(vuivui.com) Statistics Mobile World Investment (MWG VN ... › eng › wp-content › uploads › delightful-downloads › 2… · VND2.5T will eventually be spent at least on TAG

October 23, 2017

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THIS REPORT HAS BEEN PREPARED BY MAYBANK KIM ENG SECURITIES LIMITED

SEE PAGE 18 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Monthly profit vs share price

Source: Company, Bloomberg

THAI Quang Trung, CFA [email protected] (84) 844 55 58 88 x 8180

Mobile World Investment (MWG VN)

Welcome to the jungle!

Promising BHX: TP raised 31%

We have raised our DCF-based TP 31% mainly as a result of revising our

store count assumption for the grocery retailing format Bach Hoa Xanh

(BHX) from 3,000 to 5,000 at the DCF terminal-year (FY21). Our TP

revision was also a result of a lower WACC (from 11.4% to 10.2%; LTG

unchanged at 2%) as management showed more confidence in using debt

to finance expansions. Our TP equates to a fair 18x FY18E PER, supported

by 17% FY18E EPS growth as MWG transitions from the maturing

incumbent business lines to the high-growth BHX.

BHX: what do we see that the market does not?

The share price has increased faster than monthly earnings in the past

few weeks, and we attribute much of this to the market’s positive

response to MWG’s new growth initiatives (i.e. drugstores). While we

also share the market’s positive view on MWG’s growth plan, we believe

the small initial investments in drugstores will be overshadowed by

BHX’s. As we write, BHX has been opening stores at the rate of 4 /day.

This is twice the rate at which it opened stores at the peak of the

expansion of its portable electronics chain (TGDD), and is mainly

targeted at rural districts largely ignored by local peers. It appears

promising progress has been made as BHX navigates the FMCG retail

jungle with fragmented suppliers to cater to the untapped demand.

Coupled with the strong existing online platform, MWG could be

somewhat similar to Amazon in the future, in our view.

Risks to our call: BHX needs to be perfected

Besides notable progress, our channel checks indicate BHX’s opex will

remain high. FY18E is expected to be a transitional year when store

growth in the white/brown goods chain (DMX) tapers off and BHX is only

just about to conquer the critical-mass point. As such, BHX’s expansion,

if not properly planned, could further slow earnings growth.

Catalysts: further accretive M&A could be possible

That said, we expect TGDD/DMX’s FCFF to be high in FY18-19E and more

than enough to cover BHX’s capex. We do not rule out further accretive

M&A, given MWG’s highly scalable business model.

Share Price VND 132,000

12m Price Target VND 157,000 (+19%)

Previous Price Target VND 120,000

BUY

Company Description

Statistics

52w high/low (VND)

3m avg turnover (USDm)

Free float (%)

Issued shares (m)

Market capitalisation

Major shareholders:

35.6%

5.3%

43.7%

308

2.2

Vietnam's largest retailer, currently offering

portable electronics ("TGDD"), white/brown goods

("DMX"), FMCG ("BHX"), & B2C e-commerce

("vuivui.com")

Founders & related parties

PYN Elite Fund

Other foreign investors

132,000/72,000

62.0

VND40.6T

USD1.8B

Price Performance

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Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

Mobile World - (LHS, VND) Mobile World / Vietnam Composite Index - (RHS, %)

-1M -3M -12M

Absolute (%) 16 31 76

Relative to index (%) 13 22 46

Source: FactSet

FYE Dec (VND b) FY15A FY16A FY17E FY18E FY19E

Revenue 25,253 44,613 69,010 92,032 112,534

EBITDA 1,519 2,361 3,513 4,436 5,592

Core net profit 1,072 1,577 2,293 2,814 3,516

Core EPS (VND) 3,825 5,375 7,424 8,680 10,535

Core EPS growth (%) 52.8 40.5 38.1 16.9 21.4

Net DPS (VND) 750 750 1,500 1,500 1,500

Core P/E (x) 34.5 24.6 17.8 15.2 12.5

P/BV (x) 15.6 10.6 7.2 5.3 4.0

Net dividend yield (%) 0.6 0.6 1.1 1.1 1.1

ROAE (%) 54.2 49.9 47.1 39.8 36.1

ROAA (%) 20.1 14.3 13.2 12.4 12.3

EV/EBITDA (x) 8.4 11.3 12.7 10.2 7.9

Net gearing (%) (incl perps) 68.8 98.7 67.6 29.9 net cash

Consensus net profit - - 2,244 2,855 3,459

MKE vs. Consensus (%) - - 2.2 (1.5) 1.7

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October 23, 2017 2

Mobile World Investment Corp

1. Forecast revisions

Figure 1. Forecast revision details

Previous assumption in parens FY14A FY15A FY16A FY17E FY18E FY19E Notes

Mobile World (TGDD) store # 344 564 951 1,100 1,100 1,100 No change.

(951) (1,100) (1,100) (1,100)

Dien May Xanh (DMX) store # 20 69 256 756 856 856 Strong upward revisions. Inclusive of equivalent store additions from Tran Anh. (256) (556) (656) (656)

Bach Hoa Xanh (BHX) store # - - 50 250 1,050 2,050 Strong upward revisions. Good progress. 90% of retained earnings expected to be spent on store openings. (50) (202) (702) (1,202)

Total revenue (VNDb) 15,757 25,251 46,177 69,010 92,032 112,534 Higher top-line due to Tran Anh acquisition, as well as Dien May Xanh and Bach Hoa Xanh’s acceleration. (46,177) (66,888) (84,800) (99,918)

PATMI (VNDb) 668 1,072 1,577 2,293 2,814 3,516 Slightly higher bottom-line due to the above. (1,577) (2,243) (2,788) (3,516)

FCFF (VNDb) (146) (1,191) (1,752) 2,000 2,239 3,345 Sooner-than-expected mean-reversion of inventory days in FY17E but higher capex on BHX expected in FY18-19E. (1,752) 1,448 3,720 3,551

Source: Company historical data, MKE estimates

2. Key assumptions

2.1 Impact of the Tran Anh acquisition In late Aug it was made public that MWG will purchase a major stake in

Tran Anh (TAG VN, NR), a competitor in Northern Vietnam. Given MWG’s

newly approved M&A funding plan to set aside up to VND2.5T in cash (up

from VND0.5T originally approved by the AGM in Mar’17) and 6.7m new

shares to be issued, we expect MWG will acquire TAG in full in a part-

cash, part-stock deal. Details of the purchase agreement are expected to

be released in November. In our financial forecasts, we assume the full

VND2.5T will eventually be spent at least on TAG and another drugstore

chain, for which MWG has already started hiring pharmacists, and the

6.7m new shares will be issued to former TAG shareholders in 4Q17.

