Luận văn stock valuation in vietnam theory practice and recommendation the case sacom

In Vietnam stock market, the situation is much more difficult since it’s an emerging market and to some aspecl, there’s no rule for markel like this in its carly stage This study will fo

VIETNAM NATIONAL UNIVERSITY, HANOI

HANOI SCHOOL OF BUSINESS

Ngo Viet Duc

STOCK VALUATION IN VIETNAM THEORY, PRACTICE AND RECOMMENDATION

THE CASE SACOM

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi - 2007

VIETNAM NATIONAL UNIVERSITY, HANOT

HANOI SCHOOL OF BUSINESS

Ngo Viet Duc

STOCK VALUATION IN VIETNAM THEORY, PRACTICE AND RECOMMENDATION

THE CASE SACOM

Major: Business Administration

1.1.STOCE_ DEFTNITION, TYPES AND FEATURES od

APPLIED VALUATION METIIODS IN EVALUATING CABLES AND

TELECOMMENICATION MATERIALS JOINT-STOCK COMPANY (SAM) 22

2.1 OVERVIEW OE VALUATION METHODS IN VIETNAM 22 New requirements for enterprise valuation 23 2.1.1 Valuation before 1996 - - 23

2.3.1 Stock market and SAM at early stage 31

2.4.1, Applied Advantageous valuation method to value SAM quarterly stock prices in

3.2 RECOMMENDATION TO APPLY VALUATION MODELS IN VIETNAM 4 3.2.1, Intemal adjusting factors - ae 2.2 External adjusting factors - ~ 50 CONCLUSION si nrereeree „52 REFERENCES - a)

APPENDIX

‘APPENDIX 1 Beta of SAM over 280 week:

APPENDIX 2 SAM’s historical Balance Sheets 60

TNTRODUCTION

1 Necessify of the thesis

The activity in stock market exchanges has increased much in Vietnam nowadays Consequently, the stock market is playing a growing important role to the society

Many instilulions as well as mdividuals are ticavily mvested im the stock market In

order for the stock market to develop normally and stably, understanding valuation

techniques of firms is very important Without some sorts of model to estimate value, mvestors would nol be able to anive al conclusions ou whal price to bu

sell an asset

When rescarching different valuation results of a specific fim, the value often differs we can see the sample in SAM case discuss in next chapter, Different in valuation may come from different views of the future or assumption or technique and, hence, different recommended values We can’t know which of these values is the most accurate and this is only one of the many difficulties involved in valuation

In Vietnam stock market, the situation is much more difficult since it’s an emerging market and to some aspecl, there’s no rule for markel like this in its carly stage

This study will focus on several valuation models that mostly use in firm valuation

in Vietnam: Multiples (P/E), ABV, DDM and DCF in order to show the different of each method and their resuits, through understanding of those model and try to find

the possible adjustment to make il accuracy

2 Purpose

The overall purpose of this study 1s lo establish some improvements of the available valuation method curently applied in Vietnam stock market ‘Ihe aim is to expose some weaknesses of the method and the reasons behind Further, the study will be

TNTRODUCTION

1 Necessify of the thesis

The activity in stock market exchanges has increased much in Vietnam nowadays Consequently, the stock market is playing a growing important role to the society

Many instilulions as well as mdividuals are ticavily mvested im the stock market In

order for the stock market to develop normally and stably, understanding valuation

techniques of firms is very important Without some sorts of model to estimate value, mvestors would nol be able to anive al conclusions ou whal price to bu

sell an asset

When rescarching different valuation results of a specific fim, the value often differs we can see the sample in SAM case discuss in next chapter, Different in valuation may come from different views of the future or assumption or technique and, hence, different recommended values We can’t know which of these values is the most accurate and this is only one of the many difficulties involved in valuation

In Vietnam stock market, the situation is much more difficult since it’s an emerging market and to some aspecl, there’s no rule for markel like this in its carly stage

This study will focus on several valuation models that mostly use in firm valuation

in Vietnam: Multiples (P/E), ABV, DDM and DCF in order to show the different of each method and their resuits, through understanding of those model and try to find

the possible adjustment to make il accuracy

2 Purpose

The overall purpose of this study 1s lo establish some improvements of the available valuation method curently applied in Vietnam stock market ‘Ihe aim is to expose some weaknesses of the method and the reasons behind Further, the study will be

LIST OF FIGURES

Figure 2.3.2 SAM price movement (2000— 2006) 30

Table 2.1, Number of joint stock companies 2000-2004 22

Table 2.2 SAM Fundamental Financial Indicies 2000-2005 28

Table 2.4.1 SAM 3 years Fundamental Iinancial indicies 35

Tuble 2.4.4 (a) Historical RCFE for 05 years (2002-2006) 37

Yable 2.4.4{b} Cashflow projection until the end of high growth period (2008) Table 2.4.4{c) Cashflow projection until the end of high growth period (2008).

