Section 1: Company selection and justification

I. VIS (Vietnam –Italy Steel JSC)

In June 2003, VIS was established on the basis of equalization a part of state enterprises- Vietnam Italy
Steel Factory of the Song Da Company 12 - Song Da Corporation. Main activities are to produce, trade
steel products branded Vietnam Italy Steel (VISCO), import materials, equipment for steel industry;
and provide cargo service. On December 2006, it was listed on HOSE.
1. Opportunities
Because 51% capital of VIS held by Song Da Corporations, VIS has been supported in terms of
finance and technology from Corporations in many projects. Besides, more than 10% p.a
forecasted growth rate was (2005 – 2010), contributing to raise stock prices. High potential
growth, process of urbanization and industrialization at high speed has brought to VIS many
projects. Therefore, it has led to increasing in VIS’ revenue. The firm is beneficial from the
macro policies of the government (such as decreasing VAT from 10% to 5% in 2009, so VIS has
chance to decline price and improve competitive position in the market; or increase of imported
construction steel tax to 10% from 4/20/2009 by circular 75/2009 of the Financial Department,
resulted in reducing the competitive pressure for local products with foreign products. VIS
products are the necessity goods in the market. Demand for steels is inelastic irrespective of
increasing or decreasing in its price.
2. Basic financial indicators
- Net sales (see Appendix B1): VIS net sales have increased during 2009. There was a
relatively sharp increase (VND 518,066 - 704,392 million- last two quarters in 2009).
- ROA (Return on Assets) and ROE (Return on Equity) VIS Industry
According to Warren Buffet, ROE and ROA> 20% is ROA 13.98% 11.01%
ROE 68.34% 27.07%
considered reasonable.
- P/E: P/E of VIS is 9.63, higher than industry (9.33)
3. Risk factors:
- Interest risk, competition and economic fluctuation.
- VIS is dependent on steel import source of other countries. When there is a fluctuation of steel
price, VIS operation results will be affected. Moreover, payment in USD could lead to risk due
to fluctuation in exchange rate.

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II. PLC (Petrolimex PetroChemical Joint Stock Company)
PLC is a Vietnam-based chemicals manufacturer, who primarily manufactures, refines, and
markets asphalt, lubricant and other petrochemical and gas derived products, as well as
merchandises materials and equipments for refinery activities. On 27th December, 2006, the
company’s stock was listed on HNX.
1. Competitive advantages and potential
In Vietnam, lubricants demand’s average growth rate is about 6.5% per year. Specifically, total
demand for lubricants is estimated at 200,000 MT on average, which is a great opportunity for
PLC to increase productivity in 2010. In addition, Petrochemical industry is often appreciated as
one of the first priorities because it is a key industry for the success of the industrialization of the
country. Therefore, the development advantage for such Petrochemical company like PLC is
very large.
2. Financial situation
- Income after tax rose dramatically during 2009 (7,856 - 107,184 million VND). Profitability
indicators in 2009 shows a significantly growth compared to previous year, reflects the
ability to generate a sustainable profit in long-term. (see Appendix B2)
- Current ratio and quick ratio are greater than 1, and around 0.75 respectively over the latest
of three years indicating that the firm may have ability to meet current obligations at the safe
level (See Appendix B3). PLC’s ROA (45.62%) ranks the second among the firms in the
industry, and this level nearly doubles in comparison with average industry indicator
(25.88%). ROE indicator stands at 15.18%, smaller than the industry (18.2%); but still
remains at acceptable level.
- The firm’s EPS is 8,692 VND. Although PLC’s P/E ratio is slightly lower than the industry,
P/B ratio is 2.76, higher than the industry illustrating that the firm is operating well and hold
high return on assets. Another notice is that PLC’s beta is 1.36 demonstrating the ability to
make a higher profitable rate and also higher potential risk. However, in short-term, it is still
preferred.
3. Potential risk:
- Exchange rate risk: using USD in import and export contracts.
- Other risks should also be concerned are interest rate risk, economic risk.

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Section 2: Portfolio formation
Basing on optimal risky portfolio formula, the weight for each stock in the portfolio are
W VIS = .8342 and WPLC = .1658 (Refer to Appendix B4)
Section 3: Investment report
On April 5th, 2010, all 100,000,000 VND was used to distribute according to the optimal
portfolio (See Transaction record in appendix A). VIS stock experienced a slight decrease in the
next three weeks and was not active until the end of April. Therefore, not many VIS shares were
traded. Because the recovery of VIS coincided with the end of the investing period, VIS shares
were gradually sold out with the purpose of obtaining money and avoid losses in case the stock
went down. The movement of PLC share was more volatile, with upward trend in the first half of
the period and downward trend in the second half. Most of the PLC shares were sold out of the
portfolio on Aril 15th, few days before its price went down. Consequently, we did not suffer the
loss in the price of this share. All of the remaining shares were sold on the last day of the
investing period.
Section 4: Summary of profit and loss

Initial outlay 100,000,000 VND Profit 11,982,500 VND

Revenue 111,982,500 VND Return 11.98%

(Refer to appendix B5 for complete computation)

Compare to HNX and VNindex, our portfolio was underperformed (See Appendix B6).
Section 5: Conclusion and comments on experience gained
This assignment has brought us the opportunity to master more experience on selecting different
securities. By employing the “top-down” approach, obtaining information, and analyzing
financial ratios, we have understood better on the method to construct a portfolio. Especially, we
have been more sensitive to information involving our portfolio.
Besides, we realized some shortcomings during the process of investing in this portfolio. We
should have gained deeper information and based on more indicators to construct our portfolio.
Additionally, we have found that much information in the past would not repeat in the future, so
the base of knowledge prior to and during the investing process should be varied to other
sources, not only past but also current and expected events. More importantly, investors must
prepare for some unexpected situation.