No increase in securities stocks despite profits

Saigon Investment
Despite reporting huge profits in the third quarter of the year, stocks of securities companies still went downhill. 
Investors surprised
The surprise expressed by investors was completely understandable because earlier securities companies were racing to announce the third quarter results and nine months of 2021 business results were evaluated as the most effective so far. Statistics from HoSE show that up until now, at least 14 securities companies have announced their financial statements for the third quarter with impressive results.
For example, revenue and profit after tax of Saigon Securities Company (SSI) reached VND 1,846.3 bn and VND 667 bn, respectively. This was an increase by nearly two times compared to the same period in 2020. For accumulated nine months of 2021, SSI recorded total revenue of VND 5,091.1 bn, up 53.3%, and profit before tax reached VND 2,062.6 bn, up 91.8%, over the same period in 2020. With this result, SSI has exceeded 12% of the profit plan for the whole year in only nine months.
Similarly, Ho Chi Minh City Securities Company (HCM) announced third-quarter business results with revenue of VND 906 bn, up 128%, and pre-tax profit of VND 397 bn, up 127%. In nine months, HCM recorded net revenue of VND 2,411 bn, up 124%. HCM also completed 90% of the year plan. Its pre-tax profit was more than VND 397 bn, up by 135% and completed 96% of the whole plan. According to statistics, nine month earnings per share (EPS) reached VND 3,027. Return on total assets (ROA) and return on the share (ROE) were 5.9% and 19.3%, respectively.
Previously, Viet Rong Securities (VDS) announced business results for the third quarter and nine months of 2021 with a growth rate of over three digits. Specifically, VDS recorded VND 227 bn in revenue, up 153%, and accumulated nine months reached VND 761 bn, up 193%. VDS also completed 144% of the whole year plan. Third-quarter profit after tax reached VND 73 bn, up 98%, and accumulated nine months reached VND 320 bn, up 539%, and completed 222% of the 2021 plan. This continues to be the highest profit achieved by VDS since it established. This was due to the huge profit of VDS in the third quarter of VND 698, and accumulated in the last four quarters at VND 4,163.
Notably, the list of securities companies reporting profits in the third quarter also saw the presence of securities companies struggling in difficulties. Many securities companies are managing to handle losses of previous years, such as DongA Securities Company (DAS), Saigon Thuong Tin Securities Company (SBS), and APG Securities Company (APG).
Stocks fall sharply
It can be said that the impressive business results of the group of securities companies are not difficult to explain, especially in the context that everything is supporting securities companies. The first is that the transaction value of the market has increased many times over the same period last year. Specifically, the average daily transaction value in the third quarter reached US$1.1 bn, up 316 percent. This is the quarter that recorded the highest number of new account openings with 337,000 accounts. The second factor is that margin lending continues to grow, as securities companies simultaneously increase capital to take advantage of this attractive source of income. In this context, analysts recommend investors disburse into this group of stocks to wait for the third quarter business results.
Everything is in favor of securities stocks, but in fact, these stocks continuously go down to the surprise of investors. Many stocks even fell sharply, even though the closing date of the list to receive the right to buy bonus shares was near, as in the case of HCM. This stock code was continuously sold by investors and reduced in price until close to the ex-right date to buy additional shares, at VND 14,000 per share. This offer price was much lower than the market price before the ex-rights date of more than VND 50,000 per share, but investors still sold out. The selling pressure before the closing date of the list of shares entitled to receive shares also occurred with many other securities companies, including SSI. This stock code was pushed from the mark of VND 63,000 per share to only VND 60,000 before the ex-rights date.
For stock companies that have no share bonus activities during this period, the decline is even greater. According to statistics, stocks of the securities sector suffered an average price drop of 15% to 30% during the fall in October. Although this group of industries rebounded in the session of 27 October when the VN-Index established a historic milestone, many investors still suffered losses.
High expectations
Commenting on the recent price drop of the securities group, a senior investor in the stock market, said that the group of securities stocks adjusted after rising too hot, and many stocks increased two to three times compared to the beginning of 2021. With the rising wave, in addition to the expectation of business results, which is clearly shown in the third quarter financial statements, the bullish wave also comes from a greater expectation in the future when the T0 transaction was implemented in 2020. However, not all securities companies benefit from T0 transactions. In fact, only large securities companies, occupying a large brokerage market share, are the main beneficiaries of T0 transactions. With small securities companies, competitive pressure will be fiercer in the context that more and more securities companies with foreign capital enter the market.
In particular, the appearance of foreign securities companies also puts pressure on domestic giants. According to a leader of a domestic securities company, international experience helps foreign securities companies have the conditions and capacity to access new products faster, along with financial potential being a factor that helps foreign securities companies to be stronger and more daring in transforming into low-cost and attractive products and services to attract customers.
According to another leader of a securities company with investment capital from South Korea, investors are expecting too much from this industry group, and many people even expect this growth to last. Investors are optimistic about the long-term prospects of Vietnam's capital market, and that's why they are here. Although the market will not go up forever because the securities industry is a highly capital intensive business, it is trading at an average P/B of 3.6x, and ROE throughout the cycle is 11% to 15%. This is the reason investors can find better opportunities in other more attractive sectors.

Kim Giang

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