Setting up corporate valuation advisory service at mekong securities joint stock company

NATIONAL ECONOMIC UNIVERSITY BUSINESS SCHOOL NGUYEN QUANG HUY SETTING UP CORPORATE VALUATION ADVISORY SERVICE AT MEKONG SECURITIES JOINT STOCK COMPANY BACHELOR OF BUSINESS ADMINISTRATION IN ENGLISH (E[.]

NATIONAL ECONOMIC UNIVERSITY BUSINESS SCHOOL NGUYEN QUANG HUY SETTING UP CORPORATE VALUATION ADVISORY SERVICE AT MEKONG SECURITIES JOINT STOCK COMPANY BACHELOR OF BUSINESS ADMINISTRATION IN ENGLISH (E-BBA) THESIS HANOI, 2014 NATIONAL ECONOMIC UNIVERSITY BUSINESS SCHOOL SETTING UP CORPORATE VALUATION ADVISORY SERVICE AT MEKONG SECURITIES JOINT STOCK COMPANY BACHELOR OF BUSINESS ADMINISTRATION IN ENGLISH (E-BBA) THESIS Student: Nguyen Quang Huy Class: E-BBA-2A Supervisor: MBA Pham Sy Long HANOI, 2014 ACKNOWLEDGEMENT I would like to express my gratitude to all those gave me the possibility to complete this thesis I deeply indebted to my supervisor MBA.Pham Sy Long, whose help, stimulating suggestions and encouragement helped in all the time of research for and writing of this thesis He always gave full and immediate support whenever necessary In addition to that, I would like to thank to all teachers of EBBA program for giving me basic knowledge to conduct this thesis I want to sincerely thank to Mekong Securities Joint Stock Company for giving permission to commence this thesis in the first instance, providing me with the effective data, helped to supply relevant material and support me much for the competition of this thesis Without the support of all those people I could not complete my thesis and gain a great knowledge for my field of research Thus, I want to thank all of them again CONTENTS ACKNOWLEDGEMENT ABBREVIATION .5 LIST OF TABLES LIST OF FIGURES EXECUTIVE SUMMARY INTRODUCTION 11 I Rationale .11 II Objectives 12 III Research questions: 12 IV Research methodology 12 V Data collection 13 VI Structure of thesis 13 CHAPTER THEORETICAL BACKGROUND ON CORPORATE EVALUATION OF SECURITIES COMPANY 14 1.1 Theoretical background on securities company 14 1.1.1 Definitions of Securities Company 14 1.1.2 Classification of Securities Company 14 1.1.3 The roles of Securities Company .15 1.2 Theoretical background on corporate valuation 15 1.2.1 Corporate value 15 1.2.2 Principles of corporate valuation 16 1.2.3 Definition and theoretical background 17 1.2.4 Misconceptions about valuation .18 1.2.5 Reasons for valuation application and using situation 20 1.2.6 Valuation approaches .21 1.2.7 Discounted cash-flow valuation 24 1.2.8 Economic value added valuation .33 1.2.9 Asset-based method 39 CHAPTER SETTING UP CORPORATION VALUATION ADVISORY SERVICE AT MSC 41 2.1 Introduction of Mekong Securities Joint Stock Company 41 2.1.1 Overview of Mekong Securities Joint Stock Company 41 2.1.2 Professional services at MSC 41 2.1.3 MSC’s organization structure 43 2.2 Setting up corporate valuation advisory service in MSC 46 2.2.1 General description of corporation valuation advisory service 46 2.2.2 Market research 47 2.2.3 Price strategy .52 2.2.4 Selling plan 53 2.2.5 Human resources 55 2.2.6 Financial plan 58 2.2.6.1 Estimated cost 58 2.2.6.2 Forecast income statement 60 2.2.7 Legal requirements for providing corporation valuation advisory service 61 2.2.8 Corporation valuation process 64 2.2.9 Carry out the entire valuation process 64 CHAPTER RECOMMENDATIONS WHEN LAUNCHING SERVICE 76 3.1 General comment 76 3.1.1 Strengths of MSC 76 3.1.2 Weaknesses of MSC 76 3.1.3 Opportunities for MSC 77 3.1.4 Threats for MSC .77 3.2 Recommendations when launching service 78 3.2.1 Valuation method 78 3.2.2 Legal issues 78 REFERENCES 81 APPENDIXES 85 ABBREVIATION CAPM Capital assets pricing model CFO