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Team 7 - Equity Investment and Portfolio Management
Table of Contents
I.
Introduction - Investment Objective and Strategies ......................................................2
II. Investment Choices (Active Portfolio 1) .............................................................................4
1.
Vietnam Macroeconomic Overview ............................................................................................ 4
1.1. GDP ............................................................................................................................................................................................. 4
1.2. Inflation .................................................................................................................................................................................... 6
1.3. Import/Export ....................................................................................................................................................................... 9
2.
Fiscal and Monetary Policies ....................................................................................................... 11
2.1. Fiscal Policies ...................................................................................................................................................................... 11
2.2. Monetary Policies ............................................................................................................................................................. 12
3.
Active Portfolio Stock Selection by Industry ......................................................................... 13
3.1. Banking and financial services .................................................................................................................................... 13
3.2. Food and Beverage Manufacturing ........................................................................................................................... 29
3.3. Energy Industry ................................................................................................................................................................. 33
3.4. Real Estate ............................................................................................................................................................................ 40
3.5 Technology and Telecommunications ...................................................................................................................... 48
3.6. Brewers ................................................................................................................................................................................. 54
3.7. Portfolio Weighting Methodology ............................................................................................................................. 61
3.8. Active Portfolio 1 summary.......................................................................................................................................... 62
III.
Portfolio Management (Active Portfolio 2) ................................................................ 62
1.
Macroeconomics News .................................................................................................................. 62
2.
Industry Changes and Our Decision ......................................................................................... 63
2.1. Banking and financial services .................................................................................................................................... 63
2.2. Real Estate Industry ......................................................................................................................................................... 63
2.3. Consumer and Electronics Retail Industry ............................................................................................................ 66
2.4. Rubber Industry ................................................................................................................................................................ 68
2.5. Active Portfolio 2 Summary ......................................................................................................................................... 73
IV.
Stocks Contributions and Portfolio Risk/Return ...................................................... 74
1.
Contribution ...................................................................................................................................... 74
2. Attribution ............................................................................................................................................. 78
V.
Comments on total return/active return .................................................................... 82
1. Active Portfolio 1 vs Passive Portfolio (26/4/2024 - 10/5/2024) .................................... 82
2. Active Portfolio 2 vs Passive Portfolio (3/5/2024 - 17/5/2024)....................................... 83
3. Active Portfolio 2 vs Active Portfolio 1 (3/5/2024 - 17/5/2024) ...................................... 85
VI.
Compare and Contrast...................................................................................................... 86
VII.
References ............................................................................................................................ 88
VIII. Appendices ........................................................................................................................... 97
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Team 7 - Equity Investment and Portfolio Management
I.
Introduction - Investment Objective and Strategies
Being given a fund of 100 billion VND to invest in VN30-listed firms presents a significant
opportunity to engage directly with the market without incurring costs. Our primary objective
is to outperform a passive portfolio by developing two active portfolios. The first portfolio,
created between April 26 and May 10, involves analyzing the valuations and historical
volatility patterns of 12 different equities using both fundamental and technical research
methods. The second portfolio will be constructed from May 3 to May 17, considering current
news and the performance of stocks in the initial portfolio.
We pursue a value investing strategy. Value investing, proposed by prominent investors like
Warren Buffet, Charles Munger, and Willian Ruane, as well as scholars such as Basu
(1997:663), is an investment approach that centers on the belief that a company's price-earnings
ratio (P/E) can serve as an indicator of its future performance. It suggests that companies with
lower P/E ratios tend to outperform in the long run (Alfonso 2017:30). By utilizing the P/E
ratio as a predictive tool, skilled investors have the potential to achieve superior returns
(Graham 1949; Alfonso 2017:30; Buffet 1976; Munger, Ruane and Basu 1977:663). Indeed,
extensive empirical research demonstrates that, on average, value stocks generate higher
returns compared to growth stocks. The findings regarding the outperformance of value stocks,
as observed in indexes, align with similar results in other markets and strongly support the
effectiveness of value investment approaches (Truong's (2009), Basu's (1977), Chan, Hamao,
and Lakonishok's (1991))
Regarding investment goals, our aim is to mitigate the unsystematic risk of the portfolio. Our
objective is to provide the "peace of mind" for our clients, enabling them to pursue their longterm investment path despite market fluctuations, as we believe that consistency is a core
principle of value investing. This is because Lakonishok, Shleifer, and Vishny (1994:1541)
suggest that cognitive biases and agency costs contribute to the advantages of value investing,
as these biases can lead to irrational decisions and the costs arise from delegating investment
management to professionals. Exploiting these factors enables value investing to generate
favorable returns compared to growth investing in the long run.
We adopt a top-down approach, starting with macroeconomic or industry-level analysis (GDP
growth, inflation, international trade, government policies) before selecting individual
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companies. We identify industries expected to outperform or underperform and use market
evaluation ratios, fundamental research, and technical analysis to find suitable stocks. This
includes examining industry trends, competitive dynamics, regulatory environments, and
technological advancements.
We assess stock attractiveness based on criteria such as earnings per share (EPS), price-toearnings ratio (P/E), forward price-to-earnings ratio (F P/E), book value per share (BV/share),
price-to-book value ratio (P/BV), and beta. Additionally, selected stocks should have healthy
balance sheets. Our first portfolio will include 12 stocks to significantly diversify unsystematic
risk, which diminishes as the number of stocks increases (see Appendix 11). Evaluating the
balance sheet involves considering factors like a reasonable debt-to-equity ratio and effective
working capital management. We also consider companies with high return on equity (ROE)
and return on assets (ROA), as studies show these firms tend to have higher expected returns
(Fama and French 2006:491; Hou et al. 2014:650). The total assets turnover ratio, which
measures sales generated from each asset, can also assess a company's efficiency in utilizing
its assets (Kasmir 2014:203).
Although we focus on mitigating risk, profitability remains crucial. Our emphasis will be on
selecting stocks with higher profit margins. High net profit margins indicate proficiency in cost
reduction or managing costs outside of operations. We also prioritize low-beta stocks to control
systematic risk, as lower volatility contributes to sustained profitability and high returns (Dao
2020:133). Reasonable pricing is fundamental to our value investing principle, considering
stocks with relatively low P/E, P/B, or price-to-cash flow (P/CF) ratios.
For bank stocks, we use distinct financial ratios due to the unique nature of the banking industry
and regulatory requirements. While non-financial companies are assessed using liquidity,
profitability, and leverage ratios, banks are evaluated based on capital adequacy, asset quality,
and liquidity metrics.
Technical analysis is a crucial component of our strategy, utilizing Simple Moving Average
(SMA) indicators—SMA5 for short-term trends and SMA20 for long-term trends. This method
involves buying a stock when its current price exceeds its average price over a specified period
(Zhu and Zhou 2009:519). Research indicates that incorporating SMA rules into investment
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strategies enhances utility, which is particularly advantageous for strategies based on modern
portfolio theory (Markowitz 1959, 1952) and the two-fund separation theorem (Tobin 1958).
These frameworks will be used in our weight methodology to substantially improve expected
utility (Zhu and Zhou 2009:519). By combining SMA5 and SMA20, we can effectively analyze
both short-term sensitivity and long-term trend detection. When SMA5 crosses above SMA20,
it may signal a bullish trend, whereas the opposite indicates a bearish trend.
In conclusion, our investment strategy is primarily value-oriented, incorporating historical
financial ratios into our selection filters. While historical performance does not necessarily
translate into future opportunities, lessons can be learned from analyzing previous patterns
(Alfonso 2017:30). However, we also considers the growth and consistency of sales, gross
profit, and net profit. We assess these aspects based on their Compound Annual Growth Rate
(CAGR) and standard deviations over five years. Fluctuations in profitability can increase risk,
potentially undermining gains within our shorter investment timeframe. Our strategy seeks to
minimize volatility to safeguard our investments while incorporating a price momentum
approach.
II.
Investment Choices (Active Portfolio 1)
1. Vietnam Macroeconomic Overview
1.1. GDP
Figure 1: Vietnam GDP Growth (Reuter 2024)
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From 2019 to 2023, a mix of internal and external factors led to Vietnam's GDP growth
fluctuations, resilience was witnessed with a strong recovery signal from global economic
challenges. In 2020, the COVID-19 pandemic caused global disruption in socioeconomic
activities, negatively affecting GDP worldwide. Despite the swift actions to curb the COVID19 virus spread, specifically the socio-distancing initiative, adversely impacted Vietnam's trade
and manufacturing sectors, leading to the lowest GDP growth rates during 2020-2021.
However, Vietnam was the only Southeast Asian country to report positive GDP growth of 2.9
and 2.6 in 2020 and 20221, respectively (GSO 2020).
In 2022, Vietnam's real GDP surged by 8.0%, marking a significant recovery from the 2021
economic setbacks (WB 2023). This growth was fueled by recoveries in domestic private
consumption post-COVID, export-oriented manufacturing sector, and the Vietnam
government's two-year socio-economic Recovery and Development Program (2022 - 2023).
Nevertheless, the public sector aided the growth through tourism, as Vietnam decided to reopen
for tourists and international travel routes. Vietnam welcomed around 3 million foreigners in
2022, which is 23.3 times higher than in 2021 (GSO 2022).
By 2023, however, Vietnam’s economic expansion slowed to 5.05%, affected by weakening
global demand and a slowdown in public investments during a heightened anti-corruption drive
(GSO 2023). Moreover, the country’s export turnover was estimated at 355.5 billion USD,
marking a decline of 4.4% from the previous year (Vu 2023). The downturn in major export
markets such as the US and EU, which together account for 42% of Vietnam's total goods
exports, triggered a 13% decrease in exports y.o.y (Biswas 2023). This reduction in economic
activity dampened consumer demand.
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Figure 2: Vietnam GDP Distribution by Sectors (GSO 2021-2024)
In Q1/2024, Vietnam's industries experienced a growth rate of 5.66% compared to the same
period in previous years, surpassing the growth rates of the first quarters from 2020 to 2023.
The government has set an ambitious GDP growth target of 6.5% for 2024 (GovNews-a 2024).
This target is driven by various sectors including services, manufacturing, foreign direct
investment (FDI), and domestic consumption. Government policies aim to lower loan interest
rates to improve access to capital, despite potential pressures on the Vietnamese Dong,
supporting businesses, individuals, and the overall economy (GovNews-b 2024).
Domestic consumption has shown significant strength, with final consumption in Q1/2024
increasing by 4.93% (GSO 2024), indicating growing consumer confidence and increased
spending (Llop and Xavier 2015). Additionally, total FDI registered in Vietnam as of April 20,
2024, reached nearly $9.27 billion, a 4.5% increase from the previous year (VNEconomy
2024). The service sector, a major contributor to GDP, accounting for 40.96% to 42.72% from
2021 through Q1/2024, continues to show strong recovery and is expected to further expand
its contribution. The country also welcomed over 4.6 million international visitors in Q1,
highlighting the robust recovery of the service sector.
1.2. Inflation
Investors have a strong interest in using inflation as a metric to predict stock market trends, as
it can enhance their ability to manage positions and portfolios, potentially leading to higher
returns and reduced risk (Huu-Dung and Long 2024:16). Dung and Long (2024:16) suggest
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that there is a positive correlation between the Consumer Price Index (CPI) and the VN-index,
with a 1% increase in CPI associated with a 6.69% increase in the stock market index. Stocks
are considered inflation hedges due to their representation of actual assets, explaining the
significant impact of the inflation rate on stock market index changes (Huu-Dung and Long
2024:16). This can be concluded that stock market investments can serve as a hedge against
inflation, leading to a shift of capital from bank deposits to securities as inflation rises.
Therefore, examining the trend of inflation is crucial to make any informed investment
decision.
According to a report by Thoi Bao Ngan Hang in 202, despite the declining global inflation,
Vietnam and some emerging markets have shown resilience and strong recovery capabilities
in this context. Indeed, in 2023, Vietnam experienced a decrease in inflation during the first
half of the year, with rates dropping from 4.9% in January to 2.0% in June. This decrease was
influenced by weak overall demand, which in turn affected spending by low-income consumers
as manufacturing jobs were lost and over-time work was cut, resulting in low GDP growth.
Moreover, a significant reduction in world commodity prices, particularly oil, low money
supply growth and high real lending rates contributed to the decline in inflation.
Figure 3: CPI for the months of 2023 compared to the same period last year (GSO 2024)
However, in the latter half of 2023, inflation started to increase due to supply shocks, such as
adjustments in tuition fees and healthcare service prices, as well as rising rice and fuel prices
in line with global trends. Indeed, the sudden increase in the Consumer Price Index (CPI) in
August and September led to a higher inflation rate of 3.58% in December. Despite this, the
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average inflation for 2023 is projected to be around 3.25%, which is lower than the target of
approximately 4.5% (Thoi Bao Ngan Hang 2024).
In Q1 2024, there was a 3.77% year-on-year increase in the Consumer Price Index (CPI),
attributed to heightened supply and diminished demand. Gasoline prices contributed to a 0.07%
CPI surge in April 2024. On average, CPI for the initial four months experienced a 3.93% yearon-year escalation, with core inflation rising by 2.81%.
The average CPI in Vietnam for 2024 is projected to increase by up to 4.5% compared to the
previous year, with the State Bank of Vietnam forecasting inflation between 3.8% and 4.8%.
To keep inflation within the range of 4.0% to 4.5%. The demand for foodstuff, textiles, and
homewares in Vietnam has shown signs of recovery, leading to rising CPI due to higher prices
in the international market. Different scenarios for CPI growth, ranging from 2.5% to 3.5%,
have been outlined. The inflation target of 4% to 4.5% set by the National Assembly is
considered achievable due to the government's experience in price management and the yet-torebound aggregate demand. The forecast for inflation in Vietnam in 2024 is expected to be
limited. Dr. Nguyen Duc Do states that there will be limited inflationary pressures due to slower
global economic growth, the possibility of a US economic recession, and challenges in
significant oil price increases. Indeed, historical data suggests that when the yield curve of
government bonds with a 3-month maturity exceeds the yield of 10-year bonds (yield curve
inversion), the US economy tends to enter a recession within 3-6 quarters. Given the yield
curve turning negative in Q4/2022, the possibility of a US economic recession in 2024 is
plausible.
On the one hand, potential cost-push factors such as crude oil and commodity price increases,
minimum wage adjustments, and changes in the consumer price index calculation pose risks to
inflation. Additionally, factors like high global rice prices, adverse weather conditions, and
geopolitical tensions can influence inflation. Indeed, the rice export restrictions imposed by
countries like Russia and India and the El Niño phenomenon could negatively impact
agricultural yields worldwide. As a result, the limited supply can drive up the prices of those
agricultural goods in international markets. Moreover, public salary reform and an increase in
the regional minimum wage in the private sector may raise the CPI in Vietnam Despite the
global trend of declining prices due to factors such as increased money supply, rising gold
prices, and upcoming wage increases.
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However, slower global economic growth and difficulties in the real estate market are expected
to constrain inflation in the near future. If GDP growth hovers around 6% as predicted, the
average GDP growth for the 2020-2024 period will be 4.64%, indicating that the economy in
2024 will operate below its potential (Viet 2024; Thoi Bao Ngan Hang 2024). Therefore,
inflationary pressures might still be under due to several actions to be taken by the government
in 2024. Government actions, including potential price increases and policy adjustments, could
lead to a year-on-year CPI increase of approximately 3.64% to 4.05%. (Viet Nam News 2023,
Viet 2024, VnEconomy 2024a).
In summary, the expected slight increase in inflation in Vietnam next year could have a positive
impact on the stock market, as stocks are perceived as an effective hedge against inflation (Tien
2021:5139). However, the relationship between inflation and GDP growth is more nuanced. At
lower inflation rates (2-3%), there is a positive relationship with GDP growth, while at higher
levels (above 8%), inflation has a strongly negative and significant effect on GDP growth (Sarel
1995:199; Barro 1995:822). Studies have shown that a 10% increase in inflation can lead to a
decrease in the GDP growth rate by 0.2 to 0.3 percentage points per year (Sarel 1995:199;
Barro 1995:822). Fischer (1993) also found a negative relationship between inflation and GDP
growth when investigating the channels through which inflation affects GDP growth across 93
countries (Tien 2021:5139). Therefore, if inflation continues to rise significantly, it could have
a negative impact on GDP growth, which may ultimately affect stock market performance. We
believe that the Vietnamese government will effectively navigate to keep the inflation under
control while ensuring macroeconomic stability. Consequently, we will closely monitor the
inflation trend and its potential effects on GDP growth to make well-informed investment
decisions.
1.3. Import/Export
In recent times, global trade has encountered formidable hurdles, including various disruptions
in both supply and demand due to the COVID-19 pandemic, supply chain disruption, and
instability in trade policies caused by geopolitical tensions. UNCTAD (2024) emphasized these
global crises affecting the majority of developing nations more severely than the developed
nations due to their economic vulnerability and limited fiscal capacity. Nevertheless, owing to
Vietnam’s effective export promotion program and tax incentives, the nation has had a
consistent trade surplus for eight consecutive years. The State Bank of Vietnam (SBV 2023)
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persists in cutting the interest rates to enable banks to lower the deposit rates, bolstering the
trade activities.
In the first quarter of 2024, it is reported that Vietnam’s trade surplus reached $US 4.72 billion.
The total export turnover of goods in Vietnam went up by 19.2% compared to the preceding
year. reached an approximate value of 59.34 billion USD, while the import turnover of goods
is estimated at 54.62 billion USD, a surge of 18% compared to the same period last year.
