beach. This condominium is well-equipped with great facilities such as
gymnasium, kafeteria, park, parking lot and swimming pool. This project might get high demand
from the people as it gives high-class lifestyle and its strategic location which is near to the city.
However, it requires huge amount of money to complete it.

8) Commercial area - 1 block of 2-storey building which consist of 20-unit shop/ office lot

Company has decided to do project of 30 units double storey house and 2 blocks of
condominium.Due to this, it is necessary to have a shop lots and office. Shop lots are necessary for
the facility of residents that live there. Shop lots will be constructed near the double storey house a
condominium in order to make the them easy to go and buy daily expenses. Furthermore, office lot
also an essential when it comes to management purposes of shop lots to make sure the business of
shop lots run smoothly. Moreover, office lot can be a place for the tam to do a meeting and
discussion. This project can make life of residents easy to get the groceries everyday and any time
they need it.

10
9) Commercial area – SME Halal Hub

Eco World not only give attention to facilities for the residents who live there in Lumut, this
company take this chance to build commercial area SME Halal Hub that consist of 2 sections which
are Sea collections, processing & packaging centre and main centre to sales the product. This centre
that has collections, processing and packaging is one of the way to attract customer buy as the
company prepare it form the source itself and fresh. Thus, the product will be sell at sale centre that
has 20 shop lots. On the other hand, this 2 segments give big job opportunities for people for those
who seeking for the job.

10) Beautification of Pangkor Island Beach for tourism purposes

Beautify our assets such as Pangkor Island Beach is one of the best idea to utilize the natural
beautification that can bring more advantages and benefits to the company as well as to the
country. Beautification will added the value of Pangkor Island Beach to attract more tourists to come
over and enjoy the beautiful scenery and fresh air at the beach. In addition, the beautification may
preserve the natural itself to stay consistent as beauty as they are.

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CREDIT EVALUATION: 6’Cs
Bank need to do an assessment on the financed company which is Eco World Development Group
Berhad using the 6’Cs of credit and credit scores in order to determine the company’s
creditworthiness. It is a required procedure that needs to be done by the bank in considering the
financing application. It essentially means for the bank to ensure the project viability, capacity of the
company to repay the debt and to minimize the risk. All required information is taken from the
company’s profiles and portfolio that have been analyzed and briefly presented as shown below:

Component Notes

Character 1. Register with CTOS since 1974.

2. Well defined the purpose for seeking financing for their business
variations
3. Well performed for 4 years in the stock market.

Capacity 1. Developed a Sustainability Governance Structure with reference to the

Global Reporting Initiative (“GRI”) Standards.
2. Well-disclosed information on Corporate Governance Overview
Statement.
3. Board Charter incorporates the Principles, Practices and Guidance of
the MCCG for its roles and responsibilities act to aim towards
transparency, accountability, sustainability and integrity in boardroom
activities
4. Have details on Board Of Directors information with excellent
background

Condition 1. A well known brand company that has reach to London, United
Kingdom, Sydney, Melbourne and Australia.
2. Consists of internal and external condition as there are financial and
non-financial parties involve.
3. Need to prepare and aware for the upcoming problems (example:
Increase in liability)

Capital 1. Total liabilities increased with the additional borrowings taken to

finance project expenditure and for the working capital of the Group’s
various projects undertaken by its subsidiaries and joint-ventures.
2. Exercising multiple share issue to raised funds and owns outstanding
warrants which can provide additional funds for the company.
3. Capital management is monitored using gearing ratio which is net debt
divided by total equity attributable to owners of the Company aligned
with its objectives in maintaining a healthy capital ratio throughout the
period.
4. Information regarding the capitalisation of borrowing costs and
Investment in Joint Ventures are well-explained in the annual reports.

Cash 1. Well-presented of historical cash flow and projected cash flow in the
annual report.
2. The repayment profile or maturity of the loan is being monitored
thoroughly including consistent repayment of bank borrowings and
finance lease obligations.
3. Significant market share captured in just 5 years (FY14-FY18) with

12
 consistent RM3-4 billion sales per annum despite weak market
conditions.
4. Decrease in drawdown of bank borrowings (July 2017-July 2018)

Collateral 1. Guarantor : Corporate Guarantee

a. The Group is the guarantor for the Company.
2. Condition, suitability and value of the land should be concerned more
as it will be the collateral items towards the banks.
3. Collateral item commonly have some issues towards the times. For
example, the changes of its securities value during long process of
liquidation. Thus it is preferable for the collateral items to have a fixed
physical security.