LIST OF FIGURES

Figure 2.3.2 SAM price movement (2000— 2006) 30

Table 2.1, Number of joint stock companies 2000-2004 22

Table 2.2 SAM Fundamental Financial Indicies 2000-2005 28

Table 2.4.1 SAM 3 years Fundamental Iinancial indicies 35

Tuble 2.4.4 (a) Historical RCFE for 05 years (2002-2006) 37

Yable 2.4.4{b} Cashflow projection until the end of high growth period (2008) Table 2.4.4{c) Cashflow projection until the end of high growth period (2008).

TNTRODUCTION

1 Necessify of the thesis

The activity in stock market exchanges has increased much in Vietnam nowadays Consequently, the stock market is playing a growing important role to the society

Many instilulions as well as mdividuals are ticavily mvested im the stock market In

order for the stock market to develop normally and stably, understanding valuation

techniques of firms is very important Without some sorts of model to estimate value, mvestors would nol be able to anive al conclusions ou whal price to bu

sell an asset

When rescarching different valuation results of a specific fim, the value often differs we can see the sample in SAM case discuss in next chapter, Different in valuation may come from different views of the future or assumption or technique and, hence, different recommended values We can’t know which of these values is the most accurate and this is only one of the many difficulties involved in valuation

In Vietnam stock market, the situation is much more difficult since it’s an emerging market and to some aspecl, there’s no rule for markel like this in its carly stage

This study will focus on several valuation models that mostly use in firm valuation

in Vietnam: Multiples (P/E), ABV, DDM and DCF in order to show the different of each method and their resuits, through understanding of those model and try to find

the possible adjustment to make il accuracy

2 Purpose

The overall purpose of this study 1s lo establish some improvements of the available valuation method curently applied in Vietnam stock market ‘Ihe aim is to expose some weaknesses of the method and the reasons behind Further, the study will be

conducted to tind solutions of these problems This will be accomplished by a

literature study and a subsequent case study

3 Methodolugy

The Thesis uses quantitative and qualitative approach and includes statements that will give the reader an insight in, how the research arca was approached, why it was conducted in this way, how the work progressed, and, finally, the authors own critical opinions of the study

‘The intention is to introduce the reader to how the study was conducted as well as a give the opportunity to develop a personal perception conceming the

trustworthiness of the study

4, Outline of the Study

Tu the second part of this (hesis the literature study will be conducted The study helps to understand the core concepts and the basic theories of valuation as well as the basic umderslanding of stock market and value of a thing It also conlains a bref

intoduction of the development of Vietwam stock market and valuation lustory in

Vietnam, ‘That information is necessary for the discussion to valuation in practice

‘The third part of the thesis is the case study of SAM company In this we try to use different approach of valuation to find solutions for value of SAM By understanding different methods, we can understand difficulties with each valuation

we applied and can work out to find ways to increase the accuracy of valuation,

The final part of the thesis is concemed with recommendations and conclusions of how the valuation process can be improved and what should be adjusted to increase the usefulness and accuracy of the valuation process involved in Vietnam stock

TrarketL

LIST OF FIGURES

Figure 2.3.2 SAM price movement (2000— 2006) 30

Table 2.1, Number of joint stock companies 2000-2004 22

Table 2.2 SAM Fundamental Financial Indicies 2000-2005 28

Table 2.4.1 SAM 3 years Fundamental Iinancial indicies 35

Tuble 2.4.4 (a) Historical RCFE for 05 years (2002-2006) 37

Yable 2.4.4{b} Cashflow projection until the end of high growth period (2008) Table 2.4.4{c) Cashflow projection until the end of high growth period (2008).