Moreover, the domestic economic sectors have lower levels of participation in both import and
export activities compared to the foreign-invested sectors. In terms of export, the sectors with
foreign investment account for the majority of the total export turnover; meanwhile, the
domestic economic sector accounts for 27.2% of the total export turnover (GSO 2024).
Regarding import activities, they exhibit similar patterns with export activities. The domestic
economic sector reached 19.67 billion USD, up 27.4%; and the foreign-invested sector reached
34.95 billion USD, up 13.3%. Despite the dominance of foreign-invested sectors in trade
activities, the domestic economic sectors provide exceptional opportunities for growth and
diversification (VOV 2024). For instance, domestic companies may possess deeper insights
into local market dynamics, consumer preferences, and regulatory environments, allowing
them to tailor their products and services more effectively to meet domestic demand.
Additionally, investing in the domestic economic sector can contribute to the development of
local industries, job creation, and economic resilience, thereby fostering long-term
sustainability and social impact. Vietnam has made significant efforts in diversifying its export
markets. Enhancing trade relations with the United States, China, and Japan has contributed to
promoting import/export activities. Specifically, exports to the US rose by almost 34%, to
Japan by 19.6%, and to China by 7.7% in the initial two months of the year compared to the
same period last year.
These advancements in export activities are expected to escalate further, with Vietnam's
exports projected to hit US$340 billion by 2025. Domestic firms are targeting an export growth
rate of 5% per year, and exports to the European and American markets are set to grow 7–10%
per year on average. Meanwhile, imports during the 2021–2025 period are projected to expand
at an annual rate of 4.9% to US$330 billion by 2025, resulting in a trade surplus of around
US$10 billion at that time. These ambitious targets align with Vietnam's broader economic
goals, aiming for the industry to contribute over 35% to Vietnam’s GDP by 2025, with an
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annual average growth rate exceeding 7.5%. Additionally, the formation of specialized
industrial clusters in various sectors and initiatives to enhance domestic trade's contribution to
GDP underscore Vietnam's commitment to sustainable economic development and global
competitiveness (Hanoi Times 2024).
2. Fiscal and Monetary Policies
2.1. Fiscal Policies
-
Tax policies
Typically set at 10%, the value-added tax (VAT) rate in Vietnam will be reduced to 8% starting
July 1st, 2023, and this reduction has been extended until June 30th, 2024, as outlined in decree
94/2023/ND-CP. This decrease applies to all items and services previously taxed at 10% VAT
(Shira 2024; TVPL 2023).
In December 2023, the Standing Committee of the National Assembly of Vietnam opted to
extend the reduced environmental protection tax rates on gas and oil through the end of 2024
(LawNet 2024). The ministry expects that this will lead to a decrease in domestic fuel prices in
2024 (QdndNews 2024). Economists and policymakers note that fuel is a critical input for
numerous industries. By lowering the environmental tax, the government aims to provide
broader support to all economic participants and consumers, thereby fostering economic
recovery and aiding in the expansion of business operations (VNplus 2023; PWC 2024).
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Public investment policies
From 2021 to 2025, Vietnam has allocated VND 2,870,000 billion from the state budget for
investment plans, accounting for roughly 32-34% of the (FIA 2021). According to Rabnawaz
(2016), there is a clear positive correlation between public investment and GDP growth,
indicating that increased public investment could significantly boost the economy. In 2023, the
state budget planned for public investment exceeded VND 815,000 billion, yet only VND
388,000 billion was disbursed by September 30, according to Huong (2023). This slow
disbursement has impeded the recovery of aggregate demand and economic growth. As a result,
Vietnam's Prime Minister has set a national disbursement target of at least 95% of the allocated
funds in 2024. By the first four months, only 14.66% of this target had been met (VNplus
2024). Although there has been some improvement in the disbursement rate across sectors,
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numerous obstacles persist, especially with key national projects. To address this, the Ministry
of Finance has proposed amendments to Decree No. 40/2020/ND-CP, aiming to reduce the
initiation of new projects in favor of prioritizing funds for those who experienced slow
disbursement previously (NDNews 2024; TVPL 2020).
Additionally, on December 11, 2023, the Prime Minister issued Decision No. 1603/QD-TTg
to outline the public investment capital allocation for 2024. This decision prioritizes repaying
construction debt, funding the medium-term public investment plan, and supporting projects
scheduled for completion in or before 2024 (TVPL 2023). The Prime Minister also directed
ministries, sectors, and localities to focus funding on essential projects, major highway
constructions, and projects that significantly impact social and economic development
(NDNews 2024).
2.2. Monetary Policies
The State Bank of Vietnam (SBV) acts as the central bank of Vietnam. The three key interest
rates that SBV used to control and stabilize the economy are the discount rate, the refinance
rate, and the deposit interest rate ceiling.
2023 showed a low-interest rate landscape to support credit, which reached 13.71% in
December 2023. Throughout, SBV implemented four interest rate cuts, ranging from 0.5% to
2.0% per annum, in response to the global trend of rising interest rates (Vietnam Plus 2024).
Concurrently, the SBV urged credit institutions to reduce their operating costs and adopt
consistent measures to lower lending interest rates. As a result, the mobilizing interest rates and
interest rates for new loans have decreased by approximately 2.0% per annum compared to the
end of 2022 (Vietnam Plus 2024). However, credit growth remained sluggish in 2023, and the
low interbank rates signaled an excess of liquidity within the banking system. Although credit
growth for the overall economy reached 7.4% by the end of October 2023, this figure was
significantly lower than the 11.6% increase recorded during the same period in 2022 and fell
far short of the 14% credit growth target set for 2023 (Vietnam Plus 2024) Unlike countries
with demand-pull inflation, the economy of Vietnam focuses more on the FX rate rather than
placing a strong emphasis on the inflation rate. That said, in early 2024, as the FED has kept
interest rates high and with many political and economic conflicts unveiled both domestically
and internationally, the SBV has to conduct several open market operations (OMO) to keep the
USD/VND exchange rates. These conduct range from selling the USD at spot rates of 25.450
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to selling the government T-Bills to restrict the amount of VND in circulation. Currently, the
USD/VND exchange rate has slowed down to around 25.350 VND per USD; however, as the
FED is still hawkish about the inflation situation, it is expected that the exchange rates will
remain high, especially when the SBV is determined to not further raise the interest rate.
Regarding the policy rate, we expect SBV will keep the interest rate stable. This is because
most of the 2022-23 fluctuations in VND interest rates were linked to the USD-VND exchange
rate, Vietnamese policy makers tightened monetary policy whenever the value of the VND
depreciated by more than 3% YTD and inflation in Vietnam averaged 3.2-3.3% in both 2022
and 2023, then eased off the brakes once the value of the VND stabilized. The gap between
USD and short-term VND interest rates reached a record high, putting depreciation pressure
on the VND, but Vietnam’s trade surplus surged from 3%/GDP to 7%/GDP, which supported
the value of the VN Dong, as did a 2% drop in the value of the DXY (Michael 2024)
3. Active Portfolio Stock Selection by Industry
3.1. Banking and financial services
3.1.1. Industry Overview
In 2023, a low-interest rate landscape with the occurrence of many cases regarding financial
fraud and embezzlement has left the banking sector in disappointment. Especially, the case of
Mrs. Truong My Lan and the Saigon Commercial Bank (SCB) has created a wave of disbelief
and has posed significant challenges to the overall system liquidity. Coupled with these social
unrests is a challenging year for the Vietnamese economy, which has weakened the demand
for credit and increased the amount of deposits, despite the SBV keeping interest rates low for
the first 6 months into 2023 with hopes of bolstering credit and economic growth.
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By 2024, hawkish FED and global political tensions have depreciated the VND significantly
against the USD. The downtrend has forced the SBV to intervene by selling off some of its
foreign reserves and various other OMO measurements to curb the surging exchange rate. This
phenomenon means that it is less likely that the SBV will decrease the interest rate in the future,
especially when the FED is still insisting on its current rate as inflation has yet to fall within its
target zone. Together with this is the potential up-leveling of the Vietnamese securities market
(Van 2024 ), which can put the banking industry right in the center of the game as a supplier
of capital for deficit units. This potential increase in credit demand and the high-interest rate
landscape can be very beneficial for banks as it is expected for them to be able to lend more
while also gaining more on their loans.
3.1.2. Stock Selection
When choosing banking and financial services stocks, the main criteria for this portfolio will
mainly focus on the bank’s safety level and its ability to generate future income. These criteria
include a bank’s current net interest margin (NIM), capital adequacy ratio (CAR), current
account saving account (CASA), return on equity (ROE), and leverage… Net interest margin
is the difference between the interest income generated and the amount of interest paid out by
banks. The top performers in this sector are VPBank (VPB), MBbank (MBB), HDBank (HDB),
and Vietnam International Bank (VIB). Among these banks, MBbank stood out as a bank with
a relatively low P/B and currently has the highest CASA and ROA ratios among all banks.
Despite not being on the top, Techcombank (TCB)’s NIM is also on the high side. However,
the reason why picking this stock lies in the bank’s retail banking activities, risk management
operations, and future prospects. Specifically, TCB is the market leader in terms of card
transactions. Not only that, but it is also currently among the top 5 banks that have the largest
customer base. TCB’s CASA ratio is currently second (behind MBB) and it is one of the rare
banks that are implementing Basel III risk management standards.
This portfolio also includes a state-owned bank. The reason for that is that state-owned banks
are usually stable and are guaranteed by the Vietnamese government; thus, they can be useful
to hedge and shield the portfolio from market and social uncertainties that can significantly
affect private banks. In the VN30, only three out of four state-owned banks are listed (VCB,
CTG, and BID). However, CTG's most recent performance falls below its peers, with the
lowest net margin and the lowest EBITDA margin. Thus, despite a relatively lower P/B, this
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portfolio chooses not to include this bank. On the other hand, while being the number one
performing bank, VCB’s shares are currently the most expensive banking and financial services
shares on the market with a P/B value of above 3.0. That said, BIDV, the oldest bank in
Vietnam, is deemed to be the most suitable firm to be picked to analyze and monitor for this
first active portfolio.
3.1.3. Stock 1: BID
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Company Overview
As an overview, the Joint Stock Commercial Bank for Investment and Development of
Vietnam (BIDV) is one of Vietnam’s biggest banks and it is the oldest bank with a history
dating back to 1957. The bank is a partially state-run business with 80.99% of its charter capital
belonging to the State. The other major shareholders are KEB Hana with a 15% stake and
investors with around 4.01%. As a Big 4 bank, BIDV offers a wide range of products and
services to both retail and corporate clients. Not only undertaking commercial banking
operations, BIDV also takes on some investment banking businesses like financial advisory or
securities dealers although not significantly as retail banking is still its main field of business.
Throughout its history, the bank has received numerous awards and recognition. Besides being
one of the most important contributors to the Vietnamese government during wartime, the bank
has exponentially grown and adopted innovative strategies to become one of the strongest
banks in Southeast Asia. Recently, in 2024, it was named the best retail bank in Vietnam for
the 9th time by The Asian Banker (Dung 2024) or the bank of best home loans in Vietnam in
2023 (BIDV 2023). In terms of risk management and credit ratings, the bank is rated Ba2 for
both long-term local/foreign currency deposits and long-term local and foreign currency issuers
by Moody’s and was one of the very first to complete and successfully apply Basel II, which
further consolidates BIDV’s strength and ability to adapt to the global financial world
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-
Fundamental Analysis
Figure 4: Key Index and Ratios of BID (2020-2023) (Eikon n.d.)
As mentioned above, 2023 is a hard period for the banking industry as credit demand and
economic growth are slow. Overall, BIDV has been able to maintain a very strong growth in
terms of income, reaching nearly VND 22,000 billion, despite being slower in 2023. By
reaching a net income of VND 21,977 billion, BIDV remains one of the most profitable banks
in Vietnam, placing 2nd, only lower than Vietcombank (VCB). Despite being relatively stable,
the bank’s net interest margin falls below the industry median of 3.52%, lower than most
private commercial banks and all the big four banks. However, it is worth noting that all four
state-owned commercial banks also fall below this benchmark as it is believed that private
banks are often more open and profit-driven, making them likely to adopt innovations and
changes when compared to more conservative structures that state-owned banks have (Micco
et al. 2007). That said, it is still censurable that BIDV’s NIM has shown a decline, and the
overall landscape is still relatively lower than the industry. However, positives regarding the
amount of Current Account Savings Account deposits (CASA), which have increased 24% and
currently standing 2nd at nearly VND 334,000 billion, can be a premise for BIDV’s future NIM
improvements (VNBA 2023). Regarding efficiency, BIDV’s ROE outperformed the industry
benchmark (14.60%) and remains one of the best utilizers of its owners’ capital. The statistic
reached 19.35% in 2023, much higher than one of its fellow state-owned peers - Vietinbank
(CTG) (17.17%). The firm’s ROA also stays resilient at around 1.2%, which is a little lower
than the industry median of 1.5%.
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Regarding leverage, BIDV’s debt/assets ratio remains stable at around 94 – 95%, which is
normal for the banking industry where the debt level is relatively high due to the nature of
taking deposits to lend out money. Currently, the bank’s debt is 17.73 times larger than its
shareholders’ equity, which is a significant decline from 2022. When observed closely, this
decrease in liabilities isn’t the result of customer loss (deposits), but rather a decline in
borrowings from SBV and other credit institutions.
When considering some of the most crucial safety measurements, BIDV stood out as one of
the strongest banks in the risk management field. Specifically, the bank maintained an ideal
loan-to-deposits ratio (LDR) range of 80 – 90% (Murphy 2024), which was about 87% in 2023.
This means that BIDV loaned out 87% of its customers’ deposits in 2023, and successfully
utilized available funds while keeping risks and overextension under control. Moreover, the
capital adequacy ratio (CAR) remained at a good level and stayed within the 8% range stated
in Circular 22/2019/TT-NHNN. BIDV’s latest CAR was about 9.25%, and 2022 was 8.92%,
proving that the bank is very well aware and has taken necessary measurements for its riskweighted credit exposures under Basel II and the SBV’s requirements. Finally, BIDV’s
provision for loan loss as a percentage of average loans showed a steady decline over the past
3 years, reaching 1.26% in 2023. A high provision for loan loss means that a bank is cautious
and must set aside more funds to back the risks of loan defaults and uncollected loan payments.
For BIDV, a decline in this ratio can be interpreted as the bank’s customers are deemed to be
less likely to default, and BIDV is confident that its borrowers are satisfied with the security
and risk management criteria.
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Technical Analysis
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Team 7 - Equity Investment and Portfolio Management
Figure 5: Technical movement of BID (Eikon n.d.)
In terms of technical analysis, using historical price data, it can plot out moving-average lines
with the purple line being the MA50, indicating long-term stock movement; the green and blue
lines being the MA10 and MA5, representing short-term movements.
Over the last year, the stock experienced a relatively high level of volatility with the highest
climb between November 2023 to March 2024. The most recent trends, recorded on the 16th
and the 17th of April, suggest a sell signal as the short-term moving average lines cut the longterm line from above, indicating short-term momentum has broken the long-term stable line.
That said, it is expected that in the short term, prices of BID will display a downward trend.
However, when considering the long-term outlook, it is historically identified that BID usually
reached its peak again after a decline. Specifically, movements showed that BID will decline
and reach its peak again every 1.5 – 2 years. Thus, it is believed that the same pattern will
happen again, and holding a small proportion of BID shares shall benefit investors in the long
term as this is still a national business that is deemed to be guaranteed by the government.
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Figure 6: Technical movement of BID (2017-2024) (Eikon n.d.)
3.1.4. Stock 2: TCB
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Company Overview
The Vietnam Technological and Commercial Joint Stock Bank (TCB), founded in 1993, is one
of the largest private commercial banks in Vietnam and one of the most innovative banking
institutions in Asia (Techcombank n.d). With a market capitalization of around 8 billion
dollars, it stands as the fourth biggest publicly traded bank in Vietnam; only behind the stateowned banks of VCB, BID, and CTG. As a leading commercial bank, TCB offers its customers
a wide range of products and services for both individual and institutional clients. Besides
ordinary operations, the bank also provides various treasury and investment banking
businesses, especially operations regarding securities and investing as it owns another
subsidiary called Techcombank Securities (TCBS). The bank has been named for numerous
awards. For instance, it was named the best private retail bank in Vietnam by The Asian Banker
in 2023, the leading bank in terms of credit card transactions by Visa, and the best market
maker in 2022 by Refinitiv. Currently, the bank’s credit ratings remain stable at Ba3 by
Moody’s and BB by S&P. Especially, in terms of risk management and operations,
Techcombank has proven to be one of the safest and strongest banks in the Vietnamese
financial system as the bank has been leveling up its Basel standards since 2021, and it is
currently implementing Basel III standards for its liquidity risks management process (An
2023).
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Fundamental analysis
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Figure 7: Key Index and Ratios of TCB (2020-2023) (Eikon n.d.)
2023 is a tough year for banking due to the credit crunch, and overall, Techcombank income
slightly declined in 2023 despite the bank having been able to maintain very strong growth
before that. Despite a fall in net income, the bank’s net interest margin outperformed the
industry median of 3.52%, higher than the big four state-owned banks and the majority of the
private banks like Sacombank (STB) or Saigon Hanoi Commercial Bank (SHB). Regarding
the amount of Current Account Savings Account deposits (CASA), Techcombank’s value has
increased 40% in 2023 and currently stands 5th at nearly billion VND 176,000 (VNBA 2023).
