Phân tích báo cáo tài chính phát hiện các vấn đề liên quan mà tập đoàn HAGL đang phải đối mặt và đề xuất các giải pháp cho HAGL e

STUDY THE OPERATION OF HOANG ANH GIA LAI GROUP (HAGL), - Financial year end report to idendify key issues that HAGL are facing with and propose solutions for HAGL - Growth strategy of HAGL in Laos (opportunities and threats) - Analyze legislative, political system for investment in Laos and recommend solutions for HAGL - Analyze risks and impacts on the financial management of HAGL expansion plan Table of content Item Descrition Chapter I: Hoang Anh Gia Lai group 1.1Introduce about Hoang Anh Gia Lai 11.2 Vision 1.3 Mission 1.4 Growth strategy Chapter II: Analyze financial statement 2.1 Liquidity 2.2 Operation 2.3 Ratio of financial leverage and proportation of assest, equity 10 2.4 Income ratio: 11 2.5 /Payable accounts: 12 2.6 Cashflow 13 2.7 Short term debt and payment ability: 14 2.8 Future cashflow and income from mining 15 Chapter III: Growth strategy in Laos 3.1.Analyze macro micro environment impacts to business environment 3.1.1 Country environment Page 4 4 4-5 16 17 18 3.1.2 Oversea environment 3.2 SWOT analysis 3.3/ Analyze HAGL strategies and vision to 2020 10 10-11 13 19 3.4 Recommendations 20 Chapter IV: Legal framwork and political system investment in Laos 4.1 Investment law in Laos: 15-16 15-16 21 22 4.2 Policies to promote investment Chapter V: Analyze risks and impacts to the financial management of 16 23 24 25 26 HAGL expansion plan in Laos 5.1 Optimist investment should be concerned 5.2 Investment environment in Laos 5.3 Poor infrastructure, and supplementary industries Chapter VI: Recommendations and suggestions 6.1 Financial management 27 28 29 6.2 Risk management 6.3 Human Reources Management References 6-7 7 7-8 8-9 9 10 14 16-17 17-18 18 18 19 19 19 Chapter I 1.1 Hoang Anh Gia Lai group Hoang Anh Enterprise, founded by chairman Doan Nguyen Duc in 1993, was converted to a joint stock company and renamed as HAGL JSC in 2006 On 22 Dec 2008, the company’s share were officially listed on HOSE with the code HAG Establish as a small wood processing factory and now a conglomerate with the total assest of 25,577 billion VND 1.2 Vision: To become the leading diversified multi sector group in Vietnam with suitable development in rubber, hydro power, mining and real estate 1.3 Mission: To maintain the continuous creativity, and strive to produce quality products and provide good services and reasonable costs To provide good employee benefits,both in terms of monetary renumertion and employee development in order to motivate the employees to create values for shareholders and the general society 1.4 Growth strategy: Main goals of the company: - Fast and suitable development In 2012 rubber, hydro power and mining operations will be the core business of the group - Become the leading real estate company in Vietnam Medium term business plan Focus on the high profitable operations of real estate, and production and distribution of wooded furniture Long term business plan Focus on rubber plantation (51,000 ha) and hydro power (with the total capacity of 420 MW) These industries are critical for suitable and long term development of the group The Group will also focus on the development of the mining business Chapter II Analyze financial statement According to the financial data collected from the year end report of Hoang Anh Gia Lai (HAGL) group in the year of 2009, 2010, 2011, the financial issues of the group is reflected as following indicators: Unit:Billion dong Item Description Overal asset Unit Mil 2009 12.196 2010 18.772 2011 25.577 Revenue Mil 4.370 3.970 3.152 Income after tax Mil 1.188 2.081 1.325 I Liquidity Current liquidity Times 1,72 2,16 1,96 Quick liquidity Times 1,17 1,01 1,25 Immediate liquidity Times 0.02 0.52 0.44 Time for liquidity Day - 276 786 II Operation Rotation of working capital Round - 0,50 0.25 Rotation of inventory Round - 0,62 0,40 Account receivables Round - 0,81 0,70 Effectiveness of fixed assest % - 1,15 0,51 Net revenue/Average fix assest % - 0,25 0,14 10 Growth ratio of net revenue % - -9,07 -20,63 III Ratio of financial leverage and 11 12 proportation of assest, equity Payables/Assests Long term debt /Equity % % 58,09 59,08 53,89 39,18 60,57 92,71 13 Fixed assets ratio /Equity % 53,61 53,83 83,87 14 Assest growth % - 56,14 34,31 IV Income ratio 15 Accumulated income/ net revenue % 45,98 50,59 45,21 16 Net business % 29,48 52,43 42,06 17 /Investment Income after tax /Average equity % - 32,29 15,06 18 (ROE) Income after tax/Average assest % - 13,32 5,94 19 (ROA) EBIT/bank interest % 9,42 14,5 4,65 20 Growth ratio of income after tax % - 61,69 -36,33 income from Analyze the abovementioned data, we know that: The overal assets of the company is constinuously increased in the last three year because the company invests a lot on real estate to supply for the market but the real estate market is currently faced with many problems thus less demand, their customers are delayed in payment Therefore, payables increased makes the short term assest increased This is one of the problems that the group must to address it Besides, the group aslo invests on rubber, especially is to increase the plantation area of rubber in Laos but the return is not et due to plantation is just start Therefore, the long term assest will increase accordingly to make it constinuous growth in year 2.1 Liquidity: The current and quick liquidity in year have been stable in years In 2010 is 2.16 and in 2011 is account for 1.96 This will help the group to active in liquidity but it will affect to the effectiveness of