Accurate Valuations & Solutions for Efficient Reporting
Three different projects have been identified by K.P. for the students:
(a) K.P. distributes Bridgestone tires and Yamaha motorcycles in Laos, and they use five different key performance indexes (KPIs) to measure performance of these sub-units. K.P. is keen to explore other KPIs for a better assessment of the businesses’ performance. Two teams were tasked to develop balanced scorecards and a dashboard for better visualisation of the business performance for the Bridgestone and Yamaha sub-units. The student teams took accounting data provided by K.P. and developed dynamic balanced scorecards and dashboards for the Bridgestone and Yamaha sub-units. The balanced scorecards described performance in numerical terms and improved managers’ ability to benchmark and measure performance across various business dimensions. It also aligned the company’s strategic objectives with employees’ evaluation. The dashboards created complemented the balance scorecards by allowing managers to visualize KPIs and also allowed managers to easily identify areas for improvement.
(b) While the business units operate independently, their finance operations are managed by a central finance unit, with the entire distribution business being presented as a single entity in the annual filing. To ascertain the market value of the Bridgestone and Yamaha sub-units, another two student teams were tasked to research and develop a range of valuations based on different models. The student teams took accounting data provided by K.P. and built a variety of valuation models using different modelling techniques. This information was valuable to K.P. as it provided them with greater insights into the Bridgestone and Yamaha sub-units.
(c) A 5th team assisted another department of K.P. – which owns four units under its distribution business (including Fast Moving Consumer Goods, Agriculture, Automotive and Content Management System) – to research on the jurisdictions of regional countries. This is to aid K.P. in evaluating the feasibility of setting up a holding company in the region. The student team provided insights and recommendations for how K.P could set up a holding company. The proposal also included a comparison and evaluation of setting up a holding company in Singapore and Hong Kong.
K.P. Company was pleased with the quality of the proposals and is exploring implementing relevant recommendations:
- Balanced scorecard and dashboard: While K.P. currently measures business performances across its various sub-units, the performance measures used across these sub-units are not standardized. This makes it difficult for K.P to accurately compare and track business performance across sub-units. K.P. is hence seeking to improve the tools that they use for comparing and tracking of business performance. The balanced scorecards created by students provide K.P. with a variety of performance tracking measures that can be used across sub-units. Dashboards created complement these performance tracking measures by allowing K.P. to effectively monitor and track business performance.
- Valuation: K.P. is in the early stages of exploring the sale or listing of the Yamaha and/or Bridgestone business sub-units. However, one stumbling block has been the lack of reliable valuations of these sub-units. The valuation models proposed by the students provide relevant insights to K.P.’s continuing discussions on a possible sale or listing of its various businesses by providing a reliable estimate (based on accounting information) of their value.
- Setting up of holding company: K.P. is a family-run business, with a large number of family members holding varying stakes in the company. Corporate governance has been a perennial problem for the company, and the recommendations provided by students provided relevant insights to K.P.’s continuing discussions on a possible restructuring of its business to improve corporate oversight.
Mr Khemsath Philaphandeth, President of K.P, Company Limited, observed, “We have learnt immensely from the SMU faculty and students as they presented to us their proposed solutions to the business hindrances that we have been facing. Personally, I am impressed by the level of professionalism, the quality of work and the concerted efforts SMU students have shown. We hope to partner with SMU-X again in the near future."