CFA Institute Research Challenge

Hosted in Vietnam
 TEAM STUDENT RESEARCH
This report was published for educational
purposes only by students competing in The
CFA Institute Research Challenge.
Retail Sector, Telecommunication, IT & Consumer Electronics Industry
Ho Chi Minh Stock Exchange (HOSE)
Mobile World Investment Corp. (MWG)

Date: 31/10/2014 Current Price: VND 106,000 Recommendation: BUY

Ticket: MWG Target Price: VND 138,504 Upside: 30.66%

Investment Highlights
We issue a BUY recommendation on Mobile World Investment Corp. (MWG) with a one-year
Market Profile (HOSE)
target price of VND 138,504 deduced from 2 valuation approaches: Discounted Cash Flow Model
Closing Price
106,000 and Multiple Pricing Method (Table 1). This indicates a 30.66% upside from its closing price of
(VND)
VND 106,000 on October 31st, 2014. With promising outlook in Vietnam’s technology device retail
52-Week Price 68,000-
industry, MWG will utilize 3 of its components: (1) market leader position; (2) strong business
Range (VND) 117,000
performance and positive CFO (cash flow from operations); (3) visionary and experienced
Market Cap management team to deploy its realistic expansion plan and generate even higher CFO in the
10,982.10
(billion VND) future.
No. of
62,723,171 Promising outlook on Vietnam’s technology device retail industry: Thanks to Vietnam’s
Shares Listed
No. of Shares young population with strong preferences for technological advances and increasing disposable
106,622,378 incomes, Vietnam’s technology device market ranks the 5th largest growth globally in 2015 (Gfk,
Outstanding
Average Daily 2014). Also the consumption shift towards smartphones and tablets – the higher-value items –
56,103 will lead to high revenue growth rate for retailers.
Volume (52weeks)
Basic EPS (VND) 4,684 Market leader with sustainable competitive advantages: MWG dominates the retail market,
Beta - having the largest market shares for mobile phones and tablets with 23% and 25%, respectively
P/E 22.63 (Gfk, 2014). Its advantages are the largest retail chain of customer-focused stores covering the
P/B 5.77 entire 63 cities/provinces, the fastest delivery services, outstanding customer services built
EV/EBITDA 16.12 from conscientious staff and high speed website, which cannot easily be copied.
Sources: Bloomberg and Team estimates Strong business performance and CFO: Net profit margin was continually improved from
2.69% in 2013 to 4.2% in the first half of 2014 (H1/2014) thanks to effective inventory
Table 1: MWG’s target price
management and selling and administration expenses. After rapid expansion in 2011 and 2012,
DCFM MPM MWG generated positive CFO of VND 103,930 million in 2013, which then tripled in H1/2014.
Price VND 161,198 VND 85,551 This builds MWG’s strong capacity to finance for its expansion, which generates a promising,
Weight 70% 30% higher CFO in the future.
Targeted Price VND 138,504
Visionary and experienced management team: Founder, Chairman & CEO Nguyen Duc Tai,
Current Price
VND 106,000 along with other experienced board members, has directed a nameless company to become the
(Oct 31 2014)
Upsides 30.66%
market leader in only 10 years because of his visionary business ideas, learning attitude and
strong management competence maintaining MWG’s customer-focused business philosophy.
Sources: Team estimates
Realistic expansion plan: MWG plans to increase the number of Mobile World
Table 2: Financial Ratios of MWG in (thegioididong.com) and Electronics World (dienmay.com) stores by around twofold and
2013 and 2014 fourfold until 2016 to increase its market shares. MWG will successfully achieve the goal thanks
to its sustainable competitive advantages and effective management, thereby generating
2013A 2014F stronger CFO with CAGR (compounded annual growth rate) of 71% in 2014-2020.
Current Ratio 1.36 1.41 MWG’s Share Price movement (Updated to 31/10/2014)
Quick Ratio 0.39 0.42
Receivable Turnover 46.66 50.00
Inventory Turnover 7.22 8.30
Sales/Asset 4.26 4.47
Asset/Equity 2.79 2.48
Debt/Equity Ratio 0.64 0.60
ROAA 13.36% 21.57%
Gross Profit Margin 14.82% 15.30%
Net Profit Margin 2.69% 3.92%
CFO/Revenue 1.09% 0.78%
CFO/CAPEX 0.76 0.52

Source: MWG’s Financial Reports and

team estimates Source: Bloomberg and Company website

P a g e 1 | 11

Figure 1: Revenue Structure by
Companies and Products, 2013
Source: Company Prospectus and
Team estimates
MWG’s Distribution Network
Source: Company website
Figure 2: MWG Stores in 2013
Average
No. of
Types of store Area per
Stores
store (m2)
MWJ -Normal Store 125
MWJ - Flagship Store 400
EWJ - Store 1000
MWG
Source: Company Prospectus
Figure 3: Shareholder Structure
Source: Company Prospectus
Business Description
Mobile World Investment Corp. (MWG) is the leading retailer in Vietnam, founded by the
current Chairman & CEO, Nguyen Duc Tai, with 4 other co-founders in Ho Chi Minh City in 2004.
After 10 years of operations, the firm has the biggest domestic market shares in mobile phones
(23%) and tablets (25%) and controls 2 companies: Mobile World JSC (MWJ) and Electronics
World JSC (EWJ), with 83% and 17% of revenue contribution respectively (Figure 1).
The Retail Business Model has made the firm successful with some highlights:
 Products are phones, tablets, laptops, CE&DA (Consumer Electronics & Domestic Appliances)
and other accessories, which are bought from the biggest brands (such as Samsung, LC, Sony,
HTC…) before resold to the market. Therefore, these suppliers play an important role to the
sustainability of the retail business. However, being the market leader, MWG has strong
relationships with suppliers to negotiate good discounts from products, which is a competitive
advantage to competitors and also a huge barrier for new entrants.
 Distribution channels are built offline and online to form MWG’s omni-channel strategy,
which enables the firm to get access to more customers by locating the nearest local store to
assure 30-minute to 1-hour delivery for online purchases (Company Prospectus & website).
Offline channel is a nationwide retail chain with 303 MWJ normal & flagship stores and 15 EWJ
stores in 63 cities/provinces, located at good positions with consistent outlooks. MWG has
signed long-term contracts to rent lands for its stores so it can achieve stable business
performances. In 2013, MWG’s revenue per m2 is VND 241.09 million (Figure 2). Online
channel consists 2 websites of MWJ and EWJ. MWJ contributes more revenues and incomes, so
its website: www.thegioididong.com is well-built to get in top 20% worldwide website with
the fastest loading speed and have 75th daily traffic ranking in Vietnam (Alexa).
 Technology advancement are demonstrated in MWG’s operational management through ERP
(Enterprise Resource Planning) system. With diverse functions, from managing selling activities
in any MWG retail stores to reporting analytical data related to customer behaviors, ERP has
helped MWG management to make important decisions for future strategies
 Customer services are derived from MWG’s employees and policies. According to Mr. Nguyen
Duc Tai, although MWG assigns fewer employees per store than its competitors, the firm has
great training systems, different performance evaluation (which is based on customer
satisfaction rather than sales revenue) and higher salaries to create a perfect environment for
employees to challenge themselves toward excellent customer experiences. In addition,
customers are also attracted by MWG’s outstanding services including promotion discount,
fastest and free national delivery and 14-day free product return.
Company Strategies in the following period will focus on 2 aspects:
 Enlargement of customer base will be demonstrated through offline and online channels. On
the first hand, MWG is opening some new small stores (called C-shops) in rural areas to exploit
emerging trend of using smartphones and acquire additional market shares from small
Rev per retailers, while consolidating its leading position in urban areas with more flagship stores,
m2 (VND branding strategy and wider product lines to suit customers’ pockets. On the other hand, the
Million) firm will also upgrade its website to create better customer experiences and adapt with new
216 287.74 trend of online purchasing.
1 300.00
12 134.57
 Effective operational systems will continue to focus on 3 cornerstones: (1) keeping good
238 241.09 relationships with suppliers, (2) developing ERP system to update real time activities and (3)
improving sales channels to support selling activities and customer services.
Shareholder Structure includes 4 major shareholders: Mekong Enterprise Fund II – 14.32%,
CDH Bee Electric Limited – 15.84%, Tri Tam Ltd – 10.87% (With founder Nguyen Duc Tai being
in BoD) and Retail World Ltd – 14.49% (With co-founder Tran Le Quan being the Chairman), with
no shares owned by the government (Figure 3).
Founded in 2006, Mekong Enterprise Fund II (MEF II) has become MWG’s strategic investor since
2007. This private equity fund invited some professionals to hold positions in MWG’s
management as well as expanded MWG’s scale over 34-fold since 2007, when the firm only had
7 stores in Ho Chi Minh City. With expected full exist in June 2016, MEF II made a partial
divestment to sell 19.88% of MWG shares to CDH Bee Electric Limited in 2013 (Mekong Capital
website). With a consolidated position and growing potential, MWG will not be significantly
affected by MEF’s full divestment in 2016.
Corporate Management consists of professionals in retail industry. Nguyen Duc Tai – MWG
Chairman & CEO, is a visionary leader with 10+ years of experiences in retail business. He was
the pioneer in bringing customer-centric concept when MWG was founded in 2004, which was
rarely noticed in other retailers. Other board members with rich experiences in retail business
have also contributed significantly in MWG development process. With the recent participation
from ex-CEO of Best Buy International in the Board of Directors in 2013, MWG will be led with a
right direction to achieve further development in the future.
P a g e 2 | 11

