Military Commercial Joint Stock Bank (MBB)

Development opportunities outweigh the risks

Group 18
20/7/2023 FIN400 – FINANCIAL MANAGEMENT, NEU

Strong Revenue Growth and
Diversification:
Net Interest Income (NII) in Q4/2022: 9,630 billion VND (34.3% YoY
increase). Fee and Commission Income in Q4/2022: 1,224 billion VND (55%
QoQ increase). The significant growth in both NII and fee-based income
demonstrates MB Bank's ability to generate revenue from various sources,
showcasing a well-diversified revenue structure that can withstand market
fluctuations.

Prudent Credit Management
and Financial Stability:
Emphasis on Digital
Transformation:
Stable Net Interest Margin
(NIM) and Leading CASA
Ratio:
Recommended BUY, range
Share Value (21,818 VNĐ to
69,000 VNĐ)
Total Outstanding Loans as of 2022: 507,444 billion VND (25.2% YoY
increase). Provisions in Q4/2022: 3,585 billion VND (highest quarterly
provision ever recorded). Despite the increased provisions in Q4, MB Bank
maintains a healthy credit growth rate and strengthens its financial resilience.
The bank's prudent credit management helps mitigate risks and ensures the
stability of its loan portfolio.
Operating Expenses in Q4/2022: 3,628 billion VND (2.7% QoQ decrease)
Cost-to-Income Ratio (CIR) in 2022: 33% (compared to 34% in 2021)
MB Bank's commitment to digital transformation is evident in its controlled
operating expenses and decreasing CIR. By investing in technology, the bank
improves efficiency and enhances its competitive advantage in the digital
banking era.
NIM in Q4/2022: 5.87%. CASA Ratio in Q1/2023: Maintained the top
position. The stable NIM indicates MB Bank's effective management of
interest-earning assets, leading to consistent profitability. Additionally, its
leading CASA ratio signifies a strong base of low-cost deposits, providing a
reliable source of funds to support the bank's lending and investment
activities.
Considering the valuation results from Dividend Growth Model and Cash
Flows to Firm, the lower end of the value range (21,818 VNĐ) exceeds the
current market price of 18,850 VNĐ. This suggests that the stock may be
undervalued, making it an attractive investment opportunity.

BUY
Enterprise Value 113,761 Ownership structure Stock price volatility
Equity Value 113,761 Viettel 18,5% (%) 1M 3M 6M 12M
Market Cap 98,285 SCIC 9,4% Absolute 5.9 14.8 8.8 -4.8
Price 18.850 Vietnam Helicopter Corporation 8,8%
Value per share 21.818 Relative 1.1 6.9 2.3 3.4
Others 63,3%
Price movements
Tổng quan tài chính (VND) 2021 2022 2023F 2024F
Thu nhập lãi thuần (tỷ) 26,200 36,023 40,566 45,940
Tổng thu nhập hoạt động 36,934 45,593 51,305 58,097
LN thuần trước CP DPRRTD 24,557 30,777 34,888 39,564
EPS (đồng/cổ phiếu) 3,361 3,856 4,254 4,683
Tăng trưởng EPS (%YoY) 14% 15% 10% 10%
PER (x) 13.1 11.4 10.3 9.4
Giá trị sổ sách/CP (BVPS) 16,538 17,559 21,134 25,217
PBR (x) 2.66 2.51 2.08 1.74
ROE(%) 23.5% 25.6% 23.2% 20.3%
Tỷ lệ cổ tức (%) 1.36% 1.36% 1.36% 1.36%
Source: VietStock Source: KBSC

Products and services
Capital mobilization
Business Model
-Mobilizing funds in the form of deposits from organizations, individuals,
and credit institutions, including demand deposits, time deposits, and savings
deposits...
-Issuing certificates of deposit, promissory notes, bonds, and other securities
to raise funds from individuals and organizations both domestically and
internationally.
-Borrowing from credit institutions, both domestic and foreign ones.
-Borrowing from the State Bank of Vietnam through recapitalization.

Credit provision -The bank extends credit to organizations and individuals in various forms
activities such as loans, guarantees, issuance of credit cards, discounting negotiable
instruments, and providing domestic and international payment services.
-Providing short-term, medium-term, and long-term loans to individuals and
organizations.
-MB acts as a guarantor for loans, payment guarantee, performance
guarantee, contract execution guarantee, and other appropriate forms of
guarantee in accordance with the provisions of the law.

Investment activities MB Bank invests in various areas, including:

-Contributing capital to purchase shares of enterprises and credit institutions.
-Contributing capital to foreign credit institutions to establish joint-venture
credit institutions in Vietnam.
-Joint ventures, affiliations, and cooperative investments in projects that
comply with legal regulations.

Insurance MB Bank provides life insurance, non-life insurance, reinsurance, and other
types of insurance in compliance with legal regulations.

Other banking -Participating in the foreign exchange market as regulated by the State Bank
activities of Vietnam.
-Trading in foreign exchange and gold in both domestic and international
markets.
-Dealing in bonds, convertible bonds, and investing in other securities in
both domestic and foreign markets.
-Providing derivative services, including interest rate, foreign exchange,
currency, and other asset derivatives.
-And any other financial and banking activities permitted by the State Bank
of Vietnam.

