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 TFA Case Analysis- KC5 Dec 2016

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samantha gamage



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Wed Dec 28, 2016 9:29 am

Dear sir

If we are asked to do environment analysis, external environment can be analyses using PESTEL or five forces and perform SWOT analysis. In addition to that do we need to perform internal environment analysis other than SWOT . IF so what are the models to be used to do internal environment analysis?
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Wed Dec 28, 2016 9:51 am

samantha gamage wrote:
Dear sir

If we are asked to do environment analysis, external environment can be analyses using PESTEL or five forces and perform SWOT analysis. In addition to that do we need to perform internal environment analysis other than SWOT . IF so what are the models to be used to do internal environment analysis?

Normally they don't expect you to refer a model for S&W .

However when follow a model you can have a systematic approach for internal environment analysis. You can use
7 Ms, Porters Value Chain, CSF analysis, resource analysis (Physical, intangible,Financial) etc, internal competency analysis, functional areas analysis (Operation,Marketing,Finance,HR,Innovation, supply chain)
Mackency 7S etc..
pls be mindful of your time allocation as well.
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samantha gamage



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Wed Dec 28, 2016 10:10 am

Admin wrote:
samantha gamage wrote:
Dear sir

If we are asked to do environment analysis, external environment can be analyses using PESTEL or five forces and perform SWOT analysis. In addition to that do we need to perform internal environment analysis other than SWOT . IF so what are the models to be used to do internal environment analysis?

Normally they don't expect you to refer a model for S&W .

However when follow a model you can have a systematic approach for internal environment analysis. You can use
7 Ms, Porters Value Chain, CSF analysis, resource analysis (Physical, intangible,Financial) etc, internal competency analysis, functional areas  analysis (Operation,Marketing,Finance,HR,Innovation, supply chain)
Mackency 7S etc..
pls be mindful of your time allocation as well.


Thanks Sir, as you think only perform external environment using PESTEL or five forces and then perform SWOT is sufficient?? cant we directly perform SWOT without doing PESTEL and formulate strategies based on that. pls clarify??
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Aruljega



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Wed Dec 28, 2016 12:40 pm

Is it possible to get the latest Jb securities report to see the latest trend of vehicle imports to support our analysis and recommendations
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sagersl



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Wed Dec 28, 2016 8:06 pm

Dear Sir,

What will the the valuation method tested?

Will it be Price to Book Value or Residual Income method?
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sagersl



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Wed Dec 28, 2016 8:13 pm

Hi Everyone,

I found a useful ppt on Valuation Methods ->

www(dot)cfainstitute(dot)org  learning products  publications inv Documents equity_chapter9.ppt

Please insert

"." instead of (dot)
"/" instead of spaces
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prasha123



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Thu Dec 29, 2016 7:51 am

Sir ,

1.Please explain if the micro finance directions given below directly applies to RBF as it is licensed as a Finance company but not as a micro finance entity.

             1. Minimum Core Capital - Direction No. 01 of 2016
             2. Statutory Reserve - Direction No. 02 of 2016
             3. Deposits - Direction No. 03 of 2016 (This indicate company cannot accept 3 months time deposits)
             4. Maintenance of Minimum Liquid Asset Ratio - Direction No. 04 of 2016 (Liquid asset ratio should be 15% whereas RBF has it at 7%)
       

2.There are poor inventory control in TFA and spare parts in terms of having "generous stocks".If such case what we can propose as efficient inventory management strategy for TFA and spare parts?
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prasha123



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Thu Dec 29, 2016 7:59 am

Dear Sir,

1.Please explain if the regulations given by Micro finance Acts directly applicable for RBF as it is a "LFC".This question arises as there are non compliance of RBF compared to these statues like liquid asset ratio.


             1. Minimum Core Capital - Direction No. 01 of 2016
             2. Statutory Reserve - Direction No. 02 of 2016
             3. Deposits - Direction No. 03 of 2016
             4. Maintenance of Minimum Liquid Asset Ratio - Direction No. 04 of 2016
   
2.Also, there were hints on inefficient management of inventory in TFA and spare parts business (having generous stock).In such case any methods that we can suggest to improve on the inventory levels?

