Name of Lecturer

Lim Chor Ghee

Name of Students

Ha Quang Minh Tran Cong Ly Ngo Nhat Duy Ngo Ngoc My Le Xuan Thanh Vy Phan Ho Van My

I. EXECUTIVE SUMMARY:
1. Coteccons: Full name: Cotec Construction Joint Stock Company Coteccons Establish and privatized: 2004 Business model: Civil and industrial construction Listed: Jan 1, 2010 CTD has the chartered capital of VND 317.5 billion, retained earnings of VND 219 billion and shareholders equity of VND 1,316 billion. The main business lines of CTD include civil construction, designation consultant and construction project management. In 2010, the Company reported VND 240 billion net income, and the construction business is the key activities accounting for 99.8% net income and revenue of that number. CTD is a strong company which has a high development speed, stable development strategy and dominant position in construction industry. Currently, the Company is expanding its business activities in the whole country of Vietnam. 2. Ha Bnh Corporation: Full name: Hoa Binh Construction & Real Estate Corporation Establishment: 1987 Business model: Construction and Real estate. Listed: Dec 27, 2006 Founded in 1987, Construction JSC (XD) and Real Estate Peace (Hoa Binh Construction & Real Estate Corporation - HBC) activities in the field of Civil Construction and industrial real estate business; production building materials (building materials); interior and exterior. HBC mark and create a lot of sympathy with our customers with outstanding projects such as hotels (KS) Riverside, Legend, Tan Son Nhat, Melinh Point Tower, Institute of Buddhism in Vietnam Vietnam ... Strengths and also considered the competitive advantage of HBC was long reputed team of experienced managers, financial situation works healthy. Information about the business situation is quite transparent. Investment opportunities can be found are: many large real estate projects of HBC are implementing strong potential for future development, a wave of foreign direct investment (FDI) is growing strongly. In addition, the demand for real estate (real estate) increased HBC began operations with the design and construction of a number of private houses. In 1993, after successfully renovating part of the company headquarters Supply Vessel Seamen's Club, HBC was invited to continue to design, construction and renovation, bringing the building KS Riverside. Through the complex and large scale this design capability, technical qualifications; experience in construction management of HBC has made remarkable progress. Since then, HBC have the opportunity to reach new customers, said many foreign investors and invited to participate in the project HBC. 3. Construction industry outlook a. Construction industry outlook in short term Construction industry would likely encounter many difficulties in Quarter IV of 2011 and first half of 2012 because of some crucial following factors: Gloomy real estate market: many real estate projects could be delayed because of highly increasing prices of material, Many apartment buildings, office towers and

commercial centers have been encountering many difficulties in selling their products because supply has exceeded demand. Above reasons make many investors delay to start new project, therefore demand in construction industry declines. Construction material prices strongly volatiles: at the end of 2010 and beginning of 2011, steel price increased by 10%, brick price increased by 15%, cement price increased by 5%, labor expense and interest rate strongly increased. These difficulties made it hard for many construction companies. Demand declines because investors delay or avoid taking risk in starting new project. b. Construction industry outlook in long term In long term, construction industry has a bright prospect as demand for construction works in Vietnam including infrastructure works, civil works and industrials are still very large. In coming ten years, the demand for infrastructure investment in Vietnam is very large. According to the Government, capital needed for infrastructure investment would capture 10-11% of GDP from now to 2020. In detail, Vietnam would needs around USD 70-80 billion for infrastructure investment in the next five years. The Vietnamese Government really focuses on investment in building infrastructure in long term. This policy would create a source of potential demand for construction industry in coming years. According to Vietnamese real estate market analysis of UN-HABITAT, there are currently 70% Vietnamese households lacking suitable living facilities and Vietnam lacks about 20 millions apartments. In the future, construction of urban areas, housing areas would be accelerated to meet potential demand of people, creating an additional source of demand for construction industry in coming years.

