vinamilk masan consumer corporation

HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

VINAMILK &

MASAN CONSUMER CORPORATION

Lecturer: Mr Nguyen Xuan Truong

Tutor: Mr Nguyen Xuan Truong

Students: DO THI XUAN - 1804010114 LE HA VY - 1804010113

HA THI KIEU TRINH - 1804010108 KHONG KHANH HUYEN - 1804010044 NGUYEN THI HA MY - 1804010070

Subject: — Financial Management

Abstract

Business analysis and valuation is used to analyze the performance of an entity along with the economic and industry situation to measure the intrinsic value of stock price of that firm and determine how well the firm’s performance In our project, we analyze the consolidated financial statement of Vinamilk and Masan from 2018 to 2019 and the relevant financial ratio to determine how efficient these companies performed The

comparison between them is mentioned about, which helps us to evaluate

precisely, have a whole view about their activities and performance All

three aspects mentioned are operating activities, investing activities and

financing activities Measuring the intrinsic value is also mentioned as the most important point Thereby, this is the reference for those who want to invest and suggest what managers should do to improve the development of these companies.

Executive summary

This report is presented for the purpose of analyzing and assessing the activities of two companies: Masan Consumer Corporation (MCH) and Vietnam Dairy Product Joint-stock Company (VNM) To analyze and evaluate the performance of the two companies, we have: researched the basic information of the company and its relationship to the financial market, figured out the strengths and weaknesses based on Financial statement analysis After that, predictions about the future and directions for the company were suggested Besides, company activities are explored and explored Finally, the report closes with the company’s valuation and

useful suggestions for investors and financial managers In general, by analyzing the data, it is indicated that both firms' stock is overvalued, therefore stakeholders should sell the shares

Table of content

1 Introduction to the firm and its relationship with the financial market 6

3

2

3 4,

Nldt“-ỶỶẳỶẳỶỶẳÝỶÝ T he relationship between its shareholders and managers

TÚ 2020221211 12111 1111111111115 0 1111011111 11 1111111 1111111111111 1t ng T he relationship between the firm and the [inancial marKeL «cv ve si 8

QB SUGGOSTIONS ccceccececeseesessversesevsnsesesesesessesssessessesssessesesesssesssesessesesesseseressesenenseeeeneens 18

Valuation 22 n9 — 22

4.2 Sales grOwth TQẲÊ cà St HH HH tt tt ra 22

Valuation 25

5.1 WACC (Weight average COSE Oƒ CGDÏ{QÌ) - SH H HH Hy Hy 25

5.2 Value of firm qnd vdÌue© Oƒ SEOCĂ ng HH rưy 26

6 Recommendation 27

List of figures

Figure 1: Stock trading transaction by insiders of Vinamilk in 2019 55 «s25 s2 ssssssx 7 Figure 2: Number of shares presented by BOD of Masan Consumer in 2019 7 Eigure 3: Number of shares of Masan Consumer”s shareholders in 2019 s 5s + 8

Figure 4: Current rati0 9

Eigure 7: Days sales outstanding (DSO) 11 Eigure 8: Fixed aSS€(S TUTTIOV€T G0 H9 9 09909 Họ in ve 11 Figure 9: Total asset turnover 12 IiE100-01089)200io0i11 8 0y 8n 12

Eigure 11: Debt tO tOtaÏ ©QỤfy TAfO S113 9 930v 9 Họ He 13

Figure 17: Price/earnings (P/E) 16

Figure 18: Book value per Sl are ccsccsessssssesssscsessscsessssesessssensesssersssesenseseressssersnsensenscnsersens 17 Figure 19: Dupont analysis of Masan Consumer COTDOTAẸOH 55 s5 2x sec sersee 19

5

Figure 20: Dupont analysis Vietnam Dairy Product Joint-stock Compan -. - ««s»- 20 Eigure 21: Sales growth rates Of VinaimiÌÌk - -¿- 5c +5 232 3 1 1 101 2 1n Hy ng rưệc

Figure 22: Sales growth rate of Masan

INE10-200/E:7i6)/2100905 26

1 Introduction to the firm and its relationship with the financial market

In recent years, one of the fastest growing sectors in the food industry of Vietnam is dairy products Vietnam dairy’s demand is significantly increasing as a vital supplementary nutrition source Vietnam Dairy Product Joint-stock Company (Vinamilk), one of the most leading dairy

companies in Vietnam, has gained noticeable successes in the Vietnamese fresh milk market It’s

also the 15th largest company in Vietnam, based on the UNDP 2007 Top 200 largest firms in Vietnam report, and formerly the most valuable public company listed in Vietnam In 2010, it’s the first company in Vietnam to be included in 200 top-performing small and mid-sized companies with annual revenue under US$1 billion The main business of the Vinamilk are to

produce and distribute powdered milk, fresh milk, condensed milk, soya milk, yogurts, cheese, ice-cream, fruit juice, coffee and other products derived from milk Compared to Vinamilk, from

the beginning operations in 2000, along with the vision to be Vietnam's leading consumer companies by sales, profitability and brand recognition as well as to be a symbol for quality and

a source of pride among Vietnamese, Masan Consumer Corporation (belongs to Masan Group)

has steadily grown its product portfolio, domestic sales and distribution channels to prove a leading position in Vietnam's branded consumer goods and beverage product market Masan Consumer Corporation is the 7th company in the list of Vietnam's Top 50 Most Valuable Brands 2016 and 2nd in the consumer goods industry The company manufactures and distributes a wide range of food and beverage products such as chili sauce, soy sauce, fish sauce, instant coffee,

instant noodles, instant cereal, and bottled beverages

1.1 The relationship between its shareholders and managers

To understand the firms and the relationship between its shareholders and managers, mentioning each firm’s board of directors and shareholders is extremely important

