1641 valuation of the four leading pharmaceutical companies listing on hochiminh stock exchange masters thesis (FILE WORD)

UWE ofhΓ Dissertation submitted in partial fulfillment of the Bristol England lly Requirement for the MSc in Finance FINANCE DISSERTATION ON Valuation of the four leading pharmaceutical companies listing on Hochiminh Stock Exchange LE HUONG HAO ID No: 17970732 Intake Supervisor: Dr Tran Tat Thanh September 2018 ACKNOWLEGEMENT I would like to express my sincere thanks to Dr Tran Tat Thanh for his supervision and guidance His suggestions made my dissertation more profound and more perfect Finally, I wish to show an expression from my heartfelt gratitude to my parents for their encouragement, and their support TABLE OF CONTENT Title Acknowledgement ii Table of contents iii Chapter 1: Introduction .1 Chapter 2: Macroeconomics Analysis .6 Chapter 3: Industry Analysis 21 Chapter 4: Competitive Analysis .26 Chapter 5: Traphaco Joint Stock Company .32 Chapter 6: DHG Pharmaceutical Joint StockCompany 43 Chapter 7: Pymepharco Joint Stock Company 54 Chapter 8: ImexpharmCorporationJoint Stock Company .63 Chapter 9: Conclusion .71 References 72 Appendices 73 iii CHAPTER 1: INTRODUCTION The Background of the Pharmaceutical Industry The pharmaceutical industry plays a crucial role in the worldwide healthcare systems It consists of different public and private companies which discover, develop as well as manufacture drugs and medications for both human and animal (Gennaro, 1990) The scientific research and development (R&D) of medicines which preclude or treat diseases is the main activity of the industry A variety of pharmacological activity and toxicological properties are displayed through drug substances (Hardman, Gilman and Limbird, 1996; Reynolds, 1989) Due to modern scientific and technological advances, the discovery and development of innovative pharmaceuticals are hastened in order to improve therapeutic activity and reduce side effects 1.1 An overview of the global pharmaceutical industry In recent years, the global pharmaceutical industry has received an uncommon accelerated growth Its market is considered to develop perpetually The amount of money for healthcare spending over the world in 2040 was forecasted to reach to $24.2 trillion (Dieleman and colleagues, 2017) In an article, Dixon-Fyle and Kowallik (2010) predicted that most member countries of Organisation for Economic Co-operation and Development would expend more than 20% of Gross Domestic Product (GDP) on healthcare by 2050 Besides, the global aging population increases in size and emerging countries have the better conditions to access to healthcare According to a report by The Business Research Company (2018), in 2017, the revenue of the world pharmaceutical market was recorded at $934.8 billion and a 5.8% rise from 2016 This figure showed a surge in comparison with 5.2% in the previous period However, the change was not as fast as those for other two larger segments including medical equipment and healthcare services In general, there is a more than 7% of the whole healthcare last year In the report, the growth momentum of the pharmaceutical market in the world is expected to develop continually and attain $1,170 billion in 2021 1.2 An overview of Vietnam pharmaceutical industry Vietnam pharmaceutical industry has the same trend as the global pharmaceutical industry The pharmaceutical market in Vietnam has had a dramatic increase in the last decades It is arranged one of 17 pharmerging markets which have the highest growth rates in the world (Bui, 2018) In 2017, Vietnam pharmaceutical market was estimated to worth $5.2 billion and it grew 10% from last year This rate was lower than the average rate from 2010 to 2015 (14.6%) The compound annual growth rate (CAGR) of pharmaceutical market in Vietnam between 2012 and 2017 was up to 19.7% This figure was higher than the average CAGR of countries in Asia-Pacific region (P.V, 2018) It is anticipated that the double-digit growth is maintained until 2025 (Quynh, 2018) Traphaco Joint Stock Company, DHG Pharmaceutical Joint Stock Company, Pymepharco Joint Stock Company, and Imexpharm Coporation is dominating Vietnam pharmaceutical industry The market share of most four prestigious pharmaceutical companies accounts for more than 50% of Vietnam market Area of the Study This study is proposing to analyse the performance as well as evaluate the intrinsic values of the four in five leading companies in Vietnam pharmaceutical market, namely Traphaco Joint Stock Company, DHG Pharmaceutical Joint Stock Company, Pymepharco Joint Stock Company and Imexpharm Corporation Except for the global market, the analysis refers to Vietnam market which is the main region From the above -mentioned analyses, the dissertation aims to gain a better understanding of the leaders in Vietnam pharmaceutical industry and provide investment recommendations for investors regarding these firms Study Objectives In the study, I will show the “whole