Revenue structure
Core Business Net Interest Income (NII) is a key component of MB Bank's revenue
Revenue structure, representing the interest earned from loans and investments minus
the interest paid on deposits and borrowings. In Q4/2022, NII reached 9,630
billion VND, showing a significant year-on-year increase of 34.3%. The
growth in NII was mainly attributed to the bank's strong lending activity,
higher lending rates, and a focus on lucrative retail and SME
customers.(Chart 1)

Fee and Commission This component comprises revenue generated from fee-based services,
Income: including payment services and bancassurance. In Q4, the fee and
commission income reached 1,224 billion VND, indicating a substantial
QoQ increase of 55% but a slight YoY decrease of 9%. The insurance
business played a significant role in contributing to this segment's revenue,
with MB Ageas Life and MIG experiencing promising growth.(Chart2)
Biểu đồ 1:Thu nhập lãi thuần và thu ngoài lãi (Tỷ Biểu đồ 2: Cơ cấu thu thuần từ hoạt động dịch vụ
VND) theo quý giai đoạn 2021-2022

Nguồn: MBB, KBSV Nguồn: MBB, KBSV

Non-Interest Income This includes income from non-lending activities such as forex and gold
trading, securities investment, and other operating activities. In Q4, non-
interest income saw a decline of 28.1% YoY, amounting to 2,121 billion
VND. The decrease was primarily due to unfavorable performance in
securities trading.

Net Interest Margin NIM represents the difference between interest earned from loans and
(NIM) interest paid on deposits, indicating the bank's profitability from its interest-
earning assets. the combination of increased retail customers, a high level of
low-cost CASA deposits, and controlled deposit costs contributed to the
stability and slight improvement of MB Bank's Net Interest Margin, as
evident from the NIM reaching 5.87% in Q4 and 5.67% for the entire year of
2022.(Chart 3&4)
Furthermore, In Q1/23, MBB (MB Bank) has improved its Net Interest
Margin (NIM) and maintained its top position in terms of CASA ratio.

Biểu đồ 3: Biến động NIM theo quý Biểu đồ 4: Tỷ lệ CASA của MBB theo quý

Nguồn: MBB, KBSV Nguồn: MBB, KBSV

Biểu đồ 5: NIM svck trong Q1/23 (ĐV: điểm cơ Biểu đồ 6: MBB duy trì vị trí số 1 về tỷ lệ CASA trong
bản) Q1/23
Nguồn: VNDIRECT Research Nguồn: VNDIRECT Research

Credit Growth MB Bank achieved high credit growth throughout 2022, with total
outstanding loans amounting to 507,444 billion VND by the end of the year,
representing a notable YoY increase of 25.2%. The bank focused on lending
to individuals and businesses, particularly in the real estate and construction
sectors.

Provisions MB Bank made significant provisions in Q4, amounting to 3,585 billion

VND, the highest level for a quarter ever recorded. The increased provisions
impacted the bank's profitability for the quarter but strengthened its financial
resilience.

In summary, MB Bank's revenue structure is well-diversified, with net

interest income and fee-based services being the primary contributors. The
bank's prudent credit growth, along with cost optimization and digital
transformation efforts, has positively impacted its overall financial
performance. However, challenges in non-interest income from securities
trading and provisions have affected profitability in certain quarters.

Cost structure
Operating Expenses In Q4, operating expenses amounted to 3,628 billion VND, representing a
(OPEX) slight decrease of 2.7% QoQ but a 4.8% YoY increase. The bank has
managed to control its operating expenses despite its growing business
activities, leading to a decrease in the Cost-to-Income Ratio (CIR) from 34%
in 2021 to 33% in the whole year of 2022. The bank prioritizes investments
in information technology and digital transformation for customer expansion,
contributing to a yearly increase of around 12.7% in operating expenses
during the period from 2018 to 2022.

Credit Costs In Q4, credit costs increased significantly, reaching 3.1% due to the bank's
provisioning of 3,585 billion VND as the highest quarterly provision ever.
However, for the entire year of 2022, credit costs were kept relatively low at
8,048 billion VND, comparable to the previous year. The bank might still
face risks related to increasing credit costs in 2022, mainly due to the
significant growth of non-performing loans in Mcredit.(Chart 7)

Net Operating The bank experienced a decline in net operating income in Q4, mainly
Income (NOII) attributed to reduced earnings from securities and other activities. The total
NOII in Q4 was 2,121 billion VND, representing a decrease of 28%
 compared to the same period last year. The NOII-to-Total Operating Income
(TOI) ratio also dropped to around 18%, significantly lower than the 29.1%
of the previous year.

Biểu đồ 7: Quy mô nợ xấu và tỷ lệ nợ xấu của Biểu đồ 8: Tỷ lệ NOII/TOi theo quý (%)
Ngân hàng mẹ và Mcredit (%)

Nguồn: MBB, KBSV Nguồn: MBB, KBSV

Overall, MB Bank's cost structure indicates a focus on managing operating

expenses and investments in technology while also addressing provisions for
potential credit risks. The bank's efforts in cost optimization have contributed
to improved financial performance with a decreasing Cost-to-Income Ratio.
Additionally, it remains committed to strengthening its digital capabilities
and IT infrastructure for better customer service and expansion,
demonstrating a long-term strategic approach.

