Vietnam Securities Brokerage Sector – Q1/2022 Results and Outlook
Q1/2022 Results
- Despite global uncertainties, Vietnam’s equity market was relatively solid in Q1 (VNINDEX -0.4%), while the number of new securities accounts opened in 5M2022 surged to nearly 1.4mn, and total trading accounts reached 5.7 million, which is about 5.8% of the Vietnamese population. The average daily trading volume also increased by 67.0% y/y reaching USD1.1bn.
- Thanks to robust market participation, the securities brokerage sector continued to post strong financial results. We have taken 9 securities firms as a proxy for the whole sector. Net revenue increased by 32.1% y/y. Of which, brokerage income went up by 66.9% y/y, and accounted for 30.0% of total net revenue. Margin lending income rose 114.1% y/y, making up 24.3% and proprietary trading declined by 12.7% y/y, making up 31.4%.
- Gross profit increased by 44.7% y/y, faster than that of revenue mostly thanks to the lower funding cost of the margin lending segment and enhanced gross margin of the brokerage segment thanks to higher scale. Operating expenses also increased strongly mostly due to salary and bonus. Overall, net profit of the sector increased by 33.1% y/y.
Outlook
- Q2/2022 so far, the market has corrected with the VNINDEX dropping by 18.4%. The trading volume has also declined by 28.5% q/q. Nevertheless, we see this consolidation after two years of strong performances (VNINDEX +14.9% in 2020 and +35.7% in 2021) is short lived. The underlying economy is running strongly (2022F GDP growth of 6.4% after 2.9% in 2020 and 2.6% in 2021). At current market levels, 2022F P/E of VNINDEX is 11.2x. The last time a similar level was reached was in Q2/2020 when COVID-19 just broke out globally.
- Due to weak market sentiment and reductions in trading volumes in the last few months, we expect Q2/2022 results will be weaker. However, as a positive economic and earnings outlook remains, we forecast the trading volume and margin lending demand to rebound in H2/2022. Overall, we estimate net profit of the sector to decrease by 6.5% y/y, although sector EPS growth will be more negative, -26.1% y/y, due to dilution from equity capital raising in Q4/2021 and 1H/2022.
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