While awaiting TAG pricing details, we expect the impact on our FCF-

based valuation to be moderately positive. In asset-turnover terms, TAG

has been a fairly efficient retailer (Figure 2), and its store locations

appear difficult to replicate. With a trailing 12M revenue of about VND4T

(c.20% that of DMX), the TAG acquisition will be equivalent to growing

store count by c.120 new mini-DMX stores in one fell swoop. MWG’s

existing bargaining power with manufacturers will likely improve TAG’s

operating margins shortly. (This also appears to be a fairly friendly

takeover, as the TAG brand name will be retained for the foreseeable

future. As such, we do not foresee significant operating hurdles in bringing

the two companies together.)

Figure 2. Asset turnover: TAG vs MWG

Source: Company historical data

0.0

5.0

10.0

15.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 TTM

(x)

TAG MWG

TAG acquisition will be equivalent to

growing DMX store-count by about 20%. In

asset-turnover terms, TAG has been a

fairly efficient retailer.

MWG’s existing bargaining power with

manufacturers will likely improve TAG’s

operating margins shortly.

October 23, 2017 3


2.2 General capital allocation and financing Beyond the TAG acquisition, we expect MWG’s capital allocation to be

done in the following manner:

- Dividend policy: In the absence of unexpected spending needs or

earnings disruptions, we expect the company to adopt a fixed

dividend policy of VND1,500/share (which was the FY15 and FY16

rate), as this appears to be the preference of many shareholders.

- Distribution of retained earnings: Our discussion with the company

and our channel checks led us to believe MWG will allocate the vast

majority of its annual retained earnings to opening BHX stores in the

next few years. In our model, we assume 90% of annual retained

earnings will be ploughed back into BHX in the forecast horizon. For

FY18E, this would translate into about 800 new BHX stores, vis-à-vis

the company’s latest guidance of 500-1,000 stores.

Despite the aggressive BHX store opening, we still expect FCFF from

the current core businesses to be largely positive in FY17-19E (Figure

1 above), as inventory needs in the maturing TGDD/DMX businesses

slow and BHX’s increased economies of scale improve both

profitability and cash conversion cycles. In fact, we expect FY18-19E

FCFF from TGDD/DMX alone to be between VND2T to VND3T, as these

business lines mature. We will explain our BHX channel checks and

expectations of store economics later in the report.

Figure 3. FCFF turning positive as working capital needs slow

Source: Company historical data

- Investment in new ventures/M&A: Aside from reinvesting in the

current core businesses (TGDD, DMX and BHX), possible ventures that

MWG is currently considering include its maiden B2C e-commerce

(akin to Amazon) and drugstore chain (akin to Guardian/Watsons).

Based on our above assumption, it appears MWG would have 10% of

annual retained earnings, plus any extra working capital surpluses, for

spending on new investments. Nevertheless, we expect the company

to be prudent and only significantly increase its investment in these

new ventures once EBITDA is near break-even levels. Management’s

actual capex timeline for BHX in the past and their current cautious

view on e-commerce in Vietnam support our view. In our base-case

scenario, we expect these new ventures will neither consume

significant capital (aside from the abovementioned VND2.5T) nor

contribute significant earnings in the forecast horizon.

- Debt financing: We expect MWG to be more liberal in using debts to

fund expansions. Historically, the company has been rather cautious.

Gearing has been strongly correlated with inventory days (r = 0.9);

net cash was even observed during 2Q14-3Q14 when inventory days

dropped to below 40. Nevertheless, our discussion with management

leads us to believe MWG will increasingly leverage its high-turnover

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FCFF (LHS) Inventory days (RHS) CCC (RHS)

We assume 90% of annual retained earnings

to be ploughed back to BHX in the forecast

horizon.

Despite the aggressive BHX store opening,

we still expect FCFF to be largely positive

in FY17-19E.

October 23, 2017 4


business lines (which have enabled it to have very favourable lending

rates thus far) to use bank loans to minimise equity raising. Given

that debt/equity has averaged about 1x in the past one year, we

expect MWG to use bank loans to finance roughly half of its annual

working capital, capex and acquisition needs combined. (Note that,

since our base case scenario involves largely positive FCFF in FY17-

19E, we expect a net cash position again by FY19E.) While these

loans will likely be predominantly short-term, we may expect long-

term capital (bonds, bank loans or equity) to be raised, should the

company find worthwhile sizeable investments.

This higher long-term debt/equity ratio also prompts us to lower our

WACC assumption to 10.2% from 11.4%.

2.3 BHX: store economics and working capital needs We use the following assumptions for BHX’s store-level economics and

working capital needs.

Metric Medium term (2-3 years)

Long term (3-5 years)

Capex/store (VNDb) 2.0 2.0

Rev/store/mth (VNDb) 1.2 1.2

Gross margin 23% 25%

Net margin 1.9% 2.3%

ROIC 13.5% 16.2%

Receivables days 0 0

Inventory days 15 15

Payables days 30 30

Store count >2,000 >5,000

Total BHX revenue ~USD1b ~USD3b

Source: MKE estimates

We believe our long-term assumption for the total scale of the BHX

business is conservative, equal to about half of the company’s ambitious

target of a 10% market share in a USD60b market. At this stage, we

believe the company target can be achieved only if further long-term

capital is raised.

