Corporate Finance Exercise Group Work Report Group Assignment Bond Valuation And Stock Valuation Of A Vietnamese Company.pdf

Overview Established in May 2000 by Military Commercial Joint Stock Bank MB with the formerly known name as Thang Long Securities Joint Stock Company, MB Securities Joint Stock Company M

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CORPORATE FINANCE EXERCISE GROUP WORK REPORT

GROUP 9

Group Assignment: Bond valuation and Stock valuation of a

Vietnamese Company

Group members:

1 Pham Ngoc Thuy Dung- 11211463

2 Nguyén Tuan Dat- 11211279

3 Bùi Quỳnh Huong- 11212488

4 Doan Thi Thu Trang- 11215751

5 Hoang Thé Vinh- 11217754

Class: 63B TCDN CLC

Lecture: Pham Van Tue Nha

Đệ

Quy Hanoi, 2022

TABLE OF CONTENTS

PART 1: OVERVIEW

1 Overview

History of establishment

Activities

Achievements

Vision and missions

Marketing strategy

PART 2: BOND

2

3

4

1 Overview

Bond valuation

Rating

Recommendations

PART 3: STOCK

1 Overview

Stock valuation

Rating

Recommendations

10 11

PART 1: OVERVIEW

1 Overview

Established in May 2000 by Military Commercial Joint Stock Bank (MB) with the formerly known name as Thang Long Securities Joint Stock Company, MB Securities Joint Stock Company (MBS) is one of the first 6 securities companies in Viet Nam After many years of development, MBS has become one of the leading securities companies in Vietnam, continuously ranked in the Top 10 market share in both exchanges (Ho Chi Minh and Hano1)

In 2000, Thang Long Securities Joint Stock Company was established by Military Commercial Joint Stock Bank with charter capital of 9 billion VND

In 2003, the charter capital was increased to 43 billion VND

In 2006, the charter capital was increased to 120 billion dong

In 2007, the company was converted into a joint stock company, and at the same time increased charter capital to 300 billion dong

In 2008, the charter capital was increased to 420 billion VND

In 2009, the charter capital was increased to 800 billion VND

In 2010, the charter capital was increased to 1,200 billion VND

In 2012, Thang Long Securities Jomt Stock Company was renamed MB Securities Joint Stock Company (MBS)

In 2013, MBS was consolidated with VIT Securities Joint Stock Company to form a consolidated company with the name MB Securities Joint Stock Company (MBS) At the same time, Increase charter capital to more than 1,221 billion VND The company operates under the License for Establishment and Operation No 116/GP-UBCK issued for the first time by the State Securities Commission on December 9, 2013; Adjustment License No 54/GPDC-UBCK dated December 31, 2013; and Adjustment License No 12/GPDC-UBCK dated 11/06/2014

In 2020, The company issues more shares and pays dividends to existing shareholders, increasing the company's charter capital to VND 643,230.360,000

In 2021, The company issued shares to shareholders, and charter capital increased to 2,676,183,240,000 VND

3 Activities

With the strength of being a member company of MB Group, MBS continuously rises to achieve new development milestones in both scale and operations Currently, MBS focuses on developing strong securities services equally on both digital and traditional channels, along with in-depth research activities provided to customers MBS has a professional, dynamic and knowledgeable staff team; combined with a solid technology foundation; will bring to customers effective and safe securities investment solutions

4 Achievements

In 2018

¢ Certificate of Merit from the Ministry of Finance

¢ Certificate of Merit from Vietnam Securities Business Association

¢ Certificate of Merit from Vietnam Social Insurance

¢« Award given by World Finance: Best Investment Bank in Vietnam 2018

« Award given by World Finance: Best Investment Management Company in

Vietnam 2018

« TOP 10 typical securities companies awarded by Hanoi Stock Exchange

In 2019

« The best warrant issuer in Vietnam 2019 voted by International Finance magazine

In 2020

e Securities company is the most satisfied customer

5 Vision and missions

MB's business activities are very effective, showing its prestige in the financial services industry in Vietnam Besides, MBBank's services are very diverse, the database and information technology are very modern, developing strongly in parallel with the traditional service activities of the bank