picture” of the global pharmaceutical industry, Vietnam pharmaceutical industry and make investment recommendations Initially, I give the current overview of the global pharmaceutical industry and Vietnam pharmaceutical industry where is the products are consumed mainly After that, I evaluate the impacts of major macroeconomic factors as well as the pharmaceutical industry both on global and in Vietnam In the next, I will analyse the competition in Vietnam market and the financial ratios of the above companies Finally, after compute their intrinsic values, the investment recommendations is produced Methods of Study The study uses one of the most popular investment analysis approach namely top-down investing This method looks first at a broad view of the economy’s macro environment and then, summarises the general industrial situation After that, the four pharmaceutical companies are respectively analysed mainly based on their financial statements in order to assess their performances Macroeconomic analysis I use the PEST model (Political, Economic, Social, and Technological) in order to examine how main macroeconomic indicators influence the pharmaceutical industry in the world and in Vietnam Industry analysis The study supposes the key pharmaceutical activities as well as the major pharmaceutical issues over the world and in Vietnam Competition analysis In this part, the Michael Porter’s Five Forces is used to analyse the competition in Vietnam which is the domestic market of the four companies Moreover, the current market trends which impact on the companies’ growth are pointed out Company analysis and valuation I will summarise the main ratios of the four firms in order to consider their financial situation and their profitability prospects through their financial statements, a number of different financial databases (such as OSIRIS, Statista, EvaluatePharma and so on), and some financial website (such as the World Bank, the United Nations, DCAT Value Chain Insights and so on) Additionally, I build valuation models with the objective of calculating their intrinsic values Organisation of Study Based on the proposed analytical framework, this study includes nine chapters In the first chapter, I will give a brief introduction to the study area and its purposes The second chapter concentrate on the current global macroeconomic and Vietnam macroeconomic In the next chapter, I shows the major events or issues of the global and Vietnam pharmaceutical industries The forth chapter will analyse the existing forces driving the competition in the market From chapter five to chapter eight, the business description, performance, and prospects for the future on each of the top four companies are presented These chapters also evaluate companies’ intrinsic values and highlight succinct recommendations for investors in respect of investing in these firms Finally, the ninth chapter summarises the report CHAPTER 2: MACROECONOMIC ANALYSIS The macro environment affect every business and every industry To analyse and monitor its impacts, people often use a framework or a tool namely PEST model In this chapter, I will examine its influences on both the global and Vietnam pharmaceutical industry through political, economic, social, and technological The changes in these four elements leads the changes in the pharmaceutical market The Global Macroeconomic As I mentioned above, the value of the global pharmaceutical market has grown rapidly in recent decade and it is forecasted to continually have the upward trend in the next years According to a market research company namely EvaluatePharma, there were an annual CAGR of only 1.2% increase in the prescription drug sales between 2011 and 2017 This figure is expected to climb nearly six fold from 2018 to 2024 in comparison with that in the previous period and the prescription drug sales is projected to reach $1.2 trillion in 2024 (EvaluatePharma, 2018) 1.1 Political factor Corporate tax reform in the US In December of 2017, a new tax policy was issued in the US and the new corporate tax is 21% which was fall from 35% in the previous period This has been a first large US tax reform since 1986 In the 2017 tax law, there is a reduction in the orphan drug credits that are intended to encourage the development of this drug type in treating rare diseases A credit may be required equal to 25% of qualified clinical testing expenses for one year by the ...UWE ofhΓ Dissertation submitted in partial fulfillment of the Bristol England lly Requirement for the MSc in Finance FINANCE DISSERTATION ON Valuation of the four leading pharmaceutical companies. .. energy price in comparison with the lows shown in the half of 2016 affected the dynamics of inflation in the middle of 2017 The long-term inflation in the developed economies is estimated to... and valuation I will summarise the main ratios of the four firms in order to consider their financial situation and their profitability prospects through their financial statements, a number of