Vietnam's Consumer Sector - Capitalizing on Vietnam's middle-affluent class SEPTEMBER 2019 - VCSC
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Vietnam’s Consumer Sector
Capitalizing on Vietnam’s middle-affluent class
SEPTEMBER 2019 Viet Capital Research
1
Content
● Upbeat sector outlook
○ Accelerating household consumption
○ Strong consumer optimism
○ Fast-growing middle-affluent class
● Key secular, investable consumer trends
○ Modern trade, e-commerce taking off
○ Vibrant indulgent consumption
○ Consumer up-trade
● Stock recommendations
o Top consumer picks: MWG, PNJ, VEA, SAB, MSN
o Other BUYs: FPT, PTB, VHC
o Other notable stocks: VTP, VNM, QNS, FRT
2
Content
Upbeat sector outlook
• Accelerating household consumption
• High consumer confidence
• Rapidly expanding middle-affluent class
3
Vietnam is at an inflection point of accelerating household consumption
18,000 Thailand 2001 250
16,000 GDP/cap (current USD): USD1,900
GDP/cap (PPP, USD): USD7,600 200
14,000
Median age: 30.5
12,000
150
10,000
8,000 8,000 Vietnam 2018 200
100
6,000 GDP/cap (current USD): USD2,500 180
7,000 GDP/cap (PPP, USD): USD7,000
4,000 50 160
6,000 Median age: 31.0
2,000 140
0 0 5,000 120
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
4,000 100
3,000 80
60
2,000
40
18,000 China 2007 5,000 1,000 20
GDP/cap (current USD): USD2,700 4,500
16,000 0 0
GDP/cap (PPP, USD): USD6,900
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
14,000 Median age: 33.0 4,000
3,500
12,000
3,000
10,000
2,500
8,000
2,000
6,000 GDP/cap (PPP,USD) - LHS
1,500
4,000 1,000 GDP/cap (current USD) - LHS
2,000 500
Household consumption (current USD, bn) - RHS
0 0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: World Bank, Statista, VCSC
4
Consumer optimism is spurring spending
Vietnam’s retail sales growth and consumer confidence
7M 2019 Real 8.7%
16% Price growth 140
7M 2019 Nominal 11.6%
Real growth
Nielsen's Consumer confidence index 130
12%
120
8% 110
100
4%
90
0% 80
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Source: General Statistics Office of Vietnam, Nielsen
5
Vietnam boasts one of the fastest-growing middle-affluent classes in the region
2017-2030 CAGR forecast for MACs Middle-Affluent Consumers (MAC) as % of population, 2017
5.5% 5.5% 78%
5.2%
60%
44%
2.9%
34%
2.2%
25%
Vietnam The Indonesia Thailand Malaysia Vietnam The Philippines Indonesia Thailand Malaysia
Philippines
Vietnam’s consumer class breakdown (mn people)
CAGR ✓ Definition of MACs for Vietnam: monthly household
income of at least USD660, encompassing Affluent and
17 +11%
5 Established Middle Class.
19 ✓ MACs to account for 45% of population in 2030 vs 25%
Affluent 31
+4% in 2017.
Established middle class
Emerging middle class
29 ✓ Affluent consumers as % of population to widen from 5%
in 2017 to 16% in 2030.
Aspirant 37 +2%
17
Poor
-4%
23 10
9 -7%
2017 2030 Source: Boston Consulting Group
6
Booming MACs propel premiumization of products/services, indulgent consumption
Six common behaviors of the Mass Affluent
✓ Embracing premiumization: more expensive products ✓ Relishing immersive experiences: in-store
in same categories, more indulgent consumption experience, omnichannel, special in-store events.
✓ Searching for quality and value: luxury brands need ✓ Using digital media: pre-purchase research, online
worthy quality; consumers searching for proof of value shopping, commerce on social media.
(e.g. craftsmanship, advanced tech, special/quality ✓ Travel frequently: strong propensity to spend
ingredients). while traveling.
✓ Seeking exclusivity: products as a means to
differentiate oneself.
Premiumization follows distinct patterns for various products
Stable with income Maturing with income Continuous growth Inflection points
• Toothpaste • Refrigerators, TVs • Cosmetics and skin care • Cars
• Instant noodles • Smartphones • Beer • Travel and vacation
• Fresh food • Quick-service restaurants • Baby gear • Spirits
Poor Aspirant Emerging middle class Middle class Affluent
Source: Boston Consulting Group 7
Key consumer trend
Modern trade, e-commerce taking off
Beneficiaries: branded modern retailers, e-commerce players
Stocks: MWG, VTP
8
Modern retail is thriving as consumers seek convenience & better shopping quality
FMCG consumption by retail channel (Q1 2019)
10% in 2017
Minimarts/CVS Online Others
3% 1% 6%
Medium-sized
Hyper/Supermarkets street shops
9% 24% Currently in Vietnam:
Specialty stores 9,000 wet markets vs
The shift to modern retail is only beginning in Vietnam
Modern trade penetration in FMCG across Asian countries as of Q2 2018
100% Korea
Malaysia
80%
China Taiwan
60%
Thailand
Philippines
40%
Indonesia
20%
Vietnam
India
0%
- 5,000 10,000 15,000 20,000 25,000 30,000 35,000
2017 GDP per capita (USD)
Source: Kantar Worldpanel, World Bank, VCSC
10Busier lifestyles, shrinking family size point to future prosperity of mini format
Smaller Fresh &
household just-in-time
size food
Ease of
Long
access,
opening nearby
hours location
Modern
I’m on retails &
the move food
chains
Large
More Easy
school- All-in-one
aged white-collar browsing,
labor force quick billing shopping
population
Healthy
shopping/
eating
Source: Nielsen, VCSC
11Small formats are spearheading the emergence of modern trade
Average monthly shopping frequency of Vietnamese consumers across channels
2010 2018 Q1 2019
25.2
18.9 18.7
8.8 9.5
7.0
4.5 4.2 3.7
2.2 3.3 2.5 2.3
1.2
0.0
Wet market Traditional grocery Convenience stores Minimarts Supermarkets
stores
Source: Nielsen
FMCG YoY growth by retail channel in top four urban cities in Vietnam
Minimarts/CVS 32%
Hyper/Supermarkets 14%
Specialty stores 7%
Wet markets 7%
Small street shops -1%
Medium-sized street shops 8%
Source: Kantar Worldpanel (Q1 2019)
12Minimart is outgrowing convenience store
Store count of major CVS chains in Vietnam Store count of major minimart chains in Vietnam
337 1,800
1,700
300
168 160
147
118118
108 600
408
59 353
233 215 226
24 32
0
Circle K Family Mart Aeon Ministop 7-Eleven Vinmart+ Bach Hoa Xanh Coop Foods Satra Foods
Dec-18 Jun-19
Sep-16 Dec-18 Jun-19
Source: VCSC compilations
13E-commerce expected to grow the fastest in Vietnam among top ASEAN countries
SEA e-commerce market size (GMV, USD bn)
CAGR = 23%
53
27%
94% 23%
87%
19% 16% 49% 15
20%
13
12
27%
42% 22%
7
5 5
3 3
2 2 2 2
1 1 1 1 0.4
Indonesia Malaysia Philippines Singapore Thailand Vietnam
2015 2018 2025
Source: Google, Temasek (2018)
14Vietnamese are well-connected
Active internet users 143 million mobile Smartphone 65 million 3G & 4G
64 million subscriptions penetration subscriptions
or >70%
66% of population vs population of 97 vs population of 97 million
million
Unchanged vs Jan 2018
Source: We Are Social (January 2019), Internet World Stats, VCSC
15Key consumer trend
Vibrant indulgent consumption
Beneficiaries: discretionary & luxury goods
Stocks: PNJ, VEA
16Rising incomes and consumer confidence buoy discretionary spending
What Vietnamese consumers will spend on after covering necessities
76%
72%
53%
48% 47% 48%
46%
35%
33%
30%
27% 26%
Saving Travel Clothing Tech devices Home Entertainment
decoration
Q4 2016 Q3 2018
Source: Nielsen (percentages represent the % of survey respondents selecting a choice)
17Soaring car ownership a reflection of Vietnamese’s new wealth
Number of passenger cars sold in Vietnam
250,000
Consumers delayed purchases in 2017 in
anticipation of a steep reduction in tariffs on cars
imported from ASEAN. Sales got back on a
+28% YoY
growth track in 2018.
