Objectives of the study and research question
- Systematize basic theoretical issues on stock analysis and valuation, business experience using the methods.
This article conducts a comprehensive analysis and valuation of VSC shares using various methods By leveraging insights gained from this analysis, it aims to accurately assess the true value of the business, ensuring a well-informed investment decision.
-Proposing a solution system as well as making recommendations to develop in order to facilitate the analysis and valuation of stocks.
Subjects of study scope
This thesis analyzes the valuation methods applied to VICONSHIP Joint Stock Company by examining its business activities from 2017 to 2020 and assessing its future plans It aims to evaluate the company's financial position and determine its value through future cash flow projections and comparisons with industry peers Additionally, it employs financial analysis techniques to assess the company's finances and evaluate VSC stock.
Research Methodology
To clarify the research topic, the thesis mainly uses the following methods:
Structure of the thesis
In addition to the table of contents, preamble, conclusion, list of references and annex tables, the thesis consists of three chapters:
LITERATURE REVIEW
Definitions
The stock market is a marketplace where buyers and sellers trade stocks or securities that signify ownership in a business This includes publicly listed stocks on exchanges as well as privately traded shares, such as those sold through crowdfunding platforms Investments in the stock market are primarily conducted via stockbrokers and electronic trading platforms.
Shares represent the fundamental product of a joint-stock company, with the charter capital divided into equal parts known as shares When individuals purchase these shares, they become shareholders, receiving a certificate that confirms their ownership This certificate serves as evidence of their stake in the company, with ownership corresponding to the number of shares held Consequently, shares are often referred to as equity securities, reflecting their role in representing ownership in a joint-stock company.
When considering Shares of a Joint Stock Company, there is usually a distinction between authorized shares, issued shares, treasury shares, and outstanding shares.
( https://www.investopedia.com/terms/s/stockmarket.asp) 1.1.2 Stock
Stock, or equity, is a type of security that signifies ownership in a corporation, allowing shareholders to claim a portion of the company's assets and profits based on the number of shares they hold.
Stocks are bought and sold predominantly on stock exchanges, though there can be private sales as well, and are the foundation of many individual investors' portfolios.
These transactions have to conform to government regulations which are meant to protect investors from fraudulent practices Historically, they have outperformed most other investments over the long run
These investments can be purchased from most online stock brokers Stock investment differs greatly from real estate investment.
( https://www.investopedia.com/terms/s/stockmarket.asp)
Valuation is the analytical process used to assess the current or predicted value of an asset or firm Various methods can be employed for this purpose, and analysts take into account several factors, including the company's management, capital structure, future earnings potential, and the market value of its assets when determining a company's worth.
Although fundamental research is frequently used in valuation, alternative methodologies such as the capital asset pricing model (CAPM) or the dividend discount model may also be used (DDM).
Intrinsic value refers to the true worth of an asset, determined through objective calculations or sophisticated financial models, rather than relying on its current market price.
In financial analysis this term is used in conjunction with the work of identifying, as nearly as possible, the underlying value of a company and its cash flow.
In options pricing it refers to the difference between the strike price of the option and the current price of the underlying asset.
( https://www.investopedia.com/terms/s/stockmarket.asp)
An effective equity valuation approach must consider all significant factors influencing an investment's fair value Selecting the appropriate valuation method is crucial for accurately assessing a company's worth, making it a challenging task for investors to identify the best procedures for deriving precise calculations.
When assessing a stock for the first time, investors may feel overwhelmed by the numerous valuation methods available According to Investopedia's investing course, there are both basic and advanced techniques to consider However, there is no one-size-fits-all solution, as each company and industry possesses unique characteristics that require the application of multiple valuation methods for accurate assessment.
There are two of most popular valuation models:
1 The Discounted Cash Flow Model
Discounted Cash Flow Model (DCF)
The Discounted Cash Flow Model (DCF) evaluates a company's value by discounting its future cash flows based on the investor's expected rate of return, ultimately helping to establish the stock price.
Even if a corporation does not pay a dividend or has unpredictable dividend yields, the Discounted Cash Flow Model can be applied.
To assess a stock's value using the Discounted Cash Flow Model, calculate the total of future earnings and subsequently discount these earnings by the weighted average cost of capital (WACC).
The company's fair value is then calculated by subtracting net debt from the enterprise value and dividing by the number of outstanding shares to get the value of a share.
The formula for DCF is as follows:
• Take the future cash flows for year 1.
• Then divide by one plus “r,”which represents the discount rate, or WACC, raised to the first power.
• Then, add the future cash flows for year 2.
• This total is then divided by one plus “r,”or the WACC, raised to the second power.
• And continue this sequence using a detailed forecast for five years, then add a terminal value, which is the present value of future cash flows in perpetuity.
• Once you have the enterprise value, subtract the net debt of the company and divide by the number of outstanding shares.
If the estimated value of a share using the Discounted Cash Flow Model is greater than the current value of a share, the DCF model suggests it is a buying opportunity.
DCF valuation accurately reflects a company's underlying fundamental drivers (cost of equity, weighted average cost of capital, growth rate, re-investment rate, etc.).
As a result, this approach gets the closest to calculating the asset/intrinsic business's value.
Unlike other valuation methods, Discounted Cash Flow (DCF) relies on Free Cash Flows (FCF), which provide a reliable metric by removing subjective accounting practices and embellishments found in reported earnings FCF serves as an accurate representation of the actual cash available, highlighting the funds remaining after necessary expenditures.
8 spend is classified as an operating expense in the P&L or capitalized into an asset on the balance sheet.
Discounted Cash Flow (DCF) analysis not only assesses current business drivers but also allows investors to incorporate significant strategic changes into the valuation model, capturing insights that other valuation methods may overlook.
