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August 18, 2021

Securities firms raise Masan target price as Point of Life strategy proves effective

As Masan reaps the initial successes of its "Point of Life" offline-to-online platform, many domestic and foreign financial institutions raised MSN's target price 20-29 per cent over the market price.

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In its report on August 10, Credit Suisse lifts MSN’s target price to VND162,000 ($7.04) and earnings per share (EPS) for 2021 by 57 per cent compared to its previous forecast.

According to a report on August 16, Viet Capital Securities (VCSC) rated MSN with a buy recommendation at a target price of VND172,000 ($7.48), 28.8 per cent higher than the current trading price of VND133,500 ($5.80) and 21 per cent higher than its previous buy recommendation of VND142,500 ($6.20).

VCSC affirmed its optimistic view that MSN will continue to capture Vietnam's long-term consumption growth. The group owns Vietnam’s leading large-scale consumer businesses in fast-moving consumer goods, branded meat, and grocery retail.

It is challenging to maintain retail chains and consumer goods production amidst the pandemic. Masan has strictly followed pandemic prevention measures to maintain production and supply chain while rolling out new initiatives to renovate its retail system to serve the benefits of consumers.

In the first half of 2021, Masan has piloted 62 new-model VinMart+ stores in Hanoi and Ho Chi Minh City, with more than 40 per cent of shelf space allocated for fresh products, improving foot traffic and store profitability. To avoid goods disruption, Masan also pilots technology to automatically fill goods for VinMart+ and VinMart stores and supermarkets. This technology has been successfully tested and has lead to a marked improvement in the availability of goods, reaching 96 per cent. From July 26, customers who shop at VinMart+ and VinMart chain with an invoice of VND300,000 ($13.04) or more will receive a "Healthy during the pandemic" insurance package with a total benefit of up to VND40 million ($1,740).

To protect the supply chain of essential goods, Masan proposed the government and local authorities to allow the company to set up a “buffer zone” around its factory sites. This zone could be schools, warehouses, stadiums, and gymnasiums near its production sites that could be transformed into accommodation facilities for workers to live and rest. F1 and F0 workers can isolate themselves in the zone and return to work after recovering from the virus.

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Integrating F&B chain, financial services into VinMart+

Beside improving the operational efficiency of VinCommerce, Masan has rolled out the store-in-store concept with the incorporation of Phuc Long kiosks into VinMart+ stores to lure in young customers with modern lifestyles. As of July 21, 41 VinMart+ stores were serving Phuc Long's tea and coffee take-away products. VinCommerce is working with Phuc Long to replicate this model with a view to opening more than 1,000 kiosks this year.

In addition, Masan also integrated financial services of Techcombank into VinMart+ under the CVLife (Convenient Life) model, which was first launched in Hanoi. Through this, customers can quickly perform banking transactions such as transferring money, depositing and withdrawing cash, opening digital accounts and applying for cards, and even registering for e-banking services at VinMart+ stores.

When shopping at VinMart or VinMart+, consumers can participate in an ecosystem that integrates grocery products, food and beverage chains, and financial services. Customers registering for the loyalty programme can earn points when using services and convert them to benefits flexibly. For example, during the opening of the first CVLife store in Hanoi, when using Techcombank Debit card to pay, customers received a discount of 50 per cent of their bill (up to VND99,000 – $4.30) at VinMart+ or Phuc Long kiosk at the store.

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Increasing number of VinMart+ stores to 3,001

In 2021, Masan plans to increase the number of VinMart+ stores to 3,001, meeting consumer demand for fresh food with clear origin, branded consumer goods, and other services. To develop its modern retail channels, VinMart+ stores and VinMart supermarkets also act as "distribution points" for online orders.

After the agreement with a consortium led by Alibaba Group (Alibaba) and Baring Private Equity Asia (BPEA) in May, Masan has actively promoted the VinMart online channel through cooperation with Lazada, tripling its online sales in June 2021 against the previous month.

In the first quarter of 2021, online sales contributed less than 1 per cent to VinMart sales, but the figure has reached 6.8 per cent by June 2021. At four supermarkets in Ho Chi Minh City, the online channel contributed more than 10 per cent to sales in July.

After only six months of launching, the online sales channel accounted for 0.5 per cent of VinCommerce's revenue in July 2021. Every day, 1,300 of nearly 3,000 orders are received online. To remove bottlenecks, VinCommerce is building a dark-store model with professionally trained staff as well as a dedicated online store at supermarkets. From there, Masan aims to process 10,000 online orders a day by December 2021.

Given the strong results and promising prospects, BVSC has called OUTPERFORM on the MSN stock with sum-of-the-parts (SOTP) target price of VND160,000($6.96) per share. BVSC believes MCH has benefitted from its strategy focusing on premiumisation, diversification, and convenience as consumers while temporarily cutting spending, are paying more attention to health and are thus looking for quality convenience products to consume at home.

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