Joint stock company
“Qashqadaryo neft – gaz qurilish va ta’mirlash”
FOR SALE OF 51% EQUITY INTEREST
IN “QASHQADARYO NEFT–GAZ QURILISH VA TA’MIRLASH” JSC TO FOREIGN INVESTORS
Karshi – 2015
TABLE OF CONTENTS
|I||The summary of the joint stock company||4|
|1.1. General information. …………………………………………………………………||4|
|1.2. Tasks and objectives …………………………………………………||6|
|1.3. Statement of reasons for development of the company ………………….||6|
|1.4. Financing requirement……………………………………………………………….||6|
|1.5. A share of the company to be transferred to investor …………………..||7|
|1.6. The summary of marketing plan ……………………………………………..||7|
|1.7. The forecast of basic financial indicators …………………………………||8|
|1.8. Main advantages and risks of the project ………………………………….||8|
|1.9. Basic indicators of investment attractiveness of the project ………..||9|
|II||Description of the joint stock company||10|
|2.1. The history the company …………………………………………………………..||10|
|2.2. Information on the company owners (shareholders) ………………………||11|
|2.3. Organizational and legal structure …………………………………||11|
|2.4. Basic financial indicators for 2010 – 2014 …………………………………||13|
|2.5. Indicators of the company’s financial situation .……………………||14|
|III||Organization of production||16|
|3.2. Productive assets, capacities, infrastructure ….…………………….||16|
|3.3. Necessity for road transport shop fleet renewal ……………………||16|
|3.4. Raw materials base ……………………………………………. ….||16|
|3.5. Impact of the enterprise on the environment ………………………||17|
|IV||Description of works and services||17|
|4.1. Description of products ……………………………………………||17|
|4.2. Intended use and sphere of application ……………………………||17|
|4.3. Major characteristic ………………………………………………..||18|
|4.4. Distinctive features, customer benefit/ utility ………………………||18|
|4.5. Availability or necessity for licensing ………………………………||18|
|4.6. Degree of preparedness to output and sale of products ………….||18|
|4.7. Necessity for certification, availability of certificates ……………..||19|
|4.8. Necessity and possibility of upgrading of products (works/ services)
|4.9. Guarantees and servicing …………………………………………||19|
|5.1. General analysis of work and service market ………………………||19|
|5.2. Market segmentation, analysis of volume, saturation and dynamics of market segments ………………………………………………………..||20|
|5.3. Analysis of competitive environment ……………………………..||20|
|5.4. Strategy of marketing and sale of works and services …………….||20|
|5.5. Marketing analysis of strengths and weaknesses of the company……||21|
|6.1. Assumptions used in financial model construction ………………..||22|
|6.2. The company’s financing structure …………………………………||23|
|6.3. The results of the project financial model ………………………….||24|
|6.4. Analysis of investment attractiveness of the project ………………..||25|
|6.5. Sensitivity analysis and scenario analysis …………………………..||25|
|VII||Analysis of basic risks||26|
|7.1. Characteristics of basic risks ………………………………………..||26|
|7.2. Analysis of risk impact on economical efficiency for various project participants and options for minimization of the specified risks ………..||27|
|7.3. Conclusions and recommendations …………………………………||26|
- The summary of the joint stock company
- General information
- The name of the company: “Qashqadaryo neft–gaz qurilish va ta’mirlash” joint stock company.
According to the order of the State Property Committee No 1023 dated 11.09.1995 the name of the company is changed to “Qashqadaryo neft–gaz qurilish va ta’mirlash” open joint-stock company.
Postal and legal address of the company: building 2, Zhaihun street, Karshi, Kashkadarya region, the Republic of Uzbekistan, 180106.
- Subordination of the company, the parent organization: “O’zgeoburg’uneftgaz” joint stock company.
- The core business: construction and capital repair of industrial and social facilities, construction of access roads and platforms for drilling rigs, foundations of drilling rigs mostly for the companies of “Uzgeoburneftegaz” JSC. The joint-stock company is a part of the “Uzgeoburneftegaz” JSC and is one of the leading building contractors of the Company involved in construction of foundations, temporary roads leading to drilling wells, as well as construction of residential complexes, capital repair of administrative and social facilities of the enterprises of Joint-stock company.
- The asset profile as of 01.07.2015:
- A share of “O’zgeoburg’uneftgaz” JSC – 51%
- physical persons – 39.2%,
- employees – 9.8%
(In accordance with Annex 1 to the Decree of the President of the Republic of Uzbekistan dated April 28, 2015 No PP-2340 “On measures to increase the share and the value of private property in the economy” it is provided to sell a share of administration body amounting to 51% to a strategic foreign investor).
