Bad investor relations hurting stocks

Hanoi (VNA) - Stock data has revealed that 40 percent of shares listed on the local bourses are traded below book value, with local securities experts suggesting that bad investor relations (IR) was the leading cause.

As one of the top ten basa fish exporters in the country, Nam Viet Corporation JSC (ANV) with chartered capital of 660 billion VND (29.5 million USD) and equity of 1.3 trillion VND, reported revenues of 1.12 trillion VND and a profit after tax of more than 20.5 billion VND.

Despite the promising and positive business results, since June 2015, ANV shares have fallen from 10,400 VND to 7,000 VND. The prices are much lower than the book value of 19,705 VND each.

Similarly, shares of the local paper manufacturer Hapaco JSC (HAP) which has equity of 692.6 billion VND as of March 31, 2016, and a corresponding book value of 13,527 VND per stock, only traded at around 5,500 VND, or less than half the book value. Over 2015, the HAP share price fell by 27 percent.

In contrast to the low prices on the stock market, HAP posted a net revenue of 374.9 billion VND and an after tax profit of 35.4 billion VND, an increase of as much as 7.1 and 25.5 percent, respectively over 2014.

Another example was the case of Bac Lieu Fisheries JSC (BLF) that also has a very low market value compared to its book value. BLF shares traded below 4,300 VND while the book value of one share was 17,080 VND.

In the market, many stocks have fallen very far below their book values despite their business results being quite good. They include the mineral manufacturers Taicera Enterprise Company (TCR) and Chang Yih Ceramic JSC (CYC), construction firm Hacisco JSC (HAS), two cement firms under the national chemical groups of Gypsum and Cement JSC (TXM) and Hoang Mai Cement JSC (HOM), two miners of Spilit Stone Joint Stock Company (SPI) and Vinacomin-Deo Nai Coal JSC (TDN), and food manufacturer Nam Dinh Export Foodstuff and Agricultural Products Processing JSC (NDF).

Though there were many reasons for undervalued shares such as earning results, bad business outlooks and downward market trends, most securities experts claim bad investor relations was to blame.

Nguyen Xuan Binh, deputy director of the analysis section in Bao Viet Securities Company (BVSC), said the undervalued shares could be the result of a bad outlook from the industry, however the P/B (market price to book value) ratio still remained stable between 1.6 to 1.7.

Binh said that obviously business losses and bad IR activities would contribute to the low price of shares. However, he said in the case of good business results still producing undervalued share prices, it was probably due to a lack of transparency about information on the firms’ investments and concerns about cash flow stability.

Bui Nguyen Khoa, head of market analysis at BSC Securities Company, cited the example of Hoa Phat Group, saying that after the group improved its IR activities for which it had been criticised a lot, HPG shares began trading at their real value.

According to other opinions, the underpricing of shares from firms with good business results and high profitability potential in the future reflected a lack of trust from investors in both the firms and the local stock markets.

In this case, not only the firms themselves, but the entire market system must work hard to regain the investors’ trust.

Earlier, leaders of listed firms such as securities firm FIT, construction firm NBB and Refrigeration Electrical Engineering Corporation (REE) admitted that their IR activities had not been effective enough in attracting local and foreign investors, and especially in correcting rumours in the market. Now, shares in those firms were much higher in the local market.

On April 27, in meeting with Deputy Prime Minister Vuong Dinh Hue, the State Securities Commission (SSC) said one of the key goals was to make listed firms apply transparent management in their works, adding that it would mark transparent management as one of the major conditions required when it restructured and classified listed firms in the future.-VNA