While relative valuation methods are easier to compute, their reliability can be compromised when the entire sector or market is mispriced In contrast, Discounted Cash Flow (DCF) analysis effectively navigates these challenges, providing a clearer forecast of a company's intrinsic value.
The DCF model serves as an effective tool for evaluating stock valuation by allowing users to input the current share price, revealing whether the stock is over-valued or under-valued This approach provides insight into whether the existing stock price is justified, making it a valuable sanity check for investors.
( https://www.investopedia.com/terms/s/stockmarket.asp)
In DCF valuation, the assumptions regarding the perpetual growth rate and discount rate are crucial, as even minor adjustments can lead to significant fluctuations in the valuation outcome, resulting in an inaccurate fair value assessment.
A high level of trust in future cash flows is essential for strong performance; however, when a company's operations lack transparency, accurately forecasting revenue, operating expenses, and capital expenditures becomes challenging While projecting cash flows for the near future is difficult, extending these projections indefinitely, as required for Discounted Cash Flow (DCF) valuation, is nearly impossible Consequently, the DCF method is highly vulnerable to errors if these inputs are not meticulously accounted for.
Company analysis’ methods
• Macroeconomics is the branch of economics that deals with the structure, performance, behavior, and decision-making of the whole, or aggregate, economy.
• The two main areas of macroeconomic research are long-term economic growth and shorter-term business cycles.
Modern macroeconomics is largely rooted in the theories of John Maynard Keynes, who explored market behavior and government policies in the 1930s, leading to the emergence of various schools of thought over time.
• In contrast to macroeconomics, microeconomics is more focused on the influences on and choices made by individual actors in the economy (people, companies, industries, etc.).
• Macroeconomic analysis broadly focuses on three things - national output (measured by gross domestic product), unemployment, and inflation, which we look at below.
National Output: Gross Domestic Product (GDP)
• Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a specific period.
• GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rate.
• GDP can be calculated in three ways, using expenditures, production, or incomes It can be adjusted for inflation and population to provide deeper insights.
• Though it has limitations, GDP is a key tool to guide policymakers, investors, and businesses in strategic decision-making.
The unemployment rate represents the percentage of the total labor force that is without work, encompassing individuals who are actively seeking employment and are willing and able to work This metric reflects the overall economic health by considering both employed and unemployed individuals within a specific economy.
The unemployment rate serves as a key indicator of the economy's spare capacity and underutilized resources Typically, unemployment decreases during economic expansion as businesses hire more employees to meet increasing demand Conversely, when the economy contracts, unemployment tends to rise.
• There are different types of unemployment: Frictional unemployment refers to temporary unemployment during the period when people are searching for a job.
Structural unemployment is a mismatch between workers’ skills or locations and job requirements Seasonal unemployment is caused by seasonal patterns in economic activity, such as harvesting or tourism.
• The methodology for calculating the unemployment rate often varies among countries since different definitions of employment and unemployment, as well as different data sources, are used.
The Consumer Price Index (CPI) represents a weighted average of prices for various goods, with the inflation rate indicating the overall increase in the CPI The selection of items for the index reflects a typical consumption basket, varying by country and the purchasing habits of the population Consequently, while some commodities may experience price decreases, others may rise, influencing the CPI's overall value based on the weight of each item within the basket Annual inflation measures the percentage change in the CPI compared to the same month from the previous year.
Demand and disposable income are crucial factors influencing output, as demand primarily originates from consumers, government spending on goods and services, and international trade through imports and exports.
( https://www.investopedia.com/terms/s/stockmarket.asp) 1.2.2 Industry Analysis
An industry study evaluates a company's performance compared to its competitors within the same sector This analytical tool enables businesses to gauge their market position and competitive standing By conducting an industry study, companies can develop more effective business strategies tailored to their competitive landscape.
Understanding market forces is crucial for businesses to avoid becoming victims of them By thoroughly analyzing the strengths and weaknesses of competitors, firms can develop proactive strategies that enhance their market position.
According to Marketing91, industry analysis allows businesses to:
To devise and implement a successful strategic plan, you must understand the market forces at work in your industry.
The Corporate Finance Institute explains that there are three characteristics of industry analysis They are:
• Broad Factors Analysis (PEST analysis)
• Competitive Forces Model (Porter's Five Forces)
A comprehensive business analysis involves examining a company's strengths, weaknesses, opportunities, and threats through a SWOT analysis, which assesses both internal and external factors Following this, a PEST analysis evaluates external influences, focusing on political, economic, social, and technological elements Additionally, Porter's Five Forces model helps firms understand the competitive market forces impacting their business.
( https://www.investopedia.com/terms/s/stockmarket.asp) 1.2.3 Financial Statement Analysis
Financial statement analysis involves reviewing a company's financial statements to aid decision-making External stakeholders utilize this analysis to evaluate the organization's overall health, financial performance, and business value, while internal stakeholders employ it as a tool for monitoring financial management.
Every business prepares and maintains three financial statements: the balance sheet, income statement, and cash flow statement These financial statements are used
19 by businesses to manage their operations and to give reporting transparency to their stakeholders All three statements are interconnected and create different views of a company’s activities and performance.
The balance sheet is a key financial report that outlines a company's book value, divided into three main components: assets, liabilities, and shareholders' equity It highlights short-term assets like cash and accounts receivable, which reflect operational efficiency Liabilities encompass expense arrangements and outstanding debt, while shareholders' equity reveals equity capital investments and retained earnings from net income Crucially, the balance sheet must maintain equilibrium, with assets minus liabilities equaling shareholders' equity This resulting shareholders' equity represents the company's book value, a vital performance metric that fluctuates with the company's financial activities.
