According to the latest updated report of SSI Research, MWG stock Mobile World Investment Joint Stock Company is still at risk of being removed from the VNDiamond index with a 2023 forecast P/E of 147x, possibly exceeding 3 times the P/E of qualified group. This can cause large selling pressure from ETF funds referenced by this index basket.
The Vietnamese stock market currently has 3 ETFs referenced under the VNDiamond basket: DCVFM VNDiamond ETF (NAV 17,800 billion), MAFM VNDiamond ETF (NAV 290 billion) and BVF VNDiamond ETF (NAV 54 billion). Among them, the largest fund is DCVFM VNDiamond ETF, estimated to hold about 60 million MWG shares. According to SSI Research, any news related to regulatory changes in the near future will cause stock prices to fluctuate.
In fact, before the official decisions were made, MWG shares had been under strong selling pressure recently. Since climbing to a 13-month peak on September 13, this stock has continuously plummeted and at one point fell to a 3-year low.
After a short recovery in the first half of November, MWG has leveled off and shows signs of continuing to correct. This stock is currently at 40,550 VND/share, up 15.5% after more than a month but still nearly 30% lower than in mid-September. The corresponding market capitalization is 59,300 billion, only about half compared to its peak.
Foreign investors have been the main factor putting great pressure on MWG shares recently. According to statistics since September 13 (the 13-month peak) up to now, foreign investors have net sold nearly 52.8 million MWG shares, corresponding to a net selling value of more than 2,300 billion VND. This move has left MWG “open” in foreign room by more than 4% – a record number in many years.
This is quite surprising because MWG used to be a very attractive stock to foreign investors. In the past, this stock was often in a state of full foreign room and only had “open” room due to the issuance of ESOP but then it was immediately filled. There was even a time when foreign investors accepted to pay a difference of 40-50% compared to the market price to buy deals off the exchange.
Arisaig Partners – a fund group specializing in investing in billion-dollar consumer goods businesses that once loved MWG shares, has also net sold tens of millions of units in just the past few months. Notably, this foreign fund has repeatedly affirmed its long-term investment in MWG and has no mindset of trading stocks.
Growth motivation is a big question mark
MWG stock has become less attractive in the eyes of foreign investors partly because its growth prospects are not really clear. After a period of hot growth, MWG’s net profit in 2022 had negative growth for the first time since listing with a decrease of 16% compared to 2021, reaching VND 4,100 billion. This result causes retail businesses to not complete their plans.
The situation continues to be difficult as MWG has had to fight a low price war with other ICT retailers since April. In the first 9 months of the year, MWG’s revenue decreased by 15.5% over the same period last year, down nearly 87,000 billion VND. Profit after tax also decreased by nearly 97%, to 78 billion VND and only achieved less than 2% of the 2023 full-year target, facing the risk of not reaching the finish line for the second consecutive year.
In the context of the difficult ICT retail segment, Bach Hoa Xanh (BHX) is expected to be MWG’s new growth driver, but in reality the new chain is doing well in terms of revenue. As for the profit aspect, BHX is the biggest “burden” for MWG with accumulated losses of nearly VND 8,300 billion from 2016 to the end of the third quarter of 2023 (8,100 billion can also be transferred to next year). later to offset profits within 5 years from the date of the loss).
In fact, MWG also had positive signals from preliminary business results in October with estimated revenue of more than 11,000 billion VND, the first positive month-on-month growth compared to the same period since the beginning of the year. Of which, the two TGDD/DMX chains recorded revenue of about VND 7,600 billion, growing more than 5% compared to the previous month. BHX revenue exceeded VND 3,000 billion, also growing more than 5% compared to the previous month.
However, SSI Research believes that the fact that BHX has not yet reached the breakeven point by the end of 2023 in terms of accounting net profit could also disappoint investors who have been waiting for many years. According to this analysis department, MWG’s fourth quarter net profit could be 334 billion VND, much higher than the previous third quarter but mainly reflects seasonal effects rather than actual demand recovery. Compared to the same period last year, MWG’s fourth quarter forecast profit still decreased by 46%.