UNIVERSITY OF ECONOMY
Table 2.5: Loan turnover for investment projects at Vietcombank - Hue Branch in the period 2015-2017
2015 2016 2017
Target
Reserve Number
(billion VND) | (billion VND) | (billion VND) | ||||||
Total 21 | 100 | 1,177 | 19 | 100 | 1,583 | 13 | 100 | 1,724 |
Agriculture, forestry and fishery 2 | 9.52 | 46 | 1 | 5.26 | 43 | 2 | 15.38 | 98 |
Industry, construction 6 | 28.57 | 308 | 6 | 31.57 | 585 | 3 | 23.07 | 712 |
Restaurant, Hotel 8 | 38.09 | 740 | 7 | 36.84 | 820 | 5 | 38.46 | 630 |
Other 5 | 23.80 | 83 | 5 | 26.31 | 135 | 3 | 23.07 | 284 |
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Proportion (%)
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Reserve Number
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Cumulative loan turnover of projects
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Source: Vietcombank – Hue Branch (2017)
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2.5. Case study_Investment project appraisal of a fiber factory
To clarify more about the project appraisal work carried out at Vietcombank
– Hue Branch, the thesis analyzes a loan case at Vietcombank – Hue Branch. (For information security reasons, some personal information of customers will be kept confidential).
2.5.1. Introduction to the investor and the project
2.5.1.1. Investor
Overview of the investor
Joint Stock Company A was established in 2012, investing in phase 1 of a 12,000 spindle spinning line in Industrial Park B on a leased land area of 18,187 m2, and a phase 1 factory of 8,187 m2. In early 2014, the Company continued to invest in phase 2 with a scale of
6,000 spindles on the Company's premises.
Business registration: 3300001000. Date of issue: February 9, 2012 by the Department of Planning and
Thua Thien Hue Investment Granted.
Business fields: (1) Production and trading of yarn and textile raw materials and products of the yarn, weaving and dyeing industry; (2) Wholesale of other machinery, equipment and spare parts; (3) Other specialized wholesale, raw materials and accessories: Cotton, fibers, yarns of all kinds and products of the yarn and weaving industry.
Credit rating for the fourth quarter of 2015: AA+ (According to the bank).
Table 2.6: Current equity structure
Unit / Individual owned at Customer
Amount
(VND)
Percentage in
have | ||
Nguyen Van A | 4,167,000,000 | 9.58 |
Tran Thi B | 8,997,000,000 | 20.68 |
Nguyen Thi C | 2,332,000,000 | 5.36 |
Nguyen Van D | 999,000,000 | 2.30 |
Le Thi A | 2,015,000,000 | 4.63 |
Other individual shareholders | 24,990,000,000 | 57.45 |
Total | 43,500,000,000 | 100% |
total equity
Source: Vietcombank – Hue Branch (2017)
Financial situation of company A
- Asset structure: In the asset structure, the largest proportion is still fixed assets, accounting for 61.2%, including the entire value of newly formed factory assets, worth more than 122 billion VND. In the short-term assets, the largest proportion is still cash, inventory and customer receivables.
Table 2.7: Balance sheet of company A
Unit: Billion VND
INDICATORS | 2014 | 2015 | ||
A | Current assets | 67,545 | 77,408 | |
1 | Money | 16,291 | 23,329 | |
2 | Short-term financial investment | - | - | |
3 | Accounts Receivable | 23,892 | 21,411 | |
In which, must collect customer | 22,688 | 17,969 | ||
4 | Inventory | 25,054 | 32,071 | |
5 | Other current assets | 2,308 | 597 | |
B Long-term assets 130,626 122,006 | ||||
1 | Long-term receivables | - | - | |
In which, long-term receivables from customers | - | - | ||
2 | Fixed assets | 130,626 | 122,001 | |
3 | Investment real estate | - | - | |
4 | Long-term investment loans | - | - | |
5 | Other long-term assets | - | 5 | |
C Liabilities 147,226 142,665 | ||||
1 | Short-term debt | 66,285 | 74,024 | |
Then, pay the seller | 1,735 | 1,436 | ||
2 | Long-term debt | 80,941 | 68,641 | |
In which, long-term payable to seller | - | - | ||
D Equity 50,945 56,749 | ||||
1 | Equity | 50,945 | 56,749 | |
In which, the investment capital of CSH | 43,500 | 43,500 | ||
2 | Other funding sources and funds | - | - | |
Total Assets | 198,171 | 199,414 | ||
Total Capital | 198,171 | 199,414 | ||
Source: Vietcombank - Hue Branch (2017) The Company's cash items are mainly deposits at the Bank,
This item as of December 31, 2015 was 18.3 billion VND. Due to the fast capital turnover, the company
The company uses idle money in the short term to make short-term financial investments in order to
profit-making purpose. In addition, at the end of 2015, the company had no plan to pay dividends for the year, so the amount of money at this time was quite high. This shows that the Company's financial autonomy and liquidity are quite good.