The income statement evaluates a company's financial performance by comparing revenue with business costs to determine net income, which can be a profit or a loss It is structured into three key sections that assess efficiency at different levels: gross profit, operational profit, and net profit Gross profit is calculated by subtracting direct costs from revenue, while operational profit accounts for indirect expenses like marketing and depreciation Ultimately, net profit is derived after deducting interest and taxes, providing a comprehensive overview of the company's profitability.
The cash flow statement illustrates the distribution of a company's cash flows across operating, investing, and financing activities Net income serves as the top line item for operating activities and is reflected in the cash flow statement Investing activities encompass cash flows related to the company's investments, while financing activities include cash flows from debt and equity financing Ultimately, the statement reveals the total cash available to the business.
Free cash flow statements, along with other valuation metrics, are essential tools for companies and analysts to assess a firm's value By discounting the anticipated free cash flow over time, these statements help calculate the net present value Additionally, as a private company considers going public, it may maintain a value statement to guide its transition.
( https://www.investopedia.com/terms/s/stockmarket.asp) 1.2.4 Dupont Analysis
The DuPont analysis, or DuPont identity, is a powerful framework for assessing fundamental performance, originally popularized by DuPont Corporation This technique effectively breaks down the components of return on equity (ROE), enabling investors to concentrate on individual financial performance metrics By decomposing ROE, stakeholders can easily identify strengths and weaknesses within a company's financial health.
Return on equity (ROE) is influenced by three critical financial indicators: operating efficiency, asset use efficiency, and financial leverage Operating efficiency is assessed through the net profit margin, which is the ratio of net income to total sales or revenue Asset efficiency is measured using the asset turnover ratio, while financial leverage is calculated with the equity multiplier, defined as average assets divided by average equity.
DuPont analysis dissects ROE to find which elements are most responsible for variations in ROE.
Macroeconomic analysis
The World Bank projects a global economic growth of 4% in 2021, rebounding from a 4.3% decline in 2020 due to the COVID-19 pandemic Similarly, the International Monetary Fund anticipates a 5.5% growth after a negative growth of 3.5% in 2020 Private organizations like the Conference Board and Fitch Ratings predict world growth at 5.0% and 6.1%, respectively, while the Organization for Economic Cooperation and Development (OECD) forecasts a 5.6% increase in global GDP Among developed nations, the United States is expected to grow by 6.5%, and the euro area by 3.9% In Asia, Japan and China are projected to grow by 2.7% and 7.8%, respectively, while Vietnam and Malaysia are anticipated to be the growth leaders in Southeast Asia at 7.0% The Philippines, Thailand, and Indonesia are forecasted to grow at 5.9%, 4.5%, and 4.9%, respectively Fitch Ratings also predicts a 3.2% increase in world GDP for the first quarter of 2021 compared to the previous year.
In the first quarter of 2021, Southeast Asian economies showed varied GDP growth forecasts, with Indonesia at 1.9%, Malaysia at -0.7%, the Philippines at -3.5%, Thailand at -1.5%, and Singapore at 1.5%, compared to the same period last year Japan experienced a decline of 0.8%, while China saw a significant increase of 19.3%.
According to the World Bank (WB), after a recession in 2020 due to the impact of the COVID-19 epidemic, global economic growth is expected to increase by 4% in
In 2022, the global growth forecast is projected at 3.8%, reflecting the long-term impacts of the pandemic on potential growth However, a strong rebound in the global economy is anticipated as confidence, consumption, and trade improve, bolstered by worldwide vaccination efforts Developed economies are expected to see growth of 3.3% in 2021 and 3.5% in 2022, while developing economies and emerging markets are forecasted to achieve 5% growth in 2021, driven by China's economic recovery, before declining to 4.2% in 2022.
In February 2021, the World Bank reported an increase in the global composite purchasing managers' index (PMI), rising to 53.2 from 52.3 in January This improvement was attributed to positive advancements in pandemic management, which boosted investor confidence Additionally, the Global Economic Confidence Index saw a continuous rise for 11 months, reaching 20.5 points in March 2021, marking its highest level since March 2018.
In February 2021, global stock markets reached multi-year highs, driven by rising asset prices and expectations of new economic stimulus measures in the United States, alongside improved pandemic management The World Bank reports that borrowing costs remain low, benefiting businesses with favorable financial conditions as major central banks continue their asset purchases This environment of high equity valuations and low interest rates supports economic growth and investment opportunities.
28 also driving equity financing globally Corporations have raised nearly $150 billion in equity as of February 2021, more than twice as much as a year ago.
The IMF projects that major central banks will keep policy rates unchanged until the end of 2022, leading to stable financial conditions in advanced economies while gradually enhancing conditions in developing and emerging markets This approach is anticipated to positively impact economies and lower the risk of portfolio shifts.
As of February 2021, the World Bank reports that borrowing costs remain low, contributing to global stock markets reaching multi-year highs This surge in asset prices is fueled by expectations of new economic stimulus measures in the United States and improved prospects for managing the pandemic Financial conditions are favorable, with major central banks continuing their asset purchases Consequently, businesses are benefiting from low borrowing costs, and the combination of high equity valuations and low interest rates is driving a surge in equity financing worldwide, with corporations raising nearly $150 billion in equity, more than double the amount from the previous year.
The IMF projects that major central banks will keep policy rates steady until the end of 2022, leading to stable financial conditions in advanced economies while gradually enhancing conditions in developing and emerging markets These policies are anticipated to positively impact economies and lower the risk of portfolio shifts.