the public can bold in a corporation is known as preferred stock, Common stock that bas been re-purchased by the corporation is known as treasury stock and is available

for a varicly of corporate uses

Common Stockholders are not guaranteed dividends, buy they expect to receive higher dividends during the company’s prosperous periods If a company [ails or lignidates, common stockholders are paid, after bondholders and prefered

stockholders

Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation The terms common stock and capital slock are often used interchangeably when the company has no preferred stock

Holders of common stock have voli powers in the corporation and participate in the profits of the corporation by way of dividends, but only after preferred stockholders have been paid their dividends (DeAngelo 1990)

1.1.2 Preferred stock

Preferred stock is a security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation (Copeland et al, 2000) Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend This stock does not usually carry voting rights Preferred stock has characteristics of both common stock and debt

A preferred stock shareholder forfeits his voting rights, but receives dividends (which are set at a specified rate) before the common stock shareholder In the event

of liquidation, bankruptcy preferred stock sharcholders are paid before common stock shareholders

It can be considered that a preferred stock is a hybrid between a share and a bond which, as opposed to ordinary shares, has a fixed yield, providing the issuer

achieves a iminium profit (DeAngelo, 1990) The fixed come stream of preferred

stock makes it similar in many ways to bonds

1.1.3 Rights

Options granted to shareholders to purchase additional shares directly from the company concerned Rights are issued to shareholders in proportion to the securities

they may hold ina company (Fama and French, 1992)

Rights allow existing shareholders of a corporation to subscribe to shares of a new

issue of common stock befure thal stock is offered lo the public on the stock market

A right usually has a life of 2 to 4 weeks, is transferable, and entitles the holder to buy the new common stock below the Public Offering Price Rights are often

gtanted to protect existing sharcholders from the effects of dilution,

1.14 Warrants

A warrant gives investors the right, but not the obligation, to buy a share at a certain, price (the exercise price) by a certain date in the future (I'ama and French, 1992) Warrants often accompany a share issue and they can be traded in the stock market

in their own right I'he value of warrants is likely to be more volatile than the underlying shares, and this can be a high-risk area of investment Because of this it

1§ a regulalory requirement to sign a warrarils risk warring prior lo trading.

of liquidation, bankruptcy preferred stock sharcholders are paid before common stock shareholders

It can be considered that a preferred stock is a hybrid between a share and a bond which, as opposed to ordinary shares, has a fixed yield, providing the issuer

achieves a iminium profit (DeAngelo, 1990) The fixed come stream of preferred

stock makes it similar in many ways to bonds

1.1.3 Rights

Options granted to shareholders to purchase additional shares directly from the company concerned Rights are issued to shareholders in proportion to the securities

they may hold ina company (Fama and French, 1992)

Rights allow existing shareholders of a corporation to subscribe to shares of a new

issue of common stock befure thal stock is offered lo the public on the stock market

A right usually has a life of 2 to 4 weeks, is transferable, and entitles the holder to buy the new common stock below the Public Offering Price Rights are often

gtanted to protect existing sharcholders from the effects of dilution,

1.14 Warrants

A warrant gives investors the right, but not the obligation, to buy a share at a certain, price (the exercise price) by a certain date in the future (I'ama and French, 1992) Warrants often accompany a share issue and they can be traded in the stock market

in their own right I'he value of warrants is likely to be more volatile than the underlying shares, and this can be a high-risk area of investment Because of this it

1§ a regulalory requirement to sign a warrarils risk warring prior lo trading.

TNTRODUCTION

1 Necessify of the thesis

The activity in stock market exchanges has increased much in Vietnam nowadays Consequently, the stock market is playing a growing important role to the society

Many instilulions as well as mdividuals are ticavily mvested im the stock market In

order for the stock market to develop normally and stably, understanding valuation

techniques of firms is very important Without some sorts of model to estimate value, mvestors would nol be able to anive al conclusions ou whal price to bu

sell an asset

When rescarching different valuation results of a specific fim, the value often differs we can see the sample in SAM case discuss in next chapter, Different in valuation may come from different views of the future or assumption or technique and, hence, different recommended values We can’t know which of these values is the most accurate and this is only one of the many difficulties involved in valuation

In Vietnam stock market, the situation is much more difficult since it’s an emerging market and to some aspecl, there’s no rule for markel like this in its carly stage

