HO CHI MINH UNIVERSITY OF TECHNOLOGY
OFFICE FOR INTERNATIONAL STUDY PROGRAMS
Corporate Finance Assignment
Mobile World Investment Corporation (MWG)
Financial Statement Analysis
Group Members
Lê Phước Tuấn
1952517
Nguyễn Huỳnh Trúc Thanh
1952448
Bùi Nguyễn Tấn Khang
1852439
Hoàng Nhật Khang
1952758
Huỳnh Thị Anh Thư
1952131
Contents
1. Company Introduction........................................................................................................... 1
1.1 Company background...................................................................................................... 1
1.2 Main business scope.........................................................................................................1
1.3 Company’s vision............................................................................................................. 1
1.4 Trend of retail industry.................................................................................................... 1
2. Financial Statement Analysis.................................................................................................2
2.1 Classes of Financial Ratios..............................................................................................2
2.2 Trend Analysis..................................................................................................................4
2.2.1 Liquidity Ratios......................................................................................................... 4
2.2.2 Leverage Ratios.........................................................................................................5
2.2.3 Efficiency Ratios........................................................................................................7
2.2.4 Profitability Ratios.................................................................................................... 8
2.2.5 Market Value Ratios..................................................................................................9
2.3 Benchmarking Analysis..................................................................................................10
2.3.1 Liquidity Ratios....................................................................................................... 10
2.3.2 Leverage Ratios.......................................................................................................11
2.3.3 Efficiency Ratios......................................................................................................13
2.3.4 Profitability Ratios.................................................................................................. 15
2.3.5 Market Value Ratios................................................................................................16
2.4 Risk Analysis.................................................................................................................. 19
2.4.1 Beta Calculation:.................................................................................................... 20
3. Company performance......................................................................................................... 21
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Introduction
In recent years, the electronics market in Vietnam has seen up and down in business
performance of major companies, such as the dissolution of Vien Thong A and Vinpro
in 2019, the struggle of Pico, HC, MediaMart in getting a piece of the market and
noticeably, the rising of Dien May Xanh, a chain of retail stores belongs to MWG.
Looking back, it seems that newcomers in market are the ones dictating the industry
trend and market competition while the veterans are struggling to stay in the business.
To explain such market state, owners and investors have been attuned to looking at
numbers and the bottom line, not only in their own companies, but also of the
competition and the entire industry. However, simply reviewing net income, profit
margins and various cost levels provides only surface information. A more
comprehensive and thorough study of these numbers, through financial ratios, can
provide a better insight of a business’s hidden effectiveness and weakness. For this
paper, we examine the electronics retailing market back in 2018, specifically
following MWG footsteps to have a greater view about the company in this period and
also, predicting its prospects, as far as pointing out its possible future operating
strategy.
Purpose
Before 2018, the electronics retailing market was once a “hefty piece of cake” of
every huge corporation and private seller. But for the 2018 period, the market shown
that it had gone through its peak growth and was starting to show declines. Big
retailers like The Gioi Di Dong, Dien May Xanh, FPT Shop, Nguyen Kim all took up
huge proportion of the market. And for that period, these retailers had the same
expansion trend to get more market share from other smaller private sellers, which
led to more aggregate market.
The Vietnamese electronics market has entered a saturated period with low forecast
growth over the years next starting in 2018. The main reason is because the market
has entered the mature stage with high popularity of electronics commodities over the
costumer population. In addition, electronics goods are items with a long service life
and each individual or household family only need to own one phone, laptop,
television, or refrigerator, so the number of new purchases in the near future is
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deemed to be limited. According to Euromonitor's forecast, the market value of mobile
phones (both feature phones and smartphones) will go down after peaking in 2017
and will be around 59 trillion VND in 2022 (-25%). Although the electronics market is
getting more positive, there will be almost no growth soon.
In 2018, the market was developing in the trend of large retail chains with strong
financial status, management experience and brand advantage, which was quickly
taking over the market share of small retail stores when the advantage in coverage
and price of these small retailers had been caught up by giants like The Gioi Di Dong,
Dien may Xanh. This market share dominance would be accelerated in the coming
time in the context of stagnant natural growth. During this period, by following this
strategy, MWG was gaining more and more market share, about 40% of the entire
market.
Therefore, the purpose of this paper is to examine MWG’s performance in 2018,
providing in depth analysis of the company to learn more about the company
expansion strategy along with its growth and underlying problems. Furthermore, in
this paper, we also include risk analysis of MWG during the year to judge the
profitability and the risk of investment of the company, providing better data for
decision-making regarding investment in the company.
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1. Company Introduction
1.1 Company background
Mobile World Investment Corporation (MWG) is the best Retailer in Vietnam in terms of
revenue and net profit earned after taxation. The Company is occupied with the tasks of a few
corporate stores in the types of physical and electronic stores, to be specific
DienmayXANH.com, thegioididong.com, BachhoaXANH.com, and BigPhone.com.
The Gioi Di Dong was established in 2004 as the No. 1 mobile device retail chain in Vietnam
with more than 1,000 supermarkets present in 63 provinces and cities across Vietnam, this
store chain spends significant time in the retail offer of advanced items including cell phones,
tablets, laptops, and adornments for these items.
Dien May Xanh, formerly known as dienmay.com, was born in late 2010 and officially
renamed in May 2015, Dienmayxanh.com chain has practical experience in the retail offer of
customer electronic items and domestic devices, like TVs, karaoke frameworks, refrigerators,
clothes washers, rice cookers, blenders, irons, microwaves, and vacuum cleaners, and so on.
