portfolio analysis of novaland investment group corporation and fpt corporation

Table of Contents ABSTRACTS I, INTRODUCTION IL INVESTMENT POLICIES Ill PORTFOLIO FORMING

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APPENDIX A: FINANCIAL RATIOS

ABSTRACT

In this report, we will summarize all the whole progress in trading on the stock market We divided this report into five parts: introduction, portfolio forming, optimal portfolio forming, portfolio evaluation, buy-sell decisions and lessons as well as some appendices we used to compare and evaluate the stock that we traded Firstly, the paper provides briefly overall investing information of two stocks Secondly, we present the portfolio forming and reasons for selection Thirdly, optimal portfolio forming is calculated step by step to find the results of weight, beta and graph illustration In the next section, we use the Sharpe ratio and Treynor ratio to evaluate the stocks that we traded Finally, after having evaluation, buy-sell decisions are made to get gain or loss of trading.

L INTRODUCTION

The project is based on an investing assumption provided by using real-time financial information from the starting date of 1st September 2020 to the closing date of 15th November

2020 After making an effort for investment, we have chances to study about real-time financial

trading, the most basic analysis techniques and background information about portfolio performance Moreover, we already find out how to trade in the real stock market and how to handle the selected information about shares performance influenced by our decisions The project was a precious opportunity for us to apply what we had learned in the classes into realistic practice

In the period of more than two months with a starting point of VND100,000,000 the total account value has reached VND 104,559,672 which shows a gain from stock investing

Our group based on standard criteria to select the two most suitable stocks from above industries to form a portfolio:

+ Rate of return A rate of return (RoR) is the net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost When calculating the rate of return, you are determining the percentage change from the beginning of the period until the end It is

expected that each individual of our portfolio of ROR is higher than Vietnam market’s average interest rate (more than 7% - vietnamplus’ figure)

+ Risk tolerance: we are investors who are willing to take risk therefore we accept maximum

riskiness in turn of maximum return

+ Charter capital: directly involved in the economic potential of the company + Other financial ratios: ROE, P/E and liquidity ratio.

By using these tools, it is pointed out that FPT (FPT) and Novaland (NVL) are two firms that match our selection standards as well as our investment objectives To be more specific, the following analysis mentions financial performance of each firm

3.1 Stocks’ profile

Name of stock selected: | FPT Corporation

Ticker (stock symbol): | FPT

Industry/Sector: Information Technology

Basic description: FPT Corporation (FPT Corporation) is a multinational company, currently operating in three fields: Information

Technology, Telecom; Education and Training

FPT also constantly focuses on developing business

activities by sector, im which traditional businesses are

always focused on investment and achieved positive results

These are: System Integration, Software Export, Telecommunications, Trainng and Distribution of

telecommunications technology products

Name of stock selected: | Novaland Investment Group Corporation

Ticker (Stock symbol): | NVL

Industry/Sector: Vietnam real estate

Basic description: Throughout its 26 years of operation, Novaland is a prominent Real Estate Investment & Development company with diversified portfolios covering condos, villas, shop

houses, shopping centers, offices, and hospitalities Their

Industry: According to the 2019 summary report and the 2020 orientation of the Ministry of

Information & Communications, the total revenue of the ICT industry in 2019 is estimated at 112,350 billion USD, of which ICT exports account for 81.5% Additionally, the Ministry also

announced that software industry revenue reached 5 billion USD, rising slightly to 500 million USD compared to 2018 The total amount paid to the state budget from the ICT industry in 2019

was 54,000 billion VND, which is 2,000 billion greater than 2018 However, with the digital

content industry, its revenue currently comprise a very small part of the IT industry's revenue (standing at 0.76% of IT revenue) On the other hand, a survey by TopDev in 2020 illustrated

that the market in Vietnam has good feedback and thrives in 12 main areas such as: E-commerce, Fintech, Car / food, Edtech, Healthcare, etc Therefore, in the following years, Vietnam will be

the destination of many large technology corporations in the world

¢% NoVaLand Investment Group Corporation:

