NUS-DBS International Case Competition 2009 - Thammasat University (2nd Runners Up)

1,246 views
1,143 views

Published on

Published in: Education, Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,246
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

NUS-DBS International Case Competition 2009 - Thammasat University (2nd Runners Up)

  1. 1. Company Situation Issues& Paramee,Financial Jeannie, Pichaya, Jiraya Recommendation Conclusion Profile Analysis Objectives Justification
  2. 2. “Agenda” Company Profile Situation analysis Issues & Objectives Recommendation Financial Justification ConclusionCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  3. 3. Hyflux began its operations providing by providing membrane-based water treatment technology Specialty Industrial Manufacturing Water Energy materials processCore business - Develop, commercialize - Separation, clarification - Resource recovery polymers & specialty concentration, extraction, -  Waste recycling anda)  Membrane-based materials and purification of energy reclamation reverse osmosis manufacturing process desalination -Worked closely with - 50% rise of global -Expected sluggish orb)  Waste treatment & external demand for energy by negative growth in 2009 water recovery organizations 2030c) Water consumer à Still in its infancy products-  Robust growth(global population, commercial, and industrial demands) Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  4. 4. External Analysis: Water Utilities Industry Analysis Key global trendsAsia— Government’s legislates &Water waste management is the Enforces water treatmentkey driver in economic growth of its industrial sectorsof AsiaMiddle East regions— There is a need toFacing rising water shortages due develop new sourceto its surroundings & water supply of water supply Has 5% of the world Population but only 1% availability of world freshNorth Africa— water resourcesProjected that an increase of50% of water demand by 2015 Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  5. 5. External Analysis: Water Utilities Industry Analysis Key global trendsAsia— Government’s legislates &Water waste management is the Enforces water treatmentkey driver in economic growth of its industrial sectorsof Asia Where should Hyflux expand its water business in order to best capture this trend?MENA regions— There’s a need to develop new sourceFacing rising water shortages due of water supplyto its surroundings & water supply Has only 5% of the world population availability of world fresh water resourcesNorth Africa—Projected that an increase of50% of water demand by 2015 Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  6. 6. External Analysis: Energy Business Global need for energy had been increasing at an exponential pace Oil & coal still remain as the dominant source of energy Trends for searching a cleaner energy alternativesBecoming more Natural Hydro Geo Harm costly to find gas power thermal the environment & produce Which segment in the energy unit should Hyflux capitalize on by aligning with its core value & strengths? Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  7. 7. Where we are Where we want to be • Asia’s most integrated• Experience & technical Issues to be solved… water solution providercapabilities in providing that diversifies intointegrated water solution, India & MENAseeking to expandgeographically Expansion to untapped market Broaden the scope of • Forefront in the• Comprehensive solutions the energy SBU alternative energyprovider for membrane purification solution bytechnology applications strengthening company’sin broad range of industries, core valuesseeking new growth engine Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  8. 8. 1. Replenishment Strategy 2. Purification Strategy 3. Touching lives Strategy Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  9. 9. Replenishment StrategyCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  10. 10. Objective: utilize our core competencies in water business to tap on high potential markets Expanding Markets 1. Country Selection 2. Mode of EntryCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  11. 11. Expanding Markets 1. Country Selection 2. Mode of Entry Drinking water Population growth GDP growth coverage (%) Dependency ratio India 1.55% 7.4% 86% 34% Saudi Arabia 1.85% 4.2% 95% 0% Egypt 1.64% 7.2% 98% 97% Tunisia 0.98% 4.4% 93% 9% Oman 3.14% 6.4% 79% 0% Morocco 1.48% 5.4% 81% 0%Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  12. 12. Expanding Markets 1. Country Selection 2. Mode of Entry Hyflux Engineering India BOT (Chennai) State Government High grade industrial water recycling plant Rationalea) India Ø Water market worth US$1 BN Ø  15-20% growth rate Ø  Experiencing a water crisis Ø  By 2020 demand exceeds supplyb) MENA Ø  Up to 80% of distributed water is Kolkata discharged as wastewater Mumbai Value proposition Chennai ü Existing operations in Bangalore ü Expertise in waste treatment & water recovery ü High commitmentCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  13. 13. Expanding Markets 1. Country Selection 2. Mode of Entry Joint Venture Rationale: State-owned • Investment risk utilities company • Geopolitical riska) India Desalination Plants Coastal Cities Value propositionb) MENA Oman • Barka ü Expertise and • Sohar experience in • Sur desalination operations globally Egypt ü  Provides flexibility of expansion • Cairo ü  One-stop solution capabilitiesCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  14. 14. Purification StrategyCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  15. 