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MINISTRY OF EDUCATION AND TRAINING EASTERN
INTERNATIONAL UNIVERSITY BECAMEX BUSINESS SCHOOL
BUSINESS OVERVIEW, FINANCIAL PROJECTION, AND
PERFORMANCE ANALYSIS OF GEMADEPT, TRANSIMEX AND PORT
DONG NAI FOR FOREIGN TRADE OF VIETNAM
Course: Fin 319 – Intermediate Financial Management
Quarter: 3
School year: 2023-2024
Lecturer: Tran Huu Phuoc
Full name
IRN
Võ Minh Tâm
2132300435
Phan Thị Cẩm Tiên
2132300589
Ngô Kim Phượng
2032300430
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ABSTRACT
The global logistics sector, crucial for the economy, involves activities like transportation,
warehousing, and supply chain management. It's being transformed by technologies like AI and
blockchain, enhancing efficiency and customer service. Despite challenges like geopolitical
tensions and environmental concerns, its future depends on its adaptability. The Vietnamese
logistics industry, worth US$ 40 billion, is a key economic player. Its growth is fueled by the
manufacturing sector, e-commerce, and Vietnam's strategic location. The rise of e-commerce,
especially during the COVID-19 pandemic, has increased demand for various logistics services.
The report provides key statistics on three Vietnamese logistics companies: TRANSIMEX,
GEMADEPT, and PORT DONG NAI.
Keywords: PESTLE | Capital | Income Statement | WACC | Dividend Policy
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TABLE OF CONTENTS
Contents
I.
Logistics industries overview ............................................................................ 4
1.
Political policy .................................................................................................. 4
2.
Economic factors .............................................................................................. 4
3.
Social factors .................................................................................................... 4
4.
Technological factors ........................................................................................ 5
5.
Legal factors ..................................................................................................... 5
II. Companies comparison ..................................................................................... 5
1.
Past performance .............................................................................................. 5
2.
Intrinsic value ................................................................................................... 6
3.
Capital structure ................................................................................................ 6
4.
Dividend policy ................................................................................................ 9
5.
Corporate governance and ESG ....................................................................... 9
6.
Working capital management .........................................................................12
III. Conclusion ........................................................................................................13
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I.
Logistics industries overview
1.
Political policy
Political decisions have a big impact on the logistics industry, affecting how goods are
transported across borders through trade rules, tariffs, and international relations. In Vietnam, the
government has improved political effectiveness by fighting corruption and simplifying
bureaucratic processes. These efforts have made Vietnam more appealing for international trade
and investment. The country has also made significant progress in international trade through
important agreements and partnerships, which have helped its economy grow. Notable
agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership
(CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) have made it easier to trade with
other countries, benefiting the logistics industry
2.
Economic factors
a.
World Current Market
The global logistics market is growing rapidly, driven by strong economic growth and the rise of
new manufacturing and export hubs, especially in Southeast Asia. Countries in this region,
including Vietnam, are seeing increased logistics activities due to higher production and export
levels.
b.
Current Vietnam market
Vietnam's logistics market is set to grow significantly, with its size expected to reach $48.57
billion in 2024 and $71.88 billion by 2030, at an annual growth rate of 6.75%. This growth is
fueled by rapid infrastructure development like port expansions and better transportation
networks. Increased trade volumes, investments in technology and digitalization, and the
expanding e-commerce sector are also key factors. Vietnam's efforts to modernize its logistics
infrastructure and adopt advanced technologies are helping drive this growth, making the country
an important logistics hub in the region.
3.
Social factors
Logistics companies are finding it hard to hire and keep skilled workers as the industry grows.
They are trying to attract young people through apprenticeship programs. In Vietnam, the e-
commerce sector has grown quickly, especially due to the COVID-19 pandemic, increasing the
demand for logistics services. The shift to online shopping has created a need for a strong
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logistics system to handle more packages and ensure fast deliveries, highlighting the need for
skilled workers.
4.
Technological factors
The shipping industry is becoming more digital, making logistics operations more efficient.
Major shipping companies like Maersk, MSC, and Hapag-Lloyd are using digital technologies to
improve their services. Artificial Intelligence (AI) and blockchain technology are expected to
further enhance the industry by making it more transparent, secure, and efficient. In Vietnam,
logistics is one of the eight key areas in the national digital transformation program, aiming for
significant progress by 2025 and beyond to 2030. This focus on digital transformation is set to
modernise logistics operations and increase competitiveness.
5.
