(Tiểu luận) topic 5 operational analysis and valuation offinancial institutions finance company

Functions  Offer Unsecured Loans People with bad credit histories might get personal loans from finance organizations at a higher interest rate..  Offer Business Loans Businesses can a

BỘ GIÁO DỤC VÀ ĐÀO TẠO

TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN

BÀI TẬP NHÓM MÔN

THỊ TRƯỜNG VỐN Nhóm: 5 Thành viên:

Hà Chi Mai Mai Nhật Hà Nguyễn Phương Thảo Nguyễn Thu Thảo Triệu Đạt

Table of Contents

I Overview of finance companies 3

1 Definition and characteristics 3

1.1 Definition 3

1.2 Characteristic 3

1.3 Functions 3

2 Types of financial companies 4

2.1 Consumer finance companies 4

2.2 Sales finance companies 4

2.3 Commercial finance companies 4

3 Finance companies' operations 4

3.1 Finance lease 5

3.2 Factoring 5

3.3 Consumer lending 5

4 Comparisons with other financial institutions 6

4.1 Compare with commercial banks 6

4.2 Compare with securities companies 6

4.3 Compare with mortgage companies 6

II Fundamental analysis and price evaluation of EVN Finance 7

1 Basic information 7

1.1 Development history 7

1.2 Core services 7

1.4 Opportunities and challenges: 8

2 Operation analysis 8

2.1 Analysis of total assets and total capitals of EVN Finance (EVF) 8

2.2 Analysis of profits of EVF 10

2.3 Capital mobilization and usage of capitals 11

2.4 Analysis of financial ratios 14

3 Calculation of stock price and recommendation about investment 17

3.1 P/E method 17

3.2 Recommendation: 18

Topic 5: Operational Analysis and valuation of

financial institutions - Finance company

I Overview of finance companies

1 Definition and characteristics

Finance companies especially serve the demand of borrowers with poor credithistory, and are regarded as an important part of the money lending field

1.3 Functions

 Offer Unsecured Loans

People with bad credit histories might get personal loans from finance organizations

at a higher interest rate In fact, while requesting personal loans, people frequently go tobanks Banks, on the other hand, only offer personal loans to borrowers who have a solidcredit history and satisfy the requirements for the loan

 Offer Secured Loans

Due to the significantly lower risks compared to unsecured personal loans, financeorganizations prefer to offer secured loans to borrowers The finance business has theright to take possession of the collateral and sell it at public auction if the borrowerdoesn't repay the loan according to the agreed-upon terms

 Offer Business Loans

Businesses can also get loans from finance companies When a firm wishes to buy

or lease office equipment like computers or machinery, for instance, it might go to afinance company for assistance The majority of financing organizations also providebusinesses with factoring services

 Lend to Purchase Products

Customers of a select few retailers are given loans by sales-based financecompanies For instance, borrowers can obtain financing from a company that is based onsales in order to buy a refrigerator from a retailer of home appliances

2 Types of financial companies

2.1 Consumer finance companies

The first category, consumer finance companies, makes small loans to consumers(individuals), typically with terms that benefit the company and are unfavorable for theconsumer Direct-loan and payday loan companies fall within this category and have apoor reputation for taking advantage of people who are struggling and in need of quickcash

Consumer finance companies offer loans with higher interest rates than the marketaverage, which are called subprime loans

2.2 Sales finance companies

The second category is sales finance companies, which are also called acceptancecompanies These finance companies offer services for businesses in a similar way thatdirect-loan companies offer services for individuals, with some key differences Thebusinesses that borrow money from sales finance companies are typically largecorporations with impressive credit ratings A large corporation does not need to secureits loan with collateral In addition, these businesses often receive better interest ratesthan they would receive from a bank

2.3 Commercial finance companies

The third category is commercial finance companies, also known as commercialcredit companies These finance companies offer loans to both small and largebusinesses, usually to help them pay for new equipment or other significant upgrades

As small businesses pose greater risks to commercial finance companies, they oftenhave to pay higher interest rates than larger businesses These subprime loans' interestrates are usually between 0.1 percent and 0.6 percent higher than the loans given bybanks to more qualified customers (prime rate loans) This may appear to be a smalldifference, but for finance companies, this translates into thousands of additional dollars

in revenue However, finance companies are more likely to have delinquent clients than abank, so this extra money from paying customers helps mitigate these losses

3 Finance companies' operations

A finance lease is a sort of asset lease that varies from other types of leases in thatthe risks and ownership rights of the leased item are significantly altered.

