Gaussin Case Study
How much revenue the company has to generate to be able to finance itself (to survive) after TTL invested capital to Gaussin?
Gaussin Introduction :
Gaussin Business Model
Gaussin has different activities. Gaussin has been on the port activities since 1970s (the containerized boom). Gaussin went public seven years ago to finance the new business model.
The idea is to make a differentiation by not focusing on volume but more focus on the differentiation by offering better service and product than the existing offer in the market. This business model will give Gaussin more space for margin.
Three main competencies/pillars of Gaussin are :
(i) software or the fleet management – Port Automation System
(ii) hardware – Gaussin …show more content…
Increase safety – the accident in port activities keep increasing and automation can be the solution to reduce accident that mostly caused by human error
b. Increase productivity – reduce movement
c. Reduce pollution
Gaussin uses subcontracting scheme for production to reduce working capital required in the Company. However, this scheme makes tracking cost of production difficult.
Regarding the cash flow, Gaussin gets the first down payment around 20% from customers (port operators) at the signing of the contract, then another 20% after the drawing/design done, and another 10%-40% after the free on board (FoB). Hence, around 90% of the product price are able to be paid before the product is delivered. Using this payment system, Gaussin are able to pay the subscontracting agent 30 days after the delivery.
Issue in Gaussin :
The turnover that less than the order book which amounted to around 20 million on average. Gaussin was not able to deliver the Bank Guarantee because the order was 10 times of the turnover.
The Board of Director of Gaussin decided to find a partner to solve the issue, particularly an Indonesian partner because 72% of the containerization is in Indonesia. Gaussin expects to expand its network and have a new financial resource from the …show more content…
Next week the data room will be opened.
Discussion on the transaction :
Gaussin advices TTL to finance the order book of Gausin and Leaderlease because there will be more and more demand on the lease of power pack. The lease of power pack is a profitable business.
Basically, Pelindo III is an SOEs which required careful assessments before executing the deal. Pelindo III always process everything in caution because Pelindo III is using ‘state budget/money’. Hence, it will take longer time for Pelindo III to make a decision. In addition, TTL needs to understand the downside that will be bear by TTL after the initial investment to form a worst case scenario and to analyze how Gaussin can survive. TTL need this assesment to avoid issues in the future.
Before conducting the due diligence, TTL/DS needs to have the business plan first because Gaussin has negative income in the past few years. So TTL/DS needs to determine the reasoning for TTL to invest in the Company that keeps making losses in order and be able to explain to the public.
The share price is still negotiable based on TTL/DS estimation after receiving the financial data from Gaussin.
Indicative timeline from TTL