LV Thạc sĩ_Invest into stock of the Dong Phu Rubber JSC

ACKNOWLEDGMENTS The author would like to express his sincerest gratitude to Dr…, his Research Advisor for his valuable guidance, constructive comments and encouragement throughout the research study Outstanding acknowledgments are due to CFVG and CFVG management, faculty, staff and colleagues for their great support that enabled the author to achieve the degree of MBA at the CFVG The author would like to take this opportunity to express her deep appreciation to FTU group members , who have greatly supported her in study process and shared with her valuable ideas Last but not least, the author remains grateful to her family members for their continued moral support during her study Special indebtedness is due to her darling, …, for his love and sacrifice during the whole time she has been studying the MBA course at CFVG ABSTRACT The rebound of Vietnam’s stock market in 2010 among the fastest developing securities markets in Asian region is creating a big opportunity for a corporate like DPR to have better performance on the market but also getting more earnings on its financial investment DPR is among the best companies among food and beverage industry and in small candy sector listing on the Vietnam’s stock market Therefore, whenever we see a recovery on the market, we see high opportunities for DPR to be interested by investors This research aims at analyzing the performance of DPR including revenues and profit activities, corporate expenses, financial status and investment, capital structure, HR management Also the research looks through relations between DPR and other companies in candy sector and the business outlook of candy sector and candy equities on the stock exchange Through this analysis process, the author will evaluate DPR equity and find out investment opportunities for investors in the stock market TABLES OF TABLES/FIGURES TABLES OF TABLES Table 1.1 Table 2.1 Table 2.2 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 4.1 Table 4.2 Table 4.3 Table 5.1 Table 5.2 Framework of the research Factors of balance sheet Factors of income statement Charted capital increasing process Revenue structure 2006-2008 Cost structure 2006-2008 Liabilities structure 2006-2008 Liquidity ratios 2006-2008 Financial investment 2006-2008 World rubber consumption (‘000 tonnes) Top countries to import VN's natural rubber – months of 2009 Sector comparables, 2008 Cash flow forecast 2009-2013 WACC calculation TABLES OF FIGURES Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5 Figure 3.6 Figure 4.1 Figure 4.2 Figure 4.3 Figure 4.4 DPR rubber tree life cycle total cost 2006-2007 Total asset 2006-2008 Equity structure Earnings & Returns 2006-2008 Margins & Sales/Assets 2006-2008 Global rubber consumption 1970-2011 NR production in major countries, 1990-2011 (‘000 tones) Forecasts of NR production (‘000 tones) Price of Oil & Rubber TABLES OF CONTENTS LIST OF ACRONYMS DPR Dong Phu Rubber Jsc CFVG Centre for Vietnam-France Education GDP Gross Domestic Product NSC National securities council HOSE Ho Chi Minh securities trading centre SWOT Strengths, Weaknesses, Opportunities and Threats (analysis technique) VN index Securities price index in Vietnam NB Natural rubber VRG Vietnam Rubber Group DCF Discounted cash flows WACC Weight average cost of capital CHAPTER I: INTRODUCTION 1.1 Rationale of the research study The rubber industry is especially attractive for investors who want exposure to cars and heavy industry growth potential The advantage of rubber is that half of it is consumed by tires, and all vehicles – electric, hybrid, fuel-cell, and traditional internal combustion engines alike – all need tires Therefore, there is the high upside potential for investment in natural rubber production, particularly in Vietnam Because most rubber production worldwide is by private, unlisted, and smallholder enterprises, Vietnamese firms are particularly good investments for investors seeking exposure to the rubber markets but unwilling to investigate private equity opportunities Vietnam has a significant portion of the world’s publicly listed rubber production firms Investors looking for rubber industry exposure should look closely at Vietnamese firms The Dong Phu Rubber Joint Stock Company, JSC (ticker: DPR) is one of Vietnam’s largest listed companies by market capitalization and one of its largest producers of natural rubber Thus, there will be a good opportunities to invest in DPR when the world economy is showing a good sign of recovery and Vietnam’s stock market is reaching higher and higher peak Therefore, the author would like to share her financial analysis and valuation of DPR in order to ensure good performance as well as beneficial opportunities of DPR in coming times 1.2 Research Methodology 1.2.1 Pre-understanding Pre-understandings are simply people’s knowledge, insights and experiences prior to their engagement in a research project The author’s pre-understandings of CSR were limited to the environment