GROUP ASSIGNMENT COVER SHEET

STUDENT DETAILS

Student name: DANG HOANG ANH DUC Student ID number: 21000133

Student name: DO NGUYEN THIEN TRUC Student ID number: 21009995

Student name: DO HUYNH QUANG KHAI Student ID number: 21000056

Student name: Student ID number:

Student name: Student ID number:

UNIT AND TUTORIAL DETAILS

Unit name: Financial Report and Marking Decision Unit number:

Tutorial/Lecture: Class day and time: Sunday
Lecturer or Tutor name: Dr. Doan Anh Tuan
ASSIGNMENT DETAILS

Title: Analysis PSO VNG Corporation

Length: 15 pages Due date: 12/06/2021 Date submitted: 12/06/2021

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
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Student’s signature: DANG HOANG ANH DUC

Student’s signature: DO NGUYEN THIEN TRUC
Student’s signature: DO HUYNH QUANG KHAI
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Note: An examiner or lecturer / tutor has the right to not mark this assignment if the above declaration has not been
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 Table of Contents

1. COMPANY OVERVIEW...................................................................................4
1.1 COMPANY INTRODUCTION................................................................................4
1.2 FINANCE AND ACCOUTING DEPARTMENT OVERVIEW.....................................6
Advantages of Accounting..................................................................................7
Disadvantages of Accounting.............................................................................8
2. SYMPTOMS........................................................................................................8
2.1 PROFIT MARGIN DECREASE...............................................................................8
2.2 HIGHER COLLECTION PERIOD...........................................................................9
3. PROBLEM IDENTIFICATION......................................................................11
3.1 UNDERESTIMATE THE COMPETITORS..............................................................11
3.2 INAPPROPRIATE PROJECT PLANNING...............................................................13
4. CAUSE VALIDATION.....................................................................................15
5. ALTERNATIVE SOLUTIONS.......................................................................17
 1. COMPANY OVERVIEW
1.1. Company Introduction
History:

- VNG was established on September 9, 2004 with the name VinaGame.

- On July 2005, VinaGame signed a contact with KingSoft to bring game Vo Lam
Truyen Ky to VietNam. Within 1 month, Vo Lam Truyen Ky created a fever with
200.000 players accessing at the same time.
- From 2006 to 2007, The company released CSM software, e-commerce site 123,
release Zing environment.
- In 2008, the company changed its brand name to VNG corporation.
- In mid 2009, the social networking product Zing Me was born with more than 4
million CCU.
- In 2010, Thuan Thien Kiem online game was bought.
- In 2011, VNG exported Un In game to Japan.
- In 2012 and 2013, VNG launched Zalo – a free messaging and calling application
operating on mobile platforms.
- In 2015, VNG was honored as “Global Fast-growing Enterprise in East Asia” at
the World Economic Forum (Manila, Philippines).
- At the end of 2016, VNG launched ZaloPay, a mobile payment application
- In 2017, on Nasdag stock exchange (USA).
- In 2018, Additional identification of new strategic business statement such as
Finance and Payment, Cloud Services. Continued to be annouced by Google and
Temasek as 1 of 9 Technology Unicorns of SouthEast Asia.
Organization structure:

- Company VNG’s distribution network into four channel, corresponding to four

(SBUs): online gaming services, producing, advising and providing software,
advertising
+Online Games: We develop, produce and publish games to the global market, to name a
few of our outstanding products: Sky Garden, Dead Target, iCa, Vo Lam Truyen Ky,
Rules of Survival, Crossfire Legend…
+Platforms: We connect diverse platforms to deliver comprehensive communication,
entertainment and search services to individuals and organizations, to name a few of our
outstanding products: the OTT platform Zalo, vCS platforms, Zing ecosystem (Zing TV,
Zing MP3…), Laban.vn search tool…
+Finance and payments: We spearhead innovative platforms and services for
intermediary payments and personal finance, to name a few of our outstanding products:
intermediary payment gateway – 123 Pay, digital wallet – ZaloPay.
+Cloud services: vCS, Cloud server, IoT HUB, vCloudStack, vObjectStorage, Tape
Backup, vCloudcam, Vending Machin...