Bach Hoa Xanh was put into trial at the end of 2015, it is a chain of grocery stores and
supermarkets.
Bigphone retail chain of mobile devices was put into operation in 2017, there are currently
10 stores in Cambodia
1.2 Main business scope

Management consulting activities (except audit consulting, tax procedure services)

Producing computers and peripheral equipment of computers

Producing electronic and telecommunication components

Wholesale of computers, peripheral equipment, and software

Manufacture of communication equipment (not made at the office location)
1.3 Company’s vision

To be South East Asia dominator in retail, e-commerce, and similar services

To gain the trust and love of customer by wholehearted service and outstanding
products

Taking care of our own employees with kindness, happiness, wealth, and pride

To make significant impact on corporate social responsibility

Operating the corporation with integrity and humanity
1.4 Trend of retail industry
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The retail sector is undergoing massive transformations. Customer behavior is shifting, and
they have higher standards than ever before.
1. Invest in omnichannel retail strategies
Investment in omnichannel retail initiatives is one of the most significant retail market
developments. According to research, the average digital user owns 3.64 connected devices
and consults them before purchasing. Because of the widespread use of connected devices,
customers expect a consistent experience across multiple touchpoints. Instead of selling on a
traditional channel as before, business owners use many different channels to expand their
reach to customers, specifically: in-store, social media (Facebook, Instagram…), website and
ecommerce platforms (Tiki, Lazada, Shopee…)
2. Mini-Stores:
Convenience stores and mini supermarkets / department stores are attractive destinations for
Vietnamese consumers. According to Nielsen, Vietnamese shoppers gradually reduce their
shopping habits at traditional markets and choose to go to convenience stores or minimart
more often. This trend has led to fierce competition between convenience store / minimart
chains in Vietnam, including domestic brands (Vinmart +, Bach Hoa Xanh, Co-op Food) and
abroad (Circle K)., B's mart, 7-Eleven). According to retail experts, the model of convenience
stores and mini supermarkets has many advantages that make this type popular such as low
rental cost, fast buy and sell activities, 24/7 service or cashless payment.
3. Provide a customized shopping experience
Another retail industry trend that is becoming more and more pivotal to consumers is having
a personalized shopping experience. In the retail world, personalization often involves
retailers giving consumers recommendations based on their preferences like taste, location,
order history, and previous searches. Simple services can also be altered to satisfy
customer’s needs. This includes chatbots that increase customer engagement and interaction,
text messages that provide updates on orders, online- and tele-based communications, and
other services.
2. Financial Statement Analysis
2.1 Classes of Financial Ratios
The financial ratios are classified into five categories:
1. Liquidity ratios - measure the company ability to pay off its current debt obligations
without external capital.
2. Leverage ratios - indicate the firm’s long-term solvency to meet its debt.
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3. Efficiency ratios - address how efficiently a company uses its assets to generate sales.
4. Profitability ratios - measure how efficiently a company generates profit and value for
shareholders.
5. Market value ratios - help evaluate the economic status of publicly traded companies
Since there is a substantial number of financial ratios, thus in this report, only ratios that
reflect best the company’s financial performance are selected. The calculated ratio results
are shown in the appendix segment. The following table expands the definition and formulas
for the ratios.
Selected Financial Ratios and Formulas
Ratio
Formula
Liquidity Ratios
Current ratio
Quick ratio
Current Assets
Current Liabilities
Current Assets − Inventory
Current Liabilities
Leverage Ratios
Debt ratio
Debt-to-equity ratio (D/E
ratio)
Long-term debt ratio
Time interest earned ratio
(Interest leverage)
Equity multiplier
Total Debt (we use Total Liabilities)
Total Assets
Total Debt
Equity
Long − term Debt (LTD)
LTD + Equity
EBIT
Interest
Total Assets
Equity
Efficiency Ratios
Inventory Turnover
Inventory Turnover in Days
Receivables Turnover
Cost of goods sold
Inventory
365 days
Inventory Turnover
Revenue
Account Receivables
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Average Collection Period
365 days
Receivables Turnover
Profitability Ratios
Profit Margin
Return on Assets (ROA)
Return on Equity (ROE)
Net Income
Revenue
Net Income
Total Assets
Net Income
Equity
Market Value Ratios
Earnings Per Share (EPS)
Price Earnings Ratio (PE)
2.2 Trend Analysis
Net Income
Shares outstanding
Price per share
EPS
The following segment will evaluate MWG’s financial performance by trend analyzing its
financial ratios from 2016 to 2018.
2.2.1 Liquidity Ratios
Trend Analysis:
The current ratio is the first liquidity ratio to be analyzed. As for MWG, the current ratios
experienced an upward trend, starting with 1.116 results in 2016 and peaking at 1.304 in
2018. Hence, from the current ratio spectrum, MWG was not excessively investing in its
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current assets since excess current assets will reduce capital efficiency. However, to better
evaluate the liquidity level of MWG, its quick ratio must be taken into consideration.
Quick ratio is a more conservative ratio compared to current ratio as it eliminates the least
liquid current assets - inventory. From 2016 to 2018, the quick ratio of MWG fluctuated
under 0.5 which shows a low liquidity and company financial health while the calculated
current ratios were quite high. The reason is the percentage of inventory of total assets was
quite high for all three years; above 50% of its total assets. This is quite alarming as the
company did not have an efficient liquidity level and might encounter some struggles to cover
all the current liabilities which accounted for a large portion of total liabilities, more than
63% for three years.
