THE PROBLEM CONTEXT
NVT is a leading tourism real estate company in Vietnam, focusing on investment, construction, and the development of luxury eco resorts Established in 2006 with an initial charter capital of 1 billion Vietnam dong, NVT has significantly expanded its financial foundation, raising its charter capital to 505 billion Vietnam dong in 2009 and further to 905 billion Vietnam dong by 2016 The company is dedicated to creating five-star quality products that reflect Vietnamese culture and heritage, enhancing the unique characteristics of various regions in Vietnam.
Six Senses Ninh Van Bay Resort has emerged as a premier destination for over 150,000 travelers, both domestic and international The resort's exceptional services and offerings have earned it 14 prestigious awards from renowned travel agencies and magazines, including Tatler World, World Travel Awards, The Guide Magazine, and Condé Nast Traveller This recognition highlights the resort's commitment to excellence in hospitality and its continuous development in the luxury travel sector.
The Six Senses Saigon River Project, initiated on May 1, 2009, aims to serve as a key transit hub for travelers heading to popular destinations such as Nha Trang, Phu Quoc, Dalat, Bangkok, Phnom Penh, and Singapore, while also attracting a diverse range of international tourists.
Between 2013 and 2015, the company's profits experienced a significant decline, failing to meet annual targets In 2013, the earnings before tax (EAT) stood at 39.8 billion Vietnam dong, but this figure dropped to 25.6 billion Vietnam dong in 2014, falling short of the 45 billion Vietnam dong goal By 2015, the situation worsened further, with EAT plummeting to -122.9 billion Vietnam dong, marking a stark decrease compared to both 2014 and the 9.1 billion Vietnam dong target for that year.
NVT's financial results have prompted inquiries regarding potential issues within the company This study aims to identify whether there is a problem, explore the underlying reasons, and outline the organization's action plans to address these challenges.
SITUATION ANALYSIS
Problems finding process
In order to identify these company problems, these following steps will be executed:
A recent group meeting was held within the Financial Department of NVT to identify division symptoms and potential issues The meeting included key financial executives: Mr Tran Kim Nhan, Mr Truong Quang Phu, and Mrs Tran Nguyen Thi Mai Suong, who collaboratively discussed the challenges faced by the department.
This study reviews literature on the symptoms and further research regarding the financial reliability of companies listed on the Ho Chi Minh Stock Exchange, specifically focusing on NVT, whose financial reports undergo regular audits Additionally, the research incorporates information from industry competitors and credible sources within the market The findings also include insights from recent discoveries related to these financial assessments.
- Deep interview with persons in charged for more details: Mr Hoang Anh Dung - the General Director of NVT, Mrs Ngo Thi Thanh Hai – the Chief Accountant of NVT;
- Additional intelligent information may be acquired from competitors for further references.
Problem symptoms
From datas calculated from annual reports, supportive theories associated with the first meeting with responsible members, the symptoms revealed company’s ineffective profitability as the following details:
- Profit has decreased significantly while revenue showed a different trend;
- Profitability decreased sharply over the period 2013 to 2015;
- Basic Earning Power ratio decreased under interest rate.
Between 2013 and 2015, NVT experienced a significant decline in gross profit, earnings before tax (EBT), and earnings after tax (EAT), despite stable revenue figures While other companies in the same industry showed similar revenue trends during this period, NVT's profit margin sharply decreased, contrasting with the profit trends of its competitors This concerning trend is supported by the accompanying financial data and ratios.
Table 1 below shows revenues and profits of NVT from 2013 to 2015 for a clearly picture about the performance of the company.
Value (in billion VND) Position (%)
Table 1 Revenue and profit of NVT from 2013 – 2015 (Unit: billion VND)
Between 2013 and 2014, the company's revenue experienced a slight increase, followed by a minor decline from 2014 to 2015, indicating overall stability in revenue levels However, the company's profits showed a significant downward trend during the same period, contrasting with revenue stability The gross profit margin also decreased notably, falling from 46.07% in 2013 to 13.70%.