Growth rate of gross domestic product
In the first quarter of 2021, Vietnam's gross domestic product (GDP) rose by 4.48% compared to the same period last year, surpassing the 3.68% growth rate of the first quarter of 2020 Despite the complex developments of the Covid-19 epidemic from late January to early March, which adversely impacted the socio-economic landscape, the government's decisive management and the collective efforts of various sectors, businesses, and citizens facilitated the dual objective of disease prevention and economic growth The agriculture, forestry, and fishery sector saw a 3.16% increase, contributing 8.34% to overall growth, while the industry and construction sector grew by 6.3%, accounting for 55.96% of the total Additionally, the service sector experienced a 3.34% increase, contributing 35.70% to the economy.
Banking, insurance, stock market activities
In the wake of the localized control of the Covid-19 epidemic, production and business activities have resumed normalcy, leading to a surge in credit demand within the economy The insurance market has exhibited stable growth, while the stock market has thrived, with total capital mobilization for the economy in the first quarter of 2021 rising by 42% compared to the same period last year.
As of March 19, 2021, the total means of payment rose by 1.49% compared to the end of 2020, slightly lower than the 1.55% increase observed in the same period last year Additionally, capital mobilization among credit institutions grew by 0.54%, a modest increase from the 0.51% rise in the same timeframe of 2020 Furthermore, the overall credit in the economy experienced a growth of 1.47% during this period.
In the first quarter of 2021, the insurance industry is projected to see a 9% growth compared to the same period in 2020, driven by a 6% increase in non-life insurance premium revenue and an 11% rise in life insurance premium revenue.
Since the start of the year, total capital mobilization in the stock market has reached an estimated 55,562 billion dong, reflecting a 42% increase compared to the same period last year Additionally, the average trading value per session on the stock market has surged to VND 18,907 billion, marking a remarkable 155% rise from the previous year's average.
30 market reached 12,433 billion VND/session, up 19.6%; The average trading volume on the derivatives market reached 174,324 contracts/session, up 11%.
Export and import of goods and services
In the first quarter of 2021, import and export activities experienced a robust recovery, with total turnover reaching an estimated $152.65 billion, reflecting a 24.1% increase compared to the same period in 2020 Export turnover was recorded at $77.34 billion, up by 22%, while imports amounted to $75.31 billion, marking a 26.3% rise Notably, the trade balance for goods indicated a surplus of $2.03 billion during this period.
In the first quarter of 2021, Vietnam's realized social investment capital reached approximately 507.6 trillion VND, reflecting a 6.3% increase compared to the same period last year This growth indicates a positive trend in capital mobilization and investment utilization, particularly as the Covid-19 pandemic has been largely controlled This momentum is expected to drive further significant growth in social investment capital throughout the remaining quarters of 2021.
Logistic Industry
The rise of automation is revolutionizing global industries and reshaping production and consumption logistics This transformation is fueled by the digital economy, innovative government support, evolving consumer culture, and the rapid growth of e-commerce and the sharing economy, leading to stronger cross-industry and cross-border logistics than ever before.
The complexity of the global logistics market, encompassing self-executing logistics and outsourcing services, leads to inconsistent statistics and measurements, particularly due to the intricate interplay of various logistics types and cross-border supply chain activities According to the “Logistics Service Market Report – Forecast up to 2027” by Market Research Future, the global logistics market revenue surpassed one trillion USD in 2019, an increase from 900 billion USD in 2018, and is projected to grow at a rate of 6.9% per year, potentially exceeding 2 trillion USD by 2027.
Global trade has become increasingly unpredictable due to the combined effects of new-generation free trade agreements, trade barriers, and geopolitical events As a result, customers and logistics companies must frequently adapt their business strategies The rise of global e-commerce and payment platforms like Alibaba, Amazon, and eBay has enabled many micro, small, and medium enterprises in emerging markets to reach consumers worldwide by diversifying their logistics, distribution, and marketing channels Concurrently, international corporations are focusing their investments on developing logistics networks in these emerging economies to capitalize on growing consumer spending, local resources, and favorable market conditions.
Logistics by geographical regions of the world
The Asia-Pacific region, which houses approximately 60% of the global population, emerged as a key player in the logistics market in 2020, with many of its countries acting as vital production hubs.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is set to significantly impact Asia-Pacific economies in 2021 by enhancing supply chains across the region Effective supply chain management, which connects raw material sourcing to final delivery, is crucial for increasing product value Emerging economies like India and Southeast Asia, alongside developed nations such as Japan and Korea, are expected to be key drivers of the global logistics service market in the coming years Notably, Asia is experiencing an average growth rate of 5% annually.
International commerce is set to expand in 2020, driven by globalization and economic integration across regions such as Asia, Europe, America, and Australia, presenting ample opportunities for import-export businesses The logistics sector is essential in enhancing international trade, underscoring its pivotal role in this growth.
Vietnam's strategic location in Southeast Asia serves as a crucial connection between the sea and the global market With its youthful demographic, abundant natural resources, and affordable raw materials, the Vietnamese market presents an appealing opportunity for international companies seeking investment and collaboration.
In 2019, Vietnam's GDP experienced a growth of 7.02%, driven by an 8.1% rise in exports, totaling $263.45 billion, and a 7% increase in imports, reaching $253.51 billion Since joining the World Trade Organization (WTO) in 2007, Vietnam has attracted significant foreign investment, fostering the growth of cross-border manufacturing and assembly operations.
The demand for logistics service providers in Vietnam is rising, driven by the need to enhance the global supply chain With a current market share of just 7.40%, Vietnam's logistics industry is competitive and poised for significant growth in the future.