Subsidiaries Companies
+VNG Software Development Company Limited: software production and development.
+Dragon Top Entertainment Company Limited: online gaming service.
+Zion Joint Stock Company: intermediary payment services
+Nguyen Bao Digital Company Limited: operate and distribute online games.
+Vi Na Data Information Technology – Service Joint Stock Company: information
technology services.
+VNG Singapore Pte Ltd.: develop, distribute software, devices and computer
components; provide services related to software and after-sales.
+VNG Myanmar Company Limited: software development services; to provide software
related and post-sale services, computer equipment and spare parts; consultancy and
business support services; software consultant, agency business, technical consultants,
business consultants, management consultants and advisory services.
+MPT Entertainment Pte Ltd: develop, distribute software, devices and computer
components; provide services related to software and after-sales.
+Vi Na Net Services Joint Stock Company: value-added services on mobile and internet.
+Minh Phuong Thinh Communication Company Limited: software publishing.
+VNG Online Company Limited: provide services of information portal, advertising.
+VNG Data Centre Company Limited: consultation of computer and computer system
management
-Associated companies:
+Thanh Son Communication Company Limited: game card and prepaid mobile card
+Ti Ki Corporation: retailing per order via post or internet.

1.2 Finance and Accouting Department Overview

Established in 2004, accounting department provides accounting services and manages

the finances of VNG. Its responsibilities include recording accounts, paying bills,
billing clients and customers, tracking assets and expenditures, managing payroll and
keeping track of critical tax documents.
The structure is as follows:
  The CFO is at the top of the department and reports directly to the owner of the
business or the Chief Operating Officer (CEO).
 The Financial Controller reports to the CFO and has more specific responsibilities
within the department.
 The Finance Controller generally has a team of Managers – Payroll Manager,
Accounts Receivable Manager, and Accounts Payable Manager.
 Each division manager usually has a team of Accountants.

-Accountant Role: performs financial functions related to the collection, accuracy,

recording, analysis and presentation of a business, organization or company's financial
operations, primarily financial data collection, entry and report generation

-KPIs of department:

Revenue from sale of goods and rendering of services: 6.714.235.894.39 dong

Accounting profit before tax: 339.155.713.958 dong

Net profit after tax: 246.004.955.497 dong

-Measure the finanace performance:

 Gross profit margin - this measures how much money is made after direct costs
of sales have been taken into account, or the contribution as it is also known.
 Operating margin - the operating margin lies between the gross and net (see
below) measures of profitability. Overheads are taken into account, but interest
and tax payments are not. For this reason, it is also known as the EBIT (earnings
before interest and taxes) margin.
 Net profit margin - this is a much narrower measure of profits, as it takes all
costs into account, not just direct ones. So all overheads, as well as interest and tax
payments, are included in the profit calculation.
 Return on capital employed (ROCE) - this calculates net profit as a percentage
of the total capital employed in a business. This allows you to see how well the
money invested in your business is performing compared to other investments you
could make with it, like putting it in the bank.
Advantages of Accounting

 Maintenance of business records

  Preparation of financial statements

 Comparison of results

 Decision making

 Evidence in legal matters

 Provides information to related parties

 Helps in taxation matters

 Valuation of business

 Replacement of memory
Disadvantages of Accounting

 Expresses Accounting information in terms of money

 Accounting information is based on estimates

 Accounting information may be biased

 Recording of Fixed assets at the original cost

 Manipulation of Accounts

 Money as a measurement unit changes in value

Some of symptons:

+Cost increase significantly, sale income slightly increase

+Poor stakeholder follow up

+Start-up needs time to earn profit

2. SYMPTOMS
2.1 Profit margin decrease

2020 2019 2018

 Net income ₫ 183,069,119 60,845,792,951.00 ₫ ₫ 514,032,019,563

Net sales ₫ 3,690,780,773,282 3,124,367,960,068.00 ₫ ₫ 3,314,107,204,063

Profit Margin (%) 0.005% 1.95% 15.51%

Profit Margin in 2018, 2019, 2020 is 15.51%, 1.95%, 0.005% respectively.

