Are Vietnamese Stocks Expensive or Cheap?
- dummies stock
- Oct 13, 2021
- 3 min read
Updated: Nov 9, 2021
Vn-Index is currently valued at P/E at 16.3x the last 4 quarters' sliding profit to the end of Q2 2021, which is lower than the 10-year average plus one standard deviation (17.4x) and equivalent to the average valuation for the 1-year period prior to the onset of Covid-19. So is this valuation expensive or cheap?
HIGH PRICE DOES NOT MEAN EXPENSIVE AND LOW PRICE DOES NOT MEAN CHEAP
On June 24, the stock gained but it is worth noting that the liquidity on HOSE dropped to more than 18,000 billion dong, below the average level of the last 20 sessions. Is cooling trading related to the story that the market valuation is too high? To analyze this problem, a question is raised: Is the price of HPG steel industry stock at about 50,000 VND/share cheaper, or is PAS about 14,500 VND/share cheaper?
From the perspective of reporters who often follow the real estate segment, in terms of market price, PAS is only 1/4 of HPG's price. The market is cheaper, but to talk about the cheapness of the stock, compare the P/E ratio (market price/earnings per share) or P/B (market price/book value). HPG has a P/E of about 12 and a PAS of 50, which means that it takes about 12 years for HPG to pay back for 1 dong of capital and PAS is 50 years.
Draw from this comparison to see that high price does not mean expensive and low price does not mean cheap. This is also how to look at VN-Index today. Although VN-Index is now rising near the 1,400 point area, compared to other "hot" periods of about 1,200 points of the market like 2007 P/E at 31.4 and P/B of 8.9 or 2018 P/E is up to 23, the current market P/E is around 18, showing that the current increase has not been overheated.
STOCK PRICE IS CHEAP COMPARED WITH PROFIT PROSPECTS
According to the latest assessment of FiinPro, compared to the deposit interest rate of 4.4%, it will have the same attractiveness as the P/E of the stock market at 23.8x (100/4.4 and adjusted). 5% income tax on deposits).
Compared to the full year 2021 profit forecast and the potential 2022 profit, it is clear that the stock price is cheap. The reason is that if the 2H2021 after-tax profit is equivalent to the same period in 2020, the profit growth for the whole year of 2021 can still reach 31.5%, which means we are currently trading at 16.0 times the profit of 2021.
If the same business is expected to maintain a growth rate of 27% in 2022, Vietnamese stocks are trading at 13.2 times the 2022 profit.
VN-Index's P/E Valuation Index for the past 10 years (2011-2021)
Many argue that this number is difficult to achieve due to the Covid-19 epidemic, but it is observed that in many industries, except for those directly affected such as Aviation and Tourism, the current context is the opportunities for many leading large enterprises in the industry with sufficient financial capacity to increase market share and increase efficiency in this post-Covid-19 period, such as MSN.
"Most importantly in the current context, expensive does not mean the market will go down, but it depends mainly on the 'demand' for stocks, reflected in new cash flow and general market sentiment instead of simply based on internal factors and profit prospects of the enterprise.
Comments