In 2019, CRIF D&B Vietnam reported that the logistics sector in Vietnam is experiencing strong and steady growth, with sales revenue rising by 6.8% from VND 305,825 million in 2018 to VND 325,294 million in 2019.
2018, and VND 332,634 million in 2019, gross profit margin also increased from 12.23% in 2017 to 12.46% in 2018, to the highest level of 12.68% in 2019
2.2.2.2 Domestic logistic industry prospect in 2021
Despite the challenges posed by the COVID-19 pandemic, Viet Nam's industry showed resilience, driven by optimistic projections of trade growth This positive outlook is largely attributed to recent free trade agreements (FTAs), such as the European Union – Viet Nam FTA (EVFTA) and the Regional Comprehensive Economic Partnership (RCEP) Additionally, expectations of increased investment inflows, spurred by the global shift in production away from China, further bolstered the industry's potential for recovery and growth.
“The growth prospect of the seaport and logistics industry is bright in 2021, driven by the global recovery,” SSI analysts wrote.
According to SSI, the COVID-19 pandemic will continue to evolve globally, but there will be a reduction in social distancing measures and increased availability of vaccines SSI forecasts that the "new normal" and the re-establishment of inventory will take place in the latter half of this year.
The recovery of global demand would assist Viet Nam's exports, but not at a high rate because other exporting countries would begin production as well.
According to SSI, Viet Nam's import-export value and total items via seaports will expand by roughly 10% in 2021, owing to global recovery, FTA effects, and a shift in global production.
In 2020, the demand for logistical infrastructure surged, leading to a significant increase in warehouse space, which expanded by 25% in the north and 28% in the south, as reported by CBRE This growth was accompanied by a year-over-year price rise of 5% to 10%.
Deep-water seaports are set to remain central to the industry, as highlighted by SSI The expansion of the Cái Mép – Thi Vi and Lach Huyen seaports aims to attract larger vessels to Vietnam, positioning it as a competitive alternative to Singapore and Hong Kong, which could lead to approximately 20% growth in port activity.
Despite forecasting a 10% increase in revenue for the ports and logistics industry in
2021, SSI claimed profit would grow at a single-digit pace since the industry's largest company would not enjoy profit growth in the first year the seaport was open.
There were other dangers, according to SSI Container demand is expected to rise in the second half of this year.
The overall volume of products transported by ports in Vietnam increased by 9.8% in 2020, according to the Viet Nam Maritime Administration.
According to data from the General Statistics Office, Viet Nam's overall import- export value reached US$543.9 billion in 2020, up 5.1% from the previous year.
VSG Viconship (VSG) information
Name: Vietnam Container Shipping Joint Stock Corporation
Address: 11 Vo Thi Sau St - May To Ward - Ngo Quyen Dist Hai Phong City
Email: viconship@hn.vnn.vn
Website: http://www.viconship.com
Industry: Support Activities for Transportation
Become a company providing seaport and logistics services of international stature
Constantly improve service quality, labor productivity in the service chain to create added value for customers and partners
Maximize the utilization of the company's facilities and assets by prioritizing its development and future Embrace innovative technology in operational management and service delivery while committing to community engagement and social responsibility.
•Vietnam Container Joint Stock Company was established under Decision No 183/TTG dated March 4, 2002 of the Prime Minister, on the basis of converting a State-owned enterprise into a Joint Stock Company.
The company originated from the Vietnam Container Company, which was officially founded on July 27, 1985, following Decision No 1310/QD-BGTVT issued by the Minister of Transport At its inception, the state allocated an initial capital of VND 7.2 million.
In 2002, the company underwent a significant transformation, becoming the Northern Container Joint Stock Company as per Decision No 183/TTG issued by the Prime Minister on March 4, 2002 Later, in June 2002, the company rebranded itself as the Vietnam Container Joint Stock Company.
On December 12, 2007, the Ho Chi Minh City Stock Exchange granted Listing Decision No 172/QD–SGDHCM, permitting Vietnam Container Joint Stock Company (Viconship) to officially list its shares on the exchange.
On January 9, 2008, Viconship stock was officially traded with the stock code VSC and was the 139th company to list shares on the Ho Chi Minh City Stock Exchange.
2.3.6 The position of the company compared to other enterprises in the same industry
As a pioneer in container transportation, the Company prioritizes infrastructure investment, advanced production equipment, and human resource training This commitment has enabled it to not only maintain but also expand its domestic and regional market share, launching numerous new ventures The Company stands out among industry competitors, leading in market share, reputation, operational efficiency, and innovation in new products and services Viconship excels in cost control and consistently achieves high profitability for shareholders Its competitive service costs meet diverse customer needs while ensuring quality Additionally, the strategic development and operation of Greenport port since 2004 have further strengthened its market position.
Since the construction of Jetty 2 at Green Port in 2006, Viconship Port has experienced significant growth as a specialized container port Investment in wharves and advanced loading and unloading equipment has led to a remarkable increase in cargo volume In 2004, the port handled over 87,000 tons of goods, which surged to 650,000 tons by the end of 2005 and reached 1,400,000 tons by the end of 2006.
• Container agency services, shipping agents and marine brokers
• Trading in export forest products; warehouse and yard business
•Transport, organization of transportation of import and export goods, project goods, goods in transit
• Trading in petroleum, spare parts, vehicles and equipment
• Repairing, building and leasing Containers
• Seaport exploitation; coastal transport exploitation
• Trading in real estate, land use rights belonging to owners, users or renters
• Sea and ocean freight transport - inland waterway freight
• Wholesale of other machinery, equipment and spare parts, not elsewhere classified. 2.3.7.1 Seaport service
1 Currently, VSC is operating 2 seaports in Cam river area, Hai Phong including Green and Green VIP ports with a total designed capacity of about 1.1 million TEUs/year In addition, the company also outsources other ports (PTSC Dinh Vu, Nam Dinh Vu) to serve a number of ships that VIP Blue and Green ports cannot receive during the year.