the business because the group has a high short term debt (to 31/12/2011, short term debt is 3,201 billion dong) The cause is that the company has to deposit a big amount because the company is strongly investing on the finance so it is needed to have cash for the market However, it should be considered when deposit a high amount of cash, it is especially on the economic ression, the financial invest have less effective but to be bear with interest Time to payment for payables during two year is quite long, in 2011 it comes up to 786 day This means the company have use the capacital of their partners which most of them are prepaid investors for real estate projects If this situation lasts long, the reputation of the company will be degraded and real estate products are declining on the brandname of the company which led to difficult for demanding This will lead to increase inventory 2.2 Operation: The rotation of working capital is very low and in 2011 decreases a compared with 2010 Causes are: + The group are dealing with the real estate but the market is down and price reduced strongly, so it is difficult to sell The inventory of real estate is increasing + The company is dealing with the financial investment but the stock market degraded thus the inventory is there The effectiveness of fixed assest is decreased due to the abovementioned probems and the revenues in 2011 also declined as compared with 2010 2.3 The ratio of financial leverage and proportation of assest, equity: It is based on the financial leverage and proportation of assest of other enterprises is increasing With this situation, if the company can not exploit assest effectively the business will be affected and reduced The pressure of debt will be increased This issue is assessed by revenues 2.4 Income ratio: The ratio and the effectiveness of the group is currently good, ROE in 2010 accounts for 32.26%, it is higher than the bank interest, this is good aspest In 2011, ROE decreased and accounts for 15.06%, althought this firgure is acceptable but this predict the upcoming difficult for the group waiting ahead The EBIT/bank interest shows declining after years So, the use of financial leverage of the company is not good This can be made clearer when to analyze the ROA ROA in 2009 achieves 13.32% but it down in 2011 accounts for 5.94% To 31/12/2011, total assest of from the equity accounts for 15,493 billion dong, while 3,201 billion from the short term deb (interest is 12%/year) and 8,424 billion long term debt (interest 13%/year) so average equity of the group is 9.55% higher than the ROA So, the use of financial leverage is not clearly effective because the ROA is lower than average equity This situation lasts long, it will affect to the effectiveness of the group and can be lead to bankcrupcy 2.5 /Payable accounts: According to the data of the group, 15,000 billion is the total debt of the group up to 31/3/2012, exceeds 63% above total assest This firgure is risky and reate financial burden for the group when it comes to deadlines However, the cash is 3,000 billion dong and bond converted is 5,565 billion dong, will reduce the burden to the deadline, the balance of 6,435 billion dong, therefore is 25% The chairman reject the information on some newspaper To liquidate debts of the bank, the Board of Management predict casflow collected from the real estate that customer deposited 70%, estimated cash collected os 8,460 billion dong and sell the finished apartment collected 4,420 billion dong 2.6/Cashflow: To study cashflow from the business n 2009 t0 2011, we see that it has 1,000 billion in 2009, however, the cashflow is declining from 2010, in 2010 the casflow is 294 billion dong Now, it is 2011 and second quarter of 2012 the shortfall of casflow is 1,200 billion dong, therefore, it is affected to the business, the group is lacking of workig capital, eventhough is for payables such as income tax, salary Besides, cashflow from the investment in 2012 is 5,600 billion dong, the group continute to investment for project namely such as rubber, sugar cane, hygro power, real estate and mining Explanation for the shortfall of cashflow, the board of management explains that the difficult is temporary because the revenues collects frm the mining and real estate is 3,600 billion dong in third quarter and use extra 1,200 billion dong from the cash In general, HAGL cashflow is the critical issue of the group It is the risk that the bank will not guarantee for the operation of the group Moreover, the revenue predict is not happended due to the diffifult economy,investments are ineffective, thus the profit is revised to be reduced annually, predict in 2012 is 1200 billion (5% of total essest and achieves below 12% above equity) Analyze about the proportation of the equity, we know that the long term fixed assest accounts for 48%/total assest while the long term capital accounts for 73%/assest so the group has used 25% long term capital to support for the short term It is therefore release the pressure for short term payable accounts 2.7 Shorterm debts and payment ability: Short term assest account for 52%/total assest, while short term debt accounts for 27%/assest so it needs to sell and complete receivables 50% short term debts, the group can pay for short term debts However, HAGL is currently faced with difficulty and challenges because it is difficult to sell real estate and mining The inventory increases 258 billion dong as compared in 2011, till second quarter in 2012 the inventory has increased 4,676 billion dong, while the inventory for ongoing apartment is 3,697 billion dong This is main