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VIETNAM NATIONAL UNIVERSITY

INTERNATIONAL SCHOOL

Risk and Risk Analysis

Lecturer: Nguyen Phu Hung
Student’s full name: Nguyen Anh Duong
Student ID: 18071311
Class: AC2018C

Hanoi, 08/06/2021

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COMPANY NAME: Hai Phong Hoang Ha Paper JSC

SECURITIES CODE: HHP

ADDRESS: No. 194 - Kieu Ha Street - Dong Hai Ward 2 - Hai An District - Hai Phong
City

TELEPHONE: (84.225) 397 9952

FAX: (84.225) 397 9951

EMAIL: hhppaper@gmail.com

WEBSITE: http://hhppaper.com/

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TABLE OF CONTENT

INTRODUCTION............................................................................................................4

1.1. History of formation and development................................................................4

1.2. Mission, vision and core value..............................................................................5

RISK ANALYSIS............................................................................................................. 6

2.1. Risk identification.................................................................................................6

2.1.1. Major operational, financial, and economic risks of the case?......................6
2.1.2. Major indicators reflecting operational, financial, and economic risks?......7
2.1.3. Current economic scenarios that may affect the sustainability of the
company in the incoming period?.............................................................................16

2.2. Assessing the risk.................................................................................................17

2.2.1. Identify the volatility of the performance and stock price of company.......17
2.2.2. Compare company’s volatility with that of other companies in the industry
18

2.3. Optimizing investment portfolio to minimize risk............................................19

RISK MANAGEMENT RECOMMENDATIONS......................................................23

3.1. Organize an Enterprise Risk Management (ERM)..........................................23

3.2. Contents of ERM.................................................................................................23

3.3. How ERM can affect your company performance ?........................................24

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INTRODUCTION

I.1. History of formation and development

 2012: Hoang Ha Hai Phong Paper Joint Stock Company, established by 05
shareholders, with an initial capital contribution of 18 billion VND to carry out the
restructuring project of Duc Duong Paper Factory.
 2013: Production of corrugated corrugated kraft paper products (carton packaging
paper)
 2018: Consolidated revenue reached over 245 billion dong, up 74.4% compared to
2017, consolidated profit after tax reached over 10.4 billion dong, up 24%
compared to 2017
 05/2018: the Company was approved by the State Securities Commission to
become a public company according to Document No. 3105/UBCK-GSĐC.
 06/2018: the Vietnam Securities Depository Center granted the Securities
Registration Certificate No. 41/2018/GCNCP-VSD and issued a stock code to
Hoang Ha Hai Phong Paper Joint Stock Company.
 08/2018: the Company was approved by Hanoi Stock Exchange to list shares
(stock code HHP) according to Decision No. 490/QD-SGDHN and Notice No.
829/TB-SGDHN announcing the trading date. the first listed shares of the
Company. Accordingly, on August 8, 2018, the Company's shares were officially
listed on HNX with the stock code HHP.
 07/2019: the Company was approved by the State Securities Commission to issue
dividend-paying shares in accordance with Document No. 4261/UBCK-QLCB.
 08/2019: the Company was approved by the State Securities Commission for
registration for a private placement of shares according to Document No.
4681/UBCK-QLCB.
 08/2019: the Company was approved by the State Securities Commission to report
the results of the private placement of 6,500,000 shares according to Document
No. 5073/UBCK-QLCB.
 08/2019: the Company was approved by the State Securities Commission to report
the results of the issue of 1,500,000 shares to pay dividends.
 2020: Hoang Ha Paper Company has become a public company with a charter
capital of up to 180 billion VND

Company's capital increase process

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No Time Charter Charter Increased Release form

. capital before capital after charter capital
issuance issuance (million VND)
(million (million
VND) VND)
1 11/2012 18.000 Establish a
business
2 01/2016 18.000 27.000 9.000 Issue shares to
existing
shareholders
3 09/2017 27.000 100.000 73.000 Issue shares to
existing
shareholders
4 08/2019 100.000 180.000 80.000 Issuance of
dividend-paying
shares and
private
placement of
shares
I.2. Mission, vision and core value
 MISSION: Accompany and develop with Customers.