200,000
38%
CAGR
150,000
+35% YoY
100,000
50,000
-
2013 2014 2015 2016 2017 2018 7M 2019
Source: VAMA
18Key consumer trend
Product premiumization
Beneficiaries: FMCG companies with superior product innovation
and brand-building capabilities
Stocks: SAB, MSN
19Broad-based premiumization
Premium + semi-premium beer
Market share ballooned from 30% currently.
Vinamilk Organic Milk
Launch: December 2016
Features: 100% organic fresh milk, 1.8x price of mainstream
Supply inefficient to meet demand
Premium fish sauce
Household penetration broadened by ~7 ppts YoY in 12 months
ending September 10, 2018 (to 57% in urban and 39% in rural)
Source: Kantar Worldpanel, Heineken, VCSC
20Those who don’t innovate are bound to lose (1)
Laggard - QNS
QNS’s historical soymilk revenue (VND bn) during 2010-2018 QNS’s key soymilk SKUs and their inception years
Lackluster product innovation and
4,500 brand building Inception Inception
SKU SKU
year year
4,000
3,500 Fami
Fami 1997 2014
Kid
3,000
CAGR of
2,500 44% Soy
Vinasoy 2012 2015
Men
2,000
1,500 Vinasoy Fami
2012 2018
sesame Go
1,000
500
Fami
2013
- canxi
2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: QNS Source: VCSC compilations
21Those who don’t innovate are bound to lose (2)
Outperformer - VNM
VNM’s historical market share by category
2014 2015 2016 2017 2018
Liquid milk 51% 53% 56% 58% 59%
Condensed milk 80% 80% 80% 80% 79%
Spoon yogurt 85% 85% 85% 83% 83%
Powdered milk (volume) NA NA 41% 42% 42%
Source: VNM
VNM’s new products during 2018-2019
2018
2019
Source: VNM, VCSC compilations
22Consumer sector: key data
Market Foreign ADTV
State Share Target Target Div.
cap, Foreign avail, 30D, Upside 12M
Code Rating O'ship price, price, price, yield
USD limit % USD USD % TSR %
% VND ps VND ps updated %
mn mn mn
MWG BUY 2,212 0.0% 49.0% 0.0 4.2 116,900 215,000 12/08/2019 83.9% 1.3% 85.2%
VHC BUY 318 0.0% 100.0% 207.1 0.6 80,200 108,700 05/08/2019 35.5% 5.0% 40.5%
FPT BUY 1,539 6.0% 49.0% 0.0 3.7 53,100 69,300 22/08/2019 30.5% 3.8% 34.3%
MSN BUY 3,767 0.0% 49.0% 325.0 1.5 75,400 95,900 30/08/2019 27.2% 0.0% 27.2%
FRT O-PF 161 0.0% 49.0% 0.1 0.3 44,000 54,000 29/07/2019 22.7% 2.3% 25.0%
PNJ BUY 786 0.0% 49.0% 0.0 1.2 82,200 95,000 01/08/2019 15.6% 2.2% 17.8%
PTB O-PF 140 0.0% 49.0% 41.1 0.4 69,000 80,200 07/08/2019 16.2% 1.4% 17.7%
SAB O-PF 7,514 36.0% 100.0% 2,739.6 0.4 273,000 310,500 16/08/2019 13.7% 1.8% 15.6%
VEA BUY 3,148 88.5% 49.0% 1,367.0 1.2 55,200 59,800 15/08/2019 8.3% 7.1% 15.4%
VNM M-PF 9,155 36.0% 100.0% 3,800.0 4.0 123,000 124,600 23/08/2019 1.3% 3.7% 5.0%
QNS O-PF 396 0.0% 49.0% 135.5 0.4 30,600 29,800 26/08/2019 -2.6% 4.9% 2.3%
VTP N/A 342 68.1% 49.0% 106.0 0.3 136,200 N/A N/A N/A N/A N/A
Source: VCSC, share prices as of August 30, 2019
23Consumer sector: summary valuations
Share EPS g EPS g EPS g EV
P/E P/E P/E P/E ROE P/B LQ Net D/E
Code price, 2019F 2020F 2021F /EBITDA
TTM x 2019F x 2020F x 2021F x 2019F x LQ x
VND ps % % % 2019F x
MWG 116,900 34.6% 34.8% 21.7% 14.8 13.0 9.6 7.9 8.0 37.3% 5.0 0.1
VHC 80,200 10.8% 6.7% 10.6% 4.4 4.7 4.4 4.0 3.7 34.6% 1.6 0.0
FPT* 53,100 27.3% 21.2% 20.8% 13.4 11.8 9.7 8.0 6.8 24.8% 2.7 -0.1
MSN* 75,400 7.8% 24.3% 33.7% 22.2 21.7 17.4 13.0 10.8 12.9% 3.0 0.5
FRT 44,000 14.9% 15.3% 9.5% 10.0 9.7 8.4 7.6 7.9 30.3% 3.1 1.0
PNJ 82,200 20.8% 20.3% 23.3% 20.1 16.7 13.9 11.2 11.7 28.7% 4.7 0.3
PTB 69,000 12.7% 22.9% 36.2% 8.5 7.9 6.4 4.7 5.8 25.3% 2.0 0.9
SAB 273,000 25.3% 22.5% 17.4% 40.8 35.2 28.7 24.5 24.9 32.9% 10.0 -0.8
VEA 55,200 6.6% 15.9% 10.4% 10.4 9.7 8.4 7.6 N/A 29.2% 2.8 -0.4
VNM 123,000 4.6% 7.0% 6.3% 22.6 22.2 20.8 19.6 14.7 40.2% 7.6 -0.3
QNS 30,600 -11.7% 17.9% 9.9% 7.3 8.3 7.0 6.4 4.6 19.4% 1.6 -0.1
VTP** 136,200 36.0% 36.0% 28.0% 28.4 24.4 18.0 14.0 N/A N/A 10.6 -0.9
Source: VCSC; share prices as of August 30, 2019
* Earnings-related metrics are based on recurring earnings
** Based on company guidance
24Content
Top consumer stock picks
MWG, PNJ, VEA, SAB, MSN
25Mobile World Investment Corp (HSX: MWG)
Title of presentation
Mobile World Corp (HSX: MWG)
The crown jewel of Vietnam’s modern retail sector
September 2019
Copyright © Viet Capital Securities 26Investment thesis 1: Top diversified retailer in Vietnam
• #1 mobile retailer • #1 electronics retailer • #1 minimart chain
• 45% market share at YE2018 • 35% market share at YE2018 • 600 stores as of June 2019
• 1,011 stores as of June 2019 • 838 stores as of Jun-19 • Key long-term profit driver
• Focus on SSSG • Medium-term profit driver
Source: VCSC compilations
27Investment thesis 2: Dominant omnichannel (online/offline) + best execution
MWG’s historical store count by chain MWG’s online sales contribution to mobile
phone and electronics revenues
18%
TGDD (mobile phones) DMX (consumer electronics) BHX (minimart) 17%
15%
3,000
2,500
2,000 9%