cause to reduce the cash of the group in 2012 2.8/Future cashflow and mining revenues The real estate accounts for 60% of revenues for the group since 2010, while other has contributed less for examples the wood products only accounts for 20%, construction accounts for 10% In addition, the hydro power and rubber is for future revenues only, HAGL focus on mining, this is also the strategic direction and vision to 2020 Chapter III Growth strategy in Laos 3.1.Assess the marcro and micro environment which is affected to the growth strategy 3.1.1 Vietnam environment : The economy of Vietnam in 2012 has to suffer by the impact of the world economic ression, the GDP growth achives 5,2 %, it is reduced as compared with 2011 This has led to the spending, consumption, buying ability reduced, low income, the economy is on crisis and the market is narrowed, increased inventory,… The inflation in 2012 accounts for 8,5% while the interest reduced to 12%, this is positive for the whole picture of the economic ression, Vietnam government has to sastify economic growth in order to maintain the social security for the people, the government has implemented many solution package to make the economy stable, in general, the inflation is well controlled but national debet, bad debt of banking system, in balance of the international payment leverage, the fluctuation of exchang rate These are hot issues that the government concern 3.1.2 Oversea environment At present, HAGL has invested in under development namely Laos, Cambodia, Myanmar the investment environment is better than Vietnam, good natural resources, these governement is strongly support about the tax, land lease over 50 years, the cost for labour force is cheaper than Vietnam However, policy, and political system yet to complete, these countries are on the process to complete legislative, and laws thus it is so risky for investment in these countries, besides, the corruption is one of issues that needs to address it 3.2 SWOT analysis Strengths (S): - Weaknesses (W): Reputable and liability of HAGL brandname - Good knowledge and skill - Input price is not well controlled - The of employees Professional management system - Good leadership of Boards is not well implemented - - marketing The market is not national wide, teh market of real estate is more and more difficult of Management - The company is affected by the family dorminant and management system is complicated, there is too many branches to invest diversifiedly Opportunities (O): - The investment country is strongly Threats (T): - support - lacking of input cost of oil increased - increase revenue - for materials for production, the hight Rubber, hydro poower, mining have opportunity to open market, to Pressure Competition is more from the rival locally and economic It is easy to joint venture and joint internationally ression is The currently affected to the stability of society stock - Exchange rate, bond value are decreased and capital mobilization is difficult - Legislative in Viet Nam and oversea changed Through analysis on HAGL we found very strong in terms of size, diversification, has many advantages, as well as prestigious brand has been confirmed, the industries with competitive advantages such as rubber, hydro power and mining industry are difficult imitation from competitors, as the industry is capital investment, long term investment, this is important for the investment countries as it relates to national resources, ecological environment HAGL has many advantages, then there are many challenges companies face issues such as market decline, economic crisis, real estate prices are declining,share price fell sharply, raising capital difficult Policy issues of the host countries such as Laos, Cambodia, Myanmar unstable and dominated by China Given disputes in the South China Sea, will certainly have much affect the consumption of iron ore minerals,change policies of the Vietnamese government for the exploitation and export of raw minerals is a lesson for the company, revenue is expected to decline, the competitive pressure of the Vietnam rubber group increasingly causeddifficult for rubber exports to the European Union and Japan, leading to the risk of price competition reduce power manh.Thuy and issues negatively impact environmental change, pollution, tend tofind low-cost clean energy companies with economic difficulties recession and therefore, the demand for electricity will certainly reduce production in time to affect the revenue from this activity In addition, cash flow problems, the demand for capital projects is a matter of urgency, the doubts about the effectiveness of investment projects in Laos and Cambodia in the exploitation of iron ore, the concerns about investment in the field of rubber, hydropower, the cost of capital is too large and risky.Day is the conclusion of the Standard & Poor's published in the newspaper recently Currently the company is very difficult to raise capital due continuous shares fell, from the value of 54,000 VND / share, now only 22,500 shares reducing confidence for investors and shareholders revenue decreased ability and access to loans, pressure to pay its debts as challenges to overcome in the short term 3.3/ Analyze growth strategy and vision 2020 During the operation, the group has stable development based on its good and appropriate strategy Strategies have been implemented as follows: Strategies had and currently used: + Diversification: wood products, construction, real estate, rubber, mining (iron) ,hydro power ,sugar cane +Low price strategy creates compertition advantages in the market + differentiation strategy is to focus capital for projects based on the implementation stage, ensure for long term activity such as rubber and hydro power Hoang Anh Gia Lai Group has developed business strategies for the company is very professional, with a team of consultants work long-term business policy, to meet the goal of creating competitive advantage, better exploitation of the resourcescompany, the shortterm as well as long-term strategy focused on the goal to maximize profits for shareholders, employees as well as the stable development of enterprises In short the company's strategy has been planned on the basis of the analysis of the conditions inside the company as well as delve into the macro environment, the development of the industry, competitors, also specifythe strengths, weaknesses, opportunities, challenges in each stage, the company's strategy to focus on the strengths and opportunities to create competitive advantage in terms of limited resources In addition, the challenges companies face in the short term as well as long-term preparation for the development of the business cycle A special big questions need for senior management of the Group is a risk management strategy when trading industries exceed the capacity of administrator Quality human resources to respond to the global business environment or as a result of the impact of the economic crisis is not ending Recommendations: + Short term : The review shall focus on the low-cost strategy, eliminating the costs not added value such as fair labor marginal, solve inventory costs by more powerful measures to reduce prices in order to recovery of capital to generate stable cash flow in the short term - Strengthen receivables and negotiatie with partners for delaying in payments - Review investment lists, dismiss all activity that is currently lost such as construction, granit, low wuality wood products - Study market for exporting rubber and mining, search new markets - Continue to mobilize capital by issueing bonds and stocks in order to set prioritiy for ongoing real estate projects and long term rubber - Some hydro power needs to be reviewed on the environment aspect, postponed to balance capital for other projects + Long term : - It is needed to review growth strategy, focus on the competition advantages of rubber, sugar cane, develop processing industry instead off exporting raw materials - HAGL should pay attention on the international corporate finance to invetsment n Laos, Cambodia, Myanmar …,it should study on investment environment and predict changes due to the political environment for better investment - ROA/ROE, EPS, PE should be improved when participating in Stock Exchange in London.The financial statement should be transparent and ensure the return for paying debts as deadlined - Calling for strategic partners including the government for supporting the hydrow power projects because it is good for stable and security of the country - Identify effective communication activities in order to brandname development, reduce ilegal competition of partners Chapter IV Legal and legislative framework and political system in Laos 4.1 Investment law in Laos: Lao government announced the policy to promote foreign investment Investment promotion law has been in effect since 1989 and a revised law enacted on March 19, 1994 with an effective date 60 days after issuance An important part of the investment promotion law amendment is related to the type of investment Before amendment, there exist three types of investment - investment, all foreign investment and investment contracts The third type has been removed due to its complexity confused investors It only accounts for 4% of the total foreign investment projects Law amended to reduce the steps needed for investment projects is only one, is known as the one-stop service system, and during the evaluation of the project has been reduced from 90 days to 60 days Meanwhile, the business registration must be completed within 90 days, half the time required before the amendment Reduction is also done in some areas, as well as tax exemptions A percentage of the annual profit tax rate of 20% is applied to foreign investment Import duties on machinery and equipment is only 1% and income tax for foreigners living in Laos is 10% of the total income earned Income and gains from the investment of foreign investors can be sent back / her country, or a third country, through any bank located in Laos, according to the exchange rate set by the Bankof the Lao PDR This also applies to foreigners working in Laos provides all the payments before repatriation was completed Foreign Investment Management Committee (FMC) FMC is a "one stop shop" for potential investors in Laos Finally the FMC staff will coordinate the process and application for investment in the country through various levels and fields of the message to investors regularly on the status of the application Initially, however,, FimC can and will provide a comprehensive look at Laos and its potential for investors It has the latest statistics, such as demographic data, past accomplishments and careful analysis of what can be done FimC staff will listen carefully to the potential investment projects in mind, to provide recommendations for change based on the needs of the country, government requirements and other possible factors For a very modest fee, FimC will provide the fax document for investment applications and guide the applicant through the complete process, including assessment of feasibility of return, to FMC Finally, the staff will coordinate the movement of applications to different