II. RESPONSES:
Response 1. As one of the main suppliers to the companies, what are the challenges that you may face, and how would you manage the situation? From the ratios that have been calculated, ignoring other ratios and information, these are possible challenges that we found from the companies: CHALLENGES Hoa Binh Corporation (HBC) - Challenges from the credit policies and collection procedure: + Receivable turnover experienced a downfall from 2009 to 2010. From 2009 to 2010, sales increased a little bit, but receivable account was almost doubled. This means the amount of cash put in the credit sales increased much, which affected the operation and investment because it must take a time to collect the cash. The receivable turnover in 2010 was lower than the industry, means that the receivable of SOLUTIONS - If I have already given the sale on credit to the company, I would want to collect partly or all the credit sales that I made before I continue trading with HBC. - If the company delayed the payment for, I would call up a

the company far exceeded that of other companies in the same industry. Consequently, it took more time for the company from 2009 to 2010 to collect receivable, the period in 2010 was higher than the industry average.

negotiation for: + Collecting payment directly from the sale of the inventories. + Charging the interest if the company cross the - Ability to use the asset efficiently to deadline on the generate revenue was reduced, reflected by payment. the decrease in the total asset turnover, even lower than the industry average in 2010. It took about 0.76 money units to generate 1 money unit revenue, but the number was increased to about 1.09 money units to generate 1 money unit revenue, showing the inefficient management on the asset of the company. - Low liquidity level, facing a downfall from 2009 to 2010, showing that the companys current asset was not readily available to pay its current liabilities. The quick ratio in 2010 was lower than the industry and lower than 1, means that without the inventories, the least liquid assets; it was very hard for the company to cover immediately the current liabilities with other assets. The inventories of this kind of industry are usually at low level of liquidity for they are mainly the constructions under progress. - High debt: HBC seemed to have much debt reflected from the high debt to total asset ratio, which was over 50% in both 2009 and 2010. Even though there was an increase in the times interest covered from 2009 to 2010, but it was not a positive situation for HBC, because it indicated that most of the operating income of the company was used for financing debt, and level to which the operating profit can drop before meeting these obligations was very low, which means that the company must remain and increase the profit or else will face a sure loss.

- Profit margin was just medium level, decreased in 2010, means that theoretically operating performance of CTD was reduced1. Coteccons (CTD)

- From the ratios calculated, it could be acceptable for us to continue supplying, including on credit, to - Current Ratio and Quick Ratio are CTD for they have a relatively far from each other: reflects the good position and high level of inventories of the company, status. which typically very low liquid as the industry characteristics. So high current ratio does not guarantee the companys liquidity.

Response 2: As a banker / lender to the companies, do you see that the financial situation of the companies has improved or deteriorated from 2009 to 2010? Explain. For CTD, as lenders, we would say there has been an improvement on its financial situation from 2009 to 2010. Although CTD suffered from the decrease in profit margin from 11.62% to 7.27% and from the decline of return on asset (ROA) and return on equity (ROE) during the year, that would lose investors confidence on investment to CTD. However, CTD would be a good borrower for lenders as banks to consider because CTD now could faster collect its receivables (within 57.3 days in 2009 -> 56.77 days in 2010). CTD has also shown its better ability to pay interest on its debt (12.58 times to 412.71 times). But CTD has got a small difficulty in its liquidity when inventory makes a key role for debt payment. Thats actually not such a very big problem since CTD knows how to manage its debt more effective from receivables. Generally, financial situation of CTD has improved, or in other words, CTD is the better candidate for bankers. From financial ratios of HBC, unfortunately, it is not a wise decision for lenders to invest in HBC. From 2009 to 2010, HBCs ability to handle receivables form credit sales has significantly decreased as it takes longer to collect customers debts (within 83.14 days up to 137.5 days). In addition, HBCs liquidity also has declined when it could no longer manage its debt payment despite adding inventories (1.03 to 0.95). Most importantly, Hoa Binh has got a big debt (up to 63.77% in 2010). That could possibly reduce Hoa Binhs ability to cover interest payment whenever it suddenly suffers from a fall in operating profit. Therefore, Hoa Binh is not a great deal to lend money at all because their financial situation has deteriorated.