2015 EBT dropped sharply from 39.8 billion Vietnam dong in 2013 down to 25.6 billion
Vietnam dong in 2014 and dramatically decreased to -122.9 billion Vietnam dong in 2015 As a result, EAT
Revenue and Net profit of NVT 2013 - 2015 (billion VND)
From 2013 to 2015, the net profit margin experienced a significant decline, dropping from 19.52% in 2013 to 10.58% in 2014, and plummeting to -67.48% in 2015 This stark contrast between profit and revenue trends is illustrated in Figure 1 below.
Figure 1 Revenue and Net profit of NVT from 2013 - 2015
Table 2 and Figures 2 and 3 present a comparison of NVT with other companies in the tourism real estate sector, including Ocean Hospitality (OCH), Sao Mai Group (ASM), and Thanh Thanh Cong Tourist (VNG).
Table 2 Revenue and profit margin of companies in the same industry from 2013 – 2015
From 2013 to 2014, NVT's revenue mirrored that of OCH and ASM, showing an increase, followed by a decline from 2014 to 2015 However, unlike the other three companies, NVT experienced a significant downward trend in profit margins during this period, highlighting a notable issue with declining profits from 2013 to 2015.
Figure 2 Revenues of companies in the same industry with NVT 2013 - 2015
Figure 3 Profit margins of companies in the same industry with NVT 2013 - 2015
The second symptom of NVT is the remarkably decreased performance efficiency from
2013 to 2015 which has an opposite trend to other companies in the same industry.
Research by Salim et al highlights a negative correlation between firm performance, as indicated by return on assets (ROA), return on equity (ROE), and earnings per share (EPS), and various types of debt, including short-term debt (STD), long-term debt (LTD), and total debt (TD) Additionally, Chen-Ying utilized operating ratio alongside ROA as profitability indicators to assess the financial performance of insurers.
To assess the company's profitability and performance, key financial metrics such as return on equity (ROE), return on assets (ROA), earnings per share (EPS), and gross profit margin were calculated, as detailed in Table 3.
The profitability ratios of the firm, as shown in Table 3, reveal a significant decline, with ROE dropping from 4.83% to -14.71% and ROA decreasing from 2.92% to -9.64% In 2013, both ratios were positive, indicating that the company generated profits, with ROE surpassing ROA Specifically, a 4.83% ROE suggested that an investor would earn 4.83 dong on a 100 dong investment Although both ratios remained positive in 2014, they declined, and ROE continued to exceed ROA However, by 2015, ROE fell into negative territory, implying a loss of 14.71 dong on a 100 dong investment, discouraging potential investors Furthermore, the ROE was significantly lower than ROA, indicating inefficient use of leverage, as the company’s profits were insufficient to cover its financial obligations, resulting in a drastic reduction in EPS from 248 to -1,411 VND.
In the meanwhile, ROE and ROA of the companies in the same industry with NVT have the different trends.
ROE ROA EPS (thousand VND)
Table 4 ROE, ROA and EPS of companies in same industry with NVT from 2013 - 2015
Between 2013 and 2014, companies within the same industry exhibited varying trends in their ROA and ROE ratios compared to NVT While NVT showed satisfactory results, other companies faced significant declines; for instance, OCH's ROE plummeted from 5.8% in 2013 to -76.76% in 2014, and VNG's ROE decreased from 0.33% to 0.29% Consequently, both companies experienced a downward trend in their ROA during this period Overall, NVT outperformed its industry peers from 2013 to 2014.
In 2015, competitors experienced significant growth, with OCH's return on equity (ROE) rebounding from -76.76% in 2014 to 2.07% Similarly, VNG's ROE improved from a low of 0.29% in 2014 to 0.64% in 2015 However, NVT faced a contrasting trend, suffering a decline in both ROE and return on assets (ROA), resulting in the lowest earnings per share (EPS) of -1.41 for the year In contrast, OCH, ASM, and VNG reported positive EPS figures of 0.13, 0.62, and 0.19, respectively.
In conclusion, decreased performance efficiency in 2013 – 2015 is the second symptom of the company.
2.2.3Basic Earning Power ratio decrease
Between 2013 and 2015, the company experienced a consistent decline in its Basic Earning Power (BEP) ratio, which is calculated by dividing earnings before interest and taxes (EBIT) by total assets (TA) This persistent reduction in BEP serves as a clear indicator of underlying issues within the company.