This study will focus on several valuation models that mostly use in firm valuation

in Vietnam: Multiples (P/E), ABV, DDM and DCF in order to show the different of each method and their resuits, through understanding of those model and try to find

the possible adjustment to make il accuracy

2 Purpose

The overall purpose of this study 1s lo establish some improvements of the available valuation method curently applied in Vietnam stock market ‘Ihe aim is to expose some weaknesses of the method and the reasons behind Further, the study will be

of liquidation, bankruptcy preferred stock sharcholders are paid before common stock shareholders

It can be considered that a preferred stock is a hybrid between a share and a bond which, as opposed to ordinary shares, has a fixed yield, providing the issuer

achieves a iminium profit (DeAngelo, 1990) The fixed come stream of preferred

stock makes it similar in many ways to bonds

1.1.3 Rights

Options granted to shareholders to purchase additional shares directly from the company concerned Rights are issued to shareholders in proportion to the securities

they may hold ina company (Fama and French, 1992)

Rights allow existing shareholders of a corporation to subscribe to shares of a new

issue of common stock befure thal stock is offered lo the public on the stock market

A right usually has a life of 2 to 4 weeks, is transferable, and entitles the holder to buy the new common stock below the Public Offering Price Rights are often

gtanted to protect existing sharcholders from the effects of dilution,

1.14 Warrants

A warrant gives investors the right, but not the obligation, to buy a share at a certain, price (the exercise price) by a certain date in the future (I'ama and French, 1992) Warrants often accompany a share issue and they can be traded in the stock market

in their own right I'he value of warrants is likely to be more volatile than the underlying shares, and this can be a high-risk area of investment Because of this it

1§ a regulalory requirement to sign a warrarils risk warring prior lo trading.

LIST OF FIGURES

Figure 2.3.2 SAM price movement (2000— 2006) 30

Table 2.1, Number of joint stock companies 2000-2004 22

Table 2.2 SAM Fundamental Financial Indicies 2000-2005 28

Table 2.4.1 SAM 3 years Fundamental Iinancial indicies 35

Tuble 2.4.4 (a) Historical RCFE for 05 years (2002-2006) 37

Yable 2.4.4{b} Cashflow projection until the end of high growth period (2008) Table 2.4.4{c) Cashflow projection until the end of high growth period (2008).

the public can bold in a corporation is known as preferred stock, Common stock that bas been re-purchased by the corporation is known as treasury stock and is available

for a varicly of corporate uses

Common Stockholders are not guaranteed dividends, buy they expect to receive higher dividends during the company’s prosperous periods If a company [ails or lignidates, common stockholders are paid, after bondholders and prefered

stockholders

Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation The terms common stock and capital slock are often used interchangeably when the company has no preferred stock

Holders of common stock have voli powers in the corporation and participate in the profits of the corporation by way of dividends, but only after preferred stockholders have been paid their dividends (DeAngelo 1990)

1.1.2 Preferred stock

Preferred stock is a security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation (Copeland et al, 2000) Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend This stock does not usually carry voting rights Preferred stock has characteristics of both common stock and debt

A preferred stock shareholder forfeits his voting rights, but receives dividends (which are set at a specified rate) before the common stock shareholder In the event

the public can bold in a corporation is known as preferred stock, Common stock that bas been re-purchased by the corporation is known as treasury stock and is available

for a varicly of corporate uses

Common Stockholders are not guaranteed dividends, buy they expect to receive higher dividends during the company’s prosperous periods If a company [ails or lignidates, common stockholders are paid, after bondholders and prefered

stockholders

Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation The terms common stock and capital slock are often used interchangeably when the company has no preferred stock

Holders of common stock have voli powers in the corporation and participate in the profits of the corporation by way of dividends, but only after preferred stockholders have been paid their dividends (DeAngelo 1990)

1.1.2 Preferred stock

Preferred stock is a security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation (Copeland et al, 2000) Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend This stock does not usually carry voting rights Preferred stock has characteristics of both common stock and debt

A preferred stock shareholder forfeits his voting rights, but receives dividends (which are set at a specified rate) before the common stock shareholder In the event

conducted to tind solutions of these problems This will be accomplished by a

literature study and a subsequent case study

3 Methodolugy

The Thesis uses quantitative and qualitative approach and includes statements that will give the reader an insight in, how the research arca was approached, why it was conducted in this way, how the work progressed, and, finally, the authors own critical opinions of the study