Conclusion:
Despite the upward trend in the current ratio, MWG’s quick ratio varied in three years
showing concerns about the company’s liquidity level although the company had significant
results in current ratio. Having a high inventory proportion is a signature for retail
companies, however it might cause pressure for the company’s solvency which was at the
time at a low rate.
2.2.2 Leverage Ratios
Trend analysis:
Interest coverage is used to calculate the company’s ability to handle its outstanding debt.
As can be seen from the table, the interest coverage ratio over a 3-year period experiences a
downward trend, starting from 17.765 in 2016 down to 9.676 in 2018. It is also worth
noticing that the company interest was increasing significantly over the given period from
119,6 billion VND in 2016 to 436,4 billion VND in 2018 servicing for the business chain
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growth of MWG. Hence, the company should pay more attention to the interest level as it was
being pressured under the continuous business expansion.
The debt ratios measure how well debt is used to finance a company's operations. These
ratios are Debt to equity ratio, Debt to total assets ratio and Long-term debt to total
capitalization ratio. As can be seen from the table, there are no clear trends detected for all
three debt ratios; they remained relatively stable in 2016 and 2017 and were down slightly in
2018. The debt to total assets ratio hovered from 0.74 to 0.68 meaning that the MWG has
around 74 - 68VND in debt for every 100 VND in assets. The debt-to-equity ratio was
between 2.87 to 2.13 meaning that the company has a minimum 213 VND of debt for every
100VND of equity. The long-term debt ratio of 0-0.17 means that LTD was 0% to 17% of
total equity. Although the total debt to equity ratio was significant for three years, the LTD
debt ratio only peaked at 0.17 in 2017; therefore, all the debt was mainly short-term. MWG
should take this into consideration as the company might meet some challenges when it
comes to cover all the short-term debt with its current solvency.
Conclusion:
MWG’s efforts in its business development plan was clearly seen in the financial leverage
ratios with soaring results, especially in D/E ratio. Although having a high proportion of
debt in financial statements could make bad impressions to customers, there are a substantial
number of companies operating with a high degree of financial leverage and achieving
outperformed results in today’s market, specifically in the real estate, construction, and retail
sector. In fact, according to MWG, having high financial leverage ratios is the company’s
business plan by increasing the short-term debt to invest in inventory for the Tet period and
business growth. In result, the gross profit of MWG did increase significantly from 7,214
billion VND in 2016 to 15,292 billion VND in 2018 with a gradual upward trend. This
clearly shows how MWG successfully used its high financial leverage degree, making optimal
use of its external capital for strong growth. However, as mentioned above, the risk that
MWG would have to face is that the mobile phones and electronics are showing signs of
saturation and fierce competition, if it continues to keep the current high leverage ratios.
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2.2.3 Efficiency Ratios
The inventory turnover ratio measures how often a company moves its inventory out of its
warehouse and stores to its customers. MWG’s inventory turnover over three years can be
seen as remaining quite stable. This ratio started at 3.99 in 2016, reached to 4.58 in 2017
and achieved 4.08 in 2018. This indicates that in 2017, MWG had efficient sales and the
inventory was not stagnant as in 2016 and 2018.
Although the inventory increased steadily in three years, the percentage of inventory in 2017
of total assets did decrease from 63.08% in 2016 to only 52.80% whereas the percentage of
COGS of Net sales stayed similar. Therefore, the positive exception of Inventory turnover
rate in 2017 might resulted from the improvement in the total assets structure.
Receivable Turnover measures the number of times a company can turn its account
receivables into cash for a period. For MWG, the Receivables Turnover ratio in 2018
increased significantly compared to the other years with 31.63 in 2016; 23.99 in 2017 and
56.09 in 2018. Looking at the BS, we can see that the AR had decreased noticeably by 1,223
Billion VND, almost half of the amount in 2017. The changes majorly came from the decline
in receivables from customers
2016
2017
2018
Receivables from customers
243,463,945,511
1,431,776,840,141 369,573,657,457
Account receivables
1,410,642,874,572 2,765,847,815,554 1,542,529,736,073
Conclusion:
The inventory turnover also fluctuated peaking in 2017 at 4.58 mostly due to the increase in
electronics products sales structure (accounted for 55% in 2018) and led to the rise of its
inventory, hence a lower turnover ratio in 2018. However, keeping such a high level of
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inventory value might cause struggle for the company itself, especially during the expansion
phase. Moreover, MWG’s collection from customers in 2018 was timely but the trend varied
quite significantly thus consideration must be taken to maintain a healthy receivables
turnover ratio.
2.2.4 Profitability Ratios
Profit margin: MWG maintained its profit margin unchanged with a slight decrease in 2017
although its gross profit increased significantly throughout the years. The reason was the
huge increase in financial expense resulting from the high level of debt ratios servicing for
the expansion of MWG’s business chains. The financial expense increased sharply from 120
billion dong in 2016 to 436.6 billion dongs in 2018 which overcame the financial income and
recorded a financial loss in 2018 in nearly 95 billion dongs.
Besides the other expenses such as selling expenses also increased at a much faster pace
compared to the gross profit which also caused the slow growth for profit margin.
Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. As can be seen from the given table, ROA% over three years was quite stable with
only a decent decrease in 2017 from 10.62% to 9.66%. Although there was no upward trend
during the years, MWG still managed to maintain the ROA% at a rate around 10%.