departments involved 4.2 Some policie to promote investment: To promote and encourage foreign investment, foreign investment law and management provides a large range of incentives such as: - Foreign Investment and property of foreign investors will be protected by the laws and regulations of the Lao PDR Foreign investors may lease their land and lease rates - The properties of the foreign investors will not requisition, nationalization or confiscation in accordance with the constitutional law of the Lao PDR - Repatriation of capital and profits is allowed - All initiatives from all economic sectors (private, public, etc.) are encouraged and promoted - Regardless of race or nationality of the investor - Investors are allowed to bring foreign workers who are highly skilled Chapter V Analyze risks and impacts to the financial operations of HAGL expansion in Laos HAGL Group should pay special attention, strategies to control risk when investing in foreign countries such as Laos, Myanmar, Cambodia Besides attention on the strategic activities the company has set as multidisciplinary business risks while the market is very difficult HAGL need to pay attention to the risks of the business environment as follows: 5.1 Optimist on investment should be concerned First wave of foreign investment going vibrant, economic experts warn investors "cautiously optimistic" Because doing business in a country ever been isolated or country joined the World Trade Organization (WTO) is not simple In fact, the evidence of the experts also makes no economic little startled enterprise Recently, Lao Holdings NV and subsidiaries as Sanum Investments Limited submit to the International Centre for Settlement of Investment Disputes - an independent division of the World Bank (WB) offer to settle legal disputes relating to the properties is made up of direct investments Sanum investments, far more than $ 85 million According to Jody Jordahl, Chairman Sanum, the current value of the investment up to at least 400 million U.S dollars Now, Sanum that, of the policy of the Government of Laos has affected their investments, leading to the risk they may be lost fortune Not only Sanum Investments Limited, a company representative in Ho Chi Minh City said, foreign investment for the production of plastic consumer products However, before the company would take up to one year (plus the time to wait licensed) for statistical the top tu.Theo license, many investors Vietnam is facing a series of difficult foreign investment, such as lack of information, lack of manpower, investment licensing slow, infrastructure condition has not improved Meanwhile, the relationship between diplomatic missions and overseas business enterprises should loose when disputes occur maximum not enlisted the support 5.2 Investment environment shoud be concerned According to the ranking of the World Bank in 2012 on the level of business easily, Laos ranked 168 after Thailand (17), Malaisya (18), Vietnam (98) Indonesia (129), Philippines 136 According to economic experts acknowledge, the legal system related to investment of some countries in the region are in the process of amending and improving so many changes, inconsistent, difficult to access In these countries, the exchange of the initial investment between enterprises and competent authorities convenient, but when deployed, enterprises face many difficulties in administrative procedures, land planning, lack of consistency in policy, especially the regulations set by local and external application of state policies This is the most basic problems in investment activities in Laos and is also one of the causes leading to the legal dispute that some foreign investors are facing today In case of Sanum Investments Limited as an example, this is now lost control of the club Thanaleng Slot Machine in a Southeast Asian country They also recovered a number of licenses and concession projects worth hundreds of millions of dollars Consequently, Lao Holdings lost $ 1.8 million per month In addition, they also courts in the host country to be subject to more than $ 23 million in taxes and fines the business of Sanum years ago.Observers evaluated the claims of Sanum Investments Limited will last and make sure they will take more damage 5.3 Poor infrastructure, and supplementary industries As one of the poorest countries in the world, and the system infrastructure in Laos is very weak System roads good service for the movement of people in the big cities, in areas away from the city center travel conditions very difficult Transport infrastructure does not meet the freight capacity of investors Besides, the industry is almost no auxiliary This is the challenge that the investors have to accept when investing in Laos, HAGL are not case exceptions Chapter VI Recommendations and suggestions On the basis of analysis of the 2009-2011 financial statements, the Group's activities in recent years, through the analysis of the macro environment, analyzing the strengths and weaknesses of HAGL etc., Group I have the problemmade with the following HAGL group 6.1 Financial management: - Cash reserves (including bank deposits): The company needs to balance the cash reserves and short-term loan from banks to avoid wasting capital - It is needed to have solutions to accelerate short-term capital cycle by applying the discount policy, promotional, lower prices of products to solve real estate inventory inventory to increase consumption and recoveryfunded debt to reduce costs, increase business efficiency - It is needed to calculate closely the increase in loan assets, if continued ROA condition