In any case, we believe this high-turnover model will enable BHX to run

negative working capital, backed by MWG’s meticulous merchandise

management (i.e. constantly reviewing SKUs to remove low-moving items)

and proactive vendor selection. The fact that MWG secured sizeable

supply contracts for key fresh fruit products from Hoang Anh Gia Lai

Agrico (HNG VN, NR) is a good start, in our view.

We believe this high-turnover business will

enable BHX to run negative working

capital, backed by MWG’s meticulous

merchandise management (i.e. constantly

reviewing SKUs to remove low-moving

items) and proactive vendor selection.

We assume the company will be more

liberal in using debts to fund expansions.

This also prompts us to slightly lower our

WACC assumption.

While these debts are likely to be

predominantly short term, we may expect

long-term capital (bonds, bank loans or

equity) to be raised should the company

find sizeable investments.

October 23, 2017 5


3. Good progress on BHX, overall

3.1 Retail concept revisited We revisit BHX’s retail concept and are comfortable with its current

positioning. To a certain extent, we see that similar peers in the local

market are not exactly doing the same thing BHX is doing.

These peers include Coop Food under Saigon Coop Group (unlisted),

Satrafoods under Saigon Trading Group (unlisted) and Vinmart+ under

Vingroup (VIC VN, HOLD, TP45,000). While all three of these chains do sell

selected fresh food products (i.e. produce, meat and fish), they

apparently do not aim to compete with wet markets. In short, we believe

they would appeal to consumers in income quintiles 4 or 5, as depicted in

Figure 4 below. (Income quintile 5 refers to the top 20% income-earners in

the population, and quintile 1 refers to the bottom 20%).

In contrast, BHX aims to compete directly with wet markets and would

mainly target consumers in quintiles 1 to 3, in our view. Hence, the

economics of BHX would eventually depend on: (1) staying on top of what

consumers, especially those in quintiles 1 to 3 demand on a daily basis; (2)

navigating the fragmented supply chain to offer product availability,

affordability and quality to consumers. As explained by Chairman Nguyen

Duc Tai, the success of the model depends on finding a “winning formula”

to ensure the above two operational goals are systematically met. Once

they are met, BHX’s scaled-up bargaining power should eventually help to

cut out the middlemen and improve profitability.

Figure 4: HCMC average expenditure per capita per month by quintile

Source: HCMC Statistics Department, World Bank, MKE estimates

3.2 Store opening: aggressively targeting untapped demand

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We see that similar peers in the local

market are not exactly doing the same

thing as BHX.

They seem to appeal to consumers in

income quintiles 4 or 5, as opposed to

quintiles 1 to 3 by BHX.

We believe MWG has been more aggressive

than local peers in targeting untapped

mass-market demand.

October 23, 2017 6


Figure 5 and Figure 6 below demonstrate that MWG is committed to

targeting the mass market, which is what the company’s operating

platform is built for, after all. Recall, the company’s overall strategy is to

grab retailing market share from mom-and-pop stores (or wet markets, in

the case of grocery retailing). We believe MWG has been more

aggressive than local peers in targeting untapped mass-market demand.

In particular,

October 23, 2017 7


Figure 5 shows that MWG, driven by its overall strategy, naturally wants to

focus on districts that have a combination of the following characteristics:

(1) high population base; (2) low penetration of modern retail trade; and

(3) traffic difficulties, which leads to a need for brick-and-mortar

convenience. Figure 6 further confirms this. Currently, districts with a

BHX footprint account for over 60% of HCMC’s population; our survey of

residential/commercial real estate indicates these districts are mostly

home to residents belonging to income quintiles 1 to 3.

October 23, 2017 8


Figure 5. HCMC population vs retail store availability by region

Region [1] Area [2]

(km2)

Population [2] Density [2]

(persons/km2)

# of minimart stores [3]

# of supermarkets /

hypermarkets [3]

Bach Hoa

Xanh Satrafoods Vinmart+ Downtown & satellites 128 1,704,500 13,327 - 34 111 26 Chinatown neighbourhood 42 1,338,683 32,257 - 23 60 12 North/Northeast 215 1,329,359 6,196 21 24 38 9 Tan Son Nhat neighbourhood 58 1,557,668 26,773 37 25 91 22 South/Southwest 405 1,417,150 3,499 112 11 25 7 Rural 1,248 900,469 722 26 13 6 4

Total 2,095 8,247,829 3,937 196 130 331 80 [1] HCMC regions are defined by MKE Research as follows: Downtown & satellites: D1, D2, D3, D4, D7, Binh Thanh, Phu Nhuan. These districts tend to be commercially oriented, with high housing prices. Chinatown neighbourhood: D5, D6, D8, D10, D11. These districts, which comprise the Chinatown area, are densely populated and also tend to have high housing prices. North/Northeast: D9, D12, Thu Duc. The economic development of these districts tends to be driven by industrial/high-tech manufacturing activity in HCMC and surrounding provinces. Tan Son Nhat neighbourhood: Tan Binh, Go Vap, Tan Phu. These districts, which surround the airport, can be characterised by a high population base against traffic difficulties. South/Southwest: Binh Tan, Binh Chanh, Nha Be. These districts have a high population base and fairly low consumer purchasing power. There is a lack of supermarkets despite a low population density. Rural: Can Gio, Cu Chi, Hoc Mon. These districts have a high population base and arguably the lowest consumer purchasing power. There is a lack of supermarkets despite a low population density. [2] In 2015, per official statistics. [3] As at 17 Oct 2017, per MKE survey. Note that Coop Food does not list their store locations on their website. However, its Facebook page reported 156 stores nationwide as at end-Aug’17.

Source: HCMC Statistics Department, company data, MKE estimates

Figure 6. BHX stores are predominantly on the outskirts of HCMC

Note: some new stores may not be shown on the map yet; conversely, some stores recently shut down may still be shown.

Source: Google Maps, company data, MKE estimates, as at 17 Oct 2017

3.3 Merchandise management: high-turnover SKUs only Our channel checks indicate a large number of residents in the areas

targeted by BHX (i.e. income quintiles 1 to 3) have latent needs that are

neither met by other minimart chains/supermarkets nor wet markets.

