Equities | Vietnam | Consumer Discretionary - Retailing

Mobile World Investment Corp. (MWG : HSX)

Flashnote 21 August 2020

Buy
Target price: VND130,600
July net profit improved
Up/downside: 59.9%
▪ July results looked better than June’s; net profit of VND326bn was
Stock data, as of 20 August 2020 reported, up 12.4% y/y and 6.4% m/m.
Price (VND) 81,700
52 week high / low (VND) 128,000 / 58,900 ▪ Cumulative 7M20 net profit came to VND2,353bn, down 2.4 y/y%. To date,
Px. perf: (3 / 6 / 12 months) (%) -5.0/ -16.5/ -18.0 reported net profit has met 65.7% of our full year forecast and is in line with
Shares outstanding (mn) 453
Free float shares (mn) 294 our expectations.
Trading value (5D avg) (VND mn) 63,056
Market Cap (VNDbn) 36,995 ▪ We maintain our Buy rating and DCF-derived VND130,600 TP. We also
Market Cap (USDmn) 1,604 keep our estimates for FY20 and FY21.
Total FOL shares room (mn) 222
Current FOL shares room (mn) 0.000
Foreign owned ratio 49.0% Event: July results announced.
Foreign ownership limit 49.0%
MWG’s July results look better than June’s. Net sales came to VND8,669bn,
Price chart down 6.9% y/y but up 6.4% m/m. Net profit was solid at VND326bn, up 12.4%
MWG Common (MWG)
Closing price Relative To VNIndex (RHS)
y/y and 7.2% m/m.
150,000 555

130,000 484
Cumulative 7M20 net sales were VND64,308bn, up 5.6% y/y while net profit
110,000 412 was posted at VND2,353bn, down 2.4% y/y. Reported net profit completed
90,000 341 65.7% of our full year forecast and is in line with our expectations.
70,000 269

50,000 198 July sales increased slightly m/m

30,000 126

10,000 55
Compared to July 2019, net sales in July 2020 declined by 6.9% y/y to
15
10 VND8,669bn due to lower sales at TGDD (down 12.0% y/y) and DMX (down
Vol mn

5
20.4% y/y) although BHX sales surged by 83.4% y/y.
8/15

7/16

5/17

3/18

1/19

11/19

Compared to June 2020, net sales improved by 6.4% m/m thanks to a

recovery of 21.6% m/m in TGDD sales and 10.7% m/m in BHX sales while
Key metrics 12-19A 12-20F 12-21F DMX sales dropped 2.5% m/m.
Basic financials and growth
Net sales (VNDbn) 102,174 111,307 123,033 TGDD sales improved m/m but likely short-lived
Net sales growth 18.1% 8.9% 10.5%
EBITDA (VNDbn) 6,420 6,479 7,403 It seems that the increase in TGDD sales was driven by unsustainable factors
EBITDA growth 26.0% 0.9% 14.3%
EPS (VND) 8,657 7,680 9,106
such as new product launches of some mobile brands (Samsung, Oppo etc.).
EPS diluted (VND) 8,657 7,680 9,106 The company shared their view that in coming months sales of TGDD and
EPS growth 37.4% (11.3%) 18.6% DMX will be weak, due to the impact of lower disposable income on demand.
DPS (VND) 1,500 1,500 1,500
BVPS (VND) 27,414 25,186 32,890 Stores closure is the other factor. Since end of July, MWG has closed 31
Valuation stores in Da Nang and Quang Nam out of 2,031 TGDD and DMX store
EV/EBITDA (x) 7.47 7.23 6.32
P/E (x) 9.4 10.6 9.0
nationwide following lock-down orders in these provinces. Besides which, there
P/E diluted (x) 9.4 10.6 9.0 are a further 150 stores have been impacted by social distancing measures.
Dividend yield 1.8% 1.8% 1.8% Therefore, we can expect August sales of TGDD and DMX to be lower than
Profitability
EBITDA margin 6.3% 5.8% 6.0%
July.
Net margin 3.8% 3.2% 3.6%
SG&A/sales 14.2% 15.8% 16.1% BHX’s sales rose by 10.7% m/m
ROAE 36.3% 30.4% 32.7%
BS/leverage In July, BHX achieved net sales of VND1,795bn, up 83.4% y/y. Compared to a
Current ratio 1.23 1.17 1.28 weak June with sales of only VND1,622bn, BHX’s sales improved by 10.7%
Quick ratio 0.33 0.18 0.28
m/m thanks to higher sales per store (at VND1.18bn per month compared to
Total debt (VNDbn) 14,153 11,547 12,562
Net debt (VNDbn) 10,976 9,850 9,770 VND1.14bn per month in June) which reflects a less aggressive rate of store
Total debt/equity 116.6% 101.2% 81.9% openings.
Net debt/equity 90.4% 86.3% 63.6%
EBIT interest coverage ratio 8.76 6.85 7.81 During the month of July, the number of newly opened stores was 75, which
was well below May’s and June’s level of 131 and 121, respectively. The
company has said that, from July afterwards, they will focus more on
increasing sales per store rather than increasing the absolute number of
Analysts
stores.
Tran Huong My
(Continued on page 2)
my.th@hsc.com.vn
+84 28 3823 3299 Ext. 362
Figure 1: MWG 7M20 results
(In VNDbn) Jul 19 Jun 20 Jul 20 y/y% m/m% 7M19 7M20 y/y%
Net sales 9,308 8,147 8,669 -6.9% 6.4% 60,917 64,308 5.6%
Institutional research team NPAT 290 304 326 12.4% 7.2% 2,411 2,353 -2.4%
Net margin 3.1% 3.7% 3.8% 4.0% 3.7%
Source: Company data, HSC Research

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 Flashnote 21 August 2020

We expect BHX’s sales will continue to increase m/m and drive overall sales in
the remaining months of this year.