related issues only However, by working at Thanglong Securities Company, the author has acquired relatively profound knowledge of financial analysis skills as well as having a chance to access the activities of many corporate Those pre-understandings play a very important role in conceptualizing the targeted problem 1.2.2 Type of research There are two main scientific researches: objectivity-based research, also known as quantitative research and subjectivity-based research, also known as qualitative research According to Naresh K Malhotra (2005), qualitative research can be used to gain insights and understandings of the underlying reasons and motivations, whereas quantitative research seeks to quantify the data and generalize the results through application of some statistic tests Qualitative research is utilized in this consultancy project to meet the aim of in-depth analyzing financial statement and valuation of DPR The project intends to shed light to several questions which are either unsolved or touched loosely so far such as: why it is important to understand corporate financial analysis, what we can apply financial analysis in the case of DPR, how we gain from this analysis 1.2.3 Objectives The research study is carried out with the following main objectives:  Analyze business performance of DPR as well as strengths and weaknesses of DPR to find out opportunities and threats of DPR in the future  Examine influences of government policies toward DPR’s operation and relations between DPR and its competitors  Forecast the outlook of candy sector in the near future and opportunities for DPR’s development  Evaluate DPR’s equity and recommendations for investment 1.2.4 Research method The research study is carried out with the following main principles:  The result of study is based on objective analysis of official information  The analysis is based on the specific calculation process carried out by the author  The basis of calculation and analysis is based on the formal document 1.2.5 Benefit of the research It is ambitiously hoped that the results of this research can be a good recommendation for investors to review DPR performance and consider opportunities to invest in this stock in the future In addition, the research could express the importance of financial analysis and stock valuation when entering the stock market 1.2.6 Conceptual framework of the research Table 1.1: Framework of the research DPR DPRbusiness businessperformance performance Capital structure Capital structure Revenue Revenuestructure structure Cost Coststructure structure Asset-equity Asset-equity Management Management SWOT SWOTanalysis analysis Strength Strength Weakness Weakness Opportunities Opportunities Threats Threats Competitor/Industry Competitor/Industry analysis analysis Current Currentstatus status Trends Trends Outlook Outlook Specific Specificperformance performanceofofDPR DPRinincurrent currentyear yearand andininthe thenear nearfuture future Valuation of DPR and suggestion to invest in DPR 1.2.6 Organization of the Research This paper begins with a short description of Dong Phu Rubber Joint Stock Company, recommending that DPR is among the best natural rubber producers of Vietnam Rubber Group The paper then introduces some theory about the importance of financial analysis and some regular stock valuations which are widely used among Vietnamese analysts Chapter deals with the first research question which the financial situation of Dong Phu Rubber Jsc., a brief history of DPR, then some major indicators to show the financial performance of the company Chapter specializes in company and industry outlook in which the strength of DPR will be compared to other natural rubber producers in Vietnam and the future of DPR will be specifically forecasted Chapter involves with the valuation model of DPR stock Finally, the thesis ends with chapter which suggest some recommendations for investment and discusses the overall contributions of the study The structure of the thesis is exemplified as followed: Chapter 1: Background Introduction This chapter explains the rationale of study, research background, objectives, problem, framework, structure, scope and limitations, and the methodology Chapter 2: Theory of financial analysis and stock valuation This chapter is a review of theory of financial analysis and stock valuation This chapter shows the necessity of financial analysis and the suitable valuation model used for DPR Chapter 3: Overview of DPR operation and performance This chapter provides an overview of DPR performance (history, business operation, business result during the period 2006-2009, SWOT analysis and investment projects) Chapter 4: Industry & Company outlook This chapter focuses on the influences of government policies toward DPR’s activities, comparables to other companies within sectors, trends of Food and Beverage sectors in the future Chapter 5: Valuation of DPR stock This chapter provides some valuation model to give the suitable price for DPR stock on the