MSN - OUTPERFORM Tuesday, September July 25 14h th

Transcription

1 MSN - OUTPERFORM Price chart Stock Data as of September 25 th 2012 Price (VND) 98,000 Current listed shares 687,280,123 Outstanding shares 687,280, Week high 140, week low 82,500 Price change (3 months) -5.8% Price change (6 months) -14.8% Price change (12 months) -30.0% Free float (share) 7,633 Trading value (VNDmil) (average last five trading days) Key Numbers 165,787,635 Market Cap (VNDmil) 67,353,452 Market Cap (US$mil) 3,238 Total room (no. of share) 336,767,260 Current room (no. of share) 198,608,593 Foreign owned ratio (%) 20.1% Foreign ownership limit (%) 49.0% Source: HSC (VNDmn) FY2010 FY2011 Total Assets 21,129,538 33,572,619 Owers' Equity 10,623,685 15,875,652 Revenue 5,586,287 7,056,849 Pre-tax profit 2,746,121 2,868,572 Net profit 2,283,039 1,973,149 Main Ratios FY2010 FY2011 Liquidity - Current ratio Quick ratio Profitability - Gross margin 42.8% 43.3% - Net margin 26.5% 33.0% - ROE 19.3% 20.7% - ROA 7.0% 8.2% Operating Efficiency - Receivable turnover Inventory turnover Asset turnover Equity turnover Analyst - Tran Huong My Nguyen Thi Tam Hanh my.th@hsc.com.vn; hanh.ntt@hsc.com.vn MSN consolidated earnings forecast Unit: VNDbillion FY2009 FY2010 FY2011 FY2012F FY2013F Net sales 3,958 5,586 7,057 11,174 15,696 y/y % NA 41.1% 26.3% 58.3% 40.5% Pre-tax profit 733 2,746 2,869 3,896 4,794 y/y % NA 274.7% 4.5% 35.8% 23.0% Net profit after tax 680 2,629 2,496 3,578 4,434 y/y % NA 286.9% -5.1% 43.4% 23.9% Net profit after tax & minority interest 417 2,283 1,973 2,915 3,655 y/y % NA 448.1% -13.6% 47.8% 25.4% Basic EPS 2,677 4,635 3,829 5,049 5,170 Diluted EPS 747 2,951 2,515 3,775 4,732 P/E BVPS 8,545 17,424 23,879 31,253 37,798 P/B , HSC estimates Masan Group Corp. (MSN - HoSE): 1H update and FY2012 & FY2013 outlook. Strong balance sheet and cash flow. Reiterate OUTPERFORM Net sales grew strongly at 43.1% y/y including VCF. Without VCF sales growth was lower at 13.6% y/y but it was partly due to early Tet effect. Noodles saw spectacular sales growth of 73% y/y whereas sauce sales declined by 12% y/y due to lower ASP. VCF top line was a bit under expectation but there was a pick-up in Q2. Gross margin of noodle, sauce and cereals improved while coffee gross margin decreased slightly. Techcombank came in under target on sluggish growth in operational income while lower provisions was responsible for much of the bottom line. Meanwhile Nui Phao made headway in terms of funding, C&R, and construction and will be operational by Q1 FY2013. We are still positive in MSN s top line with FY2012 sales forecast of VND11,174 billion, up 58.3% y/y and FY2013 sales forecast of VND15,696 billion, up 40.5% y/y. However given lower than expected cash balance and downward revision in Techcombank s profit, we have revised down net profit forecast by 6% to VND2,915 billion in FY2012 and by 13% to VND3,655 billion in FY2013. These forecasts do not include possible M&A related earnings stream. With solid performance from Masan Consumer, some anticipated M&A, a strong cash position and clear prospects of Nui Phao, we reiterate our OUTPERFORM rating. 1

2 MSN 1H consolidated result (VAS) Unit: VNDmillion 1H FY2012 1H FY2011 Company target y/y% % fulfilled FY2011 FY2012F y/y% FY2013F y/y% Net sales 4,061,875 2,838,626 12,000, % 33.8% 7,056,849 11,174, % 15,696, % COGS 2,464,704 1,658, % 3,997,834 6,560, % 8,974, % Gross profit 1,597,171 1,180,216 4,620, % 34.6% 3,059,015 4,613, % 6,721, % Net financial income 384, , % 837, , % 215, % SG&A 833, , % 1,416,523 1,854, % 2,259, % Net operating profit 1,148, , % 2,479,973 3,695, % 4,677, % Other profit 88,134 (957) -9,309.4% (4,134) 88,134-2,231.9% - Profit and loss in associates 88,041 43, , % 16.7% 392, , % 116, % Profit before tax 1,324, , % 2,868,572 3,896, % 4,793, % Net profit after tax 1,123, ,928 3,100, % 36.2% 2,496,008 3,578, % 4,434, % Net profit after tax & minority interests 849, , % 1,973,149 2,915, % 3,655, % Gross margin 39.3% 41.6% 43.3% 41.3% 42.8% Net margin 20.9% 23.0% 28.0% 26.1% 23.3% Current outstanding shares 687,280,123 Average outstanding shares 577,477, ,982,680 Fully diluted number of shares 772,400, ,400,236 Diluted EPS 3,775 4,732 Page 2 Price 98,000 98,000 P/E Source: HSC 2

3 Investment conclusion In 1H FY2012, MSN reported strong sales and a bit under-expectation net profit. Sales growth was 43.1% y/y growth including VCF and 13.6% y/y growth excluding VCF. Instant noodles sales grew strongly at 73% with double market share while sauce products saw a decline of 12% due to lower average selling price. VCF saw a pick-up in Q2 sales and therefore had a reasonable growth in 1H of 16% y/y. Gross margin dropped slightly due to increasing contribution of Instant Noodles and VCF revenue that have lower margins compared to the sauces products. On the brighter side, gross margins of both instant noodles and sauces increased y/y indicating the company continues to enjoy pricing power and scale benefits. Techcombank came in under target on sluggish growth in operational income while lower provisions was responsible for much of the bottom line. On a better note Nui Phao made headway in terms of funding, C&R, and construction. The mine will be operational by Q1 FY2013 and contribute by the end of next year. For FY2012 and FY2013 we are positive on MSN s top line given its ability to gain market share in instant noodles, coffee and cereals as well as maintain the leading position in sauce. We forecast sales growth of 58.3% y/y in FY2012 including VCF and 34.7% y/y excluding VCF. However, we have lowered our forecast on net financial income by 26.7% as a result of lower expected cash balance. Together with a downward revision in Techcombank s profit, we have revised down our forecast of MSN net profit by 6% to VND2,915 billion in FY2012 and by 13% to VND3,655 billion in FY2013. We do have some concerns about asset quality over at TCB given its historic low cost provisioning. Even so new management at the bank seems to be getting a handle on this. Then we expect to see some M&A deals within this year. Please note our current forecast does not include possible M&A related earning streams and we will consider revising forecasts later. With solid performance from Masan Consumer, some anticipated M&A, a strong cash position and clear prospects of Nui Phao, we reiterate our OUTPERFORM rating. Valuations do not look that cheap but with M&A and the expected full year contribution from Nui Phao in FY2014 it s important to remember that the share price partly prices in strong prospective future growth. 3 Page 3