- Banking details: bank account No 20210000500487260001 in Kashkadarya Regional Branch of PSB, MFO 00824, TIN 200666828.
- Contact persons, phones, fax of the company management:
The Chairman of the Board – Sultonov K.T.
Chief Engineer – Rakhmatov A.K.
Chief Accountant – Ziyatov O.S.
Tel. 375 223-43-92, fax 375 223-40-81
Location, availability and accessibility of production and transport infrastructure, workforce
Railway tracks, leading to railway station, are laid to all industrial sites.
Medical services for workers of the designed projects are provided in the existing health post, located in territory of the enterprise.
Catering of workers is provided in the existing cafeterias, as well as in domestic premises with mess decks.
- Tasks and objectives
In accordance with the Decree of the Presidents of the Republic of Uzbekistan dated 28.04.2015. No PP-2340 “On measures to increase the share and the value of private property in the economy”, for the purpose of enhanced attraction of foreign investment, a radical increase of the level and the role of private property in the economy of the republic through the deepening of the processes of privatization and sale to private investors, primarily to foreign ones, of the state assets and shares in authorized capitals of enterprises and, on this basis, ensuring of modernization and technological renovation of production, the has been approved the list of joint-stock companies, in which the proportion of the state and economic administration bodies shall be subject to sale to strategic foreign investors.
The company implements the project Based on the Decree of the President of the Republic of Uzbekistan No PP-1623 dated from October 4, 2011 “On the Program of priority measures to expand production and to master manufacture of new types of competitive products, as well as in accordance with the Decree of the President of the Republic of Uzbekistan No PP-2264 dated November 17, 2014 “On the investment program of the Republic of Uzbekistan for 2015”.
- Statement of reasons for development of the company
The company strengthens its competitive advantage through increasing the scope of services and introducing new services.
The company strains for compete and timely discharge of commitments under the concluded contracts, which is indicative of positive evaluation of the activities of the company, the place occupied in oil and gas industry. This evaluation contributes to the expansion of financial possibilities and boost in confidence to the company among the “Customers”.
- Financing requirement
The need to attract additional financial resources lies in the necessary of expenses for the following purposes:
- Renewal of material and technical base of the company, including the procurement of new technologies and equipment in accordance with the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated March 28, 2014 No. 75 “On measures for the effective disposition of the state property”,
- development and introduction of new technologies and equipment;
- increase in performance of works and provision of services;
- acquisition of office equipment in response to the challenges identified by the Decree of the President of the Republic of Uzbekistan No PP-2158 “On measures for the further introduction of information and communication technologies in the real sector of the economy”.
- A share of the company to be transferred to investor
“Qashqadaryo neft–gaz qurilish va ta’mirlash” JSC was founded in the form of a joint-stock company. As of today the authorized capital of the company amounts to 585,270,000 soum.
The authorized fund of the company is divided into 650,300 shares with a nominal value of 900.0 soum.
|No||Name of shareholder||A share of shareholder|
|(in thousand soum)||(in %)|
In accordance with Annex 1 to the Decree of the President of the Republic of Uzbekistan dated April 28, 2015 No PP-2340 “On measures to increase the share and the value of private property in the economy” it is provided to sell a share of administration body amounting to 51% to a strategic foreign investor.
The total nominal value of shares, subject to sale to a strategic foreign investor, is 298,487.7 soum or 331,600 shares.
- The summary of marketing plan
In conditions of increasing competition, as well as the development of new segments it is required to implement an active marketing development strategy. The marketing strategy of the company is elaborated in view of the expected changes in the market and is focused on strengthening of the company’s position in the services market, competitive recovery by estimates, the expansion of the scope of services and improvement in quality, recruitment of professionals and young specialists.
- The main tasks of marketing strategy of the company are focused on ensuring cost-effective performance in constantly changing conditions, the competitiveness of the company in order to meet the customers’ interests, maintenance of public image, and maximum satisfaction of Customers in terms of scope, structure and quality of services, which creates conditions for the sustainability of business relations.
- Herewith the Company set a mission to raise competitiveness, which implies increased promotional activities, creation of additional divisions for the provision of services, adoption of new information technologies.
- Accomplishment of the assigned missions is assessed as quite realistic, given the sufficient support on the part of the founders and comparatively high profitability of the company.
- The forecast of basic financial indicators
1.7.1. Forecast of income and revenues for 2015-2019.
Given the tendency of expansion in construction and installation works services over the past 5 years and taking into account the strategic objectives of the company, the total income forecasted for 2019 amounts to 27,390.0 million soum or by 21.5% more than in 2014.