stock market 10 Turkey 3,494 5,202,481 1.40% Russia 3,463 5,461,454 1.50% 10 Italy 2,112 3,305,822 0.90% Others 20,246 29,034,121 8.10% Total 251,636 360,466,271 100% Because of the rapid rate of growth in Vietnam’s rubber industry, Vietnam is set to gain world market share in natural rubber sales, rising from 5.8% in 2006 to 7.4% in 2018 One of Vietnam’s largest advantages in the world rubber export market is its proximity to China China’s growth, especially in the car industry, is fueling high rates of rubber consumption China buys 69% of all Vietnamese rubber exports, dominating Vietnam’s export market The next largest buyers are Korea at 4%, and Germany, Malaysia, and Taiwan at 3% each As long as Vietnam retains this natural advantage in the Chinese market, the future is bright for the Vietnamese rubber production industry 4.1.2.3 Investment abroad Vietnamese rubber companies, guided by the Vietnam Rubber Group, are moving aggressively into the Cambodia and Laos markets While the total area under cultivation by Vietnamese firms in 2008 was only 13,320 in Cambodia and 2,150 in Laos, this number is projected by VRG to grow to 100,000 in Cambodia and 100,000 in Laos by 2015 The Cambodian and Laotian climates are ideal for rubber production, and Vietnamese firms are pioneering the rubber markets there As with Vietnam’s advantage in selling to China, it is quickly developing an advantage in sourcing rubber from Cambodia and Laos 4.1.2.4 Continued expansion While other major rubber producing countries are having difficulty expanding the area under rubber cultivation, Vietnam is likely to double the number of hectares under production within 10 years 35 In summary, there is the high upside potential for investment in natural rubber production, particularly in Vietnam Because most rubber production worldwide is by private, unlisted, and smallholder enterprises, Vietnamese firms are particularly good investments for investors seeking exposure to the rubber markets but unwilling to investigate private equity opportunities Vietnam has a significant portion of the world’s publicly listed rubber production firms Investors looking for rubber industry exposure should look closely at Vietnamese firms 4.1.2.5 Rising sales prices The movements of NR prices in recent years are not unique There must be a common factor influencing their movements One obvious factor is the global economic situation However, the economic factor, which influences commodity demand, cannot be judged by itself One needs to evaluate the demand in relation to supply A slower demand can still leave a commodity price higher if supply falls even sharper than demand More importantly, the economic impact takes time to feed into the picture This means the sharp fall in commodity prices must be caused by other factors One of these factors is speculative buying into the commodity market by investment funds, which was one of the factors influencing commodity prices rise and fall in 2008 Another very important factor is the exchange rate movements and in particular the value of the US dollar as discussed above Natural rubber, which currently makes up 43% of total world rubber consumption, is a nearly perfect substitute for synthetic rubber or SR (which makes up the rest of the rubber market) NR’s price, therefore, is tied to the price of synthetic rubber and therefore to the market price of oil Source: International Rubber Study Group – Figure 4.4: Price of Oil & Rubber 4.2 Company outlook 36 4.2.1 Sector comparables There are very few publicly traded companies in the world whose main source of revenue is rubber production and sales The range of comparable companies is small Most of the publicly traded companies that receive at least some revenue from rubber are large diversified multinationals that also specialize in other industrial agricultural products Here we list only those companies that obtain most of their revenue from rubber cultivation and sales Most rubber is produced by private operations In order to carry out sector comparables, the author chooses other three companies – HRC Hoabinh Rubber Jsc., TNC – Thong Nhat Rubber Jsc and TRC – Tay Ninh Rubber Jsc The companies are the biggest natural rubber production in VRG and also listed on the stock market Table 4.3: Sector comparables, 2008 Company Exchange P/E P/B DPR VN 5.25 1.81 21.52 34.70 HRC VN 4.78 1.31 22.15 26.60 TNC VN 24.54 0.84 3.09 3.82 TRC VN 4.34 1.71 26.83 40.67 Chartered Gross capital Margin ROA Debt/EBIT ROE Quick EBITA Ratio (bn VND) DPR 34.58 0.49 0.60 196.50 HRC 34.12 - 1.79 83.30 TNC 7.58 - 1.90 0.70 37 TRC 37.61 0.22 1.31 156.90 (Comparables in the financial year 2008) For investors already interested in the rubber industry, DPR is among the best targets available on public securities markets It stands out as the largest listed rubber producer in Vietnam, and among the largest in the world Its size means it employs its assets more efficiently than some smaller Vietnamese competitors, as evidenced by its relatively high ROA