Based on Figure 4 above, we estimate that these consumers can probably

only afford to buy about USD2-3 worth of daily necessities per store visit,

on average. Most of the items they purchase would probably be small in

value. This is actually where MWG has excelled in its original portable

electronics format (TGDD). The sales of small accessories, like earphones

or power banks have been highly profitable for MWG as the company

meticulously ensures friendly product classifications, ease of browsing and

reliable quality control.

We believe that in order for BHX to compensate for the low margins when

competing with mom-and-pops and wet markets, proactive merchandise

management is needed to ensure high turnovers and low working capital

requirements. This apparently involves matching customers’ needs with a

very fragmented supply chain, even when the items in demand are small

in value and require meticulous merchandise management. This is

probably a hurdle that has prevented many previous minimarts from

reaching this type of untapped demand.

In this regard, we believe BHX has made promising progress, after having

arrived at an optimal level of 2,000 high-turnover SKUs. In Figure 7, we

compare the prices of selected high-turnover low-priced items in BHX and

Satrafoods. We believe these items will have fairly stable prices, and we

deem Satrafoods one of BHX’s prominent competitors in terms of target

CBD

Most target customers probably would

purchase small-value items, on average.

This is where MWG has excelled in the past

in the original portable electronics format.

October 23, 2017 9


customers. We believe many working-class consumers now physically

frequent a nearby BHX store for these daily necessities.

Figure 7. Pricing comparison of low-priced items

Category Brand item Manufacturer Bach Hoa Xanh (VND) Satrafoods (VND) Toothbrush P/S Soft Protection 123 Unilever 9,000 9,000 Toothpaste Colgate MaxFresh 140g Colgate-Palmolive 20,000 19,500 Shampoo sachet X Men For Boss Perfumed 6g x 10 ICP 10,000 N.A. Sugar Bien Hoa Pure 500g Bien Hoa 11,000 11,000 Fish sauce Nam Ngu 3-in-1 750ml Masan 30,000 30,800 Bottled drink Lipton Honey Green Tea 350ml PepsiCo 6,000 6,200 Instant noodles Hao Hao – Hot Sour Shrimp Acecook 3,600 3,600 Condensed milk Ong Tho 380g Vinamilk 21,000 21,500 Canned meat Two Bits of Pork 150g Vissan 22,000 21,000 Powder detergent OMO 400g Unilever 17,500 17,500

Source: company data, as at 17 Oct 2017

Figure 8. Friendly classification by brand and functionality, even for small items

Source: bachhoaxanh.com

October 23, 2017 10


Figure 9. Detailed product descriptions, linked to related cooking tips & manufacturer’s profile, even for small items

Source: bachhoaxanh.com

October 23, 2017 11


4. Risks to our call

4.1 Risks to BHX OPEX: In the near term, we expect BHX’s opex to remain high. As FY18E is

likely to be a transitional year in which TGDD/DMX slows and BHX is just

about to conquer management’s 1,000-store critical-mass target, higher-

than-expected opex in the BHX business line during FY18E would directly

dampen EPS growth. We estimate TGDD/DMX combined would see

FY18/19E earnings growth of only 16%/4%, as there are currently no

store opening plans for these maturing business lines in FY19E.

Although we expect BHX to improve at a rapid rate, we have yet to see

convincing progress on fresh food items in terms of controlling wastage,

product availability and pricing. At present, if time allows, most

consumers would still choose wet markets or other minimart chains over

BHX for most of these items.

Also, certain higher-priced items, such as powder detergent of certain

brands (in large packages) and milk are admittedly more expensive than

those offered in other chains, according to BHX staff. To ensure buyers of

these high-frequency items are not turned away, higher-than-expected

promotions/discounts might be incurred.

Last but not least, inventory losses could also be a risk. The company is

yet to come up with a way to systematically prevent stolen goods, which

we think is an inevitable problem for the type of business BHX is pursuing.

Sales: Although average sales per store are already hovering around

USD50,000 per month, we are not certain whether BHX can ensure the

right products will be made available to its target customers at the right

prices at all times. Logistical difficulties and an extremely complicated

supply chain (with hundreds of vendors for each category) may hamper

product availability and lead to sales declines, at least in some locations.

Capex: In order for the high expected earnings growth to materialise and

justify the current +2SD PER, MWG would critically need to scale up BHX.

This is because only at a high scale (which management expects to be

>1,000 stores) does bargaining power with suppliers start to kick in,

ensuring profitability. However, an overly aggressive BHX store opening

schedule could coincide with opex hikes and result in higher-than-

expected debt financing and lower earnings. That said, we note that it is

much easier for MWG to open and close BHX stores than they do

TGDD/DMX-mini stores, and we still expect BHX’s capex to be below

TGDD/DMX’s FCFF in FY18-19E.

4.2 Risks to TGDD/DMX SSSG: TGDD is seeing flattish SSSG. As this is still the largest chain (>50%

revenue in FY17E), MWG’s enterprise value remains fairly sensitive to

TGDD SSSG, at least until FY19E when we expect its revenue share to drop

below 40%. That said, we still expect a long-term SSSG of 2% for this chain

as optimisation starts to kick in and more value-added in-store services

are offered over time. Also, a slowing SSSG would automatically trigger an

inventory slowdown to protect FCFF.

Online competition: We find that TGDD’s portable electronics and non-

bulky accessories are especially susceptible to online competition. This is

because these products seem to have increasingly stable sources of

supply, and their non-bulky and pricing characteristics are increasingly

making them economical items for online retailers to deliver. MWG has

historically competed successfully with online retailers in Vietnam

(without using a full-force e-commerce platform, yet) by relying on its

extensive capital-light rental store network (vs expensive distribution

centres) to provide 30-minute deliveries. However, if further investments

October 23, 2017 12


are made to logistics and staff training, players, such as lazada.vn could

challenge MWG’s #1 online retailing position.