Table 3: Top 10 Countries for
retailers to expand in the future
Source: CBRE Report, 2014
Figure 4: Market Shares of Mobile
Phones in Vietnam in 2014
Source: Gfk, 2014
Figure 5: Growths of MWG’s main
product lines
Source: IDC, Gfk and Team estimates
Industry Overview & Competitive Positioning
Industry Overview
Macro Analysis – Economic recovery after the global crisis: Vietnam economy is expected to
recover with forecasted GDP growth in 2014 and 2015 of 5.6% and 5.8%, respectively. In
addition, average CPI growth of the first 9 months in 2014 was just 4.61% – the lowest level in
such a period for the past 10 years (General Statistics Office, 2014). All of these factors will
encourage the government to loosen monetary policies with lower borrowing interest rate,
encouraging more firm investment and consumer spending in the future.
Sector Analysis – Local retailers reinforce their positions in booming domestic market: The
Retail Sector flourished with 10.4% sales growth in the first 9 months of 2014 (General Statistics
Office, 2014). With current ranking of 14th in terms of population, an expectedly enormous
increase in 2012-2020 period in middle-income consumers (from 8 to 44 million people) and
their spending (from USD 46 billion to USD 310 billion), Vietnam is in the top-10 list of the most
attractive markets that retailers were interested in their expansion (Table 3) (Nielsen Report,
2013 and CBRE Report, 2014).
Industry Analysis: MWG’s product lines fall in 3 industries: Telecommunication Equipment
(Mobile phones), Information Technology (Laptops & Tablets) and Consumer Electronics (CE
& DA – Consumer Electronics & Domestic Appliances).
In addition, foreigners will have more incentives to expand in the country thanks to Vietnam’s
agreement with WTO to allow the operations of firms with 100% of foreign capital, starting from
May 2015. However, retailing in Vietnam has high entry barriers of huge capital investments,
local market understandings and heavy dependence from suppliers on discounts to make
sustainable profits. With healthy capital structure, a consolidated market position and good
discounts with suppliers, MWG will have considerable advantages over foreign retailers.
Telecommunication Equipment Industry – Market shares to acquire in rural areas with the
growing trend of using smartphones: There are two types of mobile phone retail stores: the
traditional ones with small areas, limited categories and ordinary customer services, which are
owned by SMEs or households; and the modern ones with medium-to-big areas, diverse
categories and excellent customer services, which are owned by big companies. Despite having
some disadvantages, traditional retail stores still account for 50% of market shares (Figure 4)
(Gfk, 2014) because (1) Many of them are located in rural areas which have 70% of Vietnam’s
population, which was not considered in big companies’ roadmaps and (2) They have discount
promotions for cheap mobile phones, which suited the budgets of people living in rural areas.
However, with increasing incomes and better living standards, rural people are willing to pay
more to get better products and customer services. In the first half of 2014, domestic market
share of smartphones skyrocketed to 87.2% while Vietnam is listed in the top-10 smartphone
market in terms of sales growth in 2015 (Gfk, 2014). This indicates a clear trend of switching from
feature phones to smartphones in Vietnam. Being the leading mobile retailer with 23% of market
shares and a nationwide chain in 63 provinces, MWG is expected to gain additional market shares
from the traditional retail stores with such a change in consumer behaviors.
Information Technology (IT) Industry – Huge demands from tablets: There are three types of
products in IT group: desktop PCs, laptops and tablets (MWG is currently selling laptops and
tablets). According to Gfk, total spending on IT products in the first half of 2014 grew by 21.9%
as compared to the same period last year. Due to shrinking demand, after a slight increase of 2.3%
in 2013, revenue of laptops is expected to decline in the following years, which will reduce MWG’s
revenue growth. Meanwhile, the consumption of tablets soared with a triple-digit growth rate of
137%. This trend is expected to continue in 2014 and then slow down to double-digit growth in
the years onwards. Leading tablet market shares of 25%, MWG will capture this opportunity to
generate a large amount of profits (Figure 5)
Consumer Electronics Industry – Potential market shares in intense competition: According
to Gfk, CE&DA achieved impressive revenue growth of 21.4% in the first half of 2014. The current
market is competitive and mainly concentrated in big cities, with no companies accounting for
larger than 15% of total market shares. Despite intense competition, EWJ has remained stable
business performances since it was operated in 2010. With the intention to open new stores in
rural areas, MWG is also expected to increase its market shares in the near future (Figure 5)
P a g e 3 | 11