and ROE compared to Vietnam average DPR’s gross margins are high compared to other Vietnamese firms Its low level of debt obligations is also a mark in DPR’s favor versus some of its domestic competitors The only warning sign is DPR’s relatively low quick ratio As discussed above, the management is sinking large amounts of capital that could instead by employed as short-term assets into joint venture Especially given the possibility of rubber markets beings low in 2009 and part of 2010, the company’s cash position is a worry However, given its other favorable, DPR still looks like the best buy on the rubber market in Vietnam, and among the best worldwide 4.2.2 Company outlook 4.2.2.1 Expansion projects As discussed in the Revenue and Valuation sections, DPR has plans to expand its total rubber cultivation area and rubber output through 2019 Our own analysis estimates that large increases in rubber production will come in 2011 and 2012, much earlier than many of DPR’s competitors, who invested in increased rubber production at a later date and will have to wait several more years for their trees to reach maturity It is important to note that when it comes to expanding rubber production, state ownership of DPR can actually be beneficial DPR has close ties to VRG officials, closer than many other state-run rubber producers As a result, DPR is the beneficiary of much of VRG’s plans to expand into Cambodia and Laos VRG plans to have 500,000 hectares under rubber cultivation in those two countries by 2015, and DPR has won access to those projects by virtue of its close relationship with VRG DPR is on the front line of expansion in Cambodia and Laos Some of DPR’s rubber production expansion projects in the next few years include: 38  Establish Dong Phu - Kratie joint venture Co in Cambodia with the chartered capital   of 200 billion VND in 10,000 hectares DPR contributes 40% chartered capital 1,666 hectares general DPR land (100% ownership) 3,000 hectares in Đăk Nông province (100% ownership + limited ownership by local  officials, chartered capital of 120 billion VND, DPR contributes 90%) 10,000 hectares in Cambodia (40% ownership) – Despite some early problems with land tenure contracts, and higher-than-expected planting costs, planting should be back  on schedule by the end of 2009 10,000 hectares in Kon Tum province (10% ownership) In addition to these rubbers cultivation projects, DPR also has a latex form factory which the company claims will begin operations in June 2009 The project, with a year pay-back goal, is joined by several of DPR’s large strategic investors While there are some concerns that construction is behind schedule, we expect the project to be profitable, since Malaysian customers have already bought most of the factory’s output for the next several years The productivity of these new rubber plantation areas is estimated to be very high (close to 3,000 kg/ha, or nearly twice the world average and nearly 800 kg/ha above the firm’s current average yield) Thus, DPR’s growth prospects in rubber production are very bright 4.2.2.2 North Dong Phu Industrial Zone DPR’s prospects are not so good in its other, non-rubber investments The biggest drawback to investing in DPR is DPR’s insistence on moving forward with an investment in the North Dong Phu Industrial Zone The proposed Industrial Zone of 186 hectares would be the second largest in Binh Phuoc the area The proposed Zone would be located on land currently owned by DPR, and the state – particularly VRG and provincial and regional authorities – has a very strong interest in seeing the land developed into an Industrial Zone DPR, because of its strong ties to the state, is very interested in going through with the Industrial Zone development The company had originally planned to be major construction and investment in 2008, but was prevented from doing so by a rapidly deteriorating cash position following the collapse of international oil prices (and therefore rubber prices) in mid 2008 These financial difficulties prompted DPR to re-think its strategy and present an alternative at the 2009 shareholder meeting 39 The current plan is for the Nam Tân Uyên Industrial Zone Joint Stock Company (NTU) to take a 49% stake in the North Dong Phu Industrial Zone project, with DPR taking a controlling 51% stake Total investment is set at 100 billion VND, enough to develop the Zone along with 46 hectares of housing, and then sell the Zone to a buyer to take over final development and operations NTU was invited to take a significant stake because of the company’s experience in Industrial Zone management, and more importantly because NTU has approximately 800 billion VND in free cash and DPR is experiencing some liquidity pressures It is likely that DPR will go ahead with this project regardless of non-state shareholder concerns, which will further erode the company’s cash position and heighten concerns about liquidity and the company’s ability to deal with short-term debt in the coming year CHAPTER V: DPR VALUATION