BVH – Share valuation.
Transcript of BVH – Share valuation.
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BVH The exercise ofstock valuation
ADVISER: MRS. TRAN THI XUAN ANH
Ngc Anh
Kiu Ngc BchL Thy Lan
Th Thu QunhNguyn Thy Trang
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CONTENTS
A. Fundamental analysis.
1. Macro economic.
2. Insurance industry area.
3. The performance of the company.
B. Technical analysis.
C. Price valuation.
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I. MACRO-ECONOMIC.
A. Fundamental analysis.
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I. Macroeconomic factors
1/ Vietnams GDP growth rateo As an emerging economy, Vietnams government
always focuses on growth rate target.o GDP growth rate in Q4/2011: 6.2 %
o GDP growth rate in Q1/2012 stood at 4%, the lowest levelover the past 2 years (Q1/2010: 5.84%, Q1/2011: 5.57%)
o Economic growth expected to average 7.2% a year in
2011-15 , underpinned by strong growth in consumption,
investment and exportso Private consumption growth will be driven by an
improvement in the labor market and a consequent
increase in real wages
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I. Macroeconomic factors
1/ Vietnams GDP growth rateo Remittances from overseas Vietnamese will remain high,
while the development of the financial services industrywill make consumer credit more easily available=>providing important boost to private consumption.
o demand for exports revives, investment in form ofpurchases of capital goods for the manufacturing sectorwill pick up.
o Despite concerns about the quality of Vietnam's business
environment and a recent downturn in planned foreign-invested projects, foreign investor interest in generalremains strong. Demand for Vietnamese goods particularlyin the US, China and Europe, will remain robust
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III. Macroeconomic factors
It is widely known that, BVH are categorized
in blue chips group in stock market, whose
prices fluctuations are greatly dependent on
foreign investors The increase in the foreign exchange rate or
the depreciation of the VND would harm the
domestic stock market, as it will decrease
foreign investors profit margin whenconverting their income into their currency(namely USD, GBP)
2/ Foreign exchange rate
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I. Macroeconomic factors
2/ Foreign exchange rate
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I. Macroeconomic factors
3. Interest rates In theory, the interest rate decreases
should have positive impacts on the stock
market's performance. IRs go down -
>price of capital cheaper =>encouraging
enterprises which have investment plans --
lower rates help ease the financial burdens
on businesses
Interest rate decreases bank deposits
less attractive in the eyes of people ->prompts investors to withdraw money
from banks to purchase stocks -> stock
prices increasing
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I. Macroeconomic factors
4. Inflationary pressures
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5/ Wages growth
Wage increases that are in excess of an increase in the
productivity of that labor will reduce the proportion of
companys income revenue that goes to profit, and willrender the company less attractive to shareholders and
potential share investors
In Vietnam, the average wage of staff in insurance & finance
fields are rank at highest level -VND 5.61 million on average Prices of stocks are determined by the net earnings of a
company
I. Macroeconomic factors
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I. Macroeconomic factors
6/ Macroeconomic factors & suggestion to thefuture
PM directed the SBV to support the market
In the first quarter of 2012, Vietnams stock
market were making a gradual recoveryowing to the prime minister has recently
directed the State Bank of Vietnam (SBV) to
have measures to support the stock market
Earlier, Chair of the SSI (Saigon SecurityInc.), Vu Bang, said that the SSI will work
with the SBV to carry out measures to
support the development of the stock market.
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II. Insurance industry area.
The performance of the sector or industry that thecompany is in also plays in part in determining the
stock price of the company. Most of the times, the
stock price of the companies in the same industry will
move in tandem with each other.
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1. Insurance industry.
a. Future perspective.Despite the challenging environment, the global insurance industry has
restored capitalization beyond 2007 levels.
