Awaiting of a FTSE EM upgrade, Masan group stock remains a top pick by financial institutions
Billions of dollars to flow into the Vietnamese stock market after a FTSE EM upgrade
In Directive No. 06 dated February 15 on urging the implementation of key tasks after the 2024 Lunar New Year holiday, the Prime Minister requested the Ministry of Finance to preside and coordinate with the State Bank of Vietnam, The Ministry of Planning and Investment urgently handles problems in the fields in charge to meet the criteria for upgrading the stock market from marginal to emerging market by 2025.
The market upgrade is expected to help attract direct and indirect investment capital from foreign investors and a large number of large-scale, reputable foreign organizations. From there, this should positively impact the liquidity of the Vietnamese stock market.
According to JP Morgan's report on the Vietnamese market, an estimated 0.5 billion USD of foreign indirect capital is expected to flow into the Vietnamese market if the market is elevated to Emerging Market status this year. In addition, passive ETFs will allocate capital to emerging markets. If in a frontier market, a passive investment fund will only spend 2-3% of its capital. Besides, a higher rated stock market also increases the confidence of domestic investors, large-scale institutional investors and diversifies the investor base.
To be able to upgrade the market, the Vietnamese stock exchange needs to upgrade investment quality through many changes. In particular, according to information from the Ho Chi Minh City Stock Exchange (HoSE), at the end of 2023, the KRX system is expected to officially launch as one of the efforts to support the market upgrade.
The purpose of this project is to upgrade the technology system and infrastructure of the Vietnam Stock Exchange. The KRX system is expected to bring new products, trading and payment solutions to the Vietnamese stock market. In particular, the KRX system is expected to bring features such as intraday trading, short selling operations, risk dispersion,...
Vietnam's stock market will become more attractive to foreign investors. With the hope of foreign money pouring into the market, focusing on pillar stocks with large capitalization so those VN30 stocks that have not met FOL criteria such as Masan Group stock will reap benefits from this project.
The retail industry continues to recover in 2024
Data from the General Statistics Office shows that in the first quarter of 2024, total retail sales of goods and consumer service revenue at current prices are estimated to reach more than 1.5 million billion VND, an increase of 8.2% compared to the previous year. Compared to the same period last year (first quarter 2023 increased by 13.9%), if excluding the price factor, it increased by 5.1% (first quarter 2023 increased by 10.1%). Of which, the retail goods group increased by 7%; Accommodation and food services increased by 13.4%; Travel and tourism increased by 46.3%, other services increased by 9.5% over the same period last year.
Although this increase is lower than the 13.9% in the first quarter of 2023, and consumer purchasing power remains challenged, expectations of a double-digit recovery remain positive. Policies to support the economy such as extending the VAT reduction policy until June this year, or fiscal and monetary policies to support businesses will begin to permeate and help improve consumption levels. In addition, retail - consumer businesses are also actively implementing strategies to diversify products and services, develop e-commerce, and digitally transform to stimulate consumer demand.
According to KBSV's stock market outlook report, the organization estimates that the market will have a clearer recovery trend based on four main factors: the economy is forecast to return to 6% growth, maintaining low interest rates and promoting public investment, the FED control policy in the context of actively cooling inflation and could avoid a recession. China's economic growth slowed down but will avoid disruption in 2024. In general, categories with positive forecast from financial institutions such as KBSV, JP Morgan and UBS include banking, information technology, and retail.
In 2023, the business results of retail businesses will be differentiated between essential and non-essential consumer goods. Businesses related to retail of essential consumer goods (MSN, VNM, FRT's Long Chau chain, MWG's Bach Hoa Xanh chain) still maintain positive revenue. Meanwhile, companies related to ICT products (MWG, FRT, DGW) witnessed a sharp decline in revenue due to consumers cutting back on spending on non-essential items such as phones and laptops. This year's retail industry is expected to recover and continue to grow positively for essential goods.
