INVESTOR RELATIONS


MWG recorded 9M18 net revenue of 66.5 trillion VND, increase by 17.9 trillion VND, equivalent to 37% growth compared to the same period last year; 9M18 net profit after tax of 2.18 trillion VND, increase by 550 million VND, equivalent to 34% growth compared 9M17. The online revenue reached 8.8 trillion VND, more than doubled revenue of the same period in 2017. All net revenue, net profit after tax and online revenue are on track to achieve the company’s annual targets for FY2018. In terms of revenue breakdown by category, phones, tablets, laptops and accessories were accounting for 54% of MWG’s net revenue; following by consumer electronics (including electronics, white goods and small appliances) with 40%. Grocery & FMCGs contributed for 4% of the net turnover and the remaining 2% was belong to other services. According to GFK TEMAX’s 3Q18 update, retail sales value of the technical consumer goods (TCG) market was estimated over 160 trillion VND (approx. US$7 billion). The YOY growth of retail sales value of Telecommunications products (TC) in Vietnam was recorded at nearly 3% while MWG’s YOY revenue growth of phones and tablets was approx. 19% in the first 9 months of 2018. The 9-month sales value of consumer electronics (CE), major domestic appliances (MDA), small domestic appliances (SDA) sectors in Vietnam increased by 21%, equivalent to one-fourth of MWG’s YOY revenue growth of consumer electronics category (approx. 79%). 3Q18 was the period with lowest quarter-over-quarter growth rate of TCG (0.1%) in Vietnam. In particular, retail sales value of Telecommunications products (especially phones) almost unchanged compared to the same period last year. The electronics, MDA and SDA products recorded the highest value growth rate of approx. 5% while Information Technology (IT) and office equipment and consumables (OE) were in downtrend. If focusing on MWG’s main business including phones and consumer electronics retailing, the 3Q18 overall market’s sales value of these sectors slightly increased by more than 2%, much lower than MWG’s revenue growth of approx. 28% for the same products compared to 3Q17. The volume sales of phones at TGDD and DMX stores in 3Q18 was outperformed 2Q18’s figure and equivalent to the number of phones sold in 1Q18. However, the average price per unit in 3Q18 was cheaper compared to the selling prices in previous quarters depending on the launches of new products at different price segments over the year. In addition, the third quarter was also the off-season of consumer electronics retail business. The volume sales of whitegoods still followed the consumption model over quarters but the number of Televisions sold in 3Q18 was decreased as a result of significant consumption of this product due to the World Cup event in June. In 2018, the seasonality has been no longer offset by the aggressive new store expansion like previous years, so the 3Q18 revenue of MWG were about 4% lower than 2Q18’s result. Above all else, MWG has consistently maintained the gross profit margin of more than 17.5% in the whole year and much higher than the profit margin of other players in the domestic and regional markets such as Tiphone Mobile (Indonesia) or Com7 (Thailand). Since consumer electronics retailing is the seasonal business, the annual growth rate should be used to evaluate the market potential for this sector. Based on the Euromonitor’s forecast, Vietnam is expected to have the highest electronics and consumer appliances retail sales value and be the only country having two-digit growth rate for this sector in Southeast Asia in 2018-2022; thanks to the low penetration of white goods in Vietnamese households, potential increase of consumer electronics products owned by a household and a replacement demand of high-tech products thanks to the increase in disposable income per capita. MWG is continuing to gain more market share targeting to 45%-50% in the next 24 months. After refining winning formula, Bach Hoa Xanh (BHX) continues to open new stores in HCMC and the neighboring provinces. Together with the effort to expand the store network, BHX continued to focus on optimizing revenue per store by converting old stores to standard stores, upgrading standard-scale to large-scale stores and seriously reviewing to close the legacy underperformed stores. As of 30/09/2018, BHX has 409 stores in HCM City, Binh Duong and Long An province with the Average Monthly Sales Per Store was over VND1 billion (calculated only for the stores opened before 1 Sep 2018). In terms of revenue breakdown, 40% of the total revenue was contributed by fresh products, 45% sales value came from other foods and drinks and the remaining belonged to home- and personal-care products. From more than 20 “fresh meat – live fishes” stores experimented from the early of this year, in the last 6 months, BHX has standardized stores, expanded network and upgraded the old-format stores, resulting in 220 standard and big stores (approx. 55% of the existing stores) by end of September. The standard BHX stores (160-200sqm) have recorded average monthly revenue of more than VND1.1 billion. The newly upgraded standard stores have quickly realized the average monthly sales per store of over VND1 billion within 60 days since their conversion dates. BHX is aiming to standardize almost its store count by the year end. The gross margin of BHX was approx. 17% in September, increased from approx. 16% in June 2018. The improvement in gross margin and average monthly revenue per store recently helps BHX getting close to reach the EBITDA break-even point and is on-track to achieve the target by December 2018. From September to the year end, BHX focuses on reviewing the stores’ performance and closing the stores that don’t have potential to be upgraded to standard format or cannot generate sufficient revenue to be break-even/profitable at store-level. This decision may incur one-off losses for BHX and affect the net profit margin of the whole group, but still benefit for the long-term EBITDA result (average revenue per store continues to grow after eliminating the underperformed stores and the profits generated from good performing stores are no longer used to offset for the losses caused by these legacy ones) If taking out the losses directly related to the closing of underperformed stores, the MWG’s net margin in 3Q18 was almost unchanged compared with the previous quarter’s result. We believe that the enhancement in store operation effectiveness is the essential base for aggressive development of BHX from 2019 onwards.