Chief finance officer COO Chief operation officer DCF Discounted cash flow EVA Economic value added FCF Free cash flow HR Human Resources M&A Mergers and Acquisitions MOF Ministry of Finance MSC Mekong Securities Joint Stock Company TDGVN Vietnam valuation standard ROE Return on equity ROIC Return on invested capital VVA Vietnam Valuation Associations WACC Weighted average cost of capital LIST OF TABLES Table 1.1: EVA analysis 38 Table 2.1: Target customers 49 Table 2.2: Sales forecast from 2014 - 2017 .55 Table 2.3: Suggested salary .58 Table 2.4: Estimated annual cost 59 Table 2.5: Forecast income statement .60 Table 2.6: Legal requirements for providing advisory service 61 Table 2.7: Steps for determining intangible assets 70 Table 2.8: Classification of intangible assets 71 LIST OF FIGURES Figure 1: Research Process 13 Figure 1.1: Corporation valuation approaches 22 Figure 1.2: The relations of WACC 29 Figure 1.3: Inputs of DCF method 31 Figure 1.4: Basic concept of EVA 34 Figure 2.1: MSC’s organization structure .44 Figure 2.2: Expected market shares of MSC 48 Figure 2.3: Forecasted demand for the period 2014-2015 50 Figure 2.4: Structure of competitors .51 Figure 2.5: Price strategy of MSC 53 Figure 2.6: Reporting structure 56 Figure 2.7: Suggested valuation process 64 Figure 2.8: Process of choosing valuation methods .67 EXECUTIVE SUMMARY In the past years, M&A and equitzation activities in Vietnam have been growing rapidly in both quantity and value Vietnam is known as an attractive investment destination with the rapid GDP growth rate, young population, welltrained In addition to that the increase of population is going with the demand for improving the quality of life Vietnamese citizens enjoy the increase of level of disposable income, favorable investment environment with low cost and speed of urbanization is increasing rapidly Regard to the development of those activities, determining the corporate value is the very first step to support them According to the Announcement No.48 of MOF dated January 24th 2013, there are 83 firms which have permissions for providing corporation valuation advisory service in Vietnam In those firms, there are 53 firms in Hanoi can be considered as the potential competitors of MSC From that to explore the demand of that market and the comparative advantage of MSC, MSC should provide corporation valuation advisory service which has not provided yet Therefore, this thesis comes up with the idea of setting up this advisory service at MSC in order to fulfill the demand of market The advisory service which is built up within this thesis in accordance with the most updated laws and guidance documents of government and the theories which are mentioned in some references books and documents Therefore, it is a combination of theories and the reality This thesis uses only secondary data which are extracted from laws and guidance of government in Vietnam and the good practices of some competitors From those analyses, this thesis helps MSC to build up a standard process of determining corporate value It allows MSC to compete later on the market with others ...NATIONAL ECONOMIC UNIVERSITY BUSINESS SCHOOL SETTING UP CORPORATE VALUATION ADVISORY SERVICE AT MEKONG SECURITIES JOINT STOCK COMPANY BACHELOR OF BUSINESS ADMINISTRATION IN ENGLISH... Overview of Mekong Securities Joint Stock Company 41 2.1.2 Professional services at MSC 41 2.1.3 MSC’s organization structure 43 2.2 Setting up corporate valuation advisory service. .. this service to take advantage of this great opportunity Hence, from above practical requirements, the topic ? ?Setting up corporate valuation advisory service at Mekong Securities Joint Stock Company? ??