The formula is: BEP = EBIT/TA
The Break-Even Point (BEP) is a crucial metric for assessing a company's efficiency in utilizing its assets to generate income, while also considering the impacts of leverage and tax rates Research by Nguyen et al (3) analyzed BEP ratios to evaluate the financial influences on foreign-invested enterprises in Ho Chi Minh City from 2007 to 2011 Additionally, Burney et al (4) demonstrated that for financial leverage to enhance Return on Equity (ROE), the interest rate must remain below the BEP ratio The following table presents the BEP ratios for NVT during the period from 2013 to 2015.
Table 5 The BEP ratios of NVT 2013 – 2015
In Vietnam, the average savings interest rate stands at approximately 6.5% Analysis of the data from 2013 to 2015 reveals that the company's Break-Even Point (BEP) was significantly low, with a negative figure reported in 2015 This indicates that the use of financial leverage has adversely affected profitability Consequently, the declining and insufficient BEP is a clear indicator of underlying issues within the company.
Possible problems
From the supportive theories, researches, datas and the following Dupont analysic, these are possible problems of decreased profitability:
Ord Possible problems Supportive theories
1 Poor management of cost and expenses leads to decreased profit margin
2 The ineffective utilization of asset leads to decreased asset turnover
Abdelmoneim et al (5) Jovanovic et al (6) Soliman et al (7)
3 Ineffective utilization of leverage factor Yang (8)
Table 6 The possible problems and supportive theories
Abdelmoneim et al conducted a study to develop a comprehensive strategic model aimed at managing profitability by utilizing strategic management accounting concepts and tools This model focuses on key profitability drivers, including cost, assets, and revenue The findings indicated that the proposed comprehensive profitability model, which integrates techniques for all three drivers, outperformed alternative models that only combined two variables in predicting profitability.
Jovanovic et al (6) emphasize that a company's profitability is critically assessed through key metrics such as return on assets (ROA) and return on equity (ROE).
According to Soliman et al (7), DuPont Analysis is a widely utilized method of financial statement analysis among market participants This analytical approach breaks down the return on net operating assets into two key components: profit margin and asset turnover.
- Yang (8) aims to study the relationship among venture capital (VC), financial leverage and enterprise performance by empirical study, utilizing the data from China's GEM(Growth
Enterprises Market) listed companies of 2010-2014 The empirical results show that: VC is positively related to enterprise performance, and financial leverage is negatively correlated with corporate performance.
To identify potential issues with decreased profitability, the DuPont analysis is utilized, demonstrating that a company's return on equity (ROE) can be expressed through three key ratios: profit margin, total asset turnover, and equity multiplier This analysis reveals how ROE is influenced by operating efficiency, asset utilization, and financial leverage Numerous researchers have explored the relationship between ROE and the DuPont analysis in their studies.
- Muda et al (9) stated that ROE not only determines the profitability but also reflects the extent of effectiveness of the management use of shareholders’ investments.
- Penman (10) claim that ROE is best interpreted as a profitability measure, not a risk measure and ROE indicates future profitability and thus distinguishes market-to-book ratios.
- Klingenberg et al (11) proved that profitability ratios are Return on Asset (ROA), Return on Equity (ROE) and Basic Earning Power (BEP).
- Rao et al (12) used DuPont analysis in order to extend of ROE for deep analysis of financial performance.
- Jovanovic et al (6) used ROA and ROE to measure profitability in order to present financial performances of 5 top companies in Serbian food industry, especially in meat industry (MI).
- Khan et al (13) used profitability in the study measured by return on investment (ROI) and return on equity (ROE).
- Ibrahim (14) used three of accounting-based measures method to measure financial performance, they are return on equity (ROE), return on assets (ROA), and gross profit margin.
ROE = Profit Margin x Asset Turnover x Leverage Factor
Net Income/Total Equity = (Net Income/Net Sales) x (Net Sales/Total Asset) x (Total Asset/Total Equity)
According to calculations from financial reports, DuPont Analysis for NVT case is shown in table below:
Table 6 highlights the significant impact of various components on Return on Equity (ROE), revealing a notable decline in profit margin and asset turnover ratios from 2013 to 2015, which contributed to a negative ROE Additionally, the ratios of Total Assets to Total Debt and Total Debt to Total Equity indicate that NVT utilized leverage, potentially influencing the company's profitability Consequently, the decline in ROE raises concerns about underlying issues within the company's financial performance.
