HSBC Research forecasts the target price of Masan's (MSN) stocks at $8.81

HSBC Research’s first report about Masan Group's stocks identified a target price for its MSN ticker is at $8.81, up 24 per cent compared with the closing price of this stock on the Ho Chi Minh City Stock Exchange (HSX) on January 5.

 

The report shows valuations for each business segment of Masan based on its forecast business results in the upcoming years as well as the comparison with regional peers. WinCommerce is valued at $3.22 billion while Masan Consumer is valued at $7.18 billion.

The listed segments like Masan MEATLife, Masan High-tech Materials, and Techcombank are evaluated based on the market price of its stocks. Meanwhile, new investment segments such as Reddi and Phuc Long are evaluated based on future revenue expectations.

HSBC Research’s analyst team pointed out four potential catalysts to invest in MSN, namely rising online sales, user growth at Reddi, new partnerships in digital segments, and further sales of assets.

Alibaba Group and the world’s leading investment funds like TPG, ADIA, and Seatown have made investments in The CrownX, which reflects the attractiveness of the consumer and retail platform. WinCommerce partners with Lazada to gradually increase online sales of WinMart/WinMart+ as well as improve profitability. WinCommerce’s earnings before interest, taxes, depreciation, and amortisation margin is just 3 per cent compared with 10 per cent of regional peers.

In late 2021, Masan acquired the mobile virtual network operator Reddi. HSBC thinks its intention is to build on synergies between Reddi and its other subsidiaries, so that it can become an aggregator platform, providing a myriad of services to end-consumers.

With the recent launch of WinMart+ mini-mall outlets, customers can buy necessities from WinMart+, tea and coffee from Phuc Long kiosks, and medicine and functional food from Phano. In addition, customers can perform a variety of flexible financial services offered by Techcombank, such as cash withdrawals, transfers, bill payments, and savings deposits. They can also use telecom services by Reddi.

By combining with Reddi’s database, Masan will build its loyal customer base to deliver more exceptional value. This ecosystem will serve the essential needs of customers from necessities, financial, and digital services, accounting for 80 per cent of Vietnamese people’s spending. Customers can access different products and services under one roof. Meanwhile, sellers can earn higher revenues per sq.m with cross-selling and additional products with a loyalty customer care platform.

Masan believes that fintech will shape the competitive landscape in the coming time. Thus, it has taken advantage of its loyal customer base to offer fintech services with the core platform of Reddi. At present, fintech solutions like buy now, pay later models have yet to meet the demand of consumers.

Leveraging on a recently approved mobile money programme, Reddi can expand into payments and target users without bank accounts, which makes up for a large proportion of Vietnam’s 100-million population. As a result, Masan can realise its goal to increase the proportion of its products in people’s spending.

Although Reddi has significant potential to grow in payments, it will compete against other telcos with mobile money offerings, such as Viettel, VNPT, and Mobifone, as well as e-wallet providers VNPay and MoMo, which are backed by major financial groups like SoftBank, GIC, and Warburg.

HSBC predicts Reddi and Phuc Long could grow in value, but today they only account for a relatively small percentage of Masan’s valuation. Meanwhile, Masan Consumer and WinCommerce may drive the bulk of the value.

Masan’s other divisions – meat, banking, and commodities – remain cyclical in nature. However, each of these divisions is currently at a favourable point in their respective cycles, and Masan is benefitting from tailwinds. For instance, in the animal feed and meat division, MEATLife's feed volume in 2021 has shown strong positive momentum following a rebound from the industry caused by the spread of the African Swine Flu. In November, Masan announced the sale of its feed division to De Heus to renew its focus on downstream meat products and reduce the division’s cyclicality.

In financial services, Techcombank benefits from the recovery in the domestic banking sector. Vietnamese banks are enjoying robust loan growth and declining loan losses. Techcombank remains one of the best-in-class banks in the country. Likewise, Masan Materials’ profitability has been improving since the second quarter of 2021 following a rebound in prices of its key commodities, tungsten and copper.

Despite positive valuation, HSBC also pointed out key downside risks affecting the forecast results of Masan’s business segments. WinCommerce's profit margin can be reduced due to the higher costs of point of sale expansion or new product development costs of Masan Consumer.

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