With a valuation of VND94,640/share from J.P Morgan, MSN has the potential to increase in price by up to 27% compared to the closing price of VND74,800 on September 24.
In a recently published report, J.P. Morgan emphasized that: "Vietnam will grow beyond forecasts in the ASEAN bloc in the following areas: Banking, Information Technology and Essential Consumer Goods".
According to this financial group, in the past 12 months, nearly 3 billion USD has flowed out of the Vietnamese market due to profit-taking, portfolio reallocation by investors to technology/AI companies and the uncertainties of the US election. However, J.P Morgan believes that the Vietnamese stock market is still attractive with many positive catalysts.
Removing "pre-funding" obstacles, welcoming billion-dollar capital flows
On September 18, the Ministry of Finance approved Circular 68/2024/TT-BTC amending and supplementing a number of articles of the Circulars regulating securities transactions on the securities trading system; clearing and settlement of securities transactions; activities of securities companies and information disclosure on the securities market, effective from November 2, 2024.
Specifically, the new Circular stipulates that investors must have sufficient funds when placing an order to buy securities, except for two cases: (1) investors trading on margin as prescribed in Article 9 of this Circular; (2) Organizations established under foreign law participating in investment in the Vietnamese securities market (NTTTCNN) buying shares do not require sufficient funds when placing an order as prescribed in Article 9a of this Circular. Circular 68/2024/TT-BTC has added Article 9a on "Stock purchase transactions do not require sufficient funds when placing an order by foreign investors who are organizations".
“We believe that these changes will allow FTSE to upgrade Vietnam to emerging market status within the next 12 months, leading to more than $500 million in passive capital flows into the market and the potential for positive assessment from MSCI,” J.P Morgan’s report stated.
Sharing the same view with J.P Morgan, SSI Research predicts that Vietnam will be upgraded in the September 2025 review. With the upgrade to emerging market status, according to preliminary estimates, capital flows from ETFs could reach up to 1.7 billion USD, not including capital flows from active funds (FTSE Russell estimates that total assets from active funds are 5 times higher than those from ETFs).
According to SSI Research, stocks VNM, VHM, VIC, HPG, VCB, SSI, MSN, VND, DGC, VRE, VCI can attract large cash flows when Vietnam is upgraded to an emerging market. These are all leading Bluechip stocks but have not yet reached full foreign room.
Sharing the same opinion with SSI about the forecast that Masan Group's MSN shares will receive foreign capital, J.P Morgan recommends "increasing the proportion" of MSN shares with a valuation of nearly VND95,000/share. "The essential consumer goods industry (+7% since the beginning of the year) has had a lower increase than the general market.
We believe that the short-term momentum is favorable for consumer staples stocks with: Potential cash flow from stock market upgrade; Lower USD helps reduce input costs and stable revenue growth. We recommend overweighting this sector with MSN as one of our top picks" - J.P Morgan analysts commented.
Vietnam's economy tends to accelerate in the fourth quarter
J.P Morgan believes that the Government's economic stimulus and business cycle will be the catalysts to boost economic activity throughout the second half of 2024 and this will spill over to the performance of the stock market in the period from Q4/2024 to Q1/2025.
Vietnam’s economy is expected to pick up in the fourth quarter, driven by the business cycle (exporters pick up steam ahead of the holiday season), public investment (the government pushes for disbursements before the end of the year) and a robust tourist flow, the report said. This positivity tends to spill over into the stock market with a one-quarter lag.
The financial group said that this cycle will continue to repeat this year as recent economic data points to continued acceleration in the second half of 2024. In addition, the Government has been working to boost public investment disbursement and expand credit quotas to support growth. The Government is targeting GDP growth of 6.5-7% (up from 6-6.5% at the beginning of the year). Notably, in the past four quarters, Vietnam's growth has far exceeded that of ASEAN countries.
Using the sum-of-the-parts (SOTP) method, MSN is valued by J.P. Morgan at VND94,640/share with a target P/E for 2025 of 39x and EV/EBITDA of 12x. This price is 27% higher than the closing price on September 24 of VND74,800/share.
SOTP is a method of determining the value of a company in which each subsidiary of a company or its business division is valued separately and then all of them are added together to create the total value of the company.