Figure 6: Five-force Analysis
Sources: Team estimates
Figure 7: MWG’s Stock performance
Sources: Company website and
cophieu68.vn
Competitive Positioning
Widespread distribution network: MWG is the first retailer to operate in 63 provinces of
Vietnam with a large retail chain of 303 MWJ stores and 15 EWJ stores. In addition, the website
www.thegioididong.com also ranked 75th in terms of daily traffic in Vietnam. With strong offline
and online channels, MWG can even implement the omni-channel strategy to ensure 30-minute
to 1-hour delivery for online purchases and get easier access to more customers than other
competitors.
Visionary and Experienced Management: Nguyen Duc Tai – MWG Chairman & CEO is a
visionary person. In 2004, he founded MWG with 4 other people, 3 shops and an ambition to
change the way retailing was running in Vietnam. With extraordinary leadership a vision to bring
a strong customer-centric culture for MWG, which was rarely seen in other retailers at that time,
he directed the firm to be the leading retailer in the industry in only 10 years and position itself
as a trusted brand with excellent services for the customers. Other people in Board of Directors
and Board of Management with rich retail backgrounds also have contributed significant ideas to
scale up MWG’s business such as: omni-channel strategy to utilize its widespread network
advantage, ERP to control effectively internal system… Altogether, they will lead MWG to an even
more successful era in the future.
Customer-centric Philosophy: MWG went through various changes in 2013 with one solid aim
of increasing customer satisfaction: (1) store design: constructed spacious and consistent outlook
to create comfortable buying experiences for the customers, (2) website interface: upgraded
loading speed and created an additional website version for smartphone users and (3) customer
policies: published 16 discount promotions and free product return policies (Company
Prospectus). By putting customers as its core value, MWG was able to achieve 28.8% revenue
growth in 2013 despite having closed some of its stores
Stable Cost Management: MWG has 2 main drivers for total costs (1) COGS and (2) selling
expenses (accounted for 85.18% and 9.85% in 2013, respectively). In H1/2014, the firm reduced
these costs (84.64% and 8.17%, respectively) thanks to strict control over product portfolio and
company restructure to merge the management of MWJ and EWJ (Company Prospectus). Having
good bargaining power with major suppliers and experienced board of management, MWG is
able to maintain this cost structure even in the long run.
Pioneer retailer to enter the rural market with high growth prospect: Strategically, MWG
has realized the coming saturation of urban markets and planned to capture the huge yet
untapped demand in rural areas. The company plans to open 850 C-shops to exploit the favorable
rural market conditions: (1) 70% Vietnamese living in rural areas; (2) there is demand for low-
end smartphones yet not satisfied; (3) there are only small private stores with low-quality
products and poor customer services. With thorough research of customer preferences and
small local stores, MWG will be able to set up the very first modern store chain in rural markets
and capture 50% share of the market, thereby building a stable position in this market which no
follower can surpass, and enhancing its position nationally. This strategy also shows that MWG
has broader vision than its competitors.
Investment Summary
We issue a BUY recommendation on MWG with a one-year target price of VND 136,783 deduced
from 2 valuation methods: DCF and MPM. This indicates a 29% upside from its closing price of
VND 106,000 in October 31st, 2014.
Impressive Stock Performance
MWG’s stock price has increased by 112% since the first trading day on 14th July 2014, which
outperformed the total market (Figure 7). Foreign investors show the most active purchases,
increasing foreign ownership in MWG from 41.71% to 44.7%. This impressive stock performance
reflects MWG’s positive financial performance in the first 9 months of 2014 with 66% revenues
rise and double profit. MWG is expected to keep growing in the future thanks to its market leader
position and realistic expansion plan.
Promising Outlook on Vietnam’s Technology Device Retail Industry
Thanks to Vietnam’s young population with strong preferences for technological advances and
increasing disposable incomes, Vietnamese’s consumption on technological goods successively
increased in the recent three years (Figure 8). Vietnam’s technology device market also ranks the
5th largest growth globally in 2015 (Gfk). Smartphones and tablets, the high-value products, will
exhibit the fastest growth rates. We expect that CAGR of smart phones and tablets from 2014-
2018 will be 17.41% and 25.53%, which generates MWJ and EWJ’s industry CAGR of 16.42% and
14.15%, respectively.
P a g e 4 | 11
 Figure 8: Vietnam’s quarterly
spending on Technological
consumer goods (in VND Trillion)
Sources: Gfk, 2014
Figure 9: No. of stores forecast
Sources: Team estimates
Table 4: SSSG of MWJ and EWJ
Sources: Bloomberg, Gfk and
Team estimates
Market Leader with Sustainable Competitive Advantages
MWG dominates the retail market with the largest market shares for mobile phones and tablets
(23% and 25%, respectively). Its competitive advantages are (1) widest chain of retail stores
operating in 63 provinces of Vietnam with 303 MWJ stores and 15 EWJ stores; (2) the most
popular website (www.thegioididong.com) among all competitors, which ranked 75th in terms of
daily traffic in Vietnam (Alexa); (3) outstanding customer services built from conscientious staff,
customer-focused store and website design, and fastest delivery service.
Effective Cost Management Generates Sustainable Earnings Growth
NPM is expected to improve from 2.69% in 2012 to 3.92% in 2014, and increase to over 4% in
the later years thanks to (1) effective inventory management; (2) decrease in COGS; (3)
improving SG&A expenses management. This helps MWG accomplish expansion plan and thus
enjoy profit CAGR of 30.8% and also generates consistent ROA of roughly 25% in 2014-2020.
Visionary and Experienced Management Team
Chairman & CEO Nguyen Duc Tai, along with other experienced board members, has successfully
directed a nameless company to become the market leader in only 10 years because of his
visionary business ideas, learning attitude, management competence, and strong commitment to
MWG’s customer-focused business philosophy.
Realistic Expansion Plan
MWG plans to expand its chain to 400 MWJ stores and 52 EWJ stores by 2016 and 2017 and
expand its network to rural areas with the target of 850 C-shops (Figure 9). MWG will successfully
accomplish this plan thanks to its sustainable competitive advantages and effective cost
management. We expect that by 2016 MWG will be able to increase its MWJ’s market share to
43% for mobile phones, 45% for tablets and EWJ’s market share to 7.5%.
Strong current and future CFO
After rapid expansion in 2011 and 2012, MWG generated positive CFO of VND 103,930 million in
2013, which then tripled in H1/2014. Its realistic expansion will generate a promising higher CFO
in the future, growing by CAGR of 71% in 2014-2020. This generates abundant financial capacity
for MWG to pay cash dividends as short-term benefits to shareholders and improve solvency
when financial leverage declines from 2.79 in 2014 to 2.49 in 2018, and 2.23 in 2020.
Valuation Methods
We combine two valuation methods: Discounted Cash Flow Model (FCFF Approach) and Multiple
Pricing Method with 70% and 30% in weight, respectively. DCF is more reliable because it can
reflect company’s growth prospect into target stock price, while MPM is not suitable to measure
MWG’s intrinsic value because the company does not have perfect peers.
Possible Investment Risks
Significant risks from the market are fluctuation of exchange rate and short-term interest rate,
increasing rental fees and price competition. Project implementation and obsolete product
selection also pose additional risks. Internal risks include personnel and Corporate Governance