4 MSN 1H result by business line Unit: VNDmillion Masan Consumer Nui Phao Techcombank Total 1H FY2012 1H FY2011 y/y% 1H FY2012 1H FY2011 y/y% 1H FY2012 1H FY2011 y/y% 1H FY2012 1H FY2011 y/y% Net sales 4,061,875 2,838, % 4,061,875 2,838, % Gross profit 1,597,171 1,180, % 1,597,171 1,180, % Operating profit contribution 1,006, , % 150,298 73, % 88,041 43, % 1,244, , % Unallocated expenses (GA expense of parent company) (99,924) (66,061) 51.3% Financial income (of parent company excluding inter-group items) 181, , % Financial expense (of parent company excluding inter-group items) (90,064) (115,052) -21.7% Net operating profit 1,236, , % Net profit 1,123, , % 4 Page 4

5 1H FY2012 result decent as very strong growth in noodles offsets slower growth elsewhere MSN consolidated financial income and expense Unit: VNDmillion 1H FY2012 1H FY2011 % y/y Financial income 556, , % Interest income 550, , % Facility income from subsidiaries Facility income from parent company Foreign exchange gains 4,408 10, % Others 884 7, % Financial expense 171, , % Interest expense 160, , % Facility fee expenses to subsidiaries Foreign exchange losses 1,385 31, % Others 9,386 3, % Net financial income 384, , % MSN reported consolidated net sales of VND4,062 billion, up strongly 43.1% y/y and net profit (after tax and minority interests) of VND849 billion, up 30.1% y/y. Group sales were purely from Masan Consumer, which also now consolidates Vina Cafe (VCF) sales. In overall, Masan Consumer performed quite well but Techcombank result was a bit under our expectation. Meanwhile the company has been disbursing aggressively for Nui Phao project and the mine is on track to start commission stage in March MSN currently holds a 30.61% economic interest in Techcombank and therefore booked profit from its associate of VND376 billion, up 13.5% y/y. After subtracting VND288 billion of goodwill amortization, profit from associates was VND88 billion, up 13.6% y/y. Net financial income accounted for 31% of net operating profit. We saw a sharp increase of 39.8% y/y in net financial income thanks to a 18.4% rise in financial income and a 12% decrease in financial expense. Interest income rose by 22% y/y due to higher cash reserves. Group s net operating profit (include profit in associates) was posted at VND1,236 billion, up 27.2% y/y. Of which Masan Consumer was the largest contributor with net operating profit (excluding inter-group transactions) of VND1,006 billion, up 15.4% y/y. Meanwhile Nui Phao Mining posted net operating profit of VND150 billion, up 104.1% y/y. And Techcombank reported net profit of VND1,228 billion, up 14.4% y/y. 5 Page 5

6 Masan Consumer noodles saw spectacular growth but sauce growth slows while VCF contribution is a little below expectation Masan Consumer 1H result (VAS) Unit: VNDmillion 1H FY2012 (including VCF) 1H FY2011 y/y% 1H FY2012 (excluding VCF) 1H FY2011 Net sales 4,061,875 2,838, % 3,224,874 2,838, % Cost of sales 2,464,704 1,658, % 1,841,186 1,658, % Gross profit 1,597,171 1,180, % 1,383,688 1,180, % Net financial income 402, , % 395, , % SGA 708, , % 596, , % Operating profit 1,291, , % 1,182, , % Net other income 8,676 (941) 4,006 (941) Profit/Loss of joint ventures - Profit before tax 1,299, , % 1,186, , % Net profit 1,129, , % 1,025, , % Net profit of parents' shareholders 1,108, , % 1,004, , % Gross margin 39.3% 41.6% 42.9% 41.6% Net margin 27.3% 29.8% 31.2% 29.8% y/y% In 1H FY2012, Masan Consumer s net sales were VND4,062 billion, up 43.1% y/y. The main reason was the continued contribution from VinaCafe (VCF); acquired by Masan Consumer last October therefore naturally its results were not yet incorporated in 1H Excluding VCF, the y/y growth was far lower at However, as we had noted earlier the 1H growth was impacted by early Tet, which impacted holiday related sales being recognized in 4Q FY Q y/y growth bounced back 34% y/y. By product category, instant noodles achieved impressive sales of VND1,529 billion, up strongly 73% y/y, of which volumes grew 110% y/y even as the average selling price declined by 17.6% y/y. Volume increased dramatically as the company gain huge incremental market share rising from 16% as of December 2011 to 25% as of June Kokomi - the mass market noodles launched in last December was the key driver here. Within 6 months it has captured a 12% market share. And with sales growth of 73% y/y, Masan instant noodles outperformed the whole market which grew at just 9% y/y in 1H. The drop in averages prices was simply due to a change in product mix with mass market products had a far higher sales weight than last year. MSN has not decreased prices for any of its products. Meanwhile sales of sauce products declined by 12% y/y mainly due to the decrease in the average selling price of 25.5% y/y which in turn was impacted by a lot of changes in the product mix. We estimate volume growth of sauce products was 18% y/y. According to the company, while the premium and mass market (low-end) segments were very strong and outperformed expectations in-spite of the sluggish economy consumption in the mainstream (mid-end) segment was soft in Q1 but started to show signs of improvement during Q2. In fish sauce segment, many consumers of Nam Ngu, the mainstream brand (mid-end), have switched to either Chinsu, the premium brand or Nam Ngu Super Saver, the mass market (low-end) brand. In 1H Masan fish sauce market shares increased by 1% to 77% given its dominant market share of 76% as at end of With the sharp increase in noodles sales and the slight decrease in sauce, we see a more balance product mix. Sauce products now accounts for only 42% of total sales, instead of 69% in 1H Then thanks to the VCF acquisition, Masan Consumer now has a beverage segment, of which coffee sales contributed 16% and cereals contributed to 4% of the revenue mix. 6 Page 6

7 Masan Consumer product mix Unit: VNDmillion 1H FY2012 1H FY2011 Sales % sales contribution sales y/y% Gross margin Sales % sales contribution Gross margin Sauce products 1,711, % -12.1% 49.6% 1,947, % 46.1% Instant noodles 1,528, % 73.0% 35.0% 883, % 32.0% Coffee 655, % 10.6% 24.2% 0.0% Cereals 166, % 29.0% 30.5% 0.0% Others 0.0% % 7, % Total 4,061, % 43.1% 39.3% 2,838, % 41.6% In 1H FY2012 Masan Consumer gross margin came to 39.3%, down from 41.6% in 1H The dip in the gross margin was caused by the consolidation with VCF which carries lower margins. In fact, if we exclude VCF, gross margin of Masan Consumer would have been 42.9% in 1H FY2012, up 130 basis points from 41.6% in 1H FY2011. Indeed we see that both sauce and noodles saw improved gross margins as shown in the below table. This is testimony to the frequent launches of new products in different market segments with differing sizes and weight as an effective way of increasing selling prices and thus push gross margins higher. Therefore, mass market products such as Kokomi still enjoy the same margins as mainstream and premium products at about 35%. Even Nam Ngu Super Saver, the mass market product had similar gross margins to Nam Ngu, the mainstream product. This is a vital point for Masan Consumer; to keep margins similar throughout their product range in each segment. Regarding VCF, we saw an increase of 16% in net sales from VND721 billion in 1H FY2011 to VND837 billion in 1H FY2012. It was less than our expectation but it appears that things have improved since Q2. Masan Consumer began aggressively increasing VCF s point of sales by phasing out VCF older agent based model and replacing it with Masan Consumer s own distribution channel. This impacted VCF sales in Q1 which saw a decline of 7% y/y as the existing distribution was ramped down while distribution channel of Masan Consumer was still ramping up. The distribution synergies with Masan Consumer started to impact Q2 which therefore saw VCF sales growth of 48.5% y/y. In terms of product category cereal sales jumped while coffee sales increased slightly. In 1H cereal sales were reported at VND171 billion, up 32.8% y/y thanks to much wider distribution enjoyed from integration with Masan and new product launches. New product Kachi cereal was launched in Q2 which is mostly a repackaging and re-branding of an existing VCF product. We estimate that volume grew healthily at 13.8% y/y and average selling price increased by 16.7% y/y. We sense that Masan is trying to create a unique identity for the cereal product that VCF has been selling for many years. This may be the first step to creating a new brand segment and perhaps future cereal product launches. Coffee product sales increased by 11.7% y/y backed by 2.6 % volume growth and 8.9% average price growth according to our estimates. Since Q1, a new brand image and new TVCs for instant coffee have been introduced to the market and so far have received positive feedback. However the sales increase was less expected due to the afore mentioned changes in the distribution channels VCF 1H result Unit: VNDmillion 1H H 2011 y/y% Net sales 837, , % COGS 623, , % Gross profit 213, , % Net financial income 7,219 11, % SG&A 112,562 71, % Net operating profit 108, , % Other profit 4,670 6, % Profit and loss in associates - - Profit before tax 112, , % Net profit after tax 103, , % Net profit after tax & minority interests 103, , % Gross margin 25.5% 26.1% Net margin 12.4% 17.0% 7 Page 7

