PORTFOLIO ANALYSIS OF DHG PHARMACEUTICAL JOINT STOCK COMPANY AND HOA SEN GROUP

HANOI UNIVERSITY
FACULTY OF MANAGEMENT AND TOURISM

PORTFOLIO ANALYSIS OF DHG
PHARMACEUTICAL JOINT STOCK COMPANY AND
HOA SEN GROUP

Course: Investment Portfolio Management.
Tutor: Mrs. Pham Thi My Phuong
Student’s names and ID:
Vũ Thị Hậu - 1504000023
Nguyễn Thị Ngọc Lan - 1604010050
Nguyễn Linh Linh - 1704000072
Ngô Thị Kiều Trinh - 1704000117
Nguyễn Ngọc Quốc Khánh - 1704040054

Hanoi,2020

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Table of Contents
ABTRACTS ........................................................................................................................
1.INTRODUCTION .............................................................................................................
2. PORTFOLIO FORMING...................................................................................................
2.1

Stock’s profile .........................................

2.2

Reason for selection ................................

2.2.1
2.2.2

External...........................................................
Internal motives .............................................

3.

OPTIMAL PORTFOLIO FORMING ................................................................................

4.

PORTFOLIO EVALUATION ..........................................................................................
4.1.

Treynor ratio ..........................................

4.2.

Sharpe ratio .........................................

5. BUYING AND SELLING DECISIONS ............................................................................
6. LESSON FROM PROJECTS.............................................................................................
REFERENCES ...................................................................................................................
APPENDIX A: FINANCIAL RATIOS.....................................................................................
APENDIX B: DAILY RETURNS ...........................................................................................

APENDIX C: GRAPH ILLUSTRATION..................................................................................
APPENDIX D: THE TABLE OF HSG CALCULATION IN EXCEL ................................................

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ABTRACTS
In this report, we will summarize all the progress made in trading on the stock exchange.
We divided this report into five parts: Introduction, Portfolio Forming, Optimal Portfolio
Forming, Trading and Analysis Lessons, as well as some of the reference sections and
appendices we used to compare and analyze the stocks we exchanged. Next the paper offers
details on the general investment of two stocks. Secondly, we include the forming of
portfolios and the reasons for the selection of stocks. In addition, the optimal portfolio
formation used to combine the two companies is determined step by step in order to find
the results of the weights, beta and graph outlines. And then we use the ratio of Sharpe and
Treynor to analyze the stocks we traded, to make purchase and sale decisions. Finally, we
draw attention to some of the lessons we learned from the study of the two portfolios.

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1.INTRODUCTION
The project is based on the investment assumption provided by the use of real-time financial
information in 11 weeks from the starting date of 9 September 2020 to the closing date of 25
November 2020. After making an investment effort, we are likely to research real-time financial
trading, the most basic analysis methods and background details on portfolio results. In addition, we

are also learning how to trade on the real stock market and how to manage the selected knowledge
on the results of shares affected by our decisions. The project was a precious opportunity for us to
put into effect what we had learned in class.

There are a range of investment options that investors might take to build value for their
investment. In this study, we selected two stocks in the stock exchange to measure and
analyze carefully, i.e. the shares of the Pharmaceutical Joint Stock Company-DHG and the
Hoa Sen Group-HSG, and then analyzed those stocks in order to determine whether to
purchase or sell them..
2. PORTFOLIO FORMING
2.1 Stock’s profile

Name

of Hoa Sen Group

stock:
Listed

VNindex

market:
Stock

HSG

symbol:
Industry/

Steel industry

Sector:
Basic

Hoa Sen group first registration on 8 August 2001 and in 19 years, Hoa Sen

description:

group has become one of the leading manufacturers and traders of steel sheet in
Vietnam and a leading exporter in Southeast Asia. Hoa Sen Group is

proud to be one of the most reliable steel providers in both domestic and
international markets when HSG has 11 factories and about 300
distribution branches throughout the country. Besides, Hoa Sen group
also appears in more than 70 countries in the world.

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Name

of DHG Pharmaceutical joint-stock company

stock:
Listed

VNindex

market:
Stock

DHG

symbol:
Industry/

Pharmacity

Sector:
Basic

DHG company used to be a pharmaceutical factory in 1974 and it was

description:

officially became DHG Pharmaceutical joint-stock company on 2
September 2004. DHG is always in the top 5 pharmaceutical enterprises
with the largest market share of the pharmaceutical industry in Vietnam.
DHG distribution system including 12 subsidiaries, 24 branches, 68
pharmacy counters spread across the country.

