Investment Memorandum

Transcription

1 Investment Memorandum Ninh Chu Bay Resort Phase 1A Financing ($200,000 USD) a MGT Management Consulting Project February 2014

2 INTRODUCTION My Kim Phat Jsc. (the company) owns the lease to over 10 hectares of beautiful beach resort land in Ninh Chu Bay, Ninh Thuan Province. The land is 10 km from the Provincial capital of Phan Rang, 10 km from highway 1A, 15 km from the train station, and 60 km south of the Cam Ranh International Airport. The area is experiencing high growth in tourism, both domestic and foreign (Russian). Currently there is a lack of quality resorts and dining options for groups and tourists in the bay. Management has had many meetings with executives of Anh Duong and Pegas Touristik which has 500 Russian tourists a day in the bay during high season. Based on their suggestions, the company is developing a large restaurant, beach club, and retail center (called Coral Beach Seafood) on a corner of its resort land. This is Phase 1A of a much larger resort project. During and after development of Phase 1A, the company will look for either a buyer or larger investor. The company wants to raise $200,000 (USD) in financing to develop Phase 1A. Financing can be a loan, equity, or combination such as convertible loan. It can be considered bridge financing. Development on the restaurant has already begun. The company raised $65,000 to begin construction. The construction license for Phase 1A has been approved. The company has no debt. It will use the following for collateral. The 9 hectares of land (not developed) that company owns which has been valued at $40/sqm by CBRE (based on comparable sales). Land Use Rights Certificate, clearance, 1/500 plan, and all permits have been completed. The Phase 1A business and the 1 hectare of land. 1,600 sqm of beach land next to the 10 hectares that is personally owned. It is not project land so it is not leased from the government. 1,000 sqm has been converted to business use. This land is worth more than $200/sqm. Based on conversations with representatives from Pegas Touristik (Anh Duong), worst case scenario is that the interest and principle is paid back after 3 years. This would require on average a little over 50 guests per day. Best case scenario would be if Pegas /Anh Duong signs a contract to bring six busloads of tourists per day to the restaurant as they pass through Phan Rang on their way from the airport to Phan Thiet. We ve been told this is a good possibility. Ninh Chu Bay has seen a 30% increase in domestic tourists this past year. During Tet 2014, 40,000 tourists came to the bay, mostly in tour groups. The company s management has extensive experience selling to these groups and has contacts to over 1,000 Vietnamese travel companies. In addition, nearly all these groups pass by the land when they travel to Vinh Hy Bay. Ninh Chu Bay

3 The Investment Opportunity The Company My Kim Phat Jsc. Established in 2007 No liabilities. 49% Foreign Invested MGT Management Ltd. $40,000 invested in construction, about $25,000 in cash on hand. Owner of 10 hectare lease - valued by CBRE at near $3.5 million. The Principles Mr. Mark Gwyther (MGT Management Consulting) MBA Marketing, BA Quantitative Economics and Decision Science Owner of MGT Management Consulting ( Specializing in consulting on Vietnam coastal investments for private equity and investment funds in Hong Kong, Singapore, and the USA. Researches and publishes The Vietnam Resort Report a paid monthly newsletter subscribed to by many key players in Vietnam tourism. Analyzed and helped establish several new businesses for a division of Hasbro, while in the USA. Ms. Thao Phuong Ho (My Kim Phat Jsc.) Experience in managing 5-star restaurants and training staff. Boathouse, Caravelle Saigon Saigon Bar, Quccina, and others. Experience in Tourism Sales Recently worked as Sales Manager at VinPearl Land where she managed sales staff and worked to sell to tour groups throughout Vietnam. She still has contacts to over 1,000 tour companies. Established the Accor Advantage Call Center in Saigon. Managed over 40 sales and office staff. The Land Land Use Rights Certificate, clearance completed, Construction license for Phase 1A approved, 1/500 site plan approved. Construction has begun. 85,000 sqm of buildable land, 20,000 sqm of beautiful beach. Estimated value based on comparable sales is $3.5 million. The Phase 1A Business (called Coral Beach Seafood) 250 seat restaurant. Beach club with lounge chairs, beach bar, seafood barbeque station, spring roll wrapping station, water sports. Retail center and convenience store (leased). Focus on local products and cool beach apparel. The beach in front of Coral Beach Seafood

4 Form of Investment The company is flexible in the type of financing. Straight Loan $200,000 loan at negotiated interest rate We are willing to accept incremental payments as the building is constructed. No payment for six months 3-year re-payment Collateral of the land lease, building, and personal property. Convertible Loan $200,000 loan at negotiated interest rate. Interest and principle can be converted to equity in the event the company is purchased before maturity date. Equity Stake $200,000 investment to purchase 20% of the company. Approved 1/500 Plan for the resort (called Ninh Chu Bay Resort)

