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October 01, 2022

Retail - potential stocks of Vietnam

Retail stocks are expected to achieve positive business performance results at the end of this year. The recent market correction may open opportunities for investors with a medium or long-term vision to invest in potential stocks of Vietnam in this sector. 

Potential stocks of Vietnam thanks to better purchasing power 

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With the downtrend of the VN-Index, many groups of stocks face a short-term correction. Potential stocks of Vietnam, including retail ones are no exception. In June, when inflationary pressure built up, resulting in concerns about the profit margins of retail businesses getting severely affected. However, as oil prices fell, inflation shows signs of slowing and purchasing power gradually recovers, cash flows are expected to return to the retail industry soon. 

According to Yuanta Securities Vietnam, the retail sector has reclaimed its positive growth momentum, following the astonishing recovery of the economy, given that the Covid-19 pandemic is no longer rampant, leading to an increase in consumer demand. Therefore, retail stocks will get benefit from the estimated market size of US$ 200 billion, equivalent to 50% of GDP and continue to be potential stocks of Vietnam.

For many years, the retail sector has sustained a dramatic growth rate of 1.5-2 times higher than the overall GDP growth. Thanks to the advantages of a large population (roughly 100 million people), household consumption accounting for around 70 – 80% of GDP, high economic growth rate, and income per capita steadily increasing (US$3,560 in 2021, project to reach US$5,000 by 2025), the consumer retail segment in Vietnam has been holding a considerable appeal for both domestic and foreign investors such as Masan Group, and FPT Retail, among others. Those companies also have potential stocks of Vietnam thanks to their strong business performance for many years. 

The COVID-19 pandemic has gradually disappeared, and economic stimulus packages start to take effect. The factors to help control inflation includes the fall in global oil prices, and tax cut policies aiming to maintain the downward trend of domestic gasoline prices. Vietnam’s average consumer price index (CPI) of 2022 is expected to be around 3.5 – 4%. The GDP target is achievable when the Government speeds up the disbursement of its economic stimulus packages, which include a 2% value-added tax reduction, an extra interest rate compensation worth VND 40 trillion, and infrastructure investment worth VND 113 trillion. Consequently, the GDP of 2022 will possibly reach a growth rate of 7 – 7.5%.

Thanks to stable macroeconomic fundamentals and high GDP growth in 2022, retail sector will contain multiple bright spots. In the first nine months of 2022, total retail sales of consumer goods and services are estimated to reach $181 billion, an increase of 21 percent over the same period last year, despite inflation, which has led to higher prices. According to the retail business survey of Vietnam Report, nearly 54 percent of retail businesses have achieved business performance equal to and exceeding pre-pandemic levels. Large-scale enterprises with a methodical business strategy have a faster recovery and growth rate than the rest. Masan Group is one typical example. MSN isamong the potential stocks of Vietnam listed on the bourse that attracts investors with mid and long-term visions.

MSN: Positive outlook in mid and long term

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Masan Group (MSN) is a business group with bright prospect thanks to the rising consumer demand and the shift to modern retail channel. Starting as a FMCG producer, Masan entered the retail market in 2019, and built a Point-of-Life strategy toward serving 35-50 million customers. Since then, the group has been pursuing the strategy, offering a variety of products and services from online to offline in diversified fields such as education, entertainment and healthcare. With these products and services, Masan aims to account for up to 80% of customers’ expenses. The group’s subsidiaries and affiliates consist of leading firms in consumer goods, retail, branded meat supply, F&B, financial services, telecommunications and high-tech materials, which are high growth sectors in Vietnam. For many years, Masan has achieved outstanding business results, keeping MSN in the top potential stocks of Vietnam and receiving great interest from foreign investors. 

In 2022, the Group aims to become a consumer-tech ecosystem as it believes that technology will be the core factor that transforms the consumer landscape. According to Masan, applying technology to solve the big unmet needs of consumers is an effective way to achieve growth and increase profit while fulfilling its mission to uplift the material and spiritual life of Vietnamese people. 

Masan decided to choose the right partner to speed up this process. In May 2021, Masan entered a partnership agreement with Alibaba – the leading E-commerce platform in Asia to promote the retail of necessities on online channels. The deal accelerates Masan’s digital transformation process while optimizing, saving cost and improving quality of customer services. 4 months later, the group acquired Reddi Mobile Network and established the foundation for its digitalization. Right after the COVID-19 pandemic, Masan announced the investment in Trusting Social – a fintech company which provides cutting-edge Artificial Intelligence (AI) and Machine Learnind (ML) -led products to score credit of consumers. 

Apart from using AI and ML to provide credit services, Masan also applies these tools to WINLife ecosystem which was launched in September 2022. WINLife is Masan's next foray into enhancing its customer experience. In 2022 and 2023, the Group will continue to leverage AI and ML to drive cost efficiencies and business values. It also aims to optimize product assortment, simplify sales proces, improve store associates’ productivity, freeing their sales staff to act as customer service agents to satisfy customers. 

Masan’s unique ecosystem and clear business strategy shows that MSN is among the most potential stocks of Vietnam. The group’s consolidated net revenues for the first half of 2022 were VND36.02 trillion (US$1.55 billion). Its consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 17.5 percent to VND7.34 trillion ($315.6 million). In upcoming years, Masan aims to IPO The CrownX – the consolidation of its retail arm WinCommerce and FMCG platform Masan Consumer Holdings. Once The CrownX is listed, it could be seen as a potential stock of Vietnam. 





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