RONG VIET SECURITIES COMPANY ANALYSIS OF GENERAL STRATEGY AND FINANCIAL RATIOS, ITS EFFECT AND RECOMMENDATIONS FOR SECURITIES COMPANY

INTERSHIP REPORT ADVANCED FINANCE RONG VIET SECURITIES COMPANY ANALYSIS OF GENERAL STRATEGY AND FINANCIAL RATIOS, ITS EFFECT AND RECOMMENDATIONS FOR SECURITIES COMPANY HANOI, 2022 Table of Contents Ac.

INTERSHIP REPORT

ADVANCED FINANCE

RONG VIET SECURITIES COMPANY

ANALYSIS OF GENERAL STRATEGY AND FINANCIAL RATIOS, ITS EFFECT

AND RECOMMENDATIONS FOR SECURITIES COMPANY

HANOI, 2022

Table of Contents

Acknowledgement

Table of figure

Abbreviation

Introduction 1

Chapter 1: Company Overview 2

1.1 Company history 2

1.2 Shareholder and Management structure 3

1.3 Organization structure 5

Chapter 2: Analysis of Operating Activities and Financial Statement 6

2.1 Operating activities 6

2.1.1) Brokerage 6

2.1.2) Trading 7

2.2 Financial statement 7

2.2.1) Income statement 7

2.2.2) Balance sheet 9

2.3 Competitors 12

Chapter 3: Development Orientation of Rong Viet 15

3.1 Management strategy 15

3.1.1) Description 15

3.1.2) Analysis 16

3.2 Effectiveness Evaluation 17

3.3 Comparison with other companies 18

Chapter 4: Analysis and Recommendations for Rong Viet Securities Company 19

4.1 Analysis 19

4.2 Recommendation 20Conclusion 22References 23

STATUTORY DECLARATION

I hereby formally declare that I have written the report through my own research,collection of data, analysis All the data, figure is collected using public data andapproved data from the company Analysis conducted within this essay is my ownresearch and analytics Data that I used within this essay has been included in thereference section below

Nguyen Quang Minh

Hanoi, 02/10/2022

I would like to give out the best recognition to all of the people who had been support meduring my internship and taught me with the operation and code of conduct within thefinancial industry I deeply appreciate Rong Viet Securities and Mr Tung, lead of theanalyst team, for their assistance with my internship And more importantly, I wouldwant to thank my instructor, PhD Le Hoang Anh, for his support and advice with myinternship

Table of figure

Figure 1 Shareholder ownership 5

Figure 2 Board of Directors Composition 5

Figure 3 Management 6

Figure 4 Organization structure 7

Figure 5 Rong Viet ‘s products 8

Figure 6 VDS ‘s income statement 9

Figure 7 Growth rates of income statement 10

Figure 8 Profitability ratios of VDS (%) 11

Figure 9 VDS ‘s Balance Sheet 12

Figure 10 Balance sheet ‘s growth rate 13

Figure 11 Liquidity ratio of VDS (%) 13

Figure 12 Leverage ratios of VDS (%) 14

Figure 13 Financial ratios of peers 15

Figure 14 Rong Viet ‘s 2022 business plan 17

Figure 15 Comparison of plan and actual result in 2022 19

Abbreviation

Within the fast-growing economy of Vietnam, the need for a channel of fund to grow isbecoming increasingly important However currently, the main for channel of fund forbusiness is mainly through loan from bank But with the growing of the stock marketduring the period 2020 – 2021, the stock market is becoming an increasingly attractivechannel of funds Thus, securities companies in Viet Nam are set to growth at anexponential rate This is an opportunity to work in this field and identify potential forthese companies Rong Viet is such a company with its presences in Viet Nam dated back

to 2006, its operation is stable, and the market share of the company reach over 1% in

2021 The company’s bottom line also represents a traditional securities company –which is heavily dependent on the state of the market This report will look at thefundamental of such companies The scope of this will analyze the industry environment,the financial statement as well as the strategy of such company, and based on thoseanalysis to make recommendations for the company

Chapter 1: Company Overview

Rong Viet Securities Corporation (VDS) was established in 2006 The Company has itsbusiness in securities brokerage, investment and financial advisory, underwriting,securities depository, and propriety trading In 2021, securities brokerage revenue wasVND314.31 billion, up 197.21% over the same period Profit from FVTPL reachedVND347.08 billion, up 155.87% over the same period and contributing 55.6% of totaloperating profit Profit before tax was VND534.05 billion, up 177.2% over the sameperiod Returns on equity (ROE) at 30.28% VDS has been listed and traded on Ho ChiMinh Stock Exchange (HOSE) since 2017

1.1 Company history

21/12/2006: Rong Viet Securities Company received license to conduct business by StateSecurities Committee

26/04/2017: VDSC officially entered operation

08/2007: Capital raise from 100 billion VND to 200 billion VND through new equityissuance