Poor management of cost and expenses or/and decreased net revenues leads to decreased profit margin;
The ineffective utilization of asset or/and decreased net revenue leads to decreased asset turnover;
Ineffective utilization of leverage factor.
Main problems
An analysis of financial data reveals that the primary issues contributing to decreased profitability are heightened interest expenses and suboptimal use of leverage, indicating an ineffective capital structure This conclusion is supported by the subsequent analysis.
The table below shows an obvious look of financial expense from 2013 to 2015:
Value (In billion VND) Position (%)
Table 8 Interest Expense of NVT from 2013 to 2015
From table 8, financial expense were 1.8 billion VND with 0.9% increase to 43.8 billion VND with 23.2% In which, the interest expenses is 1.5 billion VND in 2014 and 37.7 billion VND in 2015.
Between 2013 and 2015, the company's consolidated financial reports reveal a significant increase in interest expenses primarily due to the issuance of bonds On November 11, 2014, the company successfully issued 23,000 bonds totaling 230 billion VND to Nam Thanh CO.LTD, which subsequently transferred all bonds to Vietnam Technological and Commercial Joint Stock Bank These bonds have a maturity period of three years, with interest payments made biannually at an annual interest rate of 12% for the first two years.
Between 2013 and 2015, the debt increased from 309 billion VND, with a significant event occurring in 2014 as per the contract terms The subsequent interest rate was set at 3.5% in addition to the basic interest rate of Vietnam's commercial banks This rising debt has resulted in high interest expenses, highlighting a critical issue for the organization.
2.4.2Ineffective utilization of leverage factor
The primary issue facing the company is the ineffective utilization of leverage, which stems from a suboptimal capital structure reliant on debt This conclusion is drawn from a thorough analysis of the calculated data presented in the accompanying table, supported by relevant theories.
Table 9 Capital structure ratios of NVT and other companies from 2013 to 20 15
The capital structure ratios indicate that NVT has utilized leverage by increasing its total debt Notably, the company has reduced its short-term debt from 265 billion VND in 2013 to 143 billion VND in 2015, while simultaneously increasing its long-term debt from 126 billion VND.
On November 11, 2014, the company issued 23,000 bonds, identified by warrant number 01-2100/HDDM-TP/NVT, totaling 230 billion VND This successful issuance contributed to a significant rise in long-term debt, which increased from 126 billion VND in 2013 to 306 billion VND in 2014.
OCH has significantly higher total debt (TD) to total assets (TA) and TD to total equity (TE) ratios compared to NVT, indicating that OCH utilized greater leverage, particularly in short-term debt (STD) rather than long-term debt (LTD), with these ratios increasing over time Similarly, ASM exhibited higher TD to TA and TD to TE ratios than NVT, with a notable increase in total equity from 702 to 2,436, leading to rising TD to TA and TD to TE ratios VNG, on the other hand, also favored STD over LTD, reflecting a trend of increasing TD, which rose from 25% to 56% relative to TA Overall, while most companies, including OCH and ASM, increased both TD and TE, NVT showed a contrasting trend of rising TD alongside a decrease in TE.
In NVT's case, the BEP ratios in section 2.2.3 indicate that utilizing financial leverage could negatively impact profits, primarily due to increased financial expenses.
Vătavu (15) conducted a study on the relationship between capital structure and financial performance in 196 Romanian manufacturing companies listed on the Bucharest Stock Exchange, covering the period from 2003 to 2010 The findings revealed that these companies achieve better performance by minimizing debt and relying on equity financing Additionally, the research highlighted a tendency for companies to resort to debt when experiencing financial distress, facing significant business risks, or struggling to meet their debt obligations due to cash flow issues.
Gill et al (16) aimed to build upon Abor's (2005) research by exploring how capital structure influences profitability in American service and manufacturing firms, measuring profitability through return on equity.
Therefore, the ineffective utilization of leverage factor as the ineffective capital structure using debt is the main problem of the company.
High general and administrative expenses, along with ineffective asset utilization and declining revenues, are significant challenges faced by businesses Mohamed (17) emphasizes that revenue is a crucial factor influencing profitability, and developing a model can aid in effectively managing profitability However, data analytics indicates that these issues may not be as critical as they seem.
The first unimportant problem is high general and administrative expense and revenues deduction.