15. Objective: Leverage on expertise and advanced membrane technology to tap the opportunity in alternative energy industry Raw Natural Gas Purification & Processing •  Leverage on membrane technology •  Separation of unwanted impurities •  Alternative clean energy and by products What RationaleWhere - Potential future global primary energy source - Production increases in the non-OECD region account for more than 80% of the growth in world production from 2006- 2030 How -  Still in its infancy stage -  Aligned with core values in effective environment solutionsCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  16. 16. Objective: Leverage on expertise and advanced membrane technology to tap the opportunity in alternative energy industry What China -  Strong presence in other related industriesWhere - Natural gas represents 34% of China’s primary energy consumption -  Burgeoning demand for natural gas and optimization of its energy structure HowCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  17. 17. Objective: Leverage on expertise and advanced membrane technology to tap the opportunity in alternative energy industry JV Local Natural Gas Company? -  Mitigate investment risks -  No expertise in this segment What -  Capitalize on partner’s technical capabilities and resourcesWhere Value Proposition -  Expertise in membrane technology advancement -  Strength in R&D How - Experience with Chinese JV partners - Potential long term cost savings - Ability to comply for Chinese government environmental regulationsCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  18. 18. Touching lives StrategyCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  19. 19. Where?Sanitation problem cause by water contaminationonly one of three Indians has access to improvedsanitation facilities (including improved latrines).As of 2003, it was estimated that only 30% of Indiaswastewater was being treated, with the remainder flowing into rivers or groundwater estimated in 2002 by the How? State & district government to provide water World Health Organisation that around 700,000 Sanitation filter membrane Indians die each year from diarrhoea For household consumptionCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  20. 20. TimelineReplenishment Strategy 2009f 2010f 2011f 2012f 2013f Chennai Nego. Developing Kolkata Nego. Developing Mumbai Nego. Developing Oman Nego. Developing Egypt Nego. Developing Purification Strategy Negotiation R&D Implementation Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  21. 21. Revenue Forecast Revenue Forecast CAGR ==17.5% CAGR 12% 1,400 1,200 1,000 Without S$ mn 800 Recommendation 600 With 400 Recommendation 200 0 2009f 2010f 2011f 2012f 2013f YearCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  22. 22. Net Income Forecast CAGR = 20% 24% Net Income Forecast 200 150 Without S$ mn Recommendation 100 With Recommendation 50 0 2009f 2010f 2011f 2012f 2013f YearCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  23. 23. Cost Estimation Cost of Strategies (Cumulative 5 years) Financing Method S$ ‘000Waste Water Expansion 51,300 Internally Generated FundDesalination 37,721Total CAPEX 89,021Negotiation 2,045Research and Development 6,474 Long-Term DebtTotal Expenses 8,519 Return NPV = S$ 812mn PBP = 3.6 Years Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  24. 24. Issues to be solved… Replenishment Strategy Asia’s most integrated Expansion to water solution provider untapped market that diversifies into India & MENA Purification Strategy Forefront in the Broaden the scope of alternative energy the energy SBU purification solution by strengthening company’s core valuesCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  25. 25. Thank You Q&ACompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  26. 26. Slide Navigator Company profile Recommendation 3 à feasibility Internal Analysis Timeline External : Water Utility Revenue Forecast Analysis Net Income Forecast Cost Estimation External : Energy Conclusion Issues & Objectives Recommendation1 Objective Country Criteria India MENA Recommendation 2 Objective What Where How Back up slides Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  27. 27. Slide Navigator Ratios WO SWOT Ratios W Why not the suggested countries? Valuation Why not China? Incremental Revenue Why not use GDP as a criteria? Recom1 Breakdown Why not consolidate business Recom 2 Breakdown operations? Revenue by region Why not penetrate Water IS Consumer Market? Why not scared of order BS cancellations? Why India? Risk Factors 1 Risk Factors 2 KSF Back up slides Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  28. 28. Feasibility? •  No..will not be able to achieve 5% of total revenue •  Depends on the management goal. •  Feasible if want to be CSR oriented •  Not if focus on maximizing revenue… better to use money for something elseCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  29. 29. SWOT • Strength• Experience and expertise in advanced membrane systemà key strength (membrane technology) • “ability to provide a one-stop solution, and this includes the post-commissioning operations and maintenance ( O&M) of the facilities • Pioneering financing model• AWARDS: global water award, euro money annual award, water deal of the year, water company of the year • Local & International presence • DBOO scheme, EPC, O&M • Won a contract with Algeriaà to become the world’s largest sea water reverse osmosis • High reputation & no cancellation • Good management • R&Dà developed strength of taking new developments to the market quickly and reducing the development cycle of new product offerings • R&Dà Largest of its kind in Asia outside Japan • Ability to utilize its in-house domain knowledge for the project it undertook’ • Strong management commitment and involvement in corporate social responsibility work • Patented membrane technology • Integrated water solutions •  More sophisticated funding strategy helps recycle capital for new ventures Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  30. 