Research on Vietnam Stock Market

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Research on Vietnam Stock Market

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  • https://www.mckinseyquarterly.com/wrapper.aspx?ar=2698&story=true&url=http://www.mckinseyquarterly.com/Creating_value_An_interactive_tutorial_2698%3fpagenum%3d1%23interactive&pgn=crev10_exhibit
  • Measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues. The asset turnover ratio and inventory turnover ratio are good examples of activity ratios There are several general rules that should be kept in mind when calculating asset turnover. First, asset turnover is meant to measure a company's efficiency in using its assets. The higher the number, the better, although investors must be sure compare a business to its industry. It is fallacy to compare completely unrelated businesses. The higher a company's asset turnover, the lower its profit margin tends to be (and visa versa).
  • A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations.  Commonly, including the current ratio, the quick ratio and the operating cash flow ratio. Meaning: The higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts. Working Capital = Current Assets – Current Liabilites The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign.
  • The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Financial leverage is not always bad, however; it can increase the shareholders' return on their investment and often there are tax advantages associated with borrowing. also called leverage. VIC: Vincom HAG: Hoang Anh Gia Lai TDH: Thu Duc Housing
  • Measures a firm's efficiency at generating profits from every unit of shareholders' equity
  • The return on assets (ROA) percentage shows how profitable a company's assets are in generating revenue. This number tells you what the company can do with what it has, i.e. how many dollars of earnings they derive from each dollar of assets they control. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. Return on assets is an indicator of how profitable a company is before leverage, and is compared with companies in the same industry. Since the figure for total assets of the company depends on the carrying value of the assets, some caution is required for companies whose carrying value may not correspond to the actual market value. Return on assets is a common figure used for comparing performance of financial institutions (such as banks), because the majority of their assets will have a carrying value that is close to their actual market value. Return on assets is not useful for comparisons between industries because of factors of scale and peculiar capital requirements (such as reserve requirements in the insurance and banking industries).
  • In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects. The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings. What does P/E tell you? The P/E gives you an idea of what the market is willing to pay for the company’s earnings. The higher the P/E the more the market is willing to pay for the company’s earnings. Some investors read a high P/E as an overpriced stock and that may be the case, however it can also indicate the market has high hopes for this stock’s future and has bid up the price. First, you have to understand that different industries have different p/e ranges that are considered "normal". For example, technology companies may sell at an average of 40 p/e, while textile manufacturers may only trade at an average of 8. There are the exceptions, but for the most part, these differences between sectors are perfectly acceptable. They arise out of different expectations for different businesses; tech stocks usually sell higher because they have a much higher growth rate and earn high returns on equity, while a textile mill, subject to dismal margins and low growth prospects, will trade at a much smaller multiple. http://www.investopedia.com/terms/p/price-earningsratio.asp http:// stocks.about.com/od/evaluatingstocks/a/pe.htm http://beginnersinvest.about.com/cs/valueinvesting1/a/011101a.htm
  • What Does P/B Tell Us? For value investors, P/B remains a tried and tested method for finding low-priced stocks that the market has neglected. If a company is trading for less than its book value (or has a P/B less than one), it normally tells investors one of two things: either the market believes the asset value is overstated, or the company is earning a very poor (even negative) return on its assets. If the former is true, then investors are well advised to steer clear of the company's shares because there is a chance that asset value will face a downward correction by the market, leaving investors with negative returns. If the latter is true, there is a chance that new management or new business conditions will prompt a turnaround in prospects and give strong positive returns. Even if this doesn't happen, a company trading at less than book value can be broken up for its asset value, earning shareholders a profit. A company with a very high share price relative to its asset value, on the other hand, is likely to be one that has been earning a very high return on its assets. Any additional good news may already be accounted for in the price. (For more on valuing companies and investments, check out 5 Must-Have Metrics For Value Investors.) Best of all, P/B provides a valuable reality check for investors seeking growth at a reasonable price. Large discrepancies between P/B and ROE, a key growth indicator, can sometimes send up a red flag on companies. Overvalued growth stocks frequently show a combination of low ROE and high P/B ratios. If a company's ROE is growing, its P/B ratio should be doing the same. http://www.investopedia.com/terms/p/price-to-bookratio.asp http:// stocks.about.com/od/evaluatingstocks/a/pb.htm http://www.investopedia.com/articles/fundamental/03/112603.asp http://www.investopedia.com/university/ratios/investment-valuation/ratio2.asp
