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  • Social distancing took its toll on MWG’s CE chains while largely profiting BHX stores in Q3 21

  • Outlook – Initiatives to enhance sales per TGDD & DMX stores and streamlining opex for BHX are main growth drivers

  • We raise our TP by 10% to VND163,500 per share and reiterate our Buy recommendation on MWG

Tung Do
Tung Do

Logistics, Aviation

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Rong Viet
7 December 2021
Published byRong Viet

Q3 2021 – Social distancing took its toll on MWG's CE chains while largely profiting BHX stores

  • TGDD & DMX stores posted SSSG of -36% given that many stores were temporary closed in the quarter.

  • BHX chain thrived with a SSSG of +33% in Q3 2021 as the modern trade was the only option for consumer goods in many southern provinces. Revenue surged to VND9.2tn (US$402mn; +62% yoy). BHX posted its first quarter of net profit, estimated at VND62bn (US$3mn; -5% yoy).

  • Higher contribution of DMX Super mini (DMS) lifted blended GPM of TGDD & DMX to 23% (+1.5 ppts yoy), whereas efforts to increase fresh food supply in the time of social distancing propped BHX's GPM after wastage of more than 28%.

2021f-22f Outlook – Initiatives to enhance sales per TGDD & DMX stores and streamlining OPEX for BHX are the main growth drivers

  • Projected 2021/22f revenue to come in at VND119tn (+10% yoy; US$5.2bn)/ VND150tn (+26% yoy; US$6.6bn). For TGDD & DMX, we expect a positive SSSG of 10% for 2022f from the low base in 2021 on the back of a gradual recovery in purchasing power and initiatives to increase sales per store including rollouts of the new Topzone format while piloting fashion accessories shop-in-shop format named BlueJi, and sporting goods chain named BlueSport will offer potential upside. While other chains that are rumoured to be piloted are fashion and mom-and-kid format, we believe DMS will be the main format to be opened in 2022. Meanwhile, we expect BHX to post a SSSG of 5% in 2022 from the high base in 2021.

  • We forecast that 2021/22 net profit will grow by 20% yoy/45% yoy to VND4.7tn (+20% yoy; US$206mn)/VND6.8tn (+45% yoy; US$298mn) with BHX's improved profitability to contribute the most to 2022 profit growth. Accordingly, we expect BHX to post a net profit of VND50bn (US$2.2mn) in 2022, after a projected loss of VND1.4tn (US$60mn) in 2021, mainly on the back of better optimised staff expenses and DC utilisation. For TGDD & DMX, we project NPAT to advance 11% yoy to VND6.7tn (US$296mn) in 2022.

Valuation and recommendation

We believe MWG's flexible business execution to deal with softer consumer electronics demand, and BHX's profitability will bolster system-wide operating efficiency and drive earnings growth post-2021.

Our projected NPAT 3Y CAGR of 35% during 2021f-24f makes the current 2022f P/E of 14.8x appealing. We lift our TP by 10% to VND163,500 per share, which is based on the sum-of-the-parts approach, due to our upward revision of 2021f-24f NPAT, and a rollover of our valuation to 2022f.

We reiterate our Buy recommendation on MWG with a total return of 24%, as of the closing price on 7 December 2021.