Company visit: MSN –Dividend cut in favor of future business investment

Target price: VND 93,000

Upside: 5.7%

Event catalyst:

• Cash dividend is halted.
• MSN sees beverages as the key growth driver, maintains high expectations for meat.
• Next step: Home personal care and retail.

MSN views beverages as the leading growth driver. For energy drinks, management expects to expand its distribution by doubling the total point of sales to 150K, along with launching one new product. They believe this segment should maintain 50% YoY growth in FY19E and 25%-30% growth in the medium term. Management also plans to launch one or two new nutritional drink products this year, which it expects to contribute USD 200-300 mn in revenues by 2022. For coffee, management said it will focus on ground coffee and expects 10% growth for FY19E and 20%-30% growth in the longer term.

High expectations for the meat category. With high-quality products, modern processing technology and efficient control system, management discussed their first successful steps including quick sales channel expansion and high consumer adoption, especially since the outbreak of ASF — despite the recent processing plant shutdown. MSN targets USD 1 bn in fresh meat sales by 2022. In addition, they also want to create synergy with MSN’s current processed meat division and aim for USD 1 bn in processed meat sales in 2022.

Next steps: Home personal care and retail. On home personal care, MSN only stated that they will look at M&A opportunities. But management drew an ambitious picture for the retail business. In general, they plan to penetrate all channels including traditional (11,000 Masan shops around Vietnam), modern trade (5,000 MEATDeli stores), and cooperation with a strategic partner in e-commerce. For the longer run, MSN plans to operate a fully consumer-centric ecosystem by penetrating into energy, pharma, and even education.

Dividend policy: Management indicated their intention to retain cash for future investments, saying that they will pay out cash only if they foresee no profit opportunities.

Our view: While we agree with management’s optimism on beverages and meat, we are more conservative on seasoning, noodles, animal feed, and mining. Our PAT estimate for FY19E (VND 4.9 tn) is just below their guidance range (VND 5.0-5.5 tn). We also view their M&A plans for home personal care as having unclear prospects.

Please access the link for our complete report: MSN AGM Takeaways_Dividend cut in favor of future business investment

Analyst: Quang Vo, quang.vo@yuanta.com.vn