1.1 Green Port: There is no room for growth, expect stable operation with low efficiency
Sản lượng container qua cảng Xanh Lượt tàu cập cảng Xanh tà u lư ợ t
Green Port, operational since 2004 and situated upstream of the Cam River, has a design capacity of approximately 300 TEUs per year and can accommodate two ships of 10,000 DWT simultaneously However, since 2016, there has been a gradual decline in both container volume and the number of ships visiting Green Port, attributed to various underlying factors.
Customers who are using Green Port will switch to VIP Green Port which has a more convenient location.
The growing trend of larger vessel sizes is prompting shipping lines to shift operations to downstream ports that can accommodate these massive ships and offer strategic locations Consequently, many upstream ports, including Green Port, are experiencing a decline in container throughput As a result, some ports, like Doan Xa and Trasvina, are adapting by focusing on bulk and general cargo handling.
Sản lượng container tại 1 số cảng thượng nguồn sông Cấm
Figure 2.1: Container throughput in some ports
In 2019, a shift towards larger ships with 11 rows of containers led to challenges for VSC, as these vessels exceeded the port's handling capacity, resulting in a 28% year-over-year decrease in handling volume To address this issue, the company invested in upgrading its loading and unloading equipment by August 2019, enabling it to accommodate larger ships and facilitating a recovery in commodity output in subsequent years However, in 2020, the port's operations were severely impacted by the Covid-19 pandemic, achieving only 76% efficiency with a total of 227,000 TEUs, marking a 1.3% decline year-over-year Throughout the year, Green Port managed to receive approximately 210 trains, reflecting an 11.8% decrease and averaging just four trips per week.
As we enter 2021, there is hope for a gradual recovery of Green Port operations, fueled by advancements in equipment and the anticipated control of the Covid-19 pandemic However, this recovery is expected to be moderate due to the ongoing trend of shipping lines shifting downstream, which continues to pose challenges for upstream ports.
The Green Port is projected to operate at a stable efficiency of 80-90% of its designed capacity from 2021 to 2025, which is lower than the average efficiency of 105% achieved between 2015 and 2018 To maintain customer loyalty, the port will also continue to lower service fees during this period.
1.2 VIP Green Port: Continuing to face stiff competition from new ports
VIP Green Port Officially operated since December 2015 and completed the second phase of investment in December 2016 with a total design capacity of 500,000 TEUs/year.
In July 2017, VSC launched the GIC Logistics Center, situated approximately 3km from VIP Green Port This facility enhances logistics operations, alleviating cargo pressure and boosting the port's capacity to 800,000 TEUs annually.
VIP Green Port, situated downstream of the Cam River, boasts a strategic location free from obstructions like the Bach Dang bridge, and offers a deeper draft compared to upstream ports This advantageous positioning allows VIP Green Port to accommodate larger vessels ranging from 30,000 to 50,000 DWT, aligning with the evolving trends of shipping lines Consequently, this capability significantly enhances cargo volume by facilitating the flow of goods from upstream ports.
Hai Phong port area features seaports strategically located along the Cam River, facilitating quicker access to the sea for ships This proximity not only reduces shipping time and costs but also enhances the attractiveness of these ports to shipping lines As a result, seaports closer to the sea can negotiate more favorable service fees compared to inner ports.
Viconship analysis
2.4.1 Business results and financial analysis
- Overall analysis of the company's operations compared to the plan/estimate and previous business results:
The year 2020 presented significant challenges and intense competition, particularly as the COVID-19 pandemic led to widespread social distancing measures This impacted the company's core service areas, with port operations, warehousing, and road container transport facing an oversupply, especially in Da Nang, where nearly 50% of work was affected during the second outbreak Ho Chi Minh City also struggled with production and business expansion In response, the company's Board of Directors implemented a synchronized and rhythmic approach to adapt to the "new normal," focusing on effective market strategies and management tailored to regional needs The overall results of 2020 reflect the dedication of the Board and employees towards Viconship's long-term and sustainable development goals.
Effective financial management, along with the preservation and growth of capital, adheres to state regulations and financial laws It is essential to efficiently manage the company's revenue and expenditure sources while ensuring strict compliance with tax obligations.
During the COVID-19 pandemic, the Company's Board of Directors prioritized market work and adapted their strategies accordingly The marketing approach has been strengthened to not only retain existing customers but also attract new ones to utilize the Company's services.
The company is focused on enhancing value-added services for customers while expanding its marketing reach to their clientele Embracing technology in management, service delivery, and marketing aligns with the demands of the Industrial 4.0 era, marking a significant shift in the company's approach during the COVID-19 pandemic As a result, the company has successfully achieved and surpassed its revenue and profit targets, gaining recognition among customers, financial institutions, and industry peers both domestically and internationally This growth has fostered partnerships and attracted shareholders Additionally, the company ensures job security and stable incomes for employees while fulfilling its social responsibility to the community.
Total net revenue reached VND 1,688.87 billion, up 8.96% compared to the plan for 2020 equaling 94.21% compared to the implementation of 2019.
Total profit before tax reached VND 335.89 billion, up 26.27% compared to the year plan
− The progress the company has made:
In 2020, the Company continues to maintain the growth and development process. The Company's brand is raised to new heights in the domestic and international markets.
Total assets at the beginning of the period are 2,393.25 billion dong, of which short-term assets are 635.59 billion dong and long-term assets are 1,757.66 billion dong.