Value (In billion VND) Position (%)
Table 10 Income Statement of NVT from 2013 to 2015
The decline in profit margin, as shown in Table 10, is attributed to a significant drop in revenue deductions from -0.1 billion VND to -93 billion VND, primarily due to issues with the Six Senses Saigon River project by Hai Dung CO.LTD In 2010, the company reported revenue from the foundation and civil work completed for villa sales under the resort's contracts However, by 2015, the company had not finished the interior work, leading to incomplete payments from customers for the completed items To address these contractual issues, an economic contract liquidation was signed, allowing Hai Dung CO.LTD to refund payments to customers while retrieving all related documents and receipts Consequently, NVT recorded these refunds as revenue deductions.
The increasing general and administrative expenses significantly impacted profit margins, rising from 30.0% in 2013 to 54.3% in 2015 This surge can be attributed to NVT's acquisition of 51% of Hong Hai Tourism JSC and 90% of Hai Dung CO.LTD, which resulted in a total goodwill of 224.6 billion VND allocated over ten years In 2015, the company recorded the remaining goodwill of 44.1 billion VND from the Hai Dung CO.LTD acquisition into the general and administrative expenses, contributing to a total of 102.6 billion VND Thus, the primary factor for the elevated expenses was the goodwill allocation from these subsidiary purchases.
Starting in 2016, the issues related to high expenses from goodwill allocation in subsidiary acquisitions and revenue deductions will no longer be significant, indicating that these factors should not be considered the primary problems.
The ineffective utilization of assets has led to decreased revenues, as indicated by the declining asset turnover ratio This ratio, calculated by dividing net sales by total assets, reflects a company's efficiency in generating revenue During the period, net sales significantly dropped due to revenue deductions from issues related to the Six Senses Saigon River project, while total assets remained relatively stable, declining from a growth rate of 17.7% in 2013 to -8.4% in 2015.
Value (In billion VND) Growth (%)
Table 11 NVT’s net sales and total asset
The reason of ineffective utilization of asset is originally revenue deduction which will end from 2015 Therefore, ineffective utilization of asset is not the main problem of decreased profitability.
2.5Possible causes of the problem
From supportive theories and information of the interview with Mr Hoang Anh Dung, the General Director of NVT’s, possible causes of inefficient capital structure using debts are:
Ord Possible causes Supportive theories
1 Generating cash flow in order to finance the debts Coricelli et al, Goel et al
2 Expanding by investing in the projects with high debt on total project investment
5 Reducing the agency costs of free cash flow Jensen
Table 12 Possible causes and supportive theories
Main causes of the problem
A study by Abor (22) investigated the impact of debt policy, specifically capital structure, on the financial performance of small and medium-sized enterprises (SMEs) in Ghana and South Africa The findings revealed that while capital structure does influence financial performance, it is not the sole factor Notably, the research highlighted that long-term and total debt ratios have a negative effect on the performance of SMEs.
Aivazian et al (23) demonstrated a negative relationship between leverage and investment, with the adverse impact being notably more pronounced in firms that have low growth opportunities compared to those with high growth potential.
Zhong-qin et al (24) proved that a high leverage implies more monitoring efforts by creditors on the firm's overinvestment and will have a negative effect on overinvestment.
Singh et al (25) analyzed data from US manufacturing firms and found that increased leverage negatively affects future investments in research and development (R&D) This decline in R&D investment can subsequently harm long-term operational performance and diminish future growth opportunities.
Moreover, with the purpose to go further about the original and main reasons, a deep interview with leaders of the company was conducted From Mr Hoang Anh Dung, the General
The Director of NVT has identified a significant issue: the owner's equity invested in projects, such as the Emeralda Ninh Binh project, is substantially lower than the total investment This disparity highlights the need for a more balanced financial strategy to enhance the company's capital structure and ensure sustainable growth.
150 billion Vietnam dong but the total investment of 500 billion Vietnam dong, the Six Senses Saigon River project with the equity of 110 billion Vietnam dong, but the total investment of
The financial results reveal a staggering loss of 950 billion Vietnam dong, primarily attributed to the stalled Six Senses Saigon River project This incomplete venture has resulted in a significant revenue deduction of 92 billion Vietnam dong due to depleted funds, placing a considerable financial burden on Ninh Van Bay Mr Dung highlights that the long-term inefficiency of Ninh Van Bay's business operations stems from investments made during a crisis period with high interest rates, leading to elevated capital costs and escalating debt.
