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 Chapter 1: Company Overview 1.1 Company history .2 1.2 Shareholder and Management structure 1.3 Organization structure .5 Chapter 2: Analysis of Operating Activities and Financial Statement 2.1 Operating activities 2.1.1) Brokerage 2.1.2) Trading 2.2 Financial statement 2.2.1) Income statement 2.2.2) Balance sheet 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 4.1.1) Strength 19 4.1.2) Weakness .19 4.2 Recommendation 20 Conclusion 22 References 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 and approved data from the company Analysis conducted within this essay is my own research and analytics Data that I used within this essay has been included in the reference section below Nguyen Quang Minh Hanoi, 02/10/2022 Acknowledgement I would like to give out the best recognition to all of the people who had been support me during my internship and taught me with the operation and code of conduct within the financial industry I deeply appreciate Rong Viet Securities and Mr Tung, lead of the analyst team, for their assistance with my internship And more importantly, I would want to thank my instructor, PhD Le Hoang Anh, for his support and advice with my internship Table of figure Figure Shareholder ownership .5 Figure Board of Directors Composition Figure Management Figure Organization structure Figure Rong Viet ‘s products Figure VDS ‘s income statement Figure Growth rates of income statement 10 Figure Profitability ratios of VDS (%) 11 Figure 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 BOC BOD HNX PAT PBT VDS VND VNI Board of control Board of director Hanoi Stock Exchange Profit after tax Profit before tax Rong Viet Securities Corporation Vietnam Dong VN Index Introduction Within the fast-growing economy of Vietnam, the need for a channel of fund to grow is becoming increasingly important However currently, the main for channel of fund for business is mainly through loan from bank But with the growing of the stock market during the period 2020 – 2021, the stock market is becoming an increasingly attractive channel of funds Thus, securities companies in Viet Nam are set to growth at an exponential rate This is an opportunity to work in this field and identify potential for these 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 the fundamental 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 those analysis to make recommendations for the company Chapter 1: Company Overview Rong Viet Securities Corporation (VDS) was established in 2006 The Company has its business in securities brokerage, investment and financial advisory, underwriting, securities depository, and propriety trading In 2021, securities brokerage revenue was VND314.31 billion, up 197.21% over the same period Profit from FVTPL reached VND347.08 billion, up 155.87% over the same period and contributing 55.6% of total operating profit Profit before tax was VND534.05 billion, up 177.2% over the same period Returns on equity (ROE) at 30.28% VDS has been listed and traded on Ho Chi Minh Stock Exchange (HOSE) since 2017 1.1 Company history 21/12/2006: Rong Viet Securities Company received license to conduct business by State Securities Committee 26/04/2017: VDSC officially entered operation 08/2007: Capital raise from 100 billion VND to 200 billion VND through new equity issuance 8/2018: Raise capital through private equity offering to Eximbank to 360 billion VND 2009: Become one of the first 10 companies to become listed on HNX with the ticker of VDS 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 1.2 Shareholder and Management structure Figure Shareholder ownership 17.42% 36.95% 11.65% 16.98% Nguyen Mien Tuan Pham My Linh Nguyen Xuan Do 17.00% Nguyen Hoang Hiep Others Source: VDS The board of director hold most of the voting share This allows the BOD to better business without the need to watch out for director – shareholder conflict However, the high ownership among BOD may lead to harm for individual shareholder – create a conflict between BOD and small shareholder Figure Board of Directors Composition Board of director Name President Nguyen Mien Tuan Member Nguyen Hieu Member Pham My Linh Member Nguyen Thi Thu Huyen Member Nguyen Chi Trung Member Nguyen Thuc Vinh Independent Member Hoang Hai Anh Independent Member Tran Nam Trung Asisstant Dinh Cong Minh Source: VDS Figure Management Management CEO Name Nguyen Thi Thu Huyen Deputy CEO Le Minh Hien CFO Le Minh Hien Chief Accountant Duong Kim Chi Source: VDS Rong Viet follow a two-tier board system, which is a separate BoD and BoC and each board has a different duty BoD ‘s duties is to manage the activities of the company while BoC need to supervise the BoD 1.3 Organization structure Figure Organization structure Total owner's equity and liabilities 1,843 1,932 2,300 2,568 4,033 Source: VDS Figure 10 Balance sheet ‘s growth rate (%) Total assets Long-term liabilities Liabilities Owner's equity Charter capital 2018 4.87 -86.05 2.63 6.59 10 2019 19 61.98 52.67 -5.89 2020 11.69 1,453.94 11.86 11.49 2021 57.03 419.97 70.18 41.21 Source: VDS To reap the benefit of the bull market 2022, VDS has increase its liabilities to fund activities such as margin lending, hiring new brokers, … The long-term liabilities of Rong Viet has increased by over 400% in 2021, its liabilities has also increased by 70% The increase in liabilities has subsequently led to an increase in total asset