Key performance ratios

(%) 2020 2021 2022 NOTE
Khả năng sinh lời
ROE 19.10% 23.50% 25.60% demonstrating the bank's
ability to generate returns for
its shareholders and attract
investors.
ROA 1.90% 2.40% 2.70% suggesting an improvement in
the bank's ability to earn
profits from its assets while
managing risk in its lending
activities.
ROE trước dự phòng 30.00% 34.90% 34.60% indicators assess the bank's
profitability before deducting
ROA trước dự phòng 3.00% 3.60% 3.70%
provisions for potential losses.
Higher ratios indicate better
risk management and
sustained profitability.
Biên lãi ròng (NIM) 4.70% 5.00% 5.700% indicating the bank's
improved efficiency in
earning interest income from
its loan portfolio.
Hiệu quả hoạt động
LDR thuần 94.53% 92.23% 101.13% implying the bank used
customer deposits to fund
loans, balancing capital
efficiency and risk.
CIR 38.58% 33.51% 32.50% indicating the bank's success
in optimizing costs and
enhancing operational
efficiency.
Tốc độ tăng trưởng
Tăng trưởng tổng tài sản 20.30% 22.70% 20.00% These indicators measure the
bank's growth in various
Tăng trưởng cho vay khách hàng 18.90% 20.70% 26.40%
aspects, from total assets and
Tăng trưởng LN thuần trước DPRRTD 12.60% 46.10% 25.30% profits to the value of its
shares. Positive growth in
Tăng trưởng LNST ngân hàng mẹ 5.60% 53.70% 37.70%
these areas signifies the bank's
Tăng trưởng EPS -10.50% 13.80% 14.70% development and increased
Tăng trưởng BVPS 6.50% -7.60% 6.20% shareholder value.

An toàn vốn
Tỉ lệ an toàn vốn (CAR) 8.60% 9.00% 8.90% indicating the bank's ability to
withstand potential risks.
Chất lượng tài sản
NPL (nợ xấu nhóm 3-5) 1.10% 0.90% 1.10% the bank has managed to
maintain a relatively low level
of bad loans, which is a
positive sign
Độ bao phủ nợ xấu (nợ xấu nhóm 3-5) 134.10% 268.00% 238.00% A higher coverage ratio
suggests the bank's prudence
in managing risks and
maintaining financial stability.
SML (nợ xấu và nợ cần chú ý) 1.90% 2.00% 2.80% This rising trend may indicate
a need for the bank to closely
monitor these loans to prevent
them from becoming non-
performing in the future.
Độ bao phủ nợ xấu (nợ xấu và nợ cần chú 76.80% 122.00% 93.30% The increasing coverage ratio
ý) shows the bank's proactive
approach in setting aside
provisions for potential credit
problems, which can help
mitigate future credit losses
and safeguard its financial
position.
In summary, these financial and operational indicators strongly impact the
operations of MB Bank. High profitability, improved operational efficiency,
stable growth rates, and sound capital adequacy contribute to the bank's
success and development. Effective management of asset quality and reduced
NPL ratios also ensure stability and sustainability in the bank's business
activities.
 dữ liệu ngày 31/05/2023
So sánh các DN trong ngành ngân hàng
Tăng trưởng
Ngân hàng Mã Khuyến nghị Gía đóng cửa Gía mụcc tiêu Vốn hoá P/B(x) P/E(x) EPS kép 2021- ROE ROA
(tiền nội tệ) (tiền nội tệ) (tỷ đô) 2023 2024 2023 2024 % 2023 2024 2023 2024
Vietcombank VCB VN Khå quan 94,000 108,700 18.9 2.7 2.2 12.8 11.3 21.40% 23.10% 21.50% 1.80% 1.90%
VietinBank CTG VN Khå quan 28,000 35,900 5.7 1.1 0.9 7.2 5.9 17.10% 16.20% 16.90% 1.00% 1.20%
VPBank VPB VN Khå quan 19,300 24,800 5.5 1.1 1 9.9 7.5 19.50% 12.00% 13.90% 1.80% 2.40%
Techcombank TCB VN Khå quan 29,950 42,000 4.5 0.8 0.7 4.8 4.1 12.10% 17.90% 17.40% 3.00% 3.00%
NHTMCP Å Chau ACB VN Khå quan 25,400 30,000 3.7 1.2 1 5.5 4.8 23.10% 24.10% 22.50% 2.40% 2.40%
HDBank HDB VN Khå quan 18,400 25,000 2 1 0.8 5.1 4.2 22.10% 22.60% 22.50% 2.10% 2.20%
NHTMCP Quoc te Viet NamVB VN Khå quan 21,400 27,000 1.9 1.2 0.9 4.7 4 20.70% 26.60% 25.20% 2.60% 2.70%
NHTMCP Tlền Phong TPB VN Khå quan 25,000 31,000 1.7 1 0.8 5.7 4.9 19.00% 19.40% 18.90% 2.00% 2.20%
NHTMCP Bưu điện Liên Việt
LPB VN Khå quan 14,500 17,400 1.1 0.9 0.7 5.2 4.5 25.10% 18.40% 17.70% 1.40% 1.50%

Trung bình 1.2 1 6.8 5.7 20.01% 20.00% 19.61% 2.00% 2.20%

NHTMCP Quân đội M B B VN Khả quan 18,600 29,300 3.6 0.9 0.7 4.3 3.7 21.80% 23.20% 22.20% 2.50% 2.50%

Nguồn: VNDIRECT Research, BLOOMBERG

MB Bank shows some below-average figures compared to the industry (P/B and P/E
ratios), but it also demonstrates superior performance in other aspects (compound
EPS growth and ROE). This indicates that MB Bank has the potential for growth and
is efficient in generating profits from its operations. However, further consideration
of other factors such as risks and more detailed financial information is necessary to
provide a comprehensive assessment.
Sensitivity to interest
rates
Profitability Ratios Increasing Interest Rates: Higher interest rates can impact the bank's
(ROE and ROA): profitability by increasing borrowing costs for the bank. This can lead to
compressed net interest margins (NIM) and reduced profitability ratios (ROE
and ROA) as the bank may face challenges in maintaining interest income
while interest expenses rise.
Declining Interest Rates: Falling interest rates can boost the bank's
profitability by lowering borrowing costs, potentially resulting in expanded
net interest margins and improved profitability ratios (ROE and ROA). With
reduced interest expenses, the bank can earn more from its interest-earning
assets.