Return on equity (ROE) is a measure of financial performance calculated by dividing net
income by shareholders' equity. ROE% experienced a clear downward trend from 2016 to
2018. This is because the growth rate of Net Income (above 30%/year) did not keep up with
that of Total Equity (~52%/year) caused by the uncertainty in the new risky business sector Bach Hoa Xanh. The fast growth of equity was reasonable as MWG was focusing on
8
investing in its business chains, especially in Dien May Xanh and Bach Hoa Xanh. Despite
the decrease, the average rate of ROE% remained above 30% which was quite high in
general indicating that MWG's equity efficiency was still very good.
Conclusion:
Despite the elevated rate of gross profit, MWG’s profitability ratios still did not show any
positive increase signs over the given period as the company equity rose with high annual
retained earnings. Besides, the mobile phones (The Gioi Di Dong) and electronics (Dien May
Xanh) business sector did give high growth rates, however Bach Hoa Xanh still was on the
expansion stage and thus had not contributed to the company profits. In general, the gross
profit increased because of the fast expansion of MWG’s business chains, however time is
needed for the new opened stores to make any good changes to the company’s efficiency as
the initial expenses such as financial, administration and selling expense rose along with the
business enlargement which affecting the net profit margin in short term. With high ROE%
despite the decrease, MWG still is appealing to investors.
2.2.5 Market Value Ratios
Earnings per share (EPS) is a company's net profit divided by the number of shares
outstanding. The Earnings per share showed an explicit decline movement from 2016-2018
from 10,246 to 6,689VND due to MWG having continuously increased the capital structure
means that the Share outstanding increased considerably while the net income did not have
such growth tendency.
Shares outstanding
2016
2017
2018
153,950,935
307,990,494
430,372,609
In contrast, PE ratio seemed to be fluctuating with an increase in 2017 and followed by
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a decrease in 2018. The decrease might be caused from the decline in market price in 2018 at
87000VND compared to 156000VND in 2016. This showed concern in the expansion rate for
Bach Hoa Xanh which was slower than the original plan.
Conclusion:
The downward trend in both EPS and P/E ratio shows concerns about the business situation
of MWG, especially in its new business chains, BHX and DMX. Although DMX gave out
impressive performance for the company, BHX seemed to have some struggles to improve its
growth, making the price decrease and affecting the market value ratios over the given
period. However, shareholders still have high hope for MWG’s future potentials as the
performance of new opened store chain still have room for improvement and that was clearly
showed in the MWG’s business report in 2018 with positive developments in BHX chains,
notably BHX excellently completed its EBITDA breakeven goal at the store in December
2018.
2.3 Benchmarking Analysis
2.3.1 Liquidity Ratios
Analysis:
All 4 companies had similar current ratios, fluctuated around 1.1 to 1.4. What seemed to be
noticeable was the opposite trend of the quick ratios. MWG had the lowest quick ratio among
the 4 while it was having a quite high current ratio. On the other spectrum, VTC had the
highest quick ratio at the same time having the lowest current ratio. In fact, it is plausible
because in 2018, MWG had a huge inventory, about 17,000 billion VND while the other 3
companies only had around 1,000 billion to 2,000 billion VND of inventory. MWG with a low
quick ratio might experience some short-term risks. MWG had its huge inventory as a
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powerhouse for its activities. With such short-term risks, potential investors and creditors
might concern whether to proceed their investment to the company. On the other hand,
MWG’s high current ratio might assure its creditor about its positive payback ability.
2.3.2 Leverage Ratios
Long-term debt ratio:
MWG had the highest long-term debt ratio, about 0.12 among the 4 companies. This
indicated that at the time, for every 1,000 VND in equity, there was 120 VND of long-term
debt. This is more of a problem in periods when interest rates are increasing, or when the
cash flows of a business are subject to a large amount of variation, or when an entity has
relatively minimal cash reserves available to pay down its debt obligations. This was true for
MWG which held a large inventory but a small amount of cash.
Debt-equity ratio:
Looking at the chart, it is noticeable that VTC had the most debt-equity ratio, this was since
VTC aggressively financed its operation with debt. We notice that VTC has a small level of
debt and equity compared to other 3 companies.
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Data from 2018
But what made VTC have such a high debt-equity ratio was due to the high proportion of
debt taken up in its total liabilities and owner’s equity.
In the case of MWG, a low debt-equity ratio indicated as a safer investment in the industry
whereas in the case of VTC, it was the riskiest for an investment among the 4 companies.
Interest coverage ratio (ICR)
Among the 4 companies, MWG had the greatest ICR (9.676), in fact it was nearly double that
of FRT, the second highest one. This meant, in 2018, MWG could cover its interest
obligations 9 times using its earnings. This huge level of ICR was the result of an extremely
high EBIT of MWG in 2018 (about 3,786 billion VND). In other words, MWG with very large
earnings beyond the amount required to make interest payments on its debt had a larger
financial cushion against a temporary downturn in revenues.
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Analysis:
MWG had a tendency of prolonging its debt payment despite having enough cash to do it. In
Mobile World's Q1/2019 financial report was the skyrocketing number of financial
investments, from just nearly 51 billion at 31/12/2018 then up to 3,830 billion VND.
Financial investment money soared, but MWG did not use money to repay loans, although
the company's debt ratio was quite high. MWG's liabilities as of March 31, 2019 were 20,388
billion VND, 2 times more than equity.