Asias insurance market will see sustained growth in 2012, with
emerging markets continuing to outpace developed markets Life insurance premiums in Asia are projected to grow by 4.4% (0.6%
in 2011) in real terms, fuelled by rebounds in China and India and
expected increased demand for traditional protection-type products
Non-life insurance premiums in Asia are forecasted to grow at aslower rate of 6.0% (8.1% in 2011) in real terms, aligned with
moderately slower economic growth
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The countrys insurance market has been growing at a briskpace in recent years, with total direct written premiums
increasing 20 percent annually since moves were first made to
liberalize the industry in 2008. total premiums for 2010
amounted to VND 30.8 trillion (US$ 1.57 billion), a paltry figurefor a country of almost 90 million people. Vietnams continueddemographic and economic development will fuel further
demand for insurance.
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b. Competition in the industry.
There is a strong competition between insurance players
in both and life insurance market in Vietnam.
There are currently 29 insurance companies operating
in Vietnams non-life market, with more expected tofollow due to the potential for growth. Non-life insurers
in Vietnam are expected to continue relying
comprehensively on reinsurance services to meetregulatory demands and support their large-risk
portfolios.
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The life insurance industry in Vietnam is less crowded than the
non-life sector, with only 12 registered insurers including 11
foreigncapital invested companies and direct life premiums
written amounting to VND 13.79 trillion in 2010 (US$ 673
million). The leaders in the market include Prudential, Bao Viet
Life and Manulife.
2 B ki i d t
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2, Banking industryBy the end of 2010, Vietnam had had one development bank, one bank
for social purposes, 5 state owned banks, 37 joint stock banks, 50
foreign bank branches, 5 100 percent foreign banks, 5 joint venturebanks, 18 finance companies, 12 finance leasing companies, one
centralpeoples credit funds and 1000 local credit funds.
Unfortunately, affected by unfavorable conditions from global and
domestic markets, banking industry was riddled with many difficulties.
The total bad debt ratio reported by commercial banks is 3 percent of
the total outstanding loans, while foreign institutions believe that the
actual figure is 10 percent
The Governments banking sector restructuring plan commenced in2011, with a view to ensuring a healthy banking system that operates
effectively and provides diversified products and services, enhancing
financial capacity and competitiveness to better meet the countrys
economic development needs.
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3, Securities market
Just a baby with first ten years of its life, Vietnam's security market
has developed miraculously more than expected. To date, Vietnam
has two stock exchanges and an UPCoM market, with nearly 600listed stock codes, 105 securities companies and nearly one million
trading accounts of which it is about 25% from foreign investors.
However, the stock
exchange declined strongly
in 2011 due to the
pessimistic of domestic as
well as global economy.
Under the currentcircumstances, its believed
that the restructure is
necessary to revitalize the
young market.
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II, Company analysis1. Corporate Overview
Founded:15 January 1965
Businesses:
Life & Non-Life Insurance
Services, Reinsurance, Financial
Investment, Fund Management,Securities, Banking, Real Estate
Services
Employees:
5,500 Employees
45,000 Agents Nationwide.
Annual Revenue:
USD 679 million (2010)
Nationwide Offices:
150 branches across 63 cities &
provinces in Vietnam
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Corporate governance
From 01 July 2008, a new corporate governance model has been
applied at Baoviet Holdings, consisting of the General Shareholders'
Meeting, the Board of Directors (and its supporting committees), the
Inspection Committee and functional blocks. This structure has been
built upon the business development strategy of the Company, the
best practices applied in international and domestic economic groups
as well as in compliance with the law and regulations of the Charterof Baoviet Holdings.
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The shareholder structure according to the 2012 Annual General
Meeting of Shareholders attendees list was finalized on 28 March
2012.
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a, Products and servicesBaoViet Holdings is one of the leadings in insurance industry,which offers a wide range of services. The key business lines of
Baoviet Insurance include non-life insurance, reinsurance, loss
adjustment, financial investment and other business permissible
by laws and regulations. Insurance products include:For personal customers
Personal accident insurance
Health insurance
Travel insuranceMotor vehicle insurance
Home insurance
Hull and professional indemnity
insurance...