risk. However, MWG will be able to mitigate adverse impacts of those risks.
Financial Analysis
Impressive revenue growth from 2 factors: SSSG (same store sales growth) and openings
of new stores.
SSSG (same store sales growth) were calculated from revenue contribution and forecasted
growth of MWG’s product lines. Mobile phones, contributing to 58% of MWG’s revenue in 2013
(VCSC), will still be core product with potential smartphone sales growth in Vietnam (ranked 9th
worldwide in 2015, Gfk). Tablets will also be an important revenue driver with 160% of
forecasted revenue growth in 2014 (Table 4).
According to MWG’s Report in H1/ 2014, SSSG of MWJ and EWJ for mature stores were 50% and
30%, higher than team estimates (40.5% and 27.4%) because of MWG’s market leader position
and huge demands for its product lines. Therefore, at the end of 2014, SSSG of mature stores in
MWJ and EWJ will still be higher than team estimates and stay at 51.6% and 29.5%. From 2015
onwards, the urban market will become saturated with more stores from MWG and its
competitors. Therefore, SSSG of mature stores in MWJ and EWJ will gradually become equal to
team estimates (27.97% and 20.08% in 2015; 11.37% and 11.68% in 2018). (Appendix 7)
Openings of new stores helped MWG grow sharply at 91% in 2011, with an additional of 127
MWJ stores and the first EWJ store. However, in 2012 and 2013, MWG had lower revenue growth
of 36.89% and 28.8% due to lower rate of opening stores. Therefore, with an incredible opening
P a g e 5 | 11
Figure 10: Forecast of MWG revenue
growth, SSSG of MWJ and EWJ
Sources: Bloomberg, Gfk and
Team estimates
Figure 11: GPM & NPM Forecast
Sources: MWG’s Financial Reports
and Team estimates
Figure 12: DuPont Analysis
Sources: MWG’s Financial Reports
and Team estimates
Figure 13: CAPEX, Dividend and CFO
Forecast
Source: MWG’s Financial Reports and
Team estimates
rate of new stores recently, MWG will enjoy high revenue growth with additional forecasted
number of 119 MWJ stores and 6 EWJ stores by the end of 2014.
MWJ’s revenue growth is forecasted to be 72.01% in 2014, followed by high revenue growth of
74.33% in 2015 thanks to openings of new stores last year. After completing its expansion plan,
MWJ will have a decreasing revenue growth from 13.17% in 2018 to 6.71% in 2020 because of
small growth rates of product lines and no new stores opened. Similarly, EWJ’s revenue growth
is forecasted to be 48.7% in 2014, 105.66% in 2015, 21.01% in 2018 and 6% in 2020. In total,
MWG’s revenue growth in 2014 is 68.05%, followed by 79.04% in 2015. The result reflects quite
close to MWG’s business performance as it achieved 68% of revenue growth in the first 8 months
of 2014. CAGR of MWG’s revenue in 2014-2020 is forecasted to be 30% (Figure 10).
Increasing GPM (Gross Profit Margin) from 2 factors: inventory restructure and great
inventory management (Figure 11)
In 2013, MWG’s GPM was low at 14.82% due to the inventory restructure in which the firm sold
their products at discounts. However, GPM recovered at around 15.6% and 15.1% in in Q1 and
Q2/2014. The ratio was higher than MWG peers (TAG’s was 9.2%, Jaymart’s was 13.3%, TIP’s
was 6%) thanks to (1) discounts from bulk purchases, (2) market leader position and (3) strong
relationships with suppliers.
In 2014-2016 period, with the increased weight of EWJ in MWG’s revenue structure due to
openings of EWJ stores, MWG’s GPM will increase at slowing rates from 15.3% in 2014 to 15.8%
from 2020 onwards because CE&DA has lower GPM than Mobile phones and IT products.
High NPM (Net Profit Margin) from great control of SG&A expenses (Figure 11)
In 2012-2014 period, MWG had high NPM thanks to great control of SG&A expenses, which were
driven from 2 factors: (1) Lower employee expenses resulted from MWG’s strategy to have less
employees per store, yet higher salary treatment than competitors to motivate great working
productivity and (2) Reduced administration expenses (from 11.17% in 2013 to 10.1% in
Q2/2014) thanks to effective operational control from ERP system and the merge of MWJ’s and
EWJ’s management.
In 2014-2016 period, despite higher Advertising and Marketing expenses for new stores and
employee bonuses, SG&A expenses/Revenues ratio is forecasted to rise insignificantly to 10.2%-
10.4% and stabilize at 10.5% from 2017 onwards. This enables MWG’s NPM to increase from
3.92% in 2014 to over 4.05% from 2018 onwards.
DuPont Analysis
In 2011, ROEA plummeted from 70.77% to 41.2% in 2013 but was still much higher than its peer
(Jaymart’s was 24%, TIP’s 20.7%). ROEA and ROAA shared the same unstable patterns due NPM
fluctuation and downward trend of Asset/Equity ratio. In 2013, Assets/Equity ratio stayed at
2.79, much lower than 5.01 in 2011 because of the increase in Equity from significant additional
retain earnings and no cash dividend policy. Sales/Asset ratio will remain at 4.47 in 2014 and
then increase further, as MWG has used its assets effectively. NPM will increase to 3.9% in 2014
and 4.05% in 2018 thanks to effective control of Inventories and SG&A expenses. Asset/Equity
will decrease from 2.79 in 2013 to 2.49 in 2018 as a result of cash-dividend policy after MWG’s
expansion plan (Figure 12).
Operational Efficiency
Low liquidity ratios of MWG compared with other peer firms (ex: In 2013, MWG’s quick ratio was
0.4 while TAG’s was 0.78, TIP’s was 0.9) were driven from 3 factors: (1) Huge amount of
inventories, (2) Early payments from MWG to suppliers and (3) huge CAPEX for openings of new
stores recently. MWG has been still in safe position, though, with good Current Ratio (1.36 in 2013
and 1.67 in Q1/2014) and high Interest Coverage Ratio (12.89 in 2013 and 32.79 in Q1/2014).
Efficient operation and cash management will enable MWG to have Quick Ratio and Cash Ratio of
0.42 and 0.23 in 2014, which will increase even further to 0.67 and 0.49 after the expansion plan.
In 2011 and 2012, continuous openings of new stores and increase in inventories led to negative
CFO of MWG. In 2013, as MWG nearly did not have new stores going into operations,
CFO/Revenue and CFO/NI ratios were improved to 1.09% and 40.66%. In 2014, due to openings
of new stores, CFO-related ratios will decrease again (CFO/Revenue of 0.78%, CFO/NI of 19.86%,
and CFO/CAPEX of 0.52). From 2015 onwards, MWG will be able to finance CAPEX by its positive
CFO, which achieved impressive growth rate of 360% in 2015 and CAGR of 40.3% in 2015-2020
period. As the expansion plan slows down and stops, other CFO-related ratios will be improved
such as CFO/NI will be 61.12% and 89.14% in 2016 and 2018.
Flexible financing capability in the future
MWG has never paid cash dividends to shareholders since its establishment in 2004 to finance
operation and expansion activities with the retained earnings. Around 99% of its debts were
P a g e 6 | 11
Figure 14: Financial Ratios of MWG short-term in 2010-2011 and since 2012, the firm has started to eliminate long-term debts from
and peers in 2013 its capital structure.
MWG TIP Jaymart
Revenue 2013 Debt/ Equity Ratio was low (64% while TIP’s was 105%) because of MWG’s use of only short-
447 862 294
(million USD) term debts in operations and high equities from stock-dividend policy. The firm is free to choose
Revenue growth
28.80% 27.90% 21.70% whether to use its own retained earnings or borrow long-term debts to finance for its new stores.
2013
In near future, MWG’s intention to keep this structure with no-cash dividend policy and the surge
GPM 14.80% 6% 13.30%
NPM 2.70% 3.80% 4.19%
in net income will lower Debt/ Equity Ratio to 60% in 2014. In the long term, MWG may start
Current ratio 1.4 1.4 1 paying cash-dividend because of less intensive requirements of CAPEX and ensuring benefits for
Quick ratio 0.4 0.9 0.2 shareholders, so Debt/Equity ratio will likely decrease with slower rate, fall to 50% in 2020.
ROE 40.70% 20.70% 24%
ROA 13.40% 9.80% 9.80% Because of enhanced CFO, decreased CAPEX, FCFF from 2015 onwards will be positive and grow
Sales/Assets 4.3 3.8 2.4 with CAGR of 46.6% in 2015-2020 period (Figure 13).
Debt/Equity 64% 105.5% 117.5%
Asset/Equity 2.8 1.9 2.4