Legal factors
The logistics industry faces traditional risks like wars, bad weather, and economic recessions. In
2024, new or stronger factors might disrupt global supply chains. In Vietnam, several issues
contribute to supply chain unpredictability, such as complicated and inconsistent government
regulations, lack of automation in trade processes, and poor transportation planning.
Additionally, practices like paying extra to avoid delays, low barriers to entry in the trucking
sector, and mismatches between supply and demand in infrastructure, particularly at deep-water
ports like Cai Mep-Thi Vai, create challenges. Addressing these issues is crucial to improving
the efficiency and reliability of Vietnam's logistics sector.port facilities at the Southern gateway
of Cai Mep-Thi Vai.
II.
Companies comparison
1.
Past performance
a. Charter capital
-
GMD:
3,013,779,570,000 VND
-
TMS: 1,582,705,280,000 VND
-
PDN: 185,219,540,000 VND
b. Business model
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-
Gemadept (GMD): GMD provides port operations, logistics, and shipping services,
generating revenue from port fees, logistics services, and shipping operations.
-
Transimex (TMS): TMS offers logistics services, including freight forwarding,
warehousing, and customs brokerage, earning revenue from service fees and value-added
services.
-
Port Dong Nai (PDN): PDN operates a seaport with cargo handling, storage, and logistics
services, earning income from port fees, storage fees, and additional logistics services.
2.
Intrinsic value
Regarding intrinsic value, PDN has the highest value, followed by TMS and GMD. In
comparison of market prices and intrinsic stock prices, PDN, TMS and GMD have a downside of
-30%, -124% and -141% respectively. Moreover, GMD, TMS and PDN have ineffective
management and weak operational capabilities because of a low intrinsic market value-added per
share. As a result, GMD, TMS and PDN are overvalued so they are recommended with sell
decision. Furthermore, it is not difficult to decide to sell more stocks of GMD, TMS and PDN,
because those stocks are overvalued and each stock’s intrinsic value is lower than its current
market prices.
GMD
TMS
PDN
Intrinsic stock price per
share
-35,417 VND
-11,940.77 VND
81,781 VND
Market price (12/6/2024)
85,700 VND
49,500 VND
117,700 VND
Undervalued or
Overvalued
Overvalued
Overvalued
Overvalued
Recommendation
Sell
Sell
Sell
Table 1: Comparison intrinsic value of GMD, TMS PDN
3.
Capital structure
a.
Gemadept (GMD)
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At 31/12/2023, the capital structure of GMD included 28.15% of debt and 71.85% of equity.
However, based on the data and analysis, we recommend the capital structure to be changed at
85% of debt and 15% of equity to minimize the weighted average cost of capital which is at
7.93%.
Weight
of debt
Weight of
Equity
D/E
Levered
beta
Risk-
free rate
Market risk
premium
Cost of
equity
Cost
of debt
WACC
0%
100%
0
0.72
2.88%
9%
10.46%
8.21%
10.46%
10%
90%
11.1%
0.72
2.88%
9%
10.36%
8.29%
9.98%
20%
80%
25.0%
0.72
2.88%
9%
10.25%
8.38%
9.54%
30%
70%
42.9%
0.72
2.88%
9%
10.15%
8.46%
9.13%
40%
60%
66.7%
0.72
2.88%
9%
10.05%
8.54%
8.76%
50%
50%
100.0%
0.72
2.88%
9%
9.95%
8.63%
8.43%
60%
40%
150.0%
0.72
2.88%
9%
9.85%
8.72%
8.12%
70%
30%
233.3%
0.72
2.88%
9%
9.75%
8.80%
7.85%
80%
20%
400.0%
0.72
2.88%
9%
9.65%
8.89%
7.62%
90%
10%
900.0%
0.72
2.88%
9%
9.56%
8.98%
7.42%
92%
8%
1150%
0.72
2.88%
9%
9.46%
9.07%
7.43%
Table 2: The capital structure of GMD 2023 (Source: Company data)
b.
Transimex (TMS)
At 31/12/2023, the capital structure of Transimex included 36.53% of debt and 63.47% of equity.
However, TMS can recapitalize by changing capital structure to the optimal capital structure of
50% of debt and 50% of equity to minimize the weighted average cost of capital. It will result in
the lowest rate of WACC which is 4.13%.
