Giải pháp định giá doanh nghiệp nhà nước: Luận văn Bảo hiểm Vietinbank

VIETNAM NATIONAL UNIVERSITY, HA NOI SCHOOL OF BUSINESS PHAM TRUNG THANH THE SOLUTIONS FOR VALUATION IN THE EQUITIZATION OF STATE ENTERPRISES, THE CASE OF VIETINBANK INSURANCE ONE MEMBER LIMITED COMPANY Major: Finance Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: Dr. Tran Phuong Lan Ha noi, 2011 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com VIETNAM NATIONAL UNIVERSITY, HA NOI SCHOOL OF BUSINESS PHAM TRUNG THANH THE SOLUTIONS FOR VALUATION IN THE EQUITIZATION OF STATE ENTERPRISES, THE CASE OF VIETINBANK INSURANCE ONE NUMBER LIMITED COMPANY Major: Finance Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: Dr. Tran Phuong Lan Ha noi, 2011 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS ACKNOWLEDGEMENTS i ABTRACT ii TÓM TẮT v TABLE OF CONTENTS viii LIST OF ABBREVIATIONS xii LIST OF FIGURES xiii LIST OF TABLES xiii FOREWORD 1 1. The necessity of the thesis 1 2.

The purpose of the research 4 3. The objective and scope of research 4 4. The method of research 5 5. Outline of the Thesis 5 CHAPTER 1: FRAMEWORK 7 1.2 The methods of the valuation of the firm 10 1.1 The free Cash Flow to The Firm 10 1.2 The FCFF model 11 1.3 The strengths and limitations of FCFF model 15 1.2 The FCFE model 16 1.2 The FCFE model 17 viii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.3 The strengths and limitations of FCFE model 18 1.3 The dividend discount model 19 1.2 The dividend discount model 19 1.3 The advantages and disadvantages 22 1.4 The price multiple valuation model 24 1.1 The price to earning method 24 1.1 The theoretical framework 24 1.2 The price to earning model 24 1.3 The advantages and disadvantages 25 1.2 The price to book value method 26 1.1 The theoretical framework 26 1.2 The price to book value method 27 1.3 The advantages and disadvantages 28 1.3 The economic value added method 29 1.1 The theoretical framework 29 1.2 The economic value added method 29 1.3 The advantages and disadvantages 31 CHAPTER 2: EMPIRICAL STUDY ON THE NON LIFE 33 INSURANCE INDUSTRY AND THE VALUATION OF VIETINSCO 2.1 Overview of Viet Nam insurance market 33 2.2 The influencing factor to valuation of the firm 36 2.1The Macro environment 36 2.1 Political 36 ix LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 Non life insurance Industry 37 2.1 Competition within the industry 37 2.2 Threat of new entrants 38 2.3 Threat of substitute 38 2.4 Bargaining power of customers 39 2.5 Bargaining power of Supplier 39 2.1 The psychological factors 39 2.2 The economic factors 41 2.3 The valued factors 41 2.3 General view about Vietinsco 42 2.2 The structure of organization 46 2.4 The Valuation of Vietinsco 48 2.3 The dividend discount method 63 2.4 The price multiple valuation method 65 2.1 The price to earning method 65 2.2 The price to book value method 65 2.3 The economic value add method 66 x LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 3: THE COMBINATION OF THE VALUATION 71 METHODS 3.1 The calculation of the weight rate 71 3.1 The calculation of the weight rate base on the view of author 71 3.2 The calculation of the weight rate base on the interview experts 72 3.3 The calculation of the weight rate 73 3.2 The valuation matrix 74 CHAPTER 4: THE CONCLUSION AND RECOMMENDATION 75 Reference: Appendix Appendix 1 : Vietinsco historical Balance Sheet Appendix 2: Vietinsco historical Income Statement Appendix 3: Vietinsco Capital employed Appendix 4: Vietinsco Ratio Forecast Appendix 5:Vietinsco Working Capital Movement Appendix 6: Financial Ratio Appendix 7:Vietinsco Cash Flow Analysis Appendix 8:Vietinsco sensitivity anaysis – Terminal Value approach – Growth in perpetuity method of FCFF method Appendix 9: Vietinsco sensitivity anaysis – Terminal Value approach – Growth in perpetuity method of FCFE method Appendix 10: Vietinsco sensitivity anaysis – Terminal Value approach – Growth in perpetuity method of EVA method Appendix 11: The historical data on the return of rate the stock index, xi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com treasury (a year), and Bonds (10 years) in US, 1928-2010 Appendix 12: Treasury Yield Curve Rates Appendix 13: Estimate country Risk Premiums Appendix 14: Interest rate per year Appendix 15:The information market in the non life insurance field LIST OF ABBREVIATIONS CAPM Capital asset pricing model CEO Chief executive officer COGS Cost of gross sale D Debt DDM Dividend discount model DIV Dividend value DPS Dividend per share E Earning EBIT Earning before interest and taxes EPS Earning per share EVA Economic value added FCF free cash flow FCFE Free cash flow to equity FCFF Free cash flow to firm GDP Gross domestic product NOPAT Net operating profit after taxes xii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com OCF Operating cash flow/ cash flow from operating activities P/B Price to book P/E Price to Earning PV Present Value ROA Rate of asset ROE Rate of Earning Vietinbank Viet Nam joint stock commercial Bank for industry and trade Vietinsco Vietinbank insurance one number limited company WACC Weighted average cost of capital WC Working capital WTO World trade organization LIST OF FIGURES: Figure 1: Growth GDP (2002-2010).