Mai Kieu Lien (born 1 September 1953 in Paris, France) is a Vietnamese businesswoman and

currently Chief Executive Officer (CEO) of Vinamilk Mrs Lien has been Chairwoman from

11/2003 to 2015 and an Executive BOD member since 2015 until now As being the CEO, the compensation she receives from the firm in 2019 are (1) Salary: 29%, (2) Bonuses based on the

Company’s performance: 64%, and (3) BOD’s remuneration: 7% Other members of the BOD

are Mrs Le Thi Bang Tam- an independent BOD member from April 2013 and then the

Chairwoman from July 2015 until now, Mr Lee Meng Tat- a non-Executive BOD member since

September 2016, Ms Dang Thi Thu Ha- a non-Executive BOD member since April 2017, Mr Le Thanh Liem - an Executive BOD member since April 2017, Mr Micheal Chye Hin Fah- a non- Executive BOD member since April 2017, Mr Nguyen Ba Duong- an Independent BOD

member since April 2017, Mr Do Le Hung- an Independent BOD member since April 2017, Mr Alain Xavier Cany- a non-Executive BOD member since March 2018 Presented below is the name of insiders of the firm and the number of shares they each present due to the 2019 annual report:

Ownentp ot the beginning of the

year

Figure 1: Stock trading transaction by insiders of Vinamilk in 2019

At the same time, Mr Truong Cong Thang (born 1973) is a Vietnamese businessman and

currently CEO of Masan Consumer Corporation Mr Thang has been Chairman of the Board of

Directors since 2017 and CEO since 28/2/2018 In 2019, the Board of Directors received no

compensation Other members of the board are Mr Nguyen Dang Quang- a member of BOD since 23/6/2017, Mrs Nguyen Hoang Yen- a member of BOD since 2000, Mr Nguyen Thieu Quang- a member of BOD since 2008 and Mr Danny Le- a member of BOD since 2018 Below is the name of BOD’s members and the number of shares they each present, due to the annual

report of Masan Consumer Corporation in 2019:

HOI DONG QUAN TRI

Tỷ le cố phần so hau (%)"

Trương Công Thắng Nguyễn Đăng Quang Nguyễn Hoàng Yến Nguyễn Thiếu Quang

Danny Le Thành viên Hội đồng

Figure 2: Number of shares presented by BOD of Masan Consumer in 2019

In terms of the firm’s shareholders structure, Vinamilk ’s major shareholders who are holding

more than 5% shares are total 66.63% which comprises 36.00% local shareholders and 30.63%

foreign shareholders, based on the latest shareholders list as of December 27, 2019 The firm has three block shareholders which are holding more than 5% shares:

Figure 3: Number of shares of Masan Consumer’s shareholders in 2019

During the time, Masan Consumer’s shareholders structure consisted of 92.41% local

shareholders with the largest shareholders belonging to Masan Consumer Holdings Co., Ltd

which hold all of 92.41% and 1.17% foreign shareholders based on the report of Vietstock

website on March 25, 2019

In conclusion, while managers and shareholders have an interest, whether direct or indirect, in

the financial performance of the corporation, each of the parties has different rights and rewards Typically, the CEO and other top executives are answerable for making decisions about high- level policy and strategy On the other hand, Shareholders are individuals or institutions that legally own shares of corporation stock Shareholders typically have the control rights over managers

1.2 The relationship between the firm and the financial market

To explore the relationship between the firm and the financial market, some data of the two firms will be compared in order to draw a conclusion on both firms

Firstly, in terms of their stock symbol and market price, due to the statistic aggregated on

Vietstock website, Vinamilk - Vietnam Dairy Products Joint-Stock Company, has the stock symbol is VNM and the highest trading price of the stock at 146,128 VND/share on 02/25/2019

8

and the lowest trading price of the stock at 115,084 VND/share on 08/13/2019 During the year, Masan Consumer Corporation Corporation, which has the stock symbol is MCH, has the highest trading price of the stock at 91,169 VND/share on 01/23/2019 and the lowest trading price of the

stock at 69,796 VND/ share on 11/28/2019 Based on the statistics above of both companies, we

can conclude that the current value or market value to buyers and sellers of Vinamilk was much higher than Masan Consumer Corporation during 2019 However, the stock's intrinsic value may

be higher or lower

Secondly, in terms of trading volume, Vinamilk has the share volume per day was 823,479

shares, the highest volume of 2,613,920 shares on 06/21/2019 and the lowest volume of 271,730

shares on 05/29/2019 Meanwhile, Masan Consumer Corporation has the share volume per day

of 15,652 shares, the highest volume of 249,783 shares on 12/04/2019 and the lowest volume of only 3 shares on 07/01/2019 Compare the two firms, we have a conclusion that Masan

