I.

Introduction Since the introduction of the first stock exchange in the early 17th century, the stock market all over the world has been highly developing. It has become one of the most important sources for businesses to raise additional capital by selling shares of ownership of the company in a public market. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Therefore, the movements of stock prices have a great influence on not only economic activities and business investment opportunities but also the wealth of households and their consumption. This makes prices of share be of considerable concern to all governments, companies and individual investors. Like other assets, the market price for a companys shares is determined by the demand for and supply of the shares. As a result, the findings for the question about what are the factors that affect the demand for and supply of shares in the stock market has occupied many economists time to reach reasonable conclusions. And in response, analysts tend to take one or a combination of three approaches, which are fundamental analysis top-down approach, fundamental analysis bottom-up approach and technical analysis. While fundamental analysis seeks to identify macro and micro factors that are likely to influence directional changes in the value of a company and hence its share price, technical analysis helps explain and forecast share price movements based on the past behavior of prices. In the efforts to apply three above approaches to analyze share prices, we have chosen FPT one of the largest corporations operating in IT and telecommunication sector in Vietnam. Since the IPO on December 13th, 2006, FPT stocks have undergone different patterns of share price movements. This study investigates the overall economic environment that impact on the performance of FPT and also focuses on accounting ratios which indicate FPTs financial performance. This paper is based on secondary research and available information on the Internet, and all the data used to conduct this research has been taken from the statistics in four recent years. The discussion of findings is partitioned into four main points. In the first stage, we analyze macro factors that have affected the fluctuation of FPT stocks. Based on the consolidated balance sheets and income statements of FPT, then, accounting ratios will be calculated and some implications about its operation will be discussed. Afterwards, technical analysis through moving average and charting will show the visualized figures about FPT share

price. From all the analyses, the paper will end with some recommendations whether investors should buy FPT stock for long-term or short-term. II. Findings and analysis 1. Top-down analysis To strengthen our belief that IT & Telecom Sector is one of the most promising investments, the position taken by analysts in the top-down approach is considerably desirable. This part is going to forecast and analyze the overall Vietnamese economic environment, simultaneously, point out how the forecast developments will impact on the performances of the IT & Telecom Sector. The very first part is going to work on the contemporary conditions of this sector throughout recent years. Vietnamese growth rate in IT & Telecom Sector is said to rank the almost number one amongst countries in the same region (the Southeast Asia), accounting for an average of 20-25% per year for the last decade. Vietnam has gone ahead Indonesia and shortened the distance with Philippines. Especially, in terms of fields like Telecom or Internet, Vietnam outstripped many Asian nations. Most recently, according to BSA (Business Software Alliance), Vietnam has moved towards five grades in the IT index in a single year, to rank number 61 in 2009. It also can be stressed that Vietnam is one out of the few Asia- Pacific countries that made a significant progress in the condition of economic crisis during period 2008-2009. To illustrate, total revenues from IT & Telecom Sector in 2009 reached above USD10 billion, total Internet usage level was up to 25% all over the country. Moreover, with the contribution of nearly 7% total GDP, IT & Telecom sector has become an inevitably important industry of the whole country. The IT & Telecom Sectors prospective in upcoming period is the next but more important point to be noticed. IT & Telecom Sectors growth rate is expected to reach 24-30% in 2010 and to develop at high level in the next period. This anticipation is reasoned mainly by factors such as low costs of software outsourcing, high growth rate of economic, overseas investment of big telecom companies to Laos, Cambodia, Haiti, Cuba, etc., high growth rate of Internet revenues, 3G technologies and the government support. It is undeniable that success in any economic sectors arises from strategies and consistence of the Government in development as well as investment, and IT & Telecom Sector is not an exception. Holding firm to this belief, government policies is one of the factors that will