Loan-to-Deposit Increasing Interest Rates: Higher interest rates may lead to reduced loan demand as
Ratio (LDR): borrowing becomes costlier for customers. This can result in a decrease in the LDR
as the bank might struggle to deploy its deposits into lending activities.

Declining Interest Rates: Falling interest rates can stimulate loan demand as
borrowing becomes more affordable for customers. As a result, the bank may
experience an increase in the LDR as it extends more loans using its deposits.

Increasing Interest Rates: Higher interest rates can put financial strain on borrowers,
Non-Performing leading to an increase in loan defaults and, subsequently, a rise in the NPL ratio. To
Loans (NPL) Ratio mitigate this risk, the bank may need to enhance provisioning for potential losses,
and Coverage Ratio resulting in an improved coverage ratio for NPL.
for NPL:
Declining Interest Rates: Falling interest rates can alleviate the financial
burden on borrowers, reducing the likelihood of loan defaults. Consequently,
the NPL ratio may decrease, and the coverage ratio for NPL may require less
provisioning.

Capital Adequacy Increasing Interest Rates: Higher interest rates can have mixed effects on the CAR.
Ratio (CAR): On one hand, the value of risk-weighted assets might decline due to the lower market
value of fixed-rate assets. On the other hand, increasing interest rates might lead to
higher default risks for some borrowers, potentially requiring the bank to allocate
more capital for provisioning.
 Declining Interest Rates: Falling interest rates might improve the market
value of fixed-rate assets, potentially positively impacting the CAR.
However, a prolonged low-interest-rate environment might push banks to
seek higher-yielding but riskier assets to maintain profitability, potentially
increasing the overall risk profile.

In conclusion, the sensitivity of these ratios to declining or increasing

interest rates can significantly impact the performance and stability of MB
Bank. Interest rate changes can influence profitability, asset quality, lending
activities, and capital adequacy. As such, the bank should closely monitor
and manage interest rate risks while adjusting its strategies accordingly to
maintain a healthy financial position.

Best performance QUARTER 3

quarter
Biểu đồ 9: So sánh EBIT các quý trong 5 năm (VNĐ)

Market Conditions: The third quarter might have seen favorable market conditions that boosted
the bank's revenue. During this period, there could have been increased
economic activities, higher consumer and business spending, and a surge in
demand for loans and financial services, all contributing to higher revenue
for the bank.

Strategic Focus: The bank have implemented specific strategies during the third quarter to
capture new business opportunities and improve profitability. For example,
targeting certain customer segments, promoting specific financial products,
or expanding into new markets could have positively affected revenue.

Cost Management Efficient cost management is crucial for any organization's financial
Initiatives: performance. If the bank implemented cost-cutting measures or streamlined
its operations during the third quarter, it would have positively impacted its
net income.

Loan Portfolio The quality of the bank's loan portfolio is a critical factor in determining
Quality: revenue. If the bank experienced a decline in non-performing loans, it would
have reduced the need for provisions, leading to higher net income.

Non-Interest Income The bank's non-interest income sources, such as fees and commissions, could
Sources: have experienced growth in the third quarter. This growth could have been
driven by increased demand for the bank's services, successful investment
activities, or expansion into new fee-based services.
Effective Risk Effective risk management practices can lead to reduced losses and enhanced
Management: profitability. If the bank had implemented robust risk management policies, it
would have minimized potential losses from credit, market, and operational
risks, positively impacting its revenue.

In summary, the bank's higher revenue in the third quarter could be

attributed to a combination of factors such as favorable market conditions,
interest rate environment, strategic focus, cost management, loan portfolio
quality, non-interest income sources, effective risk management,
investments, customer satisfaction, and overall economic growth. Each of
these factors played a role in contributing to the bank's improved financial
performance during that period.
 Equity Valuation
Valuation using Dividend
Growth Model:
Assumption:
We have assumed a constant growth rate of 7.9% based on the percentage growth
of EPS (Earnings Per Share) over 10 years can be justified by the following reasons:
1. Historical Performance: Analyzing the past 10 years of MB bank's
financial performance and EPS growth may reveal a consistent and
stable pattern. If the bank has demonstrated a steady growth in earnings
per share over the past decade, it may be reasonable to assume that this
growth trend will continue in the future, albeit at a constant rate.
2. Sustainable Business Model: A constant growth rate assumption could
imply that MB bank's business model is sustainable, and it has
successfully positioned itself in the market to maintain stable earnings
growth over time. A stable business model with reliable revenue streams
can support a consistent growth rate in earnings.
3. Market Maturity: In some cases, a constant growth rate assumption is
made when a market is considered mature, and the company's growth
potential is limited by the overall economic conditions and industry
maturity. In such scenarios, companies may experience more stable and
predictable growth rates.
4. Moderate Economic Conditions: Assuming a constant growth rate of
7.9% could be indicative of moderate economic conditions, where
significant fluctuations are not expected to impact MB bank's earnings
growth. This may reflect a balanced and sustainable economic
environment.
5. Conservative Approach: Adopting a constant growth rate is also a
conservative approach in financial modeling. It acknowledges that
projecting rapidly increasing or decreasing growth rates over the long
term may be challenging and uncertain. A constant growth rate provides
a stable and more manageable assumption for modeling purposes.
6. Simplified Projection: When conducting financial projections, it is
common to use simplifying assumptions to make the analysis more
Calculation: tractable. Assuming a constant growth rate eliminates the need to
forecast year-to-year fluctuations and allows for easier calculations.