 VISION:

 2025, Hoang Ha will become an automated paper production enterprise in

administration and professional working environment
 Always meet the customer's expectations in terms of product quality and
service methods.
 CORE VALUES
 Positive thinking
 Serving customers above expectations
 Fair, Honest, Reputable Like Life
 Take 100% responsibility
 Always take one more step
 Cooperation and teamwork
 Gratitude
 Hoang Ha is the common house

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RISK ANALYSIS

2.1. Risk identification

2.1.1. Major operational, financial, and economic risks of the case?

Risk category Risk Description Like lines Impact

possible
Operational Market Currently, the whole 4 4
country has 300 paper
production enterprises of
different sizes, so the
competition rate is very
large
Finacial Price Competitive pressure in the 2 4
and paper industry for
cost packaging materials is
assessed to be increasing,
with many domestic
enterprises such as Dong
Hai Ben Tre, Tan Mai
Paper ... and foreign-
invested enterprises ( FDI)
such as Cuu Long Group,
Lee&Man, Cheng Loong...
are all having investment
projects to expand capacity.
Economic Export Although most of the paper 3 3
output of FDI enterprises is
assessed for export
purposes, due to the Covid-
19 epidemic situation,
exports are not favorable.
Import main raw materials 3 3
imported from abroad, fire,
explosion, environmental
pollution, occupational
accidents

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2.1.2. Major indicators reflecting operational, financial, and economic risks?

 Total Asset Turnover

The efficiency of using total assets of HHP changed slightly over 4 years (1.61 in
2016 to 1.06 in 2020). In general, quite low compared to the industry average and
no progress over the years

 Receiable Turnover

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The receivables turnover ratio is an accounting measure used to quantify a

company's effectiveness in collecting its receivables or money owed by clients.
The ratio shows how well a company uses and manages the credit it extends to
customers and how quickly that short-term debt is collected or is paid.The
amount of Receivable turnover was changed over 5 years period ( from 8.62 to
6.12). Overview, HHP is lower than the average of the industry and it is not a
good trend. It shows that HHP may have weak credit term or their customer
don not have ability to pay all the loan.

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 Days of Outstanding

The Days of Sales outstanding of HHP is lower than the industry. This is the
positive trend, it shows that the day HHP needs more days to receive money from
customers. This shows that company can not receive money rapidly from their sale
activity effectively and its statistics tend to increase from 2016 to 2020 ( from 42
days to 60 days)

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 Inventory Turnover

HHP's inventory turnover rate is slower than other companies in the market. Those
are dangerous numbers and it is decreasing every year. In 2020, this company only
reached 7.07 inventory turnover, which shows that the company has a lot of
inventory that cannot be sold quickly.

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 Days of inventory on hand

Day of inventory represents the inventory liquidity. If the Days of inventory is high, it
indicates that the company is performing not good at all because the inventory takes short
period to be cleared. In the below chart, it is obvious that HHP deal with dangerous
number while its Days of Inventory on hand is one of the high rate company of the
market.

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 Payable Turnover

HHP's payables turnover is average in the industry and slightly below the market
average. This number fluctuates quite strongly (15.82 - .7.78 - 9.75 - 12.66 - 9.93
for the years from 2016-2020, respectively) It shows that HHP does not take long
to pay owed to suppliers when they purchase goods and services. But they should
keep their stats lower and not make it higher next year.

 Number of days of payables

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HHP has the lower Number of Days of Payable than the market. HHP pay
for their supplier faster than average of the market

 Fixed asset turnover

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HHP's fixed asset turnover is lower than the market average. The number has
not changed much in 4 years, tends to decrease through 2019 and increase slightly
in 2020. It shows that a company is not using its assets efficiently or its pulling
potential. to generate revenue or mean that it was unhealthy business at the time.

 Equity Turnover

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HHP's equity turnover is at the market average and it is also trending

downward (from 7 in 2016 to 2.17 in 2020). This shows that HHP is using capital
inefficiently.

2.1.3. Current economic scenarios that may affect the sustainability of the
company in the incoming period?
 In 2020, the company's cash flow to purchase fixed assets and other long-term
assets is 59.6 billion dong, of which machinery and equipment purchases account

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for 54.96 billion dong. The value of new purchases in the year is equivalent to
70% of the remaining value of machinery and equipment until the end of 2020.

 From 2017 to 2019, HHP's cash flow hardly had a surplus when it had to
continuously increase working capital according to the value of receivables and
surplus. In order to relieve capital pressure, this business continuously conducted
capital raising offerings in 2017 (VND 62.7 billion) and 2019 (VND 65 billion).

 By the end of 2020, the total debt and finance lease of HHP was 190.3 billion
VND, accounting for 38.1% of capital and up 42.9% compared to the beginning of
the year. The debt-to-equity ratio stands at 82.7%. Meanwhile, cash reserves are
quite thin when the value of deposits with a term of more than 3 months is only 1
billion dong.