8/2018: Raise capital through private equity offering to Eximbank to 360 billion VND2009: Become one of the first 10 companies to become listed on HNX with the ticker ofVDS

29/6/2017: Listed on HOSE

25/01/2018: Charter capital was raised to 910 billion VND

02/08/2018: Charter capital was raised to 1,000.99 billion VND

1/3/2022: Increase charter capital to 1,051.04 billion VND

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1.2 Shareholder and Management structure

Figure 1 Shareholder ownership

Figure 2 Board of Directors Composition

Member Nguyen Chi Trung

Source: VDS

Figure 3 Management

Source: VDS

Rong Viet follow a two-tier board system, which is a separate BoD and BoC and eachboard has a different duty BoD ‘s duties is to manage the activities of the company whileBoC need to supervise the BoD

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on important matters The task of the BoC is to supervise the BoD, making sure the BoDfollow the resolution that was passed at the shareholder ‘s meeting.

Chapter 2: Analysis of Operating Activities and Financial Statement

2.1 Operating activities

2.1.1) Brokerage

+ Results

In 2021, revenue from brokerage activities for Rong Viet reached 314.3 billion VND,

an 214% increase compared to 2020 and completed 241% of the initial plan.Furthermore, the total securities account at Rong Viet is 98,450, increased by 16.6%compared to the year before, make up 2.3% of all securities account in Vietnam Revenue for securities service also increase by 56% compared to 2020, reaching307.5 billion

Secondly, the increase in new accounts at Rong Viet also attract more customers toconduct securities service at VDS such as margin borrowing, … This is highlybeneficial to VDS since securities service always has a higher margin when compared

to brokerage and IB revenue

Lastly, VDS also developed many products to improve the experience andrecommendation for retail investors

Figure 5 Rong Viet ‘s products

Idragon Regular update to improve customers ' experience

goDragon Improve security in managing clients ' account and accelerate the

opening account process using eKYC

liveDragon Premium product for clients with account at VDS with regular stock

recommendation update, newsletter, investment opportunity,company information

brokerDragon Assist customer support with information management, learning

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management system,

SmartDragon iBot Automatically make investment recommendation for user using

algorithm from Smart Dragon

nDragon and smart

2.1.2) Trading

+ Results

In 2021, propriety trading revenue of VDS totaled 62.7, fell short of the 90 billionplans However, this still represents a growth of 239% compared to the year prior + Reasons:

The reasons for this underperformance compared to the initial plan is due to themarket reach a peak during the reporting period as well as the initial crash of themarket at the beginning of 2021

Moreover, Rong Viet has also shifted its resource away from trading due to theunpredictability of the market to a much more stable and higher margin activities such

as investment banking This overall has led to the underperformance of the tradingdepartment

2.2 Financial statement

2.2.1) Income statement

Figure 6 VDS ‘s income statement (billion VND)

Income Statement - VDS

2017 2018 2019 2020 2021

Net revenue 354 419 332 454 1,022

Operating expenses

General and Administrative expenses

Operating profit

Other profit 0 0 0 0 1

Profit/Loss of investments in associates and joint ventures Profit before tax

Earnings per share (VND)

9177.2

Profit after tax for shareholders of

the parent company

-38.32 -49.56 333.2

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183.58

Source: VDS

In 2021, due to the uptrend of the stock market, the revenue of VDS increased by 124%.The gross profit also increased nearly 150% while profit increase by 183% However, itshould be noted that 2021 is an exceptional year for the stock market We should notexpect the same pace of growth in the next period due to central banks increase interestrate and the crashing of stock market around the world in 2022

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Figure 8 Profitability ratios of VDS (%)

10 20 30 40 50 60 70

Gross profit margin Net profit margin

Source: VDS

As with a securities company, the profitability of Rong Viet depends on the state ofthe financial market As seen in the 2019, when VNIndex enter a sideway period, thedaily trading volume is only around 2,000 – 5,000 billion per day This has a negativeimpact on VDS when its net profit margin declined to 10.44% compared to 16.38%the previous year However, when the market starts to enter a bull run in 2020, theprofitability of VDS increased significantly The gross margin and net margin reached56% and 33% respectively, up from the high of 2018 Continued to 2021, the marketcontinues to experience a bull run with VN Index reached an all-time high of 1598,the ratios continued to improve VDS ‘s gross and net margin in 2021 are 61% and41%, a new record in the company’s history The ROE also reached a high of 30.2%and ROA is 12.9% This has contributed to a record revenue and profit for Rong Viet

in 2021 However, as the company’s profitability depends heavily on the state ofmarket, this year the company’s ratios will be worse compared to 2021 due to VNIndex has crashed from a high of 1598 to 1200 in 2022

2.2.2) Balance sheet

Figure 9 VDS ‘s Balance Sheet (billion VND)