In the case of DPR, we use the two valuation model to evaluate DPR price: Discount Cash Flow model and Price/earnings model in which there will have some comparables to get the average P/E of companies in the same sector with DPR After considering the situation for natural rubber industry and giving some assumption for DPR’s future development, the author proposes that DCF should be mainly used to evaluate DPR’s stock price, thus the portion for this valuation model is 70% 5.1 Discount Cash Flow Target price Using a Discounted Cash Flow model, we estimate that the actual per-share value of DPR is 75,700 VND Given that DPR is currently trading at below half this amount, this indicates that DPR shares are currently undervalued after the stock slump last year and the current sluggish pace of the rubber market However, once the overall market recovers and investors realize the strong outlook of the rubber market in the future, DPR’s trading price is likely to rise closer to its actual 40 per-share present value For more information on these calculations, see the data appendix at the end of this report, and the explanations below Cash inflows To estimate cash inflows, we include cash from DPR’s rubber sales and other DPR selling activities – primarily from wood sales following plant liquidation We not include cash from joint venture dividends, for several reasons First, DPR is engaged in a wide array of joint ventures, and the company itself is unclear about the schedule or amount of dividends in the next 10 years Secondly, DPR is at a crossroads in terms of deciding its future investments in joint ventures We find it useful to get a picture of the firm’s value as a rubber producer, and considering its other activities on a case by case basis Rubber sales were modeled by projecting the area under rubber cultivation in each year, the firm’s average per-hectare rubber yield, the tons of natural rubber produced, and the selling price of natural rubber Table 5.1: Cash flow forecast 2009-2013 Plant Area (thousand ha) Productivity (kg/ha) Tons 2008A 2009E 2010E 2011E 2012E 2013E 7,908 8,247 8,602 8,971 9,357 9,758 2,225 2,225 2,225 2,225 2,225 2,225 19,500 21,639 22,461 23,318 24,213 39.9 21.8 25.5 28.7 36.5 47.5 725 425 551 644 850 1,150 Sold (produced + 18,199 bought) Price per ton (mn VND) Rubber Sales 41 (bn VND) DPR’s planting schedule is not known for each year in the future We estimate plant area by taking a straight line growth estimate based on current plant area and the company’s plant area goal for 2013 Multiplying plant area by productivity (assumed constant, for a base case scenario) gives us the tons of rubber produced each year We add to this number 2,500 tons the company normally purchases per year from other growers to get the total number of tons of rubber sold each year In addition to rubber sales, DPR has a small amount of ‘other sales’, primarily wood resulting from plant liquidation after rubber trees reach the end of their productive years This income is predicted to grow in line with the rate of growth in plant area through 2018 Cash outflows The single greatest expense each year is COGS – Cost of Goods Sold COGS are broken down into salary and non-salary expenses The salary component of COGS is the largest line item on the expense side, accounting for 40% of revenue each year We model salary as being 40% of predicted revenue Non-salary COGS is set to grow at the rate of growth in plant area through 2013 Growth in overhead costs (SG&A) is set to grow at 4% per year, below the long-run inflation rate, because of economies of scale as DPR continues to expand Taxes are calculated by taking a ratio of actual taxes paid in 2006 (the last time DPR paid significant taxes before obtaining the tax benefit from listing publicly) over sales revenue This ratio of tax per VND of revenue was then projected out to estimate taxes each year through 2008 Interest expenses were estimated to be constant since we estimate the total debt level to remain constant over this period of time Finally, forex ‘expenses’ were estimated to be negative to reflect earnings gains from receiving payment for exports in dollars during a long-term deflationary period for the dong Terminal period cash flows 42 The terminal period cash flows were calculated based on a long-run growth rate in net cash flow of 4% (the assumed long-run growth rate of the price of oil) and a discount rate of 16.5% as inflation settles into its long run average and equity market risk premier rise to be in-line with international averages WACC and the discount rate Weighted-average Cost of Capital, or WACC, is the discount rate used to put future cash flows into present value It is the ‘opportunity cost’ to investing in the firm Table 5.2: WACC calculation Equity Year WACC Equity/ Debt/ Cost of Capital Capital Equity Cost Risk of Free Debt Rate Beta Market Effective Risk Tax Premiu Rate m 2009E 13.1% 91.7% 8.3% 13.5% 8.5% 9.5% 1.00 4.0% 0.0% 2010E 11.3% 91.7% 8.3% 11.5% 8.5% 9.5% 1.00 2.0% 7.5% 2011E 