  • Public currency for acquisitions Once the company is public, it can use its common stock to acquire other public or private companies in conjunction with, or instead of, raising additional capital. How IPO? Choosing advisors (Issuer) Building financial reporting infrastructure (Issuer & Investment Bank) Preparing a communications strategy (Issuer & Investment Bank) Designing the capital structure (Issuer & Investment Bank) Providing for employees (Issuer)
  • http://ezinearticles.com/?Stocks-VS-Bonds---Differences-and-Risks&id =924077 http://economics.about.com/od/smallbigbusiness/a/corp_capital.htm http:// www.ise.org/products/BondsMain/BondStockComparison.aspx
  • We acknowledge that Vietnam is not quite in the same league as the larger ASEAN markets in terms of market capitalization and turnover (see table above). However, we think Vietnam stands out as a better investment choice compared to other frontier markets like Sri Lanka and Pakistan. While Pakistan’s Karachi Stock Exchange has the same market capitalization as Vietnam’s, the average daily turnover in the past 3 months is not much more than half of Vietnam’s. Sri Lanka’s 3-month average daily turnover of USD29mn is roughly the same as Pakistan’s but the market capitalization of USD19bn is the smallest among the three. (Source: HSBC Vietnam Insights Nov10.pdf)
  • Criteria for listing shares on HoSE Capitalization: VND 80 billion charter capital Profitability: profitable for the last two consecutive years and no accumulated losses up to the year of listing Debt position: No overdue debts that are not set up provision according to the rules and regulations of accounting; disclosure of all debts to the company owed by members of the Board of directors and major shareholders Minimum shareholders: 20% of the common shares must be held by at least 100 shareholders Share lock-up: Board of directors, Board of Supervisors, (General) Director and Deputy (General) Director(s), Chief Accountant must undertake to hold 100% of the shares they owned within 6 months from the listing date and 50% of those shares for the following 6 months.
  • Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company. The law prohibits a person from [4, Article 9] Using inside information in order to purchase or sell securities for that person him/herself or for a third party; Disclosing or giving inside information to another person; and Advising another person to purchase or sell securities based on inside information. A person trading based on inside information may be subject to a fine or criminal prosecution and the trade may be canceled.
  • Securities price manipulation is the agreement between two or more people to sell or purchase securities with the aim to create artificial supply or demand, which causes artificially increasing or decreasing the price of security. Securities price manipulation is prohibited by the Penal code. Le Van Dung – General Director of Vien Dong Pharmaceutical JSC
  • One of the biggest mistakes investors make in investing is failing to separate a good company and a good stock. A great company’s (fundamental) performance is wiped out by valuation compression. This is the battle of two winds: the tailwind of earnings growth and the headwind of P/E compression. http://contrarianedge.com/2007/07/07/good-comany-vs-good-stock/
  • http://www.bukisa.com/articles/218590_technical-vs-fundamental-trading http:// hubpages.com/hub/FundamentalvsTechnicalInvesting http://www.investopedia.com/university/technical/techanalysis2.asp Warren Buffett
  • http://www.tax4india.com/finance-and-economy-india/fundamental-analysis.html
  • INDUSTRY ANALYSIS includes, but is not limited to: a. Definition of the industry; b. Industry Life Cycle - growth, maturity or decline; c. Industry History - how old is the industry; d. In-depth historical financial performance ratio analysis; e. Industry Trends - cyclical or seasonal, increased competition etc.; f. Industry Influential Factors - does economy, government, or competition effect industry; g. Primary Competitors along with entry risk and barriers to entry; and, h. Projected Industry Sales - total sales in the industry. Industry Analysis tools: 5-forces Model & SWOT http:// www.ssi.com.vn/Research/IndustryReport/SectorWatch.aspx
  • http://www.investopedia.com/university/fundamentalanalysis/fundanalysis2.asp Corporate Governance = Financial and Information Transparency + Stakeholder Rights … Our Criteria for Investment (IDG Ventures Vietnam) Be led by a strong management team with the vision, experience and dedication to build a successful company. Offer a uniquely beneficial product or service that targets a lucrative, clearly defined market opportunity in the domestic or global market. Be able to leverage technological advantage into a defensible market position. Understand the demographics, behavior and preferences of its customers. Be responsive to changing market conditions. Be 100% supportive of international best practices and financial transparency.