Total assets at the end of the period are 2,458.14 billion dong, of which short- term assets are 895.76 billion dong and long-term assets are 1,562.39 billion dong.
During the year, the Company invested and put into use machinery, equipment and means of transport Additional investment property has brought high efficiency in production and business.
No bad debts Receivables are always actively recovered early, thoroughly avoiding the long-term arrears.
− Current debt situation, large fluctuations in debts:
Liabilities at the beginning of the period are 323.17 billion VND, at the end of the period are: 287.45 billion VND In which, clause
Long-term loan at the beginning of the period is: 64.06 billion VND, at the end of the period is: 0 billion VND.
− Currently, the Company has no bad debts The difference of the exchange rate and the difference
Interest difference does not affect the results of production and business activities of the Company.
The logistics and warehousing industry in Vietnam is experiencing significant growth due to the country's advantageous geographic position for sea logistics and the increasing trading activities that require robust logistical support for imports and exports However, the COVID-19 pandemic in 2020 negatively impacted the growth of these sectors Among the top five reputable companies in transportation and warehousing—VSC, ASG, CAG, CDN, and CLL—VSC stands out with leading performance indicators compared to its competitors and the industry average A detailed comparison of VSC's profitability ratios reveals its strong position in the market.
In analyzing Viconship's profitability ratios, key indicators such as Return on Equity (ROE) and Return on Assets (ROA) are essential In 2018, Viconship's ROE was 0.16, outperforming the industry average of 0.3, indicating effective use of shareholder equity with a profit of VND 0.16 for every VND 1 invested However, by 2020, ROE declined to 0.11 due to a significant increase in equity coupled with a decrease in profit after tax, attributed to rising expenses These expenses were partly driven by customers transitioning to larger ships that exceeded the port's handling capacity, forcing Viconship to outsource services Additionally, growing competition led to price reductions, further impacting the company's profitability.
The higher the ROE, the more valuable the company's shares are Below is the ROE chart of VSC and 4 competing companies.
ROE of top 5 transportation and warehousing companies (2020)
ASG VSC CAG GMD HAH
Figure 2.8: ROE of top 5 companies
Return on Assets (ROA) measures a company's profitability in relation to its assets, highlighting how effectively assets are utilized to generate profits From 2017 to 2020, VSC maintained a stable ROA that exceeded the industry average of 0.4 in 2020, demonstrating the company's efficient use of capital and assets to maximize profits.
Figure 2.9: Gross profit margin and net profit margin
Between 2017 and 2018, the company outperformed the industry average in both gross profit margin and net profit margin However, by 2020, these margins had declined to nearly match the industry average The rise of numerous new logistics companies from 2019 to 2020 compelled VSC to lower service prices to remain competitive Additionally, the impact of Covid-19 in 2020 significantly reduced the company’s revenue.
Liquidity refers to an enterprise's financial ability to fulfill its debt obligations to individuals or organizations To assess liquidity, it is essential to consider key metrics such as the current ratio, quick ratio, and cash ratio The accompanying chart illustrates the variations in these three ratios over time.
Figure 2.10: cash ratio, quick ratio and current ratio
Viconship's current ratio has increased to 3.12, indicating strong liquidity and the ability to meet current debt obligations, with a positive outlook for the future As a leader in the transportation and warehousing sector, VSC's cash ratio, which was below 1 in 2017 and 2018 due to borrowing for business expansion, improved significantly to 1.7 in 2020, reflecting a successful recovery.
51 were also increased because company hold more money after extending and they had more receivable account from customers. c, Operating Ratio
Accounts receivable turnover is an important efficiency ratio that measures how frequently a company converts its accounts receivable into cash within a specific timeframe This ratio indicates the number of times a company collects its average accounts receivable over the course of a year, reflecting its effectiveness in managing credit and collections.
In 2020, the company's receivable turnover ratio decreased to 9.12, although it remained above the industry average This decline was primarily due to an increase in accounts receivable, which negatively impacted the turnover rate The rise in receivables was largely attributed to loans extended to customers adversely affected by the Covid-19 pandemic.
Next is Inventory turnover which I illustrated in the chart below.
The inventory turnover ratio is an essential efficiency metric that assesses how effectively a business manages its inventory by comparing the cost of goods sold to the average inventory over a specific timeframe This ratio reveals the frequency with which average inventory is sold and replaced, providing valuable insights into inventory management practices.
The company demonstrated a high inventory turnover over three years, but this figure saw a slight decline in 2020, falling below the industry average due to the impacts of Covid-19 and other adverse factors.
A leverage ratio is essential for evaluating a company's debt levels, with the debt-to-asset and debt-to-equity ratios being the most commonly used These ratios help assess a company's indebtedness and serve as indicators of financial risk, reflecting the degree of leverage or debt burden.
Figure 2.13: Debt to equity and Debt to asset
Analysis major risk related to operating activities
The International Convention for the Control of Ballast Water and Sediments of Ships (BWM 2004), which came into effect on September 8, 2017, mandates that all types of ships operating in aquatic environments must adhere to specific regulations regarding ballast water management.
Submarines, surface ships, floating structures, floating storage facilities require an approved ballast water management plan, maintaining a ballast water log.
The BWM 2004 regulation has a broad scope, compelling Vietnamese ships to make significant investments The cost of installing ballast water treatment systems on each vessel can reach hundreds of thousands of dollars.
The International Convention on Control of Noxious Antifouling Paint Systems on Ships, effective February 27, 2016, imposes stringent regulations on the selection of antifouling paints for ships in the Socialist Republic of Vietnam.