5. Valuations

5.1 DCF We normally use FCFF to value Vietnamese corporates, as there are

usually uncertainties in their future utilisation of debt to allocate capital

to benefit shareholders. However, as MWG has been fairly proactive in

leveraging its high-turnover business to use debt for expansion, we keep

an eye on both FCFF and FCFE. We find that in the near term (FY17-18E),

they yield fairly close results. We adopt a 12M target price of VND157,000

based on these results.

FCFF (VNDb) 2014 2015 2016 2017 2018 2019 2020 2021

Free cash flow to firm (FCFF) (146) (1,191) (1,752) 2,000 2,239 3,345 3,496 4,880

5-yr Total PV of FCFF 10,699 9,555 7,188 4,427 4,880

Terminal value 60,483 60,483 60,483 60,483 60,483

PV of terminal value 40,967 45,158 49,777 54,870 60,483

Total PV of FCFF 51,666 54,713 56,965 59,297 65,363

Less: debt 6,983 8,661 10,331 12,367 14,707

Add: cash 2,993 6,200 10,420 15,112 21,397

Less: MI 3 5 7 9 11

Equity value 47,672 52,248 57,047 62,033 72,041

Fair value/share (VND) 147,500 156,500 167,500 177,500 203,000

FCFE (VNDb) 2014 2015 2016 2017 2018 2019 2020 2021

Free cash flow to firm (FCFF) (146) (1,191) (1,752) 2,000 2,239 3,345 3,496 4,880

Less interest expenses after tax (16) (29) (90) (192) (279) (346) (413) (495)

Net borrowings 106 1,434 2,736 2,194 1,677 1,671 2,035 2,341

Free cash flow to equity (FCFE) (56) 215 894 4,003 3,637 4,669 5,118 6,726

5-yr Total PV of FCFE 13,904 12,352 9,536 5,849 5,849

Terminal value 52,776 52,776 52,776 52,776 52,776

PV of terminal value 30,175 34,701 39,906 45,892 52,776

Total PV of FCFE 44,078 47,053 49,443 51,741 58,625

Add: cumulative cash 2,993 6,200 10,420 15,112 21,397

Less: MI 3 5 7 9 11

Equity value 47,068 53,249 59,856 66,844 80,010

Fair value/share (VND) 145,500 159,500 175,500 191,000 225,500

Risk Free Rate 7.0%

Equity Risk Premium 8.0%

Beta 1.0

Cost of Equity 15.0%

Cost of Debt (%) - before tax 7.0%

Cost of Debt (%) - after tax 5.5%

Debt/Equity 1.0x

WACC 10.2%

Terminal Growth 2.0%

Source: MKE estimates

October 23, 2017 13


5.2 Multiples We are not overly concerned with MWG’s PER at/above 2SD to the mean

at this point. Historically, we believe the market was largely unaware of

the company’s ambition to move far beyond electronics retailing. For

instance, much of the weakness in the share price during 9M15 was due to

uncertainties regarding its arguably generous ESOP, which we think

eventually proved worthwhile.

We see MWG as a highly adaptive growth company supported by a unique

culture that will eventually lead to an upward rerating by the market, in

our view.

Figure 10: 12M Trailing PER

Source: Bloomberg

Figure 11: 12M Forward PER

Source: Bloomberg

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Forward PER Mean-2SD Mean-1SD

Mean Mean+1SD Mean+2SD

October 23, 2017 14


Value Proposition

Vietnam’s largest retailer by revenue, MWG differentiates

by pioneering a customer-centric culture and operating

efficiently via an evolving, highly-customised ERP system.

Focused products are portable electronics (“TGDD”) and

white goods/brown goods (“DMX”). Gearing up FMCG

minimarts (“BHX”). Exploring e-commerce and drugstores.

Competitive strengths are an entrepreneurial, yet prudent

management, looking for high-growth areas, on-the-

ground local expertise, and an efficient workforce.

Having seen PATMI leap 10x during 2011-16, MWG is still

looking to reach untapped demand in remote areas across

Vietnam with an on-going store expansion plan.

Secular growth story. Mom-and-pops still dominate

Vietnam’s retailing, and MWG’s scalable platform is well

positioned to capture mass-market modern trade growth.

Efficient ERP and competitive pay lift productivity

Source: Company

Price Drivers

Corporate actions and business operations key drivers

Source: Company, Maybank Kim Eng

1. Shares well received by the market due to increasing

sell-side coverage.

2. Announced generous employee stock ownership

programme (ESOP) at 5% of outstanding shares with no

upfront cost.

3. FY16 AGM saw an aggressive store-opening plan put

forward.

4. Noted progress in BHX and intention to acquire drugstore

chains well received by the market.

Financial Metrics

SSSG key to monitor in FY18E as store growth in incumbent

chains slows; currently flattish for portable electronics

and double-digit for white/brown goods.

Expect SG&A/revenue to increase as MWG seeks to: (1)

maintain competitive cash incentives for managers; (2)

expand BHX; and (3) ramp up TGDD/DMX market positions.

Cash conversion cycle (>30 days) and current liabilities to

inventory (~1x) are now stable. Expect gearing to remain

at ~1x as MWG makes use of favourable lending rates.

Increase in SG&A necessary to maintain revenue growth

Source: Company

Swing Factors

Upside

Accretive M&A opportunities may arise as MWG looks to

marry its scalable business operations and industry

expertise in other retailing formats.

Margin expansion from value-added services, such as

providing instalment loans to customers, as well as early

payment discounts.

Industry consolidation or an exit by trailing competitors

(FPTShop, Viettel Store, Vien Thong A, aside from Tran

Anh) may open up further room for growth.

Downside

Higher-than-expected opex in BHX could slow growth.

Aggressive BHX expansion, if not timed properly, could

coincide with its opex hikes and lead to higher-than-

expected debt needs and lower earnings.

Selling pressure from insiders, employees and long-

standing strategic investors is occasionally a concern.

These shareholders have acquired shares at low costs.