The total revenue forecasted for 2019 amounts to760.0 million soum or by in 21 times more than in 2014.
1.7.2 Forecast investment and income in 2015-2019.
The volume of investments of the company in 2019 will amount to 5,000.0 million soum.
The average annual return on investments over the period of 2015-2019 will make 20%.
It is provided to further improve and activate the investment activity of the company.
This shall be implemented by way of:
- Investment of proceeds from sale of shares of the new issue in financial instruments of major and reliable domestic banks;
- increase in scope of works and services;
- strengthening of operating monitoring and analysis of the customers, for which the company performs works and services.
1.7.3. Anticipated net profit for 2015-2019.
It is anticipated over the period of 2015-2019 the net profit will grow in 21 times and increase from 36 million soum in 2014 to 760.0 million soum in 2019.
- Main advantages and risks of the project
Taking into account the positive prospects for the company development, the main advantages for strategic investors of the company include:
- The presence of the state share in the authorized capital;
- The system of corporate governance that provide the greatest possible transparency of the company’s activities and adequate risk assessment;
- Availability of company divisions through which the company is represented in virtually all regions of the republic;
- Historical strategic base of the company;
- Financial stability and solvency of the company, guaranteed by mandatory requirements of regulatory body, confirmed by high rating and the highest category of issuers;
- Sound liquidity of shares, creating an opportunity for shareholders to freely dispose of the shares and voluntarily withdraw from the company;
- Well-deserved reputation and image of the company among the clients and customers.
Herewith in the opinion of the company the main risk factors of the project are as follows:
- Corporate risks;
- Risks of termination of licenses;
- Risks associated with changes in the scope of works and cost of services;
- Inflation risks;
- Social risks;
- Liquidity risks.
In order to minimize and mitigate the effects of the above-mentioned risks the company elaborates strategic and tactical decisions, eliminating any risk situations.
- Basic indicators of investment attractiveness of the project
The main indicators characterizing the investment attractiveness of the potential investors’ participation in the capital of the joint-stock company “Qashqadaryo neft–gaz qurilish va ta’mirlash” include:
- one of the leading construction enterprises of “Uzgeoburneftegaz” JSC;
- long-term sustained growth of key performance indicators of the company;
- the reputation of stable and reliable partner for the majority of large individual customers;
- legal organizational form of the company that provides the greatest openness and transparency for investors and shareholders;
- prestige and high business reputation of major shareholders, such as “Uzgeoburneftegaz” joint stock company;
- the availability of formed authorized capital of “Qashqadaryo neft–gaz qurilish va ta’mirlash” JSC amounting to 585,270.0 thousand soum.
The policy pursued by the company aimed as a matter of priority at expansion of the regional network and scale of operations;
- high level of financial stability and solvency of the company confirmed over the past 4 years by the indicator which is twice as large as the standard one.
- Description of the joint stock company
- The history the company
“Qashqadaryo neft–gaz qurilish va ta’mirlash” JSC was founded in 1997 for construction and capital repair of industrial and social facilities, construction of access roads and platforms for drilling rigs, foundations of drilling rigs mostly for the enterprises of the national holding company “Uzbekneftegaz” and “Uzgeoburneftegaz” JSC.
According to the order of the State Property Committee No 1023 dated 11.09.1995 the name of the company is changed to “Qashqadaryo neft–gaz qurilish va ta’mirlash” open joint-stock company. Starting from 2014 the name of the company is changed to “Qashqadaryo neft–gaz qurilish va ta’mirlash” joint stock company.
A purposeful work was done over the past 20 years within the framework of reforming and re-equipment of the company, characterized by the following main stages:
Firstly, new methodological procedures been developed the; changes and additions have been introduced to the internal and constituent documents; there have been developed some new regulations governing the labor relations aimed at increasing the personal responsibility of workers and strengthening of economic discipline. There has been taken an inventory of all existing rules, and their terms have been optimized.
Secondly, there has been implemented the retraining program, starting with senior managers and ending with average executives, in order that they could master the modern approaches to work, market mechanisms for customer satisfaction.
Thirdly, there has been implemented a staged reform of divisions since the major scope of works/ services was provided by these divisions.
Fourthly, the investment operation aimed at the efficient use of existing resources was organized on the essentially new level.
Fifthly, to ensure financial stability and solvency of the company there was organized the work for the expansion of scope of services, as well as improvement in quality of works.
Besides in order to improve the quality of services there have been taken measures for development, introduction and wide use of modern information technologies.
