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HANOI UNIVERSITY FACULTY OF MANAGEMENT AND TOURISM PORTFOLIO ANALYSIS OF DHG PHARMACEUTICAL JOINT STOCK COMPANY AND HOA SEN GROUP Course: Investment Portfolio Management Tutor: Mrs Pham Thi My Phuong Student’s names and ID: Vũ Thị Hậu - 1504000023 Nguyễn Thị Ngọc Lan - 1604010050 Nguyễn Linh Linh - 1704000072 Ngô Thị Kiều Trinh - 1704000117 Nguyễn Ngọc Quốc Khánh - 1704040054 Hanoi,2020 Table of Contents ABTRACTS 1.INTRODUCTION PORTFOLIO FORMING 2.1 Stock’s profile 2.2 Reason for selection 2.2.1 2.2.2 External Internal motives OPTIMAL PORTFOLIO FORMING PORTFOLIO EVALUATION 4.1 Treynor ratio 4.2 Sharpe ratio 10 BUYING AND SELLING DECISIONS 10 LESSON FROM PROJECTS 12 REFERENCES 13 APPENDIX A: FINANCIAL RATIOS 14 APENDIX B: DAILY RETURNS 15 APENDIX C: GRAPH ILLUSTRATION 16 APPENDIX D: THE TABLE OF HSG CALCULATION IN EXCEL 17 ABTRACTS In this report, we will summarize all the progress made in trading on the stock exchange We divided this report into five parts: Introduction, Portfolio Forming, Optimal Portfolio Forming, Trading and Analysis Lessons, as well as some of the reference sections and appendices we used to compare and analyze the stocks we exchanged Next the paper offers details on the general investment of two stocks Secondly, we include the forming of portfolios and the reasons for the selection of stocks In addition, the optimal portfolio formation used to combine the two companies is determined step by step in order to find the results of the weights, beta and graph outlines And then we use the ratio of Sharpe and Treynor to analyze the stocks we traded, to make purchase and sale decisions Finally, we draw attention to some of the lessons we learned from the study of the two portfolios 1.INTRODUCTION The project is based on the investment assumption provided by the use of real-time financial information in 11 weeks from the starting date of September 2020 to the closing date of 25 November 2020 After making an investment effort, we are likely to research real-time financial trading, the most basic analysis methods and background details on portfolio results In addition, we are also learning how to trade on the real stock market and how to manage the selected knowledge on the results of shares affected by our decisions The project was a precious opportunity for us to put into effect what we had learned in class There are a range of investment options that investors might take to build value for their investment In this study, we selected two stocks in the stock exchange to measure and analyze carefully, i.e the shares of the Pharmaceutical Joint Stock Company-DHG and the Hoa Sen Group-HSG, and then analyzed those stocks in order to determine whether to purchase or sell them PORTFOLIO FORMING 2.1 Stock’s profile Name of Hoa Sen Group stock: Listed VNindex market: Stock HSG symbol: Industry/ Steel industry Sector: Basic Hoa Sen group first registration on August 2001 and in 19 years, Hoa Sen description: group has become one of the leading manufacturers and traders of steel sheet in Vietnam and a leading exporter in Southeast Asia Hoa Sen Group is proud to be one of the most reliable steel providers in both domestic and international markets when HSG has 11 factories and about 300 distribution branches throughout the country Besides, Hoa Sen group also appears in more than 70 countries in the world Name of DHG Pharmaceutical joint-stock company stock: Listed VNindex market: Stock DHG symbol: Industry/ Pharmacity Sector: Basic DHG company used to be a pharmaceutical factory in 1974 and it was description: officially became DHG Pharmaceutical joint-stock company on September 2004 DHG is always in the top pharmaceutical enterprises with the largest market share of the pharmaceutical industry in Vietnam DHG distribution system including 12 subsidiaries, 24 branches, 68 pharmacy counters spread across the country 2.2 Reason for selection 2.2.1 External a Hoa Sen Group Industry: In 2019, while world markets are slowing down, the productivity of steel in Vietnam is increasing The production of steel in 2019 increased for about 11.9% compared to 2018 The amount of steel that is sold also rose 10.8% in comparison with 2018 In 2020, due to the pandemic of Covid-19; however, the production of steel in Vietnam is still stable In August 2020, Vietnam has exported 5.96 million tons of steel worth $3.11 billion to more than 30 countries around the world and the core market Vietnam focuses on is ASEAN, China, Taiwan, etc Even in the face of epidemics, this industry still brings out some impressive achievements and it remains stable b.DHG pharmaceutical joint-stock company Industry: It can be seen that Vietnam pharmaceutical industry grew dramatically and became the second largest pharmaceutical market in Southeast Asia In 2019, the pharmacy group has achieved more than $2,200 billion profits and 5.5% growth compared to the previous year Besides, the pharmaceutical industry has exported pharmaceutical products to Japan, ASEAN