of 70% Figure 11 Liquidity ratio of VDS (%) 2.5 1.5 0.5 2018 2019 2020 2021 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 – which indicate 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 ration (cash ratio) decreased to 0.2 from 0.42 However, given the high level of profitability of VDS in 2021, the decrease in liquidity ratios is not a worrying sign 11 Figure 12 Leverage ratios of VDS (%) 500 450 400 350 300 250 200 150 100 50 2018 2019 2020 2021 Source: VDS As for the leverage ratios, all of the ratios have increased YoY since 2018, which indicate that Rong Viet is using more and more leverage in order to expand its business While the profitability of Rong Viet has increased since 2018, the usage of more and more leverage may pose a challenge to VDS in a market downturn when revenue may not be enough to cover 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 its obligations 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 publicly listed securities companies that share the same characteristic with VDS As we can see from the table, almost all VDS ‘s financial ratios are in line with the industry norms 12 Figure 13 Financial ratios of peers for the previous 12 months period Financial Strength Quick Ratio Current Ratio LT Debt/Total Assets Debt/Total Assets ST Liabilities/Equity Total Liabilities/Equity Management Efficiency ROE % ROA % Payment Period Turnover Ratio Average Payment Period Sales per Employee Dividends Dividend Payout Ratio Current Financials Net profit margin Asset Turnover Ratio Gross profit margin Valuations Market Cap P/E P/B VDS HCM MBS SSI VCI VCI VND Average 1.57 1.57 1.67 1.67 1.58 1.58 1.35 1.35 1.84 1.84 1.84 1.84 1.54 1.54 1.63 1.63 0 0 0 0.00 0.09 0.54 0.59 0.6 0.41 0.41 0.46 0.44 1.75 1.45 1.85 2.01 1.24 1.24 1.98 1.65 1.83 1.45 2.01 2.01 1.3 1.3 2.06 1.71 2.60% 0.94% 15.84% 5.18% 19.35% 5.97% 19.60% 5.70% 22.30% 9.50% 22.30% 9.50% 24.49% 6.93% 0.18 0.06 64.68 1,690.01 60.64 197.17 7.26 7.26 898.69 417.96 6 50 50 16.29 3,221.6 7,019.33 3,421.8 5,545.50 15,879.7 15,879.7 4,754.07 7960.29 0 0 0 0.00 3.65% 24.69% 29.41% 35.96% 38.93% 38.93% 36.64% 0.30 0.21 0.21 0.2 0.16 0.24 0.24 0.19 0.21 17.27% 38.73% 62.04% 58.70% 64.11% 64.11% 58.94% 0.52 2,520.0 46.88 1.24 12,116.1 9.98 1.55 6,545.8 8.35 1.53 30,750.7 8.11 1.42 14,197.3 9.34 1.99 14,197.3 9.34 1.99 22,590.5 6.21 1.55 14702.55 14.03 1.55 Source: Fiinpro 13 The financial strength of VDS is generally in line with the industry Rong Viet not take on any long-term debt, moreover, its debt/total asset ratio is among the lowest in the industry, 0.09 compared to a 0.44 average This means that Rong Viet is at no risk of going bankrupt The total liabilities/equity ratio is 1.83 compared to 1.71 on average, which is high This means Rong Viet equity is lower when compared to industry average and it may also take on a lot of liabilities However, VDS ‘s financial strength is good Management efficiency of VDS is lower when compared to the industry VDS ‘s ROE and 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 to improve its efficiency As a practice common within industries, VDS not pay dividends, instead invest those money back to its business As a result of low efficiency, the valuation of VDS is lower when compared to other company 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 its customers 14 - Scale up its operation, improve efficiency, brand name, competitive advantage within its industry Increase its financing source to fund its activities through issuing bonds, partner with 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 with business 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) Revenue Brokerage Activities Securities Services Trading Investment Banking Others PBT PAT 2022 1193 350 430 282.1 100 31.5 504 403.2 Source: VDS Brokerage activities: Rong Viet is planning to improve its brokerage revenue through improving its broker ‘s quality They are planning to this by creating partner development program for brokers, collaborating with partners who has a financial ecosystem that is compatible with VDS and create new products for customers Securities service: Improving its ability to monitor and manage risk, partner with financial institutions to fund new margin borrowing activities Trading: Continue to improve its investment portfolio and ensuring VDS ‘s fixed income product is of highest quality to investors Creating new capital product to increase revenue in 2022 Conduct research on cover warrants products to implement at an appropriate time and finishing a new Platform for investment activities 15 VDS also planning to increase its variety of channel for funding to adapt to the changing regulatory environment for issuing bonds due to decree 65 Investment Banking: Improving personnel quality for consulting activities, finishing a new platform for VDS ‘s investment banking activities 3.1.2) Analysis The plan for 2022 of Rong Viet is appropriate at time of the plan Its plan to increase total revenue by 13%, profit after tax to decrease slightly given the increase in its cost to invest in digitalization as well as personnel However, as of 26/9/2022, due to the market crash, and VN Index entered a bear market, this plan appeared to be quite ambitious and be unlikely to be completed 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 and reaching more customers by partnering with many individuals’ brokers However, this strategy may run the