8 VCF product mix Unit: VNDmillion 1H FY2012 1H FY2011 Sales % sales contribution Gross margin Sales y/y% Sales % sales contribution Gross margin Coffee 662, % 24.2% 11.7% 592, % 25.7% Cereals 171, % 30.5% 32.8% 128, % 27.9% Others 3, % % % Total 837, % 25.5% 16.0% 721, % 26.1% Then VCF launched 2 new instant coffee products in June Wake-up Café Saigon targets the untapped mass market customer segment and according to the company has seen strong uptake similar to its mass market noodles product. Wake up instant coffee targets the premium market with a new formulation and packaging. The impact of these new product launches should be seen in 3Q as these products were launched only in late June and did not contribute significantly to 1H sales. In 1H VCF s gross margins slid slightly to 25.5% from 26.1% in the same period last year. The main reason was the decline in the gross margin of coffee products from 25.7% in 1H FY2011 to 24.2% in 1H FY2012. Meanwhile we saw an increase in the cereals segment gross margin from 27.9% in 1H FY2011 to 30.5% in 1H FY2012. According to MSN management, all key departments of VCF have now been fully integrated with Masan Consumer. And in 1H, VND220 billion out of VND650 billion of capex plan was spent for the new factory. The new facilities is on track to commence operations on Q The new factory is located in Long Thanh, Dong Nai and has capacity of 3,200 tons of pure instant coffee per annum which is equivalent to 20,000 tons of 3 in 1 instant coffee per annum. Construction began in December 2010 and the factory will be put into operation in the Q4 FY2012. The current factory in Bien Hoa has capacity of just 1,200 tons of pure instant coffee per annum and the company has had to import 40-50% of its pure instant coffee output over the last five years. This is an expensive solution and the new factory should solve the capacity shortage issue. 8 Page 8

9 TCB - 1H FY2012 performance sees slowing net interest income while bottom line held up only by very low provision costs. Analyst - Nguyen Thi Tam Hanh TCB 1H result Unit: VNDbillion 1H FY2011 1H FY2012 y/y% Net interest income 2,317,974 2,750,619 19% Net fee and commission income 586, ,413-36% Foreign exchange gains - net (491,947) (11,227) -98% Income from trading securities (21,971) 73,796 Income from Investment securities 206 (87,177) Other income 451,389 72,123-84% Equity income/dividends 2,456 24, % Total operating income 2,844,856 3,198,293 12% Operating expenses (979,742) (1,400,112) 43% Profit before loan loss provision 1,865,114 1,798,181-4% Provision loss (431,847) (167,752) -61% Profit before tax 1,433,267 1,630,429 14% Income tax (358,317) (407,607) 14% Net profit 1,074,951 1,222, % TCB announced unaudited pretax profit of VND1,630 billion (+ 14% y/y) in 1H FY2012 with operating incomes growing 12% y/y in 1H FY2012. According to the bank, the earnings growth came from an expansion of 19% y/y in net interest income in 1HFY2012 driven by an NIM improvement to 3.6% in 1H FY2012 from 3.52% in 1H FY2011. In contrast, interest earning assets were unchanged in 1H FY2012 in comparison with 1H FY2011. We estimate that their loan book came at VND62,500 billion (+8% y/y) in June FY2012 but down % YTD. While the bank experienced some growth in net interest income, non-interest income contracted 5% y/y in 1H FY2012 due to a 36% y/y decline in service income. Combined net interest income and fee earnings only increased by 7.6%y/y and contributed 97.7% of total operating incomes. While other income streams saw only modest growth. There were two changes in an income breakdown in 1H FY2012 compared to the same period last year. First, although FX gains were moderate, this was a big improvement from the estimated loss of around VND491 billion in 1H FY2011. Second, the other incomes category was small this year while last year we saw significant income from trust investments. On the cost side, we estimate costs accelerated quite rapidly by 43% y/y and caused the CIR to jump to 43.8% in 1H FY2012 from just 32% in FY2011. This appears to be related to the recruitment of a new top management team including the new CEO; Chief Risk Officer, Chief Marketing Officer and new COO. Compensation costs accounted for 56% of the total cost base up from 47.5% last year. On average this ratio is 45-47% for peers. TCB only booked a small provision of VND167 billion (down 60% y/y) in 1H FY2012. The NPL ratio was at 2.94% at end 1H FY2012 up from 2.8% at the end of FY So the low provisioning has caught us rather by surprise. And hence while pre-provision profit saw no growth in 1H FY2012, low provision costs pushed up pretax profit 18% y/y in 1H FY2012. Although the net interest income is the main driver of the growth of the top line, the asset quality of interest earning assets is our concerns. Their loan portfolio accelerated at 7-8% y/y to VND62,649 billion at end- June FY2012 in comparison with the figure at end-june FY2011. The bank announced their NPL group 3-5 was only 2.9% at end June FY2012 as much as the number at end FY2011. However, the sector is facing the acceleration of NPLs when the NPL group 3-5 rose to 4.47% in June FY2012 from 3.39% at end Page 9

10 Allocation of interest earning assets TCB FY2011 % of Total Asset 1-H FY2012 % of Total Asset % YTD change Loans 63,451, % 62,649, % -1.3% Interbank loans/ deposits 43,190, % 38,513, % -10.8% Bonds holding or debt investment 48,338, % 47,156, % -2.4% Interbank loans/ deposits and bonds holding 91,529, % 85,669, % -6.4% Total Asset 180,531, ,792, % TCB FY2011 % of Debt investment 1-H FY2012 % of Debt investment % YTD change FI bonds 14,223, % 14,612, % 2.7% Corporate bonds 20,394, % 26,768, % 31.3% Government bonds 13,721, % 5,775, % -57.9% Bonds holding or debt investment 48,338, % 47,156, % -2.4% Source: HSC Loans accounted for 35% of total assets at 1H FY2012 or unchanged in comparison with the end of FY2011. While the combined exposure of interbank loans/deposits and bond holdings accounted for 47.5% at 1H FY2012 or reducing slightly from 49-50% of total assets at end Financial institutions bonds (FI bonds) or corporate bonds contributed 88% of total debt invest- ments at 1H FY2012. This ratio was up from 70.1% at end We don t have information about the asset quality of these assets at 1H FY2012. However, recent market uncertainty increases the risks related to assets held in corporate bonds, FI bonds and interbank categories. 10 Page 10