Sources: MWG’s Financial Reports and

Bloomberg
Valuation
Table 5: MWG’s target price We used 2 standard approaches: Discounted Cash Flow Model (DCFM) and Multiple Pricing
DCFM MPM Method (MPM) to calculate MWG’s one-year target share price of VND 138,504 with 30.66% of
Price VND 161,198 VND 85,551 upside potentials from market price of VND 106,000 at Oct 31st 2014 (Table 5). We assigned
Weight 70% 30% 70%/30% weights to DCFM and MPM because DCFM reflects better MWG’s long-term prospects
Targeted Price VND 138,504 from its future expansion plan, while MPM only reflects MWG’s short-term earnings and has
Current Price estimation bias from the dissimilarity between the peer group and MWG in terms of ROE and
VND 106,000
(Oct 31 2014) estimated income growth.
Upsides 30.66%
The valuation was made with 2 assumptions that (1) MWG will reach the maturity stage from
Source: Team estimates 2020 onwards with saturated mobile phone and consumer electronics markets and (2) MWG will
Figure 15: Revenue Forecast of have no expansion plan to other retail sectors.
MWG, MWJ and EWJ
DISCOUNTED CASH FLOW MODEL (DCFM):
We applied DCFM approach: Free Cash Flow to the Firm (FCFF) to calculate MWG’s target share
price of VND 161,198. This method is appropriate because MWG’s capital structure has been
unstable, but from 2020 it is expected to remain at targeted Debt/Equity of 33.3%/66.7% (Team
estimates). The forecasts of important factors in our valuation are shown below:
Revenues of MWG are driven from 2 key factors: (1) openings of new stores and (2) changes in
the product mix. It is expected to grow at CAGR 46.19% in 2013-2018 period (especially grew
rapidly in 2014 and 2015 with 68.05% and 79.04%, respectively) (Figure 15). We derived MWG’s
revenues from its 2 companies: Mobile World JSC (MWJ) and Electronics World JSC (EWJ). For
each company, revenues are projected from revenue per m2 of 3 types of stores: new stores,
immature stores and mature stores (according to MWG’s CEO, a new store will achieve revenue
growth of a mature store in 2 years). Therefore, we derived growth of mature stores from
forecasted growths of MWG’s product lines: mobile phones, laptops, tablets and CE&DA, with the
assumption that growths of other accessories will be embedded within the above products
(Appendix 6.2). Revenue per m2 of immature and new stores is calculated as % of revenue per m2
Source: Team estimates of mature stores (Appendix 6.1).
Figure 16: Revenue growth Forecast  MWJ’s revenue forecast: In the next 4 years, according to team estimates, phones and tablets
of MWG, MWJ and EWJ are expected to grow at CAGR of 16.04% and 25.53% respectively, while laptops will witness
a slight decrease due to the emerging trend of switching to tablets. With market leader position,
MWJ will enjoy 51.6% revenue growth of its mature stores in 2014. This, along with revenue
growth of immature and new stores, will contribute to MWJ’s total revenue growth of 72.01%
in 2014. Furthermore, with the expansion plan to rural areas in 2016-2018 period, MWJ is able
to generate additional revenues from its C-Shop chain and acquire an expected market shares
of 50% in these untapped markets. Although MWG has the projected additional openings of
194 normal and flagship stores to urban areas by 2018, with gradual saturated market, the
firm is expected to have decreasing revenue growth in 2014-2018 period with CAGR of 37.28%
(Figure 15 &16).
 EWJ’s revenue forecast: In 2014-2018 period, with the ambition to expand in Southern
provincial areas and quadruple the number of stores to 52, EWJ has huge prospects to make
profits, although its product lines do not enjoy high growths like MWJ’s. Revenue growth of
EWJ is projected to be 48.7% in 2014 and over 105% in 2015, with revenue CAGR of 58.78%
in 2014-2018 period. Therefore, the weight of EWJ in total revenue structure climbs from 17%
in 2013 to 23.58% in 2020 according to our forecast (Figure 15 &16).
Sources: Team estimates From 2019 onwards, revenue per m2 of mature store is expected to grow at the estimated growth
rate of annual income per capita, which is 10% for 2019 and 6% from 2020 onwards. With total
projected chains in 2020 of MWJ (850 C-Shops, 410 normal and flagship stores) and EWJ (52
stores), MWG is expected to consolidate its leading position in mobile phones and tablets (53%
P a g e 7 | 11
 Figure 17: GPM Forecast and 49% of market shares, respectively) and a strong position in Southern consumer electronics
GPM 2013A 2014F 2020F market (10% of market share) (Figure 16).
MWG GPM 14.82% 15.30% 15.80%
Gross profit margin (GPM) is expected to increase in 2014-2018 period because of (1) reduced
MWJ GPM 15.80% 16.24% 17.28%
EWJ GPM 10% 10% 11%
COGS from inventory restructure to keep only highly-demanded products in 2013, (2) discounts
from suppliers thanks to well-built relationships and large purchasing volumes. However, with
Source: Team estimates
increased weight of EWJ (which has lower GPM than MWJ) in MWG’s revenue structure, MWG’s
Table 6: WACC
GPM will stay at 15.3% in 2014 and slightly increase in 2015-2018 period, before stabilizing at
WACC COMPUTATION 15.8% from 2019 onwards (Figure 17).
Variable Value
Capital Expenditure (CAPEX) is used for (1) expansion plan and (2) store maintenance:
Risk free rate (RFR) 6.35%
Equity Risk Premium  CAPEX for expansion plan will be allocated according to number of new stores in each year.
16.06%
for Vietnam (ERP) According to our forecast, MWG will need a total CAPEX for expansion plan of VND 856 billion
Adjusted beta 0.84 in 2014-2018 period.
Cost of equity (Ke) 19.78%  CAPEX for store maintenance will be measured by CAPEX maintenance per m2 of a mature
Cost of debt (Kd) 8.00%
store and Vietnam’s inflation rate, with based CAPEX per m2 of mature stores (calculated from
historical data in the Q1 and Q2 of 2014) and the assumption that immature and new stores
Marginal tax rate (T) 20.00%
are not in need of CAPEX maintenance. (Appendix 8)
After-tax cost of debt 6.40% With strong CFO and small amount of CAPEX for store maintenance in retail industry, MWG will
Weight of equity (We) 66.67% have huge FCFF when the firm finishes its expansion plan.
Weight of debt (Wd) 33.33%
Weighted Average Cost of Capital (WACC) is 15.32%, derived from the components (Table 6):
WACC 15.32%
Sources: Team estimates  The cost of equity of 20.05% was derived from Capital Pricing Asset Model (CAPM) with the
Figure 18: FCFF Forecast following components: (1) Risk-free rate of 6.35% was based on the current yield of 10-year
government bonds in October 31st, 2014. (2) MWG’s Levered beta of 0.75 was computed using
peers unlevered beta median (However, we use adjusted beta of 0.85, a better indicator of the
future) and (3) Equity risk premium of 16.06% was derived from A. Damodaran’s estimates,
2014 (Appendix 7.1).
 The cost of debt of 8% is calculated by adding current deposit interest rate with average net
interest margin (NIM) of commercial bank (Appendix 7.1).
 Weights of debt and equity is derived from MWG’s target capital structure (Debt : Equity of
33.33% : 66.67%), taken from assumed targeted D/E ratio in 2020, when MWG reaches the
maturity stage (Appendix 7.1).
Terminal growth rate of FCFF is 3.06%, conservatively calculated with 2 assumptions: (1) MWG
will have terminal Return on Capital (ROC) ratio equal to WACC (15.32%) due to intense
competition from domestic and foreign retailers and (2) MWG will benefit from its economies of
scale and reinvest its earnings to obtain an outstanding annual growth compared with long-term
growth rate of Vietnam economy, which is assumed at 3%. We expected MWG retention ratio to
Sources: Team estimates
be 20% with the assumption that MWG will pay out most of its profits in cash dividends to
maintain FCFF terminal growth (Appendix 7.4).
Table 7:MPM Approaches
Multiplier P/E EV/EBITDA MULTIPLE PRICING METHOD (MPM):
Price VND 71,151 VND 99,950
Weight for method 50% 50% We used 2 MPM approaches: P/E Ratio (PER) and EV/EBITDA with 50% : 50% weights, to get
Target Price VND 85,551 MWG’s target share price of VND 85,551 (Tablet 7). While PER measures directly the relationship
Sources: Team estimates between price and earnings, EV/EBITDA considers the differences in debt levels of each company
and avoid biases from accounting standards of different countries. These approaches are simple
Table 8: P/E & EV/EBITDA and effective for our valuation method, which chose peer group in mobile retail industry as in
Peer near future most of MWG’s profits will come from MWJ.
Company MWG
median

P/E Trailing 14.79 22.63

We chose 4 peer companies for MWG in similar emerging markets (3 from Indonesia and 1 from
Thailand) with 4 criteria: (1) market capitalization is higher than USD 200 million, (2) revenue
P/E 2014F 12.27 18.07 in 2013 is larger than USD 100 million, (3) core business is mobile phone retail and (4) ROE in
2013 was higher than 12%. Because of the pulling effect cause by outliers, we computed median
EV/EBITDA
Trailing
14.43 16.12 from peer group instead of mean for both trailing and forward ratios of P/E and EV/EBITDA
EV/EBITDA
(Appendix 10.1, 10.2 and 10.3).
12.51 12.68
2014F
Peer trailing ratios are computed basing on earnings from 7/2013 to 6/2014 (MWG Financial
Sources: Team estimates Reports), while peer forward ratios at the end of 2014 are estimated from Bloomberg, which is
very reliable since it is supported by the stable regional economic condition in the next few
months. (Table X) Because trailing multiples are not informative about the future, we assigned
trailing and forward ratios with 30%:70% weights and suppose that by using peer median
trailing and forward multipliers, our valuation is conservative (Appendix 10.4).
MWG is trading at PER of 22.63 and EV/EBITDA of 16.12, much higher than peer median.
However, the overvaluation in MWG stock multipliers can be justified by these dissimilarities
between MWG and peer group: (1) Vietnam’s mobile retail market has outstanding prospects
than other countries of peer group: it is ranked 5th in top 10 tech device markets in 2015, while