DGM
Assume that constant growth rate
DGM
Current Dividend now (Do) 4.259
Dividend in 1 year (D1) 4.595
Constant growth rate (g) 7.90%
Cost of equity (Ke) 14.55%

Conclusion: Share Price 69.083

IRR 25%

Share Price: The calculated share price based on the dividend growth model is
69.083VNĐ. This represents the estimated intrinsic value of the stock according to
the model.
Internal Rate of Return (IRR): In this case, the IRR is calculated to be 25%. This
indicates that the investment in the stock is expected to generate an annualized
 return of 25%, which is higher than the cost of equity (Ke) at 14.55%. Therefore,
the investment is considered attractive based on the DGM.
Valuation using Cash
Flows to Firm
Assumption:
We can construct a more comprehensive and accurate description of the
Conservative Case for Military Commercial Joint Stock Bank (MB bank):
Conservative Case: In the Conservative Case, MB Bank's revenue growth is
projected to be more cautious and moderate, taking into account potential
challenges in the economic environment and conservative lending practices. The
key assumptions for this case are as follows:

Revenue Growth:
MB bank's revenue is expected to grow steadily but at a more conservative rate
compared to historical figures. In 2023, revenue is projected to increase by 12.61%,
which aligns with the growth rate observed in 2020. This implies that the bank's
revenue growth remains stable and follows historical trends.
Revenue Projections
for Future Years: 2024: This cautious projection accounts for potential economic uncertainties and
challenges in the market.
2025: This conservative assumption reflects the possibility of a more moderate
economic environment in the following year.

Revenue Growth in
the Long Term (2025- From 2025 to 2028, This growth rate considers potential economic headwinds and
2028): cautious market sentiments.

EBIT Projections: For the years 2024 and 2025, This indicates a conservative approach in managing
costs and expenses.
In 2028, The conservative EBIT projection accounts for potential challenges in
achieving higher profitability in the long term.
WACC:
This higher WACC reflects the conservative nature of the case, considering
potential risks and uncertainties that might lead to higher financing costs.
TGR:
This conservative estimate indicates a cautious outlook for the bank's growth
potential in the distant future.

The Conservative Case for MB Bank is based on a prudent assessment of potential

risks and challenges, ensuring a more realistic and conservative outlook for the
bank's revenue and financial performance in the coming years.

Economic We also base on macroeconomics to choose Conservative Case:

Headwinds: The Vietnamese economy faced challenges in achieving its GDP growth target of
6.2%, with a growth rate of only 3.72% in the first six months of 2023. This slower-
than-expected growth indicates the presence of economic headwinds that could
affect businesses, including banks like MB bank. Choosing the Conservative Case
 acknowledges these challenges and adopts a more cautious approach to revenue
Industrial Slowdown: growth projections.

The report reveals that key sectors, particularly manufacturing and processing,
experienced a sluggish growth rate in 2023, and exports of industrial products
declined. As MB bank may have significant exposure to industries in need of
financial support, the industrial slowdown could impact its lending activities and,
Uncertain Global consequently, its revenue growth.
Recovery:
While there are expectations of a global economic recovery, the report highlights
that uncertainties remain due to various factors. An uncertain global economic
recovery could have implications for Vietnam's export-oriented industries and may
affect MB bank's revenue growth. The Conservative Case considers these
Rising Non- uncertainties and adopts a more cautious stance in projecting revenue growth.
Performing Loans
(NPLs): The report also indicates that the NPL ratio increased due to factors such as rising
interest rates and challenging business conditions. For MB bank, higher NPLs could
lead to increased credit risks and impact its financial performance. The
Conservative Case's assumption of a higher WACC reflects the potential impact of
Government these risks on MB bank's cost of capital.
Regulations:
While the Vietnamese government has implemented measures to address NPLs and
introduced new loan types through Circular 06/2023/TT-NHNN, certain restrictions
may influence MB bank's lending activities and revenue generation. The
Conservative Case considers the potential effects of these regulations on the bank's
Prudent Historical operations.
Performance:
By choosing the Conservative Case, there is a focus on not being overly optimistic
and aligning growth assumptions with MB bank's historical revenue performance.
This approach aims to avoid overly ambitious projections and ensures a more
realistic outlook given the current economic challenges.

In summary, the Conservative Case is selected for projecting MB bank's revenue

growth because it takes into account the existing economic challenges, industrial
slowdown, uncertain global recovery, rising NPLs, government regulations, and a
prudent approach to historical performance. By adopting a cautious outlook, the
Calculation: Conservative Case provides a more realistic and responsible estimation of MB
Conclusion: bank's revenue growth potential in light of the current macroeconomic conditions.

Value per Share: The value per share is calculated to be 21.818 VNĐ. This
represents the estimated intrinsic value of one share of the company's stock.