- Capital structure: In the Company's capital structure, the three items with the largest proportions are the owner's investment capital items of VND 43.5 billion, accounting for 21.8%; short-term debt items worth more than VND 74 billion, accounting for 37.1% and long-term debt items worth VND 68.6 billion, accounting for 34.4%. Thus, it can be seen that the Company's entire assets are mainly financed by loans (more than 70%). This also somewhat limits the business activities of the unit when it has to bear the pressure of high interest costs. However, in reality, with the current development situation, the Company is completely unaffected by the above factor. These loans are all borrowed from Vietinbank Nam TT Hue Branch, BIDV Hue and VCB Hue. According to CIC information, during the relationship at this Bank, the Company has always paid the principal and interest on time or ahead of schedule.
- Receivables from customers: The receivables item as of December 31, 2015 was 17.97 billion VND, this item is at an average level compared to the Company's production and business cycle and focuses on reputable enterprises, so the ability to be financially autonomous is quite good. The form of payment for foreign customers is LC and for domestic customers is post-payment, but the time to owe money for goods is usually less than 15 days. These are customers with long-term relationships, so the company is fully capable of recovering receivables.
- Business performance results: Net revenue in 2015 reached 232.2 billion VND - an increase of 8.7% compared to 2014, profit after tax reached more than 12 billion VND - an increase of 1.25 times compared to 2014; operating profit margin/net revenue reached 6.4%. Although the Company has only been in operation since the third quarter of 2013, the production and business performance in the two years 2014 - 2015 showed strong growth, especially in sales revenue. In 2015, due to price fluctuations, the Company's profit after tax was quite low compared to some yarn factories in the area, however, in the coming time, the Company will minimize these risks and
boost after-tax profit. In 2015, the export ratio accounted for
about 50% of total revenue.
Table 2.8: Business performance of company A
Unit: Billion VND
No. 2014 TARGETS
2015 | |||
1 | Revenue | 213,608 | 232,173 |
2 | Revenue deductions | 0.659 | 0.224 |
3 | Net revenue | 212,949 | 231,949 |
4 | Cost of goods sold | 183,981 | 198,442 |
5 | Gross profit | 28,968 | 33,507 |
6 | Financial performance | -10,481 | -9,363 |
That is, interest expense. | 10,149 | 8,453 | |
7 | Cost of sales | 7,849 | 4,959 |
8 | Management costs | 4,589 | 4,294 |
9 | Operating Profit | 6,049 | 14,891 |
10 | Other profits | 0.633 | -0.388 |
11 | Profit before tax | 6,682 | 14,503 |
12 | Profit after tax | 5,352 | 12,054 |
Source: Vietcombank – Hue Branch (2017)
- Analyze and evaluate financial indicators:
(1) Current payment: In 2015, the unit's payment ability reached 1.05, showing that the ability to pay short-term loans is at a safe level. In fact, Company A has not incurred overdue debt at credit institutions in the past.
(2) Quick payment ability: In 2015, for every 1 dong of short-term debt, there was 0.61 dong of highly liquid assets. The quick payment ratio is low due to the business characteristics of the unit with a large inventory to promptly supply yarn types to customers.
(3) Working capital turnover: In 2015, the Company's working capital turnover was 3.2 cycles, equivalent to about 3 - 4 months/cycle, this turnover index is also similar to that of other yarn factories in the area.
(4) Inventory turnover: Inventory turnover in 2015 was 6.95 times, showing that the Company's production and sales capabilities are always very good. The rapid turnover of inventory helps the Company minimize many risks in goods management.
(5) Receivables turnover: In 2015, the number of receivables days was about 35 days (10.22 cycles/year), which is quite low, proving that the Company collects debts very well, which helps the Company minimize many debt risks, ensuring better liquidity.