8%
1,500
1,000
500
0
2015 2016 2017 2018 H1 2019 2016 2017 2018 2019F 2020F
Roll-out of new products such as watches, small home appliances and kitchenware is boosting same-store sales
Source: MWG, VCSC
28Investment thesis 3: Modern retail sector has extensive growth headroom in Vietnam
Modern trade penetration in FMCG across Asian countries FMCG YoY growth by retail channel in top four urban cities
as of Q2 2018 in Vietnam (Q1 2019)
100% Korea
Minimarts/CVS 32%
Malaysia
80%
Hyper/Supermarkets 14%
China Taiwan
60% Specialty stores 7%
Philippines
Thailand
40% Wet markets 7%
Indonesia
20% Small street shops -1%
Vietnam
India Medium-sized street shops
0% 8%
- 5,000 10,000 15,000 20,000 25,000 30,000 35,000
2017 GDP per capita (USD)
Source: VCSC compilations, Kantar Worldpanel
Modern retail formats are growing rapidly but their penetration remains low in Vietnam compared to other countries
29Investment thesis 4: Electronics, grocery to drive strong medium/long-term growth
Revenue forecasts by chain (VND bn) NPAT forecasts by chain (VND bn)
23% CAGR 29% CAGR
2018 2019F 2020F 2021F 2022F 2023F 2018 2019F 2020F 2021F 2022F 2023F
TGDD (mobile) DMX (electronics) BHX (minimart)
TGDD + DMX BHX
DMX store count projections BHX store count projections
1,500 4,800
1,450
1,300
1,150 3,800
1,000
2,800
750
1,800
950
405
2018 2019F 2020F 2021F 2022F 2023F 2018 2019F 2020F 2021F 2022F 2023F
Source: MWG, VCSC forecasts
30Mobile World Investment Corp (HSX: MWG)
Title of presentation
Phu Nhuan Jewelry (HSX: PNJ)
The queen of Vietnam’s fashion gold jewelry
September 2019
Copyright © Viet Capital Securities 31Investment thesis 1: The unquestioned leader in gold fashion jewelry market
DOJI
PNJ’s store count vs competitors
Number of stores
350
324
300 PNJ
250
200
150
PRECITA TheGioiKimCuong
100 101
53
50 48
19
0
2014 2015 2016 2017 2018
PNJ SJC
DOJI PRECITA
TheGioiKimCuong
Source: VCSC compilations
32Investment thesis 2.1: Extensive headroom for store expansion
Number of PNJ gold stores per million people in PNJ’s store network
Vietnam’s tier-1 cities.
Hai Phong 1.3 North
61 stores
Hanoi 2.6 18% of PNJ store count
Can Tho 4.8
Central
Da Nang 10.8 32 stores
10% of PNJ store count
HCMC 10.6
Source: PNJ, General Statistics Office Of Vietnam Highlands
(as of YE2018), VCSC estimates 25 stores
8% of PNJ store count
The South
202 stores
64% of PNJ store count
Source: VCSC compilations
(as of YE2018; inclusive of silver standalone stores)
33Investment thesis 2.2: Headroom for footprint expansion even in HCMC
PNJ’s store network in HCMC
Source: VCSC compilations (as of end-Q2 2019)
34Investment thesis 3: Large headroom for further increase in sales/store
PNJ’s gold jewelry retail sales/stores compared to those of Chow Tai Fook (CTF), Chow Sang Sang
(CSS) and Luk Fook (LF) in Mainland China in FY2018
USDmn
2.6
2.4
1.8
1.3 PNJ's sales/store/year
CTF's Mainland China sales/store/year
CSS's Mainland China sales/store/year
LF's Mainland China sales/store/year
FY2018
Source: VCSC compilations (CTF, CSS and LF’s financial year ends March 31)
Given similarities in gold consumption habits between Vietnam and China, we expect PNJ’s sales/store to
gradually catch up with the current level of Chinese peers as income rises in Vietnam. Currently, China’s GDP per
capita is nearly 4x that of Vietnam.
35Investment thesis 4: Attractive valuation/growth profile
2018-2021F EPS CAGR
23.9%
20.2% 21.5%
12.2% 11.2%
7.2% 8.3%
Titan Tiffany & Co Chow Tai Lao Feng Luk Fook Chow Sang PNJ
Fook Xiang Holdings Sang
3y-PEG (2018 PER / 2018-2021F EPS CAGR)
3.3
1.5 1.5 1.4
1.3
0.9 0.9
Titan Tiffany & Co Chow Tai Lao Feng Luk Fook Chow Sang PNJ
Fook Xiang Holdings Sang
Source: Bloomberg consensus for peers, VCSC forecasts for PNJ (data as of August 30, 2019)
36Investment thesis 5: Bright earnings prospects
Revenue projections (VND bn) Store count projections
444
23,565 404
20,265 364
324
16,855
14,573 1%
0%
0%
0% 110
67
60% 34
57% 58% 14
56%
2018 2019F 2020F 2021F
2018 2019F 2020F 2021F
Jewelry retail revenue Watch retail revenue Others Jewelry store count Watch POS count
EPS projections (VND) Gold jewelry retail SSSG projections
21% 20%
7,314
CAGR
5,932
4,932 13%
4,083 12%
5%
2018 2019F 2020F 2021F
2018 2019F 2020F 2021F Gold Jewelry retail SSSG
Source: PNJ, VCSC forecasts
37Mobile World Investment Corp (HSX: MWG)
Title of presentation
VEAM Corp (UPCoM: VEA)
Gateway to Vietnam’s motorization
September 2019
Copyright © Viet Capital Securities 38Investment thesis 1.1: Exposure to booming car and extensive motorbike markets
VEA’s ownership in VEA’s ownership in VEA’s ownership in
Honda Toyota Ford
VEA provides exposure to Vietnam’s 20%
30% 25%
booming car and extensive motorbike
markets thanks to its 20%-30% stakes
in Honda, Toyota and Ford Vietnam.