For corporate customers
Cargo insurance
Aviation and aerospace insurance
Oil and gas insuranceHull and professional indemnity insurance
Motor vehicle insurance
Engineering insurance and property insurance
Liability and miscellaneous insurance.
Travel, Personal accident and health
insurance (for staff)....
2. Business description.
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Business partners
Currently, BaoViet has been co-operated with two strategic partners
which are HSBC and SCIC.
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3. SWOT AnalysisStrengths
The brand name: Bao Viet is the first insurance company in Vietnam with
over 40 years operating in non-life insurance field. In general, BaoViet isquite popular in Vietnam's life-insurance and non-life insurance market.Market share: Bao Vietnam is now the largest non-life insurance company in
Vietnam, accounting for more than 38% market share.Distribution: BaoViet has branches nationwide, which is conducive to its
ability to take over the marketFinancing ability: Bao Vietnam not only doing business in insurance field but
also a strong financial corporation. trading company in the insurance sector,
Relationship: Bao Viet has good relationship with the state executives, which
is the main reason why it can sign big contracts from state projectsThe corporate governance is newly applied, but gradually strengthened to
create a firm and effective business environment.Staff, branches: The corporation has a numerous skilled staff along with a
great deal of branches, which enables it to offer customers a variety of products
and services.
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Weaknesses
In terms of investment, banking fields, BaoViet is a new player in
the highly-competitive industries. As a result, the company lacks
knowledge and experience to operate effectively as well as has
difficulty in expanding the market share.As regarded to the insurance industry, which is the key field of
BaoViet, the company is facing serve competition from domestic andforeign firms.Branches: The branches of Bao Vietnamese act asymmetrically,
which results in its ineffectiveness.
Working style: Influenced by the working style of the central-planning period, sometimes, the resolution to claims and
compensation payment to customers in a number of cases are
inflexible, annoying customers .
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Opportunities
The need for insurance products is still high in domestic market as
people are more concerned about their life and future as well as more
aware of insurance products so there is huge chance for the company
to take over the market, make huge profit provided that it can producehigh-quality services at reasonable cost.Optimistic domestic economy: Provided that the company can offer
appropriate services and the domestic economy witness positive trend
which leads to the increase in people income, the corporation can stillgenerate huge profit from selling insurance products.Suitable business plan: If BaoViet can realize its suitable strategic
plans including applying technology advance, the company can
improve and enhance their services.
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Threats
Bad economic conditions, lower income can adversely affect
industries that BaoViet operatesHigh inflation rate can lead to the rise in salary, which increasethe expemse and reduces profit of BaoViet.Changes in government policies can harden the business
environment, limit the corporations abilityCompetition: The number of licensed insurance companies isincreasing. BaoViet is confronted with the competition from
domestic and overseas firms.
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4. Key Business Strategies
In 2015, BaoViet is expected to become Vietnams leading
financialinsurance group, with solid financial strength, strategically
integrating into regional and international markets, focused on three
pillars: insurance, banking and investment.
BaoViet Group forecasts that total assets grow at CAGR of 17%
for 2011-2015 period, equivalent to 100.000 bn VND by end 2015.
Total revenue grows at CAGR of 16%, equivalent to 26,000-
28,000 bn VND by end 2015. Additionally, PAT grows at CAGRof 23%, equivalent to 2,600-2,800 bn VND, PAT of BaoViet
Group after minority interests is 2,200-2,300 bn VND.
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5. Financial Performance2011 consolidated revenue was VND 14872 billion, increasing by
15.3%, compared to 2010. Non-life insurance business earned a total
revenue of VND 5612 growing 16.2% compared to 2010. Totalrevenue from life insurance reached VND 6661 billion, up 8.6%
compared to 2010, and new business premium increased by 23%.
Operating income from banking operations achieved VND 1719
billion, an impressive increase of 79.6%. Total revenue from financialservices and other revenue amounted to VND 1291 billion, rising by
30%.