Net margins have improved as well

July’s net margin was 3.8%, an improvement from 3.1% in July 2019 and 3.7%
in June 2020. Improvements were due to higher gross margin at BHX and
better operating cost management.

Maintaining Buy rating, targets and estimates

We maintain our Buy rating with a target price of VND130,600. We also keep
our FY20 net profit forecast at VND3,579bn, down 6.7% y/y and FY21 net
profit forecasts at VND4,368bn, up 22.1% y/y. Please refer to our report dated
23 June 2020 (Raising TP by 18% on better earnings) for further details.
Figure 2: Monthly net sales (in VNDtn)

Source: Company data, HSC Research

Figure 3: Monthly net profit (in VNDbn)

Source: Company data, HSC Research

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 Flashnote 21 August 2020

Financial statements and key data

Income statement (VNDbn) 12-19A 12-20F 12-21F 12-22F Cashflow statement (VNDbn) 12-19A 12-20F 12-21F 12-22F

Net sales 102,174 111,307 123,033 131,288 Operating cashflow (1,286) 4,005 4,117 5,264
COGS (82,686) (88,856) (97,507) (103,779) Investing cashflow (5,818) (2,201) (3,337) (666)
Gross profit 19,488 22,451 25,526 27,509 Financing cashflow 6,532 (3,285) 315 (1,853)
Net financial income 61 (224) (231) (259) Net cashflow (572) (1,481) 1,096 2,745
SG&A (14,511) (17,561) (19,750) (21,069)
Operating profit 5,035 4,666 5,545 6,181 Cash & equivalents at period start 3,750 3,177 1,697 2,792
EBITDA 6,420 6,479 7,403 8,195 Forex effects 0 0 0 0
PBT 5,053 4,666 5,545 6,181 Cash & equivalents at period end 3,177 1,697 2,792 5,537
NPAT 3,836 3,581 4,370 4,939
Net profit 3,834 3,579 4,368 4,937 Free cash flow (4,352) 1,977 2,963 4,805
Balance sheet (VNDbn) 12-19A 12-20F 12-21F 12-22F Key ratios 12-19A 12-20F 12-21F 12-22F

Assets Basic Financials and Valuation

Current assets 35,012 32,410 38,555 43,507 EPS (VND) 8,657 7,680 9,106 10,141
Cash & cash equivalents 3,177 1,697 2,792 5,537 EPS diluted (VND) 8,657 7,680 9,106 10,141
Short-term investments 3,075 0 2,000 2,000 EBITDA (VNDbn) 6,420 6,479 7,403 8,195
Receivables 1,815 1,977 2,186 2,332 BVPS (VND) 27,414 25,186 32,890 41,528
Inventories 25,745 27,450 30,167 32,136 DPS (VND) 1,500 1,500 1,500 1,500
Other current assets 1,199 1,286 1,411 1,501 P/E (x) 9.4 10.6 9.0 8.1
P/E diluted (x) 9.4 10.6 9.0 8.1
Long-term assets 6,696 7,760 7,949 7,347 EV/EBITDA (x) 7.47 7.23 6.32 5.23
Long-term receivables 375 375 375 375 P/B (x) 2.98 3.24 2.48 1.97
Fixed assets 5,404 6,593 6,811 6,247 Dividend yield 1.8% 1.8% 1.8% 1.8%
Investment properties 0 0 0 0 Profitability
Long-term investments 56 56 56 56 Gross margin 19.1% 20.2% 20.7% 21.0%
Other long-term assets 774 736 707 668 EBITDA margin 6.3% 5.8% 6.0% 6.2%
Goodwill Pretax margin 4.9% 4.2% 4.5% 4.7%
Total assets 41,708 40,170 46,505 50,854 Net margin 3.8% 3.2% 3.6% 3.8%
SG&A/sales 14.2% 15.8% 16.1% 16.0%
Liabilities and equity ROAE 36.3% 30.4% 32.7% 28.2%
Liabilities 29,565 28,755 31,152 31,208 ROAA 11.0% 8.7% 10.1% 10.1%
Current Liabilities 28,442 27,633 30,030 30,086 Liquidity
Long-term Liabilities 1,122 1,122 1,122 1,122 Current ratio 1.23 1.17 1.28 1.45
Quick ratio 0.33 0.18 0.28 0.38
Owners' equity 12,136 11,406 15,341 19,632 Leverage
Share capital 4,435 4,533 4,668 4,731 Total debt/equity 116.6% 101.2% 81.9% 58.2%
Retained earnings 7,150 6,322 10,122 14,350 Total debt ratio 70.9% 71.6% 67.0% 61.4%
Funds and other capital 551 551 551 551 EBIT interest coverage ratio 8.76 6.85 7.81 8.21
Minority interest 8 9 11 14 Efficiency
Days sales outstanding 6.03 6.24 6.18 6.28
Total liabilities and equity 41,708 40,170 46,505 50,854 Days in inventories 95 110 108 110
Days payables outstanding 44.8 52.3 51.6 51.7
Net debt 10,976 9,850 9,770 5,881 Cash conversion cycle (days) 56.5 63.5 62.4 64.2
Source: Company data, (F): HSC forecasts

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Explanation of Institutional Equity Research Ratings

Buy: Expected to rise by more than 20% on an absolute basis in the next 12 months
Add: Expected to rise by between 5% and 20% on an absolute basis in the next 12 months
Hold: Expected to rise or decline by less than 5% on an absolute basis in the next 12 months
Reduce: Expected to decline by between 5% and 20% on an absolute basis in the next 12 months
Sell: Expected to decline by more than 20% on an absolute basis in the next 12 months

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