Internal Rate of Return (IRR):. In this case, the IRR is calculated to be 18%. This
indicates that the investment in the stock is expected to generate an annualized
return of 18%, which is considered as the required return for this investment.
Cash Flows to Firm

DCF 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Revenue 18,000 20,278 26,200 36,023 40,566 44,865 48,539 51,674 54,118 55,742
% growth 12.65% 29.20% 37.50% 12.61% 10.60% 8.19% 6.46% 4.73% 3.00%
Conservative Case 12.61% 10.60% 8.19% 6.46% 4.73% 3%
Base Case 12.61% 13.25% 11.70% 10.80% 9.48% 9%
Optimistic Case 12.61% 14.57% 12.87% 11.91% 10.96% 10%
EBIAT 20,424 18,765 18,964 17,322 15,139 12,500
D&A 262 355 571 783 873 897 971 1,033 1,082 1,115
CapEx 702 823 1,260 1,748 1,947 2,154 2,427 2,584 2,598 2,230
Change in NWC 1,277 1,607 3,098 3,231 407 405 331 285 223 149
Unlevered FCF 18,943 17,104 17,177 15,487 13,401 11,237
Present value of UFCF 18,943 14,867 12,978 10,170 7,649 5,575
Discour Period 0.00 1.00 2.00 3.00 4.00 5.00

Terminal Value 87,839

Present value of Terminal Value 43,580

Enterprise Value 113,761

Equity Value 113,761
Market Cap 98,285
Price 18.850
Value per share 21.818
IRR 18%

Recommendation
Whether to "Hold" or Let's provide a more detailed analysis to determine whether to "Hold" or "Buy" MB
"Buy" bank stock in Quý 2/2023:

DGM Value: 69,000 VNĐ

DCF Value: 21,818 VNĐ
Range: 21,818 VNĐ to 69,000 VNĐ
Current Market Price: 18,850 VNĐ

Considering the valuation results, the lower end of the value range (21,818 VNĐ)
exceeds the current market price of 18,850 VNĐ. This suggests that the stock may
be undervalued, making it an attractive investment opportunity.

Undervalued Stock:
As per the Dividend Growth Model (DGM) and Discounted Cash Flow (DCF)
valuations, the stock's intrinsic value is estimated to be in the range of 21,818 VNĐ
to 69,000 VNĐ, both of which exceed the current market price of 18,850 VNĐ. This
suggests that the stock may be undervalued, indicating a potential buying
opportunity.

Positive Business The information provided indicates that Quý 3 is typically a strong quarter for MB
Outlook: bank. However, considering the optimistic projections for Quý 3, it may be
beneficial to position yourself in the stock before the positive business results are
released, as there might be a potential increase in share price once the market
recognizes the strong performance.

Economic Recovery: The report mentions expectations of a global economic recovery, which can
positively impact various sectors, including the financial industry. As MB bank is a
major bank in Vietnam, it could benefit from the overall economic recovery, leading
to increased lending opportunities and revenue growth.

Government Support: The Vietnamese government's commitment to boosting economic growth through
public investment may further support the banking sector. MB bank could benefit
from increased lending opportunities resulting from government-driven
infrastructure and development projects.
Historical
Performance:
 If MB bank has demonstrated a consistent and stable pattern of EPS growth over the
past 10 years, it supports the assumption of a constant growth rate of 7.9% in the
Potential Capital future, which can positively influence the stock's value.
Appreciation:
If the stock is undervalued as indicated by the valuations, there is an opportunity for
potential capital appreciation once the market recognizes the stock's true value.
Key Risks to Consider: Buying at a lower price now could yield higher returns in the future.
Market Volatility:

Stock prices can be subject to short-term fluctuations and market sentiment. There is
a risk that the market may not immediately recognize the stock's true value, leading
Economic to short-term price volatility.
Conditions:
The banking sector's performance can be influenced by economic conditions.
Adverse economic conditions, such as an economic downturn or recession, could
Regulatory and impact MB bank's earnings and the stock price.
Sector Risks:
The banking sector is subject to regulatory changes and macroprudential policies
that could affect the bank's operations and profitability. Changes in interest rates,
Company-Specific loan demand, and credit quality can also impact financial performance.
Risks:
There may be specific risks related to MB bank's operations, management, and
strategic decisions that could affect the company's financial performance and stock
"Buy" MB bank stock in price.
Quý 2/2023
Considering the potential undervaluation of MB bank's stock, the positive business
outlook for Quý 3, and the overall economic recovery, the recommendation would
be to "Buy" MB bank stock in Quý 2/2023. However, investors should carefully
evaluate their risk tolerance, conduct thorough research, and consider consulting
with a financial advisor before making any investment decisions.

Scenario analysis
Scenario 1: A rights issue is an invitation to existing shareholders to purchase additional new
shares at a discounted price. In this case, the company is offering a 2 to 1 rights
issue at a 20% discount. This means that for every two shares an existing
shareholder owns, they can purchase one additional share at a 20% discount.

Let's assume the current market price of one share is Po.

Discounted price = Po - 20% of Po = 0.8Po

The ex-rights price is the price at which the company's shares will trade after the
rights issue, taking into account the dilution from the additional shares issued.

Ex-rights price = (Total market value before the rights issue + Additional capital
raised) / (Total number of shares before the rights issue + Number of new shares
issued)

Since the rights issue is 2 to 1, the number of new shares issued is half of the
existing shares.

Total market value before the rights issue = Number of existing shares * Current
market price
Total market value before the rights issue = 2 * Po = 2Po

Additional capital raised = Number of new shares issued * Discounted price per
share
Additional capital raised = (1/2) * 0.8Po= 0.4Po
 Total number of shares before the rights issue = Number of existing shares
Total number of shares before the rights issue = 2

Ex-rights price = (2Po + 0.4Po) / (2 + 1/2)

Ex-rights price = 0.96Po

So, the ex-rights price is 0.96Po.