countries, Russia, etc and it is accounting for about 200 millions dollar 2.2.2 Internal motives a HSG Hoa Sen Group HSG owns 4.446.252.130.000 VND of charter capital and gains 444.298.113 outstanding shares According to table A.1 in appendix A, P/E ratio increased from 6.44 in 2014 to 9.15 in 2019 and decreased to 6.87 in 2020; in contrast, EPS from 2017 to 2019 declined from 4.830,00 to 877,00 and grow to 2.639,00 in 2020 It means that in the period of 20172019, although the EPS of HSG during this period decreased and the stock also decreased, it is still greater than zero And in 2020, the EPS of Hoa Sen Group will increase because the consumption and export volume in the fourth quarter of 2019-2020 increased sharply So despite the decrease in the P/E ratio, eps and the value of shares still increased, so it is possible that the growth rate of the company remains stable and develops dramatically in the future Besides, according to HSG financial statement, the company ROA raised from 1.88% in 2019 to 6.58% in 2020 and ROE is increased for 12.29% in a year b DHG pharmaceutical joint-stock company DHG has 871.643.300 VND of charter capital and this company owns 130.746.071 outstanding shares Based on the table A.2 of appendix A, P/E ratio plummeted from about 9800 in 2016 to 19.59 in 2019 and it makes EPS low of about 4.67 thousand However, the stock is still stable and greater than zero Looking at the table, it can be seen that P/E has grown from 17.79% to 19.59% and BV of DHG has increased for about 1.83 thousand This growth happens because of the cooperation between DHG and Taisho - top largest pharmaceutical corporations in Japan and in 2018, Taisho bought more stocks of DHG with high price to increase the perceptions of their own capital The higher P/E shows that DHG company is still doing well and this business also gains higher profit for 8.1% in quarter II of 2019 compared to 2018 OPTIMAL PORTFOLIO FORMING Step 1: Firstly, we calculate daily returns from stocks’ daily prices that we collected on Stockbiz.vn and input data (in three years, 31/8/2018 - 31/8/2020) into an Excel worksheet (appendix B, table B.1) Step 2: The following formula for calculating the daily returns: We show the output of daily returns to excel table Step 3: After that, expected return can be calculated as the average of the daily returns of the period being analyzed: The result is shown: R(DHG) = 0.03% R(HSG) = 0.01% Step 4: Portfolios of two risky assets We can experiment with separate portfolio proportions to see the effect on the portfolio expected return and variance (Bodie,2013) When the proportion invested in DHG varies from to (so that the proportion in HSG varies from to 0), the portfolio expected return goes from 0.01% to 0.03% (Appendix B, table B.2) In this case, we use the following formula to calculate the portfolio expected returns: E(rp) = R(DHG)* W(DHG) +R(HSG)* W(HSG) Next, we calculated the variance of the market based on return on the market which was based on the return of VN Index We have the formula as below: After calculating in Excel, we show the results in the B.2 of appendix B The weights of the optimal risky portfolio given by the formula: Where: rf = 0.01% is risk free rate which is the prime rate from State Bank of Vietnam, that is the annual rate, so we divide the rate by 360 to get to the daily rate (annual rf = 4%) After finding the weights of optimal risky portfolio, we draw the efficient frontier curve which is the set of portfolios minimizing the variance for any target expected return The graph in appendix C illustrates the correlation between the expected returns and standard deviation that we calculate in the excel worksheet Step 5: Calculating beta Suppose that returns of two stocks follow the index model (SIM) in which they perform the dependent variables and Vn Index performs independent variables (McNulty, Daniel, n.d) The coefficient of the independent one is the beta of stock In Excel worksheet, we use SLOPE function to represent the relevant linear regression between two variables with below formula: Therefore, the result turned out: β (DHG) = 0.39 β (HSG) = 1.32 Beta of portfolio is the weighted average of betas of all stocks to calculate the beta of the portfolio The result is presented in the table B.3, appendix B: β ( Portfolio) = W(DHG)* β (DHG) + W (HSG) * β (HSG) = 1.46 PORTFOLIO EVALUATION 4.1 Treynor ratio The Treynor ratio (the reward to volatility ratio) is a risk assessment formula which is used to measure the volatility in the market to calculate the value of an investment adjusted risk The formula is: T = Treynor ratio Ri = return of the portfolio Rf = the risk free rate of return βp = the beta of the portfolio After calculating the formula, we have the result: TREYNOR RATIO Portfolio Market E 0.01% -0.02% Tp= 0.00% Rf 0.01% 0.01% TM= -0.03% β 1.4599 Treynor ratio 0.00% -0.03% With the result, we find that the Treynor Ratio of the Portfolio is higher market’s one, thus, we can judge that it is a well performed portfolio to invest in 4.2 