2.2 Reason for selection
2.2.1 External
a. Hoa Sen Group
Industry: In 2019, while world markets are slowing down, the productivity of steel in
Vietnam is increasing. The production of steel in 2019 increased for about 11.9%
compared to 2018. The amount of steel that is sold also rose 10.8% in comparison with
2018. In 2020, due to the pandemic of Covid-19; however, the production of steel in

Vietnam is still stable. In August 2020, Vietnam has exported 5.96 million tons of steel
worth $3.11 billion to more than 30 countries around the world and the core market
Vietnam focuses on is ASEAN, China, Taiwan, etc. Even in the face of epidemics, this
industry still brings out some impressive achievements and it remains stable.
b.DHG pharmaceutical joint-stock company
Industry: It can be seen that Vietnam pharmaceutical industry grew dramatically and became
the second largest pharmaceutical market in Southeast Asia. In 2019, the pharmacy group has
achieved more than $2,200 billion profits and 5.5% growth compared

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to the previous year. Besides, the pharmaceutical industry has exported pharmaceutical
products to Japan, ASEAN countries, Russia, etc and it is accounting for about 200
millions dollar.
2.2.2 Internal motives
a. HSG Hoa Sen Group

HSG owns 4.446.252.130.000 VND of charter capital and gains 444.298.113
outstanding shares. According to table A.1 in appendix A, P/E ratio increased from
6.44 in 2014 to 9.15 in 2019 and decreased to 6.87 in 2020; in contrast, EPS from 2017
to 2019 declined from 4.830,00 to 877,00 and grow to 2.639,00 in 2020. It means that
in the period of 2017-2019, although the EPS of HSG during this period decreased and
the stock also decreased, it is still greater than zero. And in 2020, the EPS of Hoa Sen
Group will increase because the consumption and export volume in the fourth quarter
of 2019-2020 increased sharply. So despite the decrease in the P/E ratio, eps and the
value of shares still increased, so it is possible that the growth rate of the company
remains stable and develops dramatically in the future.

Besides, according to HSG financial statement, the company ROA raised from 1.88%
in 2019 to 6.58% in 2020 and ROE is increased for 12.29% in a year.

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b. DHG pharmaceutical joint-stock company

DHG has 871.643.300 VND of charter capital and this company owns 130.746.071
outstanding shares. Based on the table A.2 of appendix A, P/E ratio plummeted from
about 9800 in 2016 to 19.59 in 2019 and it makes EPS low of about 4.67 thousand.
However, the stock is still stable and greater than zero. Looking at the table, it can be
seen that P/E has grown from 17.79% to 19.59% and BV of DHG has increased for
about 1.83 thousand. This growth happens because of the cooperation between DHG
and Taisho - top 5 largest pharmaceutical corporations in Japan and in 2018, Taisho
bought more stocks of DHG with high price to increase the perceptions of their own
capital. The higher P/E shows that DHG company is still doing well and this business
also gains higher profit for 8.1% in quarter II of 2019 compared to 2018.
3. OPTIMAL PORTFOLIO FORMING
Step 1: Firstly, we calculate daily returns from stocks’ daily prices that we collected on

Stockbiz.vn and input data (in three years, 31/8/2018 - 31/8/2020) into an Excel worksheet
(appendix B, table B.1).
Step 2: The following formula for calculating the daily returns:

We show the output of daily returns to excel table.

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Step 3: After that, expected return can be calculated as the average of the daily returns of
the period being analyzed:

The result is shown: R(DHG) = 0.03%
R(HSG) = 0.01%
Step 4: Portfolios of two risky assets
We can experiment with separate portfolio proportions to see the effect on the portfolio
expected return and variance (Bodie,2013). When the proportion invested in DHG varies
from 0 to 1 (so that the proportion in HSG varies from 1 to 0), the portfolio expected return
goes from 0.01% to 0.03% (Appendix B, table B.2).
In this case, we use the following formula to calculate the portfolio expected returns:
E(rp) = R(DHG)* W(DHG) +R(HSG)* W(HSG)
Next, we calculated the variance of the market based on return on the market which was
based on the return of VN Index. We have the formula as below:

After calculating in Excel, we show the results in the B.2 of appendix
B The weights of the optimal risky portfolio given by the formula:

Where: rf = 0.01% is risk free rate which is the prime rate from State Bank of Vietnam, that
is the annual rate, so we divide the rate by 360 to get to the daily rate (annual r f = 4%)

After finding the weights of optimal risky portfolio, we draw the efficient frontier curve
which is the set of portfolios minimizing the variance for any target expected return. The
graph in appendix C illustrates the correlation between the expected returns and standard
deviation that we calculate in the excel worksheet.
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Step 5: Calculating beta
Suppose that returns of two stocks follow the index model (SIM) in which they perform the
dependent variables and Vn Index performs independent variables (McNulty, Daniel, n.d). The
coefficient of the independent one is the beta of stock. In Excel worksheet, we use SLOPE function
to represent the relevant linear regression between two variables with below formula:

Therefore, the result turned out:
β

(DHG) = 0.39

β

(HSG) = 1.32

Beta of portfolio is the weighted average of betas of all stocks to calculate the beta of the
portfolio. The result is presented in the table B.3, appendix B:
β ( Portfolio) = W(DHG)* β (DHG) + W (HSG) * β (HSG) = 1.46