However, if considering the percentage of CASA over total deposits, TCB is currently second
with 39.9% of its deposits (VietnamBiz 2024), prompting a future of a better NIM. Regarding
efficiency, TCB’s ROE stays around 6% and the firm’s ROA stays resilient at around 3 - 4%,
which is much more than the industry median of 1.5%.
Regarding leverage, Techcombank’s debt/assets ratio remains stable at around 83 - 84%, which
is lower than many of its peers. Currently, the bank’s debt is around 5 times larger than its
shareholders’ equity, which is also lower than most banks in Vietnam but is currently gradually
climbing. However, when observed closer at the bank’s balance sheet, most of the increases in
liabilities are the results of more deposits and valuable papers that could help TCB in its
banking operations.
In terms of safety measurements, Techcombank is believed to be one of the most aware private
banks in regards to risk management. Specifically, Techcombank’s capital adequacy ratio
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(CAR) remained as the highest in the Vietnamese banking industry at more than 15% in 2023,
far higher than Basel II Pillar 1 requirement of 8%. Regarding LDR, TCB loaned out 101% of
its customers’ deposits in 2023, showing slight signs of overextension. However, it is worth
mentioning that this also means that TCB has superior competitive advantages as it was still
able to loan out a lot during a tough period for credit like 2023. Finally, TCB’s provision for
loan loss as a percentage of average loans reached 0.85% in 2023, increasing from 2022 but
still lower than in 2021 and 2019. This could translate to the fact that the bank’s loans are
deemed to be riskier than those offered in 2022. This means that Techcombank has to set out
more money to back its assets, which could also help the bank to withstand future losses better
(Vietnam News 2022)
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Technical analysis
Figure 8: Technical movement of TCB (Eikon n.d.)
In terms of technical analysis, using the moving average method with the purple line being the
MA50, indicating long-term stock movement; and the blue line representing short-term
movements (MA10). Throughout the period, the share prices experienced a strong decline from
August to November 2022 from VND 39,650 to VND 20,810. Then, the prices climbed
gradually, breaking the MA50 line on the 6th of December, prompting a bullish signal. After
that period, TCB shares remained stable around the MAs, broke through the long-term line
again in April 2023, and remained above it until September. The most recent intersection
between the MA10 and the MA50 lines happened in December 2023, which prompted a buy
signal for investors as it is forecasted that the stock will climb in the short term; currently, the
share is outperforming its long-term movements. In terms of liquidity, recent trade volume
showed an active market for TCB shares, especially since the demand surged in March 2023
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when information regarding the bank decided to pay 15% of its income to investors as
dividends (Dong 2024).
3.1.5. Stock 3: MBB
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Company Overview
Military Commercial Joint Stock Bank or MBbank, founded in 1994, is one of the five largest
private commercial banks in Vietnam in terms of asset scale, efficiency, and profitability. MBB
offers its products and services to a wide range of customers, from individuals to corporations
and financial institutions. That said, besides commercial banking, the bank also provides
guarantees, treasury, and investment banking operations. The bank is currently the 6th largest
bank in Vietnam in terms of market capitalization, only behind the state-owned banks and two
private commercial banks (VPB and TCB) (Lan & An 2023). One of MBbank's biggest
subsidiaries is MBS, a securities company that has a market capitalization value of about $500
million. Currently, the bank’s credit ratings, published by Fitch Ratings, are BB for Long Term
Issuer, B for Short Term Issuer Default Rating, and BB for Government Support. Regarding
risk management and operations safety, MBB has been practicing and applying itself to the
three Circular of the Basel II standards since 2020, contributing to the bank’s improvements in
operation quality and security.
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Fundamental analysis
Figure 9: Key Index and Ratios of MBB (2020-2023) (Eikon n.d.)
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MBbank managed to make 18.27% more than 2022, despite disruptions in the banking
industry, and strong growth prior to 2023. MBB’s net interest margin also outperformed the
industry median and the majority of peer banks. Moreover, MBB is currently the leading bank
with a current account saving account (CASA) over total deposits ratio of 40.1%, the highest
among all Vietnamese banks. Regarding efficiency, MBB’s ROE is currently the second
highest among all banks, only behind HDBank (HDB), and far outperformed far from the
industry median. Not only that, but the firm’s ROA of about 5% has made it the highest on the
leaderboard in 2023.
Regarding leverage, MBbank’s debt/assets ratio is stable at around 90% and the bank’s
Debt/Equity has also been stable at around 9 times for the past 4 years. This showed a constant
and proportionate growth between the firm’s assets and liabilities, as when deposits rose, MBB
was able to loan them out promptly, showcasing effective competitive and management
approaches.
In terms of crucial financial safety measurements, MBbank has been strictly and successfully
applying Basel II and ICAAP criteria. Alongside Techcombank, MBB’s capital adequacy ratio
(CAR) remained in the top 5 with the latest value of 11,53%, much higher than the requirement
of 8%. In terms of LDR, MBB loaned out 94% of its customers’ deposits in 2023, meaning that
the bank is currently lending out at an optimal and stable level without overextending. Last but
not least, MBB’s provision for loan loss as a percentage of average loans has been decreasing
gradually over the past 3 years, reaching 1.16% in 2023. This means that the bank has been
able to set out less money to back its assets, potentially prompting a signal of less risky or less
default-prone borrowers. Another positive note that is worth considering is that the outstanding
debt balance of the three deemed-to-be-risky companies that own MBB (Novaland, Sungroup,
and Trung Nam Group) is declining, meaning that MBB is able to claim the funds. For instance,
the outstanding debt balance of Novaland has decreased by 50% compared to 2022 as MBbank
was able to reclaim VND 2,400 billion in 2023 (Quang 2024).
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Technical analysis
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Team 7 - Equity Investment and Portfolio Management
Figure 10: Technical movement of MBB (Eikon n.d.)
The same technical analysis technique of using the long-term and short-term moving averages
will be utilized to forecast future movements. For the past months, the share prices experienced
a gradual incline from around VND 16,600 to the peak of VND 25,500 in March 2024 with the
short-term movements outperforming the long-term most of the time. After that, on the 29th of
March, the price started to fall, breaking the MA50 line from above on the 15 th of April, and
thus, prompting a bearish signal. The reason behind this is mainly because of the negative
sentiment surrounding MBB’s exposure to many risky loans offered to firms like Novaland
and Trung Nam Group (Thai 2024). Not only that but after the annual shareholders’ meeting,
many investors believed that MBB was not yet able to provide a clear solution regarding the
loan loss problem for the firm’s merger plan with Ocean Bank. As mentioned above, the most
recent intersection between the MA50 and the MA10 lines prompted a bearish signal for
investors as it is forecasted that the stock will decline in the short term. This could be a chance
to purchase MBB shares at a cheaper price once the fundamental analysis and asset allocation
phases are consolidated. In terms of liquidity, recent trade volume showed a significant surge,
suggesting a very active market for MBB shares.
3.1.6. Stock 4: ACB
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Company Overview
Asia Commercial Joint Stock Bank (ACB), established in 1993, is one of the leading private
commercial banks in Vietnam with more than 13,000 employees, and its operations cover
nearly 80% of the nation. ACB offers its products and services to both retail customers as well
as businesses and corporations. Not only that, but ACB is also one of the most innovative banks
in Vietnam, the pioneer in implementing technology and digitalization into its business.
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Currently, the bank is valued at around $4.3 billion, making it the 7th largest bank in Vietnam
in terms of market capitalization. ACB also has its own securities firm called ACBS, which is
currently one of the youngest securities companies on the market with an NAV of around $600
million. According to data published by Fitch Ratings, ACB is rated BB- for Long Term Issuer,
B for Short Term Issuer Default Rating, and BB- for Government Support. In regard to
operational security, ACB stood out as the firm has been able to apply Basel III requirements
for its liquidity risk management and capital adequacy operation since 2022 (ACB 2023).
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Fundamental analysis
Figure 11: Key Index and Ratios of ACB (2020-2023) (Eikon n.d.)
ACB was able to increase its net income by more than 17% despite systematic difficulties.
ACB’s net interest margin outperformed the industry median of 3.52%, prompting a healthy
profitability level. Not only that, but ACB, currently standing 5th, is one of the top banks with
the highest current account saving account (CASA) over total deposits ratio, as well as the total
amount of CASA on its books. In terms of efficiency, ACB’s ROE remains on the high side,
standing 3rd and only behind MBB and HDB. Not only that, but the firm’s ROA is currently
second to MBB at around 3% in 2023.
For leverage, ACB, like any other bank, has a relatively high leverage. Specifically, the bank’s
debt/assets ratio is stable at around 90% and the bank’s Debt/Equity has also been stable at
around 9-10 times for the past 4 years. Like MBB, this showed proportionate growth between
the firm’s assets and liabilities, prompting a suitable business strategy.
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As mentioned, ACB’s operational and financial safety measurements are deemed to be superior
to most of its peers. ACB has been successfully applying Basel III and ICAAP criteria in its
operations. ACB’s capital adequacy ratio (CAR) remained on the podium with the latest value
of around 12.8% in 2022, which is much higher than the SBV’s requirement of 8%. This high
CAR puts ACB in a safe position, even during market stress (ACB 2022). In terms of LDR,
ACB often loaned out 85% of its customers’ deposits for the past 4 years, which many believed
to be an optimal level without the risk of overextending. ACB’s provision for loan loss
increased in 2023, yet still lower than 2021. As an explanation, this is believed to be because
the bank wants to consolidate its safety level during the challenging period of 2023.
Additionally, Chairman of the Board, Mr. Tran Hung Huy stated that ACB has very limited
and often doesn’t offer loans for real-estate investments or speculation; thus, the level of NonPerforming Loan of ACB is relatively lower than the overall market at about 1% (Tho 2024).
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Technical analysis
Figure 12: Technical movement of ACB (Eikon n.d.)
The long-term (MA50) and short-term (MA10) moving averages will be utilized to forecast
future movements. Historically, the share prices’ short-term movements have been
outperforming the long-term since December 2023. The share prices reached the peak of
around VND 28,500 in March 2024 and started to downwardly fluctuate in early April. The
most recent intersection between the MA50 and the MA10 lines prompted a bearish signal,
signaling that the stock will decline in the short-term. That said, ACB is currently at a cheaper
price for purchase as the company has good fundamental data.
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3.1.7. Stock 5: HDB
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Company Overview
Ho Chi Minh City Development Joint Stock Commercial Bank, established in 1989 under Ho
Chi Minh City Housing Development Bank, is one of Vietnam’s leading financial institutions
with a market capitalization value of about $2.8 billion, making it the 8th largest publicly listed
bank in Vietnam. HDB offers its diverse products and services, from credit to guarantees and
treasury operations, to both individuals and corporate customers. The bank got listed on the Ho
Chi Minh Stock Exchange (HOSE) in 2017, which hit the market as the second largest IPO in
the banking history of Vietnam (Baker McKenzie 2017). Currently, according to Moody’s,
HDBank is rated B1 for all criteria, including long-term counterparty risk ratings in both local
and foreign currencies, or long-term counterparty risk (HDBank 2023). Last but not least, in
terms of operational and financial safeness, HDBank is also one of the first banks in the country
to have successfully adopted Basel III reforms standards since January 2023. (Vietnam News
2023).
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Fundamental analysis
Figure 13: Key Index and Ratios of HDB (2020-2023) (Eikon n.d.)
HDB managed to increase its net income by nearly 30% in 2023, hitting more than VND 10,000
billion. HDBank’s NIM in 2023 stood in the top 5. Suggesting a high level of profitability. In
terms of CASA, although HDB is currently in the 10th position, the amount in 2023 has
increased 81% from 2022, prompting further future growth. Regarding efficiency, HDB’s ROE
is the highest among all the banks in Vietnam and the firm’s ROA is currently fifth at around
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2.6% in 2023. HDB, however, has a relatively higher leverage. Specifically, the bank’s
debt/assets ratio is stable at around 93% and the bank’s Debt/Equity is around 13 times for the
past couple of years, higher than many financial institutions in Vietnam.
In regards to operational and financial safeness, it has fully adopted the Basel III Reforms since
July under the guidance of EY Vietnam since early 2023 (Viet Nam News 2023). Furthermore,
HDB’s capital adequacy ratio (CAR) remained on the high side with the latest value of around
12.6% in 2023, which is much higher than the older Basel II and SBV’s 8% requirement.
Fluctuations in terms of LDR can be seen in HDBank. In 2023, HDB loaned out 75% of its
customers’ deposits, which is much lower than 2022 (93%). This showed a more conservative
and cautious approach when the market was in turmoil with many economic unrests happening
in Vietnam. HDB’s increased provision for loan loss as a percentage of average loans
consolidated this argument as this ratio of HDB is relatively higher than most of its peers and
has been increasing continuously for the past four years.
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Technical analysis
Figure 14: Technical movement of HDB (Eikon n.d.)
The movements and volatility level of HDB can be forecasted using the same model of utilizing
the short-term and long-term moving averages. As can be seen, HDB is a relatively resilient
asset to hold with not very much volatility. Since September 2023, the shares have been
outperforming their long-term movement. However, the prices experienced a significant drop
in early April, from VND 24,300 to around VND 22,200. Many analysts believe that this is
mostly because of negative sentiment regarding the global financial outlook as HDB has
reported very positive results for the year 2023 and even announced a 25% payout ratio for its
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shareholders (Phuong 2024). That said, with the most recent interception of the two moving
averages, a downward movement of the stock can be expected.
3.2. Food and Beverage Manufacturing
3.2.1. Industry Overview
Vietnam's food processing industry, encompassing approximately 11,000 companies, was
valued at $73.8 billion in 2023 (Statista 2023). According to the GSO (2024), the industry
experienced a growth rate of 6.1% in 2023, a decline from the 8.8% growth observed between
2022 and 2021 (USDA-a 2024; USDA-b 2024). The dairy sector mirrored this trend, with its
CAGR slightly decreasing by 1% as the nation grappled with the global economic downturn,
leading to reduced overall demand. The GSO also reported a significant slowdown in the
growth of purchasing power for goods and services, with adjustments for price factors
indicating a consistent decline throughout 2023. Additionally, the pricing factors that
previously propelled the dairy industry's growth were less influential compared to the previous
year.
Looking ahead to 2024, the industry shows promising signs of recovery. As of April, food and
foodstuff sales have surged by 10.3% (VNNet 2024). Despite the global challenges, there
remains significant potential for growth in Vietnam's domestic milk consumption, which
currently trails behind regional and global averages (VnEconomy 2024; Statista 2022).
Moreover, the recent reduction in value-added tax (VAT) from 10% to 8% on selected goods
and services, effective from July 1, is poised to boost consumer demand further. This tax cut is
strategically positioned to invigorate the market and drive consumption.
Figure 15: FMCG sector recorded a YoY decline in 4Q23
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Figure 16: Average milk consume per person (kg)
3.2.2. Stock Selection
Figure 17: Market valuation data for VN30 companies in Retailing industry
The market perceives VNM as undervalued by its P/E ratio of 16.6 and a P/B ratio of 4.3.
Notably, its P/B ratio slightly exceeds the peer median of 4.2, yet its P/E ratio is substantially
below the peer median of 27.3, indicating a relatively low book value. This supports our
assessment that VNM is undervalued. The low P/E ratio suggests the stock is priced
conservatively relative to its earnings. Additionally, VNM boasts the largest market
capitalization among its peers in the VN30, surpassing major companies like MSN and MWG,
highlighting its significant market presence.
We have chosen to invest in the food processing sector to enhance the safety and stability of
our portfolio. Food, being a fundamental necessity, ensures continuous demand regardless of
economic conditions, making the food processing sector a reliable buffer for our investments.
The appealing prospects and high investor expectations for VNM's growth, coupled with its
low beta of 0.50, affirm that the stock is considerably less volatile than the broader market.
This stability makes VNM an excellent candidate for a substantial portion of our portfolio,
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leveraging its market strength and the inherent stability of the food industry to optimize returns
and minimize risk.
3.2.3. Stock 6: VNM
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Company Overview
Founded on August 20, 1976, Vinamilk began with three factories: Thong Nhat, Truong Tho,
and Dielac. Over the past 47 years, it has grown into Vietnam's premier dairy company,
boasting a market share of 40% by 2023 and employing 9,877 people across over 3,000 outlets
nationwide. Vinamilk's strategic approach is built on four key pillars (Appendix 1), focusing
on strategies that include [1] leading in technological application and sustainable innovation,
[2] maintaining its market leadership by enhancing product quality and customer experience,
[3] expanding its distribution network through mergers and acquisitions, and [4] reinforcing its
position as an innovative and creative dairy company by exploring new export markets and
capitalizing on M&A opportunities (Vinamilk 2023).
In 2023, Vinamilk embarked on its inaugural major rebranding initiative, skillfully balancing
tradition with innovation and local identity with global aspirations (GovNews 2023). The
strategic shift maintained the core values and rejuvenated the brand, leading to a 3.6% yearover-year increase in total earnings, despite the market decline caused by Vietnam's economic
downturn.
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Fundamental Analysis
Figure 18: Key Index and Ratios of VNM (2020-2023) (Eikon n.d.)
From 2020 to 2022, Vinamilk's EBITDA showed a declining trend, hitting a low of VND
11,042 billion in 2022, but it recovered in 2023 to VND 11,704 billion. During this period,
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Vinamilk’s GPM averaged around 42.5%, well above the industry median of 22.39%. This
indicates that Vinamilk retained 42.5% of its revenue after covering direct costs. Despite a
slight decrease in GPM from 46.40% in 2020 to 39.90% in 2022, it rebounded to 40.70% in
2023 (Eikon n.d.). In terms of OM and NPM, the figures ranged from a high of 22.90% in 2020
to 18.80% in 2023 for OM, and from 18.80% to 14.90% over the same period for NPM, both
consistently above the industry medians of 10.16% and 6.12% respectively.
