Company visit: VSN — Pork to get roasted in 2019

Target price: N/A

Upside: N/A

Event catalyst:

• Management delivered conservative guidance for FY19 due to Asian Swine Fever.
• Key short run initiatives include distribution network expansion and restructuring of the product portfolio.
• SATRA currently has no plan to divest its stake.

Management delivered conservative guidance for FY19 on concerns over African Swine Fever. Compared to previous years, top-line growth guidance for FY19 was quite low at just 10% YoY, with net income to grow a paltry 3% YoY. Management acknowledges that both fresh meat and processed foods could be hit by pork supply shortages and increased input costs, as VSN expects swine prices to rise once consumer demand returns in 2H19.

Key short-term initiatives: Expanding the distribution network & restructuring the product portfolio. VSN plans to accelerate its market share penetration via modern channels, with supermarket/mini-mart chains (e.g., Coopmart, Coopfoods, and Satrafoods) comprising 70% of its growth plan. It plans to open an average of 5 additional self-owned VISSAN stores per year and also to establish a VISSAN Premium store brand. Additionally, management plans to expand its product range and redesign current product packaging to increase consumer interest.

Key long-term initiatives: Moving operational facilities, & increasing internal production. In line with local requirements, VSN plans to move its operational facilities, which should cost VND 1.6 tn and be completed in 2021. VSN also plans to increase its contribution of internally-sourced pork from the current 8% to 20%-30% by 2025.

SATRA: No immediate plans to divest. A SATRA representative at the meeting stated that the divestment plan will be a component of SATRA’s restructuring and equitization program, which he expects to occur sometime after 2020.

Our view: We don’t cover VSN and have no investment view on the stock other than to note its very low liquidity, which prompts our interest in SATRA’s divestment timetable. We came away from the AGM more confident in our overall views on the pork industry: cautious in the short term, but more positive in the longer term given the implied industry consolidation that should benefit large producers such as Masan (MSN VN, BUY, 8.3% expected TSR).

Please access the link for our complete report: VSN — Company Visit_Pork gets roasted in 2019

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