Mobile World Investment Corp [BUY +50%]
Report Date:
August 12, 2016
Hong Luu
Current Price:
VND137,000
Manager
Current Target Price:
VND206,000
[email protected]
Previous Target Price:
VND160,000
+848 3914 3588 ext.120
Upside to TP:
Dividend Yield:
TSR:
Industry:
Market Cap:
Foreign Room:
ADTV30D:
State Ownership:
Outstanding Shares:
Fully Diluted Shares:
Dao Nguyen
Senior Analyst
[email protected]
+848 3914 3588 ext.185
+50.4%
0%
+50.4%
Retail
$861.5 mn
$0.0 mn
$1.2 mn
0.0%
146.9 mn
146.9 mn
Update Report
Rev Growth
EPS Growth
GPM
NPM
EPS (VND)
Div/Sh (VND)
P/E
2015
60.3%
52.8%
15.5%
4.2%
7,661
0
17.9x
2016F
81.6%
71.0%
16.4%
4.2%
13,103
1,500
10.5x
2017F
49.2%
45.8%
16.6%
4.2%
19,109
1,500
7.2x
P/E (ttm)
P/B (curr)
Net D/E
ROE
ROA
MWG
12.9x
6.2x
68.8
57.9%
24.2%
Peers*
10.5x
2.0x
52.6
10.7%
4.0%
VNI
14.5x
1.8x
NA
12.9%
2.2%
* includes foreign peers using adjusted market
multiples.
150%
100%
50%
0%
-50%
Aug-15
MWG
Nov-15
Mid-Term Trend: Up
VNIndex
Feb-16
May-16
Resistance: VND144,000
MWG owns the leading mobile phone and consumer
electronics chains in Vietnam with market shares of ~35%
and >10%, respectively. It also possesses the strongest
online platform in Vietnam, accounting for 10% of value
share in 2015. To sustain strong growth going forward, a
new minimart chain, BachhoaXANH, is undergoing a pilot
phase and is expected to be rolled out in 2017.
Mini-DienmayXANH is another testament to management’s ability
to find new ways to stay ahead of the curve
We reiterate our BUY recommendation on MWG and increase our target price by 29% to
VND206,000. We raise our FY16F NPAT and FY17F by 12.5% and 26.3%, respectively, thanks to
faster-than-expected store expansion as well as the roll-out of mini-DienmayXANH, the new
consumer electronics store format starting from H2 2016.
Excellent H1 2016 NPAT growth of 84% bolstered by elevated SSSG, aggressive store
openings and online sales. SSSG was about 15% in H1 2016 vs H1 2015 while MWG opened
another 263 Thegioididong and 42 DienmayXANH in H1 2016. Meanwhile, online sales, contributing
7% to total revenues, almost doubled in H1 2016 vs H1 2015.
Store expansion remains on fire and beats our previous projections. Currently, MWG has 880
Thegioididong and 128 DienmayXANH stores, compared to our previous YE2016 projections of 880
and 125 respectively. In a recent meeting, MWG’s Chairman revealed that the aggressive store
openings will continue into YE2016 as new stores previously planned for 2017 will be fast-forwarded
to H2 2016 so that management can have a better focus on BachhoaXANH in 2017.
MWG will roll out the new mini-DienmayXANH format immediately in its quest to dominate
the consumer electronics market. Mini-DienmayXANH has officially been launched after several
months of successful testing. This will enable MWG to penetrate its market more deeply and get
closer to consumers in remote, rural areas. Mini-DienmayXANH stores are 300-400 sqm each and
sell very focused groups of products (see page 4). With mini-DienmayXANH, MWG looks to reach
30% market share in the consumer electronics market by YE2017 from about 10% currently.
We revise FY16 and FY17 NPAT by +12.5% and +23.6%, respectively, on higher projected
store count. We now pencil in a total store count of 950 Thegioididong, 135 DienmayXANH and 80
mini-DienmayXANH by YE2016. In 2017, we project another 50 Thegioididong and 200 miniDienmayXANH. Under our current projections, consumer electronics chains will contribute 41% to
MWG’s FY17F revenues, up from 31% in FY16F.
BachhoaXANH, Vuivui.com and overseas expansion continue to provide upside potential to
our target price. We maintain our optimism on BachhoaXANH following our recent visit, which is
elaborated further on page 7. BachhoaXANH’s revenue per store is making tremendous strides,
beating by far management’s initial guidance. Vuivui.com is a B2C e-commerce website currently
under experimentation and expected to be launched in Q4 2016. Meanwhile, management plans to
open the first stores overseas (either in Cambodia, Myanmar or Laos) in 2017. We have not
incorporated any of these into our model as we await more detailed guidance from management.
