Valuation of Fixed Assets Associate Industries

Question: Describe about the Valuation of Fixed Assets for Associate Industries. Answer: Company Overview TEE International Ltd along with its associate industries was established in the 1980s and from then has developed from a simple electric contractor to a well-known Real estate, Infrastructure and Integrated Engineering group. With the flow of time, the organization has speeded its operations across various countries like Thailand, Malaysia and New Zealand etc. The firm continues to concentrate on its primary engineering specialization to develop its infrastructure function along with the real estate business running simultaneously (Annual Reports |TEE. 2016. Teeintl.com). TEE International has promoted itself to the SGX Main board along with time as it is listed in the Singapore Stock Exchange. Engineering TEE international has won a great value of recognition in their clients because of their value added services and quality delivery service. The firm has been able to generate important projects locally as well in the South East Asia. The engineering department of TEE was established in the year 1991 as an engineering sub-contractor. Now, the company has developed into an engineering solution provider for engineering business like commercial buildings, research facilities etc (Grant, 2016). Their star projects include engineering works for the Frasers Tower at Cecil Street, Tampines Town Hub, and The Centre Hub etc. The company provides a high value of engineering solutions according to the international standards applicable for large-scale engineering projects. The employees and the technical team create package and one stop design according to the requirements of the clients. Some of the major clients include Citibank NA, Changi Airport Group, Hyundai Engineering and Construction, SMRT etc. The majority of the clients are their repeated customers who demonstrate the work quality and their efficiency in delivering the process. Real Estate The company is also experienced in providing well-developed residential property developments through its various subsidiaries. TEE Land is a property developer concentrating at the middle to high-income customers who are in look of a good location. It is a pre dominantly freehold tenure. The strategy aim of this organization is to increase its market share in the residential, industrial and commercial projects along with increasing its income-generating portfolio of properties. The organization is also expanding its business indifferent other countries like Malaysia, Thailand, Australia and New Zealand. The firm has also made some notable progress in this field with the acquisition of a four-star boutique Larmont Hotel in Sydney and the Thistle Guest House in New Zealand. There has been other renowned real estate development from the part of TEE International through the construction of Aura 83, Chewathai Ramkhamhaeng etc. Infrastructure TEE Infrastructure Private Ltd provides comprehensive solutions to comply with the demands for integrated infrastructure. The firm is trying to increase its infrastructural assets mainly focused on power, water and information communication through investment in the assets and development of Greenfield projects (Vogel, 2014). The company through joint venture in Thailand now owns 49% share in GETCO, which is the largest wastewater treatment organization. TEE also increased its information communication industry through its associated firm CMC Infocomm. CMC Inforcomm provides operations and service to Singapore, Thailand and Philippines. The company has also entered into the power sector through an investment of 21.05% in the Power Source Philippines Distributed Power Holdings Inc. Economic Analysis There exists a vibrant free-market economy in Singapore. Therefore, the economy is growing at a very sustainable rate. In ASEAN, Singapore has the per capita income. The business sector in the country is well supported by the corrupt-free environment. Is is thus, one of the most competitive countries in the world. A well-organized legal and financial framework of business helps the development of the economy along with the motivated and educated workers. The economy is also diversifying more with the help of the government who have also started investing, which has resulted in the rise of tourism, infrastructural and other industries. The primary factor for the rise of the economy of Singapore is their strategic geographic location and its productive assets. The availability of cheap labor also save a lot of costs for the country. The GDP of Singapore has not seen any massive increase in the past few years but has been hovering around the 2 to 3% mark. With the expansion in the information and scientific sector in the country, the company has seen a massive demand in the engineering projects, which has indirectly increased the demand for infrastructural projects, as they are complementary to each other. The real estate sector is also increasing slowly as demand for unique locations are increasing for establishing research facilities and industrial establishments (Green, 2015). There exists some demerits in the economy such as the rise in labor costs, shortage of labor, which leads to the fall in the productivity in the economy. TEE International Ltd takes in to consideration about all these factors and develops a plan so that it can maintain its competitive edge. Source: Www-emis-com.libproxy.smu.edu.sg. (2016) Industry Analysis The industrial analysis of TEE international is undertaken by evaluating with the Porters five forces model and with the evaluation of the strength and weaknesses of the organization. The analysis is done looking after the three departments of the organization. Rivalry among Existing Firms Competitive Engineering market There exists a high degree of competition in the engineering line of business for TEE as this sector is gaining a high demand in the market and thus every organization tries to implement innovative strategies to increase competitive edge. During the year, the industry has reached the all time high of $40 million by securing new contracts from the market. The number of competitors in this sector is high though the sector is losing its glamour with time. Some of the main competitors include United Engineers Ltd, Sim Lian Group Ltd etc. It is seen that these rivals put an excess force over TEE International as most of the industries have similar net profit. The quality difference of these companies depends upon the level of output given by the engineers. Therefore, most of the companies try to provide the best quality. The customer loyalty is an important aspect, which can be increased through better quality. Competitive Real Estate market Singapore is a country full of retail and financial hubs, which attract new firms to enter