MSN — FY19 results worse than expectation

Hold-OPF

Target price: VND 84,100

Upside: 68%

Event:

Masan published its results prior to the Tet holiday. Revenues missed our forecast, but the bottom-line still beat our expectation.

Our take: 

Masan Consumer (MCH) was the only subsidiary to post positive FY19 top-line growth (+8.6% YoY). This was slightly below our expectation of a 9.8% YoY increase. Management admitted that their innovations in seasonings and convenience foods in 2019 did not contribute as planned. For FY20, management expects to see 10%-15% YoY top-line growth, driven by beverages (double-digit growth), seasonings and convenience food premiumization, and the new business: home and personal care.

Masan MEATLife (MML) disappointed with a 1.3% YoY decline in sales, compared to our expectation of 5% growth. The key headwind, per management, was African Swine Fever, which dampened pig feed sales (accounting for 50% of total feed sales). As for FY20, management expects to see 20%+ growth with animal feed growing in the high-single to low-double digits. However, management says that fresh meat will be the main driver and should contribute 20%-25% of MML’s revenues.    

Masan Resources (MSR) saw the worst subsidiary top-line performance with a 31.4% YoY decline, which is worse than our expectation of a 22.5% decline. Soft tungsten prices and difficulties in selling copper were the key reasons. For FY20, management expects 17%-27% YoY growth in sales, with the assumption of average tungsten prices increasing by 11% YoY.

Vin Commerce (VCM) M&A deal: Management expects VCM to poste VND 45-48 tn in sales in 2020, with target EBITDA margin of -3% to breakeven. Investors can find more detail about management’s plans for this new business in our VCM deal: Conference call takeaways report.

Core bottom-line increased by 12%, which is better than our expectation of 10%, mainly due to lower-than-expected selling expenses (17% or VND 863 bn lower than our forecast).

Our view: Given the significant changes in MSN’s corporate structure, our FY20 forecast is under review. In general, we believe that MSN’s post-merger net profit will be reduced by two factors: (1) pre-tax losses from VCM and reduced profit from its core consumer business due to MSN’s lower ownership in the business.

Please access the link for our complete report: MSN FY19 Results

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