Accelerating Point of Life strategy, Masan recognized as consumer champion in Vietnam
In 2021, Masan became the largest consumer platform in Vietnam in terms of market capitalization (above VND177 trillion or US$7.78 billion).
Thanks to strong synergies between businesses in Masan’s consumer-retail ecosystem, Viet Capital Securities (VCSC) and HSBC have forecast a target price of VND186,000 ($8.18) and VND200,000 ($8.79), respectively, for the MSN stock, 37 percent higher than current market prices.
Previously, the Bank of America (BofA) has initiated MSN with a Buy rating and PO of VND198,000 ($8.7).
Synergies from a unique consumer-retail ecosystem
In 2021, Masan achieved many outstanding results, including but not limited to revenue growth, profit growth, business model innovation, and retail expansion. Masan Group's consolidated revenue reached VND88,629 billion ($3.89 billion), up 14.8 percent versus VND77,218 billion ($3.39 billion) in 2020.
Such growth mainly comes from The CrownX (TCX), the consumer-retail platform that delivered a net revenue of more than VND58,000 billion ($2.54 billion) in the past year. Currently, Masan is the only integrated off-to-online retail consumer ecosystem in Vietnam that owns manufacturing facilities for FMCG products (Masan Consumer Holdings, Masan MEATLife), distributes directly to consumers via WinCommerce (WCM), owns the largest retail system with the largest points of sale, and expands into the F&B and telecommunications sectors through controlling stakes in Phuc Long and Mobicast.
Thanks to Masan’s presence in many essential consumer sectors, the group has a huge-scale customer base with 98 percent of Vietnamese households using at least one Masan product, nine million loyal customers at WCM, nearly five million affluent customers from Techcombank, and young, digital-savvy customers with a urban lifestyle from Phuc Long. The group is also able to reach millions of consumers from strategic O2O partners, including Lazada.
In 2021, revenue contribution from only consumer businesses (excluding feed and high-tech material segments) was 68 percent, which is expected to increase to 85 percent in 2022.
The company’s net profit after tax in core business (Core NPAT) is estimated to be within the range of VND5-7 trillion ($219.78-307.69 million), up 32-84 percent from VND3.8 trillion ($167 million) in 2021.
Accelerating Point of Life strategy, capturing 80 percent of Vietnamese consumers’ wallet share
Following the initial success of Phuc Long kiosks at WinMart+ stores, Masan advanced its Point of Life (PoL) strategy further by building and piloting the mini-mall concept, a model that aims to provide a greater array of daily essential products and services, like groceries, pharmaceuticals, financial products, and entertainment/telecommunications offerings, altogether representing 60-80 percent of consumers’ wallet share, under an integrated offline-to-online ecosystem.
With pilot stores showing positive results, Masan is confident that the mini-mall concept can grow sales with increased foot traffic and lower breakeven sales targets to improve profitability.
Mini-mall pilot stores running in five locations during FY2021 led to a 30 percent increase in foot traffic compared to pre-mini-mall models.
This format also helped to reduce breakeven revenue required per day per location by 44 percent.
Expectations toward TCX also create synergies between different services, from groceries, pharmaceuticals, F&B (Phuc Long) to financial services (from Masan’s partner - Techcombank) to telecommunication services (Reddi).
The model follows the PoL strategy introduced by Masan earlier, almost fully integrated into an omni-channel platform, providing a myriad of services to consumers.
In FY2022, the firm aims to open 2,000 mini-mall locations through five different formats, based on catchment analysis for cities and suburban and rural areas, in new and existing WCM stores.
“The next wave is to transform The CrownX into a consumer-tech platform,” said chairman of Masan Group Nguyen Dang Quang.
“2022 will be the year when we digitalize our platform into an integrated system from manufacturing, logistics, and distribution all the way up to 100 million consumers.
“This will drive 10 percent operational cost efficiency and, most importantly, combine our traditional consumer insights with AI and machine learning insights to better serve consumers with the products and services they truly desire.”
HSBC Global Research even called Masan's transformation "a journey of a retail giant to a super app.”
This integration will help improve sales/sqm, thereby driving future profitability.
For example, in the telecommunications segment, the growth potential is still very large. After owning the Reddi mobile network, Masan has piloted the launch of telecommunication data plans under the eponymous brand at supermarkets and mini-marts WinMart+. This network service is expected to be rolled out nationwide in 2022 with the aim of reaching 500,000-1,000,000 subscribers. Reddi is the core connecting piece of Masan’s loyalty program, with co-branded customer acquisition schemes providing members with essentially no-cost data plans as they shop across the company’s ecosystem through cash back plans. This is the difference and significant advantage of Reddi compared to other mobile carriers in the market. With the participation from Reddi, consumers will have more choices regarding telco service providers. Besides, Reddi may expand into the payment field and target unbanked users, given that mobile money has been licensed to pilot in Vietnam. According to HSBC, if Reddi reaches one percent of the mobile market share in Vietnam by 2025, its revenue contribution to Masan Group will account for one percent. In addition to Reddi's user growth, new digital partnerships, such as payment and entertainment, will also be an important growth driver for TCX.
In January 2022, MSN acquired an additional 31 percent stake in Phuc Long, increasing its ownership to 51 percent.
Since MSN’s initial investment, Phuc Long has demonstrated strong synergies with the PoL strategy, which can now be accelerated with Phuc Long as a consolidated subsidiary.
VCSC believes that this transaction will bring accumulated value to Masan because Phuc Long is a leading brand, has extensive growth headroom, and strong synergies with Masan's consumer ecosystem, especially with WCM.