Sharpe ratio The Sharpe ratio measure up the change in overall risk-return characteristics when a new asset or asset class is added to a portfolio It is calculated by the formula: Using the formula, we have the result from Excel: SHARPE RATIO Portfolio Vnindex E 0.01% -0.02% rf 0.01% 0.01% Sharpe ratio of portfolio Sp= -0.15% Stdev 3.30% 29.22% Sharpe ratio of market SM= -0.12% Sharpe ratio -0.15% -0.12% Comment: The value of sharpe ratio is smaller than Sharpe value of the market, but it still is a positive number Which shows that our portfolio’s return is higher than its risk and gives us the hope of a profitable future portfolio’s performance BUYING AND SELLING DECISIONS • Structure of portfolio: P = 20.07% DHG + 79.93% HSG • Budget of project: VND 100 million • Investment decision: VND 20.07 million on DHG stock, VND 79.93 million on HSG stock • Transaction fee: 0.35% trading vollume • Tax fee: 0.1% trading vollume, applied for selling options ➢ Buy- sell DHG decisions: 10 Buy-sell options of stock DHG was taken from the beginning (7/9/2020) to closing of investment period (11/11/2020) as the following tables: ➢ Buy-sell HSG decisions We bought HSG stock the first time in 04/09/2020 According to data from the regular III 2020 of Hoa Sen Group’s financial statements, the gross profit in the third quarter of the fiscal year 2019 - 2020 reached 1,062.9 billion dong, up to 9.5%; months accumulated gross profit reached 3,092.7 billion dong, up to 31.2% Those statistics are considered as a good signal in the market with the fluctuation of COVID 2020 year Therefore, we decided to sell out our HSG stock to make profit in 19/10/2020 (Cafef, 2020) Next, we determined to purchase HSG’s shares on 29/10/2020 because of two main reasons The first, the HSG’s stock price was suddenly low at VND14.800 which was attractive for investment The second, at the same time, the financial status of steel industry was predicted that their price will increase in the nearly time (Cafef 2020) We finally closed our investing period in 13/11/2020 All calculation are showed in the table D of appendix D and appendix of excel worksheet Total gain = VND 636,400 +VND 38,672,093 =VND 39,308,493.01 11 LESSON FROM PROJECTS Some important lessons as well as experiences can be drawn from this report Firstly, stock prices can be influenced by a variety of variables that need to be fully evaluated instead of relying on the analysis of the financial statements On the other hand, the limits for potential gains or losses must be defined before any investment is made In other words, stocks should be sold if their values rise or fall to the anticipated levels Moreover, future price fluctuations cannot be predicted on the basis of previous events, which means that using only past event details for stock price predictions will be inadequate 12 REFERENCES Duy Na, 2020 “ Doanh nghiệp ngành dược làm ăn năm 2019 “ [ Online ], Viewed Feb, 6th,2020, https://vietstock.vn/2020/02/doanh-nghiep-nganh-duoc-lam-an-ra-sao-nam2019-737-729592.htm Khac Lam,2019 “ DHG: Lời giải cho toán tăng trưởng” [ Online ] , Viewed Aug, 5th,2019, https://tinnhanhchungkhoan.vn/duoc-hau-giang-dhg-loi-giai-nao-cho-bai-toantang-truong-post217386.html Chi Tin,2020 “Giá nguyên liệu nhảy múa, HSG lại thấp thỏm” [ Online ], Viewed Aug,31th,2020, https://tinnhanhchungkhoan.vn/gia-nguyen-lieu-nhay-mua-hoa-sen-hsg-laithap-thom-post249255.html Do Thi Sa,2020” Thông tin dược phẩm & Trang thiết bị y tế “ [ Online ], Viewed, Jan,20th,2020, http://thongtincongthuong.vn/upload/vtic/Cong.nghiep/Ngoai.thuong/a34203.pdf “ Thông tin cổ phiếu HSG” [ Online], viewed, Jul,23th,2019 , https://hoasengroup.vn/vi/bai-viet/hsg-thong-tin-co-phieu/8244 6.“ Ước tính kết kinh doanh quý HSG “ [ Online ], viewed Oct,13th,2020, https://s.cafef.vn/hsg-378535/hsg-uoc-ket-qua-kinh-doanh-hop-nhat-quy-3-va-ndtc20192020.chn 7.“ Thơng tin tài DHG” [ Online ], Viewed Jul,3rd,2020, http://s.cafef.vn/hose/DHG/thong-tin-tai-chinh.chn 8.“ Thông tin HSG “ [ Online ], Viewed Nov, 25th, 2020, http://s.cafef.vn/hose/HSG-congty-co-phan-tap-doan-hoa-sen.chn 13 APPENDIX A: FINANCIAL RATIOS Table A.1: Financial ratio of DHG Table A.2: Financial ratio of HSG 14 APENDIX B: DAILY RETURNS Table B.1: Daily returns of stocks 15 Table B.2: Weight of stocks Tablel B.3: Beta result APENDIX C: GRAPH ILLUSTRATION 16 APPENDIX D: THE TABLE OF HSG CALCULATION IN EXCEL 17 ... shares of the Pharmaceutical Joint Stock Company -DHG and the Hoa Sen Group- HSG, and then analyzed those stocks in order to determine whether to purchase or sell them PORTFOLIO FORMING 2.1 Stock? ??s... Stock? ??s profile Name of Hoa Sen Group stock: Listed VNindex market: Stock HSG symbol: Industry/ Steel industry Sector: Basic Hoa Sen group first registration on August 2001 and in 19 years, Hoa Sen. .. Name of DHG Pharmaceutical joint- stock company stock: Listed VNindex market: Stock DHG symbol: Industry/ Pharmacity Sector: Basic DHG company used to be a pharmaceutical factory in 1974 and it
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