Masan stock price is poised for impressive growth in 2024

Following a prolonged period of sideway, Masan stock price (traded under code MSN on the HoSE exchange) has started to garner investor interest and experience an uptick in value. This resurgence is driven by prospects of renewed business growth and its status as one of the few stocks poised to directly benefit from the stock market upgrade.

Retail stocks stand to gain from the stock market upgrade

In 2023, the Government, alongside the State Bank, made significant efforts to open up capital flows to the bond market, stimulate demand through public investment, streamline legal frameworks for real estate projects, and reduce regulatory interest rates. These measures aimed to decrease interest rates on capital mobilization and lending.

Despite the implementation of numerous coordinated solutions, the anticipated economic recovery was delayed due to policy lags. Signs of improvement only emerged in the latter half of 2023 and early 2024 following the enactment of new policies. The stimulus measures have begun to impact the domestic economy positively. Moreover, major central banks worldwide have initiated the first phase of interest rate reductions, signaling positive trends for capital flows and the overall economic recovery, both globally and in Vietnam specifically.

In 2024, Vietnam is aiming for economic growth between 6% and 6.5%, buoyed by various factors including continued attraction of FDI capital, recovery in export activities, restored confidence, and the resurgence of consumption. The supportive policies implemented by the Government and the State Bank since 2023 are beginning to yield positive effects on the economy. Notably, the International Monetary Fund (IMF), World Bank (WB), and Asian Development Bank (ADB) have forecasted Vietnam's economy to grow by 6.9%, 5.5%, and 6% respectively in 2024. This growth outlook is notably higher compared to regional counterparts such as Thailand (projected growth between 2.7% and 3.7%), Indonesia (between 4.9% and 5%), Singapore (between 2.1% and 4.8%), and Malaysia (between 4% and 4.9%).

In 2024, securities firms are uniformly predicting economic resurgence, with particular optimism emanating from the consumer and retail sectors, which had languished in 2023. According to Rong Viet Securities (VDSC), "We anticipate several factors driving the recovery of retail goods in 2024, including a rebound in the manufacturing sector, persistently low interest rates fostering consumer confidence, and stable domestic inflation. Furthermore, continued government support policies, such as sustained VAT reductions and comprehensive wage reforms, are expected to bolster public sector incomes, thereby stimulating increased consumer spending."

Notably, among the consumer businesses, Masan Group Joint Stock Company stands out. This enterprise, catering to a myriad of domestic consumer needs, has distinguished itself through adept mergers and acquisitions strategies, thereby expanding its ecosystem and rapidly building and developing brands.

Factors Driving Momentum for Masan Stock Price

In 2024, securities firms are uniformly forecasting a rebound in the stock market, with particular optimism stemming from the consumer and retail sectors, which benefited from the economic recovery, albeit from a low base in 2023.

Specifically, after 15 months of trading, Masan Group stock price have consistently recorded significant gains, reaching 75,700 VND/share. This marks the peak of Masan stock price in over 5 months, since the beginning of October 2023.

Furthermore, this breakthrough has been accompanied by a surge in cash flow into Masan stock. Trading session liquidity has reached tens of millions of shares, three times higher than the average and the highest level in MSN's listing history.

The surge in MSN stock propelled the market capitalization of billionaire Nguyen Dang Quang's retail consumer group to surpass 108,000 billion VND, equivalent to 4.3 billion USD. This milestone marks a capitalization level that Masan stock price has repeatedly approached but not quite reached, facing adjustment pressure each time it nears the VND 100,000 billion mark.

The rise in Masan stock price can be attributed to its strong financial performance

In 2024, Masan has set a revenue target of approximately 84,000 - 90,000 billion VND, representing a 7.3% - 15% increase compared to 2023. The expected profit after tax ranges from 2,250 - 4,020 billion VND, marking a substantial increase of 31% - 115% compared to 2023. By the end of the first quarter of 2024, MSN's consolidated revenue had experienced a slight growth, reaching VND 18,855 billion, while net profit after allocation to minority shareholders had doubled compared to the fourth quarter of 2023.

Moreover, the unaudited financial statements for the first quarter of 2024 of Masan Group (MSN) indicate a slight growth in consolidated revenue to VND 18,855 billion. Concurrently, MSN has successfully raised equity capital of 250 million USD from Bain Capital.

Under the agreement, Bain Capital's investment in Masan takes the form of convertible dividend preference shares ("CDPS"), issued at 85,000 VND/share, with the option to convert into common shares at a 1:1 ratio.

For the initial 5 years from issuance, each CDPS carries a fixed dividend rate of 0%. From the 6th year onwards, this rate increases to a maximum of 10%/year, with the board of directors empowered to determine the specific fixed dividend ratio and payment schedule.

By the 10th year post-issuance, any outstanding CDPS will be mandatorily converted into common shares of Masan Group.

This investment bolsters Masan's financial position, augmenting liquidity with an additional cash infusion of VND 6,228 billion and lowering the estimated net debt/EBITDA (Pro-forma) ratio to 3.7x.

This equity investment transaction eschews hedging structures or borrowing of MSN shares, preventing the dilution of MSN shares in the market upon issuance. The investment structure is carefully crafted to safeguard the interests of Masan's existing shareholders, aligning with Bain Capital's shared vision with the current stakeholders of MSN.

Hence, Masan has persistently fortified its balance sheet by reducing financial leverage and trimming interest expenses. Moreover, with domestic interest rates trending downward and international capital costs following suit in accordance with major central banks' interest rate reduction roadmaps, Masan continues to leverage these favorable conditions to access more affordable capital sources. This not only alleviates pressure on interest expenses in the foreseeable future but also enhances the stock's appeal to investors, given the bolstered health of the balance sheet.

Access to international capital markets

Over the past two years, Masan has successfully raised $1.5 billion from the global capital market. In the fourth quarter of 2023, the company effectively hedged 100% of its long-term USD-denominated debt risk under favorable terms: $950 million of loan principal was converted to VND at an exchange rate of 23,937 VND/USD, with a fixed interest rate of 8.93% per annum.

To mitigate risks associated with currency and interest rates, the company utilized interest rate swaps combined with forward FX contracts: $45 million principal repayment in 2024 was hedged at an exchange rate of 24,005 VND/USD, while $300 million with a fixed interest rate of 6.48% per annum for 5 years had a one-year exchange rate of 23,790 VND/USD. Consequently, the recent appreciation of the USD has had minimal impact on the company's profits.

Furthermore, Techcombank (TCB), an affiliate of Masan, has endorsed a 15% cash dividend proposal. With a 19.9% stake in TCB, Masan anticipates receiving over 1,000 billion VND in cash within the next 6 months, thereby aiding the company in its efforts to reduce financial leverage.

According to HSBC, the market value of Masan shares could surge by 46% over the next 12 months, particularly as the group considers listing Masan Consumer shares. HSBC is optimistic about Masan Group's business segments, citing promising prospects, especially for Masan Consumer, which has consistently maintained high profit margins since 2018. Notably, Masan Consumer has demonstrated stable revenue growth and has outperformed competitors in the fast-moving consumer goods (FMCG) and packaged foods sectors in Southeast Asia.

HSBC and several financial institutions suggest that if Masan Group successfully executes its plan to list MCH shares, it could significantly bolster business expansion initiatives, particularly in accessing international capital flows.