Market capitalization after the rights issue = Ex-rights price * Total number of
shares after the rights issue
Since the rights issue is 2 to 1, the total number of shares after the rights issue will
be 3 (2 existing shares + 1 new share).

Market capitalization after the rights issue = 0.96Po * 3 = 2.88Po

Scenario 1
20/7/2023
Current Market Price Po 18.850
Discounted Price 0.8*Po 15.080
Ex-rights price 0.96*Po 18.096
Market capitalization 2.88*Po 54.288

Scenario 2: In this scenario, the company maintains a 60% payout ratio, meaning it distributes
60% of its earnings as dividends and retains the rest.

Let's assume the company's earnings per share (EPS) is X

DPS = 60% of EPS = 0,6*X

REPS = EPS – DPS = X - 0.6 * X = 0.4X

Fair value per share = (DPS * (1 + g)) / (Ke - g) (Dividend Discount Model)
We have g= 7.9% Ke = 14,55% (assuming in Valuation Part)
Calculation:

DGM
20/7/2023
Current Earnings per share X 4.259
Dividend per share 0,6*X 2.555
Constant growth rate g 7.90%
Cost of equity Ke 14.55%
Fair Value per share 41.472

Scenario 3: Assuming the weight of debts increases by 10%, but the Bank has zero debt.
So, The fair value per share is unchanged.
 Appendix
Báo cáo tài chính

x Báo cáo Kết quả kinh doanh 2020 2021 2022 2023F 2024F đơn vị: Tỷ đồng
Thu nhập lãi thuần 20,278 26,200 36,023 40,566 45,940
Thu nhập lãi và các khoản thu nhập tương tự 32,767 38,465 52,486 63,259 71,096
Chi phí lãi và các chi phí tương tự (12,490) (12,265) (16,463) (22,692) (25,156)
Lãi/(Lỗ) thuần từ hoạt động dịch vụ 3,576 4,367 4,136 4,914 5,258
Lãi/(Lỗ) thuần từ hoạt động khác 1,680 3,254 2,142 2,145 2,429
Tổng thu nhập hoạt động 27,362 36,934 45,593 51,305 58,097
Chi phí hoạt động (10,555) (12,377) (14,816) (16,418) (18,533)
LN thuần trước CP DPRRTD 16,807 24,557 30,777 34,888 39,564
Chi phí dự phòng rủi ro tín dụng (6,118) (8,030) (8,048) (9,387) (12,908)
Thu nhập khác 2,809 4,211 3,026 3,095 3,352
Chi phí khác (1,129) (956) (884) (951) (924)
Tổng lợi nhuận trước thuế 10,688 16,527 22,729 25,501 26,657
Chi phí thuế thu nhập doanh nghiệp (2,082) (3,306) (4,574) (5,100) (5,331)
LNST 8,606 13,221 18,155 20,401 21,325
Lợi ích của cổ đông thiểu số (343) (524) (672) (874) (1,136)
LNST ngân hàng mẹ 8,263 12,697 17,483 19,527 20,189

x Bảng cân đối kế toán 2020 2021 2022 2023F 2024F

Cho vay khách hàng 293,943 354,797 448,599 524,318 616,351
Chứng khoán kinh doanh 3,085 7,575 4,106 4,470 5,177
Tiền mặt, vàng bạc, đá quý (trừ dự trữ bắt buộc) 3,109.0 3,475.0 3,744 4,527 5,244
Tài sản có sinh lời 466,734 574,482 697,256 785,552 905,362
Tài sản cố định và tài sản khác 29,909 38,176 38,836 47,509 55,389
Tổng tài sản 494,982 607,140 728,532 823,591 949,647
Tiền gửi của khách hàng 310,960 384,692 443,606 518,146 600,166
Các khoản vay phái sinh, giấy tờ có giá 51,131 68,886 98,581 123,753 144,731
Các khoản nợ chịu lãi 412,983 513,400 607,335 698,936 804,959
Các khoản nợ khác 31,900 31,254 41,584 28,597 31,161
Tổng nợ phải trả 444,883 544,654 648,919 727,532 836,121
Vốn điều lệ 27,988 37,783 45,340 45,340 45,340
Thặng dư vốn cổ phần 1,178 869 869 869 869
Lợi nhuận chưa phân phối 12,956 12,915 19,064 35,870 53,338
Các khoản điều chỉnh vốn
Vốn chủ sở hữu 50,099 62,486 79,613 96,059 113,527