PC market share (2018) Motorbike market
share (2018)
Toyota
26%
VEA’s associates commanded a
combined ~40% market share in Honda Hond
passenger cars (PC) and 76% in 11% a
motorbikes in 2018. 76%
Ford
4%
480 Number of PCs
392
325 per 1,000
Car consumption is poised to take off in
Vietnam on the back of Vietnam’s low
119 114 99
penetration and rising incomes. 52 33 21 17
Korea,
Malaysia
Japan
Philippines
China
Indonesia
Vietnam
India
Thailand
Singapore
Rep.
Source: VEA, VAMA, VCSC compilations
39Investment thesis 1.2: VEA’s associates are poised to acquire more market share
Vietnam’s passenger car market share in We expect Honda to continue gaining market
2018 (inside) and 2021F (outside) share in motorbikes
25.7%
26.2%
11.0%
2018:
4.1% 14.2%
75.9%
4.8% 2021F:
82.0%
Toyota Honda Ford Thaco Huyndai Others Honda Others
Drivers for market share expansion: strong brand equity; new model/facelift launches; better flexibility to diversify
products thanks to a healthy mix of locally assembled and imported cars
Source: VEA, VCSC
40Investment thesis 2: Attractive valuation and dividend yields
We forecast robust EPS growth and dividend yields
16,000
VEA’s PER vs regional peers
15.0%
14.6x
11.6%
14,000
10.3% 12.8x
12,000 9.2%
7.1%
10.0%
10,000
9.7x
7,257
5.0%
6,572
8,000
6,000 5,321 5,670
0.0%
4,000
-5.0%
2,000
0 -10.0%
2018A 2019F 2020F 2021F VEA's 2019F PER Asian EM car Asian motorbike
peers' TTM PER peers' TTM PER
EPS (VND) Dividend yield @VND55,200/share media median
VEA is trading at a discount of 27% to the TTM PER of regional peers, which is attractive in our view despite VEA’s lack
of control over its automobile associates
Source: VEA, VCSC forecasts, Bloomberg (data as of August 30, 2019)
41Mobile World Investment Corp (HSX: MWG)
Title of presentation
Sabeco (HSX: SAB)
Extensive earnings upside from restructuring under ThaiBev
September 2019
Copyright © Viet Capital Securities 42Investment thesis 1.1: Extensive headroom for margin expansion
Profit margins across leading beer companies in Asia (FY2018)(3)
80%
67% 64%
70%
58%
60%
50% 39%
40% 33% 34% 35% 30%+
30% 26% 26% 27%
18% 20%
20% 14%
9%
10%
0%
Heineken Carlsberg AB InBev Sabeco's Sabeco's China Heineken Heineken Carlsberg
Malaysia Malaysia Asia beer beer Resources Vietnam Asia Pacific Asia
segment, segment,
reported (1) underlying
(2)
GPM EBIT margin
Source: company disclosures, VCSC
(1)Based on SAB’s reported numbers, whereby revenue and COGS include excise tax attributed to volume sourced from
associate breweries (i.e., SAB holds minority stakes in these breweries). We further attribute all of SAB’s reported SG&A to
its beer segment.
(2)We strip out excise tax attributed to volume sourced from associate breweries from SAB’s reported revenue and COGS,
using our own estimates.
For an apples-to-apples comparison with SAB, we strip out excise tax and other tax items inclusive in these companies’
(3)
reported revenue and COGS.
Source: SAB, VCSC
43Investment thesis 1.2: Extensive headroom for margin expansion
2018 and 2021F beer GPM and EBIT/beer revenue %
Margin enhancement initiatives
34.3%
✓ ASP/mix: larger contribution from the high-margin Saigon Special
26.1% brand and price hikes on the back of strengthening brand equity.
21.4% ✓ Joint procurement of raw materials and advertising services with
ThaiBev.
14.4%
✓ Packaging reformulation and more efficient use and management
of packaging materials.
✓ Improved efficiency at breweries: larger scale and application of
new production standards and efficiency programs.
Reported beer GPM EBIT/beer revenue ✓ Reduced sourcing from non-controlling breweries.
2018 2021F ✓ Easing transportation costs thanks to competitive bidding and
route optimization.
Source: SAB, VCSC ✓ Distribution optimization: fewer but bigger distributors.
Based on SAB’s reported numbers, whereby revenue and ✓ Other initiatives: closing excessive offices and warehouses;
COGS include excise tax attributed to volume sourced from digitalizing operational processes.
associate breweries (i.e., SAB holds minority stakes in these
breweries). We further attribute all of SAB’s reported SG&A to its
beer segment.
44Investment thesis 2: We forecast SAB to gain market share going forward
Volume market share structure of Vietnam’s beer industry (2018)
8%
~40%
15%
25%+
Sabeco Heineken Habeco Carlsberg Others
VCSC’s forecast for future market shares
Source: company disclosures, VBA, VCSC
Drivers for market share expansion: better product freshness, effective marketing, improved sales
and distribution capabilities, stepped up presence in big cities
45Investment thesis 3: Market volume expected to grow 5% annually through 2022
Vietnam’s historical total beer consumption (million liters) and per capita (liters)
4,500 4,206 70.0
4,006
4,000 3,786
60.0
3,400
3,500 3,190 3,247
2,978 43 50.0
3,000 2,622 40 42
2,420 34 35 36 40.0
2,500 33
27 29
2,000 30.0
1,500
20.0
1,000
500 10.0
0 0.0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Total market volume PCC
Total beer consumption posted a 5.7% CAGR over the last five years on the back of a 4.7% CAGR in per capita
consumption
Drivers for future growth: one million people reaching the legal drinking age per year; increasing urbanization and
rising income; upbeat consumer sentiment
Source: VBA, Euromonitor, VCSC
46Investment thesis 4: Highly capable management team
Key changes/additions to board of directors following ThaiBev’s acquisition
Members Working experience
CEO of Asia Pacific Breweries from 1993 to 2008.
Mr. Koh Poh Tiong - Chairman CEO of Fraser & Neave (F&B division) from 2008 to 2011.
Undertaking board directorships at several leading corporations in Asia.