 Large loan balance causes HHP's interest expense in 2020 to increase by 24.1%
compared to 2019 even though the interest rate has decreased. Interest expense
accounted for about 1/3 of net profit from business activities. Interest payment
cash flow is equivalent to more than 55% of operating cash flow. This shows that
the burden of interest expense is quite large that HHP is bearing, corresponding to
a large risk if the business situation is more difficult.

 the production and business of paper and packaging of HHP is not very
positive. However, HHP currently owns 30% of capital (30 billion dong) in
Hoang Ha Investment Group Joint Stock Company. This company is currently
the Investor of a commercial housing construction investment project in Hai
Phong with an area of 2.72 hectares, which is one of the key projects of Hai
Phong in 2020-2021. It is expected that the project will be open for sale and
generate revenue from the fourth quarter of 2021.

 It is expected that HHP's profit will come from the fact that in 2021, HHP will
have the profit to be shared from the associate for the real estate segment.

2.2. Assessing the risk

2.2.1. Identify the volatility of the performance and stock price of company

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Looking at the statistics table, we can see that the return on assets of HHP is not
high, but it is very stable, fluctuating around 1% from 2016-2020. Due to the
impact of the Covid 19 epidemic, which had a general effect on the manufacturing

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industries, HHP was reduced a bit but not significantly. However, HHP needs
better business strategies to increase the company's return on assets. Looking at
stock prices from May 10, 2021 to June 4, 2020, we see a major downtrend in the
1-4% range. Dramatically increased to the ceiling in one session, up 6.76%.

2.2.2. Compare company’s volatility with that of other companies in the

industry

According to statistics, HHP ranked 22/25, among the top companies with low risk.
Volatility is 0.64%, which is nearly 0.4% higher than the GTA company, and nearly
1.5% lower than the industry as a whole. It is a positive sign of the company during this
period, showing that the company has not been affected too much by the covid 19
epidemic. According to the analysis, in the short term, HHP tends to grow, but in the long
term, it tends to go down. That can be seen in part in recent stock prices.

I have collected data about 6 companies of Construction and Real Estate industry.
Comparing HHP of the manufacturing industry, we see that the Construction and Real
Estate industry fluctuates quite strongly. Specifically, PV2 company, PVL is up to 10%
while HHP has only 0.6%. That can see the current trend, the Construction and Real
Estate industry is greatly affected by the covid 19 epidemic, even the profit tends to be
negative.

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2.3. Optimizing investment portfolio to minimize risk

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Draw the return-risk relationship and discuss this relationship of possible investments to
any two stocks

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RISK MANAGEMENT RECOMMENDATIONS

3.1. Organize an Enterprise Risk Management (ERM)

 First, there must be agreement from the top of the company to the lower
departments about the use of ERM
 Secondly, there is a need for the agreement of the CFO because they are
knowledgeable about risks and they are also the people who know how to use the
ERM system the most.
 Compared to traditional risk, ERM does not need to repeat a process many times
 Use ERM to find the biggest risk, then fix it from big to small instead of just
solving it out of order
 There are many types of ERM, you must find the right ERM for your company
 Always update data to optimize ERM for your company

3.2. Contents of ERM

 Enterprise risk management, often shortened to ERM, is a type of process
management strategy that seeks to identify, understand, and prepare for the kinds
of dangers, hazards, and other potential deviations from standard operating
procedures that could be perceived as risks.
 As well as identifying risks, the practice of enterprise risk management also
involves making preparations for dealing with these risks and deciding
prioritization over multiple active or potential risks.

 Plans, policies, and procedures for risk management should be made available as
widely as possible; shareholders, stakeholders, investors, and other relevant

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interested parties should all have clear, direct access as part of documented
information or regular reports.

 ERM systems will typically focus more on control of internal processes, using
principles of continuous improvement, internal audits, compliance with standards
– seeking to minimize controlled risk as much as possible, as well as setting up
preventative measures for risks and hazards outside the scope of control of
business processes.

3.3. How ERM can affect your company performance ?

 For HHP, during the Covid 19 period: HHP can effectively diversify benefits to
maximize return on invested capital, further improve the efficiency of capital and
human resources; the company is prepared in advance to take measures to manage
and respond to the case of accumulation of potential factors for the occurrence of
risks;
 Calculation focuses on profit-making activities and abandons unprofitable
business (for example, now HHP is gradually moving into real estate)

References:

https://finance.vietstock.vn/HHP-ctcp-giay-hoang-ha-hai-phong.htm
http://hhppaper.com/

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