Foreign investors net sell $118.63 mln of FPT shares amid strong gains

Foreign investors net sold FPT shares worth VND3.02 trillion ($118.63 milion) on June 1-21, making the stock the most heavily unloaded on the Ho Chi Minh Stock Exchange (HoSE).

In the past month, the ownership ratio of foreign investors in tech giant FPT Corp. declined from 49% (the maximum level) to around 47.42%.

The strong selling of FPT shares has happened in the context of the ticker becoming a bright star in the Vietnamese stock market with a rapid rise in value. FPT closed the June 20 session at VND136,100 ($5.35) per share, up more than 40% from the beginning of the year.

However, strong cash flow from domestic investors not only "balanced" the selling pressure from foreign investors, but also helped FPT keep scaling new peaks.

The recent gains have brought FPT's capitalization to VND194 trillion ($7.62 billion), larger than that of private conglomerate Vingroup (VND158.5 trillion), steel giant Hoa Phat (VND187.73 trillion), property giant Vinhomes (VND165.5 trillion) and PV Gas (VND179.15 trillion).

FPT had attained good upward momentum following the trend of technology stocks in the world. In the U.S. stock market, while the Dow Jones Industrial Average could not regain the 40,000-point mark, the Nasdaq technology index has climbed continuously.

In the domestic market, cash flowing strongly into groups with their own success stories, notably technology, has seen FPT as well as stocks of the group's member companies such as FOX of FPT Telecom, FOC of FPT Online, and FRT of FPT Retail soar recently.

For FPT, a big push has also come from the signing of a comprehensive strategic cooperation with U.S. giant Nvidia to promote artificial intelligence (AI) research. The two sides plan to build an AI factory and train high-quality human resources. FPT will become a service development partner in Nvidia's partner network. Under the deal, FPT will invest $200 million in building an AI factory to provide a cloud computing platform for AI research and development in Vietnam. The factory will include supercomputer systems operating with Nvidia's latest technology.

Expectations of the firm’s 2024 business results have also affected the stock’s performance.

Accordingly, FPT has set revenue and pre-tax profit targets of VND61.85 trillion ($2.43 billion) and VND10.8 trillion ($424.24 million) this year, both up 18% year-on-year. If the targets are met, the Vietnamese tech giant will continue to break the record it set the previous year.

The rapid and strong increase of FPT has made many investors wonder whether its share price has peaked or not; and even if a stock "bubble" has formed.

The ticker's P/E (Price to Earnings) ratio is currently more than 28x, double that of the market average. It is still lower than world tech majors such as Microsoft (37.4x) and Nvidia (31.2x). It is also lower than some domestic enterprises in the same industry like CMG of CMG Corp. (41x) or ELC of Elcom Corp. (29.3x).

In terms of business performance, FPT's ROE (Return on Equity) has ranged from 23-29% for six consecutive years, with after-tax profit growth topping 20% over reporting periods.

Its revenue grew from VND23.21 trillion in 2018 to VND52.62 trillion ($2.07 billion) in 2023, while net profit increased every year to reach VND7.78 trillion ($305.6 million) last year.

In the first five months of 2024, FPT posted consolidated revenues of VND23.92 trillion ($939.6 million) and a pre-tax profit of VND4.31 trillion. Its net profit of VND3.05 trillion ($119.8 million) marked an increase of more than 21% year-on-year; equivalent to an EPS (Earnings per share) of VNND2,403 ($0.094). Its tech subsidiaries accounted for 61% of total revenue and 45% of pre-tax profit.

In the first five months of this year, the group achieved 39% and 40% of the annual revenue and profit targets, respectively.

In addition, FPT has regularly paid dividends in cash and shares. It is expected that in the second quarter of 2024, it will pay the remaining dividend of 2023 at the rate of 10% in cash, equivalent to VND1,000 ($0.039) a share. In mid-September 2023, the company had advanced payment of its 2023 cash dividend, also at 10%.

On June 13, 2024, FPT issued an additional 190.5 million shares at a 20:3 ratio, meaning shareholders owning 20 shares received three new shares. After the issuance, FPT's charter capital rose from VND12.7 trillion to VND14.6 trillion ($573.5 million).

Good long-term investment option

Several securities firms have advised investors against rushing in because the FPT stock has been soaring.

Agribank Securities (Agriseco) assesses that cooperation with Nvidia to develop an AI and M&A strategy for foreign markets is expected to promote FPT’s sustainable growth.

However, since FPT prices have increased sharply by more than 40% since the beginning of the year and the P/E is higher than the average of the previous five years, the broker recommends that investors should wait for a more attractive price range. Agriseco evaluates that FPT remains an attractive long-term investment opportunity, given the 2025 goal of the stock reaching VND160,000 ($6.28) per share.

A similar, “neutral,” long-term investment perspective recommendation comes from SBS Securities, which says that although FPT's business prospects are positive, the stock has become “quite hot” in recent times.

For its part, Saigon Securities (SSI) estimates FPT's after-tax profits in 2024 and 2025 at VND9.2 trillion ($361.39 million) and VND11.1 trillion, respectively, up 19% year-on-year.