Retail stocks benefit from stock market upgrade
In 2023, the Government , together with the State Bank, promoted efforts to open up capital flows to the bond market, stimulate public investment, resolve legal issues for real estate projects, and reduce capital mobilization and lending interest rates by lowering operating interest rates.
Although many synchronous solutions have been implemented, the economy has not yet recovered as expected due to policy delays. Signs of recovery will only begin in the second half of 2023 and early 2024 when stimulus policies begin to have an impact on the domestic economy. In addition, major central banks in the world are also entering the early stages of lowering interest rates. These are positive signals for capital flows and the recovery of the global economy in general and the Vietnamese economy in particular.
In fact, in 2024, Vietnam aims for economic growth of 6% to 6.5% with many driving forces from continued FDI attraction, export recovery and growth, consumer confidence returning... and more specifically, the support policies of the Government and the State Bank from 2023 have begun to have a positive impact on the economy. In particular, the International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB) respectively forecast that Vietnam's economy will grow by 6.9%, 5.5% and 6% in 2024, a fairly high level compared to countries in the region such as Thailand (growth from 2.7% to 3.7%), Indonesia (from 4.9% to 5%), Singapore (growth from 2.1% to 4.8%), Malaysia (from 4% to 4.9%)...
In 2024, securities companies all predict economic recovery, in which bright spots come from the consumer and retail sectors thanks to benefits from economic recovery, also low in 2023.
According to Dragon Capital Securities (VDSC): “In 2024, we see some bases for the recovery of retail goods, including the recovery of the manufacturing sector, low interest rates are often the anchor to help consumer confidence recover, domestic inflation remains under control. In addition, the Government's demand-side support policies including VAT reduction are maintained, more comprehensive salary reform in 2024 will help increase public sector salaries, which can also promote more positive consumption”.
In fact, standing out in the consumer business group is Masan Group Corporation, a business that provides thousands of needs for domestic consumers, and is also one of the few successful businesses with a strategy of buying and merging (M&A) other units to expand the ecosystem, then quickly building and developing brands.
The analysis centers of three leading securities companies including SSI Research, BSC Research and BVSC Research all forecast that Masan's revenue and after-tax profit will increase sharply in 2024.
Of which, SSI Research forecasts profit to increase by 177.4%, to VND1,161 billion; BSC Research forecasts profit to increase by 204.1%, to VND204.1 billion; and BVSC Research forecasts profit to increase by 294.4%, to VND1,651 billion.
Factors creating momentum for Masan stock price increase
In 2024, securities companies all predict a recovery of the stock market, in which bright spots come from the consumer and retail sectors thanks to benefits from economic recovery, as well as a low base in 2023.
Specifically, after 15 months of trading, MSN shares continued to record a session of increasing to the maximum amplitude to reach 75,700 VND/share. This is also the highest market price of Masan shares in the past 5 months, since the beginning of October 2023.
Not only did the score break through, cash flow also poured into MSN shares. The liquidity of matched orders in trading sessions reached tens of millions of shares, 3 times higher than the average and also the highest level in MSN's listing history.
The acceleration of MSN shares has pushed the capitalization of billionaire Nguyen Dang Quang's retail consumer group to over VND108,000 billion, equivalent to USD4.3 billion. This is also the capitalization level that Masan has "missed" many times, because every time it approaches the VND100,000 billion mark, Masan's stock price faces pressure to adjust.
Masan stock price increases thanks to good financial health
In 2024, Masan targets revenue of around VND84,000 - 90,000 billion, an increase of 7.3 - 15% compared to 2023. Profit after tax is expected to be from VND2,250 - 4,020 billion, an increase of 31% - 115% compared to 2023. At the end of the first quarter of 2024, MSN's consolidated revenue grew slightly at VND18,855 billion, net profit after allocation to minority shareholders doubled compared to the fourth quarter of 2023.
In particular, the unaudited financial report for the first quarter of 2024 of Masan Group (MSN) shows that MSN's consolidated revenue increased slightly, at VND 18,855 billion. At the same time, MSN has just completed raising $250 million in equity capital from Bain Capital.
Under the agreement, Bain Capital’s investment in Masan is an equity investment in the form of convertible dividend preference shares (“Convertible Dividend Preference Shares” or “CDPS”) issued at VND85,000/share and convertible into common shares at a ratio of 1:1.
The fixed dividend rate of each CDPS is 0% for the first 5 years from the date of issuance. From the 6th year onwards, the fixed dividend rate of each CDPS is up to 10%/year. The Board of Directors is authorized to decide the specific fixed dividend rate and payment time.
In the 10th year from the date of issuance, outstanding CDPS will be required to convert into common shares of Masan Group.
This investment will strengthen Masan's financial resources, improve the company's liquidity with an additional VND6,228 billion in cash and net debt/EBITDA estimated (Pro-forma) reduced to 3.7x.
This is an equity investment transaction, without any hedging or borrowing of MSN shares, resulting in the sale of MSN shares to the market on the issuance date. The structure of the investment is designed to protect the interests of MSN's existing shareholders. Bain Capital is fully aligned and shares the same vision as MSN's existing shareholders.
Thus, Masan has continued to strengthen its balance sheet by reducing financial leverage and reducing interest expenses. In addition, with domestic interest rates falling and international capital costs on the decline following the interest rate cut roadmap of major central banks in the world, this continues to be the basis for Masan to access cheaper capital sources, further reducing the pressure on interest expenses in the coming time, helping to increase the attractiveness of stocks to investors as the health of the balance sheet continues to improve.
Ability to raise international capital
Over the past two years, Masan has successfully raised $1.5 billion from global capital markets. In Q4/2023, the company successfully hedged 100% of its long-term USD debt exposure with favorable terms: $950 million of principal was converted to VND at an exchange rate of VND23,937/USD and a fixed interest rate of 8.93% per annum.
Accordingly, Interest Rate Swaps combined with forward FX: 45 million USD principal payment in 2024 with FX rate of 24,005 VND/USD; 300 million USD with fixed interest rate of 6.48% per year for 5 years with 1-year FX rate of 23,790 VND/USD to minimize risks related to currency and interest rates. Therefore, the recent appreciation of the USD does not have a material impact on the company's profits.
In addition, Techcombank (TCB), an affiliate of Masan, has approved a plan to pay a 15% cash dividend. With a 19.9% stake in TCB, Masan is expected to receive more than VND1 trillion in cash in the next 6 months, helping the company reduce its financial leverage.
According to HSBC, Masan's share price could increase by 46% in the next 12 months as the group may transfer its shares to the public listing of Masan Consumer. HSBC believes that Masan Group's business segments currently have positive development prospects. In particular, Masan Consumer has maintained high profit margins since 2018, with stable revenue growth and significantly outperforming its peers in the fast-moving consumer goods (FMCG) and packaged food sectors in Southeast Asia.
HSBC and many financial institutions assess that if Masan Consumer's plan to list MCH shares is successfully implemented by Masan Group, business expansion plans will become significantly more favorable, especially in accessing international capital flows.
Source: https://www.masangroup.com/vi/news/invest-in-vietnam/Masan-stock-price-is-poised-for-impressive-growth-in-2024.html
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