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 1
H1 2016: Stellar results on the back of red-hot store
openings, solid SSSG and doubling online sales HOLD
Figure 1: MWG's H1 2016 results
% of
VCSC’s
VCSC's comments
previous
forecast
H1 2016
H1 2015
% growth
vs
H1 2015
Revenue
19,650
10,860
80.9%
15% SSSG, aggressive store
48.5% openings, and doubling online
sales
- Thegioididong
14,063
9,090
54.7%
47.1% 263 new stores in H1 2016
- DienmayXANH
5,587
1,770
215.6%
52.4% 42 new stores in H1 2016
Gross profits
3,184
1,614
97.3%
47.8%
Larger scale, increased direct
sourcing, strong accessory sales
(1,813)
(948)
91.3%
47.1%
Increase in number of staff and
more promotions to customers
G&A
(326)
(96)
237.8%
Operating profits
1,045
570
83.4%
50.1%
PBT
1,050
587
78.9%
49.2%
834
453
84.3%
49.0% Lower CIT from 22% to 20%
1,306
677
93.0%
43.2%
GPM %
16.2%
14.9%
Selling expenses%
-9.2%
-8.7%
G&A %
-1.7%
-0.9%
PBT margin %
5.3%
5.4%
NPAT margin %
4.2%
4.2%
VND billion
Selling expenses
NPAT
Online sales
Provision for the newly applied
44.7% cash bonuses for employees in
exchange for lowering ESOP%
Source: MWG & VCSC.
H1 2016’s stellar 84% growth in NPAT is thanks to:
1) Solid SSSG of ~15%. This is higher than management’s expectations as well as last year’s 7%8% growth. This is partly bolstered by strong demand across the sector in which 5M 2016
smartphone sales grew 24% in value and 15% in volume, according to GFK.
2) Fast-paced store expansion. In the first six months, MWG opened 243 Thegioididong and 42
DienmayXANH stores, bringing total store count as of the end of June 2016 to 827 and 111,
respectively, compared to our assumptions of 880 Thegioididong and 125 DienmayXANH by
YE2016. Coupled with contributions from new stores opened in 2015, this was the main growth
driver for MWG in H1 2016.
3) Almost doubling online sales. Online sales surged by 93% vs H1 2015, representing 6.6% of
total sales in H1 2016.
4) 1.3 percentage point improvement in GPM… This is driven by MWG’s larger scale and
increased direct sourcing, which helped yield better purchase prices, as well as a stronger push
in accessories sales, which carry high GPM.
5) …Offset by higher selling and G&A expenses. SG&A as a percentage of revenues surged by
3.1 percentage points to 10.9% in H1 2016. Higher selling expenses stemmed from increasing
staff count to cater for store expansion, higher compensation for after-sales staff and more
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 2
promotions for customers. On the same note, G&A more than tripled as a result of higher cash
bonuses for employees in exchange for a 2% reduction in ESOP starting FY16.
HOLD
Figure 2: MWG's historical store count by chains
827
800
160
646
564
600
111
482
430
120
91
380
69
400
200
22
31
80
39
40
0
0
Q1 2015
Q2 2015
Q3 2015
FY15
Thegioididong
Q1 2016
Q2 2016
DienmayXANH
Source: MWG
2016 outlook: We forecast 79% NPAT growth on aggressive
store openings while mini-DienmayXANH will be introduced in
H2
Mini-DienmayXANH is MWG’s latest weapon to further take market share from mom-and-pop
shops. MWG has introduced a new consumer electronics store format called mini-DienmayXANH.
These stores will typically range from 300 to 400 sqm vs 800 to 1,000 sqm of the current
DienmayXANH stores. These stores enable MWG to penetrate more deeply into the rural areas and
get closer to consumers. Besides size, the other key difference between mini-DienmayXANH and
DienmayXANH lies in their product assortment. In mini-DienmayXANH, only the most sought-after,
smaller-sized products are available. Major product groups include televisions, small household
appliances, and small-sized fridges, but there will be no air conditioners. This product assortment
ensures store efficiency because it is better suited to its target customers, who live in the outskirts of
the cities as well as in rural areas. We conservatively pencil in monthly sales per store of VND4 billion
(USD0.2 million) for mini-DienmayXANH during each store’s first year of operations.
With mini-DienmayXANH, MWG is aiming to achieve a 30% market share in the consumer electronics
market in 2017 from 10% currently.
