Bach Hoa Xanh to blossom in 2019

Transcription

1 Rating COMPANY UPDATE 2-Feb-19 MWG (HOSE) OVERWEIGHT Retailing Market price (VND) 87, Target price (VND) 14,6 Expected price return (%) 1.7% Expected dividend yield (%) 2.3% Expected total return (%) 22.% ' VND /218 5/218 8/218 11/218 2/219 Stock performance (%) YTD 1M 3M 12M Absolute % 3% 3% -2% Relative -8% -4% -3% 5% Source: Bloomberg, compare to VNI Stock Statistics 52-week range (VND) 2-Feb k-98.3k Shares o/s (m) 443 Mkt cap (VND bn.) 38,552 Mkt cap ($m) 1,662 % Foreign owned 49% Est. free float (ml. shares) 386 3m avg. daily vol. (shares) 492,62 VND/USD 23,2 Index: VN-Index/HNX 964/16 Source: Bloomberg, KIS Ownership 2-Feb-19 Mr. Nguyen Duc Tai & affiliates 14.5% Mr. Tran Le Quan 8.7% Dragon Capital Group 7.5% PYI Elite Fund 4.3% Source: StoxPlus, KIS Ms. Mai Tran Price - Volume (+84 28) Ext: 146 Mai.tt@kisvn.vn ' shares 3, 2,5 2, 1,5 1, 5 Bach Hoa Xanh to blossom in business results and 219 plans According to the unaudited financial statement of MWG, net revenue and net profit after tax (NPAT) in 218 reached VND86,516bn (+3% YoY) and VND2,88bn (+31% YoY) respectively. Thus, MWG fulfilled 1% of its revenue target and 111% of its NPAT target for 218. In which, Dien May Xanh (DMX) accounted for 55% of net revenue, The Gioi Di Dong (TGDD) with 4% and Bach Hoa Xanh (BHX) with 5% (Fig 1). In 219, MWG plans to record net revenue and NPAT of VND18,bn (+25% YoY) and VND3,571bn (+24% YoY). DMX and TGDD will contribute 9% of net revenue and the remaining comes from BHX. Mobile market is saturated but consumer electronics (CE) market booms As at 31 Dec 218, MWG operated 1,32 TGDD stores, decreasing by 4 stores compared to 217 (Fig 2). We are convinced that the number of TGDD stores will continue to decrease this year, coming from the renovation of some TGDD stores to DMX or DMX mini stores. The electronics segment made the largest contribution to 218 revenue and will continue to be the main contributor in 219. MWG operated 75 DMX stores in 218, increasing by 18 stores compared to the previous year (Fig 2). In which, the number of DMX mini stores accounted for 9% of total DMX stores. The network of DMX and TGDD in 219 will change thanks to the new opening and conversion of 15 stores as follows: (1) opening new DMX or DMX mini stores; (2) Converting TGDD stores to DMX mini or DMX stores; (3) Converting DMX mini to DMX stores. MWG estimates that the sales of each store increase by 5% in average after conversion. Besides, MWG plans to open 118 new stores, increasing its network to 1,9 TGDD and DMX stores which will contribute about 9% of total revenue in 219. MWG maintains its leading position in mobile retailing market with 45% market share. However, mobile market is almost saturated. Thus, phones sales in 218 only increased by 16%YoY compared to 43% of 217, a remarkable slowdown. Meanwhile, electronics, white goods and small appliances increased by 58%, 64% and 8% respectively. Ambitious 219 plan for BHX chain 218 was a strongly growing year for BHX store chain. The average monthly sales per store nearly has doubled since BHX changed its strategy in April 218 (Fig 3). As of Dec 218, sales/store/month reached VND1.2bn. The management's goal for BHX in 219 is profit at each BHX store, which means total sales will be enough to cover expenses at stores and distribution centers but excluding G&A expenses at the company office.. 2-Feb-219 Page 1