2.3.3 Efficiency Ratios
At the time, MWG had a skyrocketed receivable turnover with 56.09 times per year, this
meant MWG collected its outstanding credit accounts and reloaned the money 56.09 times
during the year.
On the other hand, on the inventory turnover spectrum, MWG was not efficient as its
counterparts. Briefly speaking, MWG sold off or turned over the entire inventory about 4
times a year. Compared to VTC, we realized that VTC was more efficient at managing its
inventory than MWG. But we must realize that MWG’s inventory was much larger than that
of VTC, which meant MWG had to deal with a lot more complex operation with its inventory.
This might be the reason why MWG had such a low inventory turnover compared to VTC.
But overall, judging from FRT and DGW’s performance, MWG perhaps was doing just fine.
To get a better view of this turnover concept, we can convert these ratios to a more
comprehensive unit (table below).
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Based on the new table above, we can see that MWG had its inventory sit for more than 89
days before it was sold, which was quite slow compared to FRT, DWG and VTC. On the flip
side, it only took MWG more than 6 days to collect its credit sales while others took about a
month to do so.
Summary:
With such a high receivables turnover ratio, MWG’s collection of accounts receivable was
efficient, and the company had a high proportion of quality customers that pay their debts
quickly. This can also suggest that MWG is conservative when it comes to extending credit to
its customers. Conservative credit policy can be beneficial since it could help the company
avoid extending credit to customers who may not be able to pay on time but if this policy is
not done correctly, it can drive away potential customers. In fact, these customers may then
do business with competitors who will extend them credit. This is something MWG should be
keeping in mind of.
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2.3.4 Profitability Ratios
Overall, MWG outperformed its opponents when it came to efficiency in managing its assets
and operations. In fact, 1,000 VND in sales, in equity and in assets of MWG brought more
profits for investors. Especially ROE, which measures how the stockholders fared during the
year. Because benefiting shareholders is our goal, ROE is, in an accounting sense, the true
bottom-line measure of performance. The reason for MWG to be able to obtain such a high
profitability rate was due to its high net income during the year (about 2.88 thousand billion
VND).
Analysis: We notice MWG had an exceptionally high rate of returns, using the DuPont
identity, we analyze how MWG used its debt to finance its operation. With a low equity
multiplier, it implied that MWG had low levels of debt-financed assets, which was positive
because it meant that the debt servicing costs are lower.
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Throughout the years, MWG’s equity multiplier was also getting lower and lower, this
indicated that MWG was continuously relying less on debt-financed assets.
Although this might reduce MWG’s return on equity, it also concluded that MWG was getting
more susceptible to changing economic conditions or evolving industry standards than a
traditional electronics firm.
2.3.5 Market Value Ratios
Normally, a high P/E ratio represents an investor's expectation of higher earnings growth
from that stock in the future. In 2018, MWG and FRT had a similar fashion in the P/E ratio,
13 and 14.5 respectively, while VTC was quite low with just 5.12 of P/E ratio. In addition, we
also have DGW with a P/E of 8.38. With such similar P/E value, it is safe to assume that
MWG, FRT and DGW were all having a healthy performance at the time. In 2018, FRT was
slightly better than MWG. Their investors were willing to spend 14.5 thousand VND for 1
thousand VND of profit, whereas MWG had their investors spend 13 thousand VND for 1
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thousand of profit. This was probably since MWG had a higher earnings per share than that
of FRT during the year (6.689 to 4.96 of FRT).
Analysis:
Not every high P/E ratio mean good news. Some companies may have high P/E ratio due to
poor performance during the year, which leads to a low EPS. So, making any statement
regarding only P/E ratio is unsafe and sometimes can be biased. To make a better judgement
using the P/E ratio, we should look at the P/E ratio’s fluctuation throughout a specific period.
For a company that has a steady rising of P/E ratio, it is likely that company will experience
higher profit in the future. And for companies that have an unstable fluctuation of P/E ratio,
it is harder to tell whether they will experience higher profit in the future, in this case,
investors and creditors will spend more time examining the company’s performance before
making any decision.

MWG had a stable rise of P/E ratio since 2018 (13, 13.16, 13.75), this indicates that
in the future, MWG is likely to experience higher profit, corresponding to the rising
P/E ratio. It is promising to invest in MWG.

DGW had a fluctuating P/E ratio throughout the period, which means it is not certain
to invest in DGW now.

VTC had a bit of fluctuation but generally, this is also a promising investment for the
steady past performance and an acceptable rise of P/E ratio in 2020.
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
FRT had a decreasing in P/E ratio, this meant they were performing not so great
during this period. As investors, before investing in FRT, they should further examine
their data before making any concrete conclusion.
Strategic Analysis:
Throughout the analysis, it is fair to say MWG was a dominant player in the electronic
retailing market. In fact, it outperformed its other 3 opponents drastically. In the context of
the mobile device retail market, electronics are somewhat slowing down due to market
saturation as well as the impact of the epidemic, MWG must face a change in business
operation even though it is a big player in the market. There are lots of changes that should
be considered but we believe the 2 followings are crucial and noteworthy.