Ms. Tran Kim Nga – Board
Played an instrumental role in the business expansion of Berli Jucker in Vietnam.
member
Mr. Michael Chye Hin Fah – Group CFO – International Beverage Holdings Ltd (January 2017- Present).
Board member Executive Vice President, Brand Investment Management – Thai Beverage (February 2017 – Present).
Mr. Phornprapha – Board
Worked at the Boston Consulting Group from 1994 to 2014 (Managing Director from 2001 to 2014).
member
Current board of management
Members Working experience
CEO of Fraser & Neave (food division) prior to joining SAB.
2005-2014: senior positions in Asia Pacific Breweries, including his last role of Regional Director,
Mr. Bennett Neo - Chairman
covering Indochina, Singapore, Heineken-Kirin Japan, Heineken Taiwan, Tiger Global Exports and
Heineken Asia Pacific Exports.
Mr. Teo Hong Keng - CFO Spent 17 years with Asia Pacific Breweries, including being the CFO of Heineken Malaysia, Finance
Director of APB Singapore, Head of Finance of Cambodia Brewery Ltd and Tiger Export Pte Ltd.
Mr. Hoang Dao Hiep – Deputy Managing Director of Saatchi & Saatchi Vietnam prior to joining SAB. Before that, he was Regional
CEO, Marketing Marketing Director of Carlsberg in Southeast Asia.
Mr. Nguyen Hoang Giang – CEO of Vinafco JSC, one of the leading logistics companies in Vietnam, prior to joining SAB. Before
Deputy CEO, Supply Chain that, he was Head of Logistics in Southeast Asia for IKEA Trading.
Mr. Lam Du An – Deputy CEO,
Has been with SAB since the early 1990s.
Production
Melvyn Ng Kuan Ngee – Deputy
Spent 15 years at Asia Pacific Breweries.
CEO, Sales
Source: SAB, VCSC
47Investment thesis 5: Superior earnings growth outlook vs international peers
2018- 2019-
2018- 2019-
Market 2018 2019 2021F 2022F
2018 2019F 2021F 2022F 2018 2019F
Company name cap ROE ROA D/E three- three- EBITD EBITD
PER PER EPS EPS EV/EBITDA EV/EBITDA
(USDmn) year PEG year PEG A A
CAGR CAGR
CAGR CAGR
ANHEUSER-
189,453 10.8% 3.1% 152.9% 38.1 17.4 34.8% 7.9% 1.1 2.2 14.1 13.0 6.2% 6.8%
BUSCH I
HEINEKEN NV 59,537 13.1% 4.3% 96.4% 27.8 21.0 15.5% 10.4% 1.8 2.0 14.6 12.4 9.0% 6.5%
ASAHI GROUP
21,840 13.5% 4.9% 91.1% 14.5 14.3 4.6% 6.3% 3.2 2.3 10.2 10.0 4.1% 3.9%
HOLD
CARLSBERG-B 21,437 11.5% 4.6% 50.1% 27.3 24.2 11.2% 11.7% 2.4 2.1 12.5 11.4 5.9% 5.1%
KIRIN HOLDINGS 18,245 7.7% 3.1% 39.8% 11.5 21.7 -1.8% 20.2% NA 1.1 9.2 11.1 1.0% 8.2%
CHINA
14,819 5.2% 2.4% 3.8% 119.3 58.3 55.4% NA 2.2 NA 33.1 22.2 29.5% 15.7%
RESOURCES
MOLSON
11,069 6.5% 3.0% 76.4% 9.7 11.3 -3.3% 8.9% NA 1.3 8.3 8.9 -2.7% NA
COORS-B
TSINGTAO
8,574 8.5% 4.6% 3.3% 44.0 35.6 18.7% 4.6% 2.4 7.7 15.3 16.1 6.9% NA
BREW-A
BEIJING YAN-A 2,309 1.4% 1.0% 0.4% 90.0 60.0 26.6% NA NA NA 13.1 13.6 8.9% NA
SAPPORO
1,824 6.4% 1.6% 157.6% 22.4 22.2 7.1% 3.6% 3.2 6.2 11.5 10.8 5.0% 4.0%
HOLDINGS
CARLSBERG
1,764 NA NA 41.4% 26.5 24.4 8.0% NA 3.3 NA 19.1 17.3 8.5% NA
BREWER
HEINEKEN
1,628 68.8% 34.3% 28.3% 24.2 22.4 7.2% NA 3.4 NA 14.2 14.9 2.7% NA
MALAYSIA
Average 29,375 14.0% 6.1% 61.8% 37.9 27.7 15.3% 9.2% 2.5 3.1 14.6 13.5 7.1% 7.2%
Median 12,944 8.5% 3.1% 45.8% 26.9 22.3 9.6% 8.4% 2.4 2.1 13.6 12.7 6.0% 6.5%
SABECO 7,596 27.1% 19.5% 1.9% 44.6 35.6 21.7% 18.8% 2.1 1.9 32.3 25.2 22.9% 18.8%
Source: Bloomberg, VCSC (as of August 15, 2019)
48Mobile World Investment Corp (HSX: MWG)
Title of presentation
Masan Group (HSX: MSN)
Leading packaged F&B player
September 2019
Copyright © Viet Capital Securities 49Investment thesis 1: Well positioned to ride on Vietnam’s consumption story
Seasonings
65%+ market share
Growth drivers: premiumization; expansion to adjacent categories
(granule, oyster sauce); launch of ready-to-cook seasonings
180,000
Food
POS
Convenience foods
20%+ market share
Growth drivers: premiumization; expanding meal-solution portfolio;
ramp up of presence in the mainstream segment
Coffee
~30% volume market share in instant coffee
Growth driver: potential entry into the roasted and ground coffee
segment
160,000
Beverage
POS
Beverages
~7% market share in energy drinks
Growth drivers: expanding distribution; widening product offerings
50Investment thesis 2: Extensive meat opportunity
“MEATDeli” brand, ~USD10bn market;
sold through own increasing demand
Chilled fresh pork showrooms, modern for safe and hygienic
trade and agent meat
shops
Current capacity of Recruiting
230,000-250,000 contracted farmers
Farm porkers to scale up supply
Cyclical; limited Will serve Masan’s
long-term growth own farms and
Feed due to farming contracted farmers
sector consolidation in the future
Partner with Jinju Processed meat =
Ham, a processed 1%-2% of total meat
Processed meat meat player in consumption in
South Korea Vietnam, compared
to >10% in China
51Investment thesis 3: Robust earnings outlook
2018-2021F recurring NPAT-MI breakdown (VND bn)
12,000 NPAT-MI: 25% CAGR
10,000
Techcombank’s contribution: 10% CAGR
8,000
6,000
4,000 EBIT: 12% CAGR
Including F&B EBIT CAGR of 11%
2,000
0
Net financial exp: -16% CAGR
-2,000
-4,000
-6,000
2018 2019F 2020F 2021F
EBIT TCB Net financial exp. Others Tax & MI
Source: VCSC
52Content
Other BUYs
FPT, PTB, VHC
53Mobile World Investment Corp (HSX: MWG)
Title of presentation
FPT Corp (HSX: FPT)
Vietnam’s Software/Telecom powerhouse
September 2019