MBBank 's goal in the period 2017 - 2022 1s the orientation of "Becoming the most convenient bank" with the goal that by 2021, it will be in the Top 5 of Vietnam's banking system with effective and safe business

MBBank's vision: To become the most convenient bank for customers MBBank's mission: For the development of the country, for the benefit of customers

6 Marketing strategy

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¢ Brand identity renewal

On November 4, 2019, Military Commercial Joint Stock Bank (MBBank — Code: MBB) officially changed a series of new brand platforms at 300 transaction points throughout the system and this is also the 25th anniversary of its establishment

¢ Communication strategy

Currently, MB Bank has carried out an advertising campaign on cars in Hanoi and Ho Chi Minh City, both of which are big cities in Vietnam with heavy traffic, frequent traffic jams and traffic jams Therefore, pedestrians have a lot of time to observe these banner ads In addition, MBBank has carried out many forms of advertising on media such as newspapers, television, email marketing, and social networking sites

¢ Customer service improvement

In addition to direct transaction points, MBBank also invests a lot in electronic distribution channels such as ATM, Internet, telephone, automatic switchboard, etc All

MB cardholders can conduct transactions directly at more than 5000 ATMs of MB and its affiliates Not only that, customers can also access banking services through the website instead of having to go directly to branches such as online card registration, online personal loan registration, etc For convenience in using banking services, MB provides e-banking services with many means for you to choose from With e-banking services of MB Internet banking, Home Banking, Mobile Banking, Contact Center, Billing Payment,

¢ Pricing strategy and preferential loans

For product marketing strategy, MBBank provides loan payment services with interest rates based on customers’ needs Accordingly, the interest rate will be applied based on the agreement between the customer and the bank MB is one of the few banks that can do this, MB is also the bank with the best quality of capital and solvency in the market With the above step, MBBank has been chosen by many customers as their loan destination

PART 2: BOND

1 Overview

MBbank bonds are debt securities , confirming the debt obligations of the Military Commercial Joint Stock Bank to the bondholders

Features of MBbank bonds: The interest rate of MBbank bonds, regardless of business activities, 1s previously regulated based on the average ground and the bank's policy In case MBbank encounters financial risks or goes bankrupt, it is required to pay debts of securities holders first Only then, MBbank is allowed to pay and distribute dividends and shares to shareholders

Currently, MBbank issues 3 types of non-convertible bonds in 2022:

¢ MBbank's non-convertible bond product has a term of 3 years

« MBbank bonds have aterm of 5 years and | day

¢ MBbank bond with a term of 7 years

II Bond Valuation

¢ Coupon Bond Valuation

Calculating the value of a coupon bond factors in the annual or semi-annual coupon payment and the par value of the bond

The present value of expected cash flows is added to the present value of the face value of the bond as seen in the following formula:

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BV =Cx

BV: Bond value

C: Coupon paid each period

r: Rate per period

t: Periods to maturity

F: Bond’s face value

© Zero-Coupon Bond Valuation

A zero-coupon bond makes no annual or semi-annual coupon payments for the duration of the bond Instead, it is sold at a deep discount to par when issued The difference between the purchase price and par value is the investor’s interest earned

on the bond To calculate the value of a zero-coupon bond, we only need to find the present value of the face value MBS bond is an example of Zero-Coupon bond Here is the bond valuation of MBS:

YTM = 10% — semiannual YTM = 10%

The interest rate for the terms following the first 2 terms is called “floating interest rate” This can be calculated by reference rate plus annual margin which equals to 1%

r= reference rate + spread

The reference rate is calculated by the average result of interest rate 12-month personal savings of 4 banks including: BIDV, Vietcombank, Agribank, Vietinbank after 3 years And we have 9,9%/year

=>R=9,9%41%=10,9%

YTM = 10%

Fixed interest = 9.9% = reference rate

Floating interest = 10.9%

Par value = 1,000,000,000 vnd

T =3 years = 6 semiannuals

1

l———

_ 49,500,000 49,500,000 <4 <0 gg, + 5 1.05% _, 1,000, 000,000 „+ Z =1013543562

1.05 1.05 0.05 x1.05° 1.05

0

II Rating

¢ Potentials

Safe investment channel, stable profit with low risk For investors who do not have a lot of skills or acumen when participating in the stock market, bonds will be a safe product

