VIETNAM STOCK INDEX COMPONENTS REVIEW – FPT CORP (HOSE:FPT)

WHY FPT CORP?

FPT Corporation is the largest IT company in Vietnam. Strong EPS and cashflow growth is expected over the years ahead as they benefit from a wide variety of tailwinds. The growth in digital transformation services will see margins improve at already strong levels. The telecommunications segment is underpinned by increasing demand for internet usage whether that be from households or corporates. Demand for IT education is also experiencing strong growth as is remote learning in general.

AN OVERVIEW OF THE FPT CORP (HOSE:FPT) BUSINESS

Their core segments span technology and telecommunications, and to a lesser extent education. Their history is over 30 years and in 2006 were the first IT company listed on the stock exchange in Vietnam.

FPT Sector Breakdown

On a revenue basis we can see from below that IT accounts for around 58%, followed by telecommunications 36%, and the small grey area represents education at 6%.

Source: FPT Corporation Annual Report 2021

Global contribution to revenues

Spanning 26 countries!

It is rather unique compared with other large Vietnam listed stocks I have observed, in that they are truly global, with a large part of their business outside of Vietnam.

Source: FPT Corporation Annual Report 2021

Recent Profitability / revenue trends

They are one of the genuine success stories on the Vietnam stock market over recent years and the longer term as illustrated below.

Source: FPT Corporation Annual Report 2021

KEY TAILWIND FOR THE FUTURE OF FPT CORP

Given the earlier point about FPT Corp having global reach, you want to have a firm belief in the strong growth outlook in terms of global increasing investment in technology.

Whilst we are only talking about forecasts below, FPT Corp shareholders would be encouraged about where forecasters see global spending on digital transformation heading into future years.

Source: FPT Corporation Annual Report 2021

FACTORS TO DECIDE ON WILL FPT CORP SHARES KEEP RISING IN 2022? 

Will the typical Vietnam business embrace “going digital”? – FPT Corp are well positioned to take advantage of the increasing growth in digital transformation spend globally as I just highlighted above. However they are even better placed to take advantage of this specific trend within Vietnam.

The ministry of Information and Communication in Vietnam this year has made plenty of commitments to accelerate the national digital transformation development. They talk of this contributing to investment projects in technological infrastructure, and also the social aspects of making sure such transformation reaches and benefits all households and parts of society.

FPT internally notes that the amount of small to medium enterprises wanting to go digital is increasing at a huge rate compared to surveys done pre pandemic. The extent to which all this promise and forecasts are fulfilled will have a major bearing on where FPT Corp shares are headed.

Global growth expectations – Whilst their global reach is highlighted as a strength, it does make the company more exposed to a global slowdown in economic growth compared with other large Vietnam listed stocks you may own. In mid-2022 the global economic outlook is looking increasingly uncertain.

Investors can get excited over the long-term tailwinds of big tech at times, but must be mindful how many are also tied into the fortunes of global company’s advertising budgets.

Increasing competition – Whilst FPT Corp is in such a strong position, particularly in Vietnam to capitalise on the tailwinds I have discussed, this is obvious to anyone involved in the sector. Therefore it is a situation that naturally attracts competition. Sometimes this simple fact can be forgotten by prospective investors and they get carried away and pay too high a multiple for the stock in such situations.

Does negative stock market sentiment to global tech continue? – Holders of FPT Corp need to be well aware that no matter how the company specific news may unfold, the stock may well get caught up and simply move in a highly correlated fashion to major tech stocks in the world.

In June for instance to me it largely felt like Vietnam stocks generally had such a bad month just due to following movements in the US stock market. More specifically, US stocks continued to weaken, tech sector sentiment was poor thanks to a hawkish Fed. As interest rates rise this year, investors are becoming increasingly nervous about paying higher multiples for companies where you rely on higher growth rates many years into the future. i.e. somewhat “longer duration” cashflows are not valued as highly when rates are rising.

FPT Corp being a high profile, higher P/E (read further down on this blog post to see) Vietnam tech related stock can well get caught up in this theme.

VIETNAM STOCK MARKET VALUATIONS – FPT CORP PE RATIO, YIELD ETC.

FPT Corp PE Ratio – 20.7 times

FPT Corp dividend yield – 1.1%

* Source: TIKR data captured on August 10th 2022

  • Note if you find this sort of data table useful, then below here is a link for a free sign up to TIKR (no credit card required).

https://app.tikr.com/register?ref=valueinvestliving

They are a “freemium subscription model”, so there is tons of free information and the full access pro plan you only have to pay for if you later feel comfortable you wish to do so. Note that I may receive a small commission if you join their paid plan, but at no additional cost to you.

FPT CORP SIZE IN TERMS OF VIETNAM STOCK INDEX AND COMPONENTS

FPT Corp at the time of writing is about the 17th largest company of my searched of Vietnam stock list of the largest companies. The market cap in USD is circa $3.9 billion.

IS FPT CORP A GOOD UNDERVALUED VIETNAMESE STOCK TO BUY FOR 2022?  

The future growth prospects still remain very positive for the stock so arguably current valuations are justified. The stock also, like many other stocks this year, has corrected quite a bit off its highs.

I would be a bit cautious on it in the short term, to a large extent influenced by the potential for US and in particular tech related stocks to suffer further declines, so wouldn’t surprise me to see FPT Corp get dragged down on such sentiment.

I note that it has been such a clear outperformer over the last year compared with most stocks and markets. Whilst I think the stock should do fine still for longer term holders from here, I would personally be more temped at this stage to hunt for opportunities on the Vietnam stock market amidst other stocks that have been harder hit with sharp price declines in 2022.

It remains a quality Vietnam stock though so long-term believers should not be shaken out of their positions just from the increased volatility and downside corrections we have seen this year. Long term holders should also draw comfort from the strong balance sheet, cashflow outlook, as this is one of the stronger Vietnam stocks in terms of future likelihood of paying regular dividends.

OTHER VIETNAM STOCK INDEX COMPONENTS REVIEWS

If you are interested in similar summaries and analysis on other larger Vietnam listed stocks here are some other links to check out.

VIETNAM STOCK INDEX COMPONENTS REVIEW – VINAMILK (HOSE:VNM) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)

VIETNAM STOCK INDEX COMPONENTS REVIEW – VINHOMES (HOSE:VHM) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)

VIETNAM STOCK INDEX COMPONENTS REVIEW – AIRPORTS CORPORATION OF VIETNAM (UPCOM:ACV) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)

VIETNAM STOCK INDEX COMPONENTS REVIEW – SAIGON BEER (HOSE:SAB) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)

VIETNAM STOCK INDEX COMPONENTS REVIEW – HOA PHAT GROUP (HOSE:HPG) – VIETNAM STOCK MARKET (vietnamesestockmarket.com)

And should you want a very quick description of the largest 10 companies listed on the Vietnam stock exchange, be sure to visit the below blog post I made last year.

VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET

I summarize the largest Vietnam companies by market cap:

VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET

Is Vietnam a good investment?

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