4. PORTFOLIO EVALUATION
4.1. Treynor ratio
The Treynor ratio (the reward to volatility ratio) is a risk assessment formula which is used
to measure the volatility in the market to calculate the value of an investment adjusted risk.
The formula is:
T = Treynor ratio
Ri = return of the portfolio

Rf = the risk free rate of return
βp = the beta of the portfolio
After calculating the formula, we have the result:
TREYNOR RATIO
E
Rf
β
Treynor ratio


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With the result, we find that the Treynor Ratio of the Portfolio is higher market’s
one, thus, we can judge that it is a well performed portfolio to invest in.
4.2. Sharpe ratio
The Sharpe ratio measure up the change in overall risk-return characteristics when a new
asset or asset class is added to a portfolio.
It is calculated by the formula:

Using the formula, we have the result from Excel:
SHARPE RATIO
E
rf
Stdev
Sharpe ratio
Comment: The value of sharpe ratio is smaller than Sharpe value of the market, but it still is a

positive number. Which shows that our portfolio’s return is higher than its risk and
gives us the hope of a profitable future portfolio’s performance.

5.

BUYING AND SELLING DECISIONS

•Structure of portfolio: P = 20.07% DHG + 79.93% HSG
•Budget of project: VND 100 million
• Investment decision: VND 20.07 million on DHG stock, VND 79.93 million on HSG stock

•Transaction fee: 0.35% trading vollume
•Tax fee: 0.1% trading vollume, applied for selling options
➢

Buy- sell DHG decisions:

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Buy-sell options of stock DHG was taken from the beginning (7/9/2020) to closing of
investment period (11/11/2020) as the following tables:

➢

Buy-sell HSG decisions

We bought HSG stock the first time in 04/09/2020.
According to data from the regular III 2020 of Hoa Sen Group’s financial
statements, the gross profit in the third quarter of the fiscal year 2019 - 2020 reached
1,062.9 billion dong, up to 9.5%; 9 months accumulated gross profit reached 3,092.7

billion dong, up to 31.2%. Those statistics are considered as a good signal in the market
with the fluctuation of COVID 2020 year. Therefore, we decided to sell out our HSG stock
to make profit in 19/10/2020 (Cafef, 2020).
Next, we determined to purchase HSG’s shares on 29/10/2020 because of two main reasons.
The first, the HSG’s stock price was suddenly low at VND14.800 which was attractive for

investment. The second, at the same time, the financial status of steel industry was
predicted that their price will increase in the nearly time (Cafef 2020).
We finally closed our investing period in 13/11/2020. All calculation are showed in the
table D of appendix D and appendix of excel worksheet.
Total gain = VND 636,400 +VND 38,672,093 =VND 39,308,493.01
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6. LESSON FROM PROJECTS
Some important lessons as well as experiences can be drawn from this report. Firstly, stock
prices can be influenced by a variety of variables that need to be fully evaluated instead of
relying on the analysis of the financial statements. On the other hand, the limits for
potential gains or losses must be defined before any investment is made. In other words,
stocks should be sold if their values rise or fall to the anticipated levels. Moreover, future
price fluctuations cannot be predicted on the basis of previous events, which means that
using only past event details for stock price predictions will be inadequate.

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REFERENCES

1. Duy Na, 2020 “ Doanh nghiệp ngành dược làm ăn ra sao năm 2019 “ [ Online ], Viewed

Feb, 6th,2020, />2. Khac Lam,2019 “ DHG: Lời giải nào cho bài toán tăng trưởng” [ Online ] , Viewed Aug,

5th,2019, />3. Chi Tin,2020 “Giá nguyên liệu nhảy múa, HSG lại thấp thỏm” [ Online ], Viewed
Aug,31th,2020, />4. Do Thi Sa,2020” Thông tin dược phẩm & Trang thiết bị y tế “ [ Online ], Viewed,
Jan,20th,2020,
/>5. “ Thông tin cổ phiếu HSG” [ Online], viewed, Jul,23th,2019 ,
/>
6.“ Ước tính kết quả kinh doanh quý 3 HSG “ [ Online ], viewed
Oct,13th,2020, />7.“ Thơng tin tài chính DHG” [ Online ], Viewed Jul,3rd,2020,
/>
8.“ Thông tin về HSG “ [ Online ], Viewed Nov, 25th, 2020, />
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APPENDIX A: FINANCIAL RATIOS
Table A.1: Financial ratio of DHG

Table A.2: Financial ratio of HSG

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APENDIX B: DAILY RETURNS

Table B.1: Daily returns of 2 stocks

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Table B.2: Weight of 2 stocks

Tablel B.3: Beta result

APENDIX C: GRAPH ILLUSTRATION

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APPENDIX D: THE TABLE OF HSG CALCULATION IN EXCEL

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