- Information on the company owners (shareholders)
|No||Name of shareholder||A share of shareholder|
|(in thousand soum)||(in %)|
- Organizational and legal structure
- The organizational chart of “Qashqadaryo neft–gaz qurilish va ta’mirlash” joint stock company is provided in the appendix.
- The governance of “Qashqadaryo neft–gaz qurilish va ta’mirlash” joint stock company;
The Chairman of the Board: Sultonov Kakhramon Todzhievich
Tel: 8 (375) 223-40-81
The First Deputy Chairman of the Board: Rakhmatov Asliddin Komilovich
Mobile phone +99 898 775-12-22
Deputy Chairman of the Board for transportation: Jalilov Farrukh Farmonovich
Mobile phone +99 898 775-00-48
- The curriculum the key managers of “Qashqadaryo neft–gaz qurilish va ta’mirlash” joint stock company are presented in the appendix.
- The number of employees by category is provided in the appendix;
- Wage level by category is provided in the annex.
The number of employees for 2014
|Point No||Category of personnel||Headcount|
|2.||Production personnel – managers||32|
|3.||Production personnel – workers||469|
|Total for the company||595|
The average wage in 2014 amounted to 1,068,223 soum, including in December of 2014 – 1,102.452 soum.
Wage level in 2014 by category
|Point No||Category of personnel||Average wage in 2014 (soum)||Average wage in December of 2014 (soum)|
|2.||Production personnel – managers||1,032,600||1,171,304|
|3.||Production personnel – workers||903,872||1,006,958|
|Total for the company||1,068,223||1,102,452|
- Basic financial indicators for 2010-2014
|Net proceeds from sale of products||8366||9410||12229||17614||21961|
|Cost of goods sold||8078||8019||9030||133101||17126|
|Miscellaneous expenses, total||2414||2281||3397||4067||5070|
|Other operating income||787||1087||491||649||508|
|Income from general economic activity||340,5||208,0||178,3||366,2||104|
|Actual regular staff (people)||850||750||525||500||532|
- Net profit at 2014 year end amounted to 36 million soum. Thereby it ensured stable profitability of the company with annual payment of dividends;
- There was formed a new methodological base of the company complying with market competition; there have been the principles of maintaining an adequate level of financial sustainability based on dynamic growth of authorized capital.
- There has been ensured a continuous increase in the number of divisions of the company conduct of operations in all regions of the Republic.
- Indicators of the company’s financial situation
|1. Coverage ratio ( solvency ratio)||> 1,25||0,90||0,94||The company is partially solvent|
|2. Capital ratio||> 0,2||-0,08||-0,06||The company is not provided with own circulating assets|
|3. Benefit-cost ratio||> 0||0,41||0,47||Benefit-cost ratio is not high|
|4. Return on assets||> 0||0,62||0,7||Return on assets is not high|
|5. Debt to equity ratio||> 1||0,22||0,34||High financial risk|
|6. Depreciation rate||< 0,5||0,37||0,35||Fixed asset depreciation is within normal limits|
CALCULATION OF PROFITABILITY
|Level of common profitability||3.22%||3.28%||3.83%||3.92%||3.96%|
|Return on assets||1.87%||1.94%||1.97%||2.16%||1.72%|
|Item|| Beginning of
|Million soum||%||Million soum||%|
|I. Non-current assets||2,966.4||26.1||4,362.8||29.2|
|1.1 Fixed assets and intangible assets||2,846.4||25.1||4,362.8||29.2|
|1.2 Other non-current assets||120||1|
|II. Current assets||8,393.9||70.8||10,553.9||70.8|
|2.2 Accounts receivable||5,462.2||48.1||6,157.9||41.3|
|2.3 Short-term financial investments|
|2.4 Cash assets||3.7||0.1|
|2.5 Other current assets|
|Total for Section II||8,393.9||73.9||10,553.9||70.8|
|IV. Capital and reserves||4,170.5||36.7||3,650.6||24.4|
|4.1 Authorized capital||705.2||6.2||585.3||3.9|
|4.2 Additional and reserve capital||1,965||17.3||2,024.3||13.6|
|4.3 Special-purpose receipts||926||2.4||524.0||3.5|
|4.4. Undistributed profits||574.3||8.2||517||3.5|
|V. Long term liabilities||43.6||0.3|
|VI. Short-term liabilities||7,189.8||63.3||11,222.5||75.2|
|6.2 Accounts payable||7,189.8||63.3||11,222.5||75.2|
- Organization of production
|Division||Quantity of equipment, units||Depreciation up to 50%||Depreciation up to 80%||Depreciation up to 100%|
|Machinery and equipment||35||11||6||18|
- Productive assets, capacities, infrastructure
Capacity of the enterprise: the joint-stock company has a transport station, concrete-mortar section, brickyard, wood-working shop, akfa shop, machining shop, division for construction of temporary roads and 7 brigades for construction and capital repair of residential, administrative and social facilities.