  • http://wonderfulbusinesses.com/blog/2010/08/the-history-and-importance-of-correct-intrinsic-value-calculation/
  • Research on Vietnam Stock Market

    1. 1. RESEARCH ON VIETNAM STOCK MARKET Group of Study & Research Tran Cong Tuong Bui Le Huyen Trang Tran Kim Minh To Quoc Phuong
    2. 2. AGENDA <ul><li>Importance of Financial Management </li></ul><ul><li>Capital Employed & Capital Structure </li></ul><ul><li>Operating Performance Measure </li></ul><ul><li>Vietnam Stock Market </li></ul><ul><li>Securities Law </li></ul><ul><li>Financial Investment </li></ul><ul><li>Conclusion </li></ul>
    3. 3. Importance of Financial Management
    4. 4. Corporate Finance Objectives <ul><li>Revenues growth </li></ul><ul><li>Capital growth </li></ul><ul><li>Earnings growth / Profit maximization </li></ul><ul><li>Stock price growth </li></ul><ul><li>Firm value maximization & Investor’s expectations </li></ul>
    5. 5. How Companies Create Value? [1] Capital Employed Fixed Assets + WC Equity Net Debt Balance Sheet Operating Performance (Asset allocation) Cost of capital (Capital structure) A company creates value only if operating performance is good enough to cover the cost of capital. (ROCE > WACC)
    6. 6. Firm Value, Growth Rate & Stock Price [2]
    7. 7. Firm Value, Growth Rate & Stock Price (cnt.) [2]
    8. 8. Firm Value, Growth Rate & Stock Price (cnt.) [2]
    9. 9. Firm Value, Growth Rate & Stock Price (cnt.) [2]
    10. 10. Firm Value, Growth Rate & Stock Price (cnt.) <ul><li>Why did stock price of banking sector decrease in the last two years? </li></ul><ul><li>Why should we not invest in banking sector in this year (2011)? </li></ul>
    11. 11. Capital Employed & Capital Structure
    12. 12. Capital Employed [1] Fixed Assets Equity Working Capital (Current assets- liabilities) Net Debt (Debt - cash) Fixed Assets Current Assets Cash & Equivalent Equity Provisions For risks and expenses Debt Dettes d’Exploitation Current Liabilities ASSETS LIABILITIES & EQUITY CAPITAL EMPLOYED
    13. 13. Capital Employed & Income Statement [1]
    14. 14. Low Cost Structure <ul><li>Combination of </li></ul><ul><ul><li>Common stock </li></ul></ul><ul><ul><li>Preferred stock </li></ul></ul><ul><ul><li>Bond </li></ul></ul><ul><ul><li>Long-term & short-term debts </li></ul></ul><ul><li>=> To gain lowest cost of capital </li></ul>
    15. 15. Operating Performance Measure
    16. 16. Income Statement – Basic [3]
    17. 17. Income Statement – Trend Analysis [3]
    18. 18. Income Statement – Industry Analysis [3]
    19. 19. Activity Ratios <ul><li>Indications of how well a firm utilizes various assets (inventory, fixed assets…) </li></ul><ul><ul><li>E.g. Total asset turnover ratio </li></ul></ul><ul><ul><li>The effectiveness of using total assets to create revenue </li></ul></ul><ul><ul><li>Higher -> Better, but compare industry average </li></ul></ul><ul><ul><li>Different industries -> Different turnover ratios </li></ul></ul><ul><ul><li>Manufacturing ≈ 1, Retail ≈ 10 </li></ul></ul>
    20. 20. Liquidity Ratios <ul><li>Measure firm’s abilities to pay short-term liabilities </li></ul><ul><ul><li>E.g. Current ratio </li></ul></ul><ul><ul><li>Ability to pay short-term debts as they become due </li></ul></ul><ul><ul><li>Higher -> Better </li></ul></ul><ul><ul><li>< 1 -> Liquidity crisis (Working capital negative) </li></ul></ul><ul><ul><li>= 2 -> Reasonable ratio </li></ul></ul>