‘The intention is to introduce the reader to how the study was conducted as well as a give the opportunity to develop a personal perception conceming the

trustworthiness of the study

4, Outline of the Study

Tu the second part of this (hesis the literature study will be conducted The study helps to understand the core concepts and the basic theories of valuation as well as the basic umderslanding of stock market and value of a thing It also conlains a bref

intoduction of the development of Vietwam stock market and valuation lustory in

Vietnam, ‘That information is necessary for the discussion to valuation in practice

‘The third part of the thesis is the case study of SAM company In this we try to use different approach of valuation to find solutions for value of SAM By understanding different methods, we can understand difficulties with each valuation

we applied and can work out to find ways to increase the accuracy of valuation,

The final part of the thesis is concemed with recommendations and conclusions of how the valuation process can be improved and what should be adjusted to increase the usefulness and accuracy of the valuation process involved in Vietnam stock

TrarketL

of liquidation, bankruptcy preferred stock sharcholders are paid before common stock shareholders

It can be considered that a preferred stock is a hybrid between a share and a bond which, as opposed to ordinary shares, has a fixed yield, providing the issuer

achieves a iminium profit (DeAngelo, 1990) The fixed come stream of preferred

stock makes it similar in many ways to bonds

1.1.3 Rights

Options granted to shareholders to purchase additional shares directly from the company concerned Rights are issued to shareholders in proportion to the securities

they may hold ina company (Fama and French, 1992)

Rights allow existing shareholders of a corporation to subscribe to shares of a new

issue of common stock befure thal stock is offered lo the public on the stock market

A right usually has a life of 2 to 4 weeks, is transferable, and entitles the holder to buy the new common stock below the Public Offering Price Rights are often

gtanted to protect existing sharcholders from the effects of dilution,

1.14 Warrants

A warrant gives investors the right, but not the obligation, to buy a share at a certain, price (the exercise price) by a certain date in the future (I'ama and French, 1992) Warrants often accompany a share issue and they can be traded in the stock market

in their own right I'he value of warrants is likely to be more volatile than the underlying shares, and this can be a high-risk area of investment Because of this it

1§ a regulalory requirement to sign a warrarils risk warring prior lo trading.

conducted to tind solutions of these problems This will be accomplished by a

literature study and a subsequent case study

3 Methodolugy

The Thesis uses quantitative and qualitative approach and includes statements that will give the reader an insight in, how the research arca was approached, why it was conducted in this way, how the work progressed, and, finally, the authors own critical opinions of the study

‘The intention is to introduce the reader to how the study was conducted as well as a give the opportunity to develop a personal perception conceming the

trustworthiness of the study

4, Outline of the Study

Tu the second part of this (hesis the literature study will be conducted The study helps to understand the core concepts and the basic theories of valuation as well as the basic umderslanding of stock market and value of a thing It also conlains a bref

intoduction of the development of Vietwam stock market and valuation lustory in

Vietnam, ‘That information is necessary for the discussion to valuation in practice

‘The third part of the thesis is the case study of SAM company In this we try to use different approach of valuation to find solutions for value of SAM By understanding different methods, we can understand difficulties with each valuation

we applied and can work out to find ways to increase the accuracy of valuation,

The final part of the thesis is concemed with recommendations and conclusions of how the valuation process can be improved and what should be adjusted to increase the usefulness and accuracy of the valuation process involved in Vietnam stock

TrarketL

TNTRODUCTION

1 Necessify of the thesis

The activity in stock market exchanges has increased much in Vietnam nowadays Consequently, the stock market is playing a growing important role to the society

Many instilulions as well as mdividuals are ticavily mvested im the stock market In

order for the stock market to develop normally and stably, understanding valuation

techniques of firms is very important Without some sorts of model to estimate value, mvestors would nol be able to anive al conclusions ou whal price to bu

sell an asset

When rescarching different valuation results of a specific fim, the value often differs we can see the sample in SAM case discuss in next chapter, Different in valuation may come from different views of the future or assumption or technique and, hence, different recommended values We can’t know which of these values is the most accurate and this is only one of the many difficulties involved in valuation

In Vietnam stock market, the situation is much more difficult since it’s an emerging market and to some aspecl, there’s no rule for markel like this in its carly stage