11 Nui Phao - mine facility construction well on track while off-take agreements should be in place by year-end Nui Phao long term borrowing 30-Jun Dec-11 in VNDmillion in US$million in VNDmillion in US$million From Standard Chartered Bank 1,666, From VDB 809, , % From local commercial banks 634, Total 3,110, , % YTD% In terms of Nui Phao, the company confirmed that construction is on target to bring the mine into operation on 15 March However the total required capex will be about 13% than the initial budget of US$575 million to US$650 million which is perhaps not unusual for projects like this. The off take agreements for tungsten have not been signed yet but the company is in talks with four interested off-takers from US, Japan, Korea and Israel and hopes to complete by year-end. They also confirmed that both mining license and export license have been obtained for quite a long time already. Regarding construction, design and procurement, engineering design and procurement work has nearly been completed by the Jacob Engineering Group. Tailing dam works are also nearing completion and this significantly de-risks the project construction progress. All contracts, including those for earthworks, concrete works and structural, mechanical and piping works, except for electrical works have been awarded with work already under way. According to MSN, the electrical works contract will be awarded in Q And the processing plant will be commissioned in Q as planned. As of 30 June 2012, more than US$339 million has been injected into the mine. Of which, US$77 million was disbursed in 1H FY2012, US$80 million was spent in FY2011, US$49 million paid in the 2010 post acquisition phase and US$133 million was already invested prior to acquisition. Regarding financing for the project, the company has raised more than sufficient capital for the estimated US$ million project cost from various local and international investors. Mount Kellett invested US$100 million in equity into Masan Resources in early FY2011, In terms of local bank loans, Vietnam Development Bank (VDB) has provided a VND2,377 billion facility (equivalent to around US$113 million). In addition, local commercial banks led by Vietcombank have provided a US$90 million debt facility. In addition, in early FY2012, Standard Chartered Bank provided a straight loan of US$80 million to the project. With these in place, at the moment, the project is fully funded. And as at 30 June 2012, significant amounts of these facilities had already been drawn down. Regarding the off-take agreement, the company has had talks to several interested tungsten off-takers on possible off-take proposals and partnerships. They tell us a tungsten off-take agreements should be in place by end of Regarding C&R, 98% of land immediately required has been transferred to Nui Phao Mining Company. Nearly 400 project affected people have been employed by the company to minimize economic disruption to the community. In addition, the company is training over 200 people from the local community to be plant operators and maintenance crew for the plant, which provides the company with stable long term employees from the local community. The company is continuing to work with the community and local authorities to clear remaining parcels of land. For FY2013 we expect the mine can be operational by Q1. However given the ramp up phase and testing we assume full contribution to revenue will commence only in Q4. Hence the mine will only contribute one full quarter of earnings to MSN next year. We forecast the mine will contribute VND1,097 billion worth of pre-tax profit to MSN s bottom line or 22.8% of the total in FY2013. The real contribution will kick in from FY2014 when we expect the mine will generate about VND5,935 in pre-tax profit of 60% of total FY2014 MSN pre-tax profit. 11 Page 11

12 MSN consolidated balance sheet summary Unit: VNDmillion Group Parent company Masan Consumer Nui Phao 30-Jun Dec Jun-11 YTD% y/y% 30-Jun Dec Jun Dec Jun Dec-11 Current assets 12,480,449 12,541,434 9,048, % 37.9% 3,730,418 2,291,494 6,065,094 8,948,744 2,752,633 3,598,715 Cash & cash equivalents 8,920,656 9,573,593 7,230, % 23.4% 3,364,152 1,510,736 3,233,717 4,730,727 2,322,787 3,332,130 Short term financial investments 1,487,500 1,222, , % 99.0% 48, ,000 1,439, ,000-47,500 Short term receivables 964, , , % 80.2% 283, , ,373 2,631, , ,599 Inventories 919, , , % 98.9% , , Other current assets 188, ,179 73, % 155.1% 34,776 20,262 82, ,431 71,012 37,486 Long term assets 23,697,742 21,031,185 17,822, % 33.0% 20,806,141 22,289,000 8,328,226 4,981,002 10,797,125 8,971,734 Long term receivables 1, ,192,070 2,762,294 4,962,353 2,260, Fixed assets 13,435,908 11,287,505 8,699, % 54.4% 55,962 19,201 2,662,360 2,400,169 10,717,586 8,868,135 Investment properties Long term financial investments 9,774,626 9,321,085 8,971, % 9.0% 19,490,421 19,490, ,500 - Other long term assets 485, , , % 220.4% 67,688 17, , ,671 79, ,599 Total assets 36,178,191 33,572,619 26,871, % 34.6% 24,536,559 24,580,494 14,393,320 13,929,745 13,549,757 12,570,448 Liabilities 16,050,523 12,017,587 7,697, % 108.5% 9,290,536 6,821,280 4,549,684 5,190,409 3,561, ,720 Current liabilities 2,812,672 3,625,783 1,661, % 69.2% 683,341 3,237,125 1,676,783 2,380, ,673 7,894 Short term loans 471,211 2,032, , % -22.7% - 2,630, ,210 1,402, Page 12 Current payables 2,341,461 1,593,386 1,052, % 122.6% 683, ,125 1,205, , ,673 7,894 Long term liabilities 13,237,851 8,391,804 6,035, % 119.3% 8,607,195 3,584,155 2,872,901 2,809,644 3,110, ,826 Long term loans 11,920,031 7,409,781 5,280, % 125.7% 7,376,522 3,327,960 2,577,470 2,576,057 3,110, ,000 Others 1,317, , , % 74.5% 1,230, , , , ,826 Owners equity 14,164,015 15,875,652 14,624, % -3.2% 15,246,023 17,759,214 9,045,365 7,937,093 9,987,808 11,651,728 Minority interest 5,963,653 5,679,380 4,548, % 31.1% , ,243 Total resources 36,178,191 33,572,619 26,871, % 34.6% 24,536,559 24,580,494 14,393,320 13,929,745 13,549,757 12,570,448 12

13 Balance sheet analysis MSN debt Group Parent company Nui Phao Mining Masan Consumer 30-Jun Dec-11 YTD% 30-Jun Dec Jun Dec Jun Dec-11 Short term borrowings 471,211 2,032, % - 2,630, ,210 1,402,397 Short term borrowings 368,426 1,298, % 2,000, ,426 1,298,728 Current portion of LT borrowings 102, , % 630, , ,669 Long term borrowings 11,920,031 7,409, % 7,376,522 3,327,960 3,110, ,000 2,577,470 2,576,057 Long term borrowings 5,790,530 3,329, % 4,000,000 2,000,000 3,110, ,000 2,680,254 2,679,726 Promissory notes 2,855,764 2,855, % - Convertible bonds and loans 1,176,522 1,957, % 1,176,522 1,957, Secured convertible bonds 2,200,000 2,200,000 - Loan from Masan Consumer - Repayable within 12 months (102,785) (733,669) -86.0% (630,000) - (102,785) (103,669) Total borrowings 12,391,242 9,442, % 7,376,522 5,957,960 3,110, ,000 3,048,680 3,978,454 On the group balance sheet, we saw inventories up 98.9% y/y and 50.1% YTD to VND919.6 billion. This was mainly due to a surge of 108% y/y in raw materials inventories, while finished goods inventories increased by only 56% y/y, broadly in line with the sharp increase in sales of 43.1% y/y. Therefore in our opinion the strong growth in inventories is normal. Group fixed assets rose 19% YTD or VND2,148 billion mainly due to the sharp rise in Nui Phao s fixed asset value to VND1,849 billion YTD which is related to ongoing construction and compensation cost for the mine. Meanwhile YTD Masan Consumer s fixed assets increased by only VND262 billion which almost all arose from the new factory for VinaCafe Bien Hoa. Group short term loans declined by 76.8% YTD to reach VND471 billion. We saw that short term loans accounted for only 1.3% of group total assets. at the same time group long term loans increased sharply by 60.9% YTD to VND11,920 billion at end of Q2. Of which long term borrowings from banks was VND5,791 billion, up 73.9% YTD mainly from the increase in long terms borrowings to Nui Phao. Promissory notes issued by Masan Horizon, a wholly owned subsidiary of Masan Group which holds the Company s interest in Masan Resources, were unchanged at VND2,856 billion. These notes are related to the acquisition of Nui Phao from Dragon Capital and can be regarded as equity as Masan Group has the right to force convert Dragon Capital based on today s share price. Convertible bonds and loans was reported at VND1,177 billion, down 39.9% YTD. In Q2, TPG converted VND630 billion of CB to 30,922,285 MSN shares. And IFC - another CB holder also converted VND151.4 billion of CB to 3,521,803 shares. With cash position of VND8,921 billion and a debt position (ex-promissory note, which can be force converted by MSN) of VND6585 billion, the Company s net cash position is VND2,335 billion, which is relatively robust given Masan Consumer s strong cash flows and the Nui Phao s project s equity-heavy capital structure and expected cash generation. Moreover, a majority of the debt is long term and hence the group has approx VND8,921 billion to pursue M&A opportunities. 13 Page 13