2011 lid t d fit b f t VND
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2011 consolidated profit before tax was VND
1521, up 17.3% from VND 1296 billion in 2010.
Profit from general insurance business
contributed 33.1% while that from life insurance
made up 44.9%, the rest belonged to banking
and other financial services. Despite business
challenges in 2011, BaoViet delivered resilient
growth. Non-life insurance business
dramatically jumped 345, financial services andother business expanded 1.5%
Bao Viets total consolidated assets were VND
43581 billion, a decrease of VND 1209 billion.The key reasons included BaoViets downsized
investment in bond repo, and lowered profits
made from the State Bank short-term loans and
borrowings this year.
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6. BVH shares
BVH is a blue-chip with the average transaction volume off about
135,000 shares per session (the last 12 months).
In 2011, the share price of BaoViet Holdings (BVH) tracked
higher than the VN-index.
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However, compared to other blue chip stocks, the BVH dividend is
rather low at 2% when the inflation rate is extremely high 18.5% for
the whole year 2011. The low dividend payout makes BVH is not as
attractive as other stocks to investors looking for dividend incomes.
Vietin Bank (15-20% dividend)
Vincom (5,6% dividend)JSC bank for foreign trade (4% dividend)
Bao Viet Holdings (2% dividend)
Petrovietnam Fertilizer and Chemicals (6,4% dividend)
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BaoViet has full opportunities to developfurther and generate huge profit provided that
the domestic and global economy will be
optimistic and that it can sharpen its
competitiveness by enhancing the attitude and
knowledge of staff as well as offering attractive
products and services to meet customers
demands.
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B. TECHNICAL ANALYSIS
ABOUT BVH
I. Tools of technical analysis and apply to analyze BVH.1. Moving Average Models.
2. Charting.
II. Predict the Price of BVH till the end of 2012.
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C. TECHNICAL ANALYSIS ABOUT BVH
Source of picture: www.vietstock.com.vn
T ls f t h i l l sis d l t
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Tools of technical analysis and apply to
analyze BVH:
Moving averages models:
Simple moving average (SMA): is calculated by
adding the closing price of the security for a number
of time periods and then dividing this total by the
number of time periods
How to Calculate the Simple Moving Average
Take a look at a simple moving average example with MSFT. The
last five closing prices for MSFT are:
28.93+28.48+28.44+28.91+28.48 = 143.24
The simple moving average :5-day SMA = 143.24/5 = 28.65
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Tools of technical analysis and apply to
analyze BVH:
Moving averages models:
5 PeriodSMA
http://tradingsim.com/blog/wp-content/uploads/2011/06/5-SMA.png -
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Tools of technical analysis and apply to
analyze BVH:
Moving averages models:
Basic Rules for Trading with the SMA
Buy when the actual cuts the SMA from the belowespecially if theSMA has been flat or is in a gentle decline
Buy when the SMA series is raising strongly and the price series cutsor touches the SMA from the above, but then moves back above theSMA after only a few observations.
Sell when the SMA flattens, or declines after a steady rise, and theprice series cuts the SMA from above.
Sell when the SMA series is in decline and the price series cuts ortouches the SMA from below, but then moves back beneath the SMAafter only a few observations.
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Tools of technical analysis and apply to analyze BV
Moving averages models:About BVH:
Circles No. 1 and No. 3 is that a peak of the stock price is set out on theupper band and then the next summit is set in the band. This signal warningof a reversal of stock prices to be reduced and more certainty than when thestock price goes down below the moving average SMA-15.
Circle 2 is confirmed solid and strong gains that the price of stock increasesbecause the stock price then breaks through and rises above moving averageSMA15
During the period 1, there is a sign of price decrease appears: theintersection of price and moving average SMA-5, the price tends to declinebut then recover fully
At the time of (1), there is a signal on the rise: average price intersects theSMA - 5 and beyond sharply compared to the moving average.
Finally, during the time 4, as circle 3, the signal of significant decreaseoccurs: the price intersects the moving average SMA-5 from above.
T l f t h i l l i d l t l BV
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Tools of technical analysis and apply to analyze BV
Charting
Trend Lines are an important tool in technical analysis for bothtrend identification and confirmation.
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Tools of technical analysis and apply to analyze BV
Charting
About BVH:
In overall, from mid October to January, the trend is downward, but
from that time to now, the price of BVH is upward trend.
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Tools of technical analysis and apply to analyze BV
Charting
Support and resistance lines.
Support is a level at which bulls (i.e., buyers) take control over
the prices and prevent them from falling lower.
Resistance, on the other hand, is the point at which sellers (bears)
take control of prices and prevent them from rising higher. The
price at which a trade takes place is the price at which a bull and
bear agree to do business. It represents the consensus of theirexpectations.
Tools of technical analysis and apply to analyze
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Tools of technical analysis and apply to analyzeBVH
Charting
analyze BVH:
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analyze BVH:
Charting: Support and Resistance lines:
About BVH: In the period from mid October to mid December, the
market put in a state of wreckage fluctuation betweenresistance and support lines
At the time of (1) and (2) stock prices break throughthe threshold of resistance and support, but thebreakthrough was only temporary and soon return toprice fluctuations in the threshold of resistance andsupport.
Circle 2 is about time that a bottom of the stock price isset below the level of lower band and then the next oneis set in Bollinger bands. This signal warning of areversal of stock prices to rise.
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Tools of technical analysis and apply to analyze
BVH
Charting
Reversal patterns: Head and shoulders This is one of the most popular and reliable chart patterns in
technical analysis.
Head and shoulders is a reversal chart pattern that when formed,
signals that the security is likely to move against the previous trend
T l f t h i l l i d l t l
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Tools of technical analysis and apply to analyze
BVH
ChartingReversal patterns: Head and shoulders
About BVH:
The pattern of BVHs chart, it is head and shoulders bottom, also
known as inverse head and shoulders (shown on the right) is the
lesser known of the two, but is used to signal a reversal in a
downtrend
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y pp yanalyze BVH
Charting
RSI helps to signal
overbought and
oversold conditions ina security.
This indicator helps
traders to identify
whether a securitys
price has beenunreasonably pushed
to current levels and
whether a reversal may
be on the way.
The indicator is plotted in a range between
zero and 100. A reading above 70 is used to
suggest that a security is overbought, whilea reading below 30 is used to suggest that it
is oversold.
RSI (Relative Strength Index):
Tools of technical analysis and apply to analyze
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y pp y yBVH
ChartingMACD (Moving Average Convergence Divergence) Is comprised of two exponential moving averages, which help to
measure momentum in the security
MACD= shorter term moving average - longer term moving
average
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Tools of technical analysis and apply to
analyze BVH
ChartingAbout BVH
At the time determined by the red and blue lines, the stock price exceeds the
tape on upper band or the lower band as compared to the RSI chart the time
this point corresponds to the threshold and super sale super buy. This confirms
the strength increased (or reduced) current is very strong. Especially duringOctober and November, the bottom of the continuous price is set higher than
the lower band confirmed very strong and continuous prices in long period.
During the period 1, many signs of price decrease appear: RSI cuts purchasing
threshold and go down the deficit, the appearance of negative divergence on
MACD - Histogram and. This example shows that the early forecasts helpedoff investors exit early out of the market rather than waiting for the last signal.
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Tools of technical analysis and apply to
analyze BVH
ChartingAbout BVH
The time of (1), signal on the rise: the appearance of positive divergence on
MACD - Histogram, RSI thresholds beyond the super sale. But finally
found artillery command and most certainly is that the intersection of the
moving average of MACD and itself does not happen and the price is not
really strong and fast decrease. This example points to the early nature
taking advantage of opportunities to bring more profits but less than likely
correct.
During the time 3, many signs of price increases appear: positive
divergences appear simultaneously on the RSI and MACD - histogram, RSI
rising above the threshold super sale.
Finally, during the time 4, as circle 3, the signal of significant decrease
occurs:, RSI goes out of the threshold super sale in very short time, but goes
back immediately. However, positive divergences still maintain on MACD
histogram, so that although the price decline sharply, it will recover
quickly.
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Predict the Price of BVH till the end of 2012Till the end of the year 2012, the price of BVH will
sometimes reduce sharply in short time, but in long term,it will recover to move within support and resistance
lines, be stable with steady volume of dealing stock.
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Predict the Price of BVH till the end of 2012
Based on the pattern of BVHs chart, it is head and shoulders
bottom, also known as inverse head and shoulders (shown on
the right) is the lesser known of the two, but is used to signal a
reversal in a downtrend. There will be some moments that priceof BVH will come out of the Bollinger Band.
When the price is above the band, RSI will also threshold beyond
the super purchase and leads to the signal of selling. As a result,
the price of BVH decreases. Opposite to this, when the price isbelow the band, RSI threshold beyond the super sale, the price will
increase after that.
C Securities valuation
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C. Securities valuation.
Find out intrinsic value.
Formula:
D1 = The dividend at the end of the year 1.
RE = The required rate of return on ordinary shares.G = The constant, annual dividend growth rate.
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The dividend pay- out ratio announced on June, 4th, 2011 was
12%/ value, it means 1,200 VND/share. Besides, dividends
2010 is 1100 (11% /value) decided on (14/05/2010).
G=(1200-1100)/1100=0.09=9%
D1 = The dividend at the end of the year 1 =
1,200x(1+9%)=1304.
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About required rate of return.
After examining the stock market, we decided that PVI is the
insurance company which has the same required rate of returnwith Bao Viet Holdings because of the similarity of some
financial ratios such as P/E, ROA, ROE, EPS. Furthermore,
they also had stock data and other items on financial statement
closely relative to BVH.PE EPS ROA
(%)
ROE
(%)
BIC 6.3 1,198 4 11
BVH 40.7 1,771 3 11
PVI 9.5 2,011 4 8
BMI 5.4 2,044 4 7
PGI 5.4 1,460 11 12
PTI 7.2 1,554 5 11
VNR 2.7 4,381 8 13
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PVI has the dividend rate at 15%, current share price at22,000(Viet capital), dividend payment equals 1,500 (15% x
10,000 - par value). We can calculate the PVI required rate of
return by using the formula: RE=(D/S)+g which:
RE= required rate of return;D=dividend payment;
S=current stock value;
g= dividend growth rate.
According to Viet capital(11/05/2011), we got D/S = 6.8%, g=5%(Bui Duc Hoan ofPSI) RE= 6.8%+5%=11,8%.
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D1 = The dividend at the end of the year 1 =
1,200x(1+9%)=1304
RE = The required rate of return on ordinary shares = 11,8% G = The constant, annual dividend growth rate =9% (follow
the constant growth rate model)
VE = = 46,571.%9%8.11
1304
VE 2012 VE 2013 VE 2014 VE 2015 VE 2016 VE 2017
46714,2857 50918,5714 55501,2429 60496,3547 65941,0266 71875,719
VE 2012 VE 2013 VE 2014 VE 2015 VE 2016 VE 2017
46600 51000 56000 60000 66000 72000
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BVH has good business performance and stable growth rate
on insurance industry, yet the revenue growth rate is still
low. The risk of fluctuation on stock market can affect the
companys securities investment. Therefore, we examined
carefully and valued BVH stock at 46,571, lower than thepresent price at 72,000. Besides, the dividend pay- out rate
is not high which cant attract the investors who focus on
dividend payment. To the investors who have not the
specific investment strategy on BVH, they shouldSELL thisstock.
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THANK YOU!