2 COMPANY UPDATE MWG Bach Hoa Xanh to blossom in 219 MWG plans to operate 7 stores by the end of 219, increasing 295 BHX stores compared to 218 and contributing about 1% of total revenue. Thus, KIS estimates that revenue of BHX will reach about VND1,699bn in 219, equivalent to VND1,6bn in the average sales/store/month. This is an ambitious plan and challenge for MWG. The BHX s strategy in 219 includes: (1) continue to expand network, especially in the Southwest and Southeast; (2) Improve gross profit margin to 2% in 219 from 18% in 218 by enjoying better discounts from FMCG suppliers and optimizing the stages in the supply chain to maximize profits of fresh raw food. Maintain OVERWEIGHT recommendation 219 will be a booming year for BHX chain with the strong growth of 147% compared to 218. However, the contribution is quite small in total revenue and profit. Mobile segment has been saturated, the electronics segment continues to be the main contributor to revenue growth in the next year. Accordingly, we expect to see the success of BHX chain as well as the steady growth from the DMX chain in the coming years. Using a sum-of-the-parts valuation method, we arrive at MWG target price of VND14,6 per share ending 219. Total return is 22.% (incl. 1.7% dividend yield) in 1 year, thus we maintain OVERWEIGHT with MWG. Earnings projection 218U 219E 22E Sales 86,516 18, 121,754 The gioi di dong (TGDD) 34,67 34,56 33,3 Dien may xanh (DMX) 47,584 62,741 72,621 Bach Hoa Xanh (BHX) 4,326 1,699 15,833 Sales YoY Growth % 3.4% 24.8% 12.7% The gioi di dong(tgdd) -.3% -.1% -3.6% Dien may xanh (DMX) 57.3% 31.9% 15.7% Bach Hoa Xanh (BHX) 211.9% 147.3% 48.% Gross profit 15,292 18,829 21,315 TGDĐ & DMX 14,513 16,689 18,149 Bach Hoa Xanh 779 2,14 3,167 Gross margin (%) 17.7% 17.4% 17.5% TGDĐ & DMX 17.7% 17.2% 17.1% Bach Hoa Xanh 18.% 2.% 2.% Operating profit 3,871 4,638 5,113 Growth (%) 39.3% 19.8% 1.3% Margin (%) 4.5% 4.3% 4.2% NPAT 2,88 3,591 3,957 Growth (%) 3.5% 24.7% 1.2% Margin (%) 3.3% 3.3% 3.2% Source: KIS estimate 2-Feb-219 Page 2

3 COMPANY UPDATE MWG Bach Hoa Xanh to blossom in 219 Valuation We use the sum-of-the-part method for valuation. Groceries retailing: We used the discounted FCFF method for 1 years, then calculated the terminal value using the EV/EBITDA exit multiples of 9.3x (Alfamart peer) multiplied by 228E EBITDA VND4,43bn. Bach Hoa Xanh (VNDbn) 219E 22E 221E 222E 223E 224E 225E 226E 227E 228E EBITDA ,268 1,375 1,751 2,14 2,457 2,983 3,513 4,43 BHX chain FCFF cash flow (655) (243) (585) (449) (98) ,185 Discount factor Present value of FCFF (576) (186) (389) (26) (5) Exit EV/EBITDA multiple (assumed at 228E) Terminal value 1, Segment enterprise value 8, Electronics retailing We use EV/EBITDA valuation method for consumer electronics retailing segment of MWG (incl. TGDD and DMX). Using MWG s 3-year average EV/EBITDA, then discount 17% (similar to Best Buy Inc. decreasing multiple case), with 219E EBITDA of electronic retailing segment at VND5,963bn. We value MWG share at VND14,6 at the end of 219. Sum-of-the-parts valuation EBITDA 219E (VNDbn) Peer EV/EBITDA (x) Enterprise value (VNDbn) Electronics retailing (TGDD & DMX) 5, ,943 Groceries retailing (BHX) 8,676 Net debt 3,226 Total intrinsic equity value 46,393 Total shares outstanding (mn) 443 Value per share (VND) 14,6 2-Feb-219 Page 3

4 COMPANY UPDATE MWG Bach Hoa Xanh to blossom in 219 Changes price target Company Date Recommendation Price target (VND) MWG 27 July 218 Overweight 12,978 MWG 18 February 219 Overweight 14,6 Comp. Estimates & Projections 12, 1, 8, 6, 4, 2, Feb/218 May/218 Aug/218 Nov/218 Feb/21 MWG Price KISVN 1Y- Target Price Source: Bloomberg, KIS 2-Feb-219 Page 4

5 VNDbn COMPANY UPDATE MWG Bach Hoa Xanh to blossom in 219 Fig 1. Revenue breakdown by chain, 218 Fig 2. Number of store by chains 5% ,72 1,32 55% 4% TGDD Dien May Xanh Bach Hoa Xanh TGDD Dien May Xanh Bach Hoa Xanh Source: MWG Source: MWG Fig 3. Average monthly revenue per store Fig 4. Revenue breakdown by categories, 218 1,4 1,2 1, % 5% 38% Phones, tablets, laptops & accessories Consumer electronics Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % Fresh food and FMCGs Others BHX's monthly revenue Number of Store Source: MWG Source: MWG 2-Feb-219 Page 5