have significant influence. In 2010, the Government has proposed as well as accomplished variety of supports in order to improve the Vietnamese IT competitive advantages, leading Vietnam to become a strong economy regarding IT & Telecom field within the next decade. The strategy focuses on six main issues, namely, complements of legal environment, modernization of IT infrastructure, acceleration of IT applications in eco-social sectors, investments in IT projects and research; especially, education and development on both quantity and quality of the IT workforce. A number of specific IT plans have been developed including one to modernize IT in government agencies, which was approved in March 2009. In January 2010, the Vietnam Post and Telecoms Group (VNPT) in Ho Chi Minh City launched a local version of the Computers for Education program, which provided teachers and students in the city with low-priced laptops and DSL broadband connections. The discounts were available through VNPTs 30 retail outlets and 200 agents in the city. Moreover, in August 2009, the Ministry of Education and Training launched a national program to supply 1million affordable computers to Vietnamese schools by 2011. All of these bring a big opportunity for the optimistic development of IT industry. In terms of developments in IT current account of the balance of payments, Vietnam is still in a deficit. According to Ministry of Information and Communications (MOIC), imports of telecommunication equipment reach USD 2,573,113,202 while exports are only USD 606,871,975 in 2009, which both increase compared to the previous year. Moreover, the monthly statistics report of General Statistics Office shows that imports and exports of IT goods standing at 4.6 and 3.2 million USD in 11 months of 2010 also rise considerably in comparison with 2009 (31.5% and 28.5% respectively). Among many countries, China is still the largerst import market of Vietnam with total payments of 1.3 million USD. Besides, another important part of IT market is domestic software service, which witnesses growth rate of 25% in three recent years - lower than previous years. The reason for that comes from the economic downturn resulting in a decline in outsourcing orders especially from Japanese and America markets. Therefore, many businesses have turned back to explore the domestic market and demand for software and its services. In 2009, three among five top software corporations mainly operate in domestic market, namely CSC, TMA and FPT with growth rate increase of 47% compared with 2008; whereas, in the software outsourcing export area, the turnover in 2009 only increases 13%.

The last fundamental factor needed to be considered is the rate of growth in wages. According to the figures of MOIC, the average salary of a person working in Vietnamese IT industry ranges from 1440 to 3600 USD/year in 2008 and from 1809 to 4250 USD/year in 2009. Although, there is a markedly rise in the wage of this field in comparison with some other neighbor countries, it seems to be only a drop in the ocean. Just in 2007, 2 ASEAN countries, Indonesia and Philippines, pay their IT labor an average of 10,959 and 10,899 USD/year, not to mention other more developed nations like Singapore or Thailand. In short, from all the above figures and analyses, IT and telecommunication sector is definitely a promising sector in Vietnamese economy that is and will attract a lot of investors interest and investment opportunities. 2. Bottom-up analysis Thanks to the fundamental top-down analysis, we come up with the conclusion that sector is one of the best investment opportunities. However, there also exist plenty of choices of company shares to buy within this sector. The decision for selecting FPT shares to put into the portfolio as the most potential profitable ones is reasoned by the following bottom-up analysis. This part is going to examines micro factors that indicate FPTs financial performance as well as its operational and management performance. To the extent of this report, financial statements of FPT and of its main competitors have been carefully analyzed. The first thing to come is the current position of FPT, which is illustrated in the below summarized table: Table 1. FPT financial indicators in the 3rd quarter 2010 Capital structure Liquidity Debt-to-equity ratio (x) Current ratio (x) Quick/liquid ratio (x) Interest cover (x) Debt servicing Debt-to-gross cash flow ratio (years) EBIT-to-total fund ratio (%) Profitability EBIT-to-long-term fund ratio (%) 1.96 1.69 1.29 3.07 7.11 14 26

ROE (%) ROA (%) EPS (VND) Share price and equity Risk P/E (times) Beta coefficient

7.51 2.37 6,560 10.96 1.04

From Table 1, firstly, it is marked that the liquidity position of FPT is quite strong. Quick ratio is 1.29, implying that FPT will have liquid assets sufficient to cover its current liabilities one and approximately 0.3 times, thus providing a buffer to meet expected situations. Moreover, the reason for smaller quick ratio in comparison to current ratio maybe that FPT holds a large amount of inventory, which is desirable in terms of the sector it operates in. Secondly, when it comes to debt servicing condition, about 3 times the firms financial commitments are covered by earnings. Theoretically, a minimum ratio of 2 is recommended, so 3.07 seem to be a far acceptable one. Also, it requires FPT more than 7 years for cash flow to repay all its debt. However, generally, companies try to attain debt levels at constant level (in FPT case, debt-to-equity ratio is 1.96), that a strong cash flow is a better indicator of company to maintain its ongoing operation. Then, having a look at profitability ratios, optimistic ones are observed. Lastly, the FPT beta coefficient is 1.04, whose deviation is near from 1, revealing little risk associated. However, purely basing on spot data of an individual cannot tell the whole picture. Which are the appropriate ratios and which are the poor ones? Two suggested criteria for determining gearing ratios are historical data and norm of the industry operated. Table 2 shows comparison among FMT and its main competitors, including: CMGComputer Measurement Group, SGT- Saigon Technology Co., TST- Trading Service Technology Co., POT-Post Office Technology Co. and SAM- SACOM Investment and Development Co. Table 2. Financial characteristics of FPT and its competitors (3rd quarter 2010) Ratios Debt-to-equity ratio (x) Asset growth rate (%) FPT 1.96 6.92 CMG 2.38 -7.15 SGT 1.32 7.48 TST 1.28 -16.28 POT 0.76 5.85 SAM 0.02 -0.55

ROE (%) ROA (%) Current ratio (x) P/E (times)