Mrs Ngo Thi Thanh Hai, the Chief Accountant of NVT, highlighted the company's financial situation, revealing a significant debt restructuring effort As of December 31, 2014, Ninh Van Bay faced a notable financial obligation of 230 billion Vietnam dong from a bond issuance in 2014, alongside over 59 billion Vietnam dong in short-term loans More than 51 billion Vietnam dong of these loans were sourced from shareholders and individuals, carrying interest rates between 12% and 17%, with no secured assets, set to mature by April 2015 Additionally, there was a loan of over 6.4 billion Vietnam dong from Ninh Van Bay Holiday CO.LTD, with a 15% interest rate, maturing on February 23, 2015, also without secured assets.
Mrs Ngo Thi Thanh Hai claimed that although the company has successfully issued 230 billion Vietnam dong of bonds in 2014, but mostly the purpose is to finance the debt structure.
Therefore, NVT still has been insufficient financial resources to invest in a large project, consuming hundreds of billions Vietnam dong.
In conclusion, NVT faces challenges due to an inefficient capital structure, which negatively impacts its financial performance The primary issue stems from elevated debt levels associated with total project investments, making it difficult to generate sufficient cash flow to meet debt obligations.
Cause – effect tree of problem
The following cause–effect tree is to have a general look main problem:
SOLUTION DESIGN
Possible solutions for inefficient capital structure
The study highlights that high debt levels, influenced by debt structure, can pose significant challenges for businesses While financial leverage can initially offer benefits such as lower costs of debt and tax advantages—resulting in a decreased weighted average cost of capital (WACC)—mismanagement during economic downturns can lead to fund depletion Relying on continued borrowing as a temporary fix may yield serious long-term consequences Additionally, research by Efobi et al indicates that a higher ratio of long-term debt to total assets and a greater ratio of equity to total liabilities negatively impact return on capital employed (ROE), whereas the ratio of short-term debt to total liabilities has an insignificant effect on ROE.
The possible solutions for this problem are proposed that:
1 Raising capital: 2 Reducing and financing debts by: External financing
- Increasing capital injections by issuing new shares; (Peer et al)
- Issuing new bonds; (Tawatnuntachai et al)
- Control the investment by reduction of overinvestment and reselling the inefficient projects; (Stephen et al)
- Increasing sales in the control of expenses to get profits for financing debts (Peer et al)
Internal financing earnings (Bierman et al,
Firms can raise capital through various methods, as noted by Stephen et al (27), including debt financing by borrowing money, equity financing by selling a portion of the firm, or a combination of both One effective strategy for capital generation is the public sale of securities.
Peer et al (28) suggested that company can increase the capital by increasing the profits or through capital injections by shareholders.
Research by Tawatnuntachai et al indicates that companies with a strong international reputation and those seeking substantial funding prefer to issue global bonds over domestic ones While global bonds may allow firms to raise more capital, the associated issuing costs do not tend to be lower.
Bierman et al (30) stated that firms not issuing new equity, the suitable hurdle rate for investments is a weighted average after-corporate-tax cost of debt and retained earnings.
Schworm (31) declared that firms can always retain current earnings to finance optimal capital accumulation at future dates.
Implementation of suitable plans
ID Possible solutions Company situation Decision
Increasing capital injections by issuing new shares.
The cost of issuing new share is high, dividends payable to shareholders continues to be the financial burden.
The company already issued 230 billion Vietnam dong of bonds in 2014 and maturity in 2017.
From Faulkender et al (32), firms that have access to the public bond markets, as
Unsuitable measured by having a debt rating, have significantly more leverage
This solution could be reasonable for companies which continuously produce profit and profitability is decreasing
Reduction of overinvestment and reselling the inefficient projects.
The owner equity invested in the project are much lower compared to the total investment.
Increasing sales in the control of expenses to get profits for financing current debts.
In the period from 2013 to 2015, the revenues of the company did not change much This solution is suitable for the company to get more profits to finance debts.
