Paradox in stocks
The main business of Meinfa (MEF) is the sale of all kinds of pliers, common medical equipment, metal products, and hand tools. Since listing on UPCoM in 2011, MEF has regularly traded below VND 2,000 per share. Although MEF is trading at a low price, it is one of the most efficient and regular dividend-paying companies, not only on UPCoM but also on the other two exchanges, HoSE and HNX. Its charter capital is just over VND 400 bn, but the revenue in the past five years has reached over VND 300 bn. In 2021, MEF even achieved an after-tax profit of nearly VND 28 bn, and a dividend of 35%.
Investors have always paid special attention to MEF, because of its dividend payment on two occasions at the market price. However, this attractive dividend yield is the reason why MEF shareholders prefer to receive dividends instead of selling. This has caused investors with money unable to buy. To own MEF shares, shareholders must spend 20 times more money, with the condition that buyer must be the leader of the enterprise. In 2021, MEF surprised investors when it announced the decision to issue 185,309 ESOP shares to key officials at an issue price of VND 30,000 per share, while the market price was only VND 1,600 per share. This situation inadvertently pushed MEF to become one of the most liquid stocks on UPCoM, even when there have been no transactions in recent years.
Similarly, many stocks on UPCoM have extremely high prices despite being traded with little liquidity. For instance, Halobeco (HLB) costs VND 290,000 per share, or VTV Cab(CAB) costs VND 140,000 per share. Although their transaction is at a great price, the production and business activities of both enterprises is not outstanding. Even the dividend payout is far behind MEF, with HLB paying a dividend in 2021 of 20%, and since listing on UPCoM in September 2019, CAB has not even paid any dividend to its shareholders.
High priced stocks
Licogi 14 (L14) is a stock with the highest price not only on HNX but also on the entire stock market. During the recent price increase, L14 sometimes jumped up to VND 440,000 per share. According to investors, L14 became the most expensive stock on the stock market not from core business activities, but from the pricing related to a member of the Board of Directors. Although L14 production and business activities showed signs of improvement in the last year, it came from investment activities in other industries. According to the financial report of the fourth quarter of 2021, the financial revenue of L14 reached VND 379 bn, ten times higher than in the same period, of which VND 376 bn was from profits in investment activities. The explanation is that the Board of Directors of L14 seized the opportunity and decided to invest in some impressive stocks which positively affected business results.
At the end of 2021, Vinacafé Bien Hoa (VCF) closed by paying dividends at an unbelievable 250%, spending VND 664.5 bn for nearly 26.6 million listed shares. In stark contrast to MEF, VCF is one of the highest priced stocks on HoSE at VND 240,000 per share. The reason why VCF does not have liquidity is that the shareholder structure of the enterprise is very concentrated. According to statistics, the largest shareholder of VCF is Masan Beverage, which is currently holding upto 98.49% of VCF shares. Under a similar concentrated shareholder structure, Global Asset Business (GAB) is also on the list of low liquid stocks on HoSE, even though it is trading at a price of more than VND 190,000 per share. Even though GAB is trading at a high price, it is undervalued because its business operations are not very efficient.
According to securities experts, the phenomenon of shares losing liquidity despite good production and business activities shows that Investor Relation (IR) activities of listed companies are being overlooked, leading to improper allocating of resources. While Investor Relations are an important activity to build trust with investors and the public, by helping listed companies attract investor attention they reflect the true value and increase liquidity for stocks. Many listed companies often ignore IR activities after achieving the goal of Initial Public Offering (IPO) or listing of shares. This leads to lack of information, which reduces investor confidence in businesses. Therefore, listed companies need to set up their own IR department with a clear criteria that integrates financial and communication activities to ensure an effective, sustainable, multi-dimensional relationship that will help the investment community to properly appreciate the value of the business.
Referring back to the HAG case, the fact that shareholders reacted strongly to the possibility of the HAG stock being delisted on HoSE surprised many. According to a financial expert, the delisting on HoSE is not the end for HAG, because this company can change its listing to UPCoM. The information disclosure regulation of UPCoM is not too strict compared to that of HoSE, which will benefit HAG, as this enterprise is known to often violate regulations on information disclosure on the stock market.