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 3
HOLD
Figure 3: Mini-DienmayXANH stores
Source: MWG, VCSC
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 4
Faster-than-expected store openings, including mini-DienmayXANH, prompts us to raise our
FY16F NPAT by 12.5%. As of August 8, 2016, MWG reached 880 Thegioididong stores and 128
DienmayXANH stores, compared to our previous assumptions of 880 Thegioididong and 125
DienmayXANH by YE2016. With the management’s plan to move forward the FY17 store openings
for the existing chains into H2 2016 in order to focus more on the roll-out of BachhoaXANH in 2017,
we lift our YE2016 store count projections to 950 Thegioididong and 135 DienmayXANH. In addition,
in a recent meeting, MWG’s Chairman revealed that the company plans to start rolling out miniDienmayXANH immediately, further fuelling FY16 growth. We project 80 mini-DienmayXANH stores
to be opened in H2 2016.
HOLD
Overall, we revise our FY16F revenue and NPAT up by 13.2% and 12.5%, respectively, vs the previous
report, translating to NPAT growth of 79% vs FY15.
Figure 4: VCSC's FY16F forecast summary
VND billion
FY15A
FY16F old
FY16F new
Revenues
25,253
40,501
45,861
FY16F new
vs FY15A
81.6%
Thegioididong
20,758
29,851
31,694
52.7%
DienmayXanh
4,495
10,651
12,632
181.0%
Gross profit
3,922
6,668
7,531
92.0%
Sales & marketing exp
General admin exp
Operating profit
Interest expense
Non-operating profit
Profit before tax
Profit after tax
NPAT (-MI)
EBITDA
-2,351
-249
1,322
-39
103
1,386
1,076
1,072
1,519
-3,852
-729
2,087
-106
154
2,134
1,708
1,708
2,467
-4,357
-826
2,349
-119
172
2,402
1,922
1,922
2,810
85.3%
231.5%
77.7%
205.1%
67.3%
73.3%
78.6%
79.3%
85.0%
Gross profit margin %
15.5%
16.5%
16.4%
Sales & marketing %
sales
9.3%
9.5%
9.5%
General admin % sales
1.0%
1.8%
1.8%
5.2%
5.2%
5.1%
6.0%
4.2%
6.1%
4.2%
6.1%
4.2%
22.4%
20.0%
20.0%
Operating profit margin
%
EBITDA margin %
NPAT margin %
Effective tax rate %
Explanation
Projected store count of 950 by
YE2016 vs 564 by YE2015
Projected store count of 135 by
YE2016 vs 69 by YE2015 for
DienmayXANH, and 80 for miniDienmayXANH
Larger scale, increased direct sourcing
and a stronger push in accessory sales
Increasing
sales
staff,
higher
compensation for after-sale staff and
more promotions/discounts
Increase in cash bonuses for
employees in exchange for lowering
ESOP %
Source: VCSC
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 5
FY17 outlook: mini-DienmayXANH to spearhead growth
HOLD
Store expansion in mini-DienmayXANH and full-year contribution from stores opened in 2016
will bolster NPAT growth of 50% vs FY16. We expect revenue from the consumer electronics chains
(grouped as one below as “DienmayXANH”) to grow 99% vs FY16 due to the full-year contribution of
new stores opened in 2016, 200 new mini-DienmayXANH opened in 2017 and a 12% SSSG.
Meanwhile, we forecast Thegioididong to have another robust year with 27% revenue growth on the
back of 50 new stores opened in 2017, 10% SSSG and a full-year contribution from stores opened in
2016. Under our current projections, DienmayXANH will contribute 41% to MWG’s revenues in FY17,
up from 31% in FY16.
Figure 5: VCSC's FY17 forecast summary
VND billion
FY16F
FY17F
% growth
Revenues
45,861
68,430
49%
Thegioididong
31,694
40,287
27%
DienmayXANH
14,168
28,142
99%
Gross profits
7,531
11,355
51%
Operating profits
2,349
3,486
48%
PBT
2,402
3,609
50%
NPAT
1,922
2,887
50%
Source: VCSC
Figure 6: VCSC's store count projections for FY16 and FY17
200
1,200
80
135
1,000
135
111
800
91
600
69
950
1,000
FY16F
FY17F
827
400
564
646
200
0
FY15
Q1 2016
Thegioididong
Q2 2016
DienmayXANH
Mini-DienmayXANH
Source: MWG and VCSC
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 6
BachhoaXANH is making good progress and remains a
HOLD
significant upside for MWG
Due to the lack of management guidance, we have not incorporated BachhoaXANH into our
model. Despite the high probability that BachhoaXANH will be officially rolled out in 2017,
management is holding off their guidance on its store expansion plan as well as the chain’s potential
profitability, saying that more work will have to be done before they can comfortably provide detailed
guidance. Currently, MWG is operating 16 BachhoaXANH stores and does not aim to aggressively
open more stores in 2016. According to MWG’s Chairman, the maximum store count for
BachhoaXANH is 20 for the first phase in 2016, as the company aims to optimize the chain’s
efficiencies, before rolling out 300 to 400 stores in the second phase in 2017. At this stage,
procurements and logistics, especially for fresh foods, are to be tested before the aggressive roll-out
starting 2018.