The retail - consumer corporation heads towards strong profit growth
By the end of 2023, according to consolidated business results, Masan Group (“MSN”) achieved net revenue of 78,252 billion VND (up 2.7% compared to the previous year), gross profit margin reached 28.3%, an increase of 0 .9 percentage points compared to 2022.
Interest expenses have gradually improved, reaching VND 1,669 billion, down slightly compared to previous quarters. Notably, MSN said it has completed full payment of debt obligations due in 2023. In 2024, MSN's total long-term debt due has decreased sharply compared to the beginning of 2023, Masan has completely collected arranged sources for all debts due in 2024, including 8.4 trillion in bonds due, a large part of which was paid in the first quarter of this year.
Another good news for this group is that in 2024 MSN will soon receive a large amount of cash to help increase liquidity. According to the 2023 financial report, the group currently has nearly 17 trillion in cash and is expected to have an additional 250 million USD from Bain Capital, bringing the expected amount of cash to 23 trillion in the near future.
The retail - consumer pillars of WinCommerce (WCM), Masan Consumer Holdings (MCH) and Masan MEATLife (MML) achieved many positive results. WCM maintains revenue growth momentum, continuously improving EBITDA margin with many stores achieving profitability and approaching break-even for the entire chain. The consumer market in 2024 will still be difficult to predict. Depending on the market situation, WCM is expected to open 400 - 700 new convenience stores with the expectation of achieving net revenue from 32,500 to 34,000 billion VND, an increase over the same period from 8% to 13%. In addition to expanding the retail chain, WCM will also continue to develop many utilities, helping to reduce customers' consumption costs. In addition, the WIN Membership program, which has now reached the milestone of 8 million members, will still be promoted, helping consumers access clean vegetables, nutritious cool meat products of the WinEco, and MEATDeli brands at a cheaper price with a 20% discount.
MCH and MML achieved strong growth in many industries, profit margins continued to improve thanks to reducing ingredient cost and good optimization of inventory and logistics costs. In 2024, MCH aims to continue to replicate and develop the premiumization strategy for the seasoning and convenience food segments, continuing the successes in 2023 from innovative products such as the Omachi self-boiling hot pot, Kokomi noodles, Nam Ngu fish sauce with garlic and chili from Ly Son,... In addition, MML will aim to increase sales of chilled meat products in WCM's retail system through digital marketing activities, Open more meat stalls in WCM stores and supermarkets and deploy more personalized amenities for WIN members. In addition, MML will develop an automatic replenishment system at points of sale to ensure a seamless supply of goods to consumers.
In 2024, according to Bao Viet Securities’s forecast, MSN's consolidated net revenue will reach 90,417 billion (+15.5% yoy) and profit after tax - shareholders will reach 1,651 billion, an increase of nearly 4 times compared to the low base in 2023. The two pillars MCH and WCM are expected to contribute most to the revenue and profit growth. Furthermore, MSN will also commence reducing ownership of non-core business activities such as Masan High-tech Materials to reduce the profit burden as well as focus efforts on core businesses.
Masan Group stock is highly rated as an investment opportunity
Prominent in the group of consumer businesses, Masan Group stock is being highly appreciated by many securities companies with strong growth potential in the near future. Using the SOTP method, BVSC determined the fair value of MSN shares to be 93,200 VND/share and recommended OUTPERFORM. The unit believes that the most difficult time of financial pressure has passed, and the strong recovery in profits of the Group, thanks to the stability of the Consumer business segments and reduced interest costs, will create momentum. positive force for stock prices in 2024. BVSC also emphasized that Masan Group stock, along with a number of other blue-chips, may attract cash flow in the upcoming upgrade project of the Vietnamese stock market.
For JP Morgan, in the recent market strategy report, along with TCB, ACB and FPT, Masan group stock is a code selected in the investment portfolio for 2024. This organization still favors banking industry, technology and retail, consumer goods for 2024. Using the SOTP (sum-of-the-parts) method, Masan stock is valued by J.P Morgan at 102,000 VND/share, 26% higher than the price of 80,500 VND/share as of July 18 2023.