Global investors who seek exposure to the Vietnam stock market often do so via ETFs or Closed End Funds (CEFs) that hold the larger and more liquid companies. Such companies are usually prominent constituents on various Vietnam stock indices such as the VN-Index, FTSE Vietnam Index, MSCI Vietnam Index etc.
In this blog post I shall discuss one such large Vietnam stock, the Mobile World Group (HOSE:MWG). I thought might be useful to regularly provide a broad overview of the stocks you might see pop up in fund manager holdings. The purpose is not to provide buy or sell recommendations. However a quick summary of key drivers for future performance will be the aim, and readers can make their own mind up of whether Mobile World is a good stock to buy?
AN OVERVIEW OF THE MOBILE WORLD (HOSE:MWG) BUSINESS
The main operations of Mobile World Group (MWG) consist of the following:
- Selling mobile phones and IT equipment / accessories (and providing repair and maintenance services for), under the brand of The Gioi Di Dong.
- The more commercial electronic equipment is traded under the brand Dien May Xanh.
- They trade in foods, meats, vegetables and other groceries under the brand Bach Hoa Xanh.
- A few years ago, they established the brand Bluetronics, a retail chain on mobile devices, accessories and telecommunication services to rollout stores in Cambodia.
Above is a picture of a “thegioididong” store. Personally, when I think of mobile / IT store in Vietnam this brand is the one that instantly springs to mind.
The picture also shows the Dien May Xanh store by side which is common. These stores also sell larger items such as TVs, refrigerators, washing machines, air conditioners etc.
This is crucial to understand because these stores already have established a huge footprint in Vietnam. On one hand that gives them a reliable profit stream and huge scale to achieve operational efficiencies. On the other hand, it makes it harder to assume huge upside in terms of future potential of increasing their market share. That is because the starting point is already from a dominant market share position.
History / background / scale of Mobile World Group.
According to the 2020 MWG annual report, The Gioi Di Dong brand has around 913 outlets throughout Vietnam, and Dien May Xanh had 1,427 stores. The share of the overall market was about 50% and 55% respectively.
In terms of The Gioi Di Dong brand, it was founded back in 2004 by Nguyen Duc Tai. He came from a relatively poor upbringing and remarked that “everybody laughed at me” when he made his first attempts to enter the mobile phone market.
How things have changed! He is a very rich man now.
MWG already has a dominant market share via The Gioi Di Dong and Dien May Xanh brands in terms of mobile phones, accessories, consumer electronics etc.
Their position in the grocery market is much more early stage in comparison. It was only 2015 when the first Bach Hoa Xanh store was established.
In fact, I remember around that year when I was seeing this store pop up near where I spent a significant amount of my time in Vietnam. It was good to finally see a grocery market pop up so that I could more easily buy some of the stuff I liked back in Australia but sometimes couldn’t come across in Vietnam. (Usually in Vietnam I spent time quite a few hours away from HCMC).
By 2020, it had 1,719 Bach Hoa Xanh stores located in HCMC and 24 other provinces in the southern and south-central regions of Vietnam.
Back Hoa Xanh contributed to approximately 20% of MWG’s total sales in 2020. It’s market share in its segment surpassed 10% in urban areas and 20% in HCMC alone.
As discussed earlier, the lower market share points it as it right now compared to IT/electronics sides of the company, mean that the higher growth potential sits here with the grocery side of the company.
Growth potential of Mobile World Group
The Vietnam urbanization trend is one that offers growth tailwinds to MWG.
For certain household items that some parts of the world would never contemplate not owning, there is sill some room for growth in Vietnam as we can see from the below graphic.
Source: Mobile World 2020 Annual Report
Below are some of the factors highlighting growth potential in Bach Hoa Xanh.
Source: Mobile World 2020 Annual Report
FACTORS TO DECIDE ON WILL MOBILE WORLD SHARES KEEP RISING IN 2022?
Transition to more of an Omni-Channel focus – Like many companies throughout the world since 2020, MWG improved their online sales capacity. Around 9% of the group’s overall sales were online in 2020, 11% for the mobile/electronics side versus 1% for grocery.
There is no doubt plenty of room for the company to get these rates higher.
Further evidence of improving margins – MWG experienced some impressive margin performance in 2020 during the pandemic. They were able to optimize store sizes and mixes, revaluate their diversified product assortments, and negotiate well with suppliers thanks to their huge scale.
Going forward it will be interesting to observe how the Omni-Channel focus may also potentially help margins.
Momentum in grocery sales – How will the top line growth story develop of the Vietnamese doing more of their shopping at stores such as the BHX chain compared with traditional markets? There was clearly good momentum in this side of the company over the last year or two. Whilst this might be somewhat tied into the fortunes of the country as a whole and how fast growth emerges coming out of the pandemic, this area of the company should grow well in the medium and long term.
Rollout of new Bach Hoa Xanh stores – This is kind of tied in with my point above. It just highlights though that MWG can benefit not only from this trend from a top-down macro perspective, but also from a bottom-up perspective in terms of future store openings. There is still plenty of room for more store rollouts and gains in market share.
VIETNAM STOCK MARKET VALUATIONS – MOBILE WORLD PE RATIO, YIELD ETC.
Mobile World PE Ratio – 22 times (2021)
Mobile World dividend yield – 0.2%
* Source: TIKR data captured on March 25th 2022
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They are a “freemium subscription model”, so there is tons of free information and the full access pro plan you only have to pay for if you later feel comfortable you wish to do so. Note that I may receive a small commission if you join their paid plan, but at no additional cost to you.
MOBILE WORLD SIZE IN TERMS OF VIETNAM STOCK INDEX AND COMPONENTS
Mobile World at the time of writing is about the 16th largest company of my searched of Vietnam stock list of the largest companies. The market cap in USD is circa $4.3 billion.
IS MOBILE WORLD A GOOD UNDERVALUED VIETNAMESE STOCK TO BUY FOR 2022?
I am a little torn between the somewhat mature market share position that the bulk of their earnings come from, i.e. The Gioi Di Dong and Dien May Xanh stores, versus the likely greater potential of earnings growth in the grocery side with Bach Hoa Xanh.
There are other factors that can support growth potential such as better performance in online sales and the opportunity in Cambodia for example.
I would also note that even though I remarked about the more mature market share starting position for certain segments of the company, even just slowly inching up that market share can still produce some good results. I say that in the context of how the business is tied to the fortunes of the overall urbanization trend in Vietnam.
One should keep an eye on if the company tries to expand too quickly outside of its circle of competence, a possible risk in order to grow outside of their more mature businesses.
In summary if one can pick up the stock at a forward P/E ratio of 15 times or less it is probably a relatively low risk play to benefit from the long-term future growth in Vietnam. Looking at how the stock has generally traded so far in 2022, and also what analysts are forecasting in terms of EPS this year, the stock has been near such levels.
OTHER VIETNAM STOCK INDEX COMPONENTS REVIEWS
If you are interested in similar summaries and analysis on other larger Vietnam listed stocks here are some other links to check out.
And should you want a very quick description of the largest 10 companies listed on the Vietnam stock exchange, be sure to visit the below blog post I made last year.
VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET
I summarize the largest Vietnam companies by market cap:
Is Vietnam a good investment?
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