This study will focus on several valuation models that mostly use in firm valuation

in Vietnam: Multiples (P/E), ABV, DDM and DCF in order to show the different of each method and their resuits, through understanding of those model and try to find

the possible adjustment to make il accuracy

2 Purpose

The overall purpose of this study 1s lo establish some improvements of the available valuation method curently applied in Vietnam stock market ‘Ihe aim is to expose some weaknesses of the method and the reasons behind Further, the study will be

2.3.1 Stock market and SAM at early stage 31

2.4.1, Applied Advantageous valuation method to value SAM quarterly stock prices in

3.2 RECOMMENDATION TO APPLY VALUATION MODELS IN VIETNAM 4 3.2.1, Intemal adjusting factors - ae 2.2 External adjusting factors - ~ 50 CONCLUSION si nrereeree „52 REFERENCES - a)

APPENDIX

‘APPENDIX 1 Beta of SAM over 280 week:

APPENDIX 2 SAM’s historical Balance Sheets 60

of liquidation, bankruptcy preferred stock sharcholders are paid before common stock shareholders

It can be considered that a preferred stock is a hybrid between a share and a bond which, as opposed to ordinary shares, has a fixed yield, providing the issuer

achieves a iminium profit (DeAngelo, 1990) The fixed come stream of preferred

stock makes it similar in many ways to bonds

1.1.3 Rights

Options granted to shareholders to purchase additional shares directly from the company concerned Rights are issued to shareholders in proportion to the securities

they may hold ina company (Fama and French, 1992)

Rights allow existing shareholders of a corporation to subscribe to shares of a new

issue of common stock befure thal stock is offered lo the public on the stock market

A right usually has a life of 2 to 4 weeks, is transferable, and entitles the holder to buy the new common stock below the Public Offering Price Rights are often

gtanted to protect existing sharcholders from the effects of dilution,

1.14 Warrants

A warrant gives investors the right, but not the obligation, to buy a share at a certain, price (the exercise price) by a certain date in the future (I'ama and French, 1992) Warrants often accompany a share issue and they can be traded in the stock market

in their own right I'he value of warrants is likely to be more volatile than the underlying shares, and this can be a high-risk area of investment Because of this it

1§ a regulalory requirement to sign a warrarils risk warring prior lo trading.

the public can bold in a corporation is known as preferred stock, Common stock that bas been re-purchased by the corporation is known as treasury stock and is available

for a varicly of corporate uses

Common Stockholders are not guaranteed dividends, buy they expect to receive higher dividends during the company’s prosperous periods If a company [ails or lignidates, common stockholders are paid, after bondholders and prefered

stockholders

Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation The terms common stock and capital slock are often used interchangeably when the company has no preferred stock

Holders of common stock have voli powers in the corporation and participate in the profits of the corporation by way of dividends, but only after preferred stockholders have been paid their dividends (DeAngelo 1990)

1.1.2 Preferred stock

Preferred stock is a security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation (Copeland et al, 2000) Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend This stock does not usually carry voting rights Preferred stock has characteristics of both common stock and debt

A preferred stock shareholder forfeits his voting rights, but receives dividends (which are set at a specified rate) before the common stock shareholder In the event

LIST OF FIGURES

Figure 2.3.2 SAM price movement (2000— 2006) 30

Table 2.1, Number of joint stock companies 2000-2004 22

Table 2.2 SAM Fundamental Financial Indicies 2000-2005 28

Table 2.4.1 SAM 3 years Fundamental Iinancial indicies 35

Tuble 2.4.4 (a) Historical RCFE for 05 years (2002-2006) 37

Yable 2.4.4{b} Cashflow projection until the end of high growth period (2008) Table 2.4.4{c) Cashflow projection until the end of high growth period (2008).

conducted to tind solutions of these problems This will be accomplished by a

literature study and a subsequent case study

3 Methodolugy

The Thesis uses quantitative and qualitative approach and includes statements that will give the reader an insight in, how the research arca was approached, why it was conducted in this way, how the work progressed, and, finally, the authors own critical opinions of the study

‘The intention is to introduce the reader to how the study was conducted as well as a give the opportunity to develop a personal perception conceming the

trustworthiness of the study

4, Outline of the Study

Tu the second part of this (hesis the literature study will be conducted The study helps to understand the core concepts and the basic theories of valuation as well as the basic umderslanding of stock market and value of a thing It also conlains a bref

intoduction of the development of Vietwam stock market and valuation lustory in

Vietnam, ‘That information is necessary for the discussion to valuation in practice