Consumer Corporation has a smaller number of stocks traded in exchange and there may be a liquidity risk involved when there are only a few shares traded Vinamilk has a high trading volume which can reduce liquidity risk and an idea can be put forward that more people believe that the company is good

Finally, market capitalization is also important to understand the relationship of the firm and the

marker In 2019, the number of outstanding shares of Vinamilk was 1,741,377,694 shares with

the par value is 10,000 VND per share, which creates a total market capitalization of

VND202,907 billion Meanwhile, Masan Consumer Corporation Co has 704,924,604

outstanding shares with a very high price of 80,000VND per share after the historic handshake

between billionaire Pham Nhat Vuong of Vin Group and billionaire Nguyen Dang Quang of

Masan Group which generates VND 56,393 billion market capitalization Based on the data of the market capitalization, we can say that both companies are mid-cap companies Mid-cap companies are expected to experience rapid growth and are in the process of expanding They carry higher risk than large-cap companies but they are attractive for their growth potential 2 Performance appraisal

2.1 Summary of financial ratios 2.1.1 Liquidity

a Current ratio

Masan Consumer Corporation Vietnam Dairy Product Joint-stock

Company

201 1,0x 2,0x 7

201 0,6x 1,9x

8

201 0,8x 1,7x

Figure 4: Current ratio

Based on the above report, it can be clearly seen that the current ratio of the two companies tends to go down In this situation, Masan Consumer Corporation is the company that is in more danger When the current ratio of Masan Consumer Corporation is less than 1, it is more difficult to repay immediately 1 is the minimum coefficient indicating that the company is still able to pay short-term debt Similarly, Vietnam Dairy Product Joint-stock Company's ability to pay short-term debts also decreased year by year However, Vietnam Dairy Product Joint-stock Company's status is still in a safe area Vietnam Dairy Product Joint-stock Company is still fully able to pay its debt when the lowest ratio of the enterprise is 1.7 times This is still higher than the minimum of 1

Figure 5: Quick ratio

Similar to the current ratio, the quick ratio of the two companies simultaneously decreased slightly by approximately 2 times per year The low quick ratio reduces the solvency of companies This also affects the investment ability of the company Usually, the accepted quick ratio is approximately 1 This makes it clear that Masan Consumer Corporation is ineligible to meet current debt obligations Masan Consumer Corporation's quick ratio for three years is all smaller than the minimum Vietnam Dairy Product Joint-stock Company also restrained its

ability to invest because of its reduced solvency Although this is a bad sign, the situation of

Vietnam Dairy Product Joint-stock Company is still more positive than that of Masan Consumer Corporation This can be explained by Vietnam Dairy Product Joint-stock Company's quick ratio

10

being at least 1.3 times in 2019 This number is still greater than the number accepted for payment

2.1.2 Asset Management: a Inventory turnover:

201 8,4x 5.8x 8

201 8,8x 5,6x 9

Masan Consumer Corporation's inventory turnover increased slightly year by year with a data of

0.5x Combined with the data in the Days sales outstanding table, this shows that businesses are

selling goods faster and meet the needs of buyers Businesses only take 6-7 days to collect the payment after the sale In contrast to Masan Consumer Corporation, Vietnam Dairy Product Joint-stock Company has a larger inventory over the years This is shown by the decrease in

inventory turmover Vietnam Dairy Product Joint-stock Company's inventory turnover ratio

decreased from 6.3x to 5.6x Moreover, Vietnam Dairy Product Joint-stock Company's DSO fluctuates up and down for 21-24 days over the years In general, businesses have inventory problems

€ Fixed assets turnover:

Masan Consumer Corporation Vietnam Dairy Product Joint-stock

Figure 8: Fixed assets turnover

d Total asset turnover:

Masan Consumer Corporation Vietnam Dairy Product Joint-stock

201

0.99 times 1.37 times

Figure 9: Total asset turnover

Masan Consumer Corporation has done a good job of using assets to generate revenue This is clearly shown in the above 2 tables From 2017 to 2019, the fixed assets turnover has increased

by 1.5 times Masan Consumer Corporation’s total asset turnover also increases year by year Meanwhile, Vietnam Dairy Product Joint-stock Company tends to reduce its ability to generate

revenue from the use of assets During 3 years, the annual reduction rate is about 1 times The

same thing is seen in total asset turnover However, this is only a slight reduction in the use of

assets

2.1.3 Debt Management:

a Debt to total asset ratio:

Masan Consumer Corporation Vietnam Dairy Product Joint-stock

Figure 10: Debt to total asset ratio

b Debt to total equity ratio:

Masan Consumer Corporation Vietnam Dairy Product Joint-stock