Kenneth%20Tsao%20/%20Citibank%20Taiwan - PowerPoint PPT Presentation

Title: Kenneth%20Tsao%20/%20Citibank%20Taiwan


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??????????????? The Practice of Relationship
Management Hi-tech Industry Financing


Presented by Kenneth Tsao / Citibank Taiwan May,
2005
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Table of Contents

• Practice of Relationship Management
• Organization for Relationship Management
• Spirit of Relationship Management
• New Development of Relationship Management
• Case Study
• Practice of Financing Hi-tech Industry take
  TFT-LCD as an example
• Credit Fundamental TFT-LCD Industry
• Financial Analysis of TFT-LCD Industry
• Stress test and Projection

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Corporate Investment Bank Organization
Customer Group V.S. Product Groups
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Practice of Relationship Management
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Practice of Relationship Management

• Contact Window between Bank and Customers
• Four Major functions
• Customer Satisfaction / Service
• Credit Monitoring / Decision
• Business Origination / Execution
• Cross-Selling Banks Products

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Customer Satisfaction/Service -- I

• Information Collection
• Newspaper, Stock Price, Magazines...
• Clients Financials/Trend
• Research Reports...
• Industry Information...
• Promotion, Personnel
• Corporate culture
• Peers cross checking, competitors information
• Wallet size, Share of Wallet, Share of mind

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Customer Satisfaction/Service -- II

• Actions
• Identify Key Decision Makers.
• Phone Call, Lunch/Dinner, Golf...
• Be familiar with Key Decision Makers family,
  birthday, hobbies, mobile phone
• Be familiar with Key Decision Makers working
  schedule
• Customer Activities Product seminar, Important
  Festivals
• Attend customers events Annual Dinners,
  investor seminar,

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Customer Satisfaction/Service -- III

• Value Add
• Presentation skills
• Sending research reports
• Debt/Bond market update capabilities
• Funding Suggestion / Financial Advisor
• Product Knowledge
• Industry Specialist
• Market events, new market...
• Solution provider

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Credit Monitoring

• Safe Guard of Bank
• Capability of Financial Analysis
• Industry Knowledge
• Plant Visit
• Senior Management Assessment
• Cross Checking
• Dual Control Functions

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Business Origination / Execution

• Identify Business Opportunities
• Knowing your bank
• Whats the position of your competitors
• Product Knowledge
• The desire to win Mandate
• Execution Capability
• Team work

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Cross Selling Banks Products

• Maximize Banks Revenue
• Return on Asset, Return on Equity
• Relationship with your product teams
• Better Utilize Banks Resources
• Good Reward System

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How to be a Good Relationship Manager
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Good Account Officer

• Work Hard
• People Sensitivity
• Financial/Product Knowledge
• Teamwork
• Self-Driven
• Integrity

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How to be a good Relationship Manager
Product Groups
Corporate Finance
ECM
Cash
Customer
RM
FX
Trade
Global Connection
Middle Office
Back Office
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The Trend of Relationship Management
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The Trend of Account Management

• Industry Focus.
• More Profit/Performance Driven.
• New Products.
• Balance between Account Officers / Product
  Groups.
• Partnership Accounts.
• Cross Border Coordination.

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Relationship Management Case Study
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Case Study I -- Relationship Build Up

• Hard Working / Provide Solutions
• Information Collection.
• Relationship build up in 2000.
• Introduce product teams.
• Activities
• Periodically Review Share of Mind/Wallet
• Relationship Trigger Event

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Case Study II -- Cross Selling

• From Simple Product to Sophiscated Products
• Cut in relationship by other banks mistake /
  1996
• Build up relationship by serious syndication
  loans / 1996 - 2001.
• FX/Trade/Cash Service / 1996 - 2001
• Capital Market Service / 2000 - 2001.
• MA Advisory / 2001.
• Global Custodian Service / 2002.