risk of having too many partners, which may lead to a decline in quality of its broker and worsen the company image Furthermore, partnering with too many brokers may lead to increased cost due to VDS has to offer a competitive commission to attract them This may be unsustainable in the long run and results in loss for the company Its securities service strategy is generally in line with the industry, which is partnering with 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 the unpredictability 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 more stable and diversified, lower its exposure to market volatility This move will also help to free up its resource to dedicate to more profitable activities Investment banking has long been a high margin activity for securities company Thus, VDS plan to ramp up this department is in the right direction However, investment banking activities is heavily dependent on the quality of personnel thus VDS should invest more to develop in this field 16 Lastly, VDS is shown to be interest in digitalization of its service This is crucial at this day and age since digitalization will help to reduce cost, streamline the process, and improve the experience of both employees and customers Rong Viet should complete its implementation of its platform across all departments as soon as possible to improve the overall efficiency of operation 3.2 Effectiveness Evaluation Figure 15 Comparison of plan and actual result in 2022 (billion VND) Brokerage Investment Banking Trading Securities services Others Total revenue PAT 1H 2022 Plan 148.7 25 350 100 % Complete d 42% 25% 65.6 196.7 282.1 430 23% 46% 440 -141.5 1193.6 403.2 37% -35% Source: VDS Due to the market downturn beginning in 2022, VDS has fell short of its initial plan, with it not meeting 50% of any of its initial target for the first half of 2022 3.3 Comparison with other companies + VPS: VPS ‘s target customers are retail investors The company this by recruiting as many brokers as possible by giving them a high level of commission compared to the industry average This has made VPS to have one of the largest number of brokers This high number of brokers has in turn attract many customers to VPS This is shown through the market share data, VPS is the number 1, controlling 17.1% of the brokerage market However, this strategy has results in VPS has one of the lower levels of profit, thus force them to decrease their commission fee in 2022 to improve its profitability level + Ban Viet Securities (VCI): 17 VCI is a securities company that focuses on investment banking It has advised many of the Vietnam IPOs such as Techcombank, Vingroup… as well as foreign investment in Vietnam such as MUFG buy FE Credit, … Thus, this allows the company to diversify its source of revenue, decrease its exposure to market volatility Thus, this has allowed VCI to record a 301 billion profit in Q2/2022 compared to a loss of Rong Viet +SSI: SSI is the second company in term of market share and the first 2020 Their strategy revolves around a traditional securities company – which is a high-quality broker as well as premium service They also heavily invest in technology as well as its apps in order to create a good experience for its users They also focus on institutional clients with their recommendations for these types of clients Overall, SSI is one of the top securities companies across all areas from investment banking, brokerage, advisory, … This led them to have the second highest level of profit, at 2671 billion VND Chapter 4: Analysis and Recommendations for Rong Viet Securities Company 4.1 Analysis 4.1.1) Strength + Rong Viet application of technology in its activities will help it to increase efficiency as well as streamline its risk management processes Its Idragon, goDragon and liveDragon product allow its users to invest quickly and safely, research into the market This will make Rong Viet investors more likely to trade with its accounts and thus generate more brokerage revenue and attract new customers through these features For its broker, VDS offer brokerDragon and SmartDragonIbot to support customers These products help its brokers to manage their clients, make timely recommendations using algorithms This will allow its broker to fully support its customers, developing a bond with them and make the best recommendation that suited the individual needs of each investor 18 + VDS also constantly trying to improve the quality of its workforce through its own learning system as well as broker training program This will ensure that all level of its personnel is equipped with the latest knowledge to carry out their task efficiently And with a quality source of personnel, VDS will be able to attract new customers for both its brokerage and investment banking services, thus increase its revenue + VDS new product will diversify its source of revenue, allow it to decrease it exposure to the day-to-day market Currently, as with many securities companies, Rong Viet depend heavily on the performance of the market for its profit And to reduce their dependent, Rong Viet diversified its source of revenue, create new products such as bonds, capital bond, covered warrants, … This will partly help them to diversify their revenue as well as gaining a stable stream of revenue from selling these products instead of depending on the trading activities of investors to gain revenue from brokerage fee 4.1.2) Weakness + Even though the company trying to diversify its revenue, as with securities company, VDS is still heavily exposed to the market If the market entered a downturn, both the revenue and profit of the company will decline heavily This can be seen in 2022, when VnIndex reached its peak and started to enter a downturn, VDS record a loss in Q2/2022 and does not meet any of its initial target + The company is also lacking behind in making it easier for customers to open a new account Currently, when an investor wants to open an account in Rong Viet, they must go by themselves and signed the paperwork This created inconvenience to customers and may deterred them from opening a new account Other securities company has already used eKYC to verify its users, allowing customers to open a new account from the comfort of their homes + The operating efficiency of VDS is still low compared to its peer Its sales per employee is still low compared to the industry average, nearly 50% Its profitability ratio is also low when compared However, this can be attributed to the loss stemming from its trading department, which record a loss 2022 + Its reach of new investors is low compared to industry As shown in its market share data, in 2021, it is 1.39% compared to 1.56% a year prior This is because its broker personnel are not enough to tend to its customers, thus failing to increase its market share 19 4.2 Recommendation While Rong Viet management has done a good job in managing the company and take advantage of the market uptrend of 2021 However, there are several more ways in which VDS can improve its business Below here are some suggestions for Rong Viet + Brokerage activities: Create more system to train its brokers During the current market downturn, customers are more likely to remain loyal to brokers who has a good background + Partner with digital wallet companies to create a finance ecosystem + Continue to seek funding from market Partner with more financial institutions to secure funding for its lending activities + Recruit more employees with experience and connection in investment banking field from other consulting firms/ department This will all VDS to skip the need to train as well as establish a lengthy connection with companies + Continue to digitalize its operation to reduce cost, improve efficiency + Implement a move up or move out policy within the company (this policy means that an employee must move up the position or be replaced with younger recruit) This policy will improve the company’s overall efficiency and motivate the employees to try their hardest to retain their job + Create a unified platform/portal for across all departments to save cost and increase efficiency + Research on new fixed income product Even though in 2022, the bond market has been frozen due to regulatory issue However, the bond is expected to reach at 58% by2030 according to the Ministry of Finance, it continues to be a market ripe for growth With decree 65 is being amended, the bond market is expected to resume its growth by 2023 and will grow exponentially VDS should research more bond product to capture the growth of this market 20 Conclusion Rong Viet is one of the well-established securities in Vietnam VDS continues to grow even though the stock market has entered a downtrend this is due to the company continuing to digitalize its process, develop strategy that suit the current market environment This has allowed it capture 1% of the market share and multiple awards for its service However, Rong Viet still have some drawback related to its strategy, financial distress, competition, … If left unsolved, these problems will directly affect the company’s net income, led to a fall in shareholder ‘s value Some of the solution that the company have implemented may not be enough to solve all these issues, thus through my own research, I have suggested some solutions to solve issue that I have identified with the company Which is to further focus on digitalization, employ more employee, create a better experience for users and research into new products/ market In the next internship report, I would like to take a deeper dive into issues with the company’s strategy and some potential solutions 21 References Rong Viet Securities Company (2017, 2018, 2019, 2020, 2021), Audited Consolidated Financial Statements Rong Viet Securities Company (2017, 2018, 2019, 2020, 2021), Annual Reports Rong Viet Securities Company (2017, 2018, 2019, 2020, 2021), Unaudited Consolidated Financial Statements Rong Viet Securities Company (2022), Resolution of the General Meeting of Shareholders Fiinpro (2018, 2019, 2020,2021), Securities Companies Peer Analysis 22 MẪU Xác nhận kết từ phần mềm turnitin (In từ phần mềm Turnitin) 23 Hà Nội, ngày, tháng, 10 năm 2022 Giáo viên hướng dẫn (Họ tên, chữ ký) 24 ... highest level of profit, at 2671 billion VND Chapter 4: Analysis and Recommendations for Rong Viet Securities Company 4.1 Analysis 4.1.1) Strength + Rong Viet application of technology in its activities... the strategy of such company, and based on those analysis to make recommendations for the company Chapter 1: Company Overview Rong Viet Securities Corporation (VDS) was established in 2006 The Company. .. Currently, as with many securities companies, Rong Viet depend heavily on the performance of the market for its profit And to reduce their dependent, Rong Viet diversified its source of revenue, create