Issuu on Google+

HATTHA KASEKAR LIMITED (HKL) 2010-2011

Prou Sokchea Course ID: BUS 605 Financial Management Lectured by Lect. Ros Sokheng, University of Cambodia Sunday, June 02, 2013,


Purpose • This presentation shows HATTHA KASEKAR MICROFINANCE services and product, the main focus is on studying and analysis of HKL financial statements that provide full information of HKL financial position / health, growth or losses in the business. The overall study in this presentation will get us to understand how HKL financial processes are implemented via various financial tools based on standard practices such as balance sheet, income statement and ratio analysis.


Table of content I. II. III. IV. V. VI. VII.

Background Product/Services & Coverage area Financial statement (FY2010 & FY2011) Financial analysis (Common Size ,Comparative, Ratio analysis) Comments from analysis Conclusion Reference


I.

Background

+1994: A food security project established by OCSD/OXFAM-Quebec, a Canadian organization, provided loans to rural people in four communes of Pursat province. +1996: The food security project was registered with the Ministry of Interior of Cambodia as a nongovernmental organization (NGO) called Hattha Kaksekar. In Khmer, "Hattha Kaksekar" means "Farmer's Hand" or "A Helping Hand for Farmers". The Head Office of Hattha Kaksekar NGO was based in Pursat province. +2001: Hattha Kaksekar (HK) NGO was registered with the Ministry of Commerce with paid-up capital of USD 77,850 to transform itself into a limited company with a new name, Hattha Kaksekar Limited (HKL). At the same time, HKL was granted a three-year license by the National Bank of Cambodia to operate microfinance services across Cambodia. +2003: HKL increased its paid-up capital from USD 180,000 to USD 257,850. This came from capital investment from CORDAID, based in the Netherlands. CORDAID held 19 percent of the total shares and became the fifth shareholder of HKL in addition to the existing shareholders: HK NGO, HK Staff Association, SolidaritĂŠ Internationale pour le DĂŠveloppement et l'Investissement(SIDI), and a private shareholder. +2007: The savings account and configured systems were put in place. Meanwhile, HKL increased its capital from USD 257,850 to USD 1,339,700. Due to its sustainability in terms of finance, operation and governance, HKL was offered an MFI permanent license by the National Bank of Cambodia.


Background Continue.. +2008: There was a new capital injection from Oikocredit, Norfund and Triple Jump in HKL. Thus, paidup capital of HKL increased to USD 2.7 million. Within the year, HKL introduced the Local Money Transfer Service to its clients and the public to adapt to their changing needs. +2010: HKL was offered an MDI "Micro-Finance Deposit Taking Institution" License by the National Bank of Cambodia due to the sustainability of its operations and finances. This license disclosed one of HKL's successes in providing customers with financial services, permitting HKL to officially mobilize savings from the public. Remarkably, the MIS team was working on equipping the Core Banking System to provide a prompt and efficient service, and in response to the company´s strategy to transform itself into a commercial bank in the future. +2011: The registered capital of HKL was raised from USD 2,716,800 to USD 4,036,800 to adapt to the volatility of its business environment. The rise in capital was derived from capital investment of responsAbility and other shareholders.HKL had already installed the new Core Banking System as planned. The new system enabled customers to withdraw their money as needed at all HKL offices. In early 2011, after the conducting of an institutional rating to evaluate its banking business by Microfinanza Rating, HKL received a grade of "A-" which reflects very good operation and performance. This means that the institution is stable despite being affected by major internal and external events, and that the risk is being appropriately monitored and managed to minimize its effects.


HKL Service Coverage


II. Product and Services 1.

Loans

2.

Saving Account

3.

VIP Saving Account

4.

Planned Saving Account

5.

Fixed Term Deposit

6.

Local Money Transfer

7.

UltraModern ATM


II. Products and Service 1. Loan: The maximum amount of loan depends on customer needs, and the interest rate is 1.5% or lower per month based on creditworthiness, loan size, and loan currency. HKL offers loan products to customer in three currencies: US dollar, Khmer riel, and Thai baht.