- Necessity for road transport shop fleet renewal
- acquisition of machinery and rotational transport under leasing program for transportation of workers to the site.
|No||Description||Units of measurement||Quantity||Cost
|1||“KamAZ” autocrane 25 t.||Unit||2||740|
- Raw materials base
- building materials
- open pit of brick factory in Kitab district
- sand and GPS pit in Guzar district
- burnt brick
- paving stone
- filler paste
- AKFA plastic window and door assemblies
- metal structures, metal frames, semi-finished products
- ready-mixed concrete and reinforced concrete structures
- constructional elements and millwork, wafering of materials
- masonry blocks
- concrete mixture
- Impact of the enterprise on the environment
According to the draft code provisions with regard to maximum permissible emission s developed by the State Nature Management Committee of the Republic of Uzbekistan no excess of established quotas is stipulated for the emitted ingredients subject to strict control of technological processes.
- Description of work/services
4.1. Product name
The Company offers the following main services and work for customers(clients):
– batch plant, produces ready-mixed concrete and certified ferro-concrete items.
– mechanical repair shops: manufacture steel construction, steel frames, semi-finished items.
– wood-working shop: manufactures construction members and millwork, bucking.
– AKFA shop: manufactures plastic door and window units.
– Paving block shop. Makes certified-quality paving blocks.
– Paste filler shop. Makes certified-quality paste filler.
– Brick factory in Kitab: makes baked bricks. Design capacity: 400,000 bricks/month.
– Motor-road transport shop: has 49 vehicle units. Provides construction sites with trucks.
– Road building unit: has 17 tractors and mechanisms. Provides construction sites of temporary roads and foundations with equipment.
4.2. Designation and scope
Construction is closely linked to all sectors of the national economy, especially, to the industry. On the one hand, increasing the scopes of construction depends on development of the industry sectors which provides it with the necessary tools and labor implements (machinery, materials, structures, power, etc.). On the other hand, performing construction/installation work for the numerous sectors of the national economy under contracts, construction companies are inseparably linked to customer businesses. The national economy sectors act in respect of construction as suppliers of construction products.
4.3. Principal characteristic
Karshi construction units No. 1, No. 2, No. 3, No. 4, No. 5, the Special Installation Unit, Zevarda, Urta Bulak, Kokdumalak Gas Field Construction Technology Units, Уртабулак, Кукдумалак, manufacturing base, welding shop, batch plant, wood-working shop, road vehicles depot, brickyard, design/estimate team for making up design/estimate documentation.
Objectives and subject of company business.
The Company’s main objective is to unite the economic interests, intellectual potential, physical and human resources of its shareholders in order to carry out economic activities aimed at generation of profits, with performance of construction/installation work including production of construction materials for own needs.
The major lines of the Company business are:
Performance of construction/installation work in the domestic market;
Production and sale of construction materials and structures;
Wholesale and retail trade;
Retooling and updating the operations of the joint-stock company;
4.4. Distinctive features, profit/benefit for customers
The principal features that characterize the quality of services provided by JSC Kashkadaryo Oil/Gas Construction/Repair may include::
-high professionalism of the Company key specialists in execution and signing of contracts with customers;
-relative price affordability of the Company work and services by way of standardization of terms of service contracts;
4.5. Existence of or requirement for licenses
JSC Kashkadaryo Oil/Gas Construction/Repair has the following licenses:
License registry No. 121 Р/ПР dated 03.07.2012 for construction issued by the RUz cabinet of Ministers;
(a copy of license is attached)
4.6. Readiness for manufacturing and sale of products
JSC Kashkadaryo Oil/Gas Construction/Repair is a completely operating company possessing all legal, HR, materials/equipment, technology and methodology components for providing with full-value work and services.
The Company organizational structure has the Company Development and Customer-relations which is capable of elaborating and introducing into operations the new types of equipment, machinery and processes into the services sphere as soon as possible.
4.7. Necessity of certifications, existence of certificates
(copies of certificates are attached)
4.8. Necessity and possibility of updating the products (work, services)
Possibility of updating the products are applicable to work and services exclusively in terms of revision of terms of agreements on work and services upon agreements with customers (clients) except such agreements for work and services the terms of which are set up by the laws.
