MWG_BUY_TP 119,700_Upside 39%_Bach Hoa Xanh prospect - Positive_BSC_Vietnam company update

Valuation
We recommend buying MWG with a target price of VND 119,700 (+ 39.0% compared to the closing price on 18/02/2019) based on two methods of valuation as FCFF (50%) and PE (50 %).
Catalyst
- BHX segment will break even at the level of stores and distribution warehouses (DC).
- Dienmay Xanh continues to be the primary growth driver for MWG in the next two years thanks to (1) expanding stores (150 stores in 2019), (2) Increasing the number of products on display (SKUs) ), (3) Launching new products, optimizing business operations.
Investment Risk
(1) The risk of growth rate will slow down in the future when (a) Dienmay Xanh chain becomes more saturated in the next two years and (b) Expand the BHX chain more slowly than planned.
(2) The difficulties of MWG when promoting BHX series include (a) Solving logistics problems from DC to stores, (b) Business problems to have more competitive selling prices.
Update business results
(1) Business results in 2018 recorded impressive growth, Dienmay Xanh continued to be the growth motivation of MWG. Net revenue and net profit of MWG in 2018 reached VND 86,516 billion (+ 30.1% yoy) and VND 2,880 billion (+ 31% yoy). SSSG in 2018 of TGDD and DMX is estimated at 10%.

(2) By the end of 2018, MWG's total number of stores was estimated at 2,187 stores (+ 10% yoy). Specifically, the number of Mobile World stores in 2018 reached 1,032 stores (-3.7% yoy), the number of DMX stores reached 750 stores (+ 17% yoy), and the number of BHX stores reached 405 stores ( + 43% yoy).

(3) Business performance of each segment of MWG in 2018 and orientation of 2019 (See the detailed update on page 2).

(4) MWG sets its business plan for 2019 with net revenue and profit after tax of VND 108.468 billion (+ 25% yoy) and VND 3,571 billion (+ 24% yoy). The cost of fixed asset investment (CAPEX) in 2019 is expected to be VND 2,000 billion with ½ for BHX and ½ for DMX.

(5) BSC forecasts that MWG's net revenue and profit after tax in 2019 are estimated at VND 108,220 billion (+ 25.4% yoy) and VND 3,566 billion (+ 23.8% yoy), EPS 2018F = VND 8,040/share.