Case Analysis Kuok 5-2

Case Analysis
Kuok Philippine Properties, Inc.
Carmel De la Paz, Vice-president of the account

management department of Oriental Bank, was at
her desk reviewing an account. She was to present
a strategic marketing to the Executive Committee
of Oriental Bank which told her to study the
financial performance of top new corporations in
real estate industry. The bank was planning to
aggressively penetrate this market with its credit
products. De la Paz selected for her analysis Kuok
Philippine Properties, Inc. (KPPI), a new company
that had gained prominence in the industry.
Case Analysis
By analyzing KPPIs financial ratios, De la Paz

sought to examine the financial characteristics
of companies at the higher end of the real estate
development industry. Since Oriental Bank was a
newcomer to the industry, it was concerned
about losing the ground to its competitors when
the Philippines economy grows in the second half
of the 1990s. Top management thus wanted an
assessment of the credit opportunities and risks
in the industry, and De la Paz was to come up
with this evaluation.
Case Analysis
KPPI, Key Financial data

In millions
1992
1993
Revenue
125.60
395.20
Expenses
57.10
133.00
Income before income tax
68.60
292.20
Net income
68.30
259.50
Key Results data
Key Balance sheet data
Quick asset
128.90
112.50
Current asset
132.30
134.40
2,523.20
2,711.70
130.50
62.30
Long term liabilities
30.70
1.10
Stockholder's equity
2,362.00
2,648.30
Total asset
Current liabilities
Case Analysis
Guide Questions No. 1.

Calculate the Financial ratios of KPPI for
1992 and 1993?
Case Analysis
Liquidity Ratios
Years
Current Ratio
1992
1.01
1993
2.16
Current Ratio :
Current assets
Current liabilities
134.4
2.16
62.3
In 1992, the firms ability to cover its current liabilities with its current assets
was 1.01. In 1993, the ratio goes up to 2.16 as compared to 1992, which
means that the company has the ability to pay its liabilities, as the definition
says that higher the ratio, greater the ability of the firm to pay its bills. This
tells that KPPI is improving their liquidity and efficiency, because their current
ratio is improving.
Case Analysis
Liquidity Ratios
Years
Qucik Ratio
Quick Ratio :
Quick Assets
Current liabilities
1992
0.99
112.5
1993
1.81
1.81
62.3
According to the definition of Acid Test Ratio, the company

should have the ability to pay its liabilities through its most
liquid assets. The table shows that in 1992, the firm has the
ratio 0.99 cents compare to 1993 has the ratio of 1.81. KPPI is
very high liquid company to pay its current maturing
obligation.
Case Analysis
Current Assets Turnover Ratio
Years
1992
1993
CA Turnover Ratio
0.95
2.94
CA Turnover Ratio =
Net Revenue =
CA Assets
395.2
2.94
134.4
Current Assets Turnover Ratio indicates that the current assets are
turned over in the form of sales more number of times. KPPI CA ratio
although improving but not enough to tell the company capacity to
achieve maximum sale with minimum investment in currents assets
Case Analysis
Asset Turnover Ratio
Years
1992
0.05
Net Revenue
Total Assets
395.2
2711.7
1993
.15
0.15
This ratio measures how efficiently a firm uses its assets

to generate sales, so a higher ratio is always more
favorable. KPPI has ratio in 1992 of .05 cents dollar of
sales for every 1 invested asset compare to 1993 ratio
of .15 cents. This means the company isn't using its
assets efficiently.
Case Analysis
Financial Leverage Ratio
Years
Debt to Equity Ratio
1992
0.07
1993
0.02
Debt to Equity ratio = Total liabilities =

Total Equity
63.4
2648.3
0.02
The debt to equity ratio shows the percentage of company financing

that comes from creditors and investors. KPPI Debt to equity ratio
implies the company are more financially stable organization.
Case Analysis
Years
Debt Ratio
Total liabilities
Total Assets
1992
0.06
Debt Ratio
63.4
2711.7
1993
0.02
0.02
Debt ratio is asolvency ratiothat measures a firm's total liabilities as

a percentage of its total assets. KPPI with low levels of liabilities
compared with assets are considered low leveraged and low risk for
lenders. KPPI is high suitable to lend money.
Case Analysis
Years
Equity Ratio
Equity Ratio
This
Total Equity
Total Assets
1992
0.94
=
2648.3
2711.7
1993
0.98
0.98
ratio measures the amount of assets that are financed by

owners' investments by comparing the total equity in the
company to the total assets. KPPI shows potential creditors
that the company is more sustainable and less risky to lend
future loan.
Case Analysis
Profitability Ratios
Years
Return on Sales
1992
1993
54.38%
65.66%
Return on Sales Net Income

=
=
Net Sales
259.5
395.2
= 65.66%
Measures profit percentage per pesos sales. KPPI is a

high profitable Company.
Case Analysis
Years
1992
1993
Return on Investment
2.71%
9.57%
ROI =
Net Income
Total Asset
259.5
2711.7
9.57%
Calculates the profits of an investment as a

percentage of the Investment/Total asset cost. KPPI
has a lower rate of return although with great
improvement for the two years comparative.
Case Analysis
Years
Return on Equity
Return on Equity =
Net Income
Total Equity
1992
2.89%
=
259.5
2648.3
1993
9.80%
9.80%
Measures the ability of a firm to generate profits from

the shareholders investment.
Ratio Analysis Summary

RATIO ANALYSIS
Liquidity ratios
1992
1993
Current ratio
1.01
2.16
Acid test ratio
0.99
1.81
Asset turnover
0.05
0.15
Current asset turn over
0.95
2.94
Financial leverage ratios
Debt to equity ratio
0.07
0.02
Debt ratio
0.06
0.02
Equity to asset ratio
0.94
0.98
Times interest earned
4.26
12.14
15.64
42.77
Profitability ratios
Return on sales
54.38%
65.66%
Return on investment
2.71%
9.57%
Return on equity
2.89%
9.80%
Asset to Liabilities ratio
Case Analysis
GUIDE QUESTION NUMBER 2.