Similar to Earning Power, VNM's Operational Efficiency, illustrated using ROA and ROE,
showed the same trend of decreasing from 2020-2022, then a slight recovery in 2023.
Specifically, the ROA began at 23.20% and declined to 17.80%, indicating a reduction in the
efficiency with which the company's assets generate earnings. Although the ROE also showed
a significant downward trend, it remained above the industry median of 11.48%. Nevertheless,
this overall decline in efficiency ratios highlights Vinamilk's current profit generation
challenges.
Vinamilk's earning power has consistently outperforming the industry averages, though
EBITDA, GPM, OM, and NM all followed a downward trend from 2020 to 2022, with a modest
recovery in 2023. This trend was influenced by rising COGS, which grew despite consistent
revenue increases. This increase in COGS is an industry-wide issue, exacerbated by recordhigh prices for dairy processing inputs due to the conflict between Russia and Ukraine (Vietdata
2023). However, due to intense market competition, Vinamilk has been unable to raise product
prices, leading to decreased yet still favorable earning power. Nevertheless, there is a growing
necessity for strategies that can pass these rising expenses on to consumers.
Lastly, the financial leverage aspect of Vinamilk demonstrates a relatively high Debt-to-Asset
(D/A) and Debt-to-Equity (D/E) ratio. The variability in the Debt-to-Asset ratio, which
increased from 44.75% to 49.70%, then decreased to 41.71% before rising again to 48.29% in
2023, suggests that the reliance on debt financing for assets is largely influenced by the
company's financial strategy and prevailing market conditions each year. Conversely, the
consistently low D/E ratio, which remains below the industry median, indicates that the
company's financing through shareholder equity is around 25%. This modest use of debt
highlights lower risks of financial distress and greater financial stability, suggesting that the
company has more assets and equity compared to its debt. This positions Vinamilk as a safer
investment option and indicates a strong equity base.
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In conclusion, despite Vinamilk enjoying positive earnings and a favorable growth rate in
revenue, challenges remain, notably the significant increase in raw material costs.
Nevertheless, the company's strong performance from 2020 to 2023.
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Technical Analysis
Figure 19: Technical movement of VNM (Eikon n.d.)
From early February, the SMA5 and SMA20 lines for Vinamilk began to show upward trends,
indicating a bullish market. On February 5, 2024, the SMA5 crossed above the SMA20,
reinforcing the positive trend signals. This upward movement continued until March 12, when
the SMA5 dipped below the SMA20, suggesting a shift from a bullish to a bearish trend. Since
then, both SMAs have trended downward. However, in late April, there was a slight upward
curve in the SMA5, hinting at a possible reversal back to bullish conditions and a potential
recovery in the stock price. Based on this recent behavior, it might be a good opportunity to
purchase Vinamilk stock at a relatively low price in anticipation of a future price increase.
3.3. Energy Industry
3.3.1. Industry Overview
Vietnam manages 73 power plants that include a variety of hydro, thermal, gas, and renewable
energy sources. This energy mix is predominantly based on fossil fuels like coal, oil, and
natural gas, accounting for approximately 65% of its electricity generation (EREA 2022). In
2022, the electricity sector accounted for 4% of Vietnam's total GDP, translating to more than
VND 380 trillion (Statista 2022). Positioned as one of the fastest-growing energy markets in
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Asia, Vietnam is experiencing rapid industrialization and population growth. This rapid growth
is pushing the country’s economic development forward while simultaneously leading to the
swift exhaustion of its existing oil and gas reserves.
The Institute of Energy of Vietnam forecasts a significant surge in power demand and
consumption over the next decade, highlighting a critical phase for energy security. The
government anticipates a 10-12% annual increase in power consumption through 2030, one of
the highest rates in Asia (An 2024). To meet these demands, planned investments for 20212030 are projected at approximately USD 128.3 billion, with an annual allocation of about
USD 12.8 billion. This funding will support both new and existing power generation sources
and plants, with around USD 950 million allocated annually, and significant investments of
approximately USD 3.3 billion per year, earmarked for power grids (ITA 2024). Independent
Power Producers (IPPs) are expected to play a crucial role in this expansive development, with
substantial foreign investments anticipated to energize Vietnam's power sector.
Figure 20: Share of power production and purchase in Vietnam (Statista 2023)
3.3.2. Stock Selection
Regarding the energy industry, we selected two stocks: Petrolimex (PLX) and PetroVietnam
Gas (GAS). Given the government's ambitious investments in the energy sector, totaling
around USD 128.3 billion for the period spanning from 2021 to 2030, it can be forecasted that
these pivotal industry players might gain enormous advantages from these initiatives. PLX,
represented by the ticker PLX.HM, dominates half of Vietnam's energy market and is projected
to further increase its market share in 2024. Since mid-2023, Petrolimex has led the way in
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implementing electronic invoicing at its 2,700 retail outlets, potentially enhancing its market
share in the future (VnNews 2024). PLX demonstrates stability and resilience in the sector with
a market capitalization of $1.8 billion USD and a closing price of 35,700 VND as of 26/04/2024
(Vietstock n.d). Furthermore, with an EPS of 2,539 VND and a PE ratio of 20.9, PLX presents
favorable valuation metrics. Additionally, its P/B ratio of 1.8 reflects investor confidence in
the company's asset value, solidifying its status as a cornerstone of Vietnam's energy sector. Its
ROE of 8.6% and total debt to equity ratio of 76.3% further highlight its financial structure and
leverage within the market.
Conversely, GAS, identified by the ticker GAS.HM, serves as a dominant supplier of LPG in
Vietnam (PV GAS n.d). This cooperation accounts for 70% of the nation’s LPG sector
(PetroTimes). Priced at 73,500 VND as of 26/04/2024 and with a market capitalization of $6.7
billion USD, GAS holds significant sway in the energy market (Vietstock n.d). Its robust EPS
of 5,127 VND and PE ratio of 15.3 indicate strong earnings performance and valuation.
Similarly, GAS's P/B ratio of 2.5 underscores investor trust in its asset base. With a beta of
0.93, GAS exhibits relatively lower market volatility, offering stability to investors seeking
exposure to the energy sector. Additionally, GAS's ROE of 16.3% and total debt to equity ratio
of 9.2% illustrate its profitability and prudent financial management.
3.3.3. Stock 7: PLX
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Company Overview
Established by the Prime Minister's Decision 828/QD-TTg on May 31, 2011, Vietnam National
Petroleum Group (Petrolimex) transitioned from the Vietnam National Petroleum Corporation
into a public entity. In July 2011, Petrolimex made its initial public offering, selling 2.56% of
its shares and raising $20 million, while the state retained a 94.99% stake (Petrolimex 2011).
As Vietnam's premier oil and gas enterprise, competing closely with PetroVietnam (PVN),
Petrolimex not only imports, exports, and deals in petroleum products but also invests in
refining, petrochemicals, and other legally permissible sectors. The company operates 2,352
gas stations, a significant presence in a national total of 14,000. In the second quarter of 2024,
under the directives of Resolution No. 42/2023/UBTVQH15 dated December 18, 2023,
Petrolimex adjusted its gasoline prices effective from May 9, 2024. This strategic pricing
adjustment, influenced by new environmental protection tax rates effective throughout the year,
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aims to enhance consumer consumption and bolster the company's market position (Petrolimex
2024).
-
Fundamental Analysis
Figure 22: Key Index and Ratios of PLX (2020-2023) (Eikon n.d.)
Over the span from 2020 to 2023, From 2020 to 2023, PLX's profitability ratios have shown
notable fluctuations: they initially increased in 2021, declined in 2022, and began recovering
in 2023. Despite the economic downturn in Vietnam, PLX's EBITDA strongly rebounded in
2023. To fully understand PLX's industry performance, we compared its financial ratios to
those of its direct competitor, PVOil, rather than using the industry median, to account for the
specific dynamics of the Vietnamese and global private energy markets. In 2023, PLX's gross
margin reached 5.60%, which compares favorably with PVOil's lower margin. The operating
margin (OM) and net profit margin (NPM) for PLX stood at 0.60% and 1.10%, respectively,
surpassing those of PVOil, which were 0.7% and 0.6%. This suggests that PLX has not only
controlled costs effectively but has also optimized its operations more efficiently than its
competitors.
Additionally, the increases in ROE and ROA indicate better utilization of assets and equity in
generating profits. Despite this, the relatively high debt-to-equity ratio (76%) and debt-to-assets
ratio (87%) suggest that PLX might not currently be considered financially robust. However,
when considering the industry context and comparing these ratios to PVOil's (88% and 68%,
respectively), it becomes apparent that the high leverage is typical within this capital-intensive
industry, where investments are commonly financed through debt.
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In conclusion, PLX is showing signs of improvement, and the outlook for 2024 appears
positive. The stability in gasoline supply and the strategic emphasis on COCO stores, which
make up over 50% of the total store count, provide PLX with competitive advantages. PLX's
stock in 2024 is anticipated to remain a solid player within the petroleum industry with a
favorable outlook. Continued improvements in these areas should support increased profits and
enhance PLX's gross profit margins in 2024, affirming the company as a worthwhile
investment if it maintains its recovery trajectory.
Figure 23: Key Index and Ratios of OIL (2020-2023) (Eikon n.d.)
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Technical Analysis
Figure 24: Technical movement of PLX (Eikon n.d.)
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From March to April 2024, the trend for PLX stock was predominantly bullish, as evidenced
by the SMA5 crossing above the SMA20 on February 7, 2024, and continuing to rise until
March 27. After this peak, the SMA5 began to trend downwards. During the bullish phase,
buying volume for PLX stock exceeded selling volume, suggesting that investors were
optimistic about the stock’s short-term prospects. However, as the SMA5 declined post-March
27, buying volume also decreased, paralleling the downward trajectory until April 25, where
buying slightly edged out selling.
The latest trend as of April 25, 2024, shows an upward movement in the SMA5 and a slight
decline in the SMA20, hinting at a possible crossover soon, which supports our decision to buy
PLX shares. This decision is further bolstered by recent changes in Vietnam's government tax
policy on oil and gas products, which are expected to lower fossil fuel prices and, consequently,
boost consumer and corporate demand, positively impacting PLX's future. Additionally,
trading sessions over the last four days show that buying volume has surpassed selling volume,
providing further validation from other investors and reinforcing our confidence in this
investment decision.
3.3.4. Stock 8: GAS
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Company Overview
Vietnam Gas Corporation (PV GAS), a subsidiary of PetroVietnam, plays a crucial role in
exploring, processing, and distributing natural gas and related products nationwide. As the
leading LPG supplier, controlling about 70% of the market share, PV GAS has invested
significantly in ensuring the country's long-term gas supply. In 2023, PV GAS achieved a total
revenue of VND 116 trillion and substantial profits, contributing over 10% of PetroVietnam's
revenue and over 25% of its profit. PV GAS produced and supplied over 7.1 billion cubic
meters of dry gas, including regasified LNG from the first imported LNG cargo in Vietnam,
and achieved its highest-ever LPG sales of nearly 2.5 million tons. With a market capitalization
exceeding USD 7 billion and a strong credit rating of BB+ by Fitch Ratings, PV GAS stands
as a major player in the energy sector. Its operations include gas collection, transportation, and
importation, with a focus on diversifying supply sources and developing global markets. PV
GAS has been actively advancing key projects to ensure national energy security, such as the
completion and operationalization of the Thị Vải LNG storage with a capacity of 1 MMTPA
and the initiation of the Sơn Mỹ LNG terminal project (Bao Thanh Tra 2024).
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-
Fundamental analysis
Figure 25: Key Index and Ratios of GAS (2020-2023) (Eikon n.d.)
It is evident that the rise in Brent crude oil price and Furnace oil price in Singapore substantially
contributed to the surge in GAS’s earnings between 2021 and 2022 (Viet Nam News 2023).
As the GAS’s sales price is heavily influenced by these two commodities, the corporation's
earnings growth will change in accordance with their fluctuations. Between 2021 and 2022,
GAS’s earnings growth reached 21% and 53% respectively. Nevertheless, in the following
year, GAS’s income growth slowed down, decreased by 24% compared to the previous year
because the Brent and Furnace oil price plummeted by 10% (The Business Times 2023).
Despite being significantly impacted by the world oil price, GAS remains an attractive
investment opportunity due to its stable financial performance. Its three key profitability
indicators, including gross margin, operating margin and net margin were stable throughout
the four-year period, which reveals its effective cost management practices and consistent
revenue. As GAS is the only LPG supplier, its revenue is consistent.
GAS continues to maintain a robust ROE, which saw significant improvement in 2022
compared to previous periods, albeit still below the peak level observed in 2014. However, the
company's asset turnover remains low, primarily due to substantial investment outlays for gas
pipeline infrastructure. Despite this, GAS exhibits strong financial strength, characterized by a
stable capital structure, a low leverage ratio, and a total debt-to-total assets ratio hovering
around 10%. Consequently, the interest coverage ratio has consistently exceeded 1.0 over
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several years. The fluctuation in oil prices influences ROE, which typically remains above
20%. The recent enhancement in ROE is attributed primarily to improved profit margins
resulting from elevated oil prices.
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Technical analysis
Figure 26: Technical movement of GAS (Eikon n.d.)
It can be observed that from 3rd April 2023 to 1st June 2023, GAS underwent a steep decline
in price, followed by a gradual recovery until it hit the peak on 3rd September 2023.
Subsequently, the stock price sharply declined again, exhibiting fluctuations until it began to
recover on 1st April 2024. Additionally, since 1st March 2023, MA 5 has crossed above the
MA 20 from below, indicating a bullish signal and a potential shift from a downtrend to an
uptrend. This could indicate that GAS presents a viable investment opportunity. Furthermore,
although the geopolitical events and rising world oil prices dampened the GAS’s stock
performance, it is emphasized that GAS has consistent financial performance throughout the
years (Vietnam Plus 2024)..
3.4. Real Estate
3.4.1. Industry overview
Real estate market plays a pivotal role in shaping Vietnam’s economy. In recent years, the real
estate scandals involving notable cooperation such as Tan Hoang Minh and Van Thinh Phat
have eroded the investor confidence in the real estate sector. As a result, the real estate stocks
are severely impacted. However, due to the legislative changes and steady growth trajectory,
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the real estate market shows signs of slow recovery. Legislative changes, including the
amended Real Estate Business Law and Housing Law, aim to better regulate the market and
promote social housing development. The market is expected to enter a consolidation phase
from Q4 2024 to Q1 2025, with the widespread promotion of monetary tools and policies
helping to overcome capital resource challenges. Additionally, the implementation of the Law
on Real Estate Business and Law on Housing, effective from early 2025, is anticipated to
unlock funding sources and address regulatory issues, fostering sustainable market
development (Baker Mckenzie 2023)). In Ha Noi, primary supply increases by 9% QoQ but
drops by 34% YoY, with sales rising significantly. The secondary market remains active,
particularly for Grade B apartments. In Ho Chi Minh City, primary apartment stock falls by
35% QoQ and 28% YoY, with developers offering extended payment plans to boost sales. The
villa/townhouse segment sees stable stock in both cities, with improved sales performance in
Hanoi. Regarding the retail segment, the retail occupancy remains stable throughout the years,
reaching 88% and 92% in Ha Noi and Ho Chi Minh respectively. Overall, while challenges
persist, such as oversupply in certain segments and legal obstacles, the real estate market shows
resilience and potential for growth (Savills 2024).
3.4.2. Stock selection
Figure 27: Market valuation data for VN30 companies in Real-Estate industry
VRE and VHM emerge as top real estate stocks for several reasons. Firstly, both companies
exhibit strong financial indicators, such as high trade payable turnover for VHM and
impressive inventory turnover for VRE (Appendix 2). These metrics suggest efficient
management practices and operational effectiveness, which are crucial in the competitive real
estate market. Additionally, VHM's lower days of payable compared to its counterparts indicate
a faster turnaround in paying off debts, further strengthening its financial position.
Furthermore, VHM's significantly higher fixed asset turnover compared to the other stocks,
especially VRE, underscores its efficient utilization of assets for generating revenue. This
suggests that VHM is making better use of its real estate assets to generate income, positioning
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it as a top performer in the industry. Additionally, VRE's high inventory turnover implies that
the company is effectively selling its inventory, potentially translating into higher revenues and
profitability. Moreover, VHM's low price-to-earnings (P/E) and forward P/E ratios, coupled
with its highest book value per share (BV/share) and lowest price-to-book (P/B) ratio, suggest
that the stock may be undervalued relative to its earnings and assets. This makes VHM an
attractive investment opportunity in the real estate sector. Conversely, VRE's strengths lie in
its ability to efficiently manage its trade payable turnover and its significantly lower days of
payable compared to the other stocks, indicating strong financial management practices. In
summary, VRE and VHM emerge as top real estate stocks based on their robust financial
indicators, efficient management practices, and potential for growth and profitability in the real
estate market.
3.4.3. Stock 9: VRE
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Company Overview
Vincom Retail Joint Stock Company (VRE), established in 2012 as a subsidiary of Vingroup,
is a prominent leader in the investment, development, and leasing of shopping centers across
Vietnam. VRE engages in real estate trading and leases investment properties. It also offers
real estate transfer business and related services under four brand lines: Vincom Center,
Vincom Mega Mall, Vincom Plaza, and Vincom+. As of the latest update, VRE operates a total
of 83 Vincom shopping malls throughout the country (Statista 2022; Appendix 3).
