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Research on Vietnam Stock Market
- 1. RESEARCH ON VIETNAM STOCK MARKET Group of Study & Research Tran Cong Tuong Bui Le Huyen Trang Tran Kim Minh To Quoc Phuong
- 3. Importance of Financial Management
- 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. Firm Value, Growth Rate & Stock Price [2]
- 7. Firm Value, Growth Rate & Stock Price (cnt.) [2]
- 8. Firm Value, Growth Rate & Stock Price (cnt.) [2]
- 9. Firm Value, Growth Rate & Stock Price (cnt.) [2]
- 11. Capital Employed & Capital Structure
- 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. Capital Employed & Income Statement [1]
- 16. Income Statement – Basic [3]
- 17. Income Statement – Trend Analysis [3]
- 18. Income Statement – Industry Analysis [3]
- 29. Financial Ratios – Trend & Industry Analysis [3]
- 30. Securities Issue
- 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
- 35. Vietnam Stock Market at a Glance (cnt.)
- 37. Securities Law
- 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. 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. 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
- 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
- 46. Investment Process (Value investment) Stock Valuation Investment Decision Industry Analysis Company Analysis Screening Economic Analysis
- 58. Step 5: Investment Decision - VIC
- 60. Thank you!
- 61. Appendix
- 65. Do you currently own any direct stocks/shares or funds in the VN stock market?
Editor's Notes
- 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/