Setting Up Stock Broking Business in Vietnam

15
My Preliminary Thought on the setting up of Vietnam JV Presentation to the Management of ABC Sdn. Bhd. 20 May 2012

Transcript of Setting Up Stock Broking Business in Vietnam

Page 1: Setting Up Stock Broking Business in Vietnam

My Preliminary Thought

on the setting up of Vietnam JV

Presentation to the Management of

ABC Sdn. Bhd. 20 May 2012

Page 2: Setting Up Stock Broking Business in Vietnam

Proposed Entry Planning Approach

Product Assessment Sourcing strategy

Develop or

Outsource

recommendation • Assessment of Strategic

importance

• Assessment of Company

capabilities

• Investment requirements

• Make vs. Outsource

functional role

• Medium term and long

term strategies

Suitable Site

Identification • Industry clusters

• Supplier clusters

• Government incentives

Entry Strategy

Entry Strategy • Summary Business

case

• Sourcing strategy

Distribution channels • Analyse prevalent network and

channel structures

• Recommend channel structure

• Evaluate requirement of own

structure v/s alliance options

Distribution

strategy

To-be-cost

modeling

Diagnostic (4 - 6 weeks)

Service Assessment

Market

Attractiveness • Market size and

growth

• Price bands and

trends

• Margins of existing

players

• Industry outlook

Regulatory

environment • Government policies

• Legal and licensing

requirements

• Subsidies and

incentives

Ability to compete • Industry structure

• Key players and their

product and market mix

• Regulatory environment

• Industry Critical

Success Factors

Service

Suitability • Buyer value

analysis

• Profile competing

service

• Analyse suitability

for local mkt

• Adapt for local mkt

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Detailed Evaluation and Planning ( 7 – 12 weeks)

Execution

• Detailed business case

• Implementation plan

• Application for other licenses

Financials • Investment estimates

• Funding options (potential subsidies

and incentives)

• Profitability and Cash flow projections

Marketing • Brand positioning

• Value proposition

• Advertising strategy

g

Service Delivery Strategy

Distribution structure • Network design

• Channel selection

• Infrastructure requirements

Capability Requirements

Support process

& Infrastructure • Office infrastructure

• Payroll, IT, Accounts,

channel management

and Supply Chain

process design

• In-sourcing /

outsourcing

Human

Resources • Organization &

competency model

• Recruitment needs

Selection of

Partners • Selection of Alliance

partners

• Project management

& engineering

• Turnkey contractors

for infrastructure

Implementation

Planning

Service Delivery Strategy

Outsourcing • Service provider

identification

• Service provider

qualification and selection

• Job work v/s purchase

recommendation

• Contracting and service

levels

Provision of

Services • Capacity Planning

• Greenfield project v/s

acquisition

recommendation

• Capital cost estimates

Tier I and II

Service

Provider • Identification

• Qualification

• Selection

Proposed Entry Planning Approach

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Proposed Planning Process

1) 1st Meeting: Agreement on planning process

2) 1st Field Trip to compile information for the following activities:

i. Services Assessment

ii. Sourcing strategy

iii. Distribution strategy

iv. Entry Strategy

3) 2nd Meeting:

i. Report on the findings of the 1st field trips

ii. Perform situation analysis

• Mission

• Opportunities and threats

• Strengths and Weaknesses

• Critical issues for the future

iii. Form team to complete the plan

iv. Summarize situation analysis (between meetings)

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Proposed Planning Process

5) 2nd Field Trip to compile information for the following activities:

i. Services Delivery Strategy

ii. Capability Requirements

iii. Implementation Planning

6) 3rd Meeting:

i. Report on the findings of the 2nd field trips

ii. Develop scenarios for the future (scenario approach)

• Develop scenarios (sketch of vision of success)

• Note areas of agreement and choices

ii. Summarize scenarios and choices (between meetings)

iii. Gather information to test feasibility of scenarios (between

meetings)

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Proposed Planning Process

7) 4th Meeting:

i. Evaluate scenarios (e.g fit with missions, fit with needs)

ii. Evaluate financial feasibility

iii. Select the best scenario

iv. Develop first draft of business plan. Include sections on mission,

services, staffing, finances, facilities, and implementation (between

meetings)

8) 5th Meeting:

i. Review first draft of business plan. Note suggested improvements

ii. Revise first draft of business plan (between meetings)