Weight
of debt
Weight
of equity
D/E
Levered
Beta
Risk free
rate
Market
risk
premium
Cost of
debt
Cost of
equity
WACC
Note
0%
100%
0.00
0.17
2.88%
9%
5.82%
4.42%
4.42%
10%
90%
0.11
0.19
2.88%
9%
5.88%
4.56%
4.48%
20%
80%
0.25
0.21
2.88%
9%
5.94%
4.73%
4.22%
30%
70%
0.43
0.23
2.88%
9%
6%
4.95%
5.21%
8
40%
60%
0.67
0.26
2.88%
9%
6.06%
5.24%
5.28%
50%
50%
1.00
0.31
2.88%
9%
6.12%
5.65%
4.13%
OPTIMAL
60%
40%
1.50
0.38
2.88%
9%
6.18%
6.27%
5.58%
70%
30%
2.33
0.49
2.88%
9%
6.24%
7.30%
6.56%
80%
20%
4.00
0.72
2.88%
9%
6.31%
9.35%
6.91%
90%
10%
9.00
1.40
2.88%
9%
6.37%
15.51%
7.28%
92%
8%
11.50
1.75
2.88%
9%
6.43%
18.59%
7.41%
Table 3. The capital structure of TMS 2023 (Source: Company data)
c.
Port Dong Nai (PDN)
As of 31/12/2023, the capital structure of PDN included 10.59% of debt and 89.41% of equity.
However, based on the data and analysis, we recommend the capital structure to be changed at
90% for debt and 10% for equity to minimize the weighted average cost of capital which is only
at 15.408%.
Weight
of debt
Weight of
equity
Cost of
Debt
Beta
Cost of Equity
WACC
Note
0%
100%
5.60%
0.98
11.68%
11.682%
10%
90%
6.40%
0.99
11.79%
11.251%
20%
80%
7.20%
1.00
11.88%
10.944%
30%
70%
8.00%
1.30
14.58%
12.606%
40%
60%
8.80%
1.60
17.28%
13.888%
50%
50%
9.60%
1.90
19.98%
14.790%
60%
40%
10.40%
2.40
24.48%
16.032%
70%
30%
11.20%
2.90
28.98%
16.534%
80%
20%
12.00%
3.40
33.48%
16.296%
90%
10%
12.80%
4.00
38.88%
15.408%
OPTIMAL
92%
8%
13.60%
4.70
45.18%
16.126%
Table 4: The capital structure of PDN 2023 (Source: Company data)
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4.
Dividend policy
Dividend Policy under Residual Distribution Model
GMD
TMS
PDN
Weight of Equity
15%
50%
89%
Net income
981
61
772
Distribution
522
31
758
Payout ratio
43.62%
26.23%
98%
Table 5: Dividend Policy under Residual Distribution Model
Analyzing the payout ratios reveals distinct dividend policies among GMD, TMS, and PDN.
GMD strikes a balance, distributing a moderate 43.62% of net income to shareholders while
retaining earnings for growth. This suggests a potentially stable dividend policy. TMS prioritizes
reinvestment with the lowest payout ratio (26.23%), indicating a possible growth-oriented policy
that fuels future expansion through retained earnings. Conversely, PDN's exceptionally high
payout ratio of 98% suggests an aggressive strategy, distributing nearly all profits to
shareholders. This might be unsustainable in the long run if they neglect reinvestment for
growth.
5.
Corporate governance and ESG
a.
Corporate governance
Criteria for Corporate Governance (Brickwork Rating, n.d.)
GMD
TMS
PDN
Management Transparency
4.5/5
4.5/5
4/5
Ownership Structure
4.5/5
4.5/5
4/5
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Shareholders’ Right
4/5
4.75/5
4/5
Financial Fairness
4.75/5
4.5/5
3.5/5
Responsibilities of the Board
4.5/5
4.75/5
3.5/5
Table 6: Corporate component score
According to the OECD’s Principles of Corporate Governance, and the ASEAN Regional Corporation
Governance Scorecard to score the governance component. My score for GMD, TMS, PDN is an
“EXCELLENT”, “EXCELLENT” and “GOOD” respectively corporate governance component
b.
ESG
Gemadept
Gemadept demonstrates a comprehensive approach to ESG (Environmental, Social, and
Governance) principles.
•
Environmentally focused, Gemadept prioritizes sustainability through their "Green Port"
practices at Gemalink, reducing emissions with solar energy, electric power, and shore
powering for ships. Their "SeedforSEA" initiative tackles deforestation by supporting
reforestation efforts. Additionally, they encourage eco-friendly behavior among
employees.
•
Socially responsible, Gemadept actively engages with local communities, supporting
education, healthcare, and infrastructure projects. They prioritize ethical conduct with
anti-corruption measures and transparency. The company also prioritizes employee well-
being through competitive compensation, benefits, and professional development
opportunities.
