High Profitability And High Volatility In The Vietnamese Stock Market

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Includes: VNM
by: Alexander Wetterling, CIPM

Vietnam Equity FVMR Snapshot

Remember that FVMR stands for Fundamentals, Valuation, Momentum, and Risk. Those are the factors that we look at to get an understanding of the market. This Vietnam Equity FVMR Snapshot is a bottom-up aggregate of 74 Vietnamese companies and all forecasted figures are consensus estimates.

Fundamentals: High profitability in Vietnam

The return on equity (ROE) in Vietnam is expected at 16.2% in 2018CE* and 18.6% in 2019CE*. This is well above the global average at 14.1% and 14.3% for 2018CE* and 2019CE* respectively. The two consumer sectors have the highest ROE in Vietnam at about 25-26% in 2018CE*, while the Energy sector has the lowest at about 10.8%.

Looking at the dividend payout ratio (DPR), Vietnam is below the Global average. Consumer Staples pay out the largest share of profit as dividend. The lowest DPR you find is in the Real Estate and Materials sectors.

Valuation: Vietnam trades above the World

Vietnam trades above the World on price-to-earnings (PE) and price-to-book (PB) for 2018CE*. The Materials sector trades at the lowest PE and PB. If we look at the PEG ratio, though, Materials looks a bit expensive at a 2018CE* PEG ratio of at 2.6. Still, the sector offers the best 2018CE* ROE/PB at 8.8%.

Real Estate trades at the cheapest 2018CE* PEG ratio of 0.6, followed by Consumer Discretionary at 0.9. Health Care and Energy have the highest PEG ratios, and hence appear most expensive on the measure.

As mentioned, Materials offers the most ROE for the PB you pay, while Consumer Staples, Energy, and Real Estate give you the least.

Momentum: EPS growth for Vietnam is slightly below the global average

The 2018CE* EPS growth for Vietnam is slightly below the global average. Real Estate and two consumer sectors have the highest 2018CE* EPS growth expectations. Info Tech and Industrials are expected to see falling earnings.

In terms of price performance, Vietnam has beaten the World in the past one year, returning 37.9% versus the World at 9.6%. Utilities and Financials are two of the sectors that have driven up the overall market performance in the past one year. Only Industrials and Materials have seen a negative share price performance in the past one year.

Risk: The Vietnamese market has been a lot more volatile than the World

Gearing in Vietnam, measured as net debt-to-equity, is well below the global average. In the past 12 months, Health Care, Info Tech, and Energy had a net cash position.

The Vietnamese market has been a lot more volatile than the World. In the past one year, Utilities, Industrials, and Financials have been the most volatile sectors, while Materials, Energy, and Info Tech have been the least volatile.

* Consensus Estimates