x Chỉ số tài chính

(%) 2020 2021 2022 2023F 2024F
Khả năng sinh lời
ROE 19.10% 23.50% 25.60% 23.20% 20.30%
ROA 1.90% 2.40% 2.70% 2.60% 2.40%
ROE trước dự phòng 30.00% 34.90% 34.60% 31.80% 30.20%
ROA trước dự phòng 3.00% 3.60% 3.70% 3.60% 3.60%
Biên lãi ròng (NIM) 4.70% 5.00% 5.700% 5.500% 540.000%
Hiệu quả hoạt động
LDR thuần 94.53% 92.23% 101.13% 101.19% 102.70%
CIR 38.58% 33.51% 32.50% 32.00% 31.90%
Tốc độ tăng trưởng
Tăng trưởng tổng tài sản 20.30% 22.70% 20.00% 13.00% 15.30%
Tăng trưởng cho vay khách hàng 18.90% 20.70% 26.40% 16.90% 17.60%
Tăng trưởng LN thuần trước DPRRTD 12.60% 46.10% 25.30% 13.40% 13.40%
Tăng trưởng LNST ngân hàng mẹ 5.60% 53.70% 37.70% 11.70% 3.40%
Tăng trưởng EPS -10.50% 13.80% 14.70% 11.70% 3.40%
Tăng trưởng BVPS 6.50% -7.60% 6.20% 20.70% 18.20%
An toàn vốn
Tỉ lệ an toàn vốn (CAR) 8.60% 9.00% 8.90% >8% >8%
Chất lượng tài sản
NPL (nợ xấu nhóm 3-5) 1.10% 0.90% 1.10% 1.70% 1.60%
Độ bao phủ nợ xấu (nợ xấu nhóm 3-5) 134.10% 268.00% 238.00% 158.90% 166.10%
SML (nợ xấu và nợ cần chú ý) 1.90% 2.00% 2.80% 3.50% 3.40%
Độ bao phủ nợ xấu (nợ xấu và nợ cần chú ý) 76.80% 122.00% 93.30% 77.20% 78.20%
MB Bank đơn vị (tỷ VNĐ)

Name MBB Share value VND 21.818

Date 7/20/2023 Current Share Price VND 18.850
Assumptions
Switches Conservative Base Optimistic
Revenue 1 Revenue 2024 80% Revenue 2024 110%
EBIT 1 Revenue 2025 70% Revenue 2028 9.0% Revenue 2025 110%
WACC 1 Revenue 2028 3% Revenue 2028 10%
TGR 1 EBIT 2024-25 90% EBIT 2024-25 120%
EBIT 2028 28% EBIT 2028 30% EBIT 2028 32%
WACC 15.05% WACC 15.05% WACC 14.55% WACC 14.05%
TGR 2.00% TGR 2% TGR 2.50% TGR 3%

Income Statement 2019 2020 2021 2022 2023F 2024F 2025F 2026F 2027F 2028F
Revenue 18,000 20,278 26,200 36,023 40,566 45,940 51,314 56,688 62,062 67,436
% growth 12.65% 29.20% 37.50% 12.61% 13.25% 11.70% 10.47% 9.48% 8.66%

EBIT 10,036 10,688 16,527 22,729 25,501 26,657 27,813 28,969 30,125 31,281
% of s a l es 55.76% 52.71% 63.08% 63.10% 62.86% 58.03% 54.20% 51.10% 48.54% 46.39%

Taxes 1,960 2,089 3,308 4,583 5,100 5,331 5,562 5,793 6,024 6,255
% of EBIT 19.53% 19.55% 20.01% 20.16% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%

Cash Flow items 2019 2020 2021 2022 2023F 2024F 2025F 2026F 2027F 2028F
D&A 262 355 571 783 882 919 1,026 1,134 1,241 1,349
% of s a l es 1.45% 1.75% 2.18% 2.17% 2.18% 2.00% 2.00% 2.00% 2.00% 2.00%
% of Ca pEx 37.27% 43.09% 45.33% 44.81% 44.81% 41.67% 40.00% 40.00% 41.67% 50.00%

Capital expenditures 702 823 1,260 1,748 1,969 2,205 2,566 2,834 2,979 2,697
%s a l es 3.90% 4.06% 4.81% 4.85% 4.80% 4.80% 5.00% 5.00% 4.80% 4.00%

Change in Net Working Capital 1,277 1,607 3,098 3,231

%s a l es 7.09% 7.93% 11.82% 8.97%
% of Cha nge i n Sa l es 70.57% 52.31% 32.89%

Cash Flows to Firm

DCF 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Revenue 18,000 20,278 26,200 36,023 40,566 44,865 48,539 51,674 54,118 55,742
% growth 12.65% 29.20% 37.50% 12.61% 10.60% 8.19% 6.46% 4.73% 3.00%
Conservative Case 12.61% 10.60% 8.19% 6.46% 4.73% 3%
Base Case 12.61% 13.25% 11.70% 10.80% 9.48% 9%
Optimistic Case 12.61% 14.57% 12.87% 11.91% 10.96% 10%
EBIAT 20,424 18,765 18,964 17,322 15,139 12,500
D&A 262 355 571 783 873 897 971 1,033 1,082 1,115
CapEx 702 823 1,260 1,748 1,947 2,154 2,427 2,584 2,598 2,230
Change in NWC 1,277 1,607 3,098 3,231 407 405 331 285 223 149
Unlevered FCF 18,943 17,104 17,177 15,487 13,401 11,237
Present value of UFCF 18,943 14,867 12,978 10,170 7,649 5,575
Discour Period 0.00 1.00 2.00 3.00 4.00 5.00

Terminal Value 87,839

Present value of Terminal Value 43,580

Enterprise Value 113,761

Equity Value 113,761
Market Cap 98,285
Price 18.850
Value per share 21.818
IRR 18%
Group work reflection
Group 18:
Đoàn Thái Hoàng Vũ Phạm Đức Hùng
Nguyễn Đức Thành Phạm Đình Anh
Nguyễn Đắc Vinh

All members participated in all categories of the coursework. Each part was
took charged by one member, then the rest of the group will make
comments and suggestions in the draft document. Finally, all members
contributed to the final report.
Despite having some differences related to personalities and opinions about
categories in the coursework among group members, the group could still
find out the solutions and finally collaborate with each other by combining
online and offline meetings and thorough research about information of the
company.

References
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phòng giảm. [Online]
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https://cdn.simplize.vn/simplizevn/report/MBB/Loi_nhuan_Q1_tang_do_
du_phong_giam.pdf
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