    21. 21. Solvency Ratios <ul><li>Information on firm’s financial leverage and ability to meet long-term obligations </li></ul><ul><ul><li>E.g. Financial Leverage (FL) </li></ul></ul><ul><ul><li>Level of using debt financing </li></ul></ul><ul><ul><li>More debts -> Higher FL -> More risky to shareholders </li></ul></ul><ul><ul><li>Higher FL can increase shareholders’ return (ROE) </li></ul></ul><ul><ul><li>VIC: 4.6, HAG: 2.1, TDH: 1.49, Real Estate: 2.65 </li></ul></ul>
    22. 22. Profitability Ratios <ul><li>How well company generates profits </li></ul><ul><ul><li>E.g. Cross profit margin, operating profit margin, pretax income margin, net profit margin </li></ul></ul>
    23. 23. Return on Equity (ROE) <ul><li>Return on the amount of owners’ equity </li></ul><ul><li>Higher -> Better, Desirable > 15% </li></ul><ul><li>Important ratio for investor </li></ul><ul><li>VIC: 24.35%, HAG: 30.47%, TDH: 18.76% </li></ul><ul><li>Real Estate: 19.72%, Health Care: 19.67% </li></ul><ul><li>Return on common equity = net income - preferred dividends / average common equity. </li></ul>
    24. 24. Return on Assets (ROA) <ul><li>How much earnings were generated from assets </li></ul><ul><li>Higher -> Better, but compare industry average </li></ul><ul><li>Different industries -> Different ratios </li></ul><ul><li>VIC: 4.92%, HAG: 13.16%, TDH: 12.63% </li></ul><ul><li>Real Estate: 8.28%, Health Care: 11.15% </li></ul>
    25. 25. Valuation Ratios <ul><li>Valuation ratios are used for investment analysis in common equity </li></ul><ul><li>Measure of how cheap or expensive a security </li></ul><ul><li>Earnings, Dividends, Earnings per share (EPS), Price-to-Earnings (P/E), Price-to-Book Value (P/B) </li></ul>
    26. 26. Earnings, Dividends, Earnings per share (EPS), <ul><li>Net Income – Preferred dividends = Net income available to common </li></ul><ul><li>Net income available to common – Common dividends = Retained Earnings </li></ul><ul><li>Earnings per share (basic) </li></ul><ul><li>VIC: 2,429; HAG: 6,592; TDH: 6,178 (vnd) </li></ul>
    27. 27. Price-to-Earnings (P/E) <ul><li>P/E </li></ul><ul><li>( = stock price / EPS), trailing P/E, leading P/E </li></ul><ul><li>Price an investor is paying for $1 of the company's earnings </li></ul><ul><li>E.g. EPS: $2, Stock Price: $20, P/E = 10 (20/2) </li></ul><ul><li>Higher -> More expensive -> Higher hope, but not whole story  </li></ul><ul><li>VIC: 36.64, HAG: 11.68, TDH: 5.49 (27Dec2010) </li></ul><ul><li>Compare P/E to other companies in the same industry </li></ul><ul><li>Different industries -> Different P/E ranges </li></ul><ul><li>Real estate: 14.65, Health care: 17.95, Banking: 8.44 </li></ul>
    28. 28. Price-to-Book Value (P/BV or P/B) <ul><li>Book value of equity = (total assets – total liabilities) – preferred stock </li></ul><ul><li>Compare a stock's market value to its book value </li></ul><ul><li>Screening for stocks are undervalued or overvalued, but having shortcomings </li></ul><ul><li>Different industries -> Different P/B ranges </li></ul><ul><li>Compare P/B to other companies in the same industry </li></ul><ul><li>VIC: 8.67, HAG: 3.14, TDH: 0.97 (27Dec2010) </li></ul><ul><li>Real estate: 1.69, Health care: 1.50, Banking: 1.81 </li></ul>
    29. 29. Financial Ratios – Trend & Industry Analysis [3]
    30. 30. Securities Issue
    31. 31. Initial Public Offering (IPO) <ul><li>Why IPO? </li></ul><ul><ul><li>Access to cheap capital </li></ul></ul><ul><ul><li>Increase liquidity for shareholders </li></ul></ul><ul><ul><li>Improve company’s reputation (branding) </li></ul></ul><ul><ul><li>Public currency for acquisitions </li></ul></ul><ul><li>How IPO? </li></ul>Issuer Investment Bank Investor
