Will MWG shares soon return to the VNDiamond basket?

According to MBS's calculations, the recovery of Mobile World Investment's business results in the first half of 2024 could push up MWG's P/E ratio, reaching a level that may be sufficient to meet the P/E criteria.

Having been officially removed from the VN Diamond index by the Ho Chi Minh City Stock Exchange (HoSE) in April 2024 due to not meeting the P/E ratio requirements, the retail giant's shares may have a chance to return during the portfolio restructuring (review) in October.

According to a newly published analysis report, MB Securities Joint Stock Company (MBS) believes that MWG shares of Mobile World Investment Joint Stock Company are highly likely to be re-listed in the VNDiamond index during the review period in October 2024. The securities firm argues that MWG's business results have recovered in the first half of 2024.

“MWG's P/E ratio, which reflects the relationship between the share price and earnings per share (EPS), is currently at 46.x, which is likely sufficient to meet the P/E criteria. In addition, the foreign ownership limit (FOL) is at 95.6%, meaning MWG is also likely to meet the FOL requirement of over 95% in the review period,” MBS predicted.

The MBS report also suggests that in the second half of 2024, the company will continue its strong growth trend, forecasting net profit of VND 4,571 billion in 2024 (a 2621% increase year-on-year) and VND 5,238 billion in 2025 (a 14.6% increase). The projected P/E ratios for 2024 and 2025 are 22.3x/19.5x respectively, higher than the average of 15.6 times for the 2017-2021 period due to strong momentum from Bach Hoa Xanh.

After 2024, in addition to the stable growth of ICT-CE (laptops, tablets, phones, air conditioners, refrigerators, washing machines, TVs, etc.), MBS sees potential opportunities in the modern retail sector of groceries, which will help the company achieve a higher valuation in the long term.

According to Statista, the grocery market is worth approximately $50 billion, with Bach Hoa Xanh accounting for only nearly 2% of the market, indicating significant potential for expansion. Furthermore, the modern grocery retail model like Bach Hoa Xanh also presents potential opportunities, as its market penetration rate remains relatively low at 15%, while in other developed countries, this rate exceeds 34%.

Of course, the process of removing and adding stocks to the index basket must adhere to certain criteria. Recently, the Ho Chi Minh City Stock Exchange issued the Rules for Building and Managing the Vietnam Diamond Stock Index (VNDiamond Index) version 3.0 to improve the index. This version replaces rule version 2.1 issued on September 30, 2022, and mainly updates the criteria related to liquidity conditions and the selection criteria for stocks in the basket.

Version 3.0 added several new definitions of after-tax earnings per share in the P/E ratio regulations in Section 3.6.1. Simultaneously, it adjusted some parameters and scales in the index calculation formula by adding the wS parameter to the price index calculation formula and capping; adjusting the wFOL scale in the index calculation formula; and adding the wS parameter to the TRI index calculation formula…

MWG shares typically attract investor capital due to their high liquidity. Recently, Mr. Nguyen Duc Tai, Chairman of the Board of Directors of the company, registered to sell 1 million MWG shares. The transaction is expected to take place from September 9th to October 8th, through negotiated transactions or order matching on the exchange. If the transaction is successful, Mr. Tai will reduce his ownership in Mobile World Group from 33.44 million shares, representing 2.287%, to nearly 32.44 million shares, representing 2.219% of the charter capital. This is the third time this Chairman has sold shares since the beginning of the year. Previously, in June 2024, Mr. Tai successfully sold 2 million MWG shares.

Conversely, at the 2024 Annual General Meeting of Shareholders held earlier this year, shareholders approved the use of up to VND 100 billion to repurchase outstanding shares, reducing the charter capital and the number of outstanding shares, with implementation expected in 2024. The company will authorize the Board of Directors to decide on the timing and purchase price, in accordance with legal regulations and market conditions.

Explaining the share buyback, Chairman Nguyen Duc Tai shared: “The purpose of buying back treasury shares is to increase ownership percentage and increase value for shareholders, not to artificially inflate the share price. Whether the price fluctuates high or low, we will still proceed. For example, if we make a profit of 2,400 billion VND this year, we will use about 20% to buy back shares worth 500 billion VND, regardless of how the share price rises next year.”

On the stock market, MWG shares are currently trading at around 68,000 - 69,000 VND per share, representing an increase of over 60% compared to the beginning of the year.

Source: https://baodautu.vn/co-phieu-mwg-se-som-tro-lai-ro-vndiamond-d224083.html