In certain cases, revision of terms of agreements on work and services requires making amendments to the typified regulations of work and services for compliance previously submitted to the regulating body.
4.9. Guarantees and service
JSC Kashkadaryo Oil/Gas Construction/Repair guarantees its customers(clients) providing with work and services in accordance with the requirements of the laws and agreement provisions.
The solvency requirements prescribed by the laws are complied with by keeping the relevant norms within the established parameters information about which is submitted to the regulatory body on quarterly basis.
- Market review
5.1. General analysis of the work and services market
In the last years, in construction of residential buildings, our company has focused on centralized financing, the construction sites of which have been covered by earmarked construction programs. In view of the fact that for 2015 it is planned in the region to expand construction of residential buildings under mortgage loan, it is necessary to determine the form of financing construction of residential buildings and the capital and cash requirements.
What the customers need to do is to timely submit designs and estimates which clearly substantiate the project strategy, its cost-effectiveness and stage-by-stage financing in order to promptly purchase construction materials, equipment, to pay salaries to employees and to compensate the contractor’s other operational costs. Along with implementing already signed agreements for 2015 for construction of buildings, roads and rebuilding the sector enterprises, we seek opportunities for performing work and services for customers of third companies and providing the population with services in the form of consumer goods.
5.2. Segmentation of market, analysis of capacity, saturation and dynamics of the market segments
Further development of performing work and providing with services in the construction sphere is linked, first of all, to expansion of the scale of rendering services both to domestic and foreign companies by way of introduction of new equipment and technologies, to expansion of the service infrastructure which includes increasing the number of technicians, etc., as well as information-awareness activities in all regions of the country in order to popularize the benefits of the performed work and rendered services.
5.3. Analysis of competitive environment
JSC Kashkadaryo Oil/Gas Construction/Repair performs work of construction and rebuilding of operational and public buildings, power transmission lines and gas pipelines as well as access roads and site for drill rigs, drill rig mainly for foundations mainly for JSC Uzgeoburneftegaz companies.
5.4. Strategy of marketing and sale of work and services
The main requirements for dissemination of information about work and services is advertisement. Despite creation of web-sites by JSC Kashkadaryo Oil/Gas Construction/Repair and other companies, sale through the new channels remains insignificantly low.
The main scope of work and services is sold through legal entities.
Under high competition conditions, holding a strong position by JSC Kashkadaryo Oil/Gas Construction/Repair in the market as well as winning new segments require putting active marketing strategy of development in place. The Company marketing strategy is well thought out taking into account expected changes in the services market and is aimed at building up the Company position in the services market, at enhancing competitiveness as per estimates and rates, expansion of units and improvement of the quality of provided services, by recruiting professionals and young specialists to the Company staff.
– The main goals of the Company marketing strategy are directed to providing with profitable work in continuously changing conditions, to the Company’s competitiveness in order to meet the customers’ interests, keeping up the image, to satisfy the customers’ (clients’) requirements as much as possible as per scopes, structure and quality of services which creates conditions for maintaining stable business relations.
– Meanwhile, the Company has already set up a goal of improving the competitiveness which implies enhancement of advertisement work, creation of additional units for promptly serving customers, organization of effective monitoring system, introduction of new technologies and IT.
- Marketing analysis of the Company’s strong and weak points
In past years, in construction of residential buildings, our Company aimed at centralized financing with construction sites covered by earmarked construction programs.
Due to the fact that for 2015, it is planned in the region to increase construction of residential buildings under mortgage loans, it is necessary to determine the form of financing the construction of residential buildings and capital and fund requirement. On the part of the customers, they need to timely submit approved designs and estimates which clearly substantiate the project strategy, and its cost-effectiveness and stage-by-stage financing for timely purchasing construction materials, equipment, for timely payment of salaries to employees and compensation of contractor’s other production costs.
Beside implementation of already signed agreements for 2015 for construction of buildings, roads and performing rebuilding work of the sector companies we seek opportunities for performing work and services for customers of third party organizations and for population in the form of consumer goods.