In early April 2024, Vingroup JSC announced a significant change in its business structure,
stating that Vincom Retail would no longer be its subsidiary. On March 18, Vingroup declared
its intention to sell its entire 100% stake in SDI. This strategic divestment is designed to
optimize the conglomerate’s capital allocation by shifting from stable business sectors to areas
with high growth potential and to provide additional funds for company operations, including
debt repayment. Despite this divestment, Vingroup continues to hold a direct ownership stake
of 18.4% in Vincom Retail (VNplus 2024).
Looking forward, VRE has ambitious expansion plans for 2024, with six new shopping centers
opening. This expansion includes two flagship Vincom Mega Malls and four Vincom Plazas,
adding approximately 171,000 square meters of retail space. Despite the evolving dynamics
within the parent company, Vincom Retail continues to dominate the Vietnamese shopping
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mall sector, a market where retail mall penetration remains relatively low compared to other
Asian regions (VRE 2024).
Figure 28: Vietnam’s NLA per capita
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Fundamental Analysis
Figure 29: Key Index and Ratios of VRE (2020-2023) (Eikon n.d.)
VRE's EBITDA growth rebounded strongly from 2021 to 2023, following an initial decline
during 2020-2021. Similarly, the company's earning power followed a trajectory of decrease
from 2020 to 2021, then consistently recovered through 2023. This fluctuation can largely be
attributed to the impact of the COVID-19 pandemic on VRE's profitability in 2021. However,
by 2023, VRE's earning power appears robust when compared to the industry median.
Specifically, VRE's GM reached 54.6% in FY2023, an increase of approximately 3% from
FY2022, and surpassing the industry median of 48.39%. Both OM and NPM also exceeded
industry averages, with OM at 59.8% compared to the industry's 27.7%, and NPM at 45%
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compared to 20.9%. Uniquely, VRE's OM exceeded its GM, indicating an atypical but positive
performance for the company. A detailed examination of VRE's financial performance revealed
a 3% decrease in the COGS to revenue ratio from 2022 to 2023, and an even more significant
9% reduction in Total Operating Expenses to revenue (Figure 30). This demonstrates VRE's
proficiency in managing both COGS and operating expenses, contributing to an exceptionally
high OM and indicating effective cost management strategies.
Figure 30: VRE’s Expense over Total Revenue 2021-2023
VRE's efficiency metrics, including ROA and ROE, have displayed a consistent upward trend
from 2020 to 2023, with a notable spike in 2023. These metrics exceed industry medians,
indicating that VRE has become increasingly efficient at generating profits from its assets and
equity in 2023, thereby yielding higher returns on its investments. Regarding leverage, VRE
has utilized more assets than equity to finance its debt, with a Debt-to-Assets (D/A) ratio of
17.6% compared to a Debt-to-Equity (D/E) ratio of 5.67%. Both ratios have declined,
suggesting that VRE is not currently in an expansion phase. This reduction in debt ratios also
implies that the company faces lower risks of financial distress, reflecting high financial
leverage and stability.
In summary, VRE's significant growth in EBITDA and earning power, driven by successful
cost reductions, underscores its operational efficiency. Coupled with low leverage ratios, VRE
has effectively optimized its capital structure to enhance financial stability. Given these
improvements and the anticipated easing of economic conditions in 2024, along with positive
retail and real estate trends, Vincom Retail is poised to maintain a strong financial trajectory.
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Technical Analysis
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Figure 31: Technical movement of VRE (Eikon n.d.)
The early part of February 2024 saw a bullish trend in stock prices, beginning with an upward
trajectory of the SMA5 from February 15, 2024. This trend was confirmed on February 20,
2024, when the SMA5 crossed above the SMA20, indicating a positive signal. On the same
day, Volume SMA9 peaked, with an average trading volume of 25.145 million shares over the
previous nine days, and the predominance of green volume bars suggested that the closing
prices were higher than the opening prices, indicating strong buying interest during this period.
However, the bullish momentum started to wane by March 5, and a reversal trend began as the
SMA5 turned downwards. A crossover in mid-March signaled another potential reversal,
although the slope was not steep. Subsequent fluctuations around this level suggested investor
uncertainty. By the end of these 16 days, a definitive downward trend emerged as the SMA5
crossed below the SMA20 and continued to decline until April 23, with prices decreasing
throughout this period. Given these conditions, we decided to buy VRE shares now as they
have reached a more reasonable price, and the flattening curve of the SMA5 suggests a
lessening in downward intensity. The trend reversal to upward movement on April 23 also
supports our expectations for short-term improvements.
3.4.4. Stock 10: VHM
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Company Overview
Vinhomes, a subsidiary of Vingroup, holds a prominent position in Vietnam's real estate
market, claiming a 22% market share (Viet Nam News 2024). With extensive land holdings
across the country, particularly in major urban centers like Hanoi, Hai Phong, Quang Ninh, and
Ho Chi Minh City, Vinhomes focuses on medium to high-end developments.
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Their recent projects, including Vinhomes Ocean Park, Vinhomes Smart City, and Vinhomes
Grand Park, have shown promising absorption rates, ensuring future revenue and profits. In
2019, the company announced a restructuring of its product lines, introducing two brands:
Vinhomes and Happy Town. The Vinhomes brand offers a range of options catering to different
segments, from mid-end to luxury, facilitating diverse choices for customers and suitable for
large-scale projects. On January 09, 01, Vinhomes Joint Stock Company announced the
construction of an additional self-trading distribution system in parallel with the existing dealer
system nationwide. The company also conducted a large-scale recruitment campaign for sales
staff, ready to welcome the new growth cycle of the real estate market.
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Fundamental analysis
Figure 32: Key Index and Ratios of VHM (2020-2023) (Eikon n.d.)
In recent years, Vinhomes has experienced fluctuations in earnings growth, notably reaching a
peak in 2022 followed by a significant decline in 2023. Despite these challenges, the company
has responded with strategic initiatives, notably the introduction of two flagship projects,
Vinhomes Ocean Park 2 and Vinhomes Ocean Park 3. These projects have played a pivotal
role in bolstering revenues through sales and project completions. However, Vinhomes faces a
higher cost structure compared to its industry counterparts, attributed to factors such as elevated
construction and land acquisition expenses. Consequently, its gross margin falls below the
industry average. Nonetheless, Vinhomes maintains higher operating and net margins than its
peers, a testament to its strategic focus on higher-margin segments within the real estate market,
efficient operations, and effective cost management practices. Moreover, Vinhomes has
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successfully positioned itself in niche market segments, where it can command higher prices
and faces less competition, resulting in higher overall margins. The company's exceptional
Return on Equity (ROE) and Return on Assets (ROA) underscore its effective asset utilization
and proficient management of real estate assets, further solidifying its position in the industry.
Furthermore, despite its growth in revenue, Vinhomes expanded its land bank by acquiring an
additional 1,800 hectares from five projects in Hai Phong, Khanh Hoa, and Long An provinces.
These expansion initiatives required a substantial amount of funds, as a result, the debt/equity
ratio and debt/asset ratio surged substantially post the COVID-19 pandemic.
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Technical analysis
Figure 33: Technical movement of VHM (2020-2023) (Eikon n.d.)
In the first half of August 2023, there was a notable alignment in the moving averages (MA) 5,
the stock price, and MA 20, implying a strong bullish momentum. This convergence suggested
robust buying pressure and consistent upward movement in the stock price, culminating in a
peak. Subsequently, however, all three metrics underwent a substantial downturn, moving
significantly away from their highest points, indicating a bearish sign. The current real estate
market faces significant challenges related to legal matters, administrative procedures, and
investment processes in housing projects. Consequently, real estate stocks like Vinhomes are
notably impacted by these factors.
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3.5 Technology and Telecommunications
3.5.1. Industry Overview
Intelligent Technology Services
Gartner (2024) predicts IT services will become the largest IT spending category, reaching
$1.501 trillion in 2024 and 30% of the global IT market, an 8.7% increase from the previous
year. This growth is driven by companies investing in projects to optimize operations and
improve efficiency during anticipated economic instability. Bloomberg (2023) forecasts a 42%
compound annual growth rate (CAGR) for the Generative AI (GenAI) market over the next
decade, reaching $1.304 trillion by 2032, as AI becomes more integrated into daily services.
Forrester (2023) reports that developing AI software can boost labor productivity and problemsolving by 50%. Gartner also predicts a rebound in IT spending in 2024, driven by cloud
computing and AI. Thus, technological advancements and increasing AI integration create a
favorable environment for new tech startups and innovative solutions, leading to more
entrepreneurial activity and allowing tech leaders from emerging economies to strengthen their
competitive positions.
In the IT services industry, the shift from combustion engine vehicles to electric vehicles is
expected to particularly benefit automotive software. This shift is prompting automotive
companies and their suppliers to make substantial investments in software development and
electrification technologies. Indeed, according to a recent report by Precedence Research
(2024), the global automotive software market is expected to reach 116.6 billion USD by 2032,
with a compound annual growth rate of 16.7% from 2023 to 2032. According to McKinsey
(2023), by 2030, the global automotive software and electronics market is expected to reach
$462 billion, representing a 5.5 percent CAGR from 2019 to 2030.
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Figure 34: Car’s software market forecast 2023 - 2032
McKinsey adds that software, along with sensors and similar components, is expected to
account for about 50% of vehicle costs by 2030, more than double the 20% in 2020. The global
automotive industry is predicted to spend over 238 billion USD per year by 2030 for this
service. Therefore, these disruptions are enabled by and contribute to the rapid growth of
automotive software and electronics and benefit IT service companies.
Semiconductor
According to Govi (2024), recent challenges in the semiconductor supply chain have prompted
nations and corporations to invest in diversifying their supply by establishing new production
and design facilities within their countries or in locations other than Taiwan (China), presenting
an opportunity for Vietnam to enter the semiconductor industry and improve productivity,
quality, intellectual property, and value-added aspects of their products, leading to increased
income levels (People's Newspaper 2024). The semiconductor industry holds strategic
importance in the global economy, with sales projected to exceed US$1 trillion by 2030 (Asean
Briefing 2024). Vietnam is already a significant player in the semiconductor market, ranking
among the top 10 exporters and experiencing steady growth in the industry (Asean Briefing
2024). The country aims to position itself as a major supplier and recognizes the upcoming
global shortage of IT engineers and semiconductor chips (Vietnam Economic News 2024).
Vietnamese technology companies like FPT Semiconductor, CMC, and Viettel are actively
involved in chip research, design, and production, paving the way for Vietnam's increased
participation in the global semiconductor industry (People's Newspaper 2024). Moreover, this
golden opportunity is also driving the Vietnamese government to prioritize training human
resources, such as semiconductor engineers, to catch the wave of supply chain shift. This
dynamic is expected to benefit the education market, as various parties ramp up training
programs focused on technology-related skills, such as FPT School of Business and
Technology (FSB) - FPT University.
3.5.2. Stock Selection
After evaluating the potential of the technology market in Vietnam, we see a room for growth
in technology stocks. Deciding to include FPT would be a strategic decision for our portfolio.
As a leading IT services provider in Vietnam, FPT is well-positioned to capitalize on the
industry trends we have observed.
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Then, we will apply our stated criteria and focus on assessing the company's cheapness using
Price-to-Earnings (P/E) ratios. However, as FPT is the only technology company in our
investment universe, we will conduct a peer group analysis using data provided by Refinitiv
Eikon (n.d.) to reassess the industry in a more holistic view. For the peer analysis, our
methodology involves selecting IT service companies that exhibit profitability within the range
of FPT's profitability (15-20%). In order to ensure consistency in our peer comparison, we will
eliminate outliers in terms of Return on Equity (ROE) and P/E ratios. However, we will still
include those ratios of IT services in the analysis to provide a comprehensive overview of the
entire sector. By conducting this analysis, we aim to gain insights into FPT's relative valuation
and compare quickly some fundamental aspects with its peers in the IT service industry before
going into details.
Figure 35: Market valuation data for companies in Technology and Telecommunication industry
Upon initial analysis, FPT's P/E ratio of 26.77 may not be considered "cheap" at first glance.
However, it is worth noting that the company's multiple is still slightly below its peers' median
of 27.93 and the median for the IT services sector, which is 27.21. This indicates that FPT's
stock price is relatively less expensive or undervalued compared to its peers. Furthermore, FPT
demonstrates a higher Return on Equity (ROE) of 25.1%, which is approximately 3% higher
than its peer median and more than three times the IT services sector average. Additionally,
FPT's EBIT (Earnings Before Interest and Taxes) and EBITDA (Earnings Before Interest,
Taxes, Depreciation, and Amortization) margins stand at 16.1% and 20.1%, respectively,
surpassing both the peer median and the IT services sector averages.
This contrast between FPT's higher profitability metrics and its relatively lower valuation
multiple suggests that the market may not have fully recognized the company's potential, or
there may be perceived risks or uncertainties associated with FPT, leading to a lower valuation
despite its stronger profitability. As a result, from a cheapness perspective, FPT represents an
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opportunity for potential investment with the expectation that its valuation may increase in the
future. Additionally, FPT's beta value of 0.9 falls within an acceptable range, indicating a
moderate level of systematic risk compared to the overall market. We decide to include FPT
into our portfolio as a major holding company
3.5.3. Stock 11: FPT
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Company Overview
According to Appendix 7, FPT Corporation operates in three reportable segments: Intelligent
Technology Services, Telecommunications, and Education, accounting for 60%, 30%, and
10% of their business, respectively. In 2023, FPT achieved impressive IT service revenue of 1
billion USD from foreign markets, equivalent to 24,288 billion Vietnamese dong, with a
growth rate of 28.4% compared to the previous period . Specifically, of the 1 billion USD in
revenue, 21% came from the automotive software technology and manufacturing sector, 11%
from the banking and finance sector, and 11% from the energy sector. The revenue from the
automotive and manufacturing software industry maintained a growth rate of over 11%,
reflecting FPT's increasing reputation in this field (Appendix 8).
FPT's success in the automotive and manufacturing software industry can be attributed to the
rising global demand for digital transformation, particularly in the Japanese and Asia-Pacific
markets. FPT has experienced revenue growth rates of 52.2% and 37.7% in these markets,
respectively. FPT aims to achieve a growth rate of over 30% per year and reach $1 billion in
revenue from the Japanese market by 2027. Despite challenges posed by political conflicts and
economic instability, FPT has managed to maintain revenue growth rates of 8.6% in the US
and 21.9% in Europe. Their customer-focused approach and exploration of new contracts have
contributed to this success.
FPT Corporation has also capitalized on the global shift in the semiconductor supply chain
(refer to Semiconductor industry overview). FPT Semiconductor, a part of FPT Software, has
become the first Vietnamese company to supply commercial microchips for IoT products in
the healthcare sector. FPT's customization capability through their exclusive chip "tailoring"
technology gives them an edge in the market. FPT has focused on mid-range technology chips
and received orders for nearly 70 million chips until 2025. The advantageous natural conditions
and rare earth reserves in Vietnam further enhance FPT's position in the semiconductor
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industry. In terms of education, FPT aims to train 10,000 semiconductor engineers and
specialists by 2030 to contribute to the industry's growth.
In the automotive software domain, FPT's revenue is growing at a rate of over 30%. They are
ranked as a Major Contender globally and have established FPT Automotive in Texas, USA,
to tap into the expanding automotive software market. Regarding the telecommunications
segment, FPT experienced single-digit growth in the number of internet broadband subscribers
in 2022 and 2023. However, they plan to launch a new data center in the second half of 2024
to further boost revenue in this business segment.
Overall, FPT Corporation's strategic approach, competitiveness, and innovative offerings have
resulted in significant growth across various sectors, solidifying their position as a global
technology company.
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Fundamental Analysis
Regarding fundamental evaluation, we take a closer look at FPT's fundamental metrics,
including Profitability, Liquidity, Solvency, and Activity Ratios. Among the grouped
companies (refer to Appendix 4), FPT stands out due to its superior gross margin of 38.6%
compared to the other three manufacturing companies, which have gross margins of roughly
23%. This high margin can be attributed to FPT operating in the technology industry, where it
enjoys cost advantages because its delivered values are service or intelligence-based.
Additionally, FPT exhibits the least volatility in the three profitability criteria analyzed, as
stated in the investment strategy that prioritizes stocks with stability in earnings. Over a 5-year
period, the company has a low standard deviation of net profit at only 3.9%, in contrast to other
considered stocks which have standard deviations of roughly 29% (excluding outliers). Even
in the context of the economic downturn in 2023, FPT maintains a return on equity (ROE) of
33.6%, demonstrating its resilience in the face of uncertainty.
When considering the solvency ratio, FPT appears to have a high proportion of debt, indicated
by the debt-to-total assets and debt-to-equity ratios of roughly 70% and 50%, respectively (see
Appendix 5). In comparison, based on the peer analysis, the total debt-to-equity ratios of the
peer median and the entire IT service sector are only 19% and 15%, respectively. Therefore, it
can be concluded that FPT is highly leveraged compared to its peers. Despite this, we argue
that the risk of liquidation might not be a significant concern because the company still holds
a high amount of cash (46% of total sales). Additionally, it is generally assumed that cash can
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be used to cover debt obligations in case of defaults, which is supported by the company’s
negative net debt-to-equity ratio of 0.47 (Debt minus Cash, divided by Equity) (Appendix 5).