5 Use of Funds The company needs an additional $200,000 in financing to comfortably complete the business plan. We have spent approximately $30,000 on construction, $10,000 on recent operating expenses, and have about $25,000 remaining. Of the total amount (approximately $265,000) $190,000 will be used for fixed assets $55,000 for pre-opening operating expenses and marketing $5,000 for opening inventory From our conversations with Pegas / Anh Duong, we strongly believe we can have enough customers to generate operating profits immediately. Our other target market will be Vietnamese tour groups. We ll have an accurate forecast of demand before opening so that we can scale the number of employees to the right amount. Nearly all our costs will be variable. The business has no rent payments or any other fixed costs (assuming the number of employees are scaled and flexible). Use of Funds Total Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Land Improvements 9,000 3,000 3,000 3,000 Landscaping 10,000-5,000 5,000 Build Wall 8,000 4,000 4,000 - Rest & Kitchen 93,000 23,000 40,000 30,000 Retail Center 25,000 6,000 15,000 4,000 Furn & Fixtures 27,000-10,000 17,000 PP & E 10,000-5,000 5,000 - ADMIN - Seawall 50, ,000 Mgmt Salaries 6,000 2,000 2,000 2,000 Security Consultant Design 2,500 1,000 1,500 Legal 1, Accounting Proj. Management - OPENING - Inventory 5, ,000 Pre-open Opex 2, ,000 Operating Profit $ 7,369 $ 11,031 $ 12,812 $ 10,835 $ 10,730 Interest Expense $ 2,500 $ 2,500 $ 2,500 $ 2,500 $ 2,500 Monthly Cash Needed (gained) $(40,000) $(86,750) $(124,250) $ 4,869 $ 8,531 $ 10,312 $ 8,335 $ 8,230 Total Cash Needed $251, Assumptions: For Operating Profit, we use the Likely Scenario (see next slide) Interest rate is 15%. Principle begins being paid back after 6 months.

6 Financials Likely Scenario Scenario: We work with Anh Duong/Pegas, but don t receive a large contract for their bus stop. Still, a few of their buses stop and they encourage customers to come to our place. Commission cost for this is 20%. During high season, we expect 50 of their Ninh Chu Bay customers a day. Using 2014 numbers, this would be equivalent to one visit for each person during their 10 day stay. We have talked to the Anh Duong / Pegas representatives and they confirm that this is a very realistic assumption. The Russian market has grown over 70% per year since 2012 and it is expected to continue to grow at this pace. Get deals with some Vietnamese tour companies for groups. Assume 2 tour buses per day during high season (summer) During the Vietnamese high season, we assume at least 100 buses each day of viable tour groups are in the bay. With our contacts and group sales experience, a 5% market share is reasonable. Domestic tourism to Ninh Thuan is growing at about 30% per year last year and consistently above 20% for the previous years. We expect this to continue. Local customers and local groups will fill out the rest. Average restaurant guests = 100/day. Average spending is $10/person. The Beach Club start slowly with 16 guests per day on average, and grows 10% annually. Loan paid back by the end of the 3 rd year Five Year Profit & Loss Statement Revenue CBS Beach Club $ 45,948 $ 77,878 $ 88,003 $ 99,453 $ 112,399 Merchandise $ 37,492 $ 57,925 $ 59,663 $ 61,453 $ 63,296 Lease $ 16,480 $ 25,462 $ 26,225 $ 27,012 $ 27,823 Banquets/Groups $ 196,387 $ 303,417 $ 312,520 $ 321,896 $ 331,552 Pegus Group F&B $ 53,560 $ 82,750 $ 85,233 $ 87,790 $ 90,423 Total Revenue $ 349,867 $ 547,432 $ 571,644 $ 597,603 $ 625,494 Cost of Sales CBS Beach Club $ 12,287 $ 20,882 $ 23,659 $ 26,805 $ 30,371 Merchandise $ 22,495 $ 34,755 $ 35,798 $ 36,872 $ 37,978 Banquets/Groups $ 87,481 $ 135,159 $ 139,213 $ 143,390 $ 147,692 Commission for Pegus Rep $ 13,122 $ 19,033 $ 19,604 $ 20,192 $ 20,797 Total COS $ 135,386 $ 209,828 $ 218,273 $ 227,259 $ 236,837 Gross Profit $ 214,481 $ 337,604 $ 353,371 $ 370,344 $ 388,657 Gross Profit % 61.3% 61.7% 61.8% 62.0% 62.1% Operating Expenses Total OpEX $ 188,631 $ 218,039 $ 228,266 $ 238,997 $ 250,259 EBITDA $ 25,850 $ 119,565 $ 125,105 $ 131,348 $ 138,398 Depreciation $ 13,918 $ 13,918 $ 13,918 $ 13,918 $ 13,918 EBIT $ 11,931 $ 105,646 $ 111,187 $ 117,429 $ 124,479 Interest Income $ - $ 3,254 $ 89 $ 17 $ 1,410 Interest Expense $ - $ 30,000 $ 20,000 $ 10,000 $ - Taxes $ 1,193 $ 8,053 $ 9,132 $ 10,745 $ 12,659 Net Income $ 10,738 $ 70,847 $ 82,144 $ 96,700 $ 113,229 Net Income % 3% 13% 14% 16% 18% Net Operating Income% 3% 19% 19% 20% 20% Key Revenue Assumptions: Average 100 customers per day at the restaurant Average $10 spending per meal $1.50 / person for merchandise at the retail center. $2,000/ month rent income for convenience store. Beach Club averages 16 customers per day $7/person on average for F&B 10% have a massage at $10 $1.50/person at Retail Center Key Cost Assumptions: 35% COGS for food and beverage at restaurant. 30% COGS For food and beverage at beach club. 40% COGS for Merchandise 20% Commission for Pegas 5% Commission for Vietnamese travel agents 31 Employees 1 Senior Manager 15 Restaurant employees 5 Retail Center employees 2 Beach Club waiters 3 Beach Club massage staff