9) 6th Meeting:

i. Review and approve final draft of business plan

ii. Implement plan and review progress every quarter

iii. Update plan every 6 months

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Proposed Organisation Chart

Management

Board

CEO

Advisory

Investment

Committee

Public

Relations

Human

Resources

Finance,

Admin,

Legal

Risk

Management

Information

Technology

- Stage 1 - Stage 1 and will be

separated in Stage 2 - Stage 2

Equity

Market &

Derivatives

Stockbroking

Services Research

Wealth

Management

Asset

Management

Legal

Services

Implementation Stages

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Stage 1 K

ey F

oc

us A

reas

Creating management

capacity from top to

bottom

Creating profitable

business model

Installing information

systems and processes

Managing risk

Managing and protecting

capital

Creating the Brand

Finance &

Operations

& Admin

Information

Technology

Equity

Market &

Derivatives

Stockbroking

Services

Research Set

Up

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Stage 2 K

ey F

oc

us A

reas

Creating additional

service lines

Enhancing the revenue &

cost models

Enhancing operation

efficiency

Improving information

systems and processes

Enhancing return on

capital

Improving the Brand

Admin

Legal

Services

Advisory

Risk

Management

Public

Relations

Set

Up

Asset

Management

Wealth

Management

Page 10: Setting Up Stock Broking Business in Vietnam

External Challenges

By the end of 2006, there were 18 fund management companies and 55

securities companies competing based on brand name and reputation, service

quality, value added services, and fees. This is a sign of overcrowded.

The stock market size is small with daily trading volume of only approx. USD100 million and average brokerage fee is about 0.3%.

In terms of brokerage and transaction market share, 5 biggest companies including SSI, BVSC, VCBS, BSC and ACBS account for 70% of stock brokerage, 80% of bond transaction and 65% of customers’ accounts.

In terms of corporate advisory service, SSI, BVSC, VCBS and BSC overcome other companies in attracting big corporations.

By the end of 2006, the number of trading accounts stood at over 100,000 accounts, of which, 1,700 accounts were foreign investors. The foreign investors hold 25% to 30% of the total number of listed shares, in which there were some international securities investment firms like JP Morgan, Merrill Lynch, Citigroup, BNP-Paribas Singapore, and Credit Suisse Hong Kong.

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External Challenges

With the crowded situation in the financial industry, there will a stiff competition among the employers to compete against each other to attract the best talent.

The fee for order entry error correction is expensive (VND500,000 for every correction).

Local investors understanding about financial products and services are limited.

Share prices have become less attractive after the sharp increases in September 2007. Supposed that the EPS growth rate would be 30% in 2007 and 20% in 2008, the PE index would be 23 for the next 12 months. This is a sign of overvaluation.

Strict restriction imposed on share financing and the total lending exposure of each bank is to be kept below 3% of total outstanding loans.

Under the personal income tax bill, a 25% capital gain tax and 5% tax on dividends will be imposed on securities investors.

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External Challenges

SSI, the market leader, to provide better services, will invest in a new online trading system from IBM, Cisco, FreeWill and international software giant Oracle, worth US$1.3 million.

Inflation rate increased sharply to 9.3% in October 2007, thus raising the concern among investors that the Government would tighten monetary policies.

70% of all lending activities belong to the four main state-owned commercial banks: BIDV, Vietcombank, Incombank and VBARD. Foreign banks and joint ventures accounted for about 14% of lending activities. Restrictions on raising deposits in VND prevent a level playing field and, accordingly, the market share expansion has been slow.

In 2006, 41 of 64 H5N1 (“bird flu”) deaths reported in Vietnam, 25 of 64 provinces affected in Vietnam.

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External Challenges

The market is concentrated and not competitive. SOEs

occupy monopoly positions in key industries like electricity,

aviation and telecommunications with a market share of at

least 80%. Other heavily-regulated industries tend to have

some foreign and private-sector participation but are

dominated by a state-owned oligopoly where several large

firms have a market share of 10-40% each. These

industries include cement, sugar, minerals, banking and

petroleum, in which prices tend to be high and most firms

are neither efficient nor competitive.

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Other Challenges

Compiling a detail list of Vietnamese companies with potential to become future

IPO candidates that are currently serving Build-Operate-Transfer (BOT) projects

or foreign companies located in Industrial Zones (IZ), Export Processing Zones

(EPZ) and High Technology Zones (HTZ).

Form alliances with private equity firms from Europe, US and Japan to co-invest in

Pre IPO opportunities in Vietnam.

Form alliances with other stockbroking firms and fund management houses based

in ASEAN countries to attract foreign investors and to strengthen our firm

distribution networks.

Winning advisory mandates from state-owned enterprises (SOEs) with the

potential to become future IPO candidates.

Under the law, the total number of foreign employee is restricted to the lower of

3% of the total number of employees or 50 individuals.

Trade unions are a powerful political and economic force in Vietnam and strikes

are very common.

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THANK YOU