•
Governance-wise, Gemadept adheres to strong corporate governance practices ensuring
transparency and ethical decision-making. They have a robust risk management
framework and maintain open communication with stakeholders like investors,
customers, employees, and communities. This comprehensive approach demonstrates
Gemadept's commitment to operating in an environmentally conscious, socially
responsible, and ethically sound manner.
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Transimex
•
This company prioritises environmental sustainability through their "green logistics"
strategy. They actively assess their environmental impact by monitoring air, dust, and
noise levels at their facilities. They implement pollution prevention measures through
employee training on hazardous waste management and by partnering with certified
companies for proper collection and disposal. Their commitment extends to water
treatment with modern filtration systems and even creating a greener work environment
by investing in landscaping, reducing waste with reusable straps, and using energy-
efficient LED lighting.
•
The company demonstrates a strong sense of social responsibility by actively engaging
with and supporting the communities they operate in. Their programs focus on education
through donations and scholarships, healthcare through supplying warm clothes to
students in need, and infrastructure development through participation in initiatives like
"Satra for the homeland sea and islands." They further demonstrate a commitment to
employee well-being with competitive compensation, benefits, and professional
development opportunities. Additionally, the company encourages social engagement
among its employees by promoting blood donation and other community service
programs.
Port Dong Nai:
•
Environmental: Dong Nai Port cares about the environment by managing waste and
pollution effectively. They use modern technology to clean wastewater and reduce air
pollution. The port works to save energy and use renewable sources. They also have
programs to protect local wildlife and reduce their impact on nature.
•
Social: Dong Nai Port supports its workers and the local community. They provide safe
and fair working conditions, good pay, and benefits. The port invests in community
projects to help the local area grow. They build trust by being honest and clear with
customers and partners.
•
Governance: Dong Nai Port follows strong rules for running their business. They share
clear information about their finances and operations, with checks by independent
auditors. They have plans to handle risks related to the environment, society, and
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governance. The port follows all laws and international standards, showing their
commitment to ethical and sustainable business practices.
6.
Working capital management
Cash Conversion Cycle
CCC = DIO + DSO - DPO
GMD
TMS
PDN
Day Inventory Outstanding (DIO)
13.3
3
0.57
Days
Day Sales Outstanding (DSO)
53.46
50
39.1
Days
Days Payable Outstanding (DPO)
119.71
30
44.02
Days
Cash Conversion Cycle
-52.95
23
-4.35
Days
Table 7: Cash conversion cycle of GMD, TMS and PDN
Analyzing the cash conversion cycles (CCCs) of GMD, TMS, and PDN reveals interesting
insights into their cash flow efficiency. GMD boasts the most negative CCC at -52.95 days,
indicating they collect customer payments exceptionally fast compared to supplier payments.
This translates to efficient use of working capital and potentially higher profits. TMS also enjoys
a positive CCC of 23 days, but not quite as impressive as GMD's. PDN comes in with the
shortest CCC at -4.35 days, signifying the most efficient cash conversion among the three.
Even if it implies effective cash flow management, it's critical to look at the underlying causes.
Like PDNs, an extremely negative CCC may indicate possible dangers. To attain such a quick
cash conversion, they might be storing very little inventory, which could result in stockouts and
lost revenues. In addition, prolonged payment terms with suppliers are a common feature of
really bad CCCs. Although this helps with cash flow, it can also damage relationships and reduce
future purchasing options.
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III.
Conclusion
The stocks of PDN, TMS, and GMD are currently overvalued, with their intrinsic values being
lower than their market prices. This, coupled with their ineffective management and weak
operational capabilities, suggests that they are not ideal investment options at this time.
Therefore, a sell decision is recommended for these stocks.
In terms of capital structure, it is recommended that GMD, TMS, and PDN adjust their debt-to-
equity ratios to 85:15, 50:50, and 90:10 respectively. These changes aim to minimize their
weighted average cost of capital (WACC), thereby optimizing their capital structures.
When examining dividend policies, GMD appears to have a balanced approach, TMS leans
towards reinvestment, and PDN heavily favors dividends. While GMD's and TMS's strategies
suggest stability and potential for growth, PDN's high payout ratio could be unsustainable in the
long run.
In terms of corporate governance, GMD and TMS score "EXCELLENT", while PDN scores
"GOOD". This indicates a strong adherence to the OECD’s Principles of Corporate Governance
and the ASEAN Regional Corporation Governance Scorecard.
Lastly, the cash conversion cycles (CCCs) of the three companies reveal their cash flow
efficiencies. GMD shows the most efficient cycle, followed by TMS, while PDN has the longest
cycle. while these companies show some strengths, their current overvaluation and other
financial indicators suggest caution is warranted for potential investors