ACKNOWLEDGE This report would never have been possible without the consistent support and assistance of the people whom I approached during the various stages of writing this essay. Firstly, I would like to express my heartfelt gratitude to my academic supervisor Mrs. Hang Phuong lecturer of Academy of Policy and Development, for her valuable advice, encouragement, direction, and assistance. Writing this essay would have been impossible without her guidance.
Next, I thank the ISEF teachers for their help and teach me valuable knowledge for 4 years. That really helps me to complete the essay and use the skills I have learned to analyze more clearly and in more detail. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com PREFACE Vietnam's economy has been recovering strongly in recent years, creating favorable conditions for the stock market to develop. However, the size of the market is still relatively small and there is a lot of potential for future boom.
In order to create a healthy competitive market, specialized analytical studies are required, especially studies on market volatility, changes in business lines, price fluctuations of the stock, the risks of investors when entering the stock market. Recognizing this, I decided to choose the subject: “ALTERNATIVE METHODS TO EVALUATE DHG STOCK PRICE ”. DHG shares are one of the stocks that have received a lot of market attention, including individuals and organizations. However, there are still not many in-depth reports from financial institutions, besides the information about DHG still asymmetric information phenomenon in the market.
So, I make this report with the aim of providing the most objective, unbiased information about the DHG stock code combined with the investment advice of the clients of the internship-company and small investors in the market. In addition, the report also shows a part of the process of securities investment analysis and securities dealing at the company, thereby helping the company to perfect these processes. The content of this report is mainly focus on analyzing performance of DHG PHARMA over years, combine with the fluctuation of macroeconomic and industry, so that can release assumptions to build a pricing model for DHG stock and give results at last. The report also consult information and calculation of other pricing report of securities companies to have a objectivity look about DHG stock.
I have tried to be extremely meticulous in preparing this report despite the various limitations faced as very limited information about pharmaceutical industry. 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Research objective • Research Question: How do we identify the fair value of DHG’s stock? • General Objective: Using Literature Review and Data analysis to find out the value of DHG’s stock. • Specific Objective: Analyzing the global economic condition and the developments of global and domestic pharmaceutical industry.
Basing on the research of the economics changes and external/internal pharmaceutical industry which use for showing the effect to DHG and analyzing the business performance of DHG for forecasting the potentials of DHG in four consecutive years (2019-2022). Using suitable valuation methods to determine the intrinsic value of DHG’s stock and comparing this value with the market price so as to whether DHG has been overvalued or undervalued. Relying on the valuation outcome and then recommending investors whether they should invest in this stock or not. Research Object • DHG Pharmaticeutical Joint Stock Company (DHG) stock price 3.
Research Scope • Time limited: 2015-2018 • Venue limited: Viet Nam 4. Research Methods: Literature Review Ratio analysis FCFF FCFE 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Valuation by comparable 5. Research Structure My dissertation will be separated into 3 chapters: • Chapter 1: Literature Review • Chapter 2: Global, Domestic context and Performance of DHG • Chapter 3: DHG stock valuation and Recommendation 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: LITERATURE REVIEW 1. Stock market According to the Economic Times1, stock market is a place where shares of pubic listed companies are traded.
The primary market is where companies float shares to the general public in an initial public offering (IPO) to raise capital. The Investopedia2 had written the detail definition for the stock market. The stock market refers to the collection of markets and exchanges where regular activities of buying, selling and issuance of shares of publicly-held companies take place. Such financial activities are conducted through institutionalized formal exchanges or over-the-counter (OTC) marketplaces which operate under a defined set of regulations.
There can be multiple stock trading venues in a country or a region which allow transactions in stocks and other forms of securities. While both terms - stock market and stock exchange - are used interchangeably, the latter term is generally a subset of the former. If one says that she trades in the stock market, it means that she buys and sells shares/equities on one (or more) of the stock exchange(s) that are part of the overall stock market. Leading stock exchanges in the U.
include the New York Stock Exchange (NYSE), NASDAQ, BATS and Chicago Board Options Exchange (CBOE). These leading national exchanges, along with several other exchanges operating in the country, form the stock market of the U. Though it is called a stock market or equity market and is primarily known for trading stocks/equities, other financial securities - like exchange traded funds (ETF), corporate bonds and derivatives based on stocks, commodities, currencies and bonds - are also traded in the stock markets. 1 The Economic Times is an English daily newspaper published in India, first in 1961.
