Mining, rubber stocks top earnings rankings
Mining and rubber companies recorded the highest average earnings-per-share (EPS) last year, accounting for seven of the top 10 companies and with all seeing EPS in excess of VND10,000 (US$0.50), according to Hoa Binh Securities Co's report of listed company's unaudited financial statements for 2011.
Companies in the mining and rubber sectors posted high profits despite difficult market conditions, and their good business results helped their shares maintain a relatively high average value, even as about one-third of companies listed on the stock exchange saw their prices fall below par.
Ha Giang Mineral and Mechanics (HGM) posted the highest EPS of over VND23,600 (US$1.10) on a total net profit of over VND149 billion ($7 million), while Dong Phu Rubber (DPR) had the highest EPS among the rubber companies, with an EPS exceeding VND19,700 ($0.95), on a total net profit of VND849 billion ($40.4 million).
Price-to-earnings (P/E) ratios of these stocks all remained attractively low at about 2-4, compared with a market average of over 9. Among their weaknesses was low liquidity, with trading volume avaraging just around 10,000 shares per session – suggesting they remained an insignificant afterthough to both large and speculative investors.
This year, Viet Nam's stock market has increased strongly, with an impressive gain on benchmark indices in February of nearly 25 per cent on the HCM City Stock Exchange and about 22 per cent on the Ha Noi bourse.
Shares of top 10 enterprises with the highest EPS advanced steadily, with Tay Ninh Rubber (TRC), Binh Duong Mineral and Construction (KSB) and Binh Dinh Minerals (BMC) leading the rise with average gains of over 15 per cent.
Profit of HGM and BMC more than doubled last year. Besides increased exploitation of antimony and titanium, both companies took advantage of rising prices on the global markets, especially after China announced restrictions on exports of rare earths. Prices of these minerals are forecast to continue rising, creating a favourable conditions for these companies.
In the rubber sector, a shortage of latex has driven rubber prices up sharply on the world market over the past two years and helped drive higher sales and profits for domestic rubber companies.
Entering 2012, demand for rubber is expected to rise, but demand for natural rubber has been forecast to be lower than for synthetic rubber. Demand for natural rubber increased 3.8 per cent last year and was projected to grow 5.4 per cent this year. However, rubber prices will heavily depend on major rubber-consuming countries, including Japan, China and India, as well as the recovery of European markets from the slowdown initiated by the debt crisis.
In 2011, advantageous foreign exchange rates for exporters also helped increase their profits. Companies with strong foreign reserves, meanwhile, avoided borrowing from commercial banks due to inflated interest rates, but enjoyed solid interest earnings on deposits at banks.
The Government's tight monetary policy, combined with high lending interest rates offered by banks of over 20 per cent per year on average, and up to 27 per cent at some times, drove companies in other sectors to scale back production and incur losses.
This year, however, inflation is expected to continue cooling, exchange rates are projected to remain stable, and borrowing interest rates are forecast to fall to as low as 10 per cent per year by the last quarter of this year. Greater economic stability will bring about sustainable development for enterprises in general, and for mining and rubber
companies in particular. To maintain high growth rates, these companies will have to put more effort into expanding markets, invest in production, manage costs and pursue sound inventory policies in the face of complex changes on global commodity markets. — HBS