    32. 32. Stock vs. Bond Issue Relationship between the holder and issuer is not limited to period Legal relationship between the holder & issuer ends at the end of bond term Legal Market risk (stock price) Interest rate risk (less risk) Risk (holders) Interest expense is NOT tax-deductible Interest expense is tax-deductible Tax Lower cost (depend on issuer’s profits) Fixed cost Cost Owners, Voting rights Lenders, No voting rights Holders Just good financial company Very big company Issuer Stock Bond
    33. 33. Vietnam Stock Market
    34. 34. Vietnam Stock Market at a Glance <ul><li>State Securities Commission (SSC) </li></ul><ul><ul><li>Regulate the development of the national stock exchanges </li></ul></ul><ul><li>Ho Chi Minh City Stock Exchange (Hose) </li></ul><ul><ul><li>Trade equities </li></ul></ul><ul><li>Hanoi Stock Exchange (HaSTC) </li></ul><ul><ul><li>Trade equities, bonds and over the counter (OTC) securities </li></ul></ul><ul><li>OTC securities are traded on a platform called Upcom </li></ul>
    35. 35. Vietnam Stock Market at a Glance (cnt.)
    36. 36. Top 100 Richest People on VN Stock Market <ul><li>When MBA 18? :D </li></ul>
    37. 37. Securities Law
    38. 38. Criteria for Listing Shares in Hose <ul><li>Capitalization: VND 80 billion charter capital </li></ul><ul><li>Profitability: profitable in last 2 consecutive years </li></ul><ul><li>Debt position: no overdue debts not setup provision </li></ul><ul><li>Minimum shareholders: 20% common shares held by at least 100 shareholders </li></ul><ul><li>Share lock-up: “Key people” hold 100% shares in 6 months, 50% in following 6 months </li></ul>
    39. 39. Publication of Information Event Close Factory STATE SECURITIES COMMISION Do Not Inform Him SECURITIES LAW Article: Public of Information Violate Law To Be Hard Punished LISTED COMPANY
    40. 40. Insider Trading Event Just invent a medicine for HIV Tell your wife Securities Law & Penal Code Violate Laws To Be in Jail CEO of a Listed Company Buy Stock
    41. 41. Price Manipulation Agreement Buy / Sell Stocks Securities Law & Penal Code Violate Laws To Be in Jail A Stock Surfing Team Increasing / Decreasing Stock Price Artificially
    42. 42. Financial Investment
    43. 43. Good Company vs. Good Stock <ul><li>Good company </li></ul><ul><ul><li>Great financial data (huge capital, high revenues, earnings, dividends…) </li></ul></ul><ul><ul><li>High growth rate, strong brand name, great innovation… </li></ul></ul><ul><ul><li>E.g. Microsoft, Apple, Vincom, FPT, Vinamilk </li></ul></ul><ul><li>But are they good stocks? </li></ul><ul><ul><li>May or may not be </li></ul></ul><ul><li>Good stock </li></ul><ul><ul><li>Stock price below intrinsic value (undervalued stock) </li></ul></ul><ul><li>Typical mistake of investor </li></ul><ul><ul><li>Invest on good company </li></ul></ul>
    44. 44. Value Investing vs. Technical Trading Identify up/down trends Investment valuation (find intrinsic value) Key Step Two technical investors may derive totally different conclusions when observing the same chart The firm may choose various ways of reporting their financial data (expenses, assets or liabilities…) Risk Technical analysis (based on stock price historical data) Fundamental analysis (based on company financial data) Analysis Short-term (surfing) Mid-term or long-term Investment time Speculation Invest on long-term value of the business Methodology Technical Trading Value Investing