MWG has successfully finished BachhoaXANH’s first phase, which is testing consumer
acceptance toward the minimarket format, as it has made continuous modifications to its stores along
the way. The success can be demonstrated by the significant improvement in monthly sales per store
(Figure 7) since the experimental phase started in November 2015.
Figure 7: BachhoaXANH's monthly revenue per store is making significant strides
VND bn
Re-launched fresh
foods (veggies, fruits)
starting with two
stores in May
Source: MWG
BachhoaXANH’s selling prices are true to its format as a minimart chain, which are as
competitive or even more competitive than those of supermarkets. We again visited two
BachhoaXANH stores in August, one of which now also sells fish and meat, a change from our
previous visit in June. This time we also visited a Coop Food store and a Satra Foods store, two
existing local minimart chains, which are located within the Binh Tan District and close to
BachhoaXANH stores. We believe Coop Food and Satra Foods are the closest competitors to
BachhoaXANH, while we ruled out Vinmart+, a subsidiary of Vingroup, from this comparison as we
view it as a more remote competitor mostly due to its format – seemingly a hybrid of convenience
stores and minimarts, and pricing, which is much higher than at supermarkets. Coop Food and Satra
Foods are long-standing SOEs and their brands are widely recognized among Vietnamese consumers.
Nonetheless, as SOEs, they are quite slow in expanding, i.e. store openings, as Coop Food currently
has only ~90 stores while Satra Foods has 79 stores. Once rolled out, we believe that BachhoaXANH
will quickly dwarf these two chains in terms of store coverage.
Due to similar store concepts, in this study, we focus on comparing the pricing and services
between these three minimart chains. We also compare pricing of BachhoaXANH with that of the
largest supermarket chain in Vietnam, namely Coop Mart, to see whether BachhoaXANH is living up
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 7
to the latter part of its slogan: “Quick and cheap”. The “quick” component will come later when the
chain gets scaled up from 2017 onward.
HOLD
Our study shows that BachhoaXANH is the most price competitive out of the three minimart chains,
and even competitive when being compared with Coop Mart. On the other hand, in some cases, Coop
Food and Satra Foods sell at higher prices than Coop Mart (see table below). Our study excludes
fresh foods (fresh produce, meat and fish) because currently BachhoaXANH is offering promotions on
these products.
MWG’s customer-centric DNA is unsurprisingly also displayed at BachhoaXANH. Similar to what
we experienced in our previous visit, BachhoaXANH’s staff all exhibited great customer service, a trait
that MWG promotes in all of its chains.
Figure 8: Price comparison between MWG's BachhoaXANH and main competitors
VND/unit
Unit size
BachhoaXANH
Coop Food
Satra Foods
Coop Mart
900 mL
15,900
NA
16,300
16,800
1L
46,000
45,900
48,500
45,900
15 x 2g
20,000
23,500
21,500
22,500
OMO detergent
720g
34,000
34,500
34,500
34,500
Lifebouy hand soap
450g
36,000
36,500
36,500
36,500
Sunlight dish washing liquid - lemon
750g
22,900
23,000
23,000
22,800
Downy fabric softener
1.6L
93,000
99,000
97,000
99,000
Cholimex chilli sauce
270g
10,400
10,600
10,500
11,400
Modern instant noodle cup
cup
5,800
6,600
6,000
6,400
packet
6,000
6,700
6,200
6,500
454g
28,000
29,700
31,000
29,500
4 x 180 mL
27,200
33,500
32,800
32,500
Nam Ngu De Nhi Fish Sauce
Simply cooking oil
G7 Coffee
Omachi instant noodles
Ajinomoto MSG
TH Milk UHT
Source: VCSC’s compilation
Figure 9: Location of stores visited by VCSC on August 6, 2016
Source: VCSC
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 8
Figure 10: Fresh food display comparison between BachhoaXANH vs Satra Foods and Coop Food
HOLD
Source: VCSC, August 6, 2016. (*) Coop Food and Satra Foods do not operate their own fresh meat sections and instead earn a fee from
having VISSAN (the leading meat trading and processing player in Vietnam) stalls in their stores.
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 9
Vuivui.com, currently under experimentation, carries MWG’s eHOLD
commerce ambitions
MWG is experimenting with a new e-commerce website, called “Vuivui.com”, which follows a B2C and
partnership B2C model. Vuivui.com may form another leg of future growth for MWG as it is another
step toward MWG’s vision to become the leading diversified retailer in Vietnam by 2020. Even though
Vuvui.com, which is set to be launched in Q4 2016, is not expected to have material impact on MWG’s
P&L in the short term, MWG’s Chairman did reveal his ambition for the website as he targets it to
contribute 10% to total revenues and 5% to total NPAT of MWG by YE2020.