14 MSN changes in equity shows desire to simplify structure There were a lot of significant changes in group equity in 1H resulting in an overall drop of -10.8% YTD. Of which, chartered capital was raised by 33.4% YTD from VND5,153 billion as at end of last year to VND6,873 billion as at end of June. The share premium also surged 169% YTD or VND5,833 billion to VND7,999 billion as at quarter end. In contrast, other capital declined sharply by 91.3% YTD from VND10,463 billion as at end of last year to VND910 billion as at end of June. And this was the main reason for the drop in equity. In June 2012, the Company redeemed some of its equity-linked instruments and issued shares to settle a majority of its share-based obligations and liabilities. As per discussion with management, Masan Group saw an opportunity to simplify its balance sheet prior to an overseas listing and take advantage of a challenging equity markets to reduce its share count at a discount. As a result, the following were achieved: (1) A significant amount of convertible instruments and prior obligations were converted into 172,007,854 shares bringing Masan Group s basic share count to 687,280,123 shares. Assuming all obligations were converted, the fully diluted share count of Masan Group would be 772,400,234 shares. Number of outstanding shares increased by 172,007,854 shares in 1H. By paying a consideration of VND4,635 billion, the company bought back shares at approx. 30% discount to the prevailing market price at that time. (2) As a result of the share issuances, capital surplus increased sharply by 269% YTD from VND2,166 billion as at end of last year to VND7,999 billion as at end of June. This was due to the premium of exercise and conversion price of the Company s equity-linked instruments over par. Other capital declined sharply by 91.3% YTD from VND10,463 billion as at end of last year to VND910 billion as at end of June. Other capital represents the equity-linked instrument issued by Masan Group that are not categorized as debt since there will be no future cash repayment as mentioned previously. In 1H, most of these equity-linked instruments were exercised or converted, hence other capital decreased by VND10,463 billion. 14 Page 14

15 Consolidated cash flow Unit: VNDmillion 1H FY2012 1H FY2011 y/y% Profit before tax 1,324, , % Cash flow prior to changes in working capital 1,047, , % Net cash flow from operating activities 330, , % Payments for fixed assets and other long term assets (2,013,957) (535,252) 276.3% Net deposit/payment to banks (955,500) 442, % Payment for investment in an associate - (1,000,000) % Proceeds from investment in bonds 373,000 - Payments for investments in bonds (48,000) (700,000) -93.1% Receipts of interest 543, , % Other Net cashflow from investing activities (2,099,812) (1,458,890) 43.9% Proceeds from issuance of shares to employees 411,000 - Proceeds from issuance of Masan Consumer shares to KKR and Masan Resources shares to Mount Kellet Payments for buy back of 57,929,939 shares (4,634,395) - Proceeds from issuance of USD tranche convertible debt to Kairos Capital 1,666,240 - Proceeds from issuance of VND tranche convertible debt to Kairos Capital 2,200,000 5,412, % Net proceeds from/payments for ST&LT borrowings from banks and other entities 1,531,203 (291,610) % Others (57,432) - Net cash flow from financing activities 1,116,616 5,121, % Net cash flow for the period (652,937) 3,813, % Cash at the beginning of the period 9,573,593 3,394, % Effect of changes in forex 21, % Cash at the end of the period 8,920,656 7,230, % 15 Page 15

16 Cash flow analysis Net cash flow from operating activities rose strongly by 118% y/y to come at VND330 billion. Net cash flow from investment activities was posted a negative VND(2,100) billion, widening by 43.9% y/y mainly due to the increase in capital expenditure of VND2,014 billion. In 1H 2012, the company increased bank deposits by VND955 billion. The company also withdrew money from bond investments totaling VND373 billion. Interest received jumped by 62.9% y/y to VND544 billion. Net cash flow from financing activities was reported at VND1,117 billion, down sharply 78.2% y/y. This was primarily due to the lack of issuance of shares by the company s subsidiaries in 2012 YTD versus last year. In 1H FY2011 the company received proceeds of VND5,4123 billion including US$159 million from a share sale of Masan Consumer to KKR and US$100 million from the issuance of 20% of Masan Resources shares to Mount Kellet. As mentioned above, the payment of VND4634 billion to retire equity-linked instruments was also a factor. Apart from these activities, there was some cash inflow. In 1H the company received the proceeds of VND3,866 billion from the issuance of a convertible debt to various investors, including Richard Chandler Corporation and Mount Kellett. Short term and long term borrowings from banks soared by another VND1,531 billion, mainly from the drawdown of the facilities for the development of Nui Phao. As of result of more payment for capex and lower financing cash flow, net cash flow in 1H was reported at VND(653) billion, down significantly from VND3,814 billion in 1H FY2011. Even so a consolidated net cash position of VND8,921 billion at the end of 1H and with the bulk of this year s revenues coming in 2H, the Company will have a significant cash war chest for M&A and funding the mine by the year end. 16 Page 16

17 MSN earnings forecast by business Unit: VNDmillion Group Masan Consumer (*) Nui Phao (*) Parent company (*) FY2012F y/y% FY2013F y/y% FY2012F FY2013F FY2012F FY2013F FY2012F FY2013F Net sales 11,174, % 15,696, % 11,174,197 13,514,152-2,182, COGS 6,560, % 8,974, % 6,560,776 7,919, , Gross profit 4,613, % 6,721, % 4,613,421 5,594,647-1,688, Net financial income 936, % 215, % 141, , , , ,836 SG&A 1,854, % 2,259, % 1,591,713 1,917,268 63, , , ,000 Net operating profit 3,695, % 4,677, % 3,163,287 3,677, ,000 1,699, , ,836 Other profit 88, % - 8,676-79,458 - Profit and loss in associates 113, % 116, % Profit before tax 3,896, % 4,793, % 3,171,963 3,677, ,000 1,096, , ,836 Net profit after tax 3,578, % 4,434, % 2,823,888 3,318, ,000 1,096, , ,836 Net profit after tax & minority interests 2,915, % 3,655, % 2,666,722 3,109, ,000 1,096, , , Page 17