‘The third part of the thesis is the case study of SAM company In this we try to use different approach of valuation to find solutions for value of SAM By understanding different methods, we can understand difficulties with each valuation

we applied and can work out to find ways to increase the accuracy of valuation,

The final part of the thesis is concemed with recommendations and conclusions of how the valuation process can be improved and what should be adjusted to increase the usefulness and accuracy of the valuation process involved in Vietnam stock

TrarketL

TNTRODUCTION

1 Necessify of the thesis

The activity in stock market exchanges has increased much in Vietnam nowadays Consequently, the stock market is playing a growing important role to the society

Many instilulions as well as mdividuals are ticavily mvested im the stock market In

order for the stock market to develop normally and stably, understanding valuation

techniques of firms is very important Without some sorts of model to estimate value, mvestors would nol be able to anive al conclusions ou whal price to bu

sell an asset

When rescarching different valuation results of a specific fim, the value often differs we can see the sample in SAM case discuss in next chapter, Different in valuation may come from different views of the future or assumption or technique and, hence, different recommended values We can’t know which of these values is the most accurate and this is only one of the many difficulties involved in valuation

In Vietnam stock market, the situation is much more difficult since it’s an emerging market and to some aspecl, there’s no rule for markel like this in its carly stage

This study will focus on several valuation models that mostly use in firm valuation

in Vietnam: Multiples (P/E), ABV, DDM and DCF in order to show the different of each method and their resuits, through understanding of those model and try to find

the possible adjustment to make il accuracy

2 Purpose

The overall purpose of this study 1s lo establish some improvements of the available valuation method curently applied in Vietnam stock market ‘Ihe aim is to expose some weaknesses of the method and the reasons behind Further, the study will be

conducted to tind solutions of these problems This will be accomplished by a

literature study and a subsequent case study

3 Methodolugy

The Thesis uses quantitative and qualitative approach and includes statements that will give the reader an insight in, how the research arca was approached, why it was conducted in this way, how the work progressed, and, finally, the authors own critical opinions of the study

‘The intention is to introduce the reader to how the study was conducted as well as a give the opportunity to develop a personal perception conceming the

trustworthiness of the study

4, Outline of the Study

Tu the second part of this (hesis the literature study will be conducted The study helps to understand the core concepts and the basic theories of valuation as well as the basic umderslanding of stock market and value of a thing It also conlains a bref

intoduction of the development of Vietwam stock market and valuation lustory in

Vietnam, ‘That information is necessary for the discussion to valuation in practice

‘The third part of the thesis is the case study of SAM company In this we try to use different approach of valuation to find solutions for value of SAM By understanding different methods, we can understand difficulties with each valuation

we applied and can work out to find ways to increase the accuracy of valuation,

The final part of the thesis is concemed with recommendations and conclusions of how the valuation process can be improved and what should be adjusted to increase the usefulness and accuracy of the valuation process involved in Vietnam stock

TrarketL

CHIAPTER 1:

LITERATURE REVIEWS: STOCK AND STOCK VALUATION

“Valuation: the determination, through prior analysis, of a price for a

business that might be paid by an investor “ (Tlervé, 1993-95)

In this chapter relevant theories connected to our problem discussion will be discussed

‘The chapter begins with definitions and some possible discussions about some concepts that will be important when the analysis is conducted Thereafter, basic

theories of models are imroduced This is to give the reader insight how valuation

models work Lately, history of Vietnam stock market is presented for setting up a

scenario For valuation im early slage

1.1 STOCK— DEFINITION, TYPES AND FEATURES

Stock, also referred to as a share, is commonly a share of ownership in a joint stock

company (Copeland et al, 2000) ‘The owners and financial backers of a company aay desire addilional capital to invest in new projocis wilhin the company If they were to sell the company it would represent a loss of control over the company It may be represented by a certificate and can be common or preferred, voting or non- voling, redeemable, convertible, cle

There are kinds of stocks:

1.1L Common stock

Common stock, also referred to as common shares, is the most usual and commonly

held form of stock in a corporation (DeAngelo, 1990) The other type of shares Oat

CHIAPTER 1:

LITERATURE REVIEWS: STOCK AND STOCK VALUATION

“Valuation: the determination, through prior analysis, of a price for a

business that might be paid by an investor “ (Tlervé, 1993-95)