Currently, Vuivui.com only encompasses product lines that are available at MWG’s three brickand-mortar chains, namely Thegioididong, DienmayXANH and BachhoaXANH. From these stores,
the products can be delivered to customers. In fact, at the moment, Vuivui.com will only deliver
groceries ordered online to customers within the Binh Tan District, where BachhoaXANH stores are
currently located. However, we understand that in the future, MWG aims to expand its product
categories and pursue a similar model to that of Amazon, which may require the establishment of a
brand new distribution center network.
At the current state of Vietnam’s e-commerce, online/offline model is the way to go. The
development of e-commerce in Vietnam is being hindered by the lack of consumer trust (i.e. the
commonality of fake products), weak logistical infrastructure causing inconvenient and costly delivery
process, and low usage of credit cards (>90% of the transactions are carried out in cash). Amid this,
a combination of online and offline channels seems best suited to serve consumers, with physical
stores serving as delivery hubs. This, coupled with its top-of-mind brand and market-leading customer
services, are major reasons why MWG has grown into the best e-commerce player in Vietnam with its
two websites, Thegioididong.com and Dienmayxanh.com. Early on, Vuivui.com will work in a similar
tandem. This website also offers cash on delivery, which is the crucial factor, as aforementioned.
However, in order to expand into other categories such as apparel, shoes, etc., MWG will have to go
into the unchartered water of building a distribution center system for Vuivui.com.
Figure 11: Vuivui.com's logo
Source: Vuivui.com
Overseas expansion to see first move in H2 2017
According to MWG’s Chairman, MWG aims to open the first stores in Cambodia in 2017 in order to
study the feasibility of cross-border expansion for its mobile phone and consumer electronics chains.
Although there is no detailed information on this yet, MWG’s representative revealed to us that MWG
will operate by itself in Cambodia instead of forming a JV. If successful, this will help diminish investor
concern on the future growth of MWG’s mobile phone chain caused by saturation in Vietnam’s
smartphone market.
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 10
Valuation
HOLD
Similar to the previous update, we derive our target price for MWG using a combination of DCF and
PER in an 80:20 weighting.
Our TP is revised up by 29% vs our previous report due to:
1/ Higher DCF-derived TP thanks to higher earnings forecast driven by stronger-than-expected store
expansion.
2/ Higher PER-based TP thanks to a higher TTM EPS and higher growth forecast for FY17.
Figure 12: Target price derivation
Method
Fair value
Weighting
Contribution (VND/sh)
DCF
193,066
80%
154,453
TTM PER @ 25.4x*
256,900
20%
51,380
Target Price
206,000
TTM PER at TP
20.3x
FY16F PER at TP
15.7x
FY17F PER at TP
10.8x
Source: VCSC (*unchanged from our previous report, in which we used a target PEG of 0.8)
Discounted Cash Flow
Figure 13: DCF Valuation
Cost of Capital
Beta
Market Risk Premium %
Risk Free Rate %
Cost of Equity %
Cost of Debt %
Debt %
Equity %
Corporate Tax Rate %
WACC %
Previous
Report
0.9
8.4
6.5
14.0
10
19
81
Revised
0.9
8.4
6.2
13.7
10
11
89
22
20
12.9
13.1
FCFF (Five Year)
PV of Free Cash Flows
PV of Terminal Val (5.0% g)
PV of FCF and TV
+ Cash & ST investments
- Debt
- Minority Interest
Equity Value
7,909
21,603
29,512
596
1,791
0
28,317
Shares (mn)
147
Price per share, VND
193,066
Figure 14: Cash flows
Discounted Cash Flows
EBIT
- Tax
+ Depreciation
- Capex
- Working cap increase
Free Cash Flow
Present Value of FCF
Cumulative PV of FCF
FY16
FY17
FY18
FY19
FY20
2,521
-504
461
-1,285
-769
424
402
3,737
-747
623
-810
-1,135
1,667
1,406
4,277
-855
685
-310
-883
2,913
2,179
4,807
-961
751
-331
-1,000
3,267
2,163
5,202
-1,040
419
-196
-1,378
3,007
1,760
402
1,808
3,987
6,149
7,909
Source: VCSC
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 11
HOLD
Figure 15: Peers comparables
Mkt
cap
TTM Net
Sales
Y-o-Y%
TTM
NPAT
Y-o-Y %
Debt/
Equity
ROE
TTM
P/E
Adjusted
P/E
PEG
LQ P/B
China
966.4
86.0
1.5
12.3
-20.8
22.3
5.5
82.4
26.4
1.4
4.4
Redington
India
618.9
5,417.2
12.3
65.1
10.1
77.3
16.5
9.7
6.8
0.9
1.5
Jaymart PCL
Thailand
230.4
278.1
6.2
9.4
-1.9
132.5
13.7
20.6
14.2
0.8
2.4
PT Erajaya
Swasembada
Indonesia