II. Products and Service Kind of Loan Individual Loan  Everyone can apply  Legal documents  Maximum of US$ 10,000 depending on credit worthiness  Have loan up to 24 months  Interest rate 3% per month depend on loan size and loan currency


II. Products and Service Group Loan 2-8 people Maximum of US$ 400 and 12 months Staff Loan Staff receive a loan 1.5% interest rate Have a loan up to 24 months Maximum of 6 times of salaries


II. Products and Service 2. Savings: a. Savings Account: The minimum balance must be at least USD 5 and the interest rate ranges from 3.5%-4% per annum depending on the type of currency deposited. b. VIP Savings Account: The minimum balance for this kind of account is USD 1,000 or equivalent currency. In particular, HKL offers a high interest rate between 4%4.5% per annum. c. Planned Savings Account: a minimum amount of USD 10. The interest ranges from 4%-7.5%. d. Time/Fixed Deposit Account: The minimum balance is USD 50 and the annual interest rate is between 4%-8.7% depending on the deposit term and a kind of depositedcurrency.


II. Products and Service 3. Local Money Transfer: HKL has 122 offices across the country to provide the money transfer service to customers. The transfer fee is based on the location but is less expensive (1.5$/Transaction) and safer than many other transfer methods.


II. Products and Service 4. Ultramodern ATM: the customer can perform both cash and non-cash transaction like cash deposit, cash withdrawal, fund transfer, remittance, currency exchange, mobile top up, balance inquiry, mini-statement, account maintenance, account opening, etc. With these transactions, customer has a choice to select their preferable currency such as Khmer riel, US dollar and Thai Baht.


Customer Profile by Sectors


Financial Statement Balance Sheet

Income Statement

Common Size analysis

Comparative analysis

Ratio analysis


Financial Statement Analysis (Common Size)


III. Financial Statement Analysis (Balance Sheet)


III. Financial Statement Analysis (Balance Sheet) 2011 Amount

2010 Change in %

Amount

Change in %

Balance Sheet

Assets Cash

$ 687,872

0.8

$ 278,822

0.59

Balance with central bank

$ 1,754,994

2.0

$ 712, 589

1.5

Balance with other banks

$ 6,017,370

7.0

$ 1,176,240

2.5

Loan to customers

$ 74,535,860 86.0

$ 43,578,565 91.50

Other assets

$ 1,515,678

1.6

$ 895,595

1.8

$ 911,738

1.0

$ 874,611

1.8

Intangible assets

$ 1,187,345

1.4

$ 4,347

0.01

Deferred tax assets

$ 174,875

0.2

$ 119,556

0.3

Property and equipment

Total assets

$ 86,785,732

100.0

$47,640,325

100.0


III. Financial Statement Analysis (Balance Sheet) Liabilities and Stockholders' Equity

2011

Change in %

Deposit from customers

$ 15,775,630

18.17

$ 4,630,743

9.72

Borrowings

$ 37,178,413

42.84

$ 24,349,979

51.11

Amounts due to shareholders

$ 10,447,756

12.04

$ 6,672,096

14.00

Subordinated loans

$ 2,000,000

2.30

-

$ 419,506

0.48

$ 272,893

0.57

Other liabilities

$ 2,616,941

3.01

$ 1,289,742

2.70

Provision for income tax

$ 721,542

0.83

$ 430,907

0.90

$69,159,788

79.69

Retirement benefits

Total liabilities

2010

$37,646,360

Change in %

79.03


III. Financial Statement Analysis (Balance Sheet) Shareholders’ Equity

2011

Change in %

2010

Change in %

Share Capital

$ 4,036,800

4.65

$ 2,716,800

5.70

Share Premium

$ 5,515,704

6.35

$ 1,445,955

3.03

$ 382,470

0.44

$ 234,429

0.49

$ 6,961,651

8.02

$ 4,867,462

10.21

$ 16,896,625

19.47

$ 29,264,646

61.43

$ 729,319

0.84

$ 729,319

1.53

$ 17,625,944

20.30

$ 9,993,965

20.97

$ 86,785,732

100.0

$ 47,640,325

100.0

Reserves Retained Earnings

Net Equity Subordinated Loans Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity


III. Financial Statement Analysis (Income Statement)


III. Financial Statement Analysis (Income Statement) Income Statement

2011

%

2010

%

Interest Income

$ 15,402,816

100.0

$ 9,852,392

100.0

Interest Expense

$ (4,300,110)

