Integrated Case Study: Best JV Structure for HCF in Bursa Malaysia

This integrated case study examines how HCF, a company listed on Bursa Malaysia, can structure a joint venture with Celestial Garments to its best advantage. The proposed JV involves a 70/30 profit share, with Celestial Garments holding the majority stake and requiring an RM8 million expansion, with HCF investing RM2.4 million. The analysis emphasizes the importance of adhering to IFRS standards during financial planning and cost analysis, especially concerning currency exchange rates in international trading. HCF's board of directors needs to ensure the annexure is built and manufacturing commences within six months. Strategies to mitigate the higher risks associated with the joint venture compared to HCF's independent operations are crucial. The case also considers the potential closure and sale of HCF's factories in Malaysia and Thailand for a substantial profit of approximately RM8.5 million, given their prime locations in fast-developing areas. The focus should be on quality to cater to the upper-middle-class consumer base.

Running head: INTEGRATED CASE STUDY
Integrated Case Study
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1INTEGRATED CASE STUDY
a. How can the JV arrangement be structured to the best advantage of HCF bearing in
mind HCF is listed in Malaysia bursa?
The joint venture proposal will be a seventy/thirty profit share with Celestial garments taking
70 percent stake. Both HCF as well as Celestial Cloths would form a separate company under
the agreement of joint venture. In order to experience a significant enhancement in profit,
celestial clothes would need to build an annexure to its current factory for catering for this new
venture. HCF wanted the manufacturing activities for remain separate from the existing business
of Celestial cloths. The total cost of this expansion is estimated to be roughly equal to RM8
million with the investment of RM 2.4 million from HCFs. HCF needs to consider IFRS
(International Financial Reporting Standards) while developing the financial plan and during
performing the cost analysis or cost estimation of the joint venture. Along with this, during
international trading or import-exporting operation, the currency exchange coefficient should be
based on the IFRS standards.
In Bursa Malaysia, the board of Director of HCFs needs to build the annexure as well as
start manufacturing in 6th months. Considering the fact that the joint venture proposal had a
higher risk than HCF running its own operations, strategies to deal with the mentioned issue
needs to be implemented by the management of HCF. When it comes to the proposal to close
down the factories of HCF in Malaysia as well as Thailand, HCF will gain the ability to sell the
land for a substantial profit s they were located in a fast developing area. The company will be
able to sell their factories for about 8.5 million RM. Considering the fact that the chief
consumers of the mentioned company are consumers from upper middle class society, the
organization needs to focus on it quality instead of quantity.