198.9
1,594.1
32.2
17.8
15.3
49.8
7.8
10.7
5.4
0.5
0.8
Median
424.7
936.1
9.2
15.0
4.1
63.5
10.7
15.7
10.5
0.9
2.0
Average
503.6
1,843.9
13.0
26.2
0.7
70.5
10.9
30.9
13.2
0.9
2.3
861.5
1,526.2
73.3
65.2
78.9
82.7
57.9
12.9
12.9
0.3
6.2
(USD mn)
Company
Henan
Spendor
Science &
Technology
Mobile
World
Country
Vietnam
Source: Bloomberg
Recommendation History
Figure 16: Historical VCSC target price vs share price (adjusted for stock splits)
240,000
BUY 206,000
200,000
BUY 160,000
160,000
O-PF
98,000
120,000
80,000
O-PF
98,000 BUY 100,000
O-PF
71,200
BUY
102,000
BUY 100,000
BUY
BUY
107,000 108,000
BUY 98,000
M-PF 71,200
40,000
BUY 48,000
Actual Price
0
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Target Price
Apr-16
Jul-16
Source: Bloomberg & VCSC
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 12
Mid-Term Trend
HOLD
Opinion:
MWG has been moving in a strong upward trend since May 2016. The mid-term support level for this
trend is at VND120,000, formed by the 50-day moving average (MA50) while its resistance level is
formed by MWG’s all-time high of VND144,000.
Short-term bullish signals in MWG resumed as the share price surpassed the MA25 resistance level
of VND130,000 due to the support from its MA5 and MA10. Based on this momentum, MWG has a
chance to re-test its mid-term resistance of VND144,000 in the upcoming sessions.
Recommendation:
Buy stop at VND144,000
As of August 11, 2016
(VND/share)
Mid-term Analytic horizon
Three to six months
Mid-term resistance level
144,000
Mid-term support level
120,000
Mid-term trend
Bullish
Source: VCSC
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 13
Financial Statements
INCOME STATEMENT (VND bn)
Revenue
COGS
Gross Profit
Sales & Marketing exp,
2015A
2016F
2017F
BALANCE SHEET (VND bn)
Cash & cash equivalents
2016F
2017F
1,876
25,253
45,861
68,430
344
874
-21,330
-38,330
-57,074
Short term investment
0
0
0
3,922
7,531
11,355
Accounts receivables
77
110
164
4,933
7,245
10,787
823
823
823
Total Current assets
6,176
9,051
13,651
Fix assets, gross
-2,351
-4,357
-6,638
Inventories
General & Admin exp,
-249
-826
-1,232
Other current assets
Operating Profit (EBIT)
1,322
2,349
3,486
Financial income
HOLD
2015A
81
167
246
1,183
2,468
3,278
-41
-119
-128
- Depreciation
-356
-817
-1,440
-39
-119
-128
Fix assets, net
827
1,651
1,838
0
0
0
LT investment
0
0
0
23
5
5
LT assets other
262
262
262
1,386
2,402
3,609
-310
-480
-722
1,076
1,922
2,887
-4
0
0
NPAT less MI, reported
1,072
1,922
2,887
NPAT less MI, adjusted
1,072
1,922
2,887
Other ST liabilities
EBITDA
1,519
2,810
4,109
Total current liabilities
EPS basic reported, VND
7,661
13,103
19,111
EPS basic adjusted(1), VND
7,661
13,103
EPS fully diluted, VND
7,661
2015A
Financial expenses
In which, interest expense
Share profit/loss from associates
Net other income/(loss)
Profit before Tax
Income Tax
NPAT before MI
Minority Interest
Total LT assets
1,089
1,913
2,100
Total Assets
7,266
10,964
15,751
Accounts payable
1,971
2,928
4,711
Short-term debt
2,053
2,052
2,052
759
1,378
2,057
4,782
6,358
8,820
Long term debt
0
383
2
19,111
Other LT liabilities
0
0
0
13,103
19,111
Total Liabilities
4,782
6,742
8,822
2016F
2017F
Preferred Equity
(1) Adjusted for one-off items
RATIOS
Growth
Paid in capital/Issued capital
Revenue growth
60.3%
81.6%
49.2%
Add’l share capital/share premium
Operating profit (EBIT) growth %
64.0%
77.7%
48.4%
Retained earnings
PBT growth %
59.6%
73.4%
50.2%
Other equity
EPS growth %, adjusted
52.8%
71.0%
45.8%
Minority interest
Profitability
Gross Profit Margin %
0
0
1,513
1,558
37
37
37
978
2,673
5,333
-2
-2
-2
2
2
2
Total equity
2,483
4,223
6,928
Liabilities & equity
7,266
10,964
15,751
2015A
2016F
2017F
213
344
874
1,072
1,922
2,887
15.5%
16.4%
16.6%
Operating Profit, (EBIT) Margin %
5.2%
5.1%
5.1%
CASH FLOW (VND bn)
EBITDA Margin %
6.0%
6.1%
6.0%
Beginning Cash Balance
NPAT less MI Margin, adj, %
4.2%
4.2%
4.2%
Net Income
ROE %
54.2%
57.3%
51.8%
Dep, & amortization
ROA %
20.2%
21.1%
21.6%
Change in Working Capital
Efficiency
0
1,469
197
461
623
-1,782
-769
-1,135
Other adjustments
Cash from Operations
-127
-641
0
1,614
0
2,375
Capital Expenditures, net
-587
-1,285
-810
-72
0
0
-659
-1,285
-810
Days Inventory On Hand
61.0
58.0
Days Accts, Receivable
0.9
0.7
57.7
0.7
Days Accts, Payable
22.4
22.0
23.0
Investments, net
Cash Conversion Days
39.5
36.7
35.4
Cash from Investments
Dividends Paid
0
-227
-227