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Case Study III -- Credit Monitoring

• Sensitive about Banks Asset
• Sign of weakness
• Information collection / Relationship
• Manage banks portfolio
• Integrity
• Dual Control Function

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Case Study IV -- Deal Implement

• Actions
• Identify opportunities
• Customer needs
• Customer decision process
• Where is your competitors?
• Chasing Mandate
• Key Decision Point and Win the Mandate
• Follow up

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????????? ? TFT-LCD ??
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Global TFT-LCD Industry
2005 Q1 Global TMC Review
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The Fastest Growing Industry in the World

• Due to the strong demand from the end users,
  global TFT-LCD industry growth rate in the past
  two years are over 30
• Looking forward, global TFT-LCD industry is
  expected to have over 20 yoy growth rate in 2004.

Source IDC (Dec. 2003)
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Why TFT-LCD? A Flat World!
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TFT-LCD is two times bigger than Foundry DRAM

• Global TFT-LCD industry has been two times
  larger than global foundry and DRAM in 03/04
  and is expected to have higher growth rate in the
  next two years

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What is TFT-LCD?
TFT-LCD stands for Thin-Film Transistor
Liquid-Crystal Display.
Three major components in TFT-LCD Module
Backlight Unit
TFT Array Substrate (Glass)
Color Filter Substrate
The basic structure of a TFT-LCD panel may be
thought of as two glass substrates sandwiching a
layer of liquid crystal. The front glass
substrate is fitted with a color filter, while
the back glass substrate has transistors
fabricated on it.
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TFT-LCD Production Process
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TFT-LCD Panel by Generation
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Credit Evaluation Points
2005 Q1 Global TFT-LCD Review
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Credit Analysis - How to Determine a
Companys Risk?

• Industry
• Industry Structure
• Industry Cycles/Trends
• Market Share / Competitive Position
• KSFs vs. Strategy
• Management
• Management Ability - in relation to Strategy,
  Economy, Industry Competitive Environment
• Management Integrity
• Ownership
• Organizational Structure

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Credit Analysis (Cont.) - How to Determine a
Companys Risk?

• Financial Analysis
• Historical Basis
• Operating Performance
• Growth
• Margins Operating vs. Non-Operating
• Liquidity Cash Flow
• Cash Cycle Working Capital
• Current Ratio Short-Term Assets vs. Liabilities
• Capital Structure
• Leverage Borrowed vs. Self-Funded
• Net Worth

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Credit Analysis (Cont.) - How to Determine a
Companys Risk?

• Financial Analysis (cont.)
• Forecast
• Assumption vs. Industry Outlook, Market Position
  and Company Strategy
• Financing Flexibility vs. Funding Needs
• Level of Internal Generated Cash
• Banking Relationship
• Access toward Capital Market
• Financing and Hedging Strategy
• Appropriateness
• Suitability

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Credit Analysis (Cont.) - How to Determine a
Companys Risk?

• Way-Out Analysis
• Source of Way-out and Level of Reliability
• Support or Security Appraisal
• Relationship and Account Strategy
• Share of Wallet Size
• Cross-Sales Opportunity in Non-Lending Products
• Credit Strategy and Credit Limit
• Risk Summary
• Risks and Mitigates Associated with the Exposure
• Justification for Exception on Stability Criteria
• Expectation on Future Risk Profile

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Price change on TFT-LCD Industry
2005 Q1 Global TFT-LCD Review
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ASP update February 2005 update - TV
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The Outlook of TFT-LCD Industry

• The outlook remains bright given LCD is the most
  popular display technology.
• The growth of LCD TV market is critical for
  overall TFT-LCD industry.
• The cyclical volatility in supply/demand should
  stabilize with LCD TV expansion.

Source Lehman Brothers Oct., 2004
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Global Top Ten TFT-LCD Players

• Top 10 TFT-LCD players are from Korea, Taiwan and
  Japan in terms of production capacity.

Q4, 2003 TFT-LCD Realistic Capacity by Company
Source Display Search 1Q04 (page42)
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Financial ComparisonTFT-LCD Industry
2005 Q1 Global TFT-LCD Review
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Taiwan TFT-LCD Customer Performance

• Sales Revenue

• Taiwanese TFT-LCD players experienced strong
  sales growth in 2004. Their total FY04 revenue is
  expected to reach NT493Bn, representing over 50
  yoy growth.

