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Sunday, August 1, 2021

Betting on Masan’s offline-to-online strategy, securities firms elevate MSN stock value

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Finding fast growing stocks

Selecting stocks that hold great potentials for market expansion, revenue growth and profit improvement is the core strategy of investors at present, in the context of stock market indexes expected to continue growing but at the same time experience deep division.

“The giant wakes up”

The VN-Index reaching 1,500 points by the end of this year is a scenario foreseen by many securities companies. However, it will not be easy for investors to earn a profit on the stock market. They will have to single out stocks with the best growth potential.

In this context, analysts have raised valuation of a series of bluechips. Those include not only banking and securities stocks but also stocks from large-cap companies in the market such as Masan Group Corp. (MSN).

Credit Suisse raised the target price of MSN stocks to VND137,000 per share in a report issued on July 7.

Viet Capital Securities JSC (VCSC) previously raised MSN’s target price to VND142,500 per share, which is 30% higher than the market rate on July 6. VCSC gave the new valuation after Masan raised its stake in The CrownX (TCX – a platform that incorporates Masan’s retail and consumer goods segments) from 80.2% to 84.9% and updated the business condition of VinCommerce.

Early this month, HSC Securities Company elevated MSN’s target price to VND134,000 per share based on the positive outlook of the company’s retail performance. HSC forecast that net profit growth rate would rise by 108.9% in 2021 and 95% in 2022.

Similarly, Mirae Assets Securities raised MSN’s target price from VND120,000 per share in its January valuation report to VND131,000 per share in a report published on July 5. Early this year, Mirae Assets described MSN as an “awakening giant.”

Mirae Assets said it hiked MSN’s target price based on the combined valuation of Masan’s five business segments including consumer goods (MCH), manufacturing and processing of cool meat (MML), high-tech materials (MSR), modern retail (VinCommerce) and financial services following its relationship with Techcombank.

Regarding TCX, this modern retail platform is valued at US$7.3 billion after Alibaba Group and other investors poured US$400 million to purchase a 5.5% stake in The CrownX.

In fact, TCX comprises two platforms including Vincommerce (which was valued at some US$1 billion when Masan took it over from Vingroup) and Masan Consumer Holdings (whose market capitalization reaches VND80 trillion, or nearly US$3.5 billion, on UpCom). The value of TCX has increased significantly after combining these two business segments, showing expectation for profitability in the future.

However, Danny Le, CEO of Masan Group, said the figure has not fully reflected the company’s expectation when looking at the anticipated business results this year and the growth potential of the offline-to-online integration platform.

“The current valuation of The CrownX does not accurately indicate the company’s value,” he said.

Danny Le, CEO of Masan Group Corp.

The Masan leader said The CrownX is expected to receive investment worth US$300-400 million in the second half of this year. In the long term, Masan aims to keep its ownership proportion in TCX of at least 75%.

It is obvious that MSN’s market price has skyrocketed after recent M&A deals. Last year, Mitsubishi Materials Corporation of Japan spent US$90 million to buy a 10% stake in Masan High-Tech Materials (mining segment). Moreover, Masan MEATLife, a subsidiary of Masan Group, spent VND613 billion to acquire a 51% stake in 3F Viet – a cool meat producer.

MSN’s market price began to grow in October 2020 and reached nearly VND89,000 per share by the end of last year, surging over 64%. As of July 6, MSN’s market price was VND109,000 per share.

Big opportunity from modern retail platform

M&A is expected to accelerate growth in the future. Masan is continuing to speed up the formation of the “Point of Life” platform, a model that meets the essential needs of consumers, from necessities (food and beverages) to financial services (payment, credit cards and investment) and other needs (healthcare, education and entertainment).

Masan has partnered with Phuc Long, the leading tea and coffee store chain in the country, to develop Phuc Long kiosks at VinMart+ convenience stores nationwide.

Masan plans to open 1,100 Phuc Long kiosks at VinMart+ stores by the end of this year.

As part of the deal, the kiosks will share 20% of its revenue, each estimated at some VND1 million a day, with Vincommerce (VCM). Masan plans to open 1,100 Phuc Long kiosks at VinMart+ convenience stores by the end of this year, helping the earning before interest, taxes, depreciation and amortization (EBITDA) of VinMart+ convenience stores rise over 4% against the current level.

As of late June 2021, 50 Phuc Long kiosks had been opened at VinMart+ convenience stores on a trial basis.

Masan is also collaborating with Techcombank to place Techcombank transaction points at VinMart+ stores in Hanoi to offer a more convenient experience to the customers. Techcombank and Masan call this model CVLife (Convenient Life), a multi-utility one-stop transaction model that meets customers’ daily and financial needs.

The opportunity also comes from the potential of the essential goods sector, which currently accounts for 50% of Vietnam’s retail market and 25% of Vietnamese consumer spending.

Consumers select fresh food at a VinMart+ store

Together with the US$400 million poured into TCX, the cooperation plan with Alibaba and Lazada will help Masan accelerate the modernization of the retail sector and create resonance from the current value of offline retail industries.

According to Viet Capital Securities JSC, MSN’s profit will improve significantly thanks to the company’s ability to negotiate with suppliers and shared revenues from Phuc Long kiosks as well as VCM’s own product portfolio.
In the long-term, Masan sets the target that the total commercial profit margin of VCM will exceed 30% from the current 20%.

Up to now, growth expectations have made positive progress. Revenue of existing stores and VCM in the second quarter of 2021 was equivalent to the level of the same period last year although the number of stores has dropped as Masan closed down stores that operated inefficiently.

VCM expects a net loss of VND1 trillion this year, down significantly from a net loss of VND3.2 trillion last year. The number of VCM’s stores (VinMart and VinMart+) is expected to reach 3,000 by the end of this year. In the long term, VCM aims to become a leading modern and profitable retail system.

“2021 marks a turning point for VinCommerce after this retail system started to make profits. Our top priority is to re-expand the point-of-sale system to build a leading retail chain in terms of scale and at the same time improve profits. This will create the foundation for us to increase investment and accelerate the offline-to-online integration strategy,” Danny Le said.

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