CREDIT SCORING

Eco World Development Group Bhd

No Scores 1 2 3 4 5 Justification

1. Character / Very performed company.

-Trustworthiness They can give commitment
-Performance towards their debt.
-CTOS

2. Capacity / Company has all relevant

-Legality information in regards of the
-Management company while being managed
by excellent board of directors
with clear objectives and
achievement.

3. Condition / The liability in 2018 slightly

-Financial increase than in the last year.
-Internal
-External

4. Capital / Able to show a high level of

-Management commitment in controlling the
risk in capital investment and
find the resources to put into
the venture.

5. Cash / Consistent flow of money and

-Statement of Financial Position the ability to repay the
(SOFP) financing given based on its
-Statement of Comprehensive outstanding past and projected
Income (SOCI) statement of financial.
-Statement of Cash Flow (SOCF)

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6. Collateral / Financing is secured by way of
-Guarantor collateral which is the
guarantor.

PROPOSED FINANCING PACKAGE/ STRUCTURE

NO TYPE OF COST FINANCING MARGIN FINANCING PROFIT TENURE

DEVELOPMENT (RM) CONTRACT OF AMOUNT RATE (YEAR)
‘000, 000 FINANCING (RM) %
% ‘000,000

1. Resort (4 star ) 200

which consist
of 230 rooms,
exclusive
dining
restaurant, spa,
gym, swimming
pool.

a) Construction 97 Trade 75 72.75 4 8

cost (60% of Finance
the (a)Murabaha
construction
Working
materials will
be imported Capital
from Japan, Financing-i
China, (MWCF-i)
Indonesia) (b) Accepted
Bill-i (AB-i)
(c)Murabaha
h Outward
Letter of
Credit-i
(d) Foreign
Inward Bills
for
Collection-i
(e) Outward
Bills for
Collection-i
(f) Shipping
Guarantee

14
 (SG-i)
(g) Bank
Guarantee
(BG-i)

b) Interior and 55 Trade 80 44 4.5 5

furniture (70% Finance
of the (a)Murabaha
materials will
Working
be imported
from Korea and Capital
China) Financing-i
(MWCF-i)
(b) Accepted
Bill-i (AB-i)
(c) Wakalah
Outward
Letter of
Credit-i
(d) Foreign
Inward Bills
for
Collection-i
(e) Outward
Bills for
Collection-i
(f) Shipping
Guarantee
(SG-i)
(g) Bank
Guarantee
(BG-i)

2. Construction of 2.4 Al-Istisna 85 2.04 4.7 15

New Modern Project
Jetty Financing-i

3. Upgrading of 4.5 Al-Istisna 80 3.6 4.0 15

existing jetty Project
Financing-i

4. New Ferry 1.8 Hire Purchase-i 85 1.53 3.0 7

(MHP-i/AITAB)

5 Integrated 980
Specialist

15
 Hospital
(Health
Tourism) - 300
wards, 50
consultation
specialist
rooms,
laboratories,
pharmacy,
operation
theatre and
cafeteria

a) Construction 100 Accepted Bill-I 65 65 3.5 5

of hospital (AB-i) (Import/
building (60% Purchase)
materials
from China &
Taiwan)

b) Medical 250 Accepted Bill-I 90 225 4 7

Equipment (AB-i) (Import/
(70% Purchase)
materials
from Japan
& Taiwan

c) Interior, 40 Muamalat Al- 80 32 5 3

furniture Istisna Project
and fixtures
Financing

d) Landscape 0.5 Muamalat Al- 95 0.475 4.5 3

Istisna Project
Financing

e) Working 70 Murabahah 70 49 3 3
Capital Working Capital
Financing-I
(MWCF-i)

6 Residential 44 Al-Istisna 70 30.8 4.5 15

area- 30 unit Project
double storey Financing-i
Semi D house

7 Residential 170 - - - - -
area- 2 blocks
of 15-storey

16
 condominium

8. Commercial 10 Al istisna’ 80 8 4.5 2

area 1 block of project
2 storey financing i
building which
consist of 20
unit
shop/office lot

9. Commercial 30 Al-istisna’ 75 22.5 4.0 2

area SME Halal Project
Hub which Financing
divided into 2
sections
i.Sea collection,
processing and
packaging
centre(20 lots)