30. SWOT Weakness Energy recovery business Vulnerable to crude oil price Delays in project commencement and execution Escalating commodity & construction costs could depress margins Cost overruns will affect bottom-line adverselyCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  31. 31. SWOTOpportunitiesWaste treatment & water recoveryStrong global governmental commitmentGrowing population in developing countryLooking forward to more success in Middle East and North Africa (MENA) regionà enabled them to diversify itself geographically & opened up new opportunities for its related businessDeveloping economy are now relying more on water suppliesGrowing population of developing countryEl-ninyo & global warming à in the EUChinaà Government has identified the urgent need to improve the quality &quantity of water to enable the country to continue its growth cycleIndustrialWill grow from US$150 bn worldwide to exceed US$240 by 2016Membrane technology can be deployed in energy and specialized sectors Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  32. 32. SWOTThreatO&M concessions, revenues might be tied to tariffs imposed by municipal authorities/gov’t agenciesAdditional geo-political & investment risks in certain regions like Middle-East & N. AfricaCultural & languages differences might complicate construction and project managementactivities and delay the completion of the facilityIndustrial manufacturing process sector is expected experience sluggish or even negative growth in 2009World economy had just recovered from the crisisEnergy recovery business& oil refining businessVery much affected by crude oil priceBetter technology may enter the marketLoss of personnel Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  33. 33. Why did not choose from countries in the case? •  Middle east: (Irag, Iran) though needs independent water supply, has high political uncertaintyà high operating risks we want stream of revenue •  Thailand: –  has 99% access to drinking water & 99% sanitation (already match the 86% target) –  Problem w. overdrawing of water, but government are not very concerned about it due to prioritization of politics •  Vietnam & Cambodia: –  Might face barriers to entry due to government regulationsCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  34. 34. Why not China? •  Has been strategic •  Already present in China w. over 10 projectsà S$300mn revenue •  Growth strategy: –  Organic growth strategyCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  35. 35. Why not consolidate business operations? •  Company already has efficient management structure •  Already suitable MNC •  Different SBUs have different market needs and operation processesCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  36. 36. Why not penetrate Water Consumer Market? •  Affordability is a big factor for 785 million people in Asia •  Relatively high cost of product •  Not consistent with the strategy of “finding 1st mover advantage in developing countries” •  No immediate need for itCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  37. 37. Why not scared of order cancellations? •  So far, Hyflux has not encountered any cancellations for significant projects announced prior to the global economic crisis •  Governmental utility projects have longer planning cycles and are less sensitive to cyclical economic devlopmentsCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  38. 38. Why India? •  So far, Hyflux has not encountered any cancellations for significant projects announced prior to the global economic crisis •  Governmental utility projects have longer planning cycles and are less sensitive to cyclical economic devlopmentsCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  39. 39. Risk Factor 1? •  Government may prefer to use wholly-owned company •  Unresolved conflict with JV partner i.e. goal & culture •  Paperwork & process •  Delay constructions •  Political instabilities •  Government lack fundingCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  40. 40. Risk Factor 2 •  Choosing wrong segment •  Change in demand •  Technological incapability •  Unable to find a partner in china •  JV related conflictCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  41. 41. KSF •  Prioritization •  Personnel •  Technological advancementCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  42. 42. Potential JV partners •  Chinese Natural Gas •  China Natural Petroleum CorporationCompany Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  43. 43. Back up SlidesRatios W/O Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  44. 44. Back up SlidesRatios With Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  45. 45. Back up SlidesValuation Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  46. 46. Back up SlidesIncremental Revenue Incremental Revenue 1,400,000 1,200,000 1,000,000 Recommendation 2 Amount 800,000 Recommendation 1 600,000 Base 400,000 200,000 0 1 2 3 4 5 Year Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  47. 47. Back up SlidesRecommendation 1 Breakdown Assumption •  Waste Water – From China - S$30 mn in revenue per project • Desalination - From Nigeria - Ownership of 10% Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  48. 48. Back up SlidesRecommendation 2 Breakdown Assumption •  Owner ship 10% of CNPC China •  Increase R& D for 1% (almost 4% of sales) Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  49. 49. Back up SlidesRevenue Breakdown by Regions Revenue Breakdown Singapore and Others 6% MENA 40% China 54% Revenue Breakdown Singapore and others 12% MENA 39% 1 2 3 China 29% Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  50. 50. Back up SlidesIS W Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  51. 51. Back up SlidesBS W Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification
  52. 52. Back up SlidesBS W Company Situation Issues& Financial Recommendation Conclusion Profile Analysis Objectives Justification

×