Thanks very much!
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Thu Dec 29, 2016 8:00 am

After reviewing some of your reports thought of highlighting below points:


Lets say you have a strategic issue - about acquisition of  RBF and examiner wants you to analyze environment, formulate strategies , evaluate and recommend

Examiner may ask you to perform an environmental analysis and SWOT for RBF. You have enough information to do it. Be mindful here...!
If examiner gives you separate information to analyze the environment, first use such information before you write your own ones.

Then you need to first formulate strategy for acquisition:
Here you can use a suitable model such as Ansoff/parenting model etc to formulate it.

For example if you use ansoff and you decide to take it as diversification.....
Then under this section you will write why you took it as diversification with relevant facts

Then you evaluate this strategy:
Here you consider positives/negatives or advantages/disadvantages, SAF etc of the formulated strategy

Points you discovered under environmental analysis, competitor analysis and Swot analysis financial valuation will be useful in this evaluation

Next you come to your recommendation

Here you give your recommendation and actions to consider (Justify your recommendation) depending on your recommendation.

For example you decide to acquire RBF , Then your recommendation is to acquire it. Here  you might have to give some justification for your recommendation.consider both qualitative and quantitative in arriving at your recommendation. Also if time permit some actions  based on your SWOT and above evaluation to Capitalize on strengths, eliminate weaknesses, exploit opportunities, face threats etc.

If you decide not to recommend acquisition justify it based on relevant facts again from the above SWOT/Evaluation. If you wish you can use a model like parenting model to justify your above recommendation.


Finally your concluding remarks.

[b]Other points

(1) if unseen provides you additional information on PESTEL/Industry. Analyze such information first.

(2) You can write your own findings relating to industry/pestel etc later. But point 3 above is very important and it is your priority.

(3) Answer the question that examiner has asked. Not an answer based on your own question.

Don't worry. You have enough information now. You can do it!!!!
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Nilukshi



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Thu Dec 29, 2016 5:02 pm

Sir,
If we're to not go ahead with the RBF acquisition, how should the strategy formulation be, say Ansoff?

Thank you
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Thu Dec 29, 2016 9:11 pm

Nilukshi wrote:
Sir,
If we're to not go ahead with the RBF acquisition, how should the strategy formulation be, say Ansoff?

Thank you

Pls read the above note.
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sagersl



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Thu Dec 29, 2016 10:18 pm

How to get the beta value for the industry? I searched CSE but it has only the individual company beta values. Not sector beta values. Any idea about this?
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 7:39 am

sagersl wrote:
How to get the beta value for the industry? I searched CSE but it has only the individual company beta values. Not sector beta values. Any idea about this?

I am also not sure whether CSE contain sector beta. I guess the examiner will give you.
However incase you need it only option is to consider an average value above 1 as many companies carrying above 1 beta (Asian F 1.8, LOLC 1.8, Commercial 1.2, Abans 1.Cool.

Also, I don't think levered/unlevered beta works here as industry is regulated your interest bearing debt to equity might be very close to each other, also not easy to find a similar company in industry.
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 7:45 am

Some industry figures - P/E 7, PBV- 1.1 and DY-3.30
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 8:50 am

What are the improvement you could suggest to existing performance management system of bearing business:

- Current system focuses more on achievement of sales target
- However Japanese principals require very high level of customer service. But this aspect has not been considered.

The below are strategically relevant balanced set of measures:
(a) Cash flow management in addition to purely sales and hence some weight on financial indicators such as inventory management and credit control efficiencies.
(b) Customer perspective: based on parameters such as customer satisfaction, customer loyalty, customer profitability, market share.
(c) Internal business process perspective: based and measured on perspectives such as customer lead time, availability of stocks, inventory management efficiencies, and service lead times.
(d) Learning and growth perspective: new product introductions, employee satisfaction, employee training on product benefits and the knowledge on products as well as knowledge on modern marketing management methods such as product positioning, competitive marketing strategy of the sales agents and modern inventory management methods by personnel involved in managing agencies.
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 10:28 am

What measures can be introduced to offer more flexibility for Rent a car process;