Industry: In 2019, although some traditional markets face certain difficulties, the mainstream of the real estate market continues to record positive developments Statistics show that liquidity and transaction value are still at a good level From the data of the Ministry of Planning and Investment published in the "White Paper on the 2020 enterprise survey", it is estimated that the proportion of land that contributes to the total added value of the enterprise sector is about 14.9% and contribution to GDP nearly 6% Hence, paralleling with the indirect contribution in the

construction industry, the real estate contribution also recorded about 11% of GDP (6% from land and about 5% from real estate activities) Therefore, it can be said that real estate is the lifeblood of the economy

3.2.2 Internal motives

¢ FPT (FPT)

FPT owns 42,174 billion VND of charter capital and 783,905,110 outstanding shares From the table A.1, from 2016 to 2019, there was a slight increase in FPT’ P/E ratio, from 10.15 in 2016 to 12.61 in 2019 This increase came from the company retail In July 2019, FPT's revenue and pre- tax profit reached VND 2,250 billion and VND 399 billion, up nearly 20% and 32% year-on-

year, respectively Therefore, its ROS had a sharp rise to 14.11% in the end of 2019, the gap

between the year 2016 nearly 8% That showed FPT had a large number of profit for last year

Not only that, its ratio of ROA and ROE also grew up but not significant, ROA increased from

7.12% in 2016 to 9.93% in 2019 whereas its ROE grew for 1.45% at the same time, reached

19.86% in 2019

“ Novaland (NVL)

NVL owns 61,114 billion VND of charter capital and 985,715,972 outstanding shares As of

table A.2, we can see that NLV’ P/E ratio steeply down to 16.81 in 2019 This came from the securities action of the company NVL completed issuing 18.6 million ESOP shares in 2019

With an increase in the number of shares, the share price will plummet, that lead to the number

of ROE is 15.28 and P/E ratio is 16.81(5 ratio lower compared to 2016) in 2019 By the way, its EPS and ROS grew up quickly due to the sales of the company NVL representative said that the total number of products delivered in the period increased by 70%, up to 3,269 products compared with 1,923 products in the same period, according to which the number of projects handed over is also higher The handover products mainly come from The Sun Avenue, Sunrise

Riverside, Richstar, Saigon Royal, Orchard Parkview, Newton Residence, and Victoria Village

projects The total number of cumulative handover products reaches 17,198 products from the time the Group starts to deliver EPS went up to 3,682 and ROS had a significant growth from 22.55 in 2016 to 30.99 in 2019 This means its business activities are highly profitable

Step 1: Firstly, daily returns can be calculated from stocks’ daily prices that we collected on dstock-beta.vndirect.com.vn and input data (in three years, 31/8/2017 - 31/8/2020) into an Excel

worksheet

Step 2: The following formula was used to calculate the daily returns:

Where: Price 1 is the following day close price

Dailv Return = In(Price

We show output of daily return in excel table B.1

Step 3: After having a list of daily return, expected return can be calculated as the average of the daily returns of the period being analyzed: ro =

The result after performing excel is shown: R(FPT) = 0.00272%

R(NVL) = 0.00775%

Step 4: Portfolios of two risky assets

We can experiment with separate portfolio proportions to see the effect on portfolio expected retum and variance (Bodie,2013) When the proportion invested in FPT varies from 0 to 1 (so that the proportion in NVL varies from 1 to 0), the portfolio expected return goes from 0.00272% to 0.00775%

In this case, we use the following formula to calculate portfolio expected returns and standard deviation:

E(t) = R(EPT)* W(FPT) + R(NVL)* W(NVL)

+

op = (Wpơp)“ khi (wơz)“ St 2(wpơp)(®zØg)Ðpr

After calculating in Excel, we show the results in the table B.2 of appendix B The weights of the optimal risky portfolio given by equation:

[E (ri) — 5] o3 — [EB (r2) — r¢| cov (ri, r2)

" [E (r) — rự| øã + LE (ra) — rự| đi — LE (r) — rự + E() — rr] cơu (rì, ra)

w = l-w,

Where : tf = 0.0111% 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 r; = 4.00%) => Werpr= 70.57%

=> Wyvi= 29.43%

After finding the weights of optimal risky portfolios, 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 excel worksheet

Step 5: Calculating beta

Suppose that returns of two stocks follow an index model in which they perform the dependent variables and VNIndex performs independent variables 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 excel formula:

Bi = SLOPE (daily return

of stock 1; daily return of

Therefore, the result turned out:

vndex)

B (FPT) = 0.98

B(NVL)=0.27

Re= the risk free rate of return Bp = the beta of the portfolio

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Applying the formula, we have the result:

