Many high-value stocks raising doubts with investors

Saigon Investment
(Saigon Investment) - The prolonged excitement at the stock market helped many stocks of various companies rise far beyond their intrinsic value, with some even trading above VND 100,000 per share, contrary to actual day to day value of many of these businesses. 

TDH is trading above VND 160,000 per share.

TDH is trading above VND 160,000 per share.

Dizzy increase

According to current data, there are more than 20 stocks trading at price above VND 100,000 per share on all three exchanges. To name some of them: Nam Tan Uyen Industrial Park Joint Stock Company (NTC); Vinacafe Bien Hoa Joint Stock Company (VCF); Western Bus Station Joint Stock Company (WCS); VRG Saigon Investment Joint Stock Company (SIP); Beer-Alcohol-Beverage Corporation Saigon Beverage (SAB); Rang Dong Lightbulbs and Plugs Joint Stock Company (RAL); Thaiholdings Joint Stock Company (THD); Cholimex Food Joint Stock Company (CMF); Vietnam Cable Television Corporation (CAB); World Di Investment Joint Stock Company Dong Anh (MWG); Ha Long Beer and Beverage Joint Stock Company (HLB); Saigon Cargo Service Joint Stock Company (SCS); Dong Anh Electrical Equipment Joint Stock Company (TBD); Vietnam Dairy Products Joint Stock Company (VNM); Service Joint Stock Company Online FPT (FOC); Son La Sugar Joint Stock Company (SLS); Bank for Foreign Trade of Vietnam (VCB); Central Pharmaceutical Joint Stock Company 3 (DP3); Hau Giang Pharmaceutical Joint Stock Company (DHG); Hai Ha Confectionery Joint Stock Company (HHC); Viettel Post Joint Stock Company (VTP); Masan Consumer Goods Joint Stock Company (MCH); and the Sa Giang Import and Export Joint Stock Company (SGC).

Except for stocks listed for a long time on the stock market and trading steadily at above VND 100,000, such as SAB, VNM, MWG, VCF, and DHG, most others have just been listed or have exceeded the VND 100,000 price level due to excitement in the stock market in the second half of 2020, such as VCB, SIP, WCS, NTC, DP3, RAL, and SLS. According to data, these stocks recorded an average increase of 50% to 150% in 2020. Specifically, THD listed in 2020 at a reference price of VND 19,500 per share, but is now trading above VND 160,000 per share.

Contrary business results

Although the transactions have crossed the 3-digit milestone, the business results of the above companies show in the contrary a very marked difference. According to statistics, VHM is currently leading in profit after tax in 2020 with VND 27,839 bn. This is followed by VCB and VNM with an after-tax profit of VND 18,447 bn and VND 11,099 bn, respectively. Enterprises with profits of over VND 1,000 bn include SAB with VND 4,723 bn; MCH with VND 4,556 bn; MWG with VND 3,918 bn; and SIP with VND 1,033 bn.

The group of companies with a profit of more than VND 100 bn were: THD with VND 909 bn; DHG with VND 740 bn; VCF with VND 721 bn; SCS with VND 464 bn; VTP with VND 384 bn; RAL with VND 336 bn; NTC with VND 281 bn; FOC with VND 204 bn; TBD with VND 141 bn; SLS with VND 119 bn; and DP3 with VND 114 bn. On the other hand, the bottom-ranking companies have profits of only a few tens of billion dong, some even reaching just above VND 1 bn such as GAB with VND 1.4 bn, and a little bit higher were SGC with VND 31 bn; HHC with VND 39 bn; WCS with VND 56 bn; and CAB with VND 62 bn.

Factors affecting profit

The P/E level is too large, causing this group of high-value stocks to gradually lose their attractiveness, with some even creating doubts about the true value of the stock compared to the internal situation of the company. For example, SAB is going through a very difficult period due to being overwhelmed by three objective reasons at the same time. For instance, the Covid-19 pandemic, the law on prevention of alcohol effects via Decree 100, and the huge competitive pressure from foreign beer brands. This is the reason why SAB revenue in 2020 decreased by 26.2% to reach VND 27,961 bn, and profit after tax decreased by 8.1%, reaching VND 4,937 bn. These three factors will continue to affect the profitability of SAB in 2021 as well.

The outbreak of the Covid-19 pandemic in 2020 is also the reason why VCB has had the lowest business growth rate in recent years. The business results of VCB surprised investors because most of the other banks recorded impressive growth last year. According to the consolidated financial statement of the fourth quarter of 2020, the whole year of 2020 profit before tax of VCB was flat, compared to the previous year with VND 23,045 bn. This result is also somewhat fortunate thanks to a number of businesses surging in the fourth quarter such as net interest income increased by 20%, reaching VND 10,390 bn, and interest from services increased 3.5 times, reaching VND 3,068 bn. However, the number of other non-profit activities declined, such as business activities went down 45%, and other activities lost VND 64 bn.

The NTC code is currently the most expensive stock on the stock market, sometimes reaching VND 300,000 per share, but only a few thousand shares per session are traded.
For THD, in addition to P/E of upto 64.2x, investors are also concerned about the transparency in business activities of this emerging new company. Specifically, the risk that investors face is the question of a merger and acquisition that THD is pursuing. This enterprise was newly established in 2011, with its main production and business activities of building materials, trade, food, real estate rental and investment. The commercial activities of construction materials and real estate leasing bring in the main revenue. The founder of THD, Mr. Nguyen Duc Thuy, currently owns 10.78 million shares of THD, equivalent to 20% of the capital.

By the end of 2020, THD closed listing of 296 million shares at VND 10,000 per share, to increase its charter capital from VND 539 bn to VND 3,500 bn. However, instead of using this new source of capital to supplement production and business activities, THD used almost all the raised capital of VND 2,961 bn to buy 204 million shares, equivalent to 81.6% of capital of ThaiGroup. This is a business in which Mr. Thai holds the Chair of Board of Directors.

Kim Giang

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