7 Financials Bad Scenario Scenario: We work with Anh Duong/Pegas, but don t receive a large contract for their bus stop. Commission cost for this is 20%. Average of 20 Russian tourists per day throughout the year. This is much less than the Pegas representatives think is possible. Get deals with some Vietnamese tour companies for groups. Assume 2 tour buses per day during high season (summer) Average of 30 Vietnamese tourists per day- less than a busload. Average restaurant guests = 50/day. Average spending is $10/person. It grows 5% per year. The Beach Club start slowly with 16 guests per day on average, and grows 10% annually. We are able to scale back the operating costs because of reduced demand. Loan paid back by the end of the 3 rd year Five Year Profit & Loss Statement Revenue CBS Beach Club $ 43,638 $ 73,941 $ 83,532 $ 94,373 $ 106,630 Merchandise $ 19,571 $ 30,237 $ 31,144 $ 32,078 $ 33,041 Lease $ 24,720 $ 25,462 $ 26,225 $ 27,012 $ 27,823 Banquets/Groups $ 112,476 $ 173,775 $ 178,989 $ 184,358 $ 189,889 Pegus Group F&B $ 17,996 $ 27,804 $ 28,638 $ 29,497 $ 30,382 Total Revenue $ 218,401 $ 331,219 $ 348,528 $ 367,320 $ 387,765 Cost of Sales CBS Beach Club $ 11,519 $ 19,576 $ 22,180 $ 25,130 $ 28,472 Merchandise $ 11,742 $ 18,142 $ 18,686 $ 19,247 $ 19,824 Banquets/Groups $ 45,665 $ 70,553 $ 72,669 $ 74,849 $ 77,095 Commission for Pegus Rep $ 3,509 $ 5,005 $ 5,155 $ 5,310 $ 5,469 Total COS $ 72,436 $ 113,276 $ 118,691 $ 124,536 $ 130,861 Gross Profit $ 145,965 $ 217,943 $ 229,837 $ 242,784 $ 256,904 Gross Profit % 66.8% 65.8% 65.9% 66.1% 66.3% Operating Expenses Total OpEX $ 110,900 $ 130,441 $ 136,644 $ 143,160 $ 150,006 EBITDA $ 35,064 $ 87,502 $ 93,193 $ 99,623 $ 106,898 Depreciation $ 14,173 $ 14,173 $ 14,173 $ 14,173 $ 14,173 EBIT $ 20,892 $ 73,329 $ 79,020 $ 85,450 $ 92,725 Interest Income $ - $ 3,254 $ 905 $ - $ - Interest Expense $ - $ 30,000 $ 20,000 $ 10,000 $ - Taxes $ 2,089 $ 4,821 $ 6,038 $ 7,545 $ 9,273 Net Income $ 18,802 $ 41,762 $ 53,887 $ 67,905 $ 83,453 Net Income % 9% 13% 15% 18% 22% Net Operating Income% 10% 22% 23% 23% 24% Key Revenue Assumptions: Average 50 customers per day at the restaurant Average $10 spending per meal $1.50 / person for merchandise at the retail center. $2,000/ month rent income for convenience store. Beach Club averages 16 customers per day $6/person on average for F&B 10% have a massage at $10 $1.50/person at Retail Center Key Cost Assumptions: 35% COGS for food and beverage at restaurant. 30% COGS For food and beverage at beach club. 40% COGS for Merchandise 20% Commission for Pegas 5% Commission for Vietnamese travel agents 21 Employees 1 Senior Manager 10 Restaurant employees 5 Retail Center employees 2 Beach Club waiters 3 Beach Club massage staff

8 Contact Information Ninh Chu Bay Resort and Coral Beach Seafood is managed by MGT Management Consulting. Please contact us for additional information. Additional Information Available: Complete Business Plan (Coral Beach Seafood) Marketing Plan Product Plan Design Plan Ninh Chu Bay Resort Business Plans and Forecasted Financial Statements Discounted Cash Flow Valuation Forecasted Financial Statements (3 Scenarios) P&L Balance Sheet Cash Flow Statements Project Schedule All Due Diligence and legal documents (English & Vietnamese) Land Use Right Certificate, Investment Certificate, Lease agreements Construction License (approval) 1/500 Master plan approval Land Valuation done by CBRE based on comparable sales Thank You MGT Management Consulting Send s to: