BVH – Share valuation

8/2/2019 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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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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2/ Foreign exchange rate


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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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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



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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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analyze BVH:


5 PeriodSMA
http://tradingsim.com/blog/wp-content/uploads/2011/06/5-SMA.png


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analyze BVH:


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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Charting

Trend Lines are an important tool in technical analysis for bothtrend identification and confirmation.


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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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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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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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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):



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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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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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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 payout 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 payout 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!

Documents

BVH – Share valuation