Copyright © Viet Capital Securities 54Investment thesis 1.1: Fast-growing software outsourcing player riding on cost advantage
Median annual salary (USD) of an experienced FPT Software has the largest engineer pool in Vietnam
software engineer in Vietnam vs China and India
32,190
~16,000
software engineers
19,581
~2,500
14,866 software engineers
>24%Investment thesis 1.2: Moving up the software value chain
Typical software development life cycle
Source: VCSC compilations
56Investment thesis 2: FPT Telecom – Superior services with competitive pricing
Internet package comparison between main telcos
FPT Viettel VNPT
HCM
Speed VND000 Speed VND000 Speed VND000
Package (Mbps) VND000/mth /Mbps Package (Mbps) VND000/mth /Mbps Package (Mbps) VND000/mth /Mbps
Super 35 35 225 6.4 Net1 Plus 30 185 6.2 Home 1 30 189 6.3
Super 50 50 275 5.5 Net2 Plus 40 220 5.5 Home 2 40 219 5.5
Super 65 65 340 5.2 Net4 plus 70 300 4.3 Home 3 50 259 5.2
Hà Nội
Speed VND000 Speed VND000 Speed VND000
Package (Mbps) VND000/mth /Mbps Package (Mbps) VND000/mth /Mbps Package (Mbps) VND000/mth /Mbps
Super 35 35 225 6.4 Net1 Plus 30 185 6.2 Home 1 30 189 6.3
Super 50 50 310 6.2 Net2 Plus 40 220 5.5 Home 2 40 219 5.5
Super 65 65 440 6.8 Net4 plus 70 300 4.3 Home 3 50 259 5.2
Đà Nẵng
Speed VND000 Speed VND000 Speed VND000
Package (Mbps) VND000/mth /Mbps Package (Mbps) VND000/mth /Mbps Package (Mbps) VND000/mth /Mbps
Super 22 22 200 9.1 Net1 Plus 30 165 5.5 Home 1 30 189 6.3
Super 35 35 230 6.6 Net2 Plus 40 180 4.5 Home 2 40 219 5.5
Super 50 50 290 5.8 Net3 Plus 55 210 3.8 Home 3 50 259 5.2
Super 65 65 400 6.2 Net5 Plus 150 400 2.7
Source: VCSC compilations (as of September 2019)
57Investment thesis 3: FPT University’s rising reputation fuels vibrant new enrollments
FPT Education’s total number of students FPT Education’s new enrollments
CAGR of
36,635
19,381
37%
CAGR of
54%
24,732
12,517
19,501
8,195
YE2016 YE2017 YE2018 YE2016 YE2017 YE2018
Source: FPT Source: FPT
58Mobile World Investment Corp (HSX: MWG)
Title of presentation
Phu Tai JSC (HSX: PTB)
Small-cap name with robust growth outlook
September 2019
Copyright © Viet Capital Securities 59Investment thesis 1: Leading player in domestic stone market
PTB’s domestic stone* market share in 2018 Paving/dimension stone consumption per capita of select
countries (sqm)
1,200
1,000
PTB,
28% 800
600
400
200
0
Vietnam China Taiwan World
*Only counting paving and dimension stones (2018) (2016) (2016) (2016)
• PTB operates three main businesses: stone, wooden furniture exports and an automobile dealership.
• In paving stone, PTB’s strong position is premised on its large reserve of 53 million m3 that could operate for at least
another two decades, per management, and its superior know-how evidenced by having successfully turned around
stone mines acquired from smaller companies.
Source: PTB, Ministry of Construction, Rapporto 2017, VCSC
60Investment thesis 2: At forefront of Vietnam’s growing wooden furniture exports
Global wooden furniture export market shares of Total cost of a manufacturing worker in Asia-Pacific in
Vietnam and China during 2018-2018 2018 (USD per year)
12% 40%
35% 12,000
10%
30% 10,000
8% 25% 8,000
6% 20% 6,000
4% 15%
10% 4,000
2% 5% 2,000
0% 0% -
Vietnam (LHS) China (RHS)
• PTB is at the forefront of the wooden furniture export industry thanks to its scale and track record in product quality and
wood origin. In 2018, PTB accounted for nearly 1% of Vietnam’s furniture exports, per our estimate, and was listed as
one of Vietnam’s most trustworthy wood exporters in 2017 by the Ministry of Industry and Trade.
Source: International Trade Center, Japan External Trade Organization, VCSC
61Investment thesis 3: Riding on Vietnam’s fast-growing car consumption
Toyota Vietnam’s sales volume by region and PTB’s auto revenue and Toyota’s sales volume in
PTB’s share in 2018 central Vietnam (2014-2018)
VND bn unit
PTB's auto revenue (LHS)
1,800 10,000
3% Toyota's sales volume (RHS)
9% 1,500 8,000
PTB
1,200
Others in Central 6,000
50%
900
North
38% 4,000
South 600
300 2,000
0 0
2014 2015 2016 2017 2018
• PTB currently owns two Toyota showrooms in Binh Dinh and Da Nang (central Vietnam).
• We currently expect passenger car sales in Vietnam will grow more than 20% per annum through 2021.
• Toyota is the top car brand in Vietnam, premised on its brand equity, wide range of models and extensive distribution
network.
Source: PTB, VAMA, VCSC
62Investment thesis 4: Attractive valuation against 2018-2021F EPS CAGR of 23%
VCCS’s forecasts for PTB’s gross profit during 2019-2021F PTB’s TTM PER during 2015-2019
(VND bn)
Five-year weighted-
1,800 23% EPS CAGR
14.0 average peer TTM
1,600 PER: 10.7
12.0
1,400 15%
1,200 10.0 8.1
1,000 30% 8.0
800
6.0
600 8.5
4.0
400
14% 2019F PER: 7.9x
200 2.0
– 0.0
2018 2019F 2020F 2021F Gross profit Jan 15 Jan 16 Jan 17 Jan 18 Jan 19
CAGR
Stone Wooden furniture TTM PER Five-year average
Auto dealership Real estate
• PTB is planning a foray into real estate in H2 2019. We estimate PTB’s first residential project will contribute 14% to our
2021F NPAT-MI forecast, but there are potential cyclicality and execution risks.
• Downside risks to our positive view on PTB: slowdown in domestic construction activity; potential tariffs on Vietnamese
wooden furniture, especially by the US; sluggish real estate execution.