Less inventory, more customers:
For long, MWG has been operating as a business-to-customer company, it offers goods
through its mediums such as: Mobile World, Dien May Xanh, through these mediums, MWG
is required to spend additional costs to target certain geographical customers by setting up
stores, hiring and training staff, transporting merchandise from location to location…
In fact, in 2019, Mini Mobile World - a smaller form of Mobile World store, operating based
on the principle “as cheap as possible”, was established. These stores were small-sized,
minimal staff and costs, and each store only cost 1/10 compared to the regular, big Mobile
World store. But this chain of stores was ill-fated, after 10 months, MWG had to shut down
the entire chain because they were deemed unprofitable.
But it is not entirely hopeless for MWG, they can somehow turn the market in favor of them
by changing their business structure. Specifically, Mobile World cooperates with legal names
as product resellers for Mobile World (i.e., the agent will buy goods from the Mobile World
and sell the products directly to the user's hand). To put it simply, Mobile World will import
products directly from suppliers and distributors, then divide them to retailers wishing to
become a "master dealer" in the mobile and electronics market. Of course, Mobile World
should also require resellers to keep all forms of marketing discounts (discounts, gifts), sales
support programs (installments, sell out) for their new business model.
By following this business-to-business-to-customer approach, MWG can somehow solve their
heavy inventory problem, meanwhile having a wider range of “customers”. In addition,
MWG will no longer need to set up new stores because their private resellers have already
had ones.
18
Cash deposition:
Apart from the saturated electronics market, the COVID-19 pandemic has also brought a
new form of operation for MWG in 2020. Specifically, during the period, the Company
increased its short-term financial investment (usually bank deposits with term from 3 months
to 1 year, interest rates ranged from 6% -8.65%) to 3 times higher, reaching 10,598 billion
VND. Financial income from deposit interest in the period also increased by more than 52%
to 372 billion VND.
30/09/2020
31/12/2019
Short-term financial investment 10,598,354,547,946 3,137,000,000,000
In the first 9 months of 2020, MWG achieved consolidated net revenue of 81,352 billion VND
(increased 6%), income after tax was 2,978 billion VND (increased 0.05%). Since the Covid19 outbreak in Vietnam from March to November 2020, this was the first time that MWG has
recorded positive cumulative net profit growth compared to the same period in 2019.
Meanwhile, the mobile phone segment continued to record negative cumulative revenue
growth in that same year.
This short-term investment has somehow alleviated MWG from the devastating impact of the
COVID-19. And perhaps soon, MWG’s BOD may consider shifting their company operation,
relying more on cash-based investment.
Conclusion:
Currently, MWG’s Dien May Xanh chain accounts for about 48% of Vietnam electronics
market. MWG has also speculated that their Dien May Xanh can only occupy 60% of the
market at peak which is why MWG is constantly expanding its chain overseas, looking for
more opportunities, specifically in the ASEAN region. Despite having a stagnant growth in its
homeland, MWG is still holding a lot of its prospects in overseas operation, therefore it is not
unwise to invest in MWG as the entire company is making major positive shifts, not just in its
operation, but also in its structure and strategy.
2.4 Risk Analysis
Beta is a measure of a security's or portfolio's volatility–or systemic risk–in comparison to
the market, which is mainly used in the capital asset pricing model (CAPM). Beta data for a
single stock can only give an investor a rough idea of how much risk the stock would bring to
a (presumably) well-diversified portfolio. The stock must be compared to the benchmark used
in the calculation for beta to be relevant.
19
2.4.1 Beta Calculation:
2.4.1.1 Covariance Method:
β =
Covariance(Re , Rm )
Variance(Rm )
Re = the return on an individual stock
Rm= the return on the overall market
By obtaining data from cophieu68.com and using the covariance function and the variance
function from Excel, we have the following result. Keep in mind that the input is daily value
of index price and stock price from the period 29/12/2017 to 28/12/2018.
Covariance(Re, Rm ) = 1.983720594
Variance(Rm ) = 1.969911256
Thus,
β = 1.007010132
We also have the following beta result, calculated on other two platforms, VNDIRECT and
VietCapitalSecurities.
Beta of MWG calculated by VNDIRECT
1.0
Beta of MWG calculated by VietCapitalSecurities
0.8
We notice that different platforms have different result of beta. VNDIRECT provided a 1.0
beta while VCS provided a 0.8 beta. This is because there are several ways to estimate beta.
Multiple factors, such as the duration of the period considered, are included in the
computation of the beta, which creates various results that could portray a different picture.
For example, some calculations base their data on a three-year span, while others may use a
five-year time horizon. Those two extra years may be the cause of two vastly different results.
Therefore, the idea is to select the same beta methodology when comparing different stocks.
2.4.1.2 Slope Method:
β =
(x − x)(y − y)
(x − x)2
x = excess stock return (Re - Rf)
y = excess market return (Rm - Rf)
x = sample means of known x
y = sample means of known y
By using the data of stock price and market price in 2018 for the above formula, we have the
following beta:
20
β = 1.007010132
We notice that even though using different methods to calculate beta, the result is still the
same. This is because we account the same period (daily price) of data into the calculation.
Analysis:
Through the 2 methods of calculation, in 2018, MWG had a beta of 1. Looking at its
competitors: FRT, DGW and VTC, we also have their beta in 2018 in the following chart:
Overall, MWG was a safe investment. With a beta of 1, this indicated that MWG was
synchronized with the movement of the market's changes. On the other hand, FRT and DGW
were riskier investments with 1.4 and 1.2 beta, respectively. If investors were looking for high
risk, high reward types of investment, FRT and DGW were 2 possible choices. Finally, VTC
with a 0.5 beta, this meant VTC’s stock prices were less volatile than the market, which
meant VTC was a low risk, low reward type of investment.