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VỊ BUYING AND SELLING DECISIONS: * Structure of portfolio P = 70.57% FPT + 29.43% NVL * Budget of project VND 100 million

* Investment decision: VND 70.57 million on FPTstock, VND 29.43 million on NVL stock

* Transaction fee: 0.35% trading volume

* Tax fee: 0.1% trading volume, applied for selling options

Buy- sell Novaland decisions:

Buy-sell options of stock Novaland was taken from the beginning (01/09/2020) to closing of investment period (13/11/2020) as the following tables:

Profit VND 28,731,962.42 =

Total investment VND 70,570,000.00 |Price of share (13/11/2020) 53,800

{Investment volume 70,323,866 |Number of share 1,409

Price of share (01/09/2020) 49,900 [Transaction fee (0.35%) 265,370

Profit VND 75,478.930.02 5,155,064

= Total gain = VND 4,559,672

After many hours of research, we concluded that managing a portfolio is such a labor-intensive

job yet very necessary With the VND 100,000,000 fund, we decided to invest in a portfolio

which has two noticeable stocks in the stock exchange market FPT and Novaland from September 1" to November 15", 2020 Using the 3-year data, we find out the expected return and standard deviation of the portfolio which equals 0.004% and 0.011% respectively On top of that,

the net profit of our investment is equivalent to VND 4,559,672 after closing our portfolio on

November 15" which considers being a fairly good project Besides, some important lessons can be listed Initially, stock prices can be affected by an abundance of factors that need to be carefully explored in another financial statement analysis Furthermore, restraints for expected profits or losses should be eliminated before making every single investment That is, stocks should be sold if their prices increased or buy-in if it decreased to expected levels Moreover, future price movements are hardly anticipated when solely based on historical events, which means using only outdated information to forecast stock price wouldn’t be sufficient

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REFERENCES

TopDev, 2020

http: hi trong-top-the-g1o1/

Bui Trinh (TBKTSG, 2020) https://ashui.com/mag/chuyenmuc/bat-dong-san/163 16-bat-dong- n-da-dong-gop-gi-cho-nen-kinh-te.hr

CTCP Tập Đoàn Đầu Tư Địa Oc No Va (Stockbiz, 2020)

https://www.stockbiz vn/Stocks/NVL/Chart aspx?

fbclid=Iw AR 1iYOONVZomxJnnPQdewwF DqWmU VnKa-cDtR1T6EcLg-A6TyMnwLSSCTRE

Interest rate (SBV)

CTCP FPT (DStock, 2020)

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https://dstock-beta.vndirect.com vn/tong-quan/fpt?

foclid=Iw AR lecvBISHvg 1 Unn9x0XkF TfOqQEQYuyp_4WHOODI_ HVUmp8WFMOQkm 22CU

CTCP Tap Doan Dau Tu Dia Oc No Va (DStock, 2020)

fbclid=IwAR3TZgMFBmUppleawrkDGzIBsrLWo9 Vu90QS 7Nab7 YqiB2k6akCubwLIOKO

APPENDIX A: FINANCIAL RATIOS

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Chỉ số tài chính

EPS của 4 quý gần nhất BVPS cơ bản P/E cơ bản

ROS ROEA

ROS ROEA

ROAA

Table A.2: Financial ratio of FPT

APPENDIX B

Nam 2016 01/01-31/12 KT/HN

2,825.00 17,047.00 21.27 22.55 20.63 5.28

Nam 2016

01/01-31/12 KT/HN

4,641.00 24,917.00 10.15 6.52 18.41 7.12

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Nam 2017 01/01-31/12 KT/HN

3,414.00 21,284.00 19.94 17.72 17.45 4.73

Nam 2017

01/01-31/12 KT/HN

5,904.00 24,932.00 10.34 8.27 23.75 10.69

Nam 2018 01/01-31/12 KT/HN

3,897.00 21,990.00 18.51 21.37 19.14 5.41

Nam 2018

01/01-31/12 KT/HN

4,518.00 24,076.00 9.88 13.93 18.71 9.57

Nam 2019 01/01-31/12 KT/HN

3,682.00 25,230.00 16.81 30.99 15.28 4.29

Nam 2019

01/01-31/12 KT/HN

4,797.00 24,764.00 12.61 14.11 19.86 9.93