This is the second most widely read English business newspaper in the world, just behind The Wall Street Journal of America.com) 2 Investopedia is a New York City-based US website that focuses on financial investment and education along with reviews, ratings and comparison of various financial products such as brokerage accounts.com) 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Stock A stock (also known as "shares" or "equity) is a type of security that signifies proportionate ownership in the issuing corporation. This entitles the stockholder to that proportion of the corporation's assets and earnings.com) Stocks are of two types—common and preferred. Common stocks, also known as equity securities or equities, represent ownership shares in a corporation.
Each share of common stock entitles its owner to one vote on any matters of corporate governance that are put to a vote at the corporation’s annual meeting and to a share in the financial benefits of ownership.3 The corporation is controlled by a board of directors elected by the shareholders. The board, which meets only a few times each year, selects managers who actually run the corporation on a day-to-day basis. Managers have the authority to make most business decisions without the broad’s specific approval. The broad’s mandate is to oversee the management to ensure that it acts in the best interest of shareholders.
The members of the broad are elected at the manual meeting. Shareholders who do not attend the annual meeting can vote by proxy, empowering another party to vote in their name. Management usually solicits the proxies of shareholders and normally gets a vast majority of these proxy votes. Thus, management usually has considerable discretion to run the firm as it sees fit – without daily oversight from the equity holders who actually own the firm.
Characteristics of Common stock, as an investment are its residual claim and limited liability features. Residual claim means that stockholder are the last in line of all those who have a claim on the assets income of the corporation. In a liquidation of the firm’s assets the shareholders have a claim to what is left after all other claimants such as the tax authorities, employees, suppliers, bondholders, and other creditors have been paid. For a firm not in liquidation, shareholders 3 A corporation sometimes issues two classes of common stock, one bearing the right to vote, the other not.
Because of its restricted rights, the nonvoting stock might sell for a lower price. 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com have claim to the part of the operating income left over after interest and taxes have been paid. Management can either pay this residual as cash dividends to shareholders or reinvest it in their business to increase the value of the shares. Limited liability mean that the most shareholder can lose in the event of failure of the corporation is their original investment.
Unlike owners of unincorporated businesses, whose creditors can lay claim to the personal assets of owner (house, car, furniture), corporate shareholders may at worst have worthless stock. They are not personally liable for the firm’s obligations. Preferred stock has features similar to both equity and debt. It promises to pay to its holder a fixed amount of income each year.
In this sense preferred stock is similar to an infinite-maturity bond, that is, a perpetuity. It also resembles a bond in that is does not convey voting power regarding the management of the firm. Preferred stock is an equity investment, however. The firm retains discretion to make the dividends.
Instead, preferred dividends are usually cumulative; that is, unpaid cumulate and must be paid in full before any dividends may be paid to holders of common stock. In contrast, the firm does have a contractual obligation to make the interest payments on the debt. Failure to make these payments sets off corporate bankruptcy proceedings. Valuation Valuation is the analytical process of determining the current (or projected) worth of an asset or a company.
There are many techniques used for doing a valuation. An analyst placing a value on a company looks at the business's management, the composition of its capital structure, the prospect of future earnings, and the market value of its assets, among other metrics. Intrinsic value Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, using fundamental analysis. Also called the true 4 Zvi Bodie, Alex Kane, Alan J.Marcus, Ravi Jain (2014).
Investments, 9 th Ed. 44 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com value, the intrinsic value may or may not be the same as the current market value. Additionally, intrinsic value is used in options pricing to indicate the amount that an option is "in the money.com) The goal of value investing is to seek out stocks that are trading for less than their intrinsic value. There is no one method of evaluating a stock's intrinsic value, and two investors can form two completely different (and equally valid) opinions on the intrinsic value of the same stock.
However, the general idea is to buy a stock for less than its worth, and evaluating intrinsic value can help you do just that. (The Motley Fool, fool. Valuation methods An appropriate valuation method is one which has the ability to incorporate all relevant factors that have a material effect on the fair value of investment. To value a business, choosing the correct equity valuation method is extremely important.
And that is hard step for the investor to choose the suitable methods which will calculate the closest figures. In the investing course of Investopedia shows that when deciding which valuation method to use to value a stock for the first time, it's easy to become overwhelmed by the number of valuation techniques available to investors. There are valuation methods that are fairly straightforward while others are more involved and complicated. Unfortunately, there's no one method that's best suited for every situation.
Each stock is different, and each industry or sector has unique characteristics that may require multiple valuation methods. Valuation methods typically fall into two main categories a, Absolute valuation models attempt to find the intrinsic or "true" value of an investment based only on fundamentals.