Balance Sheet - VDS 2017 2018 2019 2020 2021

Current assets 1,807 1,881 2,246 2,515 3,920

Total owner's equity and liabilities 1,843 1,932 2,300 2,568 4,033

Figure 11 Liquidity ratio of VDS (%)

0.5 1 1.5 2 2.5 3

Cash ratio Quick ratio (except: Inventories, Short-term receivables - reference) Short-term ratio

Source: VDS

Even though Rong Viet increased its liabilities to record level, the liquidity ratios – whichindicate the firm ‘s ability to pay back its obligations, has only slightly decreased in 2021.The short-term ratio decreased from 1.81 in 2020 to 1.69 in 2021 while the most stringent

Figure 12 Leverage ratios of VDS (%)

0 100 200 300 400 500

2018 2019 2020 2021

Source: VDS

As for the leverage ratios, all of the ratios have increased YoY since 2018, which indicatethat Rong Viet is using more and more leverage in order to expand its business While theprofitability of Rong Viet has increased since 2018, the usage of more and more leveragemay pose a challenge to VDS in a market downturn when revenue may not be enough tocover all its obligations This may force VDS into bankruptcy However, in the moment,the amount of cashflow from operating of Rong Viet is still enough to cover all itsobligations and its liquidity ratios is approximately the same with other security company

in Viet Nam

2.3 Competitors

Here is a table with the financial ratio for the last 12 months of 6 publicly listedsecurities companies that share the same characteristic with VDS As we can see fromthe table, almost all VDS ‘s financial ratios are in line with the industry norms

Figure 13 Financial ratios of peers for the previous 12 months period

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VDS HCM MBS SSI VCI VCI VND Average

6,545.8 0

30,750.7 3

14,197.3 0

14,197.3 0

of going bankrupt The total liabilities/equity ratio is 1.83 compared to 1.71 onaverage, which is high This means Rong Viet equity is lower when compared toindustry average and it may also take on a lot of liabilities However, VDS ‘s financialstrength is good.

Management efficiency of VDS is lower when compared to the industry VDS ‘s ROEand ROA is lower when compared to the industry Its Sales per employee is also low,3,221 compared to an average of 7960 Its profitability ratios such ass Net margin,Gross margin is also low then compared to average Rong Viet management need toimprove its efficiency As a practice common within industries, VDS do not paydividends, instead invest those money back to its business

As a result of low efficiency, the valuation of VDS is lower when compared to othercompany

Chapter 3: Development Orientation of Rong Viet

3.1 Management strategy

3.1.1) Description

Rong Viet strategy for 2021-2030 revolves around 10 of the following points:

- Digitalization as well as creating a financial and investing ecosystem for itscustomers

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- Scale up its operation, improve efficiency, brand name, competitive advantagewithin its industry

- Increase its financing source to fund its activities through issuing bonds, partnerwith financial institutions

- Improve its administrative process

- Increase high quality recruitment

- Develop new products, improve customer experience and support

- Invest more into branch, open 2-3 new branch in new potential market

- Restructure its fund company and develop fund product that is in line withbusiness activities of Rong Viet

- Push to improve brand image of Rong Viet to customers, investors, shareholder,and other partners

- Streamline the internal control and risk management of Rong Viet

Figure 14 Rong Viet ‘s 2022 business plan (billion ND)

2022 Revenue 1193

Brokerage Activities 350Securities Services 430

Trading 282.1Investment Banking 100

Others 31.5

PBT 504 PAT 403.2

Source: VDS

Brokerage activities:

Rong Viet is planning to improve its brokerage revenue through improving its broker

‘s quality They are planning to do this by creating partner development program forbrokers, collaborating with partners who has a financial ecosystem that is compatiblewith VDS and create new products for customers

Securities service:

Improving its ability to monitor and manage risk, partner with financial institutions tofund new margin borrowing activities

Trading:

revenue in 2022 Conduct research on cover warrants products to implement at anappropriate time and finishing a new Platform for investment activities.

VDS also planning to increase its variety of channel for funding to adapt to thechanging regulatory environment for issuing bonds due to decree 65

As for its strategy relating to the brokerage activities, VDS appeared to follow the try– and true method of recruiting new partner as broker instead of relying too heavily

on a permanent number of employees This will help VDS to reduce fixed cost andreaching more customers by partnering with many individuals’ brokers However, thisstrategy may run the risk of having too many partners, which may lead to a decline inquality of its broker and worsen the company image Furthermore, partnering with toomany brokers may lead to increased cost due to VDS has to offer a competitivecommission to attract them This may be unsustainable in the long run and results inloss for the company

Its securities service strategy is generally in line with the industry, which is partneringwith more financial institutions to receive funding for margin lending activities

For its trading activities, it is a right step to reduce revenue from trading due to theunpredictability of the market This source of revenue is not stable compared to other.Thus, by developing new product such as bond, Rong Viet revenue will become morestable and diversified, lower its exposure to market volatility This move will alsohelp to free up its resource to dedicate to more profitable activities

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