[email protected]

0.0

2.0

4.0

6.0

8.0

10.0

FY12 FY13 FY14 FY15 FY16

Sales per employee per day (VNDm)

50

150

250

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750

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17

Mobile World - (LHS, VND)

Mobile World / MSCI AC Asia ex JP - (RHS, %)

0.0

25.0

50.0

75.0

100.0

0.02.04.06.08.0

10.012.014.0

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

2Q

17

%

%

SG&A/revenue (LHS) Revenue growth (YoY) (RHS)

1

1

2 3

4

mailto:[email protected]

mailto:[email protected]

October 23, 2017 15


FYE 31 Dec FY15A FY16A FY17E FY18E FY19E

Key Metrics

P/E (reported) (x) 10.3 10.6 17.8 15.2 12.5

Core P/E (x) 34.5 24.6 17.8 15.2 12.5

P/BV (x) 15.6 10.6 7.2 5.3 4.0

P/NTA (x) 15.8 10.7 7.3 5.4 4.0

Net dividend yield (%) 0.6 0.6 1.1 1.1 1.1

FCF yield (%) nm nm 4.9 5.2 7.6

EV/EBITDA (x) 8.4 11.3 12.7 10.2 7.9

EV/EBIT (x) 9.6 13.4 15.7 12.9 10.1

INCOME STATEMENT (VND b)

Revenue 25,252.7 44,613.3 69,010.1 92,031.6 112,534.3

Gross profit 3,922.4 7,214.1 11,565.8 15,391.7 19,365.3

EBITDA 1,519.1 2,361.2 3,512.6 4,435.6 5,592.1

Depreciation (196.2) (369.0) (664.2) (929.6) (1,227.1)

Amortisation (0.9) (0.5) (0.5) (0.5) (0.5)

EBIT 1,322.0 1,991.6 2,847.9 3,505.5 4,364.5

Net interest income /(exp) (38.0) (117.8) (229.5) (319.2) (371.0)

Associates & JV 0.0 0.0 0.0 0.0 0.0

Exceptionals 0.0 0.0 0.0 0.0 0.0

Other pretax income 101.7 132.1 249.2 332.5 404.3

Pretax profit 1,385.8 2,005.9 2,867.6 3,518.8 4,397.7

Income tax (310.0) (427.7) (573.5) (703.8) (879.5)

Minorities (3.9) (0.9) (1.1) (1.4) (1.8)

Discontinued operations 0.0 0.0 0.0 0.0 0.0

Reported net profit 1,071.9 1,577.4 2,293.0 2,813.6 3,516.4

Core net profit 1,071.9 1,577.4 2,293.0 2,813.6 3,516.4

Preferred Dividends 0.0 0.0 0.0 0.0 0.0

BALANCE SHEET (VND b)

Cash & Short Term Investments 343.9 997.0 2,992.6 6,200.5 10,419.8

Accounts receivable 76.9 243.5 226.6 245.2 261.0

Inventory 4,932.7 9,370.7 9,768.6 11,007.5 12,266.0

Property, Plant & Equip (net) 826.9 2,069.5 2,896.2 3,823.3 4,596.2

Intangible assets 34.7 26.6 26.1 25.6 25.1

Investment in Associates & JVs 0.0 0.0 0.0 0.0 0.0

Other assets 1,050.6 2,147.0 4,017.2 4,172.9 4,344.2

Total assets 7,265.8 14,854.3 19,927.3 25,475.0 31,912.3

ST interest bearing debt 2,052.9 4,789.0 6,983.4 8,660.8 10,331.4

Accounts payable 1,971.3 4,680.0 5,353.6 6,632.2 8,124.4

LT interest bearing debt 0.0 0.0 0.0 0.0 0.0

Other liabilities 758.0 1,544.0 1,687.0 1,949.0 2,206.0

Total Liabilities 4,782.2 11,012.9 14,023.5 17,242.3 20,662.1

Shareholders Equity 2,481.9 3,839.0 5,900.4 8,227.8 11,243.5

Minority Interest 1.6 2.3 3.5 4.9 6.6

Total shareholder equity 2,483.6 3,841.4 5,903.8 8,232.6 11,250.1

Perpetual securities 0.0 0.0 0.0 0.0 0.0

Total liabilities and equity 7,265.8 14,854.3 19,927.3 25,475.0 31,912.3

CASH FLOW (VND b)

Pretax profit 1,385.8 2,005.9 2,867.6 3,518.8 4,397.7

Depreciation & amortisation 197.1 369.5 664.8 930.1 1,227.7

Adj net interest (income)/exp 38.9 119.6 229.5 319.2 371.0

Change in working capital (2,060.9) (2,534.5) 292.6 21.1 217.9

Cash taxes paid (196.0) (530.9) (573.5) (703.8) (879.5)

Other operating cash flow 31.2 78.3 10.0 10.0 10.0

Cash flow from operations (604.0) (491.9) 3,490.9 4,095.5 5,344.7

Capex (586.5) (1,260.4) (1,491.0) (1,856.7) (2,000.0)

Free cash flow (1,190.5) (1,752.3) 2,000.0 2,238.8 3,344.7

Dividends paid (1.8) (220.1) (231.6) (486.2) (500.6)

Equity raised / (purchased) (2.2) 0.0 762.3 97.1 75.7

Change in Debt 1,434.3 2,736.0 2,194.4 1,677.4 1,670.6

Other invest/financing cash flow (108.8) (110.5) (2,729.5) (319.2) (371.0)

Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0

Net cash flow 131.0 653.1 1,995.6 3,207.9 4,219.3

October 23, 2017 16


FYE 31 Dec FY15A FY16A FY17E FY18E FY19E

Key Ratios

Growth ratios (%)

Revenue growth 60.3 76.7 54.7 33.4 22.3

EBITDA growth 64.6 55.4 48.8 26.3 26.1

EBIT growth 64.0 50.7 43.0 23.1 24.5

Pretax growth 59.6 44.7 43.0 22.7 25.0

Reported net profit growth 60.4 47.2 45.4 22.7 25.0

Core net profit growth 60.4 47.2 45.4 22.7 25.0

Profitability ratios (%)