6 COMPANY UPDATE MWG Bach Hoa Xanh to blossom in 219 FINANCIALS MODEL Mkt cap: VND38,552bn Unit: VNDbn E 22E BS & CF ITEMS (VNDbn) E 22E Net Revenue 44,613 66,34 86,516 18, 121,754 Sales growth (%) 76.7% 48.7% 3.4% 24.8% 12.7% The Gioi Di Dong 3,94 34,78 34,67 34,56 33,3 Dien May Xanh 13,79 3,245 47,584 62,741 72,621 Bach Hoa Xanh 249 1,387 4,326 1,699 15,833 COGS 37,399 55,198 71,224 89,171 1,439 Gross margin (%) 16.2% 16.8% 17.7% 17.4% 17.5% SG&A 5,222 8,363 11,421 14,191 16,22 EBITDA 2,378 3,469 5,94 5,963 6,515 EBITDA margin (%) 5.3% 5.2% 5.9% 5.5% 5.4% Depr n & Amort n ,223 1,325 1,42 Operating profit 1,992 2,779 3,871 4,638 5,113 Operating margin (%) 4.5% 4.2% 4.5% 4.3% 4.2% Net interest expenses As % of avg. net debt 4.3% 5.5% 1.6% 11.% 12.4% Interest cover (x) Other profit/loss Tax ,26 1,151 Effective tax rate (%) 21.3% 21.4% 23.9% 22.2% 22.5% Net profit 1,578 2,27 2,88 3,591 3,957 Net margin (%) 3.5% 3.3% 3.3% 3.3% 3.2% Minorities Net attributable profit 1,577 2,26 2,879 3,589 3,954 Number of shares (m) EPS (VND, bonusadjusted) 3,557 4,973 6,491 7,856 8,44 EPS growth (%) 47.2% 39.8% 3.5% 21.% 7.% DPS (VND) 1, ,5 1,5 1,5 Payout ratio (%) 14.% 1.5% 23.1% 19.1% 17.8% EBITDA = Net revenue (COGs -Depr n&amort n) SG&A expenses EBIT = EBITDA Depr n&amort n Net interest expenses = interest expenses interest income Other profit/loss consists of other financial income/expenses, profit share from JVs/associates and other income/loss Payout ratio = Dividend paid / Net attributable profit Receivable turnover (x) Inventory turnover (x) Payable turnover (x) Increase in WC 2, ,27 2,681 3,25 Capex 1,279 2,65 1,484 1,532 1,15 Other cash flow items Free cash flow -1, ,3 Share issues Dividends paid Increase in net debt 2, Net debt, end of year 3,792 3,392 3,244 3,226 2,929 Enterprise value 23,471 23,871 24,21 24,41 24,34 Total equity 3,841 5,99 8,33 11,29 14,46 Minority interests Shareholder s equity 3,839 5,96 8,299 11,22 14,451 BVPS (VND, bonus-adjusted) 24,937 18,632 18,713 24,524 3,714 Net debt / equity (%) 99% 57% 39% 29% 2% Net debt / EBITDA (x) Total assets 14,854 22,823 28,14 31,28 33,981 Net debt = debts cash & equivalent Key ratios & Valuation ROE (%) (excl minority interest) E 22E 5% 45% 41% 37% 31% ROA (%) 11% 1% 1% 12% 12% ROIC (%) 28% 28% 3% 3% 27% WACC (%) 9% 11% 13% 14% 14% PER (x) PBR (x) PSR (x) EV/EBITDA (x) EV/Sales (x) Dividend yield (%) (bonus-adjusted) 1.7%.9% 1.7% 1.7% 1.7% 2-Feb-219 Page 6

7 COMPANY UPDATE MWG Bach Hoa Xanh to blossom in 219 Contacts HCM City Head Office Level 3, TNR Tower Nguyen Cong Tru St., District 1, HCM City Tel: (+84 28) Fax: (+84 28) Institutional Sales Ms. Uyen Lam Head of Institutional Sales (+84 28) (x1444) 2-Feb-219 Page 7

8 COMPANY UPDATE MWG Bach Hoa Xanh to blossom in 219 Recommendation System OVERWEIGHT: where we believe prospective 12 months VND total return (including dividends) will be 15% or more. NEUTRAL: where we believe it will be -5% to 15%. UNDERWEIGHT: where we believe it will be -5% or less. Disclaimer This report has been issued by the KIS VN Securities Corporation (KIS) with the instructional contributions of KIS VN Securities Corporation whose employees are specified in the publication. This report is for information of its institutional and professional customers. This report is and should not be construed as an offer to sell or a solicitation of an offer to purchase or subscribe for any investment. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Investors are advised make their own financial decisions based on their independent financial advisors as they believe necessary and based on their particular circumstances such as their financial situation, investment objectives and other considerations. In preparing this report, we have relied upon and assumed the accuracy and completeness of all information available from public and other sources which we believe to be reliable, but which we have not independently verified. KIS makes no express or implied guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. Opinions, estimates, and projections expressed are current opinions of the authors as of the original publication date appearing on this report only and the information, including the opinions contained herein, and are subject to change without notice. KIS and its affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, companies mentioned herein. Further, KIS and its affiliates, and/or their officers, directors and employees involved in the preparation or issuance of this report may, from time to time, have long or short positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein, or related securities or derivatives in a manner that may be consistent or inconsistent with this report and opinions expressed therein. As a result, investors should be aware that KIS and its affiliates and/or their officers, directors and employees may have a conflict of interest that could affect this report. This report shall not be copied, reproduced, distributed (in whole or in part) or disclosed by recipients to any other person without the express permission of KIS in writing. 2-Feb-219 Page 8