18 FY2012 and FY2013 forward outlook suggests growth to be led by Masan Consumer with likely continued M&A Regarding Masan Group s strategy for the near and medium term, we understand from management that they are focused on these priorities for the rest of the year: (1) Continue to prioritize and focus on the consumptiondriven sectors, both organically and inorganically. Within the organic route, Masan Consumer aims to become the No. 1 player in the instant noodles segment by year end; launch new coffee brands and products to expand VCF portfolio and enter at least 1 new product category to leverage its extensive distribution network and brand building capabilities. (2) Focus on developing the Nui Phao project in order to achieve commercial production within the first half of This will be critical to the Company as management has forecasted EBITDA contributions of US$50 million & US$250 million in FY2013 & FY2014, respectively. As such, Masan Resources will be a lucrative cash generator for Masan in the years to come. (3) At Techcombank, continue to focus on building a leading deposit franchise, which Masan Group believes will be a key competitive advantage in a volatile banking sector. We forecast FY2012 group sales at VND11,174 billion, up 58.3% y/y and FY2013 group sales of VND15,696 billion, up 40.5% y/y. Our forecast is based on the assumption that Masan Consumer will achieve VND11,174 billion and VND13,514 billion respectively in FY2012 and FY2013, and that Nui Phao will generate revenue of VND2,182 billion in FY2013. We forecast group net financial income at VND936 billion, up 11.8% y/y in FY2012. We expect that in 2H, MSN will book a reversal of accrued interest expense totaling VND284 billion which was recorded in the last three years related to the convertible bonds issued to TPG. In FY2013 we forecast that interest income will drop sharply as a result of a lower cash reserve caused by a share buyback totaling VND4,634 billion and heavy capex of VND3,500 billion in 2H FY2012 and FY2013. Therefore we forecast that net financial income in FY2013 will come at VND215 billion, down 77% y/y. We forecast Techcombank net profit at VND2,269 billion, down 28% y/y and VND2,275 billion, up 0.3%y/y respectively in FY2012 and FY2013. This would mean it contributes only VND113 billion and VND116 billion to FY2012 and FY2013 respectively to group profit after subtracting VND577 billion of goodwill amortization. Due to lower than expected net financial income and lower forecast for Techcombank s profit contribution, we have revised down our forecast on MSN net profit by 6% to VND2,915 billion in FY2012 and by 13% to VND3,655 billion in FY2013 assuming no further M&A activities at the company. We will look at our forecast again when full information on expected M&A deals are disclosed over the next few months. Even with our downward revision of MSN s FY2012 net profit by 6%, with continued solid performance of Masan Consumer, focused business strategy at Masan Group, strong cash balance, anticipated M&A and better prospects for Nui Phao, we reiterate our OUTPERFORM rating. 18 Page 18

19 Masan Consumer outlook calls for further gains in market share and margin growth on a better product mix Masan Consumer experiences seasonality in its net sales and net profit. Typically, 60 to 70 percent of net sales and net profit occurs in the second half, due to the higher consumption paterns leading into the Tet holidays. This year, Masan Consumer will time launches of new brand variants to kick in during the second half as well. Regarding sauce products, we believe Masan Consumer is able to maintain its dominant market share or even enjoy a slight increase in market share given its ability to successfully launch new products. For fish sauce, we forecast the company will win another 1% market share this year thanks to the recent successful launch of Chinsu-Nam ngu brand which is neatly placed between the premium and mainstream segment. The strategy is to move the customers from the mainstream product to the crossover product and then finally to the premium Chin Su brand. We forecast that fish sauce sales will increase by 11.9% y/y to VND4,072 billion in FY2012 thanks to the contribution of Chinsu-Nam Ngu and the Nam Ngu Super Saver which is expected to consolidate the unbranded market. For FY2013 we expect Masan will gain an additional 1.8% fish sauce market share as Chinsu-Nam Ngu will have been in the market for 12 months. Regarding instant noodles, we expect to see a jump in market share to 28.4% in FY2012 and 29.9% in FY2013 from 16.7% in FY2011. The key drivers here are Kokomi, Omachi and the newly launched mainstream product Yoshi. That means instant noodles sales will surge by 90.3% y/y and then 19% y/y in FY2012 and FY2013 respectively. For Vinacafe s products, we expect a sales growth of 33.5% y/y in FY2012 and then 28.9% y/y in FY2013 thanks to sales gains from the distribution network integration with Masan Consumer, capacity expansion and new product launches. Regarding coffee, we forecast FY2012 sales at VND2,028 billion, up 28.5% y/y supported by the re-launch of Vinacafe 3 in 1 instant coffee, the launch of Wake up Saigon 3 in 1 instant coffee and the launch of a premium instant coffee in Q4 FY2012. Masan is also working closely with VCF to introduce a R&G coffee product, in an effort to transition unbranded R&G customers to branded products. Management believes that it can replicate its past success in transitioning unbranded fish sauce customers to branded fish sauce within the $300m coffee market which is still 75% unbranded. Masan Consumer - HSC sales forecast by product categories Product category FY2010 FY2011 FY2012F FY2013F Soya sauce ,108.4 y/y% 12.8% 32.0% 12.5% 12.0% Market share 59.1% 69.0% 69.0% 69.0% Fish sauce 3, , , ,889.7 y/y% 41.5% 12.7% 11.2% 20.8% Market share 73.8% 77.0% 77.5% 78.2% Chili sauce y/y% 17.2% 60.0% 10.9% 20.3% Market share 32.1% 46.2% 46.2% 50.0% Instant noodles 1, , , ,532.4 y/y% 49.0% 36.3% 90.3% 19.0% Market share 14.1% 16.7% 28.4% 29.9% Cooking oil y/y% Market share 0.2% 0.0% 0.0% 0.0% Coffee - 1, , ,027.8 y/y% 25.8% 28.5% Market share NA 26.0% 28.0% 32.2% Cereals y/y% 63.1% 30.0% Market share NA NA NA NA Total sales 5,516 8,297 11,174 13,514 y/y% 39.4% 50.4% 34.7% 20.9%, HSC We expect that cereal sales will increase strongly by 30% y/y in FY2012 and 25% y/y in FY2013 thanks to the contribution of new products such as Kachi. We keep our forecast on gross margin of Masan Consumer at 41.3% in FY2012 and 42.8% in FY2013. The improvement in gross margin is supported by better product mix and strong pricing power. 19 Page 19

20 TCB earnings forecast Unit: VNDbillion Value % y/y change h/h growth in FY2012 FY2010 FY H F2012 (*) 2-H FY2012 FY2012F FY2013F FY2011 FY2012F FY2013F Net interest income 3,184,349 5,298,375 2,750,619 2,665,736 5,418,767 5,598, % 2.3% 3.3% -3.1% Net fee and commission income 929,800 1,150, , , , , % -33.0% 12.0% 5.3% Foreign exchange gains - net (91,383) (698,913) (11,227) 61,227 50, , % % 316.0% % Income from trading securities (71,418) (55,333) 73,796 (23,796) 50, , % % 100.0% % Income from Investment securities 160, ,257 (87,177) 137,177 50, , % -88.0% 100.0% % Other income 526, ,374 72, , , , % -29.1% 0.0% 334.5% Equity income/dividends 80,747 8,061 24,746 13,941 38,687 39, % 379.9% 3.1% -43.7% Total operating income 4,719,021 6,662,175 3,198,293 3,563,000 6,763,706 7,295, % 1.5% 7.9% 11.4% Operating expenses (1,587,749) (2,099,198) (1,400,112) (1,328,845) (2,728,957) (3,014,207) 32.2% 30.0% 10.5% -5.1% Profit before loan loss provision 3,131,272 4,562,977 1,798,181 2,234,155 4,034,748 4,280, % -11.6% 6.1% 24.2% Provision loss (387,645) (341,864) (167,752) (838,741) (1,006,493) (1,346,334) -11.8% 194.4% 33.8% 400.0% Profit before tax 2,743,627 4,221,113 1,630,429 1,395,414 3,028,255 2,934, % -28.3% -3.1% -14.4% Income tax (670,872) (1,067,347) (407,607) (349,457) (757,064) (733,632) 59.1% -29.1% -3.1% -14.3% Net profit 2,072,755 3,153,766 1,222,822 1,045,957 2,271,191 2,200, % -28.0% -3.1% -14.5%, HSC; Note: HSC estimates TCB tax for 1-H FY Page 20