Compared to 2018, Profit Margin decreased 3120 times. This deep decrease is due to
a sharp decrease in Net income, only 183 million VND in 2020, but net sales did not
grow strongly.

The business situation of VNG Corporation in 2020 has a large decrease compared to
2019 and 2018. However, if we take it into consideration, we see that VNG's sales
revenue in 2020 is still almost remained at the same figure in 2018. Besides, the
construction in progress and fixed assets at the Balance sheet in 2018 increased
sharply because VNG's new office construction project is completed in 2020, and the
company expands its investment into new areas, using capital to invest in fixed assets
quite a lot. When looking at VNG's 2020 business results, it can be easily seen that
selling and administrative expenses increased relatively much.

Consequently, a lower profit margin results in less money being available to cover

the operating costs of the business, including marketing expenses and administrative
salaries. Not being able to spend as much on marketing as competitors do will, over
time, result in the company growing more slowly. Low profitability prevents
business managers from increasing spending. Expenses for future benefits, such as
marketing expenses allocated to drive sales, are necessary to maximize profits.
2.2 Higher collection period

2020 2019 2018

Accounts Receivable
₫ 624,723,725,349 271,263,653,953.50 ₫ ₫ 492,653,653,078

Total Revenue ₫ 3,690,780,773,282 3,793,135,217,139.00 ₫ ₫ 3,339,960,080,789

Collection period
62 25 51
(days)
(Source: VNG financial report in 2020)

The collection period in 2018, 2019, 2020 is 51 days, 25 days, 62 days respectively.
Compared to 2018, the collection period increased by about 20%. Compared to 2019,
the collection period increased by about 150%. This reflects that the debt collection
of VNG corporation is having problems. Collection period is high, if not strictly
controlled, it can lead to appropriation of capital.

The analysis results show that the receivables from customers account for a high
proportion and increase over the years. Therefore, the Company needs to pay
attention to these receivables from the time of signing the sales contract to debt
collection measures to reduce the occupied capital, contributing to improving
business efficiency.

Consequently, the high average collection period ratio could indicate trouble with

VNG’s cash flows.
 3. PROBLEM IDENTIFICATION
3.1 Underestimate the competitors
Online Gaming

Most of the online games sold in Vietnam are produced by foreign companies.

Chinese companies account for 69% of online multiplayer games released in the
Vietnamese market. Among the top five games, Arena of Valor and Call of Duty Mobile
are both produced by TiMi Studios, a subsidiary of Tencent. This reflects China's
dominance in the game industry. The country is home to the world's largest gaming
company, Tencent Holdings.

Other big players are South Korean and US companies, the people behind titles like
PlayerUnknown's Battlegrounds (PUBG), League of Legends and FIFA Online.

However, for the game to be successful and popular, local knowledge of the Vietnamese
market is very important. Overseas developers often partner with Vietnamese publishing
companies to help them navigate the market, build and manage communities, market
their products, and meet local regulations.

Besides, unlincensed games account for 30% in Vietnam market.

E-wallet

Currently, MoMo and ZaloPay (VNG) spend the most on marketing and promotion
activities, seemingly not afraid of big losses. Despite being among the most popular e-
wallets in Vietnam, with the number of users quadrupling since the end of last year,
ZaloPay recorded a loss of $9 million, according to the company's consolidated financial
statements. company for the first quarter of 2021.

MoMo is the most used e-wallet with 20 million individual users at the end of 2020 but
does not own any community or ecosystem. Although there are more than 60 million
users, ZaloPay has not yet won the hearts of the community. Similarly, Indian payment
gateway provider AirPay cannot dominate the market even though it has worked closely
with platforms like Shopee - the largest e-commerce site in Vietnam today.