P a g e 8 | 11
 Table 9: Variables sensitivity
Sources: Team estimates
Table 10: MWG’s Corporate
Governance Score
MWG’s
Score
Overall CG score
The Rights of Shareholders
Equitable Treatment of
Shareholders
Role of Stakeholders in
Corporate Governance
Disclosure and Transparency
Responsibilities of the Board
Sources: Team estimates
Figure 19: Risk matrix
Sources: Team estimates
Indonesia is only ranked 9th and Thailand is out of the list, (2) MWG has excessive ROE and higher
growth of historical revenues and estimated net incomes than its peers. (Appendix 10.5).
Sensitivity analysis is conducted to analyze possible risks which can affect our Valuation result.
(Table 9 and Appendix 14).
We believe that the conservative assumptions, which based on company announced plans, do not
reflect all of MWG’s growth potential. Therefore, after 2020, MWG can possibly perform an even
better growth in the future because: (1) With successful business model, MWG still has the
potentials to reach 20% market shares in consumer electronics segment after controlling 10% in
2020. (2) With reputable brand, strong financial position and experienced management, MWG
can enter in other retail industries through M&A or establish new businesses itself, although
these prospects could not be quantified immediately.
Corporate Governance
Corporate Governance of MWG is evaluated basing on 5 criteria from Principles of Corporate
Governance (OECD, 2004). MWG’s final score is 54.6 over 100 (Table 10), which is much higher
than the average score of 42.5 of 100 listed companies (with market capitalization making up
Weight
80% of HOSE’s market capitalization). MWG’s score is also higher than FPT and other 4
technology companies. Thus, we reckon that MWG’s corporate governance is relatively good as
54.6 100% compared to the market. We believe that after IPO, MWG’s Corporate Governance system will
64 15% further be improved to attract new investors. (Appendix 11). Some highlights are shown below:
58 20%
 The Rights of Shareholders and Key Ownership Functions: Shareholders have the right to
5%
participate actively in the Shareholder Meeting as well as to influence key corporate
62
governance decisions.
45 30%
 The Equitable Treatment of Shareholders: Equitable rights of all stock class are
56 30% recognized. There is mechanism to protect minority shareholders’ rights.
 The Role of Stakeholders in Corporate Governance: MWG respects the legal rights and
important roles of banks, debtors, consumers, suppliers, community and employees.
 Disclosure and Transparency: Shareholders have available access to a rich source of
relevant information.
 The Responsibilities of the Board: Board members have sufficient competence and also
fulfill their responsibilities. However, the fact that Mr. Nguyen Duc Tai holding both
Chairman and CEO positions may trigger conflict of interest and other problems.
Investment Risk
MARKET RISK:
Fluctuation of VND/USD affects electronics’ prices (MR1): Because the majority of electronics
are imported, the recent depreciation of VND over USD may drive up product prices, which might
decrease consumption. Even though the current VND/USD rate will be not be appreciated
because of SBV’s policy to support export, in the recent months SBV has shown much effort in
stabilizing exchange rate and limiting exchange rate amplitude at +/-2% so as to control inflation
in 2014 and 2015. Therefore, the exchange rate fluctuation can be mitigated.
Volatility of short-term interest rate pose uncertainty about financial expenses (MR2):
With debt structure of 100% short-term loans, there is considerable difficulty for MWG to
manage financial expenses because short-term interest rate may fluctuate greatly due to
changing macroeconomic conditions such as inflation, economic cycle or government policies.
However, our team estimates that with 1% increase in interest rate, MWG’s profit will decrease
by 0.85%, which means impact is fairly low. Moreover, with SBV’s attempt to control inflation,
inflation rate will be reducing from 6.5% in 2014 to 6%, 5.5% and 5% in the next three years
(E&Y, Q2/2014) (Figure 20). Thus, future interest rate fluctuation may be favorable to MWG.
Increased rental fees from the recovery of real estate market (MR3): After hitting the bottom
in 2012 and 2013, the downward trend of real estate prices is expected to slow down and slightly
recover in the next 3-5 years, starting from 2014. However, prices are expected to gradually
increase only after the recovery period. Moreover, in the previous years, MWG signed long-term
rental contracts to take advantage of low rental fees. Because of MWG’s policy of long-term rental
contracts to maintain stable fees and store location, we expect the negative impacts of increasing
rental fees will be minimized.
Economic cycle affects sales revenue growth (MR4): Consumer electronics retail is a highly
cyclical market. A sluggish economic growth or decreased income level can reduce spending on
electronics by a large amount. However, after the economic crisis in 2012, Vietnam’s economy is
expected to recovery in 2014 with 6% GDP growth, which will increase to 6.4-7% in 2015-2017
(E&Y, Q2/2014) (Figure 20). Until 2020, there will be an enormous rise in Vietnam middle income
class from 8 to 44 million people and their consumption will grow from VND 966 to 6,510 trillion
(Nielsen, 2013). Thus, the risk of negative impacts from economic cycle is very low.
P a g e 9 | 11
 ECONOMIC RISKS
Stiff competition against domestic retailers (ER1): Traditional stores’ tax-evaded and second-
Figure 20: Vietnam’s GDP and hand phones are priced at 20-30% and 50% lower than that of the genuine ones. Therefore, more
inflation rate forecast discount campaigns may be essential for MWG to win customers, leading to dilution in NPM.
Moreover, MWG faces fierce competition with other modern retailers who pursue the same
competitive strategies as MWG. Nevertheless, with the widest network, unsurpassed customer
services and efficient operation with the highest revenue/m2 among all competitors, MWG can
maintain its position and margins, providing to customers the value and experience which are
commensurate with product prices.
Potential competition from new foreign competitors (ER2): From May 2015, Vietnam will
open the door for foreign retailers as a commitment with WTO. Thus, it is a challenge for MWG to
compete with foreign retail brands. However, with the wide store chain, widely trusted brand
and rich understanding of Vietnamese customer preferences, the competition from foreign
retailers will not likely affect MWG’s position in the market.
OPERATIONAL RISKS:
Project implementation risk (OR1): In the implementation of store chain expansion and rural
market conquering plan, there might be unexpected loss because of planning and cost
management deficiency. The rapid increase in store numbers may increase SG&A expenses
resulting from higher costs for labors and store management. According to our team estimate,
1% increase in SG&A will reduce profit by 25.89%. However, MWG can control this risk because
high salaries for labors are well compensated by higher customer services and thus higher
revenue and profit, and MWG has decreased administration cost by the recent administration
Source: E&Y forecast merge of MWJ and EWJ. Another risk is unexpected low revenue from rural markets due to
weaker demand and higher distribution cost. Nonetheless, with strong understanding of
competitors and customer preferences along with wide distribution network, MWG can secure
its profitability.
Product portfolio selection risk (OR2): Rapid change in customer tastes along with swift
development of new technological models pose significant risks of choosing goods which do not
meet customer preferences. In 2012, due to MWG’s wrong product selection, there were a large
number of products which could not be sold. High inventory level leads to prices cut and rising
storage costs, thus decreasing NPM. Nonetheless, MWG can mitigate this risk by its product-
tracking ERP system as well as deeper understanding of customer tastes achieved from the
customer feedback line.
IT system failure causing disruption of operation (OR3): MWG’s core technological system is
its ERP whose functions include store operation management, inventory control, information
tracking, and product delivery. A failure in the system will lead to an operational disruption of
the whole store chain. However, as the ERP system is self-developed by MWG with regular
maintenance, the company can control the risk of any breakdown.
Reputation risk (OR4): In April, 2014, there were several complaints from customers that
MWG’s amortization policy made them unknowingly pay extremely high interest rate. This may
affect MWG’s brand of integrity and customer-focused philosophy. However, as the complaints
came from only few customers and MWG made a thorough explanation to the public media, the
consequence from this event is limited. In the future, with the commitment to place customer
benefits in the center for every thought and action, MWG will be able to minimize the arising of
image scandals as well as maintain and improve its image.
INTERNAL RISKS
Personnel risk (IR1): We assess that MWG’s reliance on key personnel in BOD and BOM is
considerable, because those people are mainly founders and/or have irreplaceable contribution
to the company success. The effect of losing them might be loss of invaluable company knowledge
and business expertise, potential decrease in confidence towards the business or loss of
contracts/relationship. Nevertheless, for the time being the probability of key personnel
departure due to death, health problems or retirement is still low, MWG can mitigate the risk by
investing in key personnel insurance, staff training and planning for alternative personnel.
Corporate Governance Risk (IR2): From our team’s estimate in Appendix 11, MWG’s CG scores
54.6 over 100, which is higher than average scores of their competitors and market, but the CG is
not good as compared to international standards. Main CG issue is potential problems arising
from the fact that Mr. Nguyen Duc Tai holds both Chairman and CEO positions. However, being a
significant minority shareholder, he cannot influence the decisions of shareholders. Moreover,
with 10 years of dedication to MWG’s success as well as the strong commitment to protect
interests of shareholders and employees, Mr. Tai will act on the long-term interests of
shareholders and direct MWG to further growth.

