Mobile World Investment Group (MWG: HOSE): 8M16 earnings result

Mobile World Investment Group (MWG: HOSE): 8M16 earnings result

Outstanding shares: 147 mil; Market Cap: USD 881 mil; Average trading value 3M: USD 1.42 mil, Market price: VND 134,100; and Foreign ownership: 49%

MWG posted revenue and net profit of VND 27,028bn (+78% YoY) and VND 1,120bn (+ 74% YoY), achieving 79% and 81% of yearly revenue and net profit targets respectively.

Source: MWG

In 8M16, MWG has opened 384 shops and stores nationwide, including 316 mobile shops and 68 CE stores. In Aug alone, MWG opened 14 new mobile shops and 15 CE stores. However, in Aug, MWG withdrew 12 mobile shops from Big C according to requirement of Central Group. Central Group was concerned on competition between thegiodidong.com and Nguyen Kim – also owned by Central Group, thus they required MWG to withdraw its shops from Big C.

The model shops in Big C does not work well in Vietnam as most buyers prefer convenience in street shops and most of the shops in malls such as Big C is actually for marketing purpose rather than actual sales point. We expect that the 12 shops in Big C only contribute lower than 1% of revenue and net profit to MWG’s mobile segment (even lower when compared to total sales and net profit). However, closing the 12 shops created some cost for MWG in Aug.

In addition, in Aug 2016, MWG boosted marketing expense and bonus for employees to launch more than 200 mini-CE stores. Similar to 2012, when MWG boosted its marketing expense for mobile chain, the following years’ growth showed impressive and margin improvement as marketing cost declined.

BachHoaXanh Chain showed positive results in the pilot period with average monthly sales on the rise and above VND 1bn/month, which is higher than their expectation. Until now, MWG owned 18 fresh food stores located Binh Tan and Tan Phu Districts. According to management, the model is different from Vinmart+ in which MWG will open stores in a centralized area and a warehouse in the center, supplying inventory for the surrounding stores. In our previous report, we mentioned that in 2017, MWG expects to open up to 400 stores and might record some loss on that. However, management is quite confident that once they open 400 stores, there is no reason why they will incur a loss on the segment.

We retain our forecast for MWG in which this year revenue and net profit might reach VND 41,791bn (+65% YoY) and VND 1,717bn (+60% YoY). In 2017, we expect revenue and net profit will reach VND 60,758bn (45.4% YoY) and VND 2,446bn (+42.4% YoY), resulting in diluted EPS of VND 15,396. Potential contribution from BachHoaXanh chain has not been accounted in our forecast.

MWG is now trading at 2016 and 2017 P/E of 12x and 8.7x, which are very low. We maintain our BUY recommendation for MWG at 1Y target price of VND 180,000/share (34% upside).

SSI Research