Since no service shines through unique selling propositions, e-wallet services are forced
to constantly offer promotions and introduce attractive services and utilities to retain their
customers. customers, which is why many of these services have suffered losses in recent
years.

Specifically, as of June 30, 2020, VNG still kept its ownership rate in Zion at 60%, but
the investment value nearly doubled compared to the end of 2019 and reached VND
714.79 billion.

However, in the opposite direction, VNG also increased the provision for long-term
financial investment in Zion to VND 371.4 billion, up 75.8% compared to the beginning
of the year and equivalent to 52% of the investment value.

(Source:VNG financial report)

This partly reflects the negative business results of Zion, or ZaloPay e-wallet.

This loss also reflects the underestimation of Zion (Zalopay) for the competitors: Momo,
Airpay,...
E-commerce
0 ABA Thanh Son Tiki Total

Investment value as of June

14.684 1.47 506.28 522.434
30, 2020

Accumulated profit (loss) from affiliated companies

As of December 31, 2019 (14.684) 17.09 (472.834) (470.428)

Profit (loss) from affiliated

- 5.747 (33.446) (27.698)
companies

As of June 30, 2019 (14.684) 22.837 (506.28) (498.126)

Value remaining

As of December 31, 2020 - 18.56 33.446 52.006

As of June 30, 2020 - 24.308 - 24.308

(Unit: VND billion)

VNG has invested VND 522 billion (USD 22.7 million) in affiliated companies. Of these,
506 billion VND ($22 million) was poured into the Tiki e-commerce platform and was
lost.

The competition between e-commerce platforms is increasingly fierce with Tiki, Lazada,
Shopee, Sendo all suffering great losses in the war of attrition. Tiki's loss increased year
by year, from VND 179 billion ($7.78 million) in 2018 to VND 282 billion ($12.26
million) in 2019 and VND 757 billion ($32.9 million) ) in 2020.

3.2 Inappropriate project planning

VNG take high risk in investment a lot so that effect to the net profit.
 (Source: VNG financial report)
The reason is due to a decrease in profit because its subsidiary, the payment application
ZaloPay, lost VND 670 billion last year.

Last year, the company also paid $3.4 million to acquire a 20% stake in logistics startup
EcoTruck. It also owns a 30% stake in the Got It digital gift platform and a 22% stake in
the Tiki e-commerce platform.

The company is investing heavily in technology for projects like ZaloPay and the
establishment of VNG's data center, which is expected to be completed by the end of
2021.

After the big loss from investing in Tiki and Zalopay, VNG also take high risk pouring
VND138 billion ($6 million) in digital gifting platform Got It.
 4. CAUSE VALIDATION

REFERENCE
Technology Human related Investing much on start-up

Unplanned uptrend Lack of system knowledge Cost increase signigicantly, sales

period users method (IT) income slightly increase

Not-well prepare Communication

the server -> lag problem Start-up take time to
earn profit
Inappropriate
investing
planning
Weak control (family-run Unclear roles from Project
business) manager and Head of
Engineering

Poor stakeholder Absence of technology team

follow up

Corperate Governance Organization

The company's business performance decreased. This is reflected in the decline in return
on equity and return on net sales.

In order for the production process to continue, enterprises need a certain amount of
capital to invest in each stage of the production process. That capital comes from self-
invested capital or external loans. But because VNG Corporation does not use external
loans to maintain production and business activities, therefore, analyzing VNG's capital
efficiency only focuses on analyzing the efficiency of using equity.

Firstly, VNG Corporation has plan investing much on start-up technology company but
start-up takes time to earn profit. (even 6 years not reach the break-even point).

Secondly, VNG Corporation has problem with human-related, especially the requirement
for human resource of new start-up is redundant, like technical team (IT). They recuit and
train continuously but the VNG’s system is too hard to absorb quickly. In the tech team
has communication problem with each other, especially between developer and tester. It
effects to the quality of product.