For decades, the shipping industry relied on TBT paint for antifouling coatings due to its effectiveness in preventing marine fouling on ships However, the harmful effects of this technology have led to a necessary phase-out Ship owners now face the challenge of replacing these coatings, which will incur additional costs.
Vietnamese ship owners are significantly influenced by longstanding conventions, including the Noise Code and the Maritime Labor Convention (MLC), which continue to shape industry standards and practices.
The shipping market has faced continuous decline since 2008, with only recent signs of improvement This prolonged downturn has led to financial exhaustion for many shipping companies, making it challenging for them to invest heavily in meeting the requirements of new conventions.
In Vietnam, the supply chain involves numerous intermediaries, which raises transaction costs and selling prices for consumers Each party in the chain seeks to maximize its own profits, leading to a lack of transparency As a result, members of the supply chain are often unaware of the roles and impacts of other participants, focusing only on those directly related to their business dealings.
58 the other members and end up with the other party The result is an exaggeration of logistics costs that impact not only logistic companies but also customers.
Only that one ship, but when carrying a shipment through many different regions and territories, is subject to the laws of many different places through which it passes.
Shipping operations face disputes globally, often resolved through international laws and agreements; however, many regions rely on local regulations This has led to significant financial losses for several shipping companies in our country and unjust imprisonment of numerous Vietnamese crew members in foreign jurisdictions.
The Covid-19 pandemic that emerged in 2020 prompted nations worldwide to implement strict measures aimed at curbing the virus's spread, significantly disrupting logistics operations and affecting supply chains and trade flows.
According to VLA statistics, the Covid-19 pandemic has significantly impacted businesses, with 15% experiencing a 50% revenue decline compared to 2019 Additionally, over 50% of businesses have reduced their domestic and international logistics services by at least 10%.
%-30% over the same period in 2019.
Besides, logistics activities such as transportation decreased, because customs clearance services at border gates were hindered, warehousing services, and freight rates were also heavily affected.
Border gates with China are frequently overloaded and have been further impacted by the Covid-19 pandemic, resulting in frequent closures This situation has led to damaged goods and increased transportation challenges, causing financial strain for shippers and creating difficulties for logistics companies.
Along with that, many factories had to suspend operations, so the amount of goods that needed to be moved was less, leading to a decrease in the transportation and
59 delivery of goods in the supply chain, greatly affecting the activities of business enterprises transportation and logistics service business.
In the current epidemic, businesses are facing challenges due to a shortage of raw materials for production and difficulties in finding markets for their products in Asia and other regions, leading to issues with overproduction that cannot be exported.
Vietnam became a member of the WTO in 2006, leading to increased competition across all economic sectors, particularly in maritime services Following its WTO accession, foreign shipping lines can establish 100% foreign-owned branches in Vietnam, which poses a significant challenge for domestic enterprises in container agency services, ship agency, and cargo brokering, as their market share continues to diminish This situation represents a common risk that all shipping service providers in Vietnam must confront.
The Company's operations focus on the import and export activities of domestic industry, closely collaborating with major shipping lines Consequently, fluctuations in the business of key customers and the global maritime market can impact the Company's performance However, the strong partnerships with major shipping lines are currently thriving, reducing the likelihood of negative fluctuations in the near future, particularly over the next three years.
The Company primarily receives service fees in foreign currencies, reflecting the nature of its business Additionally, it utilizes foreign currency for purchasing and renewing essential services.
60 specialized equipment Therefore, the Company often faces the risk of exchange rate fluctuations, this may have certain effects on the business results of the Company.
VSC's strategy and plan 2021-2025
To enhance profitability and achieve sustainable revenue growth, businesses should focus on maintaining and developing existing markets while conducting thorough market research to identify and capitalize on new opportunities Effective resource and cost management is essential, emphasizing frugality and operational efficiency Additionally, companies should aim for a dividend payout ratio of 20%, with retained earnings reinvested to support business expansion.
To enhance competitive advantages, Viconship employs targeted pricing strategies tailored to specific customer segments and market needs By consistently innovating and developing new services, the company aims to elevate service quality and add value, ultimately boosting customer satisfaction, trust, and loyalty.
Review personnel, salary and reasonable transfer of labor between units for management and use most effective use of labor.
Strengthening inspection and supervision of subsidiaries and member units
To foster a sustainable workforce and create a positive work environment, organizations must focus on strategic planning and capacity building for future leadership This includes enhancing training programs to proactively equip employees with essential knowledge and skills, enabling them to effectively navigate the digital transformation and adapt to the growing influence of technology in the workplace.
SWOT analysis
• The distribution system is widespread in Vietnam compared to the domestic and foreign competitors
• Leading position in market share, reputation, and brand position in transportation and warehousing industry in Viet Nam
• Strong financial resource, effective enables the Company to implement modern strategies to attract skillful personnel, R&D investment, capital mobilization, M&A, and Joint-Venture.
• Viconship has grown and trained passionate and enthusiastic staffs
• The link between logistics service enterprises with each other and with import- export enterprises is still limited, not tight and trusting
• They have high logistic expense
• The application of new technology in services but is not highly effective
The Vietnamese economy is projected to sustain robust growth in the coming years, driven by thriving commercial activities In 2021, Vietnam's total trade value surged to hundreds of billions of dollars, highlighting the nation's dynamic market and economic potential.
• Institutions such as customs procedures, administrative reform, speeding up the process of deep integration… continue to be consolidated and improved.
The logistics industry faces significant challenges due to unclear and inadequate institutions and policies, which hinder its growth Many regions still experience high costs associated with informal business practices, creating unfavorable conditions for the development of this emerging sector.
Regarding the supply of logistics human resources from society, up to this point, only a few 62 universities across the country have specialized in logistics training combined with transportation.