(6) Debt balance: Liabilities to Total Assets at a ratio of 71.5%, these debts are mainly long-term debts for factory construction and short-term debts to serve the Company's production and business.
Table 2.9: Financial indicators of company A
UNIT INDICATORS 2014 2015
Liquidity ratio
1 Current Payment Ability Times
1.02 | 1.05 | ||
2 Fast payment ability | Time | 0.64 | 0.61 |
3 Instant Payment Ability | Time | 0.25 | 0.32 |
Performance indicators | |||
4 Working Capital Turnover Cycle | 3.95 | 3.20 | |
5 Inventory Turnover | Ring | 8.41 | 6.95 |
6 Receivables Turnover | Ring | 11.76 | 10.22 |
7 Total Asset Utilization Efficiency | Time | 1.24 | 1.17 |
8 Fixed Asset Utilization Efficiency | Time | 1.81 | 1.84 |
Debt balance indicator | |||
9 Total liabilities/Total assets | Time | 0.74 | 0.715 |
10 Long-term debt/Equity | Time | 1,589 | 1.21 |
Income target | |||
11 Gross Profit/Net Revenue % | 13.6 | 14.4 | |
12 Operating Profit/Net Revenue | % | 2.8 | 6.4 |
13 Average Return on Equity (ROE) | % | 11.3 | 22.4 |
14 Average Profit/Total Assets (ROA) | % | 3.1 | 6.1 |
Source: Vietcombank – Hue Branch (2017)
General comments:
Although the operating profit margin on revenue in the year was quite low (6.4%), this was still consistent with the difficult situation in 2015, demonstrating the Company's great efforts in ensuring the efficiency of production and business activities. The Company focused on and well managed the items of receivables and inventories. The Company's products are currently capturing the market demand very well, there are times when the output is not enough to meet the demand. In the coming time, the Company will plan to implement phase 3 with a scale of 18,000 piles to expand the production scale and diversify products to better meet the market demand.
In the first quarter of 2016, the Company's output was higher than its inventory. This shows that the Company's production and business activities are growing very well. Items such as customer receivables, inventory, and payables as of March 31, 2015 did not have many fluctuations compared to the beginning of the year. In 2015, the Company completed the adjustment to increase equity to 43.5 billion VND. This capital adjustment shows that the financial autonomy of the unit has been significantly improved. This is also a stepping stone for the project in the upcoming year 2016.
Customer relations with credit institutions and banks Vietcombank – Hue Branch
According to CIC information, the unit currently has a credit relationship with
Vietcombank – Hue Branch, BIDV Hue and Vietinbank Nam TT Hue.
For relations with Vietcombank – Hue Branch:
Debt classification results at the Bank (as of May 9, 2016): Company A is currently ranked in group 1.
Currently, the Company is using many products and services provided by the Bank such as domestic and international money transfer and payment transactions, international payments, etc.
Products currently used by the Bank in 2015:
- Average demand deposit balance: 1,176 million VND
- Average term deposit balance: 6,434 million VND
- Average short-term loan balance: 5,582 million VND
- Import-export payment turnover: 42,678 million VND
- Other related banking products: Internet banking, SMS banking, foreign currency trading,...
- Profit in 2015 that customers brought to the Branch: 212 million VND.
Table 2.10: Customer relationships with credit institutions
Million
VND | ||
1. Vietnam Joint Stock Commercial Bank for Industry and Trade - Nam Thua Branch Thien Hue | ||
Short-term loan balance: | 15,341 | 549,173 |
- Qualified loan balance | 15,341 | 549,173 |
Outstanding medium-term loans: | 765 | 0 |
- Qualified loan balance | 765 | 0 |
Long-term loan balance: | 47,486 | 0 |
- Qualified loan balance | 47,486 | 0 |
Outstanding loans received directly from international organizations: | 20,855 | 0 |
- Qualified loan balance | 20,855 | 0 |
2. Joint Stock Commercial Bank for Investment and Development of Vietnam - Thua Thien Branch Hue | ||
Short-term loan balance: | 10,196 | 311,980 |
- Qualified loan balance | 10,196 | 311,980 |
3. Joint Stock Commercial Bank for Foreign Trade of Vietnam - Branch Hue | ||
Short-term loan balance: | 2,875 | 247,236 |
- Qualified loan balance | 2,875 | 247,236 |
Total | 97,518 | 1,108,389 |
USD criteria
Source: Vietcombank – Hue Branch (2017)