Thirdly, VNG Corporation invests too fast. It cause the technology system problem. For
unplanned uptrend period, the server cannot load for a lot of user, causing lagging and
bug in the system.

Fourthly, VNG Corporation has the weak control because it is the family-run business.

Last but not least, the unclear role from each project that VNG investing on cause the
poor stake holder follow up.
 5. Alternative Solutions
During the process of reviewing, evaluating and analyzing the financial statements, we
realize that the business activities of the Company in the past time, although some results
have been achieved to recognize the efforts of the whole Company in general and staff in
particular, but there are also some limitations such as: the efficiency of using the
Company's available resources is not high, and the role has not been fully promoted in
improving the efficiency of using short-term assets term and long-term assets. Therefore,
when using and operating the business capital, the Company wants to save capital and
increase the turnover rate, the Company needs to pay close attention to managing all
costs... that is a dilemma that the Company needs. must be resolved in order to further
improve business performance as well as the efficiency of resource use in the current
volatile market economy. After researching and analyzing the financial statements at the
Company, based on my own understanding and knowledge, the author offers some
solutions to overcome the limitations in order to improve business efficiency as well as
improve business performance. financial performance in the Company.
• Strictly manage cash flow
To improve the quality of cash flow, the company's financial management department
(Finance - accounting department) needs to manage cash flow more closely. This
department is not able to increase or decrease the company's cash flow by itself, but it is
the part that can identify the strength and risks through the circulation of cash flow from
which to propose necessary solutions to help the management board. The company's
leaders find out the cause of slow traffic at any stage and how to remedy that situation.
• Strictly manage activities to improve the efficiency of asset use
- The company must constantly improve the efficiency of using short-term assets. In
order to improve the efficiency of using short-term assets, the Company can do so by
increasing the turnover of short-term assets, that is, shortening the time capital is in the
area of production and circulation reserves, from That reduces the amount of capital
occupied, saving capital in circulation.
In addition, it is necessary to overcome the situation of entangled debts and increase the
ability to recover capital to put this misappropriated capital into business. The company
must have a staff of marketing and market analysis staff, learn professional customers,
from there have accurate information about the financial capacity of customers to have
appropriate payment methods, have reasonable credit policies for each customer:
 For customers who do long-term, stable and reputable business, to both ensure
long-term business and ensure that they do not take up a lot of capital, they can ask
customers to pay a part of the value of the shipment in advance. .
  For customers who do not regularly do business, do not know, the Company
forces customers to pay 100% of the value of the shipment. But this measure does
not attract customers, the following alternatives can be offered: Allow mortgage,
mortgage of properties for customers who are unable to pay immediately; Through
the bank, require them to have a bank guarantee.
- Improve the efficiency of long-term asset use
To improve the efficiency of using long-term assets, the Company should pay attention to
a number of issues as follows:
Limit purchases of unused fixed assets. Therefore, to ensure efficient use of capital, the
Company should only invest in machinery and equipment for new products when
accurately forecasting market fluctuations.
Reduce unnecessary fixed assets, liquidate unnecessary fixed assets that are no longer in
use or are still in use but are outdated, inefficient, and reduce depreciation costs.
In addition, in order to manage fixed assets effectively, the company needs to calculate
the full depreciation, use the correct number of depreciation periods, consolidate the
inventory, better organize the distribution network to save capital. fixed capital,
improving the efficiency of using fixed capital.
• Improve the quality of management work
One of the factors determining the success of the company is the management of the
company. If the Company manages well and effectively, it will achieve the highest set
goals.
Improve the management, streamline and organize the lean apparatus, improve the
operating capacity of managers through standardization of responsibilities and tasks.
Develop training plans and improve professional qualifications and management skills
for young staff with a sense of responsibility for work, sensitivity to the market situation,
and dynamism in business. , know a harmonious combination between school training
requirements and reality in the classroom.
REFERENCE
VNG Corporation (10 March 2021). In Wikipedia
https://en.wikipedia.org/wiki/VNG_Corporation