    45. 45. Other Investment Notes <ul><li>Determine required rate of return </li></ul><ul><li>Measure the rate of return </li></ul><ul><li>Identify/measure risks (market risk, liquidity risk…) </li></ul><ul><li>Compare with alternative investments (bond, gold, real estate, foreign currencies, savings…) </li></ul>
    46. 46. Investment Process (Value investment) Stock Valuation Investment Decision Industry Analysis Company Analysis Screening Economic Analysis
    47. 47. Step 1: Industry Analysis <ul><li>Sectors </li></ul><ul><li>Selecting investment sectors </li></ul><ul><ul><li>Your knowledge & experience about the sector (in-depth understanding) </li></ul></ul><ul><ul><li>Trends of the sector </li></ul></ul><ul><li>How to find Industry Analysis reports? </li></ul><ul><ul><li>Saigon Securities Inc. website (SSI) </li></ul></ul>Pharmaceuticals Oil & Gas Farming & Fishing Transport Electricity Coal Mining Technology & Telecom Real Estate Consumer Goods Commodity Chemicals (Natural Rubber) Materials Financials
    48. 48. Step 2: Screening <ul><li>Screening: </li></ul><ul><ul><li>Create a shortlist of “industry-average-above” companies in a sector </li></ul></ul><ul><ul><li>The shortlist is used for company analysis step </li></ul></ul><ul><ul><li>How to create the shortlist? </li></ul></ul>
    49. 49. Step 2: Screening (cnt.) <ul><li>Quick review balance sheet & income statement in last 3 years </li></ul><ul><li>“Industry-average-above” criteria </li></ul><ul><ul><li>Charter capital, revenues, earnings </li></ul></ul><ul><ul><li>Net profit margin, EPS </li></ul></ul><ul><ul><li>ROE </li></ul></ul><ul><ul><li>P/E </li></ul></ul><ul><ul><li>Financial Leverage </li></ul></ul><ul><ul><li>It’s not necessary to satisfy all criteria </li></ul></ul>
    50. 50. Step 3: Company Analysis <ul><li>Fundamental analysis on the shortlist’s companies </li></ul><ul><li>Fundamental analysis </li></ul><ul><ul><li>Analyzing company business </li></ul></ul><ul><ul><li>Analyzing company financial data </li></ul></ul>
    51. 51. Step 3: Company Analysis (cnt.) <ul><li>Analyzing company business </li></ul><ul><ul><li>Business model </li></ul></ul><ul><ul><li>Competitive advantage </li></ul></ul><ul><ul><li>Management team </li></ul></ul><ul><ul><li>Corporate governance </li></ul></ul>
    52. 52. Step 3: Company Analysis (cnt.) <ul><li>Detailed financial analysis (both trend & industry analysis) </li></ul><ul><ul><li>Balance sheet, Income statement, Cash flows </li></ul></ul><ul><ul><li>Shareholder equity (market capital, book value / a stock…) </li></ul></ul><ul><ul><li>Management effectiveness (ROE, ROA, ROCE…) </li></ul></ul><ul><ul><li>Profitability (gross profit margin, net income margin…) </li></ul></ul><ul><ul><li>Growth rate (revenue growth, earning growth… ) </li></ul></ul><ul><ul><li>Financial leverage & risks (quick ratio, debt-to-equity, financial leverage… ) </li></ul></ul><ul><ul><li>Dividend </li></ul></ul>
    53. 53. Step 4: Stock Valuation <ul><li>Valuation is finding real value of stock (intrinsic value) </li></ul><ul><ul><li>Market price < intrinsic value => undervalued stock </li></ul></ul><ul><ul><li>Market price > intrinsic value => overvalued stock </li></ul></ul><ul><li>How to find intrinsic value of stock? </li></ul><ul><ul><li>Calculate by yourself (based on forecast of future cash flow) </li></ul></ul><ul><ul><li>From reputable securities companies: Mekong Securities, Kim Eng, SSI, VinaSecurities, BVSC </li></ul></ul>