Current Ratio x
1.3
1.4
1.5
∆ in Share Capital
0
44
45
Quick Ratio x
0.1
0.2
0.2
∆ in ST debt
1,433
0
0
Cash Ratio x
0.1
0.1
0.2
∆ in LT debt
0
383
-381
28.2%
22.3%
13.1%
Other financing cash flows
Cash from Financing
Liquidity
Debt / Assets x
Debt / Capital x
45.2%
36.7%
22.9%
Net Debt / Equity x
68.8%
37.0%
2.9%
34.0
19.7
27.1
Interest Coverage
See important disclosure at the end of this document
-3
0
0
1,430
201
-562
Net Change in Cash
131
530
1,002
Ending Cash Balance
344
874
1,876
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Viet Capital Securities | 14
Rating and Valuation Methodology
HOLD
Absolute, long term (fundamental) rating: The recommendation is based on implied total return for the stock defined as
(target price – current price)/current price + dividend yield, and is not related to market performance. This structure applies from
27 May 2015.
RATING
BUY
OUTPERFORM (O-PF)
MARKET PERFORM (M-PF)
UNDERPERFORM (U-PF)
SELL
NOT RATED
RATING SUSPENDED
DEFINITION
Total stock return including dividends over next 12 months expected to exceed
20%
Total stock return including dividends over next 12 months expected to be
positive 10%-20%
Total stock return including dividends over next 12 months expected to be
between negative 10% and positive 10%
Total stock return including dividends over next 12 months expected to be
negative 10%-20%
Total stock return including dividends over next 12 months expected to be
below negative 20%
The company is or may be covered by the Research Department but no rating
or target price is assigned either voluntarily or to comply with applicable
regulation and/or firm policies in certain circumstances, including when VCSC
is acting in an advisory capacity in a merger or strategic transaction involving
the company.
A rating that happens when fundamental information is insufficient to
determine an investment rating or target. The previous investment rating and
target price, if any, are no longer in effect for this stock.
Unless otherwise specified, these performance parameters only reflect capital appreciation and are set with a 12-month horizon.
Future price volatility may cause temporary mismatch between upside/downside for a stock based on market price and the
formal recommendation, thus these performance parameters should be interpreted flexibly.
Target price: In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. The target
price is the level the stock should currently trade at if the market were to accept the analyst's view of the stock, provided the
necessary catalysts were in place to effect this change in perception within the performance horizon. However, if the analyst
doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the
target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between
current market price and our assessment of current fair value.
Risks: Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely affect
the value, price or income of any security or related instrument mentioned in this report. For investment advice, trade execution
or other enquiries, clients should contact their local sales representative.
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 15
Disclaimer
HOLD
Analyst Certification of Independence
I, Dao Nguyen, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers.
I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed
in this report. The equity research analysts responsible for the preparation of this report receive compensation based upon various factors,
including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from,
among other business units, Institutional Equities and Investment Banking.
VCSC and its officers, directors and employees may have positions in any securities mentioned in this document (or in any
related investment) and may from time to time add to or dispose of any such securities (or investment).VCSC may have, within the last three
years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of
the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services
in relation to the investment concerned or a related investment.
Copyright 2013 Viet Capital Securities Company “VCSC”. All rights reserved. This report has been prepared on the basis of information believed
to be reliable at the time of publication. VCSC makes no representation or warranty regarding the completeness and accuracy of such information.