Table 14 Implementation of suitable plans
3.2.1Reduction of overinvestment and reselling the inefficient projects
To enhance financial stability, the company must focus on restructuring by narrowing its investments and prioritizing high-profit assets This includes actively engaging with potential domestic and international partners to explore opportunities for collaboration or the resale of the Six Senses Saigon River project Currently, the company holds 183,600 shares, representing 12.24% of Tan Phu JSC's charter capital, which is involved in the Emeralda Ninh Binh project As of December 31, 2015, Tan Phu JSC's gross loans, excluding interest, amounted to 210 billion Vietnam dong To meet the operational needs of NVT, it is essential for the company to divest its investment in Tan Phu JSC, encompassing both shares and loan accounts, to bolster its capital.
3.2.2Increasing sales in the control of expenses to get profits for financing debts
To enhance sales activities, it is essential to target traditional customers such as Six Senses Ninh Van Bay and Emeralda Ninh Binh The marketing efforts for these projects should concentrate on both domestic and international markets to broaden their reach Specifically, for the Six Senses Ninh Van Bay project, the company aims to uphold service quality while also expanding promotional programs to attract more visitors.
Actions Plan
The actions plan in 6 months could be scheduled as following:
Ord Solutions Task name Sub-tasks
Start Finish Duration Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 w1 w2 w3 w4 w1 w2 w3 w4 w1 w2 w3 w4 w1 w2 w3 w4 w1 w2 w3 w4 w1 w2 w3 w4
Reduction of overinvestment and increase cash by resale the inefficient projects
Resell the project Six Senses Saigon River
Value the project to be onsale
Looking and negotiating with interested investors
Conducting selling contract and process
Transfer and withdraw the investment in Tan Phu JSC.
Finance Department of Tan Phu JSC.
Increasing sales in the control of expenses to get profits for financing current debts
Maintain services quality and expands the promotional programs to attract tourists
Create and promote the promotional programs
Create promotional policies in low seasons
Selecting, training and improving the qualifications of resort's service staff
2 times a month (1st and 15th) Practice
Control the quality of training
1 times a month (end of month)
To address the issues identified in section 3.2, NVT should focus on two key actions: reducing overinvestment and increasing cash flow through the sale of inefficient projects Additionally, enhancing sales while managing expenses is crucial for generating profits to finance current debts These strategies should be implemented within the first six months of 2016 to effectively resolve the company's financial challenges.
The company should prioritize reselling the Six Senses Saigon River project within three months and promptly withdraw its investment in Tan Phu JSC, with the Finance Department leading these efforts within one month to mitigate risks The reselling process involves three key actions: first, the Finance Department, with support from the Project Development team, must value the project for sale within two weeks Next, the company should identify and negotiate with potential investors over a period of 1.5 months Upon successfully securing a suitable investor, NVT can finalize the selling contract and initiate the project transfer, aiming to complete the first transaction within one month, while subsequent transactions may extend up to six months based on negotiations Additionally, the withdrawal of investment in Tan Phu JSC must be expedited within one month.
To boost profits for current debt financing, NVT must focus on increasing sales while controlling expenses through three key initiatives that should be implemented simultaneously The resort's general director is responsible for maintaining high service quality, which is essential for attracting tourists Concurrently, the Sales and Marketing department should develop and promote enticing promotional programs, such as competitive package deals and wedding offers, to draw in more visitors.
To enhance sales during the low season from April to June, resorts should implement 33 promotional policies, including discount and voucher programs A key strategy for maintaining service quality is the careful selection and ongoing training of service staff The Training department, reporting to the resort's general director, should schedule training sessions twice a month, with assessments conducted at the end of each month to ensure staff proficiency By continuously focusing on these three tasks, resorts can effectively manage expenses and address issues related to service quality, ultimately driving sales growth.
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Appendix Appendix 1 NVT’s subsidiaries, affiliates and the company’s investments, projects
NVT operates through two subsidiaries: Hong Hai Tourism JSC and Hai Dung CO LTD It holds a 51% stake in Hong Hai, which has a charter capital of 90 billion Vietnam dong and specializes in holiday tourism and accommodation services, including the award-winning Six Senses Ninh Van Bay resort in Khanh Hoa, managed by Six Senses Resort & Spa Group for over a decade Additionally, NVT owns 90% of Hai Dung CO LTD, the developer of the Six Senses Sai Gon River project, featuring 154 private villa-style rooms and luxury services; however, this project, initiated in 2008, has been postponed.