    54. 54. Step 4: Stock Valuation (cnt.) <ul><li>Relative valuation </li></ul><ul><ul><li>Comparing the stock price to those of similar companies </li></ul></ul><ul><ul><li>Often used in Screening step (step 2) </li></ul></ul><ul><li>P/E method: comparing stock P/E with </li></ul><ul><ul><li>Average P/E of the industry </li></ul></ul><ul><ul><li>Average P/E of similar companies in the same industry </li></ul></ul>
    55. 55. Step 5: Investment Decision - Buy <ul><li>Company business </li></ul><ul><ul><li>Good business model </li></ul></ul><ul><ul><li>Strong management team </li></ul></ul><ul><ul><li>A unique competitive position </li></ul></ul><ul><li>Company financial status </li></ul><ul><ul><li>High management effectiveness </li></ul></ul><ul><ul><li>High profit margin </li></ul></ul><ul><ul><li>Fast growth rate </li></ul></ul><ul><li>Valuation </li></ul><ul><ul><li>Market price much smaller than intrinsic value </li></ul></ul>
    56. 56. Step 5: Investment Decision - Sell <ul><li>Market price greater than intrinsic value </li></ul><ul><li>And other criteria </li></ul>
    57. 57. Step 5: Investment Decision - VIC <ul><li>VIC – Vincom Joint Stock Company </li></ul><ul><li>Good business & financial status </li></ul><ul><li>Market price on 25/10/2010: 69.000 </li></ul><ul><li>BVSC Valuation: </li></ul><ul><li>Market price (69) much smaller intrinsic value (104) </li></ul><ul><li>Market price on 31/12/2010: 97.500 </li></ul><ul><li>Return on investment (monthly): 18.5% >> Interest rating 1.5% </li></ul>
    58. 58. Step 5: Investment Decision - VIC
    59. 59. Conclusion <ul><li>Importance of correct intrinsic value calculation (valuation) </li></ul><ul><li>Using financial leverage as you can control risk </li></ul><ul><li>Building ability of smelling undervalued asset </li></ul>
    60. 60. Thank you!
    61. 61. Appendix
    62. 62. Investor Confidence Survey <ul><li>Start date: 26-Nov-2010 </li></ul><ul><li>End date: 09-Dec-2010 </li></ul><ul><li>Number of respondents: 32 </li></ul>
    63. 63. Demographic - Age
    64. 64. Demographic - Gender
    65. 65. Do you currently own any direct stocks/shares or funds in the VN stock market?
    66. 66. Investor Confidence Index <ul><li>Investor confidence is quite low but investor confidence index should be compared with results of other quarters to see investor confidence trend. </li></ul>
    67. 67. Investor Confidence Index (cnt.) <ul><li>People who own stocks ( red bar ) are more positive than people who not own stocks ( yellow bar ). </li></ul>
    68. 68. Expectations about the stock market Compared to current, how do you think your investment portfolio will be in the next 6 months? <ul><li>“ Tất cả” is investors </li></ul>
    69. 69. Do you intend to withdraw from the VN stock market in the next 6 months? <ul><li>30% of investor will withdraw from VN stock market in the next 6 months. </li></ul>
    70. 70. References <ul><li>Prof Patrick GOUGEON, ESCP Europe/ 2009 – Financial Analysis </li></ul><ul><li>McKinsey Quarterly, The CEO’s guide to corporate finance </li></ul><ul><li>Schweser Study Notes CFA Level 1 2011 </li></ul><ul><li>Slide Template: Avaya Asia-Pacific </li></ul>
    71. 71. Group of Study & Research <ul><li>Tran Cong Tuong, tctuong@gmail.com </li></ul><ul><li>Bui Le Huyen Trang, huyentrang2310@gmail.com </li></ul><ul><li>Tran Kim Minh, yaletran@yahoo.com </li></ul><ul><li>To Quoc Phuong, toquocphuong@gmail.com </li></ul>

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