Vietnam Securities Brokerage Sector – Q2/2022 Results and Outlook
Q2/2022 Results
- Recent investigations and tightening of capital market regulations by the government combined with global economic uncertainty have led to a significant correction in Vietnam’s stock market. The VNINDEX fell 19.7% in Q2, which coupled with a decrease in the average daily trading volume (-33.1% q/q). However, the stock market remained an attractive investment channel. The number securities accounts opened in July and August 2022 continued to grow with 662k new accounts, with the total trading accounts reaching 6.4mn, about 6.4% of the Vietnamese population.
- In terms of financial performance, we have taken 9 securities companies as a proxy for the brokerage sector. In Q2, net sales declined 4.3% y/y as proprietary trading income tumbled (-67.8% y/y), with a reduction in brokerage income (-11.4% y/y). Other main streams posted positive growth rates like margin lending income (+53.1% y/y) and other services like Investment Banking and advisory services (+33.6% y/y).
- Gross profit declined by 8.9% y/y as a result of negative sales growth. Operating expenses increased notably as companies continued to invest in digitalization. Overall, net profit dropped 30.2% y/y and 0.3% y/y in Q2 and H1/2022, respectively.
Outlook
- After the correction in Q2, the valuation of Vietnamese stocks has become undemanding, as the top 100 by market cap trade on average at a 2022F P/E of 12.5x. Macroeconomic indicators are robust with 2022F GDP growth of 6.7% (after 2.9% in 2020 and 2.6% in 2021) and in-check inflation (2022F’s 4.0%). The stock market has shown signs of bottoming out with higher trading volumes and higher margin trading levels from the lows in Q2. We view that general investors are regaining their interests in the stock market, especially as interest rates on deposits, a key investment/ saving asset class, remain much lower than pre-Covid levels.
- We project all revenue streams will recover strongly from H1/2022. However, because H2/2021 had a high base with a record trading volume, on a y/y basis, H2 profit growth will still be negative leading to a FY2022 net profit to drop of 2% y/y, with the EPS to drop more by 29.6% y/y due to dilution from raising equity capital.
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Featured image credit: TIM