In conclusion, for the period 2018, it was advised to invest to MWG because of its stabilized
stock price with a promising company overall performance.
3. Company performance
Throughout the analysis, it is fair to say MWG was a dominant player in the electronic
retailing market. In fact, it outperformed its other 3 opponents drastically. However, in the
context of the mobile device retail market, electronics are somewhat slowing down due to
market saturation as well as the impact of the epidemic, MWG must face a change in
business operation even though it is a big player in the market.
Chain of store expansion:
MWG’s result throughout the years surpassed the annual plan set by the company, marking
the year 2018 with net sales of 86.516 billion VND increased by 30.4% year on year base.
The main driving force for growth is the continuous expansion of the electronics chain and
21
will keep being one for the next 2-3 years. According to MWG, by changing the mini Dien
May Xanh layout to optimize the number and display area of products, these stores increased
the revenue by 30% without increasing the rental cost and other operational costs. Besides,
as reported by MWG, by the end of 2018, BHX’s gross profit reached 16% compared to 12%
in 2017 and the EBITDA margin at the store level was positive. However, the average
EBITDA per store is still negative as operating costs in distribution centers are about 2.5%
of sales.
Ominous obligations
Keeping up with the constant growth in business chains, MWG also recorded significant
increases in expenses, especially financial expenses from 120,1 billion VND in 2016 to 436,6
billion VND in 2018 which surpassed the company’s financial income and led to a financial
loss in 2018 of 94,5 billion VND. Although MWG maintained a high interest coverage ratio
from 2016-18, having such elevated trends for interest would cause pressure for the company,
specifically in this business expansion period.
Profit margin was also affected by the incline in expenses and remained unchanged since
2017 though the gross profit increased sharply through the given period. ROE% result
showed a downward trend since 2016, mainly caused by the uncertainty in BHX business
enlargement. However, the ratio remained at a high rate of 30% and MWG outperformed its
competitors with 32.1% in 2018 while FRT, DGW and VTC was 30%, 14.3% and 11.7%
respectively. Thus, the company yet to lose its position in the marketplace and remained
appealing to investors.
Bulking inventory issue
As a retail business, inventories account for the largest proportion in the company's asset
structure (accounted for more than 50% for three years). The inventory turnover also
fluctuated peaking in 2017 at 4.58 mostly due to the increase in electronics products sales
structure (accounted for 55% in 2018) and led to the rise of its inventory. According to MWG,
the inventory value grew because the company was preparing and accumulating products
preparing for the Tet season. However, as being analyzed above, MWG’s solvency was at a
low degree with the quick ratio remaining under 0.5 for all three years and this is worth
noticing as pressure would rise for MWG if the company kept maintaining such a high
inventory level.
Debt-holding risk in the saturated period
During the given period, MWG was paying attention to its business chains expansion,
especially in Dien May Xanh and Bach Hoa Xanh and as a result, the debt proportion also
22
increased servicing its growth. Thus, all three debt ratios remained at high levels showing
risks and concerns for investors. But the annual net sales did give growth through the years
indicating MWG’s efficient use of financial leverages and making itself appealing to
investors. Nevertheless, with the electronics and mobile phones market showing signs of
saturation, it is recommended that MWG should consider the risk it has to face in the future
with high levels of debt and inventory.
Overall, MWG’s financial performance did and would continue to surpass its competitors in
the future despite the risks it might have to face. In this report, we recommend maintaining to
Buy for MWG’s share, based on: (1) the rapid growth of the Dien May Xanh chain comes
with positive prospects for the industry in the future; (2) Bach Hoa Xanh chain is gradually
improving in operating efficiency with average revenue tending to increase; (3) the stability
and product diversification in TGDD chains. Besides the ability to complete its annual
business plan for 5 years also is what we value at MWG. We believe that MWG deserves a
good opportunity for investors in the future.