and establish themselves. Therefore, there is a demand for premium, office locations is high. The analysis of the economy reveals that the demand strong tourism in the country attracts the construction of retail real estate. The country with an effective economic growth and business environment also increases investment in the commercial real estate. The demand for real estate has always been high in the Singapore market as the consumers are in search of unique locations and the availability of a high number of real estate industries in the market has made the work for TEE even harder. The company tries to use its expertise and experience to move ahead of its rivals (Danguy, 2014). Source: Eiu-bvdep-com.libproxy.smu.edu.sg. (2016). Low Competition in the Infrastructure The economy of Singapore stays in a competitive position and the investment by the government in infrastructure creates confidence and develops growth in the sector. The efficient transport and energy industries induce a strong core for construction projects. Due to this reason, the country has a saturated infrastructure market and thus contributes a small fraction in the construction industry. A small labor market in the country is another factor leading to the price of input thereby de motivating new firms to enter this market. TEE International having a lot of experience in this field, thus differentiates its quality of work by implementing expert employees in the work process and generates quality service thereby increasing customer loyalty (Dobbs, 2014). The switching cost in this sector is also high and so there are not many organizations performing in this sector. Threat of New Entry Engineering The threat of new entry is relatively high in this sector as the initial cost investment is very high to establish a base in the market. It also requires a specialized knowledge about the sector and any mistake will lead to economic downfall. TEE International being an experienced industry has knowledge about the sector and knows to protect its technologies and thereby having good economies of scale. The barriers to entry are very strict as there are rules and regulations framed by the government, which restricts new firms to enter. Real Estate In this sector, the restriction on entry is low because real estate is a demanding line as new firms enter the country as the country has a good retail hub. Everyone knows the knowledge and the technology to be used and thus there is scope for new firms to enter the market to generate profit. There are no specific rules to enter this market and thus new firms can easily enter (Chang, 2016). Infrastructure The barriers to entry in this sector are relatively high as this sector in interconnected with the engineering sector. The knowledge and initial investment is quite high and due to a small market in Singapore, there has been a maturity in this sector. This is what makes the new firms reluctant to enter. TEE International having a comprehensive market position in this segment knows all the relevant features to improve and survive in the business and thereby progressing ahead of its rivals. Bargaining Power of Buyers The bargaining power of buyers is very high in all the three aspects namely engineering, infrastructure and real estate. All the organizations existing in these sectors provide the same type of services to the consumers and therefore, the buyers are in a better position to negotiate with the companies. The number of customers is a major factor along with the sensitivity of price in the market. The buyers can respond to another substitute if they find that other firms are offering better service at a lower cost (Danguy, 2014). TEE International has a good knowledge about this aspect and therefore provides quality service at an economical price thereby creating customer loyalty. The firm knowing the fact that buyers are sensitive makes extensive plans to retain and attract new customers. Threat of Substitutes The threat of substitutes in engineering, real estate and infrastructure is very low because there are no alternatives for these sectors. The work of engineering cannot be duplicated by any other sector and the cost of change will be very high if any alternatives do come up. The real estate can only meet the need for new office space and so no substitute is possible in this aspect. The rent of old houses is also a substitute but might not be attractive to the buyer. In case of infrastructure, alternatives are not available as infrastructural companies are helpful in developing the economy of a country. Bargaining power of Suppliers Tee International Ltd produces most of its raw material about their infrastructural and engineering products and therefore the suppliers bargaining power is low and in case of real estate sector, the bargaining power is relatively higher as there are a lot suppliers along with real estate firms and therefore they can charge higher prices (Magretta, 2013). Source: Www-emis-com.libproxy.smu.edu.sg. (2016) SWOT Analysis Strength: The strength of TEE International Ltd is their expertise and experience, which makes them superior than their rivals. They are using these traits to expand their business all around the world. Weakness: There are relatively less weakness pertaining to the business. It is of primary notice to upgrade their mechanism and make supervision of their strategies so that their competitors do not move ahead of them. Opportunity: Having a well experienced team of employees the firm will increase its service quality, thereby can increase its market share and customer base, and thus can expand their business globally (Chang, 2016). Threat: With the introduction of new and improved technologies, new firms can up with better cost effective ideas to capture the market and thus TEE needs to from time to time monitor its production process. While expanding their business in other countries, the company needs to implement plan according to the culture prevalent there so as to capture market share (Li, Gao, 2013). Conclusion The above study thus shows us the economic and industrial analysis of TEE International Private Ltd. The analysis indicates that the company is in a profitable condition and if they need to stay in this position, it requires special attention towards the business process and function. The firm also needs to look after its strength and weaknesses and work accordingly. The firm can therefore increase its competitive edge by concentrating on the core fundamentals in engineering, implementing an integrated business platform and increasing the foothold in the overseas market. Reference List Annual Reports |TEE. (2016). Teeintl.com. Retrieved 20 October 2016, from https://www.teeintl.com/investor-relations/annual-reports Bentley, K. A., Omer, T. C., Sharp, N. Y. (2013). 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