With virtually no liquidity, stock prices remaining almost unchanged and only "adjusting" on dividend payment deadlines, many companies with sound financial situations are "hiding" behind small-cap (penny) stocks.
The goose that lays the golden eggs is lacking liquidity.
In mid-June 2024, Phan Thiet Garment Export Joint Stock Company (PTG) completed the dividend payment to its shareholders. For each share held, shareholders received 5,000 VND in dividends, equivalent to a payout ratio of 50% – a highly desirable dividend rate that far exceeds that of most listed companies.
More importantly, the current share price of PTG is only 500 VND/share. The dividend yield (D/P), calculated as the dividend amount relative to the share price, reflects the potential return on dividends if the shares were purchased at the current price, which could reach 1,000%. According to regulations, the share price after the ex-dividend date will be adjusted downwards by the corresponding dividend payout ratio. However, the current PTG share price... cannot be adjusted further.
With regular dividend payments and a high payout ratio, early shareholders of PTG shares quickly recouped their investment solely from dividend income. Meanwhile, due to a lack of liquidity as there were no investors buying or selling, the share price gradually declined as a result of adjustments on ex-dividend trading days.
Efficient business operations combined with a small and unchanging registered capital helped this garment company's equity capital to be 3.5 times its registered capital by December 31, 2023. However, this is not the only case with this paradox.
Menifa Joint Stock Company's MEF shares are largely illiquid because shareholders are clinging to their "golden goose." The mechanical engineering company, headquartered in Thai Nguyen, finalized its dividend distribution on May 6th and promptly paid dividends on May 15th. At that time, the MEF share price was 3,000 VND/share, and could not be adjusted due to the dividend payout of 45% (resulting in a reduction of 4,500 VND/share). For the past decade, Menifa's dividend payout ratio has consistently fluctuated between 30-40%.
The BCB shares of 397 Joint Stock Company, listed on the UPCoM exchange, are in a similar situation, remaining pegged at 700 VND per share. Based solely on the share price, investors could easily mistake BCB for a penny stock due to its small market capitalization. However, these are all hidden gems with sound financial situations.
Annually, this company consistently pays dividends in the range of 20-40% with a sky-high ROE (approximately 30%). The registered capital of 397 Joint Stock Company is only about 57 billion VND, but in some years its profits reached 34 billion VND.
Transparency stemming from intrinsic needs.
These stocks share many similarities. Besides their modest registered capital, concentrated shareholder structure, and exceptionally strong financial performance and business results, all three companies disclose information minimally. Phan Thiet Garment Export Joint Stock Company, 397 Joint Stock Company, and Menifa all only publish annual financial reports.
Of course, according to regulations, only listed companies and large-scale public companies are required to publish quarterly financial reports or audited quarterly financial reports (if available). All three companies mentioned above are trading shares on the UPCoM exchange and have modest charter capital. Therefore, publishing only annual financial reports meets the regulations. However, for investors, the barrier to accessing information will affect investment decisions to some extent.
Sharing their investment perspective from the viewpoint of a fund management company, an expert also emphasized that funds do not reject all stocks traded on UPCoM. For businesses with full access to information, as well as additional information gained from site visits and direct meetings with company leaders, the stock may also be on the fund's radar if it is a company with a sound financial situation and potential for improved liquidity and price in the future.
Even on the HoSE, many companies that once had low stock liquidity and whose management hadn't considered raising capital for years still complied with regulations on information disclosure. Some companies also considered issuing bonus shares or paying dividends to increase the number of outstanding shares, thereby gradually improving liquidity in the market.
In a statement at the end of 2023, Ms. Nguyen Thi Mai Thanh, Chairwoman of the Board of Directors of REECorp, emphasized that the stock market is a place that "tempers" listed companies to conduct business more honestly, transparently, responsibly, and with obligations to stakeholders such as investors, sponsors, customers, employees, and even tax obligations to the State.
Among nearly 1,600 listed and registered companies, not all are well-known. Information about these companies on the market provides investors with additional "material" for investment decisions and serves as a communication channel for partners and customers to learn more about the businesses.
Disclosure of information for transparency stems from internal needs and brings many benefits to businesses; furthermore, it cannot be ruled out that it can take advantage of opportunities for further development through capital raising channels in the stock market.
Source: https://baodautu.vn/chuyen-ve-nhung-co-phieu-tham-lang-d218350.html
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