Furthermore, with an interest coverage ratio of 12, FPT's EBIT can cover twelve times the
company's annual interest payment. Both the current ratio and quick ratio are also higher than
1, suggesting that the company maintains a healthy liquidity position and is able to meet its
short-term financial obligations.
Overall, considering FPT's fundamental metrics, it demonstrates strong profitability, effective
asset management, and a healthy liquidity position. However, its higher proportion of debt
compared to peers indicates a higher level of leverage. Nevertheless, the company's cash
holdings, negative net debt-to-equity ratio, and favorable interest coverage ratio mitigate the
risk of liquidation. Therefore, we include FPT to our portfolio.
-
Technical Analysis
Figure 36: Technical movement of FPT (Eikon n.d)
Throughout 2023, the FPT stock exhibited an overall upward trend, though the second half of
the year saw some consolidation with fluctuations in the share price, resulting in an M-shaped
pattern from September to November 2023. Toward the end of September 2024, the short-term
moving average (MA5) dropped below the long-term moving average (MA20), which was
followed by a dip in the stock price to around 90,000 VND. However, the price then rebounded
to 100,000 VND.
In November 2024, the FPT stock experienced a deeper decline, falling to nearly 80,000 VND.
But from that point onwards, the stock began a consistent upward trajectory. In early 2024, the
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MA5 and MA20 lines converged, a phenomenon often associated with sideways or rangebound trading without a clear directional trend. The convergence of the short-term MA5 and
the longer-term MA20 of FPT stock from November 2023 to February 2024 suggests that the
short-term momentum was slowing down and aligning more closely with the broader mediumterm trend. In the beginning of February, there was a significant surge in buying volume. At
this point, the MA5 crossed above the MA20, and the spread between the two moving averages
started to widen, a bullish signal. Consequently, the FPT stock price increased rapidly from
around 80,000 VND to nearly 120,000 VND by mid-March. However, the stock experienced
another decline in late April 2024. But by the end of the month, the MA5 had made another
crossover above the MA20, which is generally considered a bullish sign. Following this, the
FPT stock price began an exponential increase from 110,000 VND up to 127,000 VND. The
widening spread between the MA5 and MA20 lines, along with a series of buy volume surges,
is also seen as a positive indicator for potential further price appreciation. Therefore, we expect
a continuation of the bullish trend in FPT's stock price, supported by the company's positive
fundamental and macroeconomic factors.
3.6. Brewers
3.6.1. Industry Overview
The beer industry in Vietnam has faced significant challenges in recent years, particularly in
2023. The effects of the Covid-19 pandemic, coupled with a strict zero-tolerance policy and
rising input prices, have led to a tightening of consumer spending. The beer market experienced
a notable decline in consumption, with a 20% decrease in revenue and profits for the industry,
as reported by the General Statistics Office. This decline can be attributed to factors such as
rising raw material costs, inflation rates, interest rates, and reduced consumer spending amid
the economic recession. Additionally, the enforcement of alcohol concentration control
policies has contributed to the decrease in beer consumption, particularly in restaurants and
bars.
Additionally, raw material prices (malt, rice, cans) increased by 20-40%, while consumption
demand has been in sharp decline and prices cannot be increased further, causing production
costs to escalate. This forces them to increase prices and consumers have to "bear" this
increased cost.. These factors have caused significant damage to the production and business
activities of beverage enterprises. The consumption market has contracted by 20-30 per cent,
and the overall revenue of the beverage industry has dropped by as much as 16 per cent
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compared to 2019 (Viet Nam News 2024). Additionally, the ongoing Russia-Ukraine conflict
has triggered a crisis in the global supply chain, further exacerbating the challenges faced by
the beverage industry and leading to soaring raw material prices.
However, Vietnam's beer market still has experienced significant growth so far and possesses
a strong beer consumption culture. Indeed, there is a growing trend of premiumization, with
consumers increasingly willing to pay more for imported beers (Viet Nam News 2024).
According to research by 6Wresearch (2024), the Vietnam Beer Market is projected to grow
by 8.86%, reaching a market volume of US$7.06 billion between 2023 and 2029. Additionally,
Astute Analytica (2024) reports that the Vietnam beer market was valued at US$7,526.3
million in 2023 and is expected to exceed US$14,154.2 million by 2032, with a compound
annual growth rate (CAGR) of 7.27% during the forecast period of 2024-2032.
Competition in the Vietnamese beer market is intense, involving both local and international
players. The market is highly concentrated, with four major brands—Sabeco, Habeco,
Heineken, and Carlsberg—dominating the industry (Astute Analytica, 2024). This
concentration creates an oligopolistic market structure, which presents barriers to entry for new
firms and makes it challenging for smaller players to compete. Established companies benefit
from significant resources, economies of scale, and brand recognition, which deter new entrants
and limit overall market competitiveness. However, this competitive landscape has encouraged
the growth of premium and craft beer segments and has led Vietnamese beer brands to explore
international markets, particularly in neighboring countries. The rising interest in organic, lowalcohol, or environmentally-friendly beer options provides opportunities for product
differentiation and market capture.
Despite the challenges faced by the beer industry, there is belief in its recovery. Vietnamese
beer companies have begun exploring export opportunities to neighboring countries and
international markets, which can contribute to further industry growth. The Vietnam BeerAlcohol-Beverage Association (VBA) has proposed delaying the amendment of the Special
Consumption Tax Law until at least 2025 to provide conditions for Vietnamese beverage
makers to recover, stabilize, and gradually develop (Viet Nam News 2024).
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In addition to geographical expansion, there's a significant opportunity in aligning beer
products with emerging consumer values such as sustainability and health consciousness
(Astute Analytica 2024).
Figure 37: Revenue of the beer market in Vietnam (2018 - 2028) (Statista n.d)
In conclusion, Vietnam still has seen a notable increase in beer consumption per capita over
the years, driven by economic growth, urbanization, and changing consumer preferences.
Vietnam beer consumption per capita was estimated to be around 43-46 liters per person per
year, making it one of the largest beer markets in Southeast Asia (6Wresearch 2024).
Additionally, beer is a popular beverage in Vietnam culture and is often consumed in social
gatherings. The affordability of beer compared to other alcoholic beverages has also
contributed to its immense popularity (Astute Analytica 2024). We believe that with the
established market and financial position in the industry, the leading market players will
capitalize on resources to navigate the policy challenges, adapt to the new young generation’s
preferences and extract the untapped opportunities.
3.6.2. Stock selection
Having a understanding of the recovery of brewer market,
We conduct peer analysis for the brewer companies and decide to select SAB. Overall, SAB's
P/E is trading at a reasonable level of 11.3x compared to its peer median of 13.6x. SAB also
appears to be cheaper than other beverage companies, trading at a P/E of 18.9x. The company
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also boasts a higher ROE and ROA relative to the median of its competitors, at 12.4% and
16.5% respectively. In particular, SAB stands out from its peers with a very low proportion of
debt compared to equity, only at 2.9%. This is typically seen as favorable because it suggests
that the company has a stronger financial position and is less reliant on borrowed funds to
support its operations. SAB's EBIT and EBITDA margin are always within the industry
average.
Figure 38: Market valuation data for companies in Brewing industry
3.6.3. Stock 12: SAB
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Company overview
According to a news article by VN Express (2024), SABECO, the Saigon Beer - Alcohol Beverage Joint Stock Corporation, has outlined ambitious growth objectives for 2024 based on
market insights and economic forecasts. The company aims to focus on commercial excellence,
production efficiency, and promoting Environment, Social, and Governance (ESG) initiatives.
In the last quarter of 2023, SABECO recorded a profit of 966 billion VND, which was a 10%
decrease compared to the same period in 2022, and the lowest level in the past two years. The
company's annual profit after tax for the year was around 4.255 billion VND, a decrease of
23%. This decline in profit was attributed to a decrease in beer demand in 2023 due to factors
such as Decree 100 and economic fluctuations. To stimulate demand and cope with
competition, SABECO increased its advertising and promotion expenditure to over 2.800
billion VND.
Despite the challenges, SABECO reported a considerable improvement in demand in the first
quarter of 2024, although Decree 100, which deals with the punishment of drunken drivers, is
still strictly enforced. To achieve its objectives for 2024, SABECO is focused on three stated
areas: commercial excellence, supply chain efficiency, and ESG initiatives. The company
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successfully organized various cultural and culinary events, such as Saigon Night, Vung Tau
Beerfest, The Chill Fest, and the "Sao Cua Moi Cuoc Vui" singing competition, as well as the
Tet campaign "Don Tet Rong, Nhan Boi Loc" These activities helped strengthen SABECO's
connection with consumers and enhance relationships with local distributors and stakeholders
in its value chain, thereby increasing sales opportunities. SABECO also implemented costsaving measures and initiatives for efficient production. The company completed the
Warehouse Master Plan Project to improve supply chain management and expedite the routeto-market process. Considering favorable opportunities such as Vietnam's growing income
levels and evolving policy landscape, as well as global economic projections for 2024,
SABECO aims to achieve a net revenue of VNĐ34.3 trillion and a profit of VNĐ4.58 trillion
in 2024, representing a 13% and 8% increase compared to 2023, respectively (VN Express
2024).
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Fundamental Analysis
Although SAB's 5-year earnings growth is just 80.4% (Appendix 4), its gross profit seems more
consistent than that of HPG and GVR, which could suggest that the company is able to maintain
a consistent and predictable level of profitability from its core operations.
However, profitability is not the only reason prompting us to include SAB in our first portfolio.
Indeed, our strategy in portfolio 1 is to mitigate the volatility of the entire portfolio, ensuring
'peace of mind' for our clients, but we also seek higher returns by including some bank stocks
that have high correlation with each other. For instance, MBB has a high correlation with all
of the other four banks: TCB (0.82), BID (0.66), ACB (0.77), HDB (0.7), but has a low
correlation with SAB, only at 0.25 (Appendix 9). Additionally, SAB's price movement also has
a relatively low correlation with the other stocks, ranging from 0.2 to 0.4, which could
significantly offset the volatility of the entire portfolio. Therefore, we select SAB as a defensive
stock due to its low correlation and consistency in profitability.
The company's efficiency in asset management can also be demonstrated by the asset turnover
of 0.89. The company has the highest interest burden (Net income before taxes/EBIT) among
4 grouped companies, meaning that the company is bearing a very small amount of interest
charged relative to its profitability. This can also be seen in the interest coverage ratio of the
company, at 107.9 (Appendix 5), which suggests that the company generates sufficient
operating income to comfortably cover more than a hundred times of its interest payments. As
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a result, SAB yields a high return on equity of 17.5% (Appendix 4), which can be regarded as
'higher' compared to the rule of thumb's ROE of 15%. SAB is a low leverage company with
the amount of debt to total assets being only 25%. Nevertheless, net debt-to-equity is negative
at 0.93, meaning that SAB secures a large amount of cash as a precaution. On the one hand, in
nature, the company’s capital structure already has a high book value, so holding too much can
also be seen as unnecessary because it underscores the
importance of focusing on capital allocation (Michael and Dan 2022) and does not effectively
make use of investors’ capitals due to opportunity cost of holding cash . On the other hand,
securing a large amount of cash can help the company retain a specific amount of funds for
many strategies activities such as M&A or unexpected opportunities.
Regarding working capital, the proportion of current liabilities is also lower relative to current
assets, reflected in SAB’s current ratio of 3.23 (Appendix 5), demonstrating the company's
efficiency in working capital management. Taking a closer look at the Appendix 6, it appears
that it only takes 1 day for the company to collect payment from customers, allowing it to
quickly convert its sales into cash. Moreover, SAB also has a high days of payables relatively
operating cycle, which results in a negative cash conversion cycle, demonstrating a high
bargaining power of the company to extend payment periods to suppliers. In effect, SAB can
sell their inventory and collect cash before they have to pay their suppliers. As a result,
suppliers effectively become a source of financing. There is academic research that suggests
the cash conversion cycle can be a useful aid in stock picking (Baolian 2021:472). We include
SAB into our portfolio due to its competency in liquidity management and its stability in
business’s nature.
-
Technical Analysis
Figure 39: Technical movement of SAB (Eikon n.d.)
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The price action of the SAB stock has displayed a significant amount of volatility and
consolidation over the past several months. In December 2023, we observed a notable event
where the SMA20 experienced a sharp decline and crossed below the SMA5. This type of
moving average crossover is typically considered a bullish signal, as it suggests the shorterterm momentum has overtaken the medium-term trend. However, in this case, the bullish
implication was short-lived, as the price then proceeded to decline sharply after this crossover
event. This price action indicates that the market dynamics were more complex than a simple
moving average crossover would suggest.
Following this initial crossover, we witnessed the SMA5 and SMA20 begin crossing each other
repeatedly, creating a prolonged consolidation phase where the stock traded sideways without
a clear directional trend. The repeated back-and-forth crossovers between the two moving
averages can be interpreted as a lack of conviction from both buyers and sellers, with the stock
trapped in a range-bound market. We therefore must exercise caution during such consolidation
periods, as the stock is susceptible to sudden and sharp moves in either direction once the
trading range is eventually broken.
Later, in mid-March 2024, SAB saw the SMA5 dramatically decrease, causing it to cross below
the SMA20 once again. This bearish crossover signals that the short-term momentum had
shifted significantly to the downside, potentially foreshadowing further price declines in the
near term. Such moving average crossovers can often trigger sell signals for traders relying on
technical analysis. However, the tide began to turn in early May 2024, as the SMA5 started to
increase dramatically, crossing back above the SMA20. This bullish crossover, combined with
the widening spread between the two moving averages, suggests that the shorter-term
momentum has regained strength and is now outpacing the medium-term trend. This technical
pattern could signal the potential for renewed bullish momentum in the SAB stock.
Therefore, based on this renewed bullish signal, we consider taking long positions in the SAB
stock, as the price could continue to appreciate in the near term, provided that the market
conditions remain favorable and the broader uptrend is confirmed.
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3.7. Portfolio Weighting Methodology
The traditional approach of portfolios weighting, which involves subjectively setting weights
or allocating an equal amount to each asset, has significant limitations. It fails to effectively
capture the relationship between stock-picking concept weights and portfolio performance,
does not provide an optimal combination of weights, and does not meet the diverse preferences
of investors. Therefore, we will determine the optimal weights for the portfolio based on
Markowitz's Modern Portfolio Theory (1959, 1952), utilizing the Sharpe Ratio to balance the
risk and return of each stock included in the portfolio (Kirby and Ostdiek 2012:437). This
approach aims to achieve an optimal risk-reward trade-off for us.
We will use historical weekly prices from the past five years to calculate the weekly standard
deviation and weekly return. Subsequently, a covariance matrix will be constructed by
combining the historical data with random weights, allowing us to derive the standard deviation
of the entire portfolio. The Solver function will then be employed to identify the optimal weight
by minimizing the variance. Additionally, a correlation matrix will be constructed to observe
the market interaction between stocks and reassess the robustness of the Excel metrics' weight
allocation.
To control risk and ensure effective risk management, we will set a maximum limit of 25% of
the portfolio allocated to any single stock. This constraint ensures that our portfolio is welldiversified and avoids overexposure to any single stock, decreasing the potential impact of
adverse events or negative news affecting that specific company. Additionally, we will
establish a minimum weight of 2% to prevent the automatic exclusion of stocks with higher
volatility. This measure is necessary to maintain a sufficient number of stocks in the portfolio
and to ensure that the benefits of diversification are not significantly diminished.
Our results from this methodology will ensure a portfolio with minimal variance, meeting our
investment objectives.
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3.8. Active Portfolio 1 summary
Figure 40: Active Portfolio 1 Capital Weight by Industries and Companies
Figure 41: Active Portfolio 1 Capital Weight by Industries
III.
Portfolio Management (Active Portfolio 2)
1. Macroeconomics News
03/05: PMI reached over 50 points in April, Vietnam’s production sector is growing again
(Vietnam Economy)
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As reported by S&P Global, the Vietnamese PMI reached 50.3 points in April, a breakthrough
compared to March’s PMI of 49.9. This showed a small growth and suggested a slight
expansion in the Vietnamese production sector. The main driver behind this positive movement
is believed to be the surge in demand that has led to more new orders for Vietnamese factories.
Many view this expansion, despite being small, as a sign that the economy is in a better
condition, especially after a decline in Q1. If this growth continues, many production firms
can gain benefit, especially in commodities and consumer goods.
03/05: Vietnam’s FDI in the first four months of 2024, reached its highest in the last 5 years
(Government News)
Statistically, for the first 4 months of 2024, Vietnam’s FDI inflows reached $6.28 billion, a
7.4% increase from the same period in 2023. In which, 78,5% of total FDI inflows are for the
investments in industrial production and manufacturing. These investments mostly are from
Singapore, Hong Kong, China, and Japan. The positivity in FDI can prompt a stronger economy
with businesses operating at a higher efficiency level. This promising news poses a possibility
of less unemployment and more production in the Vietnamese economy.
2. Industry Changes and Our Decision
2.1. Banking and financial services
After careful consideration, the second portfolio chose not to proceed with BID. The reason for
this decision is because of various reasons. Firstly, BIDV’s shares, despite being lower than
VCB, still have a relatively high P/B ratio of about 2.4, which made BID an expensive
investment to purchase. Moreover, the bank’s efficiency level is currently on the lower side of
the industry, especially ROA when BIDV’s ROA is reported to be the lowest among all of its
peers. That said, despite being a state-backed bank with a high CASA and a safe operating
level, those are not enough for the second portfolio to accept as there are many other choices
to help it reach its goal of minimizing the portfolio variance while keeping returns high.