91.7% 8.3% 9.0% 8.5% 12% 1.00 -3.0% 7.5% 91.7% 8.3% 12.0% 8.5% 15% 1.00 -3.0% 7.5% 9.0% 2012E 11.7% WACC weights the cost of equity by equity’s share of the capital structure, and adds that to the cost of the firm’s debt, weighted by debt’s share of the capital structure We assume that the firm’s capital structure will remain fairly constant over time, with equity and debt maintain their share of capital in the next 10 years The ‘cost of debt’ is a straight-forward average of the interest rates DPR pays on its short and long-term debt weighted by the outstanding value of those debts (with a discount based on the company’s effective tax rate) 43 We model the ‘cost of equity’ using a modified version of the Capital Asset Pricing Model (CAPM) The model calculates the Cost of Equity as the sum of a Risk Free Rate, plus the asset’s beta versus the market times an Equity Market Risk Premium In open securities’ markets, the Risk Free Rate is taken to be long-term Treasury yields in the United States, since these are the logical alternative risk free investment for most investors However, here in Vietnam, most investors not have the option of owning Treasuries, and their more relevant Risk Free Rate is the yield on long-dated government bonds The risk free rate we employ varies over time, but is based on yields for 10 to 15 year Vietnamese bonds The rate changes as we assume Vietnam will experience another round of severe inflation some time in 2011 and 2012, after which we will return to a slightly higher long-term inflation rate The beta assumption is based on the backward-looking variance against the VN-index over the past two years DPR’s beta has been a fairly constant 0.999 during its short time as a publicly traded company This is a reasonable value for a rubber company that faces rapidly changing demand and prices depending on the changing macroeconomic outlook Finally, the Equity Market Risk Premium is one of the most contested values in modern academic economics In the US, based on historical calculations of equity market premiums over risk free bonds, the premium is estimated to be 6.1% However, looking historically at developing economies, risk premiums vary greatly We assume that at some point during 2011 and 2012, during the coming period of inflation, there will be another stock market boom that will lead equity risk premiums to go negative for a short period (this is actually common in booming emerging markets in history) The rate should then move upwards and go in-line with historical averages in the West Discounted cash flows at present value Given that we are using a time-variant WACC, the present value of future cash flows is not calculated using a simple summation formula Discounting between periods involves a manual calculation whereby the contemporary value of all future cash flows to the current year’s cash flows and discounted by that year’s WACC, working in reverse chronological order Using this model, we calculate a present value (Enterprise Value) of 3.138 trillion VND Equity’s share of this value, after debt obligations are accounted for, is 3.03 trillion VND Dividing this 44 equity value by the number of shares outstanding (40 million), I obtain a discounted per-share price of 75,700 VND 5.2 P/E model Some companies in the rubber sector of Vietnam have different P/E, thus if I calculate DPR basing on the average P/E for the rubber sector in domestic market, the price may not reflect the real value of DPR In order to calculate the exact average P/E to evaluate DPR price, I choose some natural rubber companies in Asian regions which have the same production capacity, market capitalization, revenues Thus, the average P/E is 15.11 Basing on the actual performance of DPR after months and basing on forecast about the natural rubber market till the end of 2009, I estimate that DPR’s profit at the end of 2009 is approximately 120 billion VND With the current outstanding shares of 40 million shares, earnings per share will be 3,000 VND/share, the price for DPR at the end of 2009 will be 3,000*15.11=45,330 VND CHAPTER VI: CONCLUSIONS & RECOMMENDATIONS 6.1 Favorable points  Flexible and tight cost structure: Costs are set to decrease when rubber prices fall, making tough cost-cutting choices unnecessary during lean times Management and  overhead costs are also reasonable and no growing very fast Strong expansion plans: DPR is likely to increase its total rubber output sharply over the next ten years, especially in some of the most sought-after rubber projects in  Cambodia and Laos Very high productivity: DPR obtains higher yields on its current estates than most others in Vietnam, and its projected yields on expansion projects are twice that of world  average Growth industry: rubber prices are likely to rise quickly with oil prices starting in 2010 Rubber is a good industry to target to have exposure to motor vehicle demand without having to invest in specific vehicle manufacturers or specific technologies 6.2 Concerns 45  Liquidity: DPR has low