21 Techcombank outlook mixed on slow credit growth while we forecast a sharp increase in provisioning Analyst - Nguyen Thi Tam Hanh Assumption table YTD in 1- H FY2012 h/h growth in 2-H FY2012 y/y growth in FY2012 y/y growth in FY2013 Loan growth -1.30% 3.40% 2.07% 10% Interbank exposure growth -11% 2% -10% 1% Bond investment growth -2.70% 2.70% % NIM 3.65% 3.58% 3.55% 3.58% y/y growth h/h growth in 2-H FY2012 y/y growth in FY2012 y/y growth in FY2013 Net service growth -35% 5% -33% 12% Other incomes -81% 335% -29% 0% Operating costs 32% -5% 30% 10% End of 1- H FY2012 End of 2- H FY2012 End of FY2012 End of FY2013 NPL ratio group 3-5 before write off 2.95% 4.80% 4.80% 5.50% NPL ratio group 3-5 after write off 2.95% 3.94% 3.94% 3.82% Source: HSC HSC forecast that FY2012 total operating income will grow by 1.5% to VND6.76 trillion giving us net profit of VND2,269 trillion (-28% y/y). To be driven by modest 2.2% growth in interest income driven mainly by credit growth of 2% and partially offset by a slight drop in NIMs. Overall interest earning assets are forecast by us to decline slightly. Given the growth assumption for loans, bonds and interbank exposure in 2H FY2012, we forecast the bank should experience the growth of 2.3% h/h in 2H FY2012. However, comparison with the end of FY2011, total interest earning assets would decline at 2.2% y/y in FY2012. Opportunities to boost interest earnings assets are few given poor loan demand and the shrinking of the interbank market with many smaller banks now relying on the refinancing window. We forecast that NIMs will come to 3.58% for 2H FY2012 and then 3.55% for all of FY2012 or 17 bps lower than FY2011. The lower NIM is a result of lower loan demand while many banks, like TCB are incurring additional costs to keep higher liquidity levels at the moment. In fact, it is likely that deposit rates will accelerate again as banks are preparing to meet liquidity requirements by end of FY2012. Typically the State Treasury withdraws money from SOCBs to settle public investments at year end so liquidity becomes tight. In addition given the current environment all banks are focusing on keeping very high levels of liquidity compared to the past. Given this, we assume net interest income will fall 3% h/h and contribute 74.8% of total operating income in 2H FY2012. For FY2012 we forecast net interest income will increase by 2% y/y in FY2012 due to the slight expansion in interest earning assets in FY2012. Then fee income streams follow credit growth and hence we forecast fee earnings will advance at 5% h/h in 2H FY2012. However, due to the sharp decline in the 1H FY2012, we expect that their net fees will decrease by 33% y/y and account for 10-11% of operating income in FY2012. Other incomes are generated by investment vehicles and other assets that are similar to interest earning assets and we forecast other incomes will come to VND386 billion (down 41% y/y) due our belief that these assets currently carry low average yields. TCB had other assets of VND13,411 billion at end 1H FY2012, up 31% YTD. We have few details on the composition but speculate that these are financial assets or receivables which are interest bearing. We forecast that these three combined income streams will contribute 97.2% of total operating incomes in FY2012. Given these assumptions, we estimate that operating income will increase 1% y/y in FY2012 on lower earnings streams from service fees and investment gains while net interest income only rises marginally. 21 Page 21

22 In terms of operating costs, we expect the bank will manage their cost base more efficiently in 2H FY2012. We expect costs to slightly decline by 5% h/h in 2H FY2012 or up 30% y/y as the bank is likely to squeeze costs. However this would lead to a CIR of 40% for FY2012 up sharply from 32% in FY2011. The main driver here would appear to be the new management team who having international experience are rather more expensive We forecast the bank will book provision costs totaling VND839 billion (+400% higher than 1H FY2012) in 2H FY2012. For the whole year, we forecast the bank will book total provision costs of VND1,006 billion (+194% y/y) in FY2012. Although we expect the provision costs will be far higher, the ratio of provision costs/total loans would be just 1.6%; lower than the 1.87% average for the top 20 banks according to our forecasts. Hence our forecasted provisioning still looks on the low side compared to some peers. In fact we note that provision costs declined at a CAGR of 17.6% in FY2009- FY2011 although their loan book surged by a CAGR of 34% over the same period. This leaves open the risk of a surge in provisioning in subsequent years as provisioning finally catches up to previous loan book growth. Based on these assumptions, we expect the bank will show FY2012 consolidated pretax profit of VND1,395 billion (down 14% h/h) on higher provision costs while for the whole year, we forecast the bank will earn VND3,028 billion (-28% y/y) in FY2012. The bank would achieve ROA and average ROE of 1.71% and 21.7%, respectively in FY2012. These are lower than FY2011. These ratios were 1.91% and 28.8% in FY2011. If the bank manages their credit risk better than our expectation, their actual performance would higher than our forecasts. 22 Page 22

23 FY2013 outlook calls for some improvement on stronger credit growth outlook TCB 's CAR FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY H FY H FY2012 FY2013F Chartered capital 617,660 1,500,000 2,521,308 3,642,015 5,400,417 6,932,555 8,788,079 8,788,079 17,636,158 21,163,390 Equity 1,009,405 1,761,687 3,573,416 5,625,408 7,323,826 9,389,161 12,515,802 13,909,399 30,238,566 32,389,463 CAR 12.0% 10.9% 16.2% 12.6% 9.6% 13.1% 11.4% 13.2% 12.8% 10.7% HSC forecasts the overall banking sector will see loan growth of 10% y/y in FY2013 on a modest cyclical recovery while we expect to see some government action on system NPLs. Given this scenario, we forecast TCB, will see growth 7.8% in interest earning assets. And while we see sluggish growth in interbank exposure we forecast the loan book and debt investments will expand by 10% y/y in our model (much slower than the CAGR of 25.2% over FY ). Then we assume NIMs will be unchanged at 3.58% in FY2013 as the bank faces relatively high cost of funds while lending interest rates remain flat on modest loan growth especially in the 1-H. Given these assumptions, we forecast FY2013 net interest income of VND5,598 billion (+3% y/y) accounting for 75.7% of total operating incomes. For service earnings, we forecast growth of 12% y/y or broadly in line with loan growth due. As for FX lines, we forecast the bank will focus once again on earnings decent brokerage fees for FX transactions related to trade finance which we expect to generate VND208 billion (+316% y/y) in FY2013. In the past these fees have been sacrificed to boost interest income. We forecast that other incomes will be unchanged in FY2013. In total, we forecast operating incomes will increase by 8% y/y in FY2013. For operating costs, we expect an increase of 10% y/y in the cost base to hit a CIR of 41.3% in FY2013, or slightly higher than FY2012. Then we project provision costs of VND1,346 billion (+34% y/y) in FY2013 after a sharp rise of 194% y/y in FY2012. In general banks will only book provision to the extent that they can still earn decent post provision profit. So until the SBV strictly enforces tough provisioning across the board banks will be able to lowball their provision costs if they so wish. Given these assumptions, the bank would achieve pretax profit of just VND2,934 billion (+3% y/y) due to low growth in operating incomes and somewhat higher provision costs in FY2013. Given these forecasts, this would generate FY2012 EPS of VND2,099 and FY2013 EPS of VND2,034. These are a BVPS of VND16,371 and VND18,701 in FY2012 and FY2013, respectively. TCB shares are trading in the OTC market at a forward P/E of xs and a current P/B of xs. The shares look cheaper than other bank shares; however, they trade at a discount because of the illiquid nature of trading. 23 Page 23