- GPS/RFID system fixed to the car to track it
- Loyalty point system to encourage known/repeated customers
- Obtain security deposits via credit card- It will solve identification problem as well. Credit card provides the identity.
- Make online reservation in advance (no waiting)and get passport/visa pictures via whats ap/viber
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 10:44 am

What are the differentiators available to rent a car business:

- Air port pick up and dropping
- Delivering vehicles to the hotel
- Separate seats for Childs
- Usage based charges, with a minimum fixed fee.
- Reservations in advance (online)
- Request client to take pictures before renting the car. If there is a issue at the return client can refer it.
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PBH



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 11:05 am

Thank you Sir for all the helps....until last moments.
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Admin
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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 11:11 am

prasha123 wrote:
Dear Sir,

1.Please explain if the regulations given by Micro finance Acts directly applicable for RBF as it is a "LFC".This question arises as there are non compliance of RBF compared to these statues like liquid asset ratio.


             1. Minimum Core Capital - Direction No. 01 of 2016
             2. Statutory Reserve - Direction No. 02 of 2016
             3. Deposits - Direction No. 03 of 2016
             4. Maintenance of Minimum Liquid Asset Ratio - Direction No. 04 of 2016
   
2.Also, there were hints on inefficient management of inventory in TFA and spare parts business (having generous stock).In such case any methods that we can suggest to improve on the inventory levels?

Thanks very much!

Micro finance act is to regulate Micro Finance service providers who are not regulated yet. As we discussed, RBF is already regulated and they are subject to more stringent regulations anyway.
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 11:13 am

sagersl wrote:
Dear Sir,

What will the the valuation method tested?

Will it be Price to Book Value or Residual Income method?

Sorry. I am not in a position to give a direct answer.
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 11:16 am

Aruljega wrote:
Is it possible to get the latest Jb securities report to see the latest trend of vehicle imports to support our analysis and recommendations

Sorry , I don't have it.
Pls use data upto July. I don't think there is any major change in the trend, Rather it will further aggravate with new LBV ratio effective from Jan 2017 and Rs depreciation.
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sagersl



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 12:43 pm

Thanks a lot for your support sir.

One last question. If the question has given expected ROE is say 10% and beta value is 1.5,
Can we assume Ke = Expected ROE
Or should we assume a Risk free rate and calculate the Ke based on the ROE and beta value?
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 7:14 pm

sagersl wrote:
Thanks a lot for your support sir.

One last question. If the question has given expected ROE is say 10% and beta value is 1.5,
Can we assume Ke = Expected ROE
Or should we assume a Risk free rate and calculate the Ke based on the ROE and beta value?

ROE and Ke are different calculations. Ke measures the cost of equity to the shareholder. It is a relative mesure as it takes into account the Rf rate in the country, market return and volatility of share prices compared to market.

ROE is more to do with specific return (profit) ratio in relation to a particular company.
You may have to calculate Ke separately based on given information.
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Admin
Admin


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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 7:40 pm

PPE position.

The below was highlighted by one of your colleague- Anas Faiz

Direction 11 of 1991

No finance company shall purchase or acquire any immovable property or any right title or interest therein exceeding :–
(i) in the aggregate at any time the amount outstanding on the loans obtained for the specific purpose of purchasing ; or

(ii) fifty (50) per cent of the capital funds of the finance company without the prior approval of the Director. This shall not prevent an institution :–
(a) from holding immovable property purchased by the company for re-sale as part of its trade or business;
(b) from securing a debt on any immovable property and in the event of default in payment of such debt, from holding that immovable property for realisation by sale or auction at the earliest.

3. In this Direction, “Capital Funds” shall have the same meaning as contained in the definition in section 46 of the Finance Companies Act, No.78 of 1988

Capital Funds = SC+ Reserves + Unsecure Subordinated Debentures

On the face of it appears that company violates this rule. Need to check whether they have obtained prior approval from the Director CBSL
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Prashan Muthugala



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PostSubject: Re: TFA Case Analysis- KC5 Dec 2016   Fri Dec 30, 2016 9:05 pm

Sir, any Risk management strategies for TFA and RBF?

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