What strengths and weakness of KPPI were revealed by the
financial ratios? Did the ratios adequately answer the
questions raised by VP De la Paz?
Strengths
KPPI high liquid company can pay immediately their

maturing obligation and high financially stable company as
well profitable.
Weakness
KPPI has low return of Investment and return on equity.
Case Analysis
Guide questions No. 3
What conclusions can be drawn the real estate

development industry based only on the performance
of KPPI?
After applying all the ratios we got an idea that the

KPPI Company is a profitable firm. Because throughout
the analysis of two years, we found that the company is
getting profitable return on sales even not well on
Investment and equity rate of return, their profit
margin has been increased as well and they are in the
position to pay their debts with in their resources.
Case Analysis
I.
Time Context
.The
case Happened on the year

1994.
Case Analysis
II. View Point

Top
Management, Executive
Committee of the Oriental
Bank.
Case Analysis
III. Central Problem

How will Oriental Bank able to present an
effective marketing strategy to aggressively
penetrate the industry and achieve high
competitiveness in the market?
Case Analysis
IV. Objectives
Must Objective
To create a plan by differentiating from the

competitors.
Want Objective
To build better community relationships by

attracting consistent stream high-end clients in
Banking industry.
V. Areas of consideration
Internal Environment
Strength
Having available strategic marketing plan to

present to clients, they are able to convince and
penetrates the market.
Weakness
Banking preferences among clients for already

established names and clients loyalty.
New player in banking industry.
V. Areas of consideration
External Environment
Opportunity
It may create goodwill among the new clients

that avail the credit products facilities. This may
create customer referrals.
Market penetration strategy.
Treats
Their competitors are already established and

known to the market.
VI. Alternative Courses of Action

ACA No. I- Create new Marketing plan based
on the specifications and needs of their
credit products clients.
Advantages
The company will be able to meet the expectation

and needs of their clients.
Tailored made marketing plan to attract more

clients in the market.
Disadvantages
It will take longer time to achieve the right

marketing strategy.

ACA No. II- Oriental Bank must be more
committed in giving clients service before,
during and after the credits products.
Advantages
Clients loyalty to Oriental bank will be much

stronger
The number of clients avail the credits product

will increase
Disadvantages
There will be added cost to the company

ACA No. III- Developing Research and
Development Programs
Advantages
Investment in research will give Oriental bank

better ideas and guidelines in the current trends.
Market positioning.
Disadvantages
R and D programs are too expensive.
VII. Recommendation
Considering that the target market are the high

end real estate development industry, it is
recommended the adoption of alternative
Course No. I (ACA No. I) - Create new Marketing
plan based on the specifications and needs of
their credit products clients. Oriental Bank
would be able to meet the expectation of their
clients since the marketing strategy is based on
their specific requirements. With satisfied
clients, the customer value of the company will
surely increase through referrals and other
means.
VIII- Action Plan

Nature of Activity
Responsible Person
Duration
Warmed list Clients Financial Staff analysts

statements analysis.
3 Hours
Marketing plan presentation Carmel De la Paz

to the Top management.
1-2 Hours
Marketing plan approval
CEO/President
Immediately
Present the Marketing plan to the

high end real estate clients.
Carmel De la Paz/Marketing
Officer
After the approval of

the Top Management

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Case Analysis

Kuok Philippine Properties, Inc.

Carmel De la Paz, Vice-president of the account

By analyzing KPPIs financial ratios, De la Paz

KPPI, Key Financial data

Income before income tax

Key Results data

Key Balance sheet data

Long term liabilities

Guide Questions No. 1.

According to the definition of Acid Test Ratio, the company

Asset Turnover Ratio

Asset Turnover Ratio

This ratio measures how efficiently a firm uses its assets

Debt to Equity Ratio

Debt to Equity ratio = Total liabilities =

The debt to equity ratio shows the percentage of company financing

Debt ratio is asolvency ratiothat measures a firm's total liabilities as

ratio measures the amount of assets that are financed by

Return on Sales Net Income

Measures profit percentage per pesos sales. KPPI is a

Calculates the profits of an investment as a

Measures the ability of a firm to generate profits from

Ratio Analysis Summary

Acid test ratio

Current asset turn over

Financial leverage ratios

Debt to equity ratio

Equity to asset ratio

Times interest earned

Asset to Liabilities ratio

GUIDE QUESTION NUMBER 2.

KPPI high liquid company can pay immediately their

KPPI has low return of Investment and return on equity.

Guide questions No. 3

What conclusions can be drawn the real estate

After applying all the ratios we got an idea that the

case Happened on the year

II. View Point

III. Central Problem

To create a plan by differentiating from the

To build better community relationships by

Having available strategic marketing plan to

Banking preferences among clients for already

New player in banking industry.

It may create goodwill among the new clients

Market penetration strategy.

Their competitors are already established and

VI. Alternative Courses of Action

The company will be able to meet the expectation

Tailored made marketing plan to attract more

It will take longer time to achieve the right

VI. Alternative Courses of Action

Clients loyalty to Oriental bank will be much

The number of clients avail the credits product

There will be added cost to the company

VI. Alternative Courses of Action

Investment in research will give Oriental bank

R and D programs are too expensive.