Figure 2: Non cash charges Figure 3: The structure of organization: LIST OF TABLES Table 2.1: FCFF for Vietinbank Insurance Company (2010-2015) Table 2.2: The β information market in US Table 2.3: The input information Table 2.4: The Valuation using terminal value xiii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.5: The valuation using FCFF method Table 2.6: The FCFE for Vietinbank insurance Company 2010-2015 Table 2.7: The valuation using teminal value Table 2.8: The Valuation using FCFE method Table 2.9: The income statement Table 2.10: The growth rate data Table 2.11: The valuation using DDM Table 2.12: The economic value added valuation Table 2.13: The valuation using terminal value Table 2.14: The valuation using EVA method Table 3.1: The view of experts about the weight rate Table 3.2: The weight rates Table 3.3: The valuation matrix xiv LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com FOREWORD 1 – THE NECESSITY OF THE THESIS In the context of post-crisis global economy, Viet Nam’ economy has been growing continually to a high and stable speed. Although the pace of global economic recovery is not all over the world, Asia has achieved quite well. In Asia, Vietnam has continued to achieve the impressive growth. After real GDP growth of 5.3% in 2009, Vietnam's economic growth forecasts to 6.78% in 2010 like China, Viet Nam is not only outstanding achievement by high growth but also a stable trend.

However, comparing with the growth of Thai Land (from -2.8%) and Malaysia (from - 1.1%) , the growth of Viet Nam is the slower than the negative growth of countries in Asia in 2010. Figure 1: Growth GDP (2002-2010) Resource: International Monetary Fund, World Economic Outlook Database, April 2011 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com However, the impressive growth performance is also accompanied with a number of macroeconomic issues. The first signs of risk appeared in 2007 when Viet Nam’ economy received a surge in foreign capital inflows that have not seen immediately after Vietnam joined the WTO. It started to the credit boom and asset price bubbles.

Since then, the problem becomes more serious with a series of external shocks such as the world commodity price increases in 2008, the financial crisis and global economic crisis in 2009 and the national debt in 2010 in Europe. Viet Nam now falls in unexpected high inflation rate in the entire East Asia and Pacific (6.5%) in 2009 and approximately 10% in 2010 (International Monetary Fund, World Economic Outlook Database, April 2011). Secondly, Viet Nam’ economy also faces to pressure on currency, to decrease foreign exchange reserves, to be dismal stock market and balance of high national interest rates compared to other fast growing economies in Asian. Thus, although one of the most dynamic economies in the region, Vietnam’ economy is also an exception from the trend of emerging market such as more powerful currencies in general, strong capital inflows and increasing foreign exchange reserves.

Besides, the competition between insurance companies and other financial services such as attracting savings deposits, securities, real estate business … is complex. The requirement of customers in service of the insurance field is creasing, they are many the best choices and the best firm 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com for service them. So, insurance companies want to attract the customers, they have to a detail strategy for making a strong brand name, to enhance a service quality by performing the commitment to the method, manner and compensation duration, to bring more value added service for customers instead of lowering premiums and promotion before. More over, not only the number of foreign insurance companies licensed to operate in Viet Nam but also the number of domestic insurance companies are increasing, they have a strategy to dominate the market, increasing the market share in various forms including marketing and advertised techniques to accept losses for a long time ( even over 5 years ), the result of this strategy creates the unequal competition with other insurance companies but this operation is suitable to the insurance business law.

The policy of insurance business management is more complete and more close to both promote self reliance of insurance company and ensure the legitimate rights and interest of the clear and better insured. The equalization of state enterprises is considered an effective tool to enhance competitiveness, to improve the management capacity and management administration, to improve the efficiency of property management and the development of various kinds of products and services, what supply the needs of increasingly complex and diverse customers. The equalization of state owned enterprises is also committed to participate in Viet Nam's integration into the international economy .However, the equalization of state enterprises should comply with the requirements strategy, coordinating between the State's policy with 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Vietnam's commitments and the basic characteristics of the economy of Vietnam. Therefore, the equalization of state owned enterprises such as Vietinsco if to be done right, Vietinsco will enhance completely in domestic and foreign markets as well as to meet the management requirements of the particular business, to contribute to raise the efficiency of Vietinsco in particular and to promote growth and economic development in general Moreover, Vietinsco is a component of the Vietinbank, the equitization of state owned enterprises is part of a roadmap for equitization of Vietinbank.

2- THE PURPOSE OF THE RESEARCH Theoretical methods of valuation of enterprises in the equitization of state enterprises resolve the need of business valuation. The purpose of the research is to analyze and to evaluate the business activities of Vietinsco. On the basis of theoretical research on business valuation in the equitization of state enterprises and Vietinsco of valuation process, the thesis proposes the value of Vietinsco what it is suitable with price market and the provision of law. 3- THE OBJECTIVE AND SCOPE OF RESEARCH The objective of research is Vietinsco and the business of Vietinsco from 2008 to present.

The scope of research is comprehensive Vietinsco, regardless of 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com branch’ Vietinsco. Therefore, the financial statements of Vietinsco will be the range of focused research topics 4- THE METHOD OF RESEARCH: To achieve the research objectives, author mainly use to the methods in the thesis such as analysis, synthesis, comparison, qualitative method, quantitative method, and technical method in related research topics of the thesis 5- OUTLINE OF THE THESIS: In order to provide an overview of the structure of the thesis, author briefly introduces each chapter as following. Preface: It provides the background that familiarizes the reader to the subject. The thesis’ research problem is formulated and defined, and followed by purpose.

Author introduced general information about the economy, the industry and market of insurance.