2.2. Real Estate Industry
The proposed Land Law, slated for implementation on July 1, 2024, instead of January 1, 2025
(Hung 2024). According to the Ministry of Natural Resources and Environment, the new Land
Law, proposed to take effect on July 1, 2024, instead of January 1, 2025, will have a significant
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impact on all societal classes by enhancing the effectiveness and efficiency of land
management and use. The law allows individuals not directly involved in agricultural
production to receive transfers of rice land use rights within the land allocation limits. This,
coupled with exemptions or reductions in land use fees, will intensify competition for land,
driving up costs and affecting real estate companies' ability to acquire and expand land
holdings. Companies like VHM and VRE, included in our portfolio, will be directly impacted.
Moreover, the implementation of Decision No. 05/2024/QD-TTg, which takes effect from May
15, 2024, introduces a mechanism for adjusting average electricity retail prices in Vietnam
every three months (Luat Viet Nam 2024). This decision, coupled with Vietnam Electricity's
(EVN) recent announcement of a 3% increase in the average retail electricity price compared
to the current rate, could significantly impact real estate stocks (Nguyen 2023). These increased
costs could dampen profit margins, especially for firms with fixed rental agreements.
Additionally, rising living costs resulting from increased electricity prices might reduce the
demand for residential properties, negatively affecting property sales and values. Given these
factors, real estate stocks may become less attractive to investors due to the heightened
financial uncertainty and potential for reduced profitability, suggesting that it may be wise to
eliminate or reduce exposure to this sector in a diversified investment portfolio.
2.2.1. Stock 1: VRE
-
Technical Analysis
Figure 42: Technical movement of VRE (Eikon n.d.)
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As we predicted before the trading day on April 26th, the upward trend of the SMA5 line and
the consistent slowdown of the SMA20 line suggested a likely cross shortly. The two lines did
cross on May 7, 2024, supported by the green Volume SMA9, indicating that consumer buying
outweighed selling over the past nine days. However, unexpectedly, the SMA5 line reversed
again on May 9, 2024. We now predict that it will soon cross below the SMA20, confirming a
downward trend shortly. To protect our portfolio as short-term investors, we decided to Sell
VRE at the end of the trading day on May 10, 2024.
2.2.2. Stock 2: VHM
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Technical Analysis
Figure 43: Technical movement of VHM (Eikon n.d.)
During the period from 1st May to 17th May 2024, both the SMA5 and SMA20 have
consistently declined, indicating a decreasing trend in the stock's price movement.
Additionally, the volume bars, particularly on May 7th to 14th and May 16th, have
predominantly been red, suggesting heightened selling pressure compared to buying interest.
The crossover of the SMA 5 below the SMA 20 further confirms this bearish signal, implying
a potential shift towards a downtrend. The downward slope of the SMAs and the persistent
position of the SMA 5 below the SMA 20 indicate a weakening trend in the stock's
performance. The prevalence of red volume bars reflects significant selling activity, while the
lack of strong buying activity, indicated by the absence of green volume bars, suggests
diminishing demand for the stock. Overall, the technical analysis suggests a bearish outlook
for VHM stock, indicating that selling may be advisable to mitigate potential losses
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2.3. Consumer and Electronics Retail Industry
2.3.1. Stock 3: MWG
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Company Overview
Mobile World Investment Corporation, established in March 2004, specializes in the retail and
repair of mobile phones, digital devices, and e-commerce services (Vietstock Finance n.d). The
company’s subsidiaries encompass Điện máy XANH, a prominent retail chain for consumer
electronics with over 1,500 stores throughout Vietnam; Bách hóa XANH, which focuses on
fresh food and essential goods; Bluetronics, MWG’s first international consumer electronics
retail chain, established in 2017; 4KFarm, a high-tech agricultural branch aimed at providing
safe, healthy food; and An Khang Pharmacy, a chain dedicated to pharmaceuticals and medical
devices. Toàn Tín Logistics Joint Stock Company, founded in early 2022, is a member of the
Mobile World Group, offering warehousing and supply chain services nationwide. Among
these subsidiaries, Điện máy XANH and Bách hóa XANH contributed significantly to the
company's performance(Dat 2023). MWG's consumer electronics and ICT retail sector is
experiencing significant growth, as evidenced by a 15% year-on-year increase in revenue in
April 2024, surpassing expectations and aiming for profitability (VN Business 2024). In
contrast, real estate companies like VHM face challenges stemming from regulatory changes
and potential increases in land costs, indicating MWG is a more appealing investment
opportunity.
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Fundamental analysis
Figure 44: Key Index and Ratios of MWG (2020-2023) (Eikon n.d.)
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Mobile World Investment Corporation (MWG) has recently announced the dissolution of its
subsidiaries, 4KFarm and Toàn Tín Logistics, as part of a strategic initiative aimed at enhancing
operational efficiency. This decision was prompted by the high operational costs and consumer
resistance to price differences for 4KFarm’s safe produce, which resulted in its
underperformance, and by the insufficient profits generated by Toàn Tín Logistics relative to
the group’s scale. An analysis of MWG's financial performance from 2020 to 2023 reveals
significant fluctuations, with EBITDA surged from 7,638 billion VND in 2020 to 10,493
billion VND in 2022, followed by a substantial fall to 4,097 billion VND in 2023. This decrease
is mirrored in the EBITDA growth rate, which plummeted by 60.95% in 2023. Furthermore,
its profitability ratios all declined, with net margins plummeting from 5.0% to 0.9%. Both ROA
and ROE experienced substantial declines, revealing its challenges in sustaining profitability
and operational efficiency. The Debt-to-Equity (D/E) ratio showed variability, indicating a
reduced reliance on debt in 2023, which could suggest an improvement in long-term financial
stability. However, MWG’s cost leadership strategy, intended to boost revenue and reduce
inventory, significantly impacted profit margins, with the net profit margin dropping from
3.98% in 2021 to 0.14% in 2023 (Dat 2023)
In the short term, the investment proposition of MWG is promising despite its recent setbacks.
The corporation's strategic approach to dissolve underperforming subsidiaries, notably 4KFarm
and Toàn Tín Logistics, signifies its significant effort to optimize operational efficiencies and
improve the bottom-line performance. Although MWG's adoption of an assertive pricing
strategy has momentarily impacted its profit margins, it has helped the cooperation gain more
market share and lower the inventory levels. Additionally, its effective debt management
practices and leadership illustrates MWG as a profitable near-term investment opportunity.
Hence, we decided to Buy the MWG at the end of our trading day for the first portfolio.
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Technical analysis
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Figure 45: Technical movement of MWG (Eikon n.d.)
The stock chart of Mobile World Investment Corporation (MWG) between May 1st and 17th
2024 has several positive indicators suggesting a potential uptrend. The volume bars,
particularly on May 3rd to 6th and May 10th to 11th, predominantly appear green, indicating
higher buying activity compared to selling. Although there are fluctuating red volume bars, the
overall pattern suggests a healthy level of buying interest in the stock. Additionally, the SMA20
consistently remains above the SMA5 throughout the period, with both lines showing an
upward trajectory. This bullish crossover and the upward slope of both SMAs indicate a
strengthening trend in the stock's price movement.
Given these technical signals, we decide to buy the MWG stock. The predominance of green
volume bars suggests strong buying momentum, supported by the upward trend in the SMAs.
The consistent uptrend in the SMAs indicates sustained upward momentum in the stock's price
movement, further bolstering the bullish outlook. Moreover, choosing MWG over VHM, a real
estate stock, may offer diversification benefits as MWG operates in the mobile and electronics
retail sector. As consumer spending on technology products continues to rise, MWG's business
may benefit from this trend, potentially providing better growth opportunities compared to the
real estate sector represented by VHM.
2.4. Rubber Industry
The Vietnam rubber market has shown positive growth in recent years. In 2022, rubber exports
reached approximately 2.1 million tons, valued at over $3.3 billion, representing a 9.6%
increase in volume and a more than 1% increase in value compared to 2021. This resulted in a
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new record high for rubber export turnover (Vietdata 2023). According to data from the
General Department of Customs in March 2024, Vietnam's rubber exports continued to perform
well. Exports reached nearly 116.1 thousand tons, worth $180.36 million, showing a significant
increase of 32.3% in volume and 38.8% in value compared to February 2024. Compared to
March 2023, there was a slight increase of 0.2% in volume and a 10% increase in value
(Vietnam WTO Center 2024)
China was still Vietnam's largest rubber export market, accounting for 52.83% of the country's
total rubber exports, worth US$90.72 million, an increase of 4.5% in volume and 7.9% in value
compared to February 2024 (Viet Nam News 2024). Therefore, while many export sectors are
concerned about the tensions in the Red Sea and rising freight rates, the rubber industry will be
less affected by these issues but heavily impacted by concerns over weakened demand in China
(Vietnam WTO Center 2024). Additionally, according to Reuters (2024), the economic
situation in China is not very optimistic, especially with the slowdown in car sales (Appendix
12), a prominent user of rubber (for production of tyres), this could indirectly exert pressure on
export price of Vietnam rubber market in the near future.
However, positive signals from demand outside of China have also contributed to price support
in the early months of 2024. India, a major importer of rubber, has decided to reduce import
duties on certain types of electric vehicles produced by car manufacturers committing to invest
at least 500 million USD and start production within 3 years (Reuters 2024). This is expected
to be a new step for the populous country's automotive industry and, consequently, increase the
demand for rubber in tire production.
Moreover, in the first three months of 2024, the global rubber market witnessed significant
price fluctuations. Notably, rubber trading on the Osaka Exchange (OSE) in Japan reached a
seven-year high on March 15, closing at 352 yen/kg, representing increases of 36% and 57%
compared to the beginning of 2024 and the same period in 2023, respectively (VNEconomy
2024). This sudden increase in rubber prices in March and early April can be explained by the
geopolitical tensions in the Middle East, which pushed oil prices higher. Rubber prices are
influenced by oil prices because synthetic rubber, which is made from petroleum, is closely
tied to the price of oil. When the cost of synthetic rubber goes up, it also affects the price of
natural rubber, resulting in a general increase in rubber prices (VnEconomy 2024)
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Forecast for the second quarter of 2024 suggests that rubber exports will remain favorable. It
is believed that the global supply of rubber may continue to experience shortages in 2024-2025,
with an estimated annual deficit of around 600-800 thousand tons (VnEconomy 2024). Indeed,
Marklines (2024) reports that monthly sales of new cars in the first half of 2023 were
consistently around 2 million units (Appendix 13). By November 2023, sales had risen by
27.4% compared to the previous year, reaching 2.97 million units. In December 2023, sales
experienced a further increase to 3.15 million units, representing a growth of 23.5% (Appendix
13). The China Association of Automobile Manufacturers (CAAM) predicts that China's car
sales in 2024 will reach approximately 31 million units, growing in a stable manner and achieve
a more than 3% increase (Global Times 2023).
Overall, the Vietnam rubber market has experienced steady growth, with increased export
volumes and values. The market has also witnessed rising export prices, indicating positive
trends and potential for the industry.
Stock 4: GVR
-
Company Overview
The rubber industry has displayed positive growth signals since the start of the year. In Q1
2024, rubber exports experienced an upswing due to a significant surge in rubber prices. The
supply shortage is expected to persist throughout the year, partly due to the recovery and
expansion of the tire manufacturing sector in China, leading to a substantial increase in demand.
This market scenario has prompted us to include rubber stocks in our portfolio, with GVR
being one of the listed companies in this industry.
GVR specializes in three primary categories of rubber products: technical standard rubber,
centrifugal rubber, and smoke sheet rubber. The company is also actively involved in the
development of its own high-quality rubber products. In 2023, GVR surpassed its annual
consumption volume target, reaching 520,290 tons, representing a remarkable 103.8% increase
compared to the previous year and exceeding the annual plan by 102.4%.
GVR supplies its rubber products to major global customers, including renowned companies
such as Goodyear, Bridgestone, Michelin, Yokohama, Kumho, and Sailun. Despite facing
challenges and political instability in certain regions, the company's industrial parks largely
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achieved their production and business objectives. To be more specific, GVR successfully met
its targets in rubber production, reaching 450,500 tons, equivalent to 106% of the annual plan
and reflecting a growth rate of 105% compared to the previous year. Rubber consumption also
performed well, reaching 520,290 tons, equivalent to 102.4% of the annual plan and showing
a growth rate of 103.8% compared to the previous year.
-
Fundamental Analysis
The company demonstrates promising growth potential in terms of sales, gross profit, and net
profit, with growth rates of 111.8%, 107.4%, and 88% respectively (Appendix 4). Out of the
three manufacturing companies analyzed, GVR exhibits the lowest volatility in profitability
measures, with a sales standard deviation of only 15.7%. This indicates the company's
consistent sales stability. Consequently, GVR boasts an impressive operating margin of 20.7%.
We anticipate a similar upward trend as both rubber prices and demand continue to rise.
Moreover, GVR maintains a favorable debt-to-equity ratio of 10% (Appendix 5). This signifies
a lower financial risk and reduced dependence on borrowed funds. It indicates that the company
enjoys a solid financial position, making it more resilient to economic downturns and financial
challenges. Additionally, the statement mentions a secure interest coverage ratio of 10 times,
indicating that GVR generates sufficient earnings to comfortably cover its interest payments.
This ensures financial stability and reduces the risk of defaulting on debt obligations. A healthy
interest coverage ratio implies that the company has the capability to meet its interest
obligations and minimizes the risk of financial distress. GVR also exhibits low liquidity risk,
evident in its current ratio of 2.47 and cash as a percentage of sales at 76%. This highlights
GVR's strong liquidity position, with ample current assets to cover short-term liabilities. It
demonstrates the company's ability to fulfill its financial obligations promptly and potentially
reinvest in the business, pay off debts, or distribute dividends to shareholders.
However, GVR's asset turnover is relatively low at 0.28 (Appendix 6), indicating that sales
volume remains modest compared to its asset base. This suggests some limitations in
effectively managing capital. Consequently, despite maintaining high and stable profit margins,
GVR's return on equity stands at only 6.7%. Coupled with its high price-to-earnings (P/E)
multiple of 61x, it is the reason behind our decision to save this company for portfolio 2 instead
of portfolio 1 due to some of its limitations in fundamental aspects. However, we expect a
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growth potential of the rubber industry, which could leverage GVR's existing stability in
profitability. Therefore, we add GVR to reap the benefits of the industry.
-
Technical Analysis
Figure 46: Technical movement of GVR (Eikon n.d.)
From November 2023 to January 2024, we noticed a period of consolidation, where the 5-day
and 20-day moving averages (MA5 and MA20) were closely aligned, which suggests a phase
of market stability, low volatility, and indecision, which may potentially lead to a future
breakout in either direction, depending on the resolution of the consolidation phase.
Then, in February 2024, a significant surge in the MA5 was experienced, crossing above the
MA20 with a wide spread. This notable shift in short-term bullish momentum potentially
signals a trend reversal or a breakout opportunity. Indeed, this led to a substantial increase in
the stock price from 20,000 VND to 35,000 VND. While the MA5 adjusted downward in the
beginning of April 2024, causing the price to decline to 30,000 VND, we have observed the
MA5 moving upward again and crossing above the MA20 in the beginning of May 2024. Based
on this recent trend, this shift from bearish to bullish will incur increased buying pressure,
which is likely to drive a series of price increases in the future. The strong support found at the
30,000 VND level, coupled with the psychological impact of the price crossing this threshold,
further supports the expectation of continued upward movement
This positive trend can be attributed to the changes in the rubber market, as rubber is a key
factor for the company's performance. We note that the recent increase in rubber price, driven
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by high demand and the recovery of the Chinese automotive industry, which is Vietnam's
largest rubber consumer, has likely contributed to the observed stock price movements.
2.5. Active Portfolio 2 Summary
Figure 47: Active Portfolio 2 Capital Weight by Industries and Companies
Figure 48: Active Portfolio 2 Capital Weight by Industries
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IV.
Stocks Contributions and Portfolio Risk/Return
1. Contribution
1.1. Active portfolio 1 (26/04/2024 - 10/05/2024)
Figure 49: Active Portfolio 1 highlights
In summary, our Portfolio 1 achieved a 4.23% return during the trading period from April 26
to May 10. The largest position stocks contributed 4.1% to this return, indicating that the
portfolio's success was largely due to the effective allocation of the six stocks with the highest
weights.
Top 6 stocks contribute toward return in Active portfolio 1
The leading performer in our Active Portfolio 1 is PLX, positioned within the Energy sector
with the highest individual stock return of 12.32% and a portfolio weight of 5%, contributing
0.62% to the portfolio's return. Following closely are FPT and SAB from the Technology &
Communication and Brewers sectors, yielding returns of 6.33% and 5.88%, respectively.
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Notably, FPT and SAB significantly influence the total portfolio return, contributing 1.26%
and 1.09% respectively, thanks to our strategic allocation of 20% and 18.5% to these sectors.
In the banking sector, which includes five stock tickers, only TCB and ACB stand out as top
contributors with returns of 4.08% and 3.17%, respectively. Unfortunately, our modest
allocation of just 2% to TCB curtailed our potential returns for Portfolio 1. GAS, also in the
Energy sector, emerges as another key performer. The optimistic forecast for the Energy sector,
alongside the Brewers and Technology & Communication sectors for FY2024, guided our
strategic allocations, leading to positive results and affirming the success of our investment
approach in these sectors.