Ii.sales Centre
mainly to
market
products from
(i) 20 shop lots

10. Beautification 20 Al istisna’ 75 15 3.0 1

of Pangkor project
Island Beach financing
for tourism
purposes

Project 1 : Resort (4 star)

The first project that had been suggested by Eco World Development Group Berhad as one
of its development strategy for the new tourism area which is Eco Paradise, is the building of the
four-star resort. This resort is expected to be constructed at Pangkor Island. The resort is a luxurious
adn grand resort which consists of 230 rooms, exclusive dining restaurant, spa, gym and swimming
pool. The total cost for this resort development is expected to be around RM 200,000,000 and it will
take 2 years to be completed. The construction materials, interior and furniture were imported from
Japan, China, Korea and Indonesia.

For the construction cost, 60% of the materials were imported from Japan, China and
Indonesia. The cost for this imported materials is about RM97,000,000. Due to the large cost, we
advise the company to take Trade Financing from Bank Muamalat. The purpose of the trade
financing is to finance the purchase of imported goods. One of the facility that had been offered in
Trade Financing is Murabahah Working Capital Financing-I (MWCF-i). It is acknowledged to the
buyer to finance their purchase of trading goods which include raw materials and semi-finished
(cost-plus profit).Mode of the payment and the date of payment also will be determined and will be
send to the buyer at a specific time. We have decided to finance only 75% of the construction cost,
which amounted to RM72,750,000 as the company acquired profit from the last year and these

17
show that the company have enough money to start the invest in the project . We also charged 4%
profit rate as we used murabaha contract over 8 years repayment period. Another additional facility
is Accepted Bills-i (AB-i) to finance their purchase of trading goods that include raw materials, semi-
finished and finished goods. The Bank will enter into Murabahah contract with the customer and
later the bill is traded in the secondary market under Bai-Al Dayn contract. Next is the Murabahah
Outward Letter of Credit-I which refers to a commodity exchanged for is delivered immediately and
the price is paid in lump sum at a later date. Other than that, we recommend Foreign Inward Bill for
Collection-I whereas the bank receives IBC documents from the bank's agents (foreign and domestic)
together with a collection instruction requesting the bank to collect the payment. Thus, the bank will
advise the customer and collect the bill of payment from the customer under the concept of
Wakalah. Next is Outward Bills of Collection-i. This facility is where bank would handle the export
documents sent by the exporter and present it to the importer to allegate for the purchase price of
the goods. In addition, we also offer Shipping Guarantee (SG-i) so that our customer can take
delivery of the goods prior to receipt of the relevant original bill of lading under the concept of
Kafalah of Dhamanah.Lastly is Bank Guarantee (BG-i). It is an agreement by the Bank to a named
Beneficiary and to an agreed sum, in case of default by a third party in fulfilling their responsibility
under the contract.

Next, for the Interior and furniture, 70% of the materials will be imported from Korea and
China. The cost for this transaction is RM55,000,000. We recommend the same financing as the
purchase of the construction materials which is Trade Financing. For this financing product, we
would finance 80% of the project cost, thus the total amount of financing is RM44,000,000. In this
transaction, we would provide Wakalah Letter of Credit-i. For this facility, the bank will act as an
agent on behalf of the customer to handle the import and export transaction and payment made
upon receipt of complied documents. We decided to give the margin of financing at 75% as the
company have a lower net cash inflow from operating activities compared to previous year. We
evaluate that the company could generate more income from the resort over five years, thus
capable to pay its financing. We also suggest additional facility such as, Shipping guarantee (SG-i),
Foreign Inward Bill for Collection-I (FIBC-i), Outward Bills of Collection-i (FOBC-i) and Bank Guarantee
(BG-i).

Project 2: Construction of New Modern Jetty

The second project that had been proposed by Eco World Development Group Berhad is the
construction of New Modern Jetty located in Pangkor Island. The construction of the New Modern
Jetty costs RM2,400,000 and the project is expected to be completed within 12 months.

In order to fulfill our customer requirement, we offer them Al-Istisna Project Financing-i
facility. This financing is based on the contract of Bai' Al-Istisna which refers to a sale by order of
good or property, which is to be constructed or manufactured, and delivered at a specified future
date. With this facility, customer enable to plan their cash flow since monthly payment is fixed
throughout the financing period and they also will be covered by the Takaful Mortgage Plan. We
have decided to finance up to 80 percent of the project cost, which is amounted to RM 2,040,000
due to the company’s revenue has slightly dropped last year. We will also concede the company a
profit rate of 4.70% with fifteen years tenure of repayment.