P a g e 10 | 11
 APPENDIX 1.1: INCOME STATEMENT

2014
In VND Millions 2010A 2011A 2012A 2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
QI-II A
Revenues 2,816,602 5,387,506 7,374,966 9,498,849 6,974,887 15,962,590 28,579,578 41,286,411 53,282,141 63,433,558 71,413,905 76,087,197
COGS (Costs of Goods Sold) 2,308,159 4,431,536 6,180,426 8,091,484 5,903,414 13,520,314 24,178,323 34,887,017 44,970,127 53,474,490 60,130,508 64,065,420
Gross Profit 508,443 955,970 1,194,540 1,407,365 1,071,473 2,442,276 4,401,255 6,399,394 8,312,014 9,959,069 11,283,397 12,021,777
SG&A Expense (excluded
347,048 718,260 950,541 1,027,186 635,990 1,546,111 2,814,516 4,153,929 5,407,948 6,464,274 7,300,818 7,812,234
Depreciation & Amortization)
EBITDA 161,395 237,710 243,999 380,179 435,483 896,165 1,586,739 2,245,465 2,904,066 3,494,795 3,982,579 4,209,543
Depreciation & Amortization 4,374 8,823 27,525 34,254 51,052 82,073 129,180 139,858 186,676 196,250 197,642 176,921
EBIT - Operating Income 157,021 228,887 216,474 345,925 384,431 814,092 1,457,558 2,105,607 2,717,389 3,298,545 3,784,937 4,032,621
Financial income 7,454 7,639 3,195 29,466 24,007 30,327 54,299 78,441 101,231 120,518 135,680 144,559

Interest and other financial expenses 13,152 27,856 56,441 26,843 10,751 48,254 81,727 139,077 177,950 232,664 252,054 288,446

EBT - Earnings Before Taxes 151,323 208,670 163,228 348,548 397,687 796,166 1,430,130 2,044,971 2,640,671 3,186,399 3,668,563 3,888,735
Other income/losses 2,964 3,935 5,240 2,241 2,577 11,500 20,590 29,745 38,387 45,701 51,450 54,817
Total Accounting Income before
154,287 212,605 168,468 350,789 400,264 807,666 1,450,720 2,074,716 2,679,058 3,232,100 3,720,014 3,943,552
Tax
Tax Expenses 43,931 55,795 42,289 92,319 88,550 177,687 319,158 414,943 535,812 646,420 744,003 788,710
EAT - Earnings After Tax 110,356 156,810 126,179 258,470 311,714 629,979 1,131,562 1,659,773 2,143,246 2,585,680 2,976,011 3,154,842
Profits (losses) of Minority
320 (1,746) 1,127 2,869 3,317 4,410 7,921 11,618 15,003 18,100 20,832 22,084
shareholders
NET INCOME 110,036 158,556 125,052 255,601 308,397 625,570 1,123,641 1,648,154 2,128,244 2,567,580 2,955,179 3,132,758
Average outstanding shares - - 10,082,251 10,522,685 62,434,104 106,479,273 106,623,809 106,623,809 106,623,809 106,623,809 106,623,809 106,623,809
EPS - Earning Per Share (VND) - - 12,403 24,294 4,940 5,875 10,538 15,458 19,960 24,081 27,716 29,381

Sources: MWG’s Consolidated Financial Statement & Team estimates.

APPENDIX 1.2: COMMON-SIZE INCOME STATEMENT

2014
% of Total Revenue 2010A 2011A 2012A 2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
QI-II A
Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
COGS (Costs of Goods Sold) 81.95% 82.26% 83.80% 85.18% 84.64% 84.70% 84.60% 84.50% 84.40% 84.30% 84.20% 84.20%
Gross Profit 18.05% 17.74% 16.20% 14.82% 15.36% 15.30% 15.40% 15.50% 15.60% 15.70% 15.80% 15.80%
SG&A Expense (excluded
12.32% 13.33% 12.89% 10.81% 9.12% 9.69% 9.85% 10.06% 10.15% 10.19% 10.22% 10.27%
Depreciation & Amortization)
EBITDA 5.73% 4.41% 3.31% 4.00% 6.24% 5.61% 5.55% 5.44% 5.45% 5.51% 5.58% 5.53%
Depreciation & Amortization 0.16% 0.16% 0.37% 0.36% 0.73% 0.51% 0.45% 0.34% 0.35% 0.31% 0.28% 0.23%
EBIT - Operating Income 5.57% 4.25% 2.94% 3.64% 5.51% 5.10% 5.10% 5.10% 5.10% 5.20% 5.30% 5.30%
Financial income 0.26% 0.14% 0.04% 0.31% 0.34% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19%

Interest and other financial expenses 0.47% 0.52% 0.77% 0.28% 0.15% 0.30% 0.29% 0.34% 0.33% 0.37% 0.35% 0.38%

EBT - Earnings Before Taxes 5.37% 3.87% 2.21% 3.67% 5.70% 4.99% 5.00% 4.95% 4.96% 5.02% 5.14% 5.11%
Other income/losses 0.11% 0.07% 0.07% 0.02% 0.04% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07%
Total Accounting Income before
5.48% 3.95% 2.28% 3.69% 5.74% 5.06% 5.08% 5.03% 5.03% 5.10% 5.21% 5.18%
Tax
Tax Expenses 1.56% 1.04% 0.57% 0.97% 1.27% 1.11% 1.12% 1.01% 1.01% 1.02% 1.04% 1.04%
EAT - Earnings After Tax 3.92% 2.91% 1.71% 2.72% 4.47% 3.95% 3.96% 4.02% 4.02% 4.08% 4.17% 4.15%
Profits (losses) of Minority
0.01% -0.03% 0.02% 0.03% 0.05% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03%
shareholders
Net Income (Loss) 3.91% 2.94% 1.70% 2.69% 4.42% 3.92% 3.93% 3.99% 3.99% 4.05% 4.14% 4.12%

Sources: MWG’s Consolidated Financial Statement & Team estimates.

 APPENDIX 2.1: BALANCE SHEET

In VND Millions 2010A 2011A 2012A 2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
ASSETS
Cash & Cash Equivalents 28,546 79,997 104,832 304,734 492,128 921,392 1,152,490 1,863,250 2,465,167 3,364,641 3,847,791
Short-term Investments - 50 - - - - - - - - -
Short-term Account Receivable 129,759 201,550 159,814 247,311 391,193 667,310 807,204 1,030,111 1,120,179 1,260,284 1,275,956
Inventories 339,828 877,100 951,564 1,288,950 1,968,957 2,965,395 4,302,734 4,969,457 5,515,737 5,937,693 6,265,244
Prepaid Expenses 14,886 36,086 36,530 30,513 83,555 149,421 215,600 277,913 330,469 371,603 395,921
Others Current Assets 13,372 44,759 28,280 37,577 70,235 125,750 181,660 234,441 279,108 314,221 334,784
Current Assets 526,391 1,239,542 1,281,020 1,909,085 3,006,068 4,829,268 6,659,689 8,375,172 9,710,660 11,248,443 12,119,695
Fixed assets 25,614 113,686 110,983 275,040 432,903 468,684 625,580 657,661 662,328 592,889 566,026
Other Non-current Assets 47,556 182,893 202,822 47,751 128,784 210,908 281,511 295,948 298,048 266,800 254,712
Long-term Assets 73,170 296,579 313,805 322,791 561,687 679,592 907,091 953,609 960,375 859,690 820,738
Total Assets 599,561 1,536,121 1,594,825 2,231,876 3,567,754 5,508,860 7,566,780 9,328,781 10,671,035 12,108,132 12,940,433
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term Borrowings 92,952 299,383 391,345 513,189 865,493 1,469,565 2,007,349 2,441,393 2,728,918 2,872,274 2,896,640
Account Payable 249,148 724,570 598,212 693,539 878,590 1,370,556 1,983,965 2,199,303 2,256,905 2,477,781 2,566,740
Unearned Revenues 0 July 10, 1902 1,628 1,566 2,222 3,978 5,747 7,416 8,829 9,940 10,590
Taxes Payable 33,958 42,691 48,552 84,241 177,687 319,158 414,943 535,812 646,420 744,003 788,710
Salary Payable June 6, 1901 1,179 12,155 4,500 10,082 18,051 26,077 33,653 40,065 45,105 48,057
Accrual Expenses 61,406 112,541 67,383 94,070 159,626 285,796 412,864 532,821 634,336 714,139 760,872
Other Current Liabilities 4,319 36,776 16,413 16,135 31,925 34,295 45,415 53,282 57,090 57,131 53,261
Total Current Liabilities 442,306 1,218,062 1,135,688 1,407,240 2,125,625 3,501,399 4,896,360 5,803,680 6,372,562 6,920,373 7,124,871
Long-term Debt 2,433 6,545 - - - - - - - - -
Others Non-current Liabilities 3,052 2,675 - - - - - - - - -
Total Liabilities 447,791 1,227,282 1,135,688 1,407,240 2,125,625 3,501,399 4,896,360 5,803,680 6,372,562 6,920,373 7,124,871
Capital at Par Value 7,614 98,344 105,027 109,567 1,066,271 1,066,271 1,066,271 1,066,271 1,066,271 1,066,271 1,066,271
Additional paid-in Capital 46,478 46,478 78,485 151,578 36,711 36,711 36,711 36,711 36,711 36,711 36,711
Retained Earnings 89,529 157,354 282,407 538,008 333,608 895,428 1,554,690 2,405,987 3,176,261 4,062,815 4,689,367
Others Components of Equity 1,130 1,131 (10,030) 1,131 1,130 1,130 1,130 1,130 1,130 1,130 1,130
Total Equity 144,751 303,307 455,889 800,284 1,437,719 1,999,540 2,658,801 3,510,099 4,280,373 5,166,927 5,793,478
Minority Interests 7,019 5,532 3,247 24,352 4,410 7,921 11,618 15,003 18,100 20,832 22,084
Total Liabilities and
599,561 1,536,121 1,594,824 2,231,876 3,567,754 5,508,860 7,566,780 9,328,781 10,671,035 12,108,132 12,940,433
Shareholders' Equity