Financial leasing is a medium- and long-term credit activity based on a financiallease contract (with the leased assets being machinery, equipment, means oftransportation, motor vehicles, etc.) between the lessor (a financial leasing company(non-banking credit institution) and the lessee (customers wishing to lease are typicallybusinesses and economic partners)

The finance leasing firm owns the leased asset, and the lessee is required to pay rent(depreciation of the leased asset) to the finance leasing company At the end of the leaseperiod, the lessee either buys back or continues to lease the asset in accordance with thelease contract terms

The lessee does not have to spend the entire amount all at once to have machineryand equipment, and the lessee does not have to mortgage assets as in other loantransactions; the lessee does not bear the risks of asset devaluation, depreciation, and soon.e parties may not cancel the contract unilaterally during the leasing period

3.2 Factoring

Factoring is the activity of a factoring unit that buys back receivables fromcustomers arising from sales or service provision transactions but pay late, allowingclients to obtain payment in advance at a fixed rate of the receivable amount When thebuyer makes the payment and deducts the fees, the remaining will be refunded to theconsumer The financial firm offers debt collection and credit risk insurance services inaddition to funding in the form of loans to customers based on accounts receivable

3.3 Consumer lending

Consumer lending is a type of credit extension given by credit organizations inwhich banks or financial corporations make loans to people and families to meet theirpurchasing needs

Credit institutions can give consumer loans with or without collateral, depending onthe customer, loan purpose, loan size, or loan length, among other factors Individual andhousehold consumers now utilize consumer loans to cover costs such as buying a house,buying a car, education, health care, travel, and so on

Demand for consumer loans is increasing in emerging nations In Vietnam, forexample, consumer loan growth has always been greater than overall loan growth duringthe last ten years People can access consumer financing through a variety of channels,including commercial banks, social policy banks, finance firms, people's credit funds, and

Trắc nghiệm thương mại điện tử

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microfinance organizations The State Bank of Vietnam has licensed 16 financialbusinesses to provide consumer loans.

4 Comparisons with other financial institutions

4.1 Compare with commercial banks

Finance firms and commercial banks differ even though they both take the form ofcredit lending institutions, primarily in their activities and levels of legal capital Afinance company is a non-banking organization that solely performs banking tasks likelending, financial leasing, and guaranteeing However, compared to commercial banks,the working range of financing companies is considerably smaller and more constrained.For instance, financial institutions are not allowed to handle individual customers'deposits or offer payment services through their accounts Furthermore, although financefirms and commercial banks both need to maintain legal capital levels, the level of theformer is substantially lower than the latter Typically, finance companies may impose ahigher interest rate in order to provide services that banks are unable to, including speedyloan disbursement or specialized services

4.2 Compare with securities companies

Although securities companies and finance businesses are both types of financialentities, there are certain commonalities between the two Finance companies primarilyperform banking activities such as lending, financial leasing, and guaranteeing, whereassecurities companies specialize in the field of securities by selling securities, brokeringsecurities, issuing and underwriting securities, advising investment, and managinginvestment funds The sources of profit for these two types differ as a result of theoperational variances Unlike securities businesses, which primarily benefit fromcommissions from selling and brokering securities, finance companies make the majority

of their money from the interest rates imposed on loans

4.3 Compare with mortgage companies

A financial entity called a mortgage business performs comparable key functions to

a finance company Mortgage and finance firms are both credit-lending organizations,and issuing loans is their primary business Mortgage businesses and financing firms,however, are two different kinds of financial institutions The main type of loans financecompanies provide is consumer loans, while that provided by mortgage companies isoriginating home loans The main difference between these types is in the form of loan orlending conditions Whereas collaterals are required by mortgage companies, they are notcompulsory in finance companies The sources of capital used by these organisations alsovaried The capital utilized by finance firms comes from the individuals and organizationsthat comprise the companies, from deposits made by individuals and organizations with

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deposit and precious papers.