current assets and cash reserves, but high cash needs to finance  short term debt and make capital contributions to expansion projects and joint ventures State pressures: With 60% state ownership, DPR is subject to controlling state interests that are not always aligned with private shareholder interests, leading to an erosion of  shareholder value over time Non-rubber investments: State pressures are particularly strong in deciding what DPR does with its retained earnings DPR is under pressure to build an industrial zone on some of its land, over strong objections from key foreign shareholders 6.3 Recommendations In summary, DPR looks like a good buy for many different investment time horizons In the short term, DPR is a good buy for investors betting on a broad-based market recovery in 2009 or early 2010 DPR’s ‘beta’ against the VN-index is 0.999 over the past years in which it has been a publicly-traded company In fact, in the last years, changes in the VN-index have driven about half of all changes in DPR’s price per share Investors looking to ‘buy the market’ but hoping to avoid ETFs will find a lot to like in DPR Additionally, while the rubber industry is likely to remain slow for 2009 and early 2010, as our valuation model shows; it is likely to pick up strongly thereafter Once this becomes common knowledge in the market, DPR is likely to move closer to its current target per-share value of 75,700 VND Investors who get in now can expect a 100% or more return as DPR reaches its target price In terms of value investing, DPR’s trailing twelve month price-to-earnings ratio of 5.25 showed that DPR was trading at a discount to many international peers and other large companies on the VN-index DPR looks undervalued, making now a good time to buy Finally, one important concern for shareholders goes beyond value and speaks more to cognitive impressions of pricing As the graph below shows, DPR’s share price has been on a long-term decline ever since first listing on the HOSE in 2007 As a result, DPR today looks cheaper than it has ever looked on a shallow basis of dong per share Since value investing has yet to gain a broad hold in Vietnam, such considerations are not unimportant Now is a good time to take advantage of such perceptions of ‘cheapness’ 46 CONCLUSIONS In general, the research has achieved its set objectives Those are briefly described the scenario and to analyze the whole financial situations related to DPR performance and operation From these analyses, the research has showed the opportunities and threats of DPR in the near future, basing on this the author carries out the stock prices of DPR in such valuation The research has also showed all aspect relating to DPR’s performance In addition, the research also give out some recommendations to invest in DPR stocks and investment opportunities the investors will achieve from this Limitations and suggestions for future research The way I tackle the presented controversial issues are highly qualitative and explorative The findings, though based on a solid theoretical ground, are limit to the initial description of possible future trends in tomorrow The thesis lacks of profound supporting data in certifying the results In other words, people really express their bona fide thought toward the issue presented in the survey, or they just boycott the negligent company and favor the responsible one because they want to get impression with the interviewer that they also actually go green There is a need to conduct quantitative experiment with real stimuli so that we can get robust 47 findings without the fear of bias answer Moreover, several untouched issues in this thesis promise to be worthwhile for future researches REFERENCES Olivier Blanchard, Massachusetts institute of Technology, (1985), Macro Economics, Prentice Hall, upper Saddle River, New Jersey Band, W A., (1991), Contemporary corporate finance, West publishing company, New York Butcher, S.A (1998), Corporate finance and investment , Charles W L Hill., (1998), Global business today, McGraw-Hill DPR Annual Reports, 2005, 2006, 2007 48 Web sources: http://www.doruco.com.vn http://www.stox.vn http://www.thanglongsc.com.vn http://www.hsx.com.vn http://www.ssc.gov.vn http://en.wikipedia.org/wiki/Beta_(finance) http://www.investopedia.com/terms/c/costofequity.asp http://www.cfainstitute.org Search engines: http://www.google.com http://www.yahoo.com 49 ... description of Dong Phu Rubber Joint Stock Company, recommending that DPR is among the best natural rubber producers of Vietnam Rubber Group The paper then introduces some theory about the importance of. .. indicator of the overall economic situation of a country and of the world There were signs well before the start of the financial meltdown in the final quarter of 2008 that the global rubber industry... determined by the price of synthetic rubber (SR), which is an oil derivative The selling price of NR therefore depends on the volatile price of oil When the price of oil jumped to the peak in 2007