7.51 2.37 1.69 10.96

0.98 0.28 1.24 9.55

0.65 0.29 1.04 23.97

1.25 0.55 1.32 8.92

1.32 0.76 1.95 17.51

2.01 1.94 23 9.57

High level of leverage can provide high ROE but involve high risk, too. What is more, too much liquidity is not always good, as there is a cost in maintaining this high level. So, optimal ratios can be balanced basing on the norm of the industry. From table 2, FPT seems to have the most moderate debt level (1.96) and current ratio (1.69). Next, FPT ranks number 2 in terms of asset growth rate while half of its rivals have negative ones. It illustrates large amount of investment and therefore, indicates potential development of the company. Another point, with the outstanding ROA and ROE, FPT has one more reason for outweighing its competitors. In generally, FPT may not rank first in every criterion but there is relevance among all the aspects. Take CMG for example, whose debt level are very high, it presences negative asset growth rate and poor ROE-ROA level, too. The last point for working on accounting ratios is the growth rate of FPT in variety of financial aspects. Table 3. FPT growth rate of financial ratios from 2006- 2009 Year Gross revenue (%) Gross profit (%) Total equity (%) Total assets (%) Gross profit margin (%) Net profit margin (%) ROA (%) ROE (%) EPS (VND) Current ratio (x) Debt-to-equity ratio (x) 2009 12.34 33.76 25.37 73.8 8.66 20.02 16.77 51.27 7,498 1.68 2.24 2008 21.36 19.4 22.93 14.35 7.27 18.18 18.31 47.64 5,959 1.47 1.3 2007 18.43 64.35 26.41 57.1 7.06 14.53 20.09 49.66 5,317 1.43 1.56 2006 -19.17 77.72 142.09 53.6 5.07 11.99 19.03 48.41 8,008 1.78 1.1

Again, in general, table 3 shows positive growth rates of FPT throughout recent years. However, these positive rates are not much stable. There are 2 important things to focus, which are Gross profit margin and ROE growth rate. Their upward trend partly increases our expectation on a stable profitability growth rate of the company. To the very end of the bottom-up approach, some information about FPT future strategic direction will be analyzed. According to FPT shareholders' meeting on 01/11/2010, FPT decided to invest in 44% charter capital of EVN Telecom (60% for both FPT and FPT Telecom). This decision comes from the fact that FPT Telecom lacks of

Telecommunication business registration certificate. Also, this investment will help FPT and FPT Telecom seek new opportunities in this sector. Basing on the first 9-month-income statement of FPT, telecommunication sector is the one that provided the most profitable income with the amount of 443 billion VND (accounting for 29% total income). This is an important step to provide FPT with very potential prospective as well as to provide investor with a positive signal. In summary, for all research on micro factors, FPT share is strongly recommended as an optimistic investment. 3. Technical analysis The technical analysis commonly uses two main forecast models: Moving average and Charting, both of which will be used to give some idea about the investment decision in stock of FPT Company. 3.1. Moving average model Our model includes three graphs: an actual price series of FPT share, a Simple Moving Average (SMA) constructed using daily price movements and adopted periods are 5 days. Another alternative line used to compare with actual series price is weighted moving average (WMA) that values most recent price with greatest weight in the calculation MA. When the actual price series and the MA are plotted on the same graph, buy and sell signal are generated.

3.1.1. Short-term trend (one-month period): November, 2010

As the graph indicates, we can see that the general trend of FPTs stock price is to decline over the month (November, 2010). The price reached a peak of 76,000 VND on the 5th of November, and then it decreased rapidly and got the lowest level of 68,000 VND on November, 19th. After hitting its bottom price level, there was a fluctuation in FPTs stock price from the 22th to the end of month. However, the price could not rise to a much high level as it did in the first 10 days of the month and it got the price level of 70,000 VND at November, 30th. The graph above also shows us that SMA and WMA nearly had the same tendency. These two lines help us find the buy and sell signals of FPTs stock price in November, 2010 and predict the potential of FPTs stock price in the very first part of December as well. Basing on the theory of Moving Average models, there were three times the price series cut the SMA and WMA from below, namely on the 9th, the 19th, and the 28th .Specifically, investors who bought FPTs stocks on the 9th should sell out those stocks on the 10th, the 25th, or the 30th because there were sell signals on these days. In addition, on the 5th of November, investors holding FPTs stocks should sell out because of the intersections between the price series and the falling SMA and WMA. In order to forecast the investment opportunity in FPTs stock in the early December, we can look at the trend of price series as well as SMA and WMA on the last day of November. All of three lines were going down, so there was no clue for investor to purchase more FPTs stock in the beginning of December.