(27.91)

$ (2,739,898)

(27.81)

Net Interest Income

$ 11,102,706

72.08

$ 7,112,494

72.19

-

-

$ 42,192

0.43

$ 974,735

6.32

$ 513,073

5.20

Operating Income

$ 12,077,441

78.41

$ 7,667,759

77.82

Personnel Expenses

$ (4,724,733)

(30.67)

$ (2,892,481)

(29.36)

General and administrative expenses

$ (3,196,469)

(20.75)

$ (2,054,158)

(20.85)

Provision for bad and doubtful loans

$ (328,085)

(2.13)

$ (438,986)

(4.45)

Operating Profit before income tax

$ 3,828,154

24.85

$ 2,282,134

23.16

Income tax expense

$ (804,869)

(5.22)

$ (444,607)

(4.51)

Net Profit for the year

$ 3,023,285

19.63

$ 1,837,527

18.65

Grant Income

Other Operating Income


Financial Statement Analysis (Comparative)


III. Financial Statement Analysis (Balance Sheet) Balance Sheet 2010

2011

Change

Change in %

Cash

$ 278,822

$ 687,872

409,050

42.31

Balance with central bank

$ 712, 589

$ 1,754,994

1,042,405

42.24

Balance with other banks

$ 1,176,240

$ 6,017,370

4,841,130

67.29

Loan to customers

$ 43,578,565 $ 74,535,860

30,957,295

26.20

Assets

Other assets Property and equipment Intangible assets Deferred tax assets

Total assets

$ 895,595

$ 1,515,678

620,083

25.75

$ 874,611

$ 911,738

37,127

2.07

$ 4,347

$ 1,187,345

1,182,998

99.27

$ 119,556

$ 174,875

55,319

18.78

$47,640,325

$ 86,785,732

39,145,407

29.12


III. Financial Statement Analysis (Balance Sheet) Liabilities and Stockholders' Equity

2010

2011

Change

Change in %

Deposit from customers

$ 4,630,743

$ 15,775,630

11,144,887

54

Borrowings

$ 24,349,979 $ 37,178,413

12,828,434

21

Amounts due to shareholders

$ 6,672,096 $ 10,447,756

3,775,660

22

2,000,000

100.0

146,613

21

1,327,199

34

290,635

25

31,513,428

29

Subordinated loans Retirement benefits Other liabilities Provision for income tax Total liabilities

$ 272,893

$ 2,000,000 $ 419,506

$ 1,289,742 $ 2,616,941 $ 430,907

$ 721,542

$37,646,360 $69,159,788


III. Financial Statement Analysis (Balance Sheet) Shareholders’ Equity

2010

2011

Change

Change in %

Share Capital

$ 2,716,800

$ 4,036,800

1,320,000

19.54

Share Premium

$ 1,445,955

$ 5,515,704

4,069,749

58.45

$ 234,429

$ 382,470

148,041

24.00

$ 4,867,462

$ 6,961,651

2,094,189

17.70

$ 29,264,646

$ 16,896,625

(12,368,021)

$ 729,319

$ 729,319

0

$ 9,993,965

$ 17,625,944

7,631,979

Reserves Retained Earnings Net Equity

Subordinated Loans Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

$ 47,640,325

$ 86,785,732

39,145,407

(26.79)

0 27.63

29.12


III. Financial Statement Analysis (Income Statement) Income Statement Interest Income Interest Expense Net Interest Income

2010

2011

Change

Change in %

$ 9,852,392 $ (2,739,898) $ 7,112,494

$ 15,402,816 $ (4,300,110) $ 11,102,706

5,550,424 1,560,212 3,990,212

$ 42,192 $ 513,073

$ 974,735

(42,192) 461,662

Operating Income Personnel Expenses

$ 7,667,759 $ (2,892,481)

$ 12,077,441 $ (4,724,733)

4,409,682 1,832,252

22.33 24.05

General and administrative expenses Provision for bad and doubtful loans Operating Profit before income tax Income tax expense

$ (2,054,158)

$ (3,196,469)

1,142,311

21.75

$ (438,986)

$ (328,085)

(110,901)

14.45

$ 2,282,134

$ 3,828,154

1,546,020

25.30

$ (444,607)

$ (804,869)

360,262

28.83

$ 1,837,527

$ 3,023,285

1,185,758

24.39

Grant Income Other Operating Income

Net Profit for the year

21.97 22.16 21.90 (100.00) 31.02


Financial Statement Analysis (Ratio Analysis)

     

Profitability Ratios Asset Utilization Ratios Liquidity Ratios Return on Equity Ratios Time Interest Earned Ratios (TIER) Debt utilization ratios


Profitability Ratios .