23
Appendix: Financial Statement
VND Billion
2016
2017
2018
996 ,983 ,46 2,01 2
3,41 0,9 83,3 51,393
3,74 9,55 0,2 58,2 12
0
0
50,92 2,4 51,7 39
AR
1,41 0,6 42,8 74,572
2,76 5,8 47,8 15,554
1,54 2,52 9,7 36,0 73
Invento ry
9,37 0,7 31,7 49,778
12,0 50,162 ,650 ,98 2
17,4 46,0 05,298 ,98 1
O ther C A s
509 ,784 ,32 0,90 7
635 ,867 ,48 8,35 2
582,987 ,011 ,38 9
12,288,142,407,269
18,862,861,306,281
23,371,994,756,394
179 ,685 ,17 5,40 7
242 ,115 ,97 0,11 8
313,775 ,645 ,33 2
2,09 6,4 23,2 49,031
3,46 3,6 57,9 94,935
3,33 3,14 7,6 59,6 02
80,4 20,562 ,147
35,4 57,4 06,785
256,831 ,997 ,20 7
LT Investm en ts
0
0
59,93 7,7 63,1 15
O ther LT A ssets
209 ,591 ,83 9,13 7
218 ,571 ,53 7,10 1
786,843 ,665 ,20 6
Total LTA
2,566,120,825,722
3,959,802,908,939
4,750,536,730,462
TA
14,854,263,232,991
22,822,664,215,220
28,122,531,486,856
CL
11,0 12,905 ,506 ,62 8
15,7 13,814 ,885 ,17 5
17,9 29,4 33,003 ,62 6
In w hich: S T debt
4,78 8,9 91,7 46,757
5,60 3,5 05,9 90,526
5,83 6,45 4,6 37,0 89
N on-current Liab ilities
0
1,19 9,9 32,9 94,830
1,21 0,06 3,1 51,8 88
In w hich: LT D
0
1,19 9,9 32,9 94,830
1,20 8,16 7,1 40,3 89
Total Liabilites
11,012,905,506,628
16,913,747,880,005
19,139,496,155,514
C ontrib ute d captial
1,53 9,5 09,2 70,000
3,16 9,8 84,3 70,000
4,43 4,96 1,7 80,0 00
36,7 17,698 ,286
36,7 17,6 98,286
551,451 ,995 ,48 6
2,26 1,7 63,3 98,339
2,69 8,5 72,7 48,459
3,98 9,60 3,9 10,0 55
3,36 7,3 59,7 38
3,74 1,5 18,4 70
7,01 7,6 45,8 01
Shareholder's Equity
3,841,357,726,363
5,908,916,335,215
8,983,035,331,342
TL+OE
14,854,263,232,991
22,822,664,215,220
28,122,531,486,856
(586,4 81,629 ,90 0)
2,66 3,6 63,9 56,855
2,26 1,13 4,5 31,0 69
(1,276,037 ,943 ,51 7)
(2,120 ,21 4,98 6,4 82)
(2,344 ,39 4,04 0,3 32)
2,51 5,6 00,1 91,276
1,87 0,5 36,5 52,446
421,719 ,356 ,77 6
653,080,617,859
2,413,985,522,819
338,459,847,513
343 ,872 ,96 8,70 5
996 ,983 ,46 2,01 2
3,41 0,98 3,3 51,3 93
Balance Sheet
C ash
S hort-te rm investm ents
CA
LT R eceivab les
NFA
LT A ssets in progress
S hare prem ium
RE
O ther capita l/fund
Cash Flow
C F from ope ratin g
activitie s
C F from investing
activitie s
C F from fin ancin g
activitie s
Net increase in cash
B egining cash
Ending cash
996,983,462,012
3,410,983,351,393
3,749,550,258,212
1
VND
2016
2017
2018
44,613,332,672,988
66,339,804,192,178
86,516,287,002,499
(37,39 9,2 26,3 60 ,426 )
(55,19 8,0 24,9 25 ,235 )
(71,22 4,1 59,2 39 ,435 )
7,214,106,312,562
11,141,779,266,943
15,292,127,763,064
135,3 27,700 ,732
250,5 09,808 ,12 7
342,083 ,875 ,22 9
F ina ncial E xpense
(120,0 85,861 ,34 6)
(234,2 86,596 ,27 5)
(436,5 73,150 ,23 6)
In w hich: Intere st cost
(119,6 45,695 ,30 6)
(233,2 02,340 ,49 2)
(436,4 16,577 ,67 4)
0
0
(2,100,986 ,885 )
(4,287 ,69 6,26 0,2 26)
(7,017 ,06 1,32 1,3 66)
(9,659 ,74 1,18 8,7 56)
Income Statement
Net Sales
COGS
Gross Profit
F ina ncial Incom e
Incom e (Loss) from associate s
S elling E xpen se
A dm in E xpen se
Income from business
operation
N et O ther Incom e
(934,7 76,941 ,12 4)
(1,345 ,49 7,38 1,5 59)
(1,761 ,61 3,90 0,0 80)
2,006,874,950,598
2,795,443,775,870
3,774,182,412,336
(960,8 35,675 )
13,8 68,256 ,776
12,1 36,156 ,582
P rofit B efo re T ax
2,00 5,9 14,1 14,923
2,80 9,3 12,0 32,646
3,78 6,3 18,5 68,918
Net Income
NI attributable to
shareholders
Basic EPS (VND)
1,578,250,620,837
2,206,897,119,349
2,880,309,060,133
1,577,372,426,339
2,205,679,630,420
2,878,724,130,907
10,2 46.00
7,162 .00
6,689 .00
EBIT
2,12 5,5 59,8 10,229
3,04 2,5 14,3 73,138
4,22 2,7 35,1 46,592
Financial Ratios
Liquidity Ratios
C urrent ratio
Q uick ratio
Profitability Ratios
P rofit M argin
R O E (% )
R O A (% )
Leverage Ratios
Intere st coverage
EM
D ebt ratio
D /E ratio
LT D ratio
Efficiency Ratios
Inventory T urnover
Inventory T urnover in D ays
R eceivable T urnover
A verag e C ollectio n P eriod
TAT
N W C T urnover
Market Value Ratios
EPS
PE
M arket price
(closed price at the last session each year)
2016
1.116
0.265
2016
0.035
41.06 %
10.62 %
2016
17.7 65
3.87
0.74
2.87
0.00
2016
3.99
91.45
31.63
11.54
3.00
34.98
2016
10,2 46
15.23
2017
1.20 0
0.43 4
2017
0.03 3
37.3 3%
9.66 %
2017
13.0 47
3.86
0.74
2.86
0.17
2017
4.58
79.6 8
23.9 9
15.2 2
2.91
21.0 7
2017
7,16 2
18.2 9
2018
1.304
0.331
2018
0.033
32.0 5%
10.2 4%
2018
9.676
3.13
0.68
2.13
0.12
2018
4.08
89.40
56.09
6.51
3.08
15.90
2018
6,689
13
1560 00
131 000
8700 0
2
3