Opinions, estimates and projection expressed in this report represent the current views of the author at the date of publication only. They do not
necessarily reflect the opinions of VCSC and are subject to change without notice. This report is provided, for information purposes only, to
institutional investors and retail clients of VCSC in Vietnam and overseas in accordance to relevant laws and regulations explicit to the country
where this report is distributed, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction.
Investors must make their investment decisions based upon independent advice subject to their particular financial situation and investment
objectives. This report may not be copied, reproduced, published or redistributed by any person for any purpose without the written permission of
an authorized representative of VCSC. Please cite sources when quoting.
U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by
VCSC issued by VCSC has been prepared in accordance with VCSC’s policies for managing conflicts of interest arising as a result of publication
and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report
has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by
persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons
and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional
investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by VCSC in Australia to "wholesale clients"
only. VCSC does not issue or distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or
outside Australia without the prior written consent of VCSC. For the purposes of this paragraph the terms "wholesale client" and "retail client" have
the meanings given to them in section 761G of the Corporations Act 2001. Hong Kong: The 1% ownership disclosure as of the previous month
end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the
Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month
end data from two months prior.) Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share
trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, VCSC will be
receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was
individually agreed between VCSC and the customer in advance. Korea: This report may have been edited or contributed to from time to time by
affiliates of VCSC. Singapore: VCSC and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where
the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not
for sale.Pakistan: For private circulation only, not for sale.New Zealand: This material is issued and distributed by VCSC in New Zealand only to
persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest
money. VCSC does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities
Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of VCSC.
Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public
offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or
territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file
a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or,
alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer
or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of
Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer
incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted
through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed
judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the
contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. United
States: This research report prepared by VCSC is distributed in the United States to Major US Institutional Investors (as defined in Rule 15a-6
under the Securities Exchange Act of 1934, as amended) only by Decker&Co, LLC, a broker-dealer registered in the US (registered under Section
15 of Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Decker&Co, LLC in the US shall be
borne by Decker&Co, LLC. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US.
This report is not directed at you if VCSC Broker or Decker&Co, LLC is prohibited or restricted by any legislation or regulation in any jurisdiction
from making it available to you. You should satisfy yourself before reading it that Decker&Co, LLC and VCSC is permitted to provide research
material concerning investment to you under relevant legislation and regulations.
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 16
Contacts
HOLD
Corporate
www.vcsc.com.vn
Head Office
Hanoi Branch
Bitexco Financial Tower, 2 Hai Trieu Street
109 Tran Hung Dao
District 1, HCMC
Hoan Kiem District, Hanoi
+848 3914 3588
+844 6262 6999
Transaction Office
Transaction Office
10 Nguyen Hue Street
236-238 Nguyen Cong Tru Street
District 1, HCMC
District 1, HCMC
+848 3914 3588
+848 3914 3588
Research
Research Team
Barry Weisblatt, Head of Research ext 105
+848 3914 3588
[email protected]
[email protected]
Long Ngo, Senior Manager ext 145
Anirban Lahiri, Senior Manager ext 130
Banks, Securities, Insurance
Logistics, Agriculture and Industrial
- Hoa Trinh, Senior Analyst ext 124
- Hai Hoang, Analyst ext 138
- Thuy Le, Analyst ext 116
- Nga Nguyen, Analyst ext 199
Construction Materials
Duong Dinh, Manager ext 140
- Dung Ly, Analyst ext 149
Oil & Gas, Power and Fertilizer
Macro
- Tram Ngo, Analyst ext 135
- Hien Nguyen, Analyst ext 132
Hong Luu, Manager ext 120
Phap Dang, Manager ext 143
Real Estate and Construction
Consumer Goods, Autos and Tires
- Tho Hoang, Analyst ext 174
- Dao Nguyen, Senior Analyst ext 185
- Nghia Le, Analyst ext 181
Duc Vu, Manager ext 363
Retail Client Research
- Vy Nguyen, Analyst ext 147
- Thanh Nguyen, Analyst ext 173
Institutional Sales and Brokerage
& Foreign Individuals
Head of Institutional Sales
Vietnamese Sales
Michel Tosto, M. Sc.
Dung Nguyen
+848 3914 3588 ext 102
+848 3914 3588 ext 136
[email protected]
[email protected]
Retail & Corporate Brokerage
Ho Chi Minh City
Hanoi
Quynh Chau
Quang Nguyen
+848 3914 3588 ext 222
+844 6262 6999 ext 312
[email protected]
[email protected]
See important disclosure at the end of this document
www.vcsc.com.vn | VCSC<GO>
Viet Capital Securities | 17