Profit margin = Net income / Sales Profit Margin

Sale Net income

2010 in USD 43,578,565 1,837,527

4.2 %

2011 in USD

4.05%

74,535,860 3,023,285

Explanation Above table shows that in average of every 10$ sales between (2010 and 2011 ) generate a return of 4.05$ and 4.2 $ to the firm that indicates a profitable investment and can lead to more business expansion opportunity.


Asset Utilization Ratios Asset Turnover = Net Sales / Total Asset Asset Turnover

2010 in USD

9.1

2011 in USD

Net Sales

43,578,565

74,535,860

Total Asset

47,640,325

86,785,732

8.6

Explanation Above illustrates an efficient use on asset of the company in operating business, every 10$ spent on asset , 9.1$ (2010) and $8.6 (2011) generated sales. This is a positive spending on assets in business.


Liquidity Ratios • Liquidity ratio = Current asset / current liability Current Ratio Current Assets

2010 in USD 1.22

Explanation

2011 in USD 1.22

45929222

84,511,774

37,646,360

69,159,788

Current Liability

Explanation In 2010, current assets were 1.22 times the value of current liabilities. That ratio maintained the same value of 1.22 times at the end of 2011, that suggesting a stable pace of business and the HKL has enough money to pay its debts.


Return on Equity • Return on Equity (ROT) = Net Income/Shareholder's Equity ROT

2010 in USD

1.8

2011 in USD

Net Income

1,837,527

3,023,285

Shareholder’s Equity

9,993,965

17,625,944

1.7

Explanation In 2010, ROT of HKL is 1.8 times that means every $1 invested, it generated a return of 1.8 and slightly down to 1.7 in 2011.This ROT ratio shows a positive sign that Investors can put more money to invest with HKL.


Time Interest Earned Ratio (TIER) • TIE = Earnings before interest and tax (EBIT)/ Interest expense TIER EBIT

2010 in USD

8.3

2011 in USD

2,282,134

3,828,154

2,739,898

4,300,110

8.9

Interest Expense

Explanation The times interest earned ratio of HKL is 8.3 (2010) and followed 8.9 times in 2011. It means that the interest expenses of the company are 8.3 and 8.9 times covered by its net operating income (income before interest and tax). So, HKL is fully capable of paying its interest charges against its income.


Debt Utilization Ratios • Debt ratio = total debt / total asset Debt Ratio Total Asset Total debt

2010 in USD 0.79 47,640,325

37,646,360

2011 in USD 0.79 86,785,732

69,159,788

Explanation Above table shows HKL debt ratio (2010 & 2011) of less than 1 that means the company balanced well on the assets using in the business comparing to the debt they have.


VI. Conclusion Through analysis of HKL financial statements, We can see HKL has generated sustainable growth in business, net income in 2011 ($3,023,285) increased nearly one-third comparing to 2010 ($1,837,527). Although general expenses increased noticeably due to expansion of business operation but the income is fully proportionated in the investment. Loan and deposit from customers increased in size that is a positive move of income generating. Looking on key ratios such as profitability, in average HKL made profit between 4.05 - 4.2% after whole year operation in consecutive years (2010-2011) while maintaining optimum liquidity to its liability. Debt and asset set consistently at 0.79 < 1 that showed a well balancing of asset usage versus its debt. Although, HKL has business growth and balance well in its business operation but HKL should keep minimizing its general expense and liability at large because these are parts of risk in business success in long-time running and also key indicators for competitive advantage over other competitors in current market.


VII. Reference http://www.hkl.com.kh http://www.investopedia.com


Prou sokchea hkl presentation assignment bus 605 june 2013