24 Overview MSN overall seems in reasonable operational shape with strong growth Masan Consumer underpinned by both existing sales (on new product launches) and likely new M&A. Techcombank is a concern at the moment given the general problems in the banking sector and likely low growth for some time but we expect it to contribute just 2.9% of the FY2012 consolidated pretax profit so any effect on future earnings growth is containable. Then with Nui Phao on track for a Q2 launch FY2013 earnings growth will be given a significant boost. The risks to the growth model would of course be (1) any delay in Nui Phao launch (2) unforeseen problems at TCB. The likelihood of the former is slight not least because this is seen as a mining project of national importance and has been well managed since MSN took over. On the second possibility it's hard to quantify this for the time being. The new management at TCB has worked hard to get a handle on the balance sheet all year but it may well take more time to figure it all out. The other assets category on the TCB balance sheet does give us some qualms given its rapid growth in recent years and fairly limited information to hand as to what exactly it consists of. Even so we think the new team will get a handle on things over the next few quarters and we expect TCB to return to a normal growth trajectory by the end of next year at the latest. We continue to rate the stock as an OUTPERFORM given growth potential of Masan Consumer and the expected contribution from Nui Phao next year. While the balance sheet remains very strong and cash flows positive. Against that we would keep a close eye on developments at TCB. The stock is currently valued at a FY2012 PE of 26x and PB of 3.1x while for FY2013 based on our EPS forecast the stock is valued at a forward PE of 20.7x and PB of 2.6x. Excluding the mine value of VND18,256 billion, the stock is currently valued at a FY2013 PE of 16.2x and PB of 2.6x. We remove the valuation of the mine from the PE calculation given the non-producing nature of the mine. 24 Page 24

25 FINANCIAL RATIO Ratio FY2009 FY2010 FY2011 FY2012F FY2013F Average outstanding shares 155,608, ,546, ,272, ,477, ,982,680 Average outstanding shares (fully diluted) 557,422, ,604, ,418, ,400, ,400,236 Valuation EPS (basic) 5,712 3,010 5,319 4,805 5,823 EPS (diluted) 747 2,951 2,515 3,775 4,732 P/E BVPS 8,545 17,424 23,879 31,253 37,798 P/B Dividends DPS Dividends (VNDb) Yield 0% 0% 0% 0% 0% Dividend Growth NA NA NA NA NA Payout Ratio 0% 0% 0% 0% 0% Retention ratio 100% 100% 100% 100% 100% Growth Rates (%) Sales growth 0.0% 41.1% 26.3% 58.3% 40.5% Pre-tax profit growth 0.0% 64.3% 73.6% 30.1% 20.1% NPAT growth 0.0% 66.8% 84.8% 27.4% 21.2% EPS growth 0.0% -47.3% 76.7% -9.7% 21.2% Internal Liquidity Current Ratio Quick Ratio Cash Ratio Receivable Turnover Inventory Turnover Payables Turnover Profitability Gross Margin 34.7% 42.8% 43.3% 41.3% 42.8% Pre-tax Margin 30.5% 35.4% 48.7% 40.0% 34.2% Net Profit Margin 22.5% 26.5% 33.0% 31.2% 27.0% Return on Assets (ROA) 12.7% 7.0% 8.2% 8.3% 7.7% Return on Assets - 2 Yr. Avg. 12.7% 9.8% 7.6% 8.2% 8.0% Return on Equity (ROE) 19.9% 19.3% 20.7% 18.8% 17.1% Return on Equity - 2 Yr. Avg. 19.9% 19.6% 20.0% 19.7% 17.9% Operating Efficiency Total Asset Turnover Fixed Asset Turnover Equity Turnover Financial Risks Debt to Equity Ratio Total Debt Ratio Page 25

26 MSN - Consolidated balance sheet Unit: VNDbillion FY2009 FY2010 FY2011 FY2012F FY2013F Current Assets 2,442 4,627 12,541 13,889 24,063 Cash and cash equivalents 1,124 3,395 9,574 7,757 15,482 Short term investments ,223 4,048 4,048 Receivables ,046 2,873 Inventories Other current assets Long-term Assets 4,575 16,503 21,031 25,776 27,950 Long-term receivables Fixed assets 605 8,262 11,288 16,466 18,664 Investment Properties Long-term investments 3,920 8,100 9,321 8,932 8,932 Other long-term assets Goodwills Total Assets 7,017 21,130 33,573 41,998 55,029 Liabilities 1,948 8,981 12,018 14,529 17,405 Current Liabilities 1,211 3,225 3,626 3,300 5,040 Long-term Liabilites 737 5,756 8,392 11,230 12,365 Owners' Equity 4,763 10,624 15,876 21,284 28,302 Owners' Equity 4,763 10,624 15,876 21,284 28,302 Other capital and funds Minority Interest 307 1,525 5,679 6,184 9,322 Total Resources 7,018 21,130 33,573 41,998 55, Page 26

27 July 14h 2008 Global Disclaimer Copyright 2008 Ho Chi Minh Securities Corporation (HSC). All rights reserved. This report has been prepared and issued by HSC or one of its affiliates for distribution in Vietnam and overseas. The information herein is believed by HSC to be reliable and is based on public sources believed to be reliable. With the exception of information about HSC, HSC makes no representation about the 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 HSC and are subject to change without notice. HSC has no obligation to update, amend or in any way modify this report or otherwise notify a reader thereof in the event that any of the subject matter or opinion, projection or estimate contained within it changes or becomes inaccurate. The information herein was obtained from various sources and we do not guarantee its accuracy or completeness. Prices and availability of financial instruments are also subject to change without notice. This published research may be considered by HSC when buying or selling proprietary positions or positions held by funds under its management. HSC may trade for its own account as a result of short term trading suggestions from analysts and may also engage in securities transactions in a manner inconsistent with this report and opinions expressed there in. Neither the information nor any opinion expressed in this report constitutes an offer, nor an invitation to make an offer, to buy or to sell any securities or any option, futures or other derivative instruments in any jurisdiction. Nor should it be construed as an advertisement for any financial instruments. Officers of HSC may have a financial interest in securities mentioned in this report or in related instruments. This research report is prepared for general circulation for general information only. It does not have regard to the specific investment objectives, financial situation or particular needs of any person who may receive or read this report. Investor should note that the prices of securities fluctuate and may rise and fall. Past performance, if any, is no guide to the future. The financial instruments discussed in this report may not be suitable for all investors. Investors must make their own financial decisions based on their independent financial advisors as they believe necessary and based on their particular financial situation and investment objectives. This report and any part of this report may not be copied, reproduced, published or redistributed by any person for any purpose without the express permission of HSC in writing. Please cite sources when quoting. HEAD OFFICE Level 5 & 6, AB Tower 76 Le Lai, District 1, HCMC T : (+84 8) F : (+84 8) E: infor@hsc.com.vn W: HANOI OFFICE Level 4 & 5 66A Tran Hung Dao, Hanoi T : (+84 4) F : (+84 4) Page 27