Investors yet to bite on carrot

Cheap shares are offering some sweet deals, but investors are not hungry

Hoa Binh Securities Company (HBS) statistics reveal that as of late April, there were 213 stocks, out of 632 on the nation’s two bourses, with market valuations below face values.

Long An Schoolbook and Equipment Company (LBE), which traded at VND7,800 per share on May 10, earned a VND3.4 billion ($164,000) after-tax profit in 2010, an earnings per share (EPS) of VND3,100 each and a price to earnings (P/E) ratio of 2.2. LBE also paid a 20 per cent ratio cash dividend per share.

With the minimum cash dividend ratio of 10 per cent a share for 2011, market analysts said investors could expect high capital gains while enjoying high yields from cash dividends. LBE also holds VND11 billion cash in hand, or three times higher than its market capitalisation. LBE shares were, however, being ignored by the market.

Ngo Quyen Seafood Export Company (NGC), General Materials Biochemistry Fertiliser Company (HSI), Vitaly (VTA), Pha Lai Thermal Power Company (PPC) and Ha Tien 1 Cement Company (HT1) had also failed to satisfy investors’ risk appetite.

NGC, HSI, VTA, PPC, HT1 were traded at VND8,100, VND9,300 VND3,000, VND9,000 and VND6,900 a share, respectively, on May 10.

Quan Trong Thanh, Mekong Securities’ senior analyst, said the majority of small- and medium-sized market capitalisation stocks were traded with low liquidity due to little market attention. There were now 340 stocks, with P/Es below 6.

“Generally, Vietnamese stocks are cheap. However, with the current macroeconomic conditions remaining unclear, it is hard to persuade and recommend investors to stay in,” said Thanh.

Thanh said with high inflation, high lending rates and a tightened monetary policy, risks of long market sideways like 2002-2003 and 2004-2005 were relatively high.

“Moreover, the average bank deposit rates of 16-17 per cent offer higher yield while risks are lower [than stocks]. Investors hold cautious views on equities,” said Thanh.

Nguyen Quang Thuan, StoxPlus chief executive officer, argued that in order to compete the high interest rates, the VN-Index had to rise to at least 566 points within the year.

“Currently, it is unclear if the VN-Index can rise to 566 points within 12 months,” he said.

Thuan said while the stock market was less attractive than bank deposits, investors could find stocks with dividend ratios or yields higher than bank deposits. Thuan found IJC, SBT, TIX, CSG, PHT, VC9, EID and MCP as good options.