In general, although finance companies have some similarities to other kinds offinancial institutions, they also have several characteristics that distinguish them from theothers

II Fundamental analysis and price evaluation of EVN Finance

1 Basic information

1.1 Development history

EVNFinance Joint Stock Company was officially put into operation on September1st 2008 under the financial institution model, with the mission and strategic objectives toprofessionally arrange and manage capital for Vietnam Electricity

After more than 15 operating years, witnessing great complicated fluctuations ofthe world and domestic economy, under plain direction, the Board of Management and allenthusiastic employees of EVNFinance have concertedly endeavored to execute businessstrategy EVNFinance has step by step achieved the expected goals in the process ofshaping its image and position in Vietnam financial market, paving the wave to attainother encouraging achievement in many respects

1.2 Core services

1.2.1 Business credit

To meet various capital demands of enterprises, such services are provided:Investment project loans, Loans to supplement working capital, Co-financing loans,Factoring, etc

1.2.2 Capital mobilization

EVNFinance receives deposits in VND or foreign currencies (USD, EUR ) fromdomestic and foreign Enterprises and Organizations operating under Vietnamese law

1.2.3 Easy Credit consumer loans

Easy Credit provides consumer cash loans and online unsecured loans withpreferential interest rates and transparency in costs

1.2.4 Loans for investment in sky-voltage power projects

Meet the demand for additional capital to invest in rooftop solar power projects

1.3 Goals

After more than 11 operating years, EVNFinace has grown in both quantity andquality with its reputation and position increasingly recognized in the domestic and

towards integration in scale, quality and efficiency, and sustainable growth To bring thehighest benefits to customers and shareholders, with the mission "The fulcrum Reliablefinance, always accompanying the development of the electricity industry andcustomers."

1.4 Opportunities and challenges:

EVF is one of the two companies in the consumer finance industry presenting on thelisted floor, along with VietCredit (TIN) But both of these companies have a much lowerconsumer credit market share than the industry leaders, currently accounting for 80% ofthe market pie which are Fe Credit, HD SAISON and Home Credit

Based on the capital scale, EVF's total assets are quite large compared to othercompanies, except for Fe Credit, EVF with its major shareholder, Vietnam ElectricityGroup (EVN), seems to have a favorable consumer group in the electricity field, but havenot really exploited it effectively

If there is no separate between "segmental" and "general" operations, businesseslike EVF, even with large scale and assets, may find it difficult to thrive, especially withthe growing market, when increasing competitive force appears from SMBC at FeCredit;Krungsi at SHB Finance; Mirae Asset Finance, Shinsei Bank at MB Shinsei…

2 Operation analysis

2.1 Analysis of total assets and total capitals of EVN Finance (EVF)

Table 1 Analysis of total assets of EVN Finance (EVF)

Source: Financial statements of EVF

29 billions to 32 billions between 2021 and 2022, then reach 42.2 billions at the end of

2022 It can be seen that the figure of EVF’s total assets witnessed a growth of roughly46.5% during the period We can conclude that comparing to other financial institutions,EVF has done a wonderful job in generating profit, which shows its potentialdevelopment despite the COVID-19 pandemic

From the graph above, during the period, the amount of cash and other equivalentsskyrocketed by 166.2% in the first year, then sharply decreased by 50.5% in the nextyear This is due to the fact that EVN had to spend more cash on interest payment forother credit instituions on its deposits and loans, as the amount of that increased by25.02% between 2021 and 2022 Long-term investment also shows the same figure, as itfluctuated over the two-year period The only thing which rapidly declined was the netvalue of investing securities, as the company has sold more and more securitiesthroughout the year In addition, the other figures show a sharp increase The porportiontaking up the most part in EVF’s assets is loans to customer, which shares around 50% inall the 3 years It also doubled, from 12 billions to 24 billion just from 2020 to 2022

Table 2 Analysis of total equity of EVN Finance (EVF)

Source: Financial statements of EVF

In general, both total liabilities and total equity went up at a significant rate.While the amount of total liabilities skyrocketed in 2022, the total equity grew at amore constant pace, which is around 9% every year Like most financialinstitutions, most of EVF’s capital came from borrowings and debts, contributingnearly 90% in all three years

As can be seen from the table above, the only figure which experienced adecline was EVF’s deposits from customers The amount of that dropped down fornearly 40% in just 2 years, from 6.7 billions to 4.1 billions One more noticeable