Bottom 6 stocks contribute toward return in Active portfolio 1
BID and VHM are the two stocks that generated losses in our Active Portfolio 1, with returns
of -0.3% and -1.10%, and contributed 0 and -0.01 to our portfolio return, respectively. We
made a prudent decision by allocating these two stocks a moderate portion of 2% of our
portfolio compared to other stocks. The other four bottom contributors delivered positive but
relatively low results, with VRE at 0.22%, HDB at 0.42%, MBB at 1.57%, and VNM at 2.31%.
VNM's return is considered acceptable as it is a defensive stock characterized by low risk and
low return, consistent with its large market capitalization and expected low yield rate. However,
in the banking sector, our expectations for higher returns driven by increased credit demand
and a high-interest rate environment did not materialize, resulting in a low return of 1.57% for
MBB with a 2% portfolio weight, and a negative return for BID. Furthermore, the Real Estate
sector also yielded low returns with two stocks among the bottom three performers, indicating
that the returns from this sector did not meet our expectations. This outcome underscores the
need to reassess the Real Estate sector when shaping Active Portfolio 2.
In conclusion, despite the negative returns from two selected stocks, Portfolio 1 still achieved
substantial overall success. This success can be attributed to our accurate allocation strategy
for the bottom five stocks, which yielded the lowest returns, demonstrating the effectiveness
of our investment decisions.
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1.2. Active portfolio 2 (03/05/2024 - 17/05/2024)
Figure 50: Active Portfolio 2 highlights
Top 6 stocks contribute toward return in Active portfolio 2
After adjusting some tickers and weights in Active Portfolio 2 and continuing to observe the
performance, the results show that the new equities align with our expectations for positive
future outcomes. The performance of Active Portfolio 2 demonstrates that the adjustments—
specifically, removing VHM and VRE from the Real Estate sector and BID from the Banking
sector, while adding GVR in Rubber and MWG in Consumer Retail with a 4% portfolio
weight—had a slight impact on the total returns. Despite the overall returns decreasing from
4.23% to 4.16% due to these adjustments, the benchmark's returns decreased more
significantly, indicating the impact of industry trends.
In the second portfolio, we saw remarkable growth in the Rubber and Consumer Electronic
Retail sectors, which were among the top three highest-return stocks, confirming that our
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decision to make these changes was accurate. Despite a few changes, the overall sector
composition of the portfolio remained consistent, and the selected companies regained their
profitability. Notably, our initial decision to invest 5% of our funds in PLX from the Energy
sector and 20% in FPT from the Technology & Communication sector yielded favorable
results, with these stocks contributing 0.51% and 1.32% to the portfolio return, respectively.
Additionally, MBB and TCB in the Banking sector continued to yield significant positive
results, though we only allocated 2% of the portfolio weight to them.
Bottom 5 stocks contribute toward return in Active portfolio 2
Fortunately, only HDB yielded negative results, and was the bottom contributor to the portfolio
with a slight decrease of -0.61% in portfolio return, contributing -0.02% to the overall results.
Despite this, our decision to slightly reduce the weight of the banking sector proved beneficial,
as BID maintained the same price from 3/5 to 17/5. This demonstrates the accuracy of our
allocation strategy, as the stocks we focused on turned out to be top contributors.
Additionally, the remaining stocks yielded moderately positive results, with all four stocks
being among the top six largest positions in our portfolio. We decided to keep VNM as our
largest stock weight to maintain our strategy of a minimum variance portfolio. VNM's stable
returns play a crucial role in preventing the portfolio from declining and minimizing risk.
However, the returns for ACB, SAB, and GAS decreased compared to the first portfolio.
Specifically, ACB's return dropped from 3.17% to 2.73%, and SAB's return significantly fell
from 5.88% to 2.47%, contributing to the overall decrease in earnings from Portfolio 1 to
Portfolio 2.
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2. Attribution
2.1 Active Portfolio 1
2.1.1. Allocation Effect
Figure 51: Active Portfolio 1 allocation effect
According to Bacon and Wright (2008), performance return attribution is a crucial management
tool that quantifies a portfolio's excess return against its benchmark by analyzing the active
decisions made in the investment process. Our allocation for Active Portfolio 1 proved
successful, with a positive allocation effect of 1.11. We effectively overweighted the
Technology & Communication (FPT), Brewers (SAB), and Energy (PLX) sectors, resulting in
positive allocation effects of 0.56, 0.44, and 0.46, respectively. However, we over-allocated to
the underperforming Integrated Oil & Gas and Real Estate sectors, leading to negative
allocation effects. We also underweighted the underperforming Banking sector, resulting in a
negative allocation effect of -0.24. Overall, Active Portfolio 1 had a total allocation effect of
1.10, indicating that our asset allocation decisions positively impacted the portfolio's
performance.
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2.1.2 Selection Effect
Figure 52: Active Portfolio 1 selection effect
Portfolio 1 exhibited a diverse array of selection effects across its holdings, indicating both
positive and negative variances compared to the benchmark. The selection effect serves as a
crucial metric for assessing portfolio performance against benchmarks, with positive effects
denoting outperformance and negative effects indicating underperformance relative to the
benchmark within specific segments (CFA n.d). Portfolio 1’s selection effect is -0.39, which
reveals the portfolio's underperformance compared to its benchmark due to the selection of
particular stocks. MBB.HM displayed a positive selection effect, surpassing the benchmark
by 0.03%, despite its relatively minor weight of 2.000%. Conversely, VNM.HM faced
challenges, recording a substantial negative selection effect of -7.85%, despite its significant
weight of 18.521%. Notably, TCB.HM precisely matched the benchmark, despite a
considerable weight variance of -60.19%, resulting in a selection effect of 0.00%. However,
holdings such as BID.HM, ACB.HM, and HDB.HM fell short of the benchmark, yielding
negative selection effects of -0.09%, -0.11%, and -0.11%, respectively. Additionally, assets
like FPT.HM performed in line with the benchmark, displaying a selection effect of 0.00%.
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2.2 Active Portfolio 2
2.2.1 Allocation Effect
Figure 53: Active Portfolio 2 allocation effect
Our Portfolio 2 outperformed the benchmark (4.16% vs 3.13%), with a positive allocation
effect of 1.21 contributing significantly to this performance. We successfully overweighted the
Technology & Communication and Energy sectors, which yielded substantial returns of 6.83%
and 9.63%, respectively, creating positive allocation effects of 0.71 and 0.35. We also
effectively overweighted the Consumer & Electronic Retailer and Rubber industries, adding to
the positive allocation effect. While we underweighted the underperforming Food Processing
sector, our over-allocation to the Breweries and Integrated Oil & Gas sectors led to negative
allocation effects. Our insufficient weight to the banking sector, which underperformed, also
resulted in a negative allocation effect. Nonetheless, the total allocation effect of 1.21 for
Portfolio 2 was higher than Portfolio 1's 1.10, indicating our slight adjustment decisions were
successful in optimizing the portfolio's return. This underscores the effectiveness of our active
portfolio management approach.
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2.2.2 Selection Effect
Figure 54: Active Portfolio 2 selection effect
In portfolio 2, the selection effect is -0.18, which is significantly lower than the first portfolio.
It indicates that the second portfolio outperforms the first one. VNM.HM shows a selection
effect of 0.00%, suggesting its performance mirrors that of the benchmark. Conversely,
ACB.HM and HDB.HM display negative selection effects of -0.06% and -0.12%, respectively,
signaling underperformance compared to the benchmark. Conversely, holdings like FPT.HM,
MBB.HM, GAS.HM, MWG.HM, SAB.HM, PLX.HM, TCB.HM, and GVR.HM exhibit
selection effects of 0.00%, indicating performance aligns with the benchmark in their
respective sectors. Furthermore, Active_2_Team7's overall selection effect is -0.18%,
contrasting with the first portfolio's 0.00% selection effect. This negative selection effect
suggests the portfolio, on the whole, underperformed relative to its benchmark, offering
valuable insights into the effectiveness of stock selection decisions and their impact on
portfolio performance.
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V.
Comments on total return/active return
1. Active Portfolio 1 vs Passive Portfolio (26/4/2024 - 10/5/2024)
1.1. Total Return/ Active Return
Figure 55: Returns comparison between Active Portfolio 1 and the Passive Portfolio
Analyzing the performance of our active portfolio compared to the benchmark, it is safe to say
that our strategy has been highly successful in not only minimizing the risk as stated in the
investment goals, but also gaining more return than expected. Indeed, our active portfolio
generated a total return of 4.23%, significantly outperforming the benchmark return of 3.51%.
This 0.72% active return demonstrates the value-add of our active management approach.
1.2. Risk-Adjusted Returns & Realized Risks
Figure 56: Risks comparison between Active Portfolio 1 and the Passive Portfolio
Our actively managed portfolio has a slightly higher total risk, as measured by standard
deviation, at 8.7% compared to the benchmark's 8.73%. However, this modest 0.03% increase
in risk has been more than offset by the superior returns we have achieved, making the tradeoff acceptable.
Our risk-adjusted performance metrics demonstrate strong results. The Treynor ratio is 1.13%
for our portfolio versus 0.79% for the benchmark, indicating we are earning a higher excess
return per unit of market risk. Our Sharpe ratio of 11.86 is significantly higher than the
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benchmark's 9.23, suggesting superior risk-adjusted returns overall. The high information ratio
of 5.02 and tracking error of 4.62% further highlight the consistency and meaningfulness of
our outperformance.
Other metrics support our portfolio's strong performance. The R-squared of 0.74 implies
moderate correlation with the benchmark, while the upside capture ratio of 1.2 shows we have
captured 120% of the benchmark's upside. The high alpha of 30.4% and beta below 1 at 0.86
demonstrate substantial risk-adjusted outperformance and lower systematic risk.
In conclusion, the combination of higher returns, better risk-adjusted performance, and
consistent outperformance validates the effectiveness of our active portfolio management
strategy. We have successfully balanced risk and return, underscoring the value and robustness
of our approach.
2. Active Portfolio 2 vs Passive Portfolio (3/5/2024 - 17/5/2024)
2.1. Total Return/ Active Return
Figure 57: Returns comparison between Active Portfolio 2 and the Passive Portfolio
After reviewing our investment portfolio, we made some strategic adjustments. Specifically,
we removed 2 real estate stocks and added positions in GVR and MWG. These changes resulted
in an enhanced performance for our updated portfolio, which we'll refer to as Portfolio 2 going
forward. As a result, the new Portfolio 2 generated a return of 4.16%. In comparison, the
benchmark return over the same period was 3.13%. This represents a difference of 1 percentage
point, which may not seem large at first glance, is approximately one-third of the benchmark
return. Moreover, over time, these types of incremental gains can compound to deliver
significantly higher long-term returns for our investment portfolio. The improved performance
of Portfolio 2 compared to the benchmark demonstrates the effectiveness of our portfolio
optimization strategy. By carefully analyzing the holdings and making targeted adjustments,
we were able to outperform the broader market index by a meaningful margin. This recent
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success demonstrates our capability to achieve that goal through diligent analysis and strategic
decision-making.
2.2. Risk-Adjusted Returns & Realized Risks
Figure 58: Risks comparison between Active Portfolio 2 and the Passive Portfolio
While the overall performance of our updated Portfolio 2 has been favorable, it is clear that we
have encountered some challenges in fully achieving our primary investment objective of
minimizing risk. The risk-adjusted metrics continue to paint a positive picture, but the increase
in the portfolio's total risk is a significant concern that requires close attention. Specifically, the
standard deviation of Portfolio 2 has risen to 9.56%, a substantial jump from the benchmark's
7.32% standard deviation. This elevated total risk suggests the changes made to the portfolio
have introduced greater overall volatility, which is troubling given our focus on risk
minimization.
Despite the positive signs, such as the Treynor ratio increasing to 1.19% versus the benchmark's
0.68% and the Sharpe ratio improving to 10.55 versus 9.42, these risk-adjusted metrics do not
fully offset the concerns around the portfolio's heightened total risk. The substantial realized
alpha of 42.85% is still an impressive achievement, and the lower correlation coefficient of
0.59 compared to the benchmark's 1.0 suggests our portfolio's returns have become less
correlated with the broader market.
While the portfolio's market outperformance is commendable, the difference in standard
deviation compared to the benchmark matters in the long run, which is a clear indication that
we have not fully accomplished our primary investment goal of minimizing risk with the
changes made to Portfolio 2. This prompts our team to reassess each component of the portfolio
and explore additional options for inclusion to better cater to our clients' risk appetite.
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Maintaining a delicate balance between risk and return is crucial, and we must ensure that our
portfolio decisions are more aligned with our core investment philosophy and risk tolerance.
3. Active Portfolio 2 vs Active Portfolio 1 (3/5/2024 - 17/5/2024)
3.1. Total Return/ Active Return
Figure 59: Returns comparison between Active Portfolio 1 and Active Portfolio 2
Regarding the comparative analysis of our two actively managed portfolios, it is evident that
the timely implementation of our adjustment strategy has proven to be effective. Specifically,
we made the proactive decision to exclude select real estate stocks from the portfolios, given
the observed weakness in the short-term recovery of that industry sector. Conversely, we
strategically included exposure to a retail stock and a rubber stock, in order to capitalize on the
prevailing market trends. As a result of these portfolio adjustments, our Portfolio 2 has
generated a 4.16% gain, outperforming the 3.41% return achieved by Portfolio 1. Remarkably,
both of our actively managed investment strategies have unexpectedly outperformed the
broader market benchmark, delivering an active return of 0.75%
3.2. Risk-Adjusted Returns & Realized Risks
Figure 60: Risks comparison between Active Portfolio 1 and Active Portfolio 2
The analysis of the data provides valuable insights into the risk-adjusted performance and
realized risk of both Active 1 and Active 2 strategies. Notably, both strategies demonstrate
commendable risk-adjusted returns, as evidenced by their strong Sharpe and Information ratios.
However, a closer examination uncovers subtle distinctions in their risk profiles. Active 2
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stands out with a slightly higher Treynor Ratio, indicating superior risk-adjusted performance
relative to its market exposure.
Upon delving into realized risk, Active 2 reveals notably higher realized alpha, suggesting its
capacity to generate excess returns beyond its beta exposure. Nonetheless, this advantage
comes with a trade-off, reflected in its elevated realized beta and tracking error compared to
Active 1, implying potentially increased volatility and divergence from the benchmark. Despite
their strong correlation with the market, as indicated by exceptionally high R-squared values,
Active 1 and Active 2 exhibit varying degrees of correlation. Active 2's higher upside capture
ratio implies its tendency to outperform during upward market movements, although this is
accompanied by a greater standard deviation, indicating heightened volatility compared to
Active 1. In light of these nuanced differences, investors should carefully consider their risk
tolerance and investment objectives to make well-informed decisions aligned with their
financial goals.
VI.
Compare and Contrast
Figure 61: Comparison between Active Portfolio 1, Active Portfolio 2, and the benchmark
In conclusion, both active portfolios outperform their benchmarks, with Active Portfolio 2
generating a slightly higher overall return of 4.16% compared to 4.23% for Active Portfolio 1.
However, Active Portfolio 2 had a higher active return of 1.03% vs 0.72% for Active Portfolio
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1, indicating greater real return. The key difference is that Active Portfolio 2 used a broader
approach considering macroeconomic factors, which appears to have aligned better with
market expectations. Active Portfolio 2 had greater overall volatility, but both portfolios had
lower realized betas than their benchmarks. In terms of performance measures, Active Portfolio
1 had a lower Treynor ratio but higher Sharpe ratio. The attribution analysis showed Active
Portfolio 2 had higher allocation and selection effects, suggesting superior decision-making.
However, both portfolios benefited more from effective weighting than stock selection, leaving
room for improvement in the analysis process.
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VII.
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VIII.
Appendices
Appendix 1: Vinamilk Development Strategy 2022-2026
Appendix 2:
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Appendix 3: VRE’s Shopping Mall Distribution
Appendix 4: Profitability Ratios (FPT, GVR, HPG and SAB)
Limitation: Due to time and resource constraints, we may not be able to conduct a
comprehensive financial analysis of the target company's peers. Additionally, FPT is the only
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technology company in the VN30 index. As a result, we have grouped 3 manufacturing
companies from the Brewers, Steels, and Rubbers sectors, along with 1 technology company,
to highlight the scale of the target company's operations. Although there may be some
differences in the calculation methods used between our analysis and the Definitiv Eikon data,
we assume these differences are insignificant and the analysis will still provide insights into
the nature of the target company's business and offer a reasonable basis for comparison, despite
potential minor discrepancies in the financial metrics.
Appendix 5: Solvency and Liquidity Ratios (FPT, GVR, HPG and SAB)
Appendix 6: Activity Ratios (FPT, GVR, HPG and SAB)
Appendix 7: Total revenue structure of FPT (By segment)
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Appendix 8: Revenue structures of FPT’s IT service segment (2023)
Appendix 9: Correlation Matrix of Portfolio 1
Appendix 10: Covariance Matrix of Portfolio 1
Limitation: Since we rely on historical data to calculate the annual return and standard
deviation, it's important to note that the Sharpe ratio we obtain may not fully reflect the
intrinsic performance or future prospects of the selected stocks. Consequently, there is a
possibility that we may overweight certain stocks with low standard deviation (because our
strategy is to minimize the variance of the whole portfolio), even though they may not
necessarily align with the current or anticipated market conditions. This is because our
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analysis primarily relies on past data rather than incorporating forward-looking insights or
outlooks.
Appendix 11: Relationship between standard deviation of Portfolio and Number of
Stocks (Gottschlich et al. 2014)
Appendix 12: Car sales total 3.16 million units in Jan and Feb
Appendix 13: China - Automotive sales volume, 2023
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