EBITDA margin 6.0 5.3 5.1 4.8 5.0

EBIT margin 5.2 4.5 4.1 3.8 3.9

Pretax profit margin 5.5 4.5 4.2 3.8 3.9

Payout ratio 19.6 14.0 20.2 17.3 14.2

DuPont analysis

Net profit margin (%) 4.2 3.5 3.3 3.1 3.1

Revenue/Assets (x) 3.5 3.0 3.5 3.6 3.5

Assets/Equity (x) 2.9 3.9 3.4 3.1 2.8

ROAE (%) 54.2 49.9 47.1 39.8 36.1

ROAA (%) 20.1 14.3 13.2 12.4 12.3

Liquidity & Efficiency

Cash conversion cycle 36.1 38.1 29.8 21.6 17.3

Days receivable outstanding 0.9 1.3 1.2 0.9 0.8

Days inventory outstanding 60.2 68.8 60.0 48.8 45.0

Days payables outstanding 24.9 32.0 31.4 28.2 28.5

Dividend cover (x) 5.1 7.2 4.9 5.8 7.0

Current ratio (x) 1.3 1.1 1.1 1.1 1.2

Leverage & Expense Analysis

Asset/Liability (x) 1.5 1.3 1.4 1.5 1.5

Net gearing (%) (incl perps) 68.8 98.7 67.6 29.9 net cash

Net gearing (%) (excl. perps) 68.8 98.7 67.6 29.9 net cash

Net interest cover (x) 34.8 16.9 12.4 11.0 11.8

Debt/EBITDA (x) 1.4 2.0 2.0 2.0 1.8

Capex/revenue (%) 2.3 2.8 2.2 2.0 1.8

Net debt/ (net cash) 1,709.1 3,792.0 3,990.8 2,460.4 (88.3)

Source: Company; Maybank

October 23, 2017 17


Research Offices

REGIONAL

Sadiq CURRIMBHOY

Regional Head, Research & Economics

(65) 6231 5836 [email protected]

WONG Chew Hann, CA

Regional Head of Institutional Research


ONG Seng Yeow

Regional Head of Retail Research


TAN Sin Mui

Director of Research


ECONOMICS

Suhaimi ILIAS Chief Economist Malaysia | Philippines (603) 2297 8682 [email protected]

CHUA Hak Bin Regional Thematic Macroeconomist (65) 6231 5830 [email protected]

LEE Ju Ye

Singapore (65) 6231 5844 [email protected]

Saktiandi SUPAAT Head, FX Research (65) 6320 1379 [email protected]

STRATEGY

Sadiq CURRIMBHOY

Global Strategist


Willie CHAN

Hong Kong / Regional


MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas Services- Regional

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove • Ports • Shipping

Ivan YAP (603) 2297 8612 [email protected] • Automotive • Semiconductor • Technology

Kevin WONG (603) 2082 6824 [email protected] • REITs • Consumer Discretionary

LIEW Wei Han

(603) 2297 8676 [email protected] • Consumer Staples

Adrian WONG

(603) 2297 8675 [email protected] • Constructions • Healthcare

Jade TAM

(603) 2297 8687 [email protected] • Media • Building Materials

Mohd Hafiz Hassan (603) 2082 6819 [email protected] • Small & Mid Caps

TEE Sze Chiah Head of Retail Research (603) 2082 6858 [email protected]

Nik Ihsan Raja Abdullah, MSTA, CFTe (603) 2297 8694 [email protected]

HONG KONG / CHINA

Christopher WONG (852)2268 0652 [email protected] • HK & China Properties

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables

Ka Leong LO, CFA (852) 2268 0630 [email protected] • Consumer Discretionary & Auto

Mitchell KIM (852) 2268 0634 [email protected] • Internet & Telcos

Ning MA, CFA (852) 2268 0672 [email protected] • Insurance

Ricky NG, CFA (852) 2268 0689 [email protected] • Regional Renewables • HK & China Properties

Sonija LI, CFA, FRM (852) 2268 0641 [email protected] • Gaming

Stefan CHANG, CFA (852) 2268 0675 [email protected] • Technology – Regional

Tony Ren, CFA (852) 2268 0640 [email protected] • Healthcare & Pharmaceutical

INDIA

Jigar SHAH Head of Research

(91) 22 6623 2632 [email protected]

• Strategy • Oil & Gas • Automobile • Cement

Vishal MODI


• Banking & Financials

Neerav DALAL


• Software Technology • Telcos

Vishal PERIWAL


• Infrastructure

SINGAPORE

Neel SINHA Head of Research (65) 6231 5838 [email protected] • Strategy • SMID Caps – Regional

CHUA Su Tye (65) 6231 5842 [email protected] • REITs

Derrick HENG, CFA (65) 6231 5843 [email protected] • Transport • Property • REITs (Office)

Luis HILADO (65) 6231 5848 [email protected] • Telcos

John CHEONG, CFA (65) 6231 5845 [email protected] • Small & Mid Caps • Healthcare

NG Li Hiang (65) 6231 5840 [email protected] • Banks

INDONESIA

Isnaputra ISKANDAR Head of Research (62) 21 8066 8680 [email protected] • Strategy • Metals & Mining • Cement

Rahmi MARINA (62) 21 8066 8689 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 8066 8691 [email protected] • Property

Janni ASMAN (62) 21 8066 8687 [email protected] • Cigarette • Healthcare • Retail

Adhi TASMIN (62) 21 8066 8694 [email protected] • Plantations

PHILIPPINES

Minda OLONAN Head of Research (63) 2 849 8840 [email protected] • Strategy

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Strategy • Consumer • Materials • Ind. Estates • Oil & Gas • Telcos

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector • Transport • Property • Telcos

Tanawat RUENBANTERNG (66) 2658 6300 ext 1394 [email protected] • Banks & Diversified Financials

Ornmongkol TANTITANATORN (66) 2658 6300 ext 1395 [email protected] • Oil & Gas

Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 5000 ext 5090 [email protected]