Source The companies and Citibanks estimate
TFT-LCD realted sales accounts for 58 of CPTs
sales in 2004.. Innolux, established in 2003,
belongs to Hon Hai group. Its ramp-up of G4.5 and
G5 lines is in 4Q,2004.
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Taiwan TFT-LCD Customer Performance
Operating Margin

• Due to increasing demand and improving yield
  rate, all Taiwanese TFT- LCD players reported
  handsome operating profit in 1H04. However, the
  unexpected price drop impaired their margins in
  3Q04.

Source The companies CPT numbers only
represent TFT-LCD business
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Global TFT-LCD Players Performance

• All global TFT-LCD players showed decreased
  EBITDA margin in 3Q04 due to declining panel
  price.

Source The companies The figures of
LCD-Division of CPT and Samsung
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Taiwan TFT-LCD Players Performance in 2004
Profit Margin still maintain at good level after
the price downturn in 2004
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Taiwan TFT-LCD Players Performance in 04 (contd)
Capital Structure is improved in 2004 due to
Equity injection and profit generation
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Taiwan TFT-LCD Players Performance in 04 (contd)
Heavy Capex is the major cash outflow v.s. cash
generation from operation and fund raising
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Way-Out AnalysisTFT-LCD Industry
2005 Q1 Global TFT-LCD Review
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Taiwan TFT-LCD Portfolio

• Active ECM Global Loan Fund Raising Total 18
  ECM transactions with amount of US4,974MM during
  2002-2004. Meanwhile, there are also 10
  significant syndications happened during
  2002-2004.

• TFT-LCD syndication loan Large size longer
  tenor (e.g. US2BN 7-year syndication for AU and
  ChiMei in 2004) Major in local currency Club
  deal type syndication.

• Limited Credit Appetite on Term Exposure

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Taiwan TFT-LCD players Fund Raising in 2004

• Total fund-raising of Taiwanese TFT-LCD players
  amounts to around US12bn in 2004.

Source The companies as of Nov. 2004
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Price Drop Leads to Expansion Slow-down of
Taiwanese Players

• Due to 2H04 unexpected ASP drop and overcapacity
  concern, AUO and CMO have announced to postpone
  their next-generation fabs (slow ramp-up in G6
  and delay in G7) while Hannstar decided to halt
  their G6 investment.

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Stress TestTFT-LCD Industry
2005 Q1 Global TFT-LCD Review
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Stress Test Price v.s. Display Search Price
Display Search Forecast Blue Line
Stress Test Price Red Line
Source Display Search, Nov., 2004
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630


600


550


550


550


550


37" Price Changes ()
0.0
-48.0
-16.7
-16.0
-4.8
-8.3
0.0
0.0
0.0
42" LCD TV Panel Ave. Unit Price
stress
N/A
1,800
1,260


945


756


642


550


550


550


42" Price Changes ()
-
-30.0
-25.0
-20.0
-15.1
-14.3
0.0
0.0
47" LCD TV Panel Ave. Unit Price
stress
N/A
3,200
2,600


2,300


2,000


1,750


1,550


1,350


1,200


47" Price Changes ()
-
-18.8
-11.5
-13.0
-12.5
-11.4
-12.9
-11.1
50" LCD TV Panel Ave. Unit Price
stress
N/A
5,500
5,000


4,500


4,000


3,500


3,000


2,500


2,000


50" Price Changes ()
-
-9.1
-10.0
-11.1
-12.5
-14.3
-16.7
-20.0
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Stress Test Worksheet Take AU as an example (1)
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Stress Test Worksheet Take AU as an example (2)
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TFT-LCD Stress Test Result 2005
Profit Margin will be hit significantly under the
Stress Test in 2005
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TFT-LCD Stress Test Result 2005 (Contd)
Balance Sheets still show a healthy status
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TFT-LCD Stress Test Result 2005 (Contd)
Heavy Capex will drive the cash level down
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AppendixIndividual Names Analysis(Example)
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Discussion