|Competitive advantages||Competitive disadvantages|
|Existence of one of the largest regional complex of own warehouses, workshops and operation units||Medium-sized warehouse/workshop complex with company lower regional units.|
|Existence of skilled staff in key positions in the Head Office and regional units.||Shortage of skilled specialists, high staff turnover in lower units.|
|Existence of elaborated rules of providing with services and established methodology basis for most conventional types of work and services.|
|Possession of experience in performance of all types of work and provided services||Lack of adequate experience in performance of work and providing with services in the international market.|
|A broad range of provided services|
|Company shareholders’ composition and the support provided by them||Restrictions in promptly addressing matters related to changing the Company structure.|
|High capital base, financial stability and reliability||Decreasing liquidity of the Company’s investments.|
|Existence of a group of customers(clients) maintaining long-term partnership relations with Company.|
|Large-scale introduction of modern ICT into Company business|
|Increasing the incomes of the Company employees||Acceleration of inflationary processes (growth in service rates, etc.)|
|Growth in demand for services due to expected growth in the number of car loans.||Loss of clients due to unfair competition|
- Financial plan
6.1. Assumptions used in building the financial model
A series of indices and factors were used in building the financial model which affect the final result based on the market situation, expected demand, expected rates for provided services, achieved agreements with key customers(clients), planned marketing events, etc.
The following groups of indices have been reviewed:
- human resources (human resource requirement, salary costs, working hours);
- financial (financing requirements, sources and terms of attraction of investments);
- tax (rates of taxes and contributions payables to budgets of all levels);
- marketing (contract prices and price change projections);
- investment (acquired equipment, purchase of machinery, capital expenditures on construction of buildings and structures), etc.
Operational costs are taken into account which are related to the Company’s inter-company activities, including expenses on depreciation and taxes. The operational costs include:
- variable services (of third party organizations);
- general production (salaries, expenses on maintenance of equipment and buildings and other constant costs);
- commercial costs related to sale and promotion of insurance services;
Sources, amounts and periods of attraction and repayment of investment funds have been taken into account.
The Company’s operational profit, pre-tax profit, profit tax and net profit have been calculated.
Information about the Company within a certain period has been analyzed in terms of profitability, operational activity profitability, the Company’s financial and proprietary status.
- Company financing structure
The aggregate of equity funds and receipts from outside held by the Company at its disposal intended for fulfillment of financial obligations, financing current costs –all of these are the Company’s financial resources.
Existence of financial resources in required sums as well as their effective use pre-determine the Company’s financial well-being, its financial stability, solvency and balance sheet liquidity.
The main sources for financing are equity funds. The Company’s equity funds are created from internal sources (it is profit remaining with the Company, depreciation charges) . External sources (these are additional contributions to the authorized capital, additional issue and sale of shares, other external sources of creation of own financial resources).
Profit is the main source of funds of a dynamically developing company. It is present on the balance sheet:
1) in an explicit form: as individed profit;
2) in a disguised form: as funds and reserves created from profits.
The amount of profit depends on many factors, the main one of which is the income to expense ratio.
Profit is the main source of creation of the Reserve Fund which is intended for compensation of contingent losses and possible losses from economic activities. The procedure for creation of the Reserve Fund is described in the regulatory documents which regulate the Company’s business as well as its constituent documents.
|Projection of 2015-2019 incomes and expenses|
|JSC Kashkadaryo Oil/Gas Construction/Repair|
|No.||Description of costs||Projection|
|from construction/installation work||20,650||21,480||22,340||23,235||24,165|
|2.2.1.||administrative/management staff expenses||750||780||815||845||900|
|2.2.2.||other operational costs||4,348||4,400||4,710||4,905||5,100|
|3||Balance sheet profit||821||895||870||910||915|
6.3. Results of application of project financial model
The planned size of the Company profit may be adjusted due to:
- increase in the size of the authorized capital;
- keeping re-financing rate unchanged;
- keeping salary level unchanged;
The presented indices are current as of date of submission. The likelihood of conformance of the result obtained by the Company to the projected parameters will depend on possible increase in the size of the Company Authorized, market situation and changes in the applicable laws so the objectives set up by the Company for expansion and raising the profitability are modified. The Company’s actual development will follow the planned parameters.
6.4. Analysis of project investment attractiveness
Recently, the policy aimed at expansion of the regional network is considered to be the priority direction of the Company’s business. As from the moment of its incorporation, the Company takes an active part in shaping a developed market of services in the country and systematically expands the scale of its business.
The achieved indices ensure the Company’s financial stability and solvency at high level. For example, for the last 4 years, the Company’s solvency index exceed the norm set up by the State Inspectorate of the Republic of Uzbekistan 1.5-2 times and has a positive dynamics of growth. This is, certainly, a guarantee for meeting by the Company of its assumed obligations to the customers, partners and shareholders. The warranty reserves created from the generated profit serve as the guarantee that the Company will meet its obligations assumed in respect of partners. Dynamic improvement of the operational indices of the Company and the ramified units show that they are well ahead in performing work and rendering services. Finally, this assessment promotes expansion of financial opportunities and growth in trust to the Company among the clients.