In this chapter relevant theories connected to our problem discussion will be discussed

‘The chapter begins with definitions and some possible discussions about some concepts that will be important when the analysis is conducted Thereafter, basic

theories of models are imroduced This is to give the reader insight how valuation

models work Lately, history of Vietnam stock market is presented for setting up a

scenario For valuation im early slage

1.1 STOCK— DEFINITION, TYPES AND FEATURES

Stock, also referred to as a share, is commonly a share of ownership in a joint stock

company (Copeland et al, 2000) ‘The owners and financial backers of a company aay desire addilional capital to invest in new projocis wilhin the company If they were to sell the company it would represent a loss of control over the company It may be represented by a certificate and can be common or preferred, voting or non- voling, redeemable, convertible, cle

There are kinds of stocks:

1.1L Common stock

Common stock, also referred to as common shares, is the most usual and commonly

held form of stock in a corporation (DeAngelo, 1990) The other type of shares Oat

2.3.1 Stock market and SAM at early stage 31

2.4.1, Applied Advantageous valuation method to value SAM quarterly stock prices in

3.2 RECOMMENDATION TO APPLY VALUATION MODELS IN VIETNAM 4 3.2.1, Intemal adjusting factors - ae 2.2 External adjusting factors - ~ 50 CONCLUSION si nrereeree „52 REFERENCES - a)

APPENDIX

‘APPENDIX 1 Beta of SAM over 280 week:

APPENDIX 2 SAM’s historical Balance Sheets 60

LIST OF FIGURES

Figure 2.3.2 SAM price movement (2000— 2006) 30

Table 2.1, Number of joint stock companies 2000-2004 22

Table 2.2 SAM Fundamental Financial Indicies 2000-2005 28

Table 2.4.1 SAM 3 years Fundamental Iinancial indicies 35

Tuble 2.4.4 (a) Historical RCFE for 05 years (2002-2006) 37

Yable 2.4.4{b} Cashflow projection until the end of high growth period (2008) Table 2.4.4{c) Cashflow projection until the end of high growth period (2008).

2.3.1 Stock market and SAM at early stage 31

2.4.1, Applied Advantageous valuation method to value SAM quarterly stock prices in

3.2 RECOMMENDATION TO APPLY VALUATION MODELS IN VIETNAM 4 3.2.1, Intemal adjusting factors - ae 2.2 External adjusting factors - ~ 50 CONCLUSION si nrereeree „52 REFERENCES - a)

APPENDIX

‘APPENDIX 1 Beta of SAM over 280 week:

APPENDIX 2 SAM’s historical Balance Sheets 60

2.3.1 Stock market and SAM at early stage 31

2.4.1, Applied Advantageous valuation method to value SAM quarterly stock prices in

3.2 RECOMMENDATION TO APPLY VALUATION MODELS IN VIETNAM 4 3.2.1, Intemal adjusting factors - ae 2.2 External adjusting factors - ~ 50 CONCLUSION si nrereeree „52 REFERENCES - a)

APPENDIX

‘APPENDIX 1 Beta of SAM over 280 week:

APPENDIX 2 SAM’s historical Balance Sheets 60

conducted to tind solutions of these problems This will be accomplished by a

literature study and a subsequent case study

3 Methodolugy

The Thesis uses quantitative and qualitative approach and includes statements that will give the reader an insight in, how the research arca was approached, why it was conducted in this way, how the work progressed, and, finally, the authors own critical opinions of the study

‘The intention is to introduce the reader to how the study was conducted as well as a give the opportunity to develop a personal perception conceming the

trustworthiness of the study

4, Outline of the Study

Tu the second part of this (hesis the literature study will be conducted The study helps to understand the core concepts and the basic theories of valuation as well as the basic umderslanding of stock market and value of a thing It also conlains a bref

intoduction of the development of Vietwam stock market and valuation lustory in

Vietnam, ‘That information is necessary for the discussion to valuation in practice

‘The third part of the thesis is the case study of SAM company In this we try to use different approach of valuation to find solutions for value of SAM By understanding different methods, we can understand difficulties with each valuation

we applied and can work out to find ways to increase the accuracy of valuation,

The final part of the thesis is concemed with recommendations and conclusions of how the valuation process can be improved and what should be adjusted to increase the usefulness and accuracy of the valuation process involved in Vietnam stock

TrarketL