3.1.2. Long-term trend (three-month period): from September to December, 2010

In the period of three months, from September to December, 2010, the stock price of FPT Company went up then down many times but generally it oscillated between the interval VND 68,000 and VND 76,500. After the price hit two peaks at VND 76,500 on 1st November and at VND 76,000 on 5th November, then it decreased and touches the lowest level at VND 68,000. It is very clearly to see that FPT share fluctuated more than previous months. This is point that investors need to concern if they want to invest in FPT stock. What will happen for this share in the next period? Is it safe to use surplus funds to buy this stock or is it profit or loss if investors sell this stock at this moment? In order to make decision, we need to follow trading rules of MA technique. A stock price that is moving up and crosses the moving average, this is a buy signal. Conversely, when a stock price is falling and moves below its moving average, this is a sell signal, or possibly the signal for a short trade. For only few days at the end of November, 2010, the WMA and SMA crossed the actual series price 4 times that result 4 signal of sale and purchase. On 22nd November, actual price cut the MA from below and likely increase after touch the lowest price VND 68,000, this is a buying signal. On 25th November, actual price crossed the MA from above and likely to decrease, this is a selling signal. Similarly, on 29th November is buying signal and on 30th November is selling signal, respectively.

From the movement of share price in the whole period and the price at the end of November, we can apply to predict the movement of the FPT stock price. After the phase of reducing in price and hit the trough, the price is going to retrieve and has a trend to move up in the future. The advice for the investors is should buy this stock today with expectation for profit will generate later.

3.2. Charting model In this model we use candlestick graph to realize the pattern of the stock prices of FPT Company. For the short term trend, the period is too short to acquire clear pattern for the prices, therefore we only focus on the long term trend that is long enough to detect the form of FPT share prices. From the chart below, we can detect two prominent patterns: the blue one is one type of continuation patterns - descending triangle and the second one is the reversal pattern: head and shoulders with the brown neckline. The first form is specified by downward trend and is characterized by decreasing top and horizontal bottom. We can see that the volumes decrease during the formation but increase just prior to the usual downside breakout. This trend just lasted for one month from

September 1st, 2010 to October 1st, 2010 and move to another form for the next two months.

Head Left shoulder Right shoulder

Neckline

The second acquired head and shoulders pattern is seen by chartist to be one of the most reliable of patterns. This one is a simple form which consists of only three parts: one left shoulder, one head, and one right shoulder. These were followed by a reaction of equivalent risen and reduced volumes. This pattern had not finished but we can estimate the neckline which is attained by drawing across the bottoms of the left and right shoulders. It is clear that the neckline (the line with brown color) shows a slightly decreasing trend in the prices of the stock. The purpose of the charting technique is to try and obtain early warning signals relating the movement in stock prices. In this case, the analysis indicates a downward movement of the price. The investors can use it as a reference for making the sale or purchase or just holding the shares of FPT Company. However, the decision should be consulted from fundamental factors as well. The top-down and bottom-up analysis presented in the early parts of this report show the positive signals from macro and micro factors, the FPT is likely to recover from the crisis of the economy. Moreover, signals of potential development of the IT

industry in the future may increase the value of FPT shares. Hence, the stock price of FPT Company is expected to move up in the near future, and it is recommended to invest in these shares now for higher return later. 4. Conclusion Essentially, the demand for and supply of the share determined the price of a share, so we introduced three approaches to help you have awareness of factors that influence this Top-down approach showed you macro factors that impact on the overall FPTs investment environment: the rate of growth in international markets, the interest rate, indicator of future economic growth, and other Government responses. It looks at prospective development in the large economic environment within which the various industry sectors and specific companies are situated. And generally the theoretical frameworks on which this draws come from macroeconomic Additionally, bottom-up approach helped you clarify about the companys financial and management performance, strength, efficiency by accounting ratios (capital, liquidity, debt, profitability, share price, and equity ratios).Besides, technical analysis also provide us better forecast of FPTs share market movement basing on past price behavior. On assumption, as a new pattern emerges, the past behavior experienced in the same historic pattern will also re-emerge. Moving averages and charting models, two principal models used by technical analysis, are significantly explained above All data are from confident sources according to statistics in the year 2009. We focused on four main operating areas to help you have a clearer view of the company. So that you can make the decision of buying FPT stock for long-term or short-term. In IT, growing demand for digital infrastructure projects in segments such as banking, telecoms, energy and government has attracted global IT services providers to invest more in Vietnam. In Financial aspect, you can see the data in our table, there is an upward trend that defines a stable profitability growth rate, so increases expectation as well as opportunities for the company. Specially, Technical Analysis presented the trend of price series that and easier to predict the movement of the FPT stock price. Combine information that we provided and analyzed, we recommend that you should buy FPT stock for long-term with expectation for generating profit in future.