Source: PTB, Bloomberg, VCSC
63Mobile World Investment Corp (HSX: MWG)
Title of presentation
Vinh Hoan Corp (HSX: VHC)
World’s leading pangasius fish exporter
September 2019
Copyright © Viet Capital Securities 64Investment thesis 1: Best of breed in Vietnam’s monopoly pangasius export market
Global pangasius export Global pangasius exports by
• VHC is the world’s largest pangasius
market share (2018) country (2018)
(Vietnamese catfish) exporter with a
global market share of ~17% in 2018.
VHC
• It has a long track record in product 17%
quality, traceability and regulatory
compliance, which is demonstrated by its
~50% market share in the US. Vietnam,
94%
• The company is riding on rising
pangasius demand amid limited wild-
caught whitefish and consolidation of the
pangasius value chain. Global seafood production by Pangasius consumption per capita in
capture and aquaculture (mn tonnes) 2010-2017 (kg)
• New free trade agreements (especially
200
the upcoming VN-EU FTA), a potential 0.5
pork shortage following ASF outbreaks in
150 0.4
China and the US’s new tariffs on 83.6 93.6 0.32
Chinese whitefish are potential boons to 66.4
100 0.3
pangasius demand and VHC.
0.2 0.16 0.14
50 89.5 90.4 93.2
0.1
0 0.0
2012 2017 2030F US EU China
Capture Aquaculture 2010 2017
Source: Worldbank, FAO, ITC, VASEP,
Agromonitor, NOAA, VCSC estimates
65Investment thesis 2: Solid earnings outlook and attractive valuations
We forecast a 9% EPS CAGR over 2018-2021F driven by a 10% Cheap valuation compared to historical average
volume CAGR
VND
25,000 22.5% 18
20,000 22.0% 15
12
15,000 21.5% 8.0x
9
10,000 21.0% 6
3 TTM 4.4x
5,000 20.5% 2019F PER: 4.7x
0 20.0%
2018 2019F 2020F 2021F
VHC's reported EPS (LHS) VHC's GPM (RHS) TTM PER 5-year average
Source: VHC, Bloomberg, VCSC
66Content
Other notable stocks
VTP, VNM, QNS, FRT
67Mobile World Investment Corp (HSX: MWG)
Title of presentation
Viettel Post (UpCOM: VTP)
Riding on Vietnam’s e-commerce boom
September 2019
Copyright © Viet Capital Securities 68Investment thesis 1: 2nd leading postal company with large e-commerce exposure
Vietnam’s postal market shares in 2017 VTP’s 2018 revenue by segment
Trading
12%
Others, VN Post,
20.7% 31.9%
Lazada
Express, Non-E-
commerce E-commerce-
6.6%
delivery related delivery
EMS, 7.5% and other 57%
services
31%
DHL-VNPT,
10.3% Viettel Post,
23.0%
• VTP is the 2nd largest postal company in Vietnam with a market share of 23% in 2017, per the Ministry of Information and
Communication.
• VTP has one of the most extensive postal outlet networks in Vietnam with 1,300 post offices and 6,000 drop-off points, only
behind Vietnam’s national postal company – VN Post.
• As a subsidiary of Viettel Group, which is the largest telco in Vietnam with 2018 revenue of USD10bn, VTP receives strong
support from its parent company regarding manpower, facilities and technology.
Source: VTP, Ministry of Information and Communication, VCSC
69Investment thesis 2: E-commerce has ample growth headroom in Vietnam
Share of e-commerce in retail sales in China during 2007-2018
20% Emerging stage Developing stage Developed stage
Share: < 1% Share: 10%
18% Growth: >50% Growth: 20-30% Growth:Investment thesis 3: Positive management guidance for 2018-2024
VTP’s profit before tax during 2016-2024G based on company guidance
1,600 PBT growth
PBT(VND bn)
1,400
1,200
1,000
800
600
400
200
78% 45% 64% 36% 36% 28% 24% 19% 14%
0
2016 2017 2018 2019G 2020G 2021G 2022G 2023G 2024G
Continual investments in technology to bolster growth
• In July 2019, VTP rolled out a new on-demand delivery app called MyGo to outsource a portion of its last-mile operation.
• Also in July 2019, VTP launched an ecommerce platform named Voso.vn, which is aimed to support its merchant clients
that are doing business on Facebook.
• VTP is upgrading its sorting centers by applying automation. The current sorting capacity of VTP’s automatic conveyor belts
amounts to ~36,000 parcels per hour per line, which is the highest in Vietnam, per VTP.
Source: VTP, VCSC
71Mobile World Investment Corp (HSX: MWG)
Title of presentation
Vinamilk (HSX: VNM)
Dominant dairy player but valuation looks full against moderate growth
September 2019
Copyright © Viet Capital Securities 72Investment thesis 1: Market volume to grow 3.5%-4% p.a. over the next ten years
Dairy consumption per capita in Vietnam vs Asian peers in 2017 (kg)
74 76
2005: 21 kg 2005: 22 kg
28 33
21 22
Vietnam Malaysia Thailand China Japan Korea
Source: EMI, VCSC estimates and compilations
We expect Vietnam’s dairy market to post annual volume growth of 3.5%-4.0% over the next ten years
✓ Dairy consumption per capita in China and Thailand grew 2.5%-3.5%/year from 2005-2017
✓ Vietnam has population growth of 0.5%-1%/year
73Investment thesis 2: VNM is the prime beneficiary of Vietnam’s dairy consumption
VNM’s market share across categories
85% 83%
80% 81%
59%
51% 2014
40% 42% 2015
36%
2016
22% 2017
2018
Liquid milk Infant formula RTD infant Condensed milk Spoon yogurt
(volume) formula (volume)
Source: VNM
Drivers for market share gain
✓ Active new product launches; pioneer in bringing higher-quality products to consumers (e.g., organic milk & A2 milk)
✓ Top-of-mind brand name
✓ Extensive nationwide distribution network that spans 270,000 POS
✓ Significant scale advantage, enabling VNM to overwhelm smaller competitors with strong marketing activities
74Investment thesis 3: Valuation looks full vs growth outlook
Comparable peers
(USD mn) TTM Net Y-o-Y TTM Y-o-Y Debt/ TTM
Ticker Mkt cap ROE % ROA% LQ P/B
Company Sales % NPAT % Equity % P/E
China Mengniu Dairy 2319 HK 16,423.2 10,435.7 14.7 460.4 48.6 48.3 12.7 4.9 37.9 4.6
Inner Mongolia Yili
600887 CH 24,629.6 12,302.0 15.5 985.9 3.9 5.8 24.7 13.0 26.4 6.6
Industrial Group
MEIJI Holdings 2269 JP 10,581.7 11,315.8 1.7 533.7 -3.4 21.0 11.6 6.1 18.1 2.0
Bright Dairy & Food 600597 CH 1,885.2 3,169.9 -2.0 52.1 -38.6 69.4 6.3 2.0 38.2 2.4
PT. Ultrajaya Milk
ULTJ IJ 1,220.6 403.0 N/A 58.7 N/A 2.2 18.1 14.6 20.4 3.4
Industry & Trading
Dutch Lady Milk
DLM MK 982.2 256.9 -3.1 31.7 7.6 14.4 93.0 30.4 31.9 29.5
Industries Berhad
Henan Kedi Dairy 002770 CH 388.2 192.6 1.4 20.2 6.4 67.9 7.8 4.3 19.8 1.5
Median 1,885.2 3,169.9 1.5 58.7 5.2 21.0 12.7 6.1 26.4 3.4
Average 8,015.8 5,439.4 4.7 306.1 4.1 32.7 24.9 10.8 27.5 7.2
Vinamilk VNM VN 9,230.7 2,344.4 5.9 453.6 7.6 4.9 38.8 27.6 22.6 7.6
Source: Bloomberg (data as of August 20, 2019)
We project VNM’s EPS CAGR over 2018-2021F to slow down to 6% vs 10% during 2015-2018
75Mobile World Investment Corp (HSX: MWG)
Title of presentation
Quang Ngai Sugar (UPCoM: QNS)
Management selling pours cold water on re-rating hopes
September 2019
Copyright © Viet Capital Securities 76Investment thesis 1.1: Ineffective capital allocation
Contributed 80%-95% to
QNS’s NPAT between 2014 and 2019F
Soymilk & other Accumulated since 2012 8,084
Unit: VND bn 6,970
F&B businesses(1) 4,705
5,732
3,295
2,065
1,291
708
-484
-1,258 -1,569
-2,467
-4,565
-5,433 -5,998
-7,031
2012 2013 2014 2015 2016 2017 2018 2019F Sugar & biomass
Accumulated NPAT Accumulated capex
Responsible for the majority of capex
between 2014 and 2019F
Source: QNS, VCSC, (1) includes beer, confectionary, mineral water
77Investment thesis 1.2: Ineffective capital allocation
Soymilk Sugar
✓ Consumer staple product that generates high profit margins. ✓ Volatile, low-margin commodity business.