Attractive MBbank bond interest rates, flexible fixed and floating rates Floating interest rate margin is higher than bank savings

MBbank bonds, issued by a reputable MBS securities company in the market Therefore, investors can be assured of the safety and reliability of MBbank's bond products

Liquidity of MBbank bonds is high With the advantage of the leading

a reputable MBS securities company, investors can easily transfer and trade bonds on the floor when needed

Security of customer information is good, the procedure to buy bonds with quick, time-saving steps

e« Obstacles

The price of MBbank bonds is quite high, with many restrictions under 100 investors Opportunities are not many for investors with small capital

MBbank's bond products do not have many options Currently, there are only 3 products with quite limited quantities

IV Recommendations

First, investors should consider buying MBbank bonds or corporate bonds issued

by MBS

Moreover, investors need to consider and evaluate the financial and economic situation and the debt payment ability of MBbank By reviewing the financial statements and debt payment status of MBbank for assessment as well, investors could invest at the ideal time so as to achieve the highest rate and make sure they could get their money back whenever they need and in the safest way

Last but not least, investors need to carefully review the contract and terms when buying MBbank bonds Although MBS is a reputable brokerage company, to ensure benefits, customers need to carefully check the information before signing a transaction contract to protect their own benefits

PART 3: STOCK

I Overview:

« HOSE code: MBS

MBS was founded in 2000 by MB Securities Joint Stock Company

In two consecutive years between 2009 and 2010, MBS led the brokerage house in terms of market share on both Hanoi Stock Exchange (HNX) and HCMC Stock Exchange (HOSE) and continuously ranked among the Top 5 of market share at both stock exchanges

First exchange day: 28/3/2016 with the price of 2856 vnd per share

10/2018 - 10/2020, MBS stock has not changed much, only ranging from 4,094 VND

- 9,800 VND / share The highest MBS valuation time was VND 9,800/share, on April

9, 2019 Following the peak in April, MBS price tended to decrease slightly but did not change much

Starting from November 2020, MBS securities started to grow strongly and set new peaks in 2021 On April 5, 2021, MBS reached a value of VND 16,900 per share However, this is not the peak period of MBS stock prices

10/5/2021, MBS increased vertically, with many version link points created, strong development in the field The highest peak of MBS in the past 5 years was recorded at VND 33,817 per share, on November 22, 2021

After scoring at the end of November 2021, MBS code started to trend down slightly to VND 27,776 This was followed by a drop in price of MBS to the bottom

of VND 11,112 per share, at the end of June 2022 This is also a common point that stocks have a sharp decline

II Stock valuation (4/11/2022)

e Valuation method: DCF Method

Discounted cash flow (DCF) refers to a valuation method that estimates the value of an investment using its expected future cash flows

DCF analysis attempts to determine the value of an investment today, based on projections of how much money that investment will generate in the future

It can help those considering whether to acquire a company or buy securities make their decisions Discounted cash flow analysis can also assist business owners and managers

in making capital budgeting or operating expenditures decisions

Formula:

; > = D, + D, 2 D; Se (+R) (+RY (+R)

In dividend growth situation:

p= D(i+g) D +1

P: price of stock

D: dividend per share

g: growth rate

R: required return

e Valuation

Example: The MB Securities Joint Stock Co just paid a dividend of 11.2000 VND per share on its stock (November 2022) The growth rate is expected to be 2% indefinitely The required return rate is 10% in 3 years

By using DCF method, we will have:

D, =11200 VND

D, _ D¿q+gŸ”

_ 11200x (1+ 2%)*

10%- 2%

R=

= 140935.67

Il Rating

e Advantages

Firstly, MB owns a relatively complete ecosystem of financial products, focusing

on retailing on individual customers, small and medium enterprises

Secondly, the prestige and brand name of Military Bank is associated with the Ministry of National Defense and military enterprises such as Viettel Therefore, the safety level of the stock is relatively high

Thirdly, MBBank's business performance is not too volatile The results are somewhat positive, although some asset quality indicators have decreased slightly, but compared to the whole industry, they are still at a good level