Ekachai TARAPORNTIP Deputy Head 66) 2658 5000 ext 1530 [email protected]

Surachai PRAMUALCHAROENKIT (66) 2658 5000 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 5000 ext 1430 [email protected] • Media • Commerce

Sutthichai KUMWORACHAI (66) 2658 5000 ext 1400 [email protected] • Energy • Petrochem

Termporn TANTIVIVAT (66) 2658 5000 ext 1520 [email protected] • Property

Jaroonpan WATTANAWONG (66) 2658 5000 ext 1404 [email protected] • Transportation • Small cap

Poonpat CHAIKUMHAN, CFA (66) 2658 5000 ext 1511 [email protected] • Electronics • ICT

Sorrabhol VIRAMETEEKUL Head of Digital Research (66) 2658 5000 ext 1550 [email protected] • Food, Transportation

Wijit ARAYAPISIT (66) 2658 5000 ext 1450 [email protected] • Strategist

VIETNAM

LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified

THAI Quang Trung, CFA, Deputy Head, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials

LE Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas

NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

TRUONG Quang Binh, Deputy Head, Retail Research (84) 4 44 555 888 x 8087 [email protected] • Rubber Plantation • Tyres and Tubes • Oil&Gas

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port Operation • Pharmaceutical • Food & Beverage

NGUYEN Thanh Lam (84) 4 44 555 888 x 8086 [email protected] • Technical Analysis

October 23, 2017 18


APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report to the extent permitted by law.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Maybank Kim Eng Securities (Thailand) Public Company Limited. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) accepts no liability whatsoever for the actions of third parties in this respect.

Due to different characteristics, objectives and strategies of institutional and retail investors, the research reports of MBKET Institutional and Retail Research Department may differ in either recommendation or target price, or both. MBKET Retail Research is intended for retail investors (http://kelive.maybank-ke.co.th) while Maybank Kim Eng Institutional Research is intended only for institutional investors based outside Thailand only.

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. MBKET does not confirm nor certify the accuracy of such survey result.

The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, MBKET does not confirm, verify, or certify the accuracy and completeness of the assessment result.

US This third-party research report is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security mentioned within must do so with: Maybank Kim Eng Securities USA Inc. 777 Third Avenue 21st Floor New York, New York 1- (212) 688-8886 and not with, the issuer of this report.

http://kelive.maybank-ke.co.th/

http://kelive.maybank-ke.co.th/

October 23, 2017 19


Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 23 October 2017, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: As of 23 October 2017, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

India: As of 23 October 2017, and at the end of the month immediately preceding the date of publication of the research report, KESI, authoring analyst or their associate / relative does not hold any financial interest or any actual or beneficial ownership in any shares or having any conflict of interest in the subject companies except as otherwise disclosed in the research report. In the past twelve months KESI and authoring analyst or their associate did not receive any compensation or other benefits from the subject companies or third party in connection with the research report on any account what so ever except as otherwise disclosed in the research report.

MKE 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 and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Conduct Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938- H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This report is distributed in Singapore by Maybank KERPL (Co. Reg No 198700034E) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Maybank Kim Eng Securities (“PTMKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the Financial Services Authority (Indonesia). Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities Limited (License Number: 117/GP-UBCK) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited and the Bombay Stock Exchange and is regulated by Securities and Exchange Board of India (“SEBI”) (Reg. No. INZ000010538). KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) and as Research Analyst (Reg No: INH000000057) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Conduct Authority.

October 23, 2017 20


Historical recommendations and target price: Mobile World Investment Corp (MWG VN)

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)

SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

20,000.0

40,000.0

60,000.0

80,000.0

100,000.0

120,000.0

140,000.0

Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17


21 Apr Buy : ₫48,000

12 Jul Buy : ₫82,500

31 Aug Buy : ₫92,000

11 Nov Buy : ₫96,000

22 Mar Buy : ₫113,500

23 May Buy : ₫114,000

4 Aug Buy : ₫120,000

October 23, 2017 21


Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank,

100 Jalan Tun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

50 North Canal Road

Singapore 059304

Tel: (65) 6336 9090

London Maybank Kim Eng Securities

(London) Ltd

PNB House

77 Queen Victoria Street

London EC4V 4AY, UK

Tel: (44) 20 7332 0221

Fax: (44) 20 7332 0302

New York Maybank Kim Eng Securities USA

Inc

777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

Level 30,

Three Pacific Place,

1 Queen’s Road East,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Sentral Senayan III, 22nd Floor

Jl. Asia Afrika No. 8

Gelora Bung Karno, Senayan

Jakarta 10270, Indonesia

Tel: (62) 21 8066 8500

Fax: (62) 21 8066 8501

India Kim Eng Securities India Pvt Ltd

2nd Floor, The International,

16, Maharishi Karve Road,

Churchgate Station,

Mumbai City - 400 020, India

Tel: (91) 22 6623 2600

Fax: (91) 22 6623 2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th - 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited

4A-15+16 Floor Vincom Center Dong

Khoi, 72 Le Thanh Ton St. District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 8 38 271 030

Saudi Arabia In association with

Anfaal Capital

Villa 47, Tujjar Jeddah

Prince Mohammed bin Abdulaziz

Street P.O. Box 126575

Jeddah 21352

Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading Kevin Foy

Regional Head Sales Trading

[email protected]

Tel: (65) 6636-3620

US Toll Free: 1-866-406-7447

North Asia Sales Trading Andrew Lee

[email protected]

Tel: (852) 2268 0283

US Toll Free: 1 877 837 7635

Malaysia Joann Lim [email protected] Tel: (603) 2717 5166

Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia Harianto Liong [email protected] Tel: (62) 21 2557 1177

London Scott Kinnear-Nock [email protected] Tel: (44) 207-332-0221

New York Andrew Dacey [email protected] Tel: (212) 688 2956

India Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam Patrick Mitchell

[email protected]

Tel: (84)-8-44-555-888 x8080

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

www.maybank-ke.com | www.maybank-keresearch.com

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