- MWG announced its H1 2021 results, including revenue of VND62.5tn (USD2.7bn; +12% YoY) and NPAT of VND2.6tn (USD94mn; +26% YoY). These results imply revenue of VND32tn (USD1.4bn; +20% YoY) and NPAT of VND1.2tn (USD53mn; +36% YoY) in Q2 2021.
- TGDD and DMX’s aggregate revenue advanced 6% YoY in H1 2021 and 14% YoY in Q2 2021 partly thanks to a continued rollout of super-mini-DMX stores (120-150 sqm/store) whose revenue reached VND3tn (USD130mn — equivalent to 6% of TGDD and DMX’s combined revenue) in H1 2021. We also note that Q2 2020’s performance was hurt by nationwide social distancing measures that were imposed in April 2020, meaning it was a low comparative base.
- BHX’s revenue reached VND13.4tn (USD581mn; +41% YoY) in H1 2021 and VND7.4tn (USD323mn; +49% YoY) in Q2 2021 primarily on the back of store expansion. Notably, we estimate that BHX’s net margin improved by ~5 ppts QoQ to -5.7% in Q2 2021 backed by higher sales/store and cost control efforts.
- Online sales advanced 6% YoY to VND5.3tn (USD230mn) in H1 2021 — of which TGDD and DMX’s combined online sales were flat YoY at ~VND4.9tn (USD212mn; 10% of TGDD and DMX’s total revenue) while BHX’s online sales surged 340% YoY to ~VND424bn (USD18mn; 3% of BHX’s total revenue).
- Amid a widening net cash balance, net financial income reached VND269bn (USD12mn) — compared to net financial expenses of VND21bn (USD900,000) in H1 2020 — and contributed 8% to PBT in H1 2021.
- H1 2021 results were broadly in line with our expectations as revenue and NPAT achieved 50% and 49% of our respective full-year forecasts. However, given the current escalation of COVID-19 in Vietnam that is dampening consumer income as well as severely disrupting the operations of TGDD and DMX, we see potential downside risk to our current forecasts, pending a fuller review.

Elevated iPhone sales and roll-out of the super-mini-DMX format buoyed TGDD and DMX’s revenue. In terms of category performances: (1) electronics revenue (e.g., TV, audio systems and other consumer electronics products — excluding white goods) slid 3% YoY due to weak consumer demand, which was partly offset by robust TV sales in June amid the UEFA European Championship; (2) revenue from white goods, laptops and home appliances posted single-digit growth; and (3) mobile phone revenue jumped 16% YoY mainly on the back of strong iPhone sales. Meanwhile, the super-mini-DMX format expanded its store count to 566 stores as of June 2021 from 302 at YE2020.

The escalation of COVID-19 in Vietnam is disrupting the majority of TGDD and DMX stores. Current social distancing restrictions — especially those in the entire southern region and Hanoi — are crippling the operations of nearly 2,000 TGDD and DMX stores (i.e., stores either undergoing temporary closure or restrictions in terms of the number of people in the store). Per MWG, to cope with this difficulty, the company is (1) negotiating rent reductions, (2) adjusting employee compensation, in which staff at the director level or above are temporarily working without salary and (3) reassigning staff from TGDD and DMX to BHX in order to optimize employee productivity as well as meet soaring consumer demand for essential goods.

We estimate BHX’s net margin materially increased in Q2 2021 thanks to sales/store improvements and cost control efforts (e.g., employee productivity optimization). Per our estimate, sales/store rose from VND1.2bn (USD52,000) in April 2021 to more than VND1.35bn (USD59,000) in May 2021 and more than VND1.4bn (USD61,000) in June 2021, which we attribute partly to consumers stocking up on essential goods in addition to the closure of wet markets amid renewed social distancing restrictions. Backed by this sales/store improvement and cost optimization initiatives, we estimate BHX’s net margin improved from -9.0% in 2020 and -10.7% in Q1 2021 to -5.7% in Q2 2021. Meanwhile, BHX’s store count expanded to 1,888 as of June 2021 vs 1,719 as of YE2020 and 1,486 as of June 2020, which was in line with our expectation.