Project 3: Upgrading of existing jetty

This project of upgrading the existing jetty is at the mainland of Lumut Jetty and also to
expand the jetty size aimed to serve bigger operations capacity. It is being secured via contract

18
award of RM4.8 million from the Tourism Ministry. The expected cost required by the project is
RM4,500,000 which would take 15 months for it to be completed.

Thus, we proposed Muamalat Al-Istisna Project Financing-I as their project financing term.
This financing is based on the contract of Bai' Al-Istisna which refers to a sale by order of good or
property that is to be manufacture and delivered at a specified future date. Under this contract, we
decided to give a margin of financing up to 80% of the cost amounting to RM3,600,000 with a profit
rate of 4.0%. The project will be constructed at the Bank’s selling price (cost plus profit margin). Eco
World Development Group Berhad will have to settle down the payment which may be paid in full or
by way of progressive payment which to be fixed if paid monthly within 15 years. We believe the
jetty as one of the main important feature for the Eco World Development Group Berhad that could
generate much profit after being upgraded and will be able to settle the amount. Until then, the
project ownership will be under the bank’s claim and will be handed over to Eco World Development
Group upon completion of full payment. Eco World Development Group will also be covered by the
Takaful Mortgage Plan under this contract of financing.

Project 4: New Ferry

Based on requests made by Eco World Development Group Berhad to purchase new ferry as
an asset increase will cost as much as RM1,800,000. We decided to finance up to 85% that is
RM1,530,000 using Muamalat Hire Purchase-i or Al-Ijarah Thumma Al-Bai (MHP-i/AITAB) for the
ferry and the rest of the amount will be covered by their own.

Under the Shariah principles of Ijarah (Lease) and Bai' (Sale), the bank will purchase the ferry
required by the Eco World Development Group Berhad from third party and subsequently lease it to
Eco World Development Group Berhad where they will have the right to use it dependent on the
terms and conditions agreed by both parties. They will have to pay a fixed rental rate plus with the
profit rate of 3.0% until the maturity date of payment which is within 7 years. Upon completion of
the lease period, bank will sell the ferry with full ownership to Eco World Development Group
Berhad at an agreed price.

Project 5 : Integrated Specialist Hospital (Health Tourism)

The initial process to build Integrated Specialist Hospital is to construct a building. This
project required 300 wards, 50 consultation specialist room, laboratories, pharmacy, operation
theatre and cafeteria. For construction of hospital building, 60% of raw materials are being imported
from China and Taiwan. So the cost is RM100 000 000, but we will finance only 65% of the cost from
Trade Finance-Accepted Bill-I (AB-i) which amounted RM65 000 000. Next, medical equipment are
needed by this hospital project which required 70% materials from Japan and Taiwan. We also
decided to finance this project using Trade Finance-Accepted Bill-I (AB-i) that handle the import
process. Instead of fully finance the cost amounted RM 250 000 000, we will only finance 90% of the
cost.
Other than raw materials for construction and equipment, Eco World also requested a
financing for interior, furniture and fixtures for this project. The proposed amount is RM40 000 000,
but we planned to only finance 80% of the cost using Muamalat Al-Istisna Project Financing. Also,
Eco World proposed a financing for landscape as this hospital main for health tourism amounted RM
500 000. We decided to finance 95% of the actual cost using Muamalat Al-Istisna Project Financing.
Lastly, for the working capital, Eco World seek for the financing amounted RM 70 000 000. We
approved 70% of the amount using Murabahah Working Capital Financing-I (MWCF-i).

Project 6 : Residential area - 30 unit double storey semi D house facing the beach
For this project, we agree to finance 70% of the total cost amounting to RM30,800,000.00.
The total amount is RM44,000,000.00. The balance will be borne by the company itself. We offered

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Al-Istisna Project Financing-i. This contract is based on Bai’ Al-Istisna. Under this contract, the
customer will request and the bank will construct. Then, the bank will charged the total cost of the
project which is the bank selling price that consist of cost plus profit margin. The profit rate charged
is 4.5% due to the high risk that the project holds. This project is estimated to take 18 months to be
finished and the tenure of financing is 15 years. Under this contract, customer is covered by the
Takaful Mortgage Plan.