Ninh Van Bay JSC oversees five affiliates, including Con Bap Ecological Tourism Co LTD, Danh Viet Trading & Service JSC, Tan Phu Tourism JSC, Ninh Van Bay Holiday Co LTD, and EMG JSC Notably, Tan Phu Tourism JSC manages the Emeralda Ninh Binh project, which has been operational since May 2011, achieving full capacity for all rooms and services by 2013.
The company's tourism real estate division boasts fully completed and operational luxury projects, including the Six Senses Ninh Van Bay in Khanh Hoa and Emeralda Ninh Binh in Ninh Binh province Six Senses Ninh Van Bay, established between 2002 and 2005, spans 55 hectares of leased land and 95 hectares of sea surface, featuring 58 luxury villas Emeralda Ninh Binh covers 16.2 hectares and includes 52 four-star luxury villas, along with a range of amenities such as a restaurant, bar, spa, gym, large outdoor pool, indoor hot water pool, tennis court, and convention and meeting areas, as well as a children's care area.
Pending projects in Vietnam include the Six Senses Saigon River and Ana Mandara Hoi An The Six Senses Saigon River, situated in Dong Nai province, spans 55.3 hectares and features 150 luxury villas, a water park, cinema, children's playground, spa, massage services, restaurants, and a fruit garden However, the first phase of this project has been halted due to a lack of capital, prompting the company to seek investors for project transfer Meanwhile, the Ana Mandara Hoi An project, located in Hoi An, covers an area of 244,848 square meters and is currently in the development phase.
Appendix 2 Overview of tourism real estate market in Vietnam
Tourism real estate properties are situated in sought-after tourist destinations and include second-home units as well as extensive tourism and leisure facilities like hotels, parks, marinas, and golf courses These amenities enhance the tourist experience, attract visitor traffic, and offer services to both guests and property owners, ultimately increasing the desirability and accelerating the sales of residential units While the operation of these facilities may sometimes be unprofitable, their contribution typically elevates the overall value of the projects.
Between 2013 and 2015, the Vietnam tourism industry faced significant challenges, including political tensions, ethnic conflicts, and a sluggish global economic recovery following the recession Additionally, increased aviation accidents and the Ebola outbreak heightened psychological fears among potential tourists China's illegal placement of an offshore oil rig in Vietnamese waters further negatively impacted tourism, particularly among Chinese-speaking visitors The depreciation of the ruble also affected the influx of Russian tourists, a key market for Vietnam Despite these hurdles, both international and domestic tourist numbers in Vietnam experienced steady growth during this period.
Table 15 Numbers of international visitors, domestic visitors and revenues from 2013 to
Domestic visitors (in millions of visitors)
Revenue (in billions of VND)
% change in comparison with the past year
(Numbers from Vietnam National Administration of Tourism)
Vietnam has experienced a steady increase in both international and domestic tourism over the past three years, driven by factors such as political stability, its prominent position on the global stage, the friendliness of its people, and improved infrastructure, along with a diverse culinary scene According to STR, a Tennessee-based company that tracks supply and demand in various markets, the Vietnamese hotel industry saw remarkable growth in the first quarter of 2016, with occupancy rates rising by 5.6% to reach 68.7%, and average daily room rates (ADR) increasing by 4.5% to an impressive $129.67 in the premium segment, marking a record high for the country.
Investment in coastal real estate has surged significantly in recent years, with numerous projects attracting attention from investors These prime locations not only offer beautiful scenery but also draw a substantial number of tourists, further enhancing their appeal.
The resurgence of the economy has significantly energized the tourism real estate market, largely due to the implementation of two key decree-laws: the amended Real Estate Trading Act and the modified Housing Act, both effective January 7, 2015 These laws notably enhance conditions for real estate ownership by overseas Vietnamese and foreigners Additionally, the inclusion of five European countries—namely the United Kingdom, France, Germany, Italy, and Spain—in the visa exemption program for 15 days underscores the Vietnamese Government's proactive efforts to boost tourism.
Once a booming market, coastal resort real estate saw a surge of hundreds of projects launched for sale However, many of these developments remained unfinished, resulting in a chaotic and uneven landscape along the coastline.