In accordance with the formulated the 2015-2019 business plan, the rated indices of profitability of the authorized capital, profitability of assets and profit per share have the following form::
|Authorized Capital profitability||3.7%||3.9%||4.0%||4.2%||4.5%|
|Прибыль на акцию (сум)||105.7||110.5||125.8||130.2||140.7|
6.5. Sensitivity analysis and scenario analysis
In the process of business-planning, sensitivity is analyzed, i.е. the impact of change in the basic parameters on its final results is measured. The sensitivity analysis technique consists in changes of the selected parameters within certain limits, provided that the remaining parameters shall remain unchanged. This sensitivity analysis enables to assess how the resulting indicators change at various values of preset variables required for the calculation. This type of analysis allows to identify the most critical variables which to a high extent may affect the feasibility and effectiveness of the business plan.
The following were accepted as the initial variables:
-amounts of revenues;
-operational expenses or their components;
-specification of creation of reserves, etc.
The following were the resulting indicators:
– discounted profitability index
– investment profitability
-balance sheet profit
-accumulated real cash position.
The absolute sensitivity analysis allowed to determine numerical deviation of resulting indices in case of changes in the initial variable values.
Analysis of project development scenarios allowed to assess the impact of possible simultaneous changes in several variables on the business plan through the likelihood of each scenario.
- Analysis of major risks
7.1. Characterization of major risks
- Corporate risks
This category of risks is linked to the likelihood of worsening of the financial status of the Company as a result of negative changes which may take place as a result of it activity as well as in entities affiliated to it. The Company has all opportunities for immediately influencing the likelihood of occurrence of the said changes as well as reducing as much as possible negative impact on its financial status as a result of the said changes.
- License termination risks
To-date, the Company has the license for running its business. The licenses are for definite period. Running the business in accordance with the obtained license, without breaches in the license regulations and rules, timely submission of reports to the relevant bodies will allow the Company to minimize these risks.
- Risks related to changes in the market size and service rates
This risk is created by the results of the Company operations specifying drops in the level and it its profit sums. The following may act as the cause of occurrence of such risk: a drop in the potential of provided services, a drop in demand for its work and services, reduction in the Company revenues under the conditions of growing competition, and a series of other similar factors. As a result of a drop in the Company profit and relevant deterioration of its financial status, a threat may occur for a drop in the level of dividends on shares. The Company assesses these risks as moderate.
- Risks caused by inflation, devaluation and bank interest rates
The Company’s operation is subject to inflationary risks as the Company deposits its free funds in the bank accounts.
7.2. Analysis of the extent of impact of risks on cost-effectiveness of project various areas and the options of minimizing the said risks
In order to minimize and mitigate the consequences of the abovementioned risks, the Company develops tactical solutions that preclude occurrence of risky situations. A resolution on rejection of a specific risk may be adopted both in the phase of resolution formulation and by way of cancellation of the type of activity in which the Company already takes a part, if the actual risk is higher than the assumed one. Also, in order to minimize the risks specific attention should be given to the following methods:
- Taking chances – the managerial decision to take some (existing or planned) level of risk, without taking any actions to reduce it, usually for technical or cost reasons. In case chances are taken, it is necessary to take into account possible losses: – losses of constant nature which are easy to foresee; – possible losses caused by one-time, statistic risks. As a rule, such risks involve significant losses. Their particularity consists in the fact that they cannot be statistically assessed.
- Reduction in possible losses which are achieved, on the one part, by development of the accuracy of prediction of losses, on the other part, by means of more full use of knowledge existing in this science.
7.3. Conclusions and recommendations
Taking into account society development positive perspectives, main advantages for strategic investors of enterprise are as follows:
-Availability of state share in statutory capital;
– Availability of corporate management system allowing provide the most transparency of society activity and adequately assess risks;
-Historically established client base of society;
– Financial sustainability and solvency of society guaranteed by mandatory requirements of regulating body and confirmed by availability of high rating and location in official exchange listing and the highest category of emitters;
– High shares liquidity creating opportunity for shareholder to dispose shares freely or emerge from society at his own wish;
– Served reputation and formed image of society among clients.
Juridical address: Kashkadarya region, Karshi city, Jaikhun str., 2.
Mailing address: Kashkadarya region, Karshi city, 180106, Jaikhun str., 2.
Теl/Fax: (0375) 223-40-77, 223-40-81.
– Copy of registration certificate;
– Copy of charter;
– Copy of license;
– Photo of buildings and equipment, special mechanisms and automobiles;
– Structure layout
– CV of principal managers