To finance this project, we consider the design of the house as well as the location that takes
place. Those who love nature and calm scenery might choose to have this house as it is located
facing the beach. Moreover, the buyers of the houses can enjoy their own yard and broader housing
area so that they can spend time to do outdoor activities together with family members. We trust
that Eco World is very eligible to develop this project. This is because, Eco World had recorded a
successful achievement in developing residential area before. They had presented a very unique and
attractive design contain the element of luxurious but environmental friendly. The example of their
projects are The Chateau The Verandah in Iskandar Puteri, Johor. Eco World had also received
several international awards for their great performance. For example, in 2017 Starproperty.my
Awards 2017 granted them with The Earth Conscious Award (Merit) Eco Grandeur for The Best
Sustainable Development while in 2016, they got The Earth Conscious Award (Excellence) Eco
Botanic for The Best Green Development. Hence, we believe that they will give their best towards
this project.

Project 7 : Residential area - 2 blocks of 15-storey condominium next to the semi-D

Eco World also proposed to get financing for this project. However, we decided to exclude
this project from receiving the financing amount that the company require because of the possibility
of default risk. The project cost is RM170,000,000 which is a huge amount. It is a large scale project,
hence we need to be very cautious about the project’s opportunities and the consequences that
might arise.

Among the risk that we consider is credit risk. If the condominium does not achieve the
company’s target whether to be sold or rent, it will affect the lenders’ repayment. In fact, building
condominium in rural areas or country side is not a good idea because most of people might does
not afford to have it due to the their financial condition. They might not earn good income as high as
people living in city. Moreover, 2 blocks of 15-storey condominium is actually give a large number of
total lot. Apart from that, for us, the location and condition of the place and the city is not suitable
to build more high-class residential area like condominium. According to the research that we had
conducted also shows that there are already many condominium were built before. It results to the
existing condominium does not achieve good sales or rental due to the competition among them as
well as the lower cost of residential like apartment or flat. Hence, because of the high risk, we are
not consider to give financing to this condominium. However, we would like to recommended Eco
World to build apartment or any type of building that also requires low space but with lower cost.
The company can also focus more on the development related to tourism and the projects which are
relevant as well as suitable for the tourists as well as the local community.

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Project 8 – Commercial Area
As the above project will have residential double storey houses and residents from
condominium, it is necessary to have facilities like shop lots including with essential office for
management purposes. Shop lots that will be build in the mainland in Lumut may ease for the
residents that want to have basic things such as groceries which is important for the household to
always restock dry and wet food everyday in a quick. This commercial are will be constructed in 1
block that have 2 storey building and contain 20 shop and office lots.

This commercial area 1 block of shop and office lots cost RM 10,000,000. Bank Muamalat offers to
financed 80% of the cost for this project and agreed with the profit rate 4.5. In addition, Bank
Muamalat suggest to use Al istisna’ project financing-I to Eco World to construct this commercial
area in a smooth way. Since this financing product of payment is fixed, it bring benefits for the
company to plan their cash flow fixed monthly payment. Al istisna’ financing will pass the ownership
to the company when the construction is complete within 2 years but the financing period will be
given up to 15 years of period.

Project 9 – Commercial Area

It only take 24 months to develop this commercial area SME Halal Hub that made of 2
sections which are Sea Collections, Processing & packaging centre and Sale Centre. This project
which will be construct at the mainland Lumut has been awarded by the Ministry of Agriculture and
Agro Based Industry Malaysia with a contract value of 35 million. These two segments of project are
important as company able to supply and process freshly from sea collections itself to their
customers.

In order to assist the money management for this project, we find that Muamalat Al istisna’
project Financing-I is the best financing product to accomplish this SME Halal Hub project . Bank
Muamalat consent to give financing 75% of the cost for this project which is RM 22,500,000. Bank
Muamalat will pass this project to contractor for constructing purposes according to the company
plan. The company will get covered by Takaful Mortgage Plan by the bank.

This Syariah compliant financing product help company control finance management by
paying fixed payment on deferred basis within the financing period given. Once the construction
completed based on tenure, bank will pass over the ownership of property to the company.
Company will be given up to 15 years payment time.

Project 10 – Beautification
As Eco World has many project to do, it is necessary to take this chance to attract more
tourist by make some added value and beautification of Pangkor Island Beach.This can increase the
revenue of the company itself as well as national income. This project is awarded by the state of
Government with a contract value of 25 million. Thus, Bank Muamalat offers al istisna’ project
financing-i for the beautification.