✓ 84% market share in the branded soymilk market in 2018. ✓ Upcoming tariff removal (starting 2020) under the ATIGA
✓ Strong cash generation. could further expose Vietnam’s sugar industry to
✓ Reactivated product launching and modernized marketing international competition.
campaigns since late 2018 should bolster top-line growth. ✓ Capital intensive.
43.6% 7,000 30.0%
8,000 45.0% 19.1%
40.3% 39.6% 40.5% 40.0% 40.2% 39.6% 6,000 13.8%
7,000 12.6% 12.8% 20.0%
6,000 40.0% 5,000 11.3% 9.8%
2.7% 10.0%
5,000 4,000
4,000 3,783 3,683 3,899 3,863 35.0% 2,422
3,020 3,000 2,387 0.0%
3,000 1,828 1,653 1,867
1,881 2,115 2,000 1,525 1,466
2,000 30.0% -10.0%
1,000 1,000
0 25.0% 0 -20.0%
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Soymilk revenue (VND bn) Soymilk GPM Sugar revenue (VND bn) Sugar GPM
35.2%
32.8%
29.4%
Ineffective capital 23.8%
20.0% QNS's ROIC
allocation 18.1% 18.9%
15.1%
2012 2013 2014 2015 2016 2017 2018 2019F
Source: QNS, VCSC
78Investment thesis 2: Management selling pours cold water on re-rating hopes
Monthly and accumulated insider buying/selling since 2018 (unit: million shares)
2.0
-0.6
-0.5
-0.7
-1.1
1.0
0.0
-1.0
-2.0
Monthly insider buying (selling)
-3.0 Accumulated insider buying (selling) since Jan 2018
-3.7
-4.0
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19E
QNS’s historical TTM PER QNS’s historical stock price (VND)
13 45,000
12 40,000
11
35,000
10
9 30,000
8 25,000
7
20,000
6
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Source: Bloomberg, VCSC compilation,
79VCSC’s 2018-2021F NPAT forecasts
Projected NPAT breakdown by segment between 2018-2021F
VND bn
1,600
1,400 13% -3% CAGR
1,200 14% 9% -7% CAGR
19%
10%
1,000 18%
12%
800
600 78% +10% CAGR
76%
69% 82%
400
200
0
2018 2019F 2020F 2021F
Soymilk Sugar & biomass Others F&B businesses
Source: VCSC
80FPT Retail (HSX: FRT)
Capable retailer trying to build its next leg of growth
September 2019
Copyright © Viet Capital Securities 81Investment thesis 1: A young but proven retailer
FRT’s year-end store count since inception Number of mobile shops among key retailers in
Vietnam as of June 2019
533 1,849
473
385
252
163
558
100
298
50 184
2012 2013 2014 2015 2016 2017 2018 MWG FRT Viettel VienThongA
Source: FRT Source: VCSC
FRT is the youngest company among the leading mobile phone retailers in Vietnam and it has quickly risen to
the second position
82Investment thesis 2: Potential long-term growth from pharmacy
Store count of major pharmacy chains in Vietnam as of Monthly sales/store by pharmacy chain (USD thousand)
June 2019
74
>50,000
28 27
200 25
18
59
34
12 10 9
Nationwide Pharmacity Phano Long Chau An Khang ECO Minh Chau Long Chau Pharmacity An Khang ECO Phano
Source: VCSC compilations Source: FRT, VCSC estimates
FRT scores a good head-start in pharmacy with acquisition of Long Chau
✓ Long Chau is a top-of-mind pharmacy chain in HCMC when it comes to prescription drugs
✓ Extensive product assortment (>5,000 SKUs), which makes Long Chau a one-stop shop for customers
83Disclaimer
Analyst Certification of Independence
I, Phap Dang, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed in this report. The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and
accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.
VCSC and its officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such securities (or
investment).VCSC may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report
or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment.
Copyright 2013 Viet Capital Securities Company “VCSC”. All rights reserved. This report has been prepared on the basis of information believed to be reliable at the time of publication. VCSC makes no representation or warranty
regarding the completeness and accuracy of such information. Opinions, estimates and projection expressed in this report represent the current views of the author at the date of publication only. They do not necessarily reflect the
opinions of VCSC and are subject to change without notice. This report is provided, for information purposes only, to institutional investors and retail clients of VCSC in Vietnam and overseas in accordance to relevant laws and
regulations explicit to the country where this report is distributed, and does not constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction. Investors must make their investment decisions based
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an authorized representative of VCSC. Please cite sources when quoting.
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advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described
herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or,
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84VCSC Contacts
RESEARCH INSTITUTIONAL SALES
Head of Research Head of Institutional Sales
Alastair Macdonald Dung Nguyen
alastair.macdonald@vcsc.com.vn dung.nguyen@vcsc.com.vn
(284) 3914 3588 ext. 105 (84) 3914 3588 ext. 102
Associate Director Corporate Access
Phap Dang, CFA ca@vcsc.com.vn
phap.dang@vcsc.com.vn
(284) 3914 3588 ext. 143
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