The cost needed beauty Pangkor Island Beach for tourism purposes is RM 200,000,000.As
agreed in the contract Bank Muamalat will bear 75% margin of financing of the cost to beauty the
Pangkor Island Beach to the company. Company have to pay the construction on deferred payment
on quarterly basis as the period of payment is more than 10 years. This project tenue take only 12
months to be complete. This project will promote beauty of Malaysia itself to the world.

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 STRENGTH AND WEAKNESS OF THE PROJECT

Strength of the company’s project is 4 star resort located at Pangkor Island. This is because
resort is a calmness place that company to attract tourist to come to the resort as the resort is based
on nature that bring freshness and calmness.it is suitable for those who live in hectic life that find
situation peace of mind and relaxing their body. Not to forget this resort are fully occupied by many
facilities to their customer such as 230 rooms, swimming pool, gym, spa, exclusive dining
restaurant.In addition,the construction material can be trusted and high quality as the raw materials
are import from source of the country that supply good items. To add, Korea and China is the
country that supply 70% of inferior and furniture to the resort which known as country that have a
good materials.

These facilities can bring the joyful and excitement for the tourist that want to have some
relaxing mind through the fresh of nature itself and relaxing body by doing some exercise like
swimming and spa as swimming is part of activity that can bring someone’s mind free from thought.
By booking 4 star resort can make the tourist enjoy the nature therapy and peace. The location for
the resort is strategic as Pangkor island is one of the best place to have a holiday far from hectic and
busy traffic life.

On the other hand, weakness from this company project is when the construction to build
specialist hospitality is too costly that bring into amount of RM 980,000,000. Construction cost to
complete this specialist hospital include by providing 300 wards, 50 specialist rooms for
consultation, operation theatre, laboratoris and cafetaria.

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 RECOMMENDATION

This project requires about RM571 695 000.00 which is estimated to be completed within 3
years. The margin of financing is from 65% to 95% depends on the condition of each projects. The
balance amount is to be borne by the company. We decided to put 3% to 5% for the profit rate
based on the riskiness that each project holds.

We would recommend this project to be financed because of the huge potential that it has.
In addition, we put our trust to Eco World because the company is well established and well-known
for its great performance. It had taken many mega projects which involved several countries before.
Apart from that, Eco World had also received some awards for its achievement in several categories.
For example, Top 10 Developers by The Edge Property Excellence Awards 2018 and Best Developer
for Residential, Malaysia award by Euromoney Real Estate Awards 2018. This convince us that Eco
World can handle this project in the best way.

Another speciality of Eco World is for its excellence in developing sustainable development.
The company focus on the environment and ecosystem as a vital component in every project it
takes. It can be proved by the concept and architecture of every building or projects of the company.
Eco World had received many Green Award for its contribution in upholding calm surrounding and
nature. Apart from that, this company also received Best Performing Stock Award in 2015 and
Highest Returns to Shareholder Over Three Years in 2016 from by The Edge Billion Ringgit Club
Awards. It reflects the great capability and excellent performance that the company has in order to
ensure their investment gives high benefit to its stakeholders. Lastly we would really recommend the
bank management to approved the financing of this project.

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 REFERENCES

Abd. Rahman, N. H. (2019). Handbook Bank Management.

EcoWorld. (n.d.). Creating Tomorrow and Beyond. Retrieved from https://ecoworld.my/awards/

EcoWorld. (n.d.). E-Brochure. Retrieved from https://ecoworld.my/ecobotanic/e-brochure.php

ECO WORLD DEVELOPMENT GROUP BERHAD. (n.d.). Retrieved from

https://www.ctoscredit.com.my/business/ECO-WORLD-DEVELOPMENT-GROUP-BERHAD-0017777V
(n.d.). Retrieved from http://www.bursamalaysia.com/market/listed-companies/list-of-
companies/plc-profile.html?stock_code=8206

(n.d.). Retrieved from

https://info.creditriskmonitor.com/Report/ReportPreview.aspx?BusinessId=5491863

(n.d.). Retrieved from http://www.muamalat.com.my/index.html

(n.d.). Retrieved from http://www.muamalat.com.my/business-banking/corporate-

banking/financing/al-istisna.html

7 things to know about Eco World Development Group. (2017, October 06). Retrieved March 19,
2019, from https://fifthperson.com/7-things-know-eco-world-development-group/

Company Overview of Eco World Development Group Berhad. Retrieved March 19 2019 from
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=8087265

Eco World Development Annual Report 2018 https://ecoworld.my/wp-

content/uploads/2019/02/ar2018.pdf

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