APPENDIX 2.2: COMMON-SIZED BALANCE SHEET

% of Total Assets 2010A 2011A 2012A 2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
ASSETS
Cash & Cash Equivalents 4.76% 5.21% 6.57% 13.65% 13.79% 16.73% 15.23% 19.97% 23.10% 27.79% 29.73%
Short-term Investments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Short-term Account
21.64% 13.12% 10.02% 11.08% 10.96% 12.11% 10.67% 11.04% 10.50% 10.41% 9.86%
Receivable
Inventories 56.68% 57.10% 59.67% 57.75% 55.19% 53.83% 56.86% 53.27% 51.69% 49.04% 48.42%
Prepaid Expenses 2.48% 2.35% 2.29% 1.37% 2.34% 2.71% 2.85% 2.98% 3.10% 3.07% 3.06%
Others Current Assets 2.23% 2.91% 1.77% 1.68% 1.97% 2.28% 2.40% 2.51% 2.62% 2.60% 2.59%
Current Assets 87.80% 80.69% 80.32% 85.54% 84.26% 87.66% 88.01% 89.78% 91.00% 92.90% 93.66%
Fixed assets 4.27% 7.40% 6.96% 12.32% 12.13% 8.51% 8.27% 7.05% 6.21% 4.90% 4.37%
Other Non-current Assets 7.93% 11.91% 12.72% 2.14% 3.61% 3.83% 3.72% 3.17% 2.79% 2.20% 1.97%
Long-term Assets 12.20% 19.31% 19.68% 14.46% 15.74% 12.34% 11.99% 10.22% 9.00% 7.10% 6.34%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
LIABILITIES & SHAREHOLDERS' EQUITY
Short-term Borrowings 15.50% 19.49% 24.54% 22.99% 24.26% 26.68% 26.53% 26.17% 25.57% 23.72% 22.38%
Account Payable 41.56% 47.17% 37.51% 31.07% 24.63% 24.88% 26.22% 23.58% 21.15% 20.46% 19.84%
Unearned Revenues 0.00% 0.06% 0.10% 0.07% 0.06% 0.07% 0.08% 0.08% 0.08% 0.08% 0.08%
Taxes Payable 5.66% 2.78% 3.04% 3.77% 4.98% 5.79% 5.48% 5.74% 6.06% 6.14% 6.09%
Salary Payable 0.09% 0.08% 0.76% 0.20% 0.28% 0.33% 0.34% 0.36% 0.38% 0.37% 0.37%
Accrual Expenses 10.24% 7.33% 4.23% 4.21% 4.47% 5.19% 5.46% 5.71% 5.94% 5.90% 5.88%
Other Current Liabilities 0.72% 2.39% 1.03% 0.72% 0.89% 0.62% 0.60% 0.57% 0.54% 0.47% 0.41%
Total Current Liabilities 73.77% 79.29% 71.21% 63.05% 59.58% 63.56% 64.71% 62.21% 59.72% 57.15% 55.06%
Long-term Debt 0.41% 0.43% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Others Non-current
0.51% 0.17% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Liabilities
Total Liabilities 74.69% 79.89% 71.21% 63.05% 59.58% 63.56% 64.71% 62.21% 59.72% 57.15% 55.06%
Capital at Par Value 1.27% 6.40% 6.59% 4.91% 29.89% 19.36% 14.09% 11.43% 9.99% 8.81% 8.24%
Additional paid-in Capital 7.75% 3.03% 4.92% 6.79% 1.03% 0.67% 0.49% 0.39% 0.34% 0.30% 0.28%
Retained Earnings 14.93% 10.24% 17.71% 24.11% 9.35% 16.25% 20.55% 25.79% 29.77% 33.55% 36.24%
Others Components of
0.19% 0.07% -0.63% 0.05% 0.03% 0.02% 0.01% 0.01% 0.01% 0.01% 0.01%
Equity
Total Equity 24.14% 19.74% 28.59% 35.86% 40.30% 36.30% 35.14% 37.63% 40.11% 42.67% 44.77%
Minority Interests 1.17% 0.36% 0.20% 1.09% 0.12% 0.14% 0.15% 0.16% 0.17% 0.17% 0.17%
Total Liabilities and
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Shareholders' Equity

Sources: MWG’s Consolidated Financial Statement & Team estimates

APPENDIX 3: CASHFLOW STATEMENT

In VND Millions 2014F 2015F 2016F 2017F 2018F 2019F 2020F

CASH FLOW FROM OPERATING

Income before Tax 807,666 1,450,720 2,074,716 2,679,058 3,232,100 3,720,014 3,943,552
Adjusments
Depreciation & Amortization 82,073 129,180 139,858 186,676 196,250 197,642 176,921
Provisions & Gains/Losses from
investments 32,284 20,946 887 29,520 28,878 37,567 2,036
Interest Expenses 48,254 81,727 139,077 177,950 232,664 252,054 288,446
Cashflow before Changes in
970,277 1,682,574 2,354,537 3,073,204 3,689,892 4,207,277 4,410,955
Working Capital
Change in Current Assets (876,930) (1,338,422) (1,543,412) (951,943) (688,905) (603,195) (367,539)
Change in Accounts Receivable (143,882) (276,118) (139,894) (222,906) (90,068) (140,105) (15,671)
Change in Inventories (680,007) (996,438) (1,337,339) (666,723) (546,280) (421,957) (327,550)
Change in Prepaid Expenses (53,042) (65,866) (66,179) (62,313) (52,557) (41,134) (24,318)
Change in Current Liabilities 256,845 627,860 750,272 344,541 166,941 306,830 139,295
Change in Accounts Payable 185,051 491,965 613,409 215,337 57,602 220,876 88,960
Change in Unearned revenue 656 1,756 1,769 1,670 1,413 1,111 650
Change in Salary payable 5,582 7,969 8,026 7,577 6,412 5,040 2,952
Change in Accrual expense 65,556 126,170 127,068 119,957 101,514 79,803 46,733
Interests paid in cash (48,254) (81,727) (139,077) (177,950) (232,664) (252,054) (288,446)
Income Tax paid in cash (177,687) (319,158) (414,943) (535,812) (646,420) (744,003) (788,710)
Total CFO 124,252 571,127 1,007,377 1,752,041 2,288,844 2,914,855 3,105,554
CASH FLOW FROM INVESTING
Cash from buying assets (241,936) (167,082) (299,011) (221,174) (203,501) (130,970) (153,018)
Cash from selling assets 2,000 2,120 2,258 2,416 2,585 2,766 2,960
Other components (47,905) (19,152) (28,417) 20,379 23,770 38,091 9,495
Total CFI (287,841) (184,114) (325,171) (198,379) (177,146) (90,113) (140,563)
CASH FLOW FROM FINANCING
Shares issued - - - - - - -
Repurchased stocks 300 - - - - - -
Proceedings from borrowings 3,797,715 3,987,600 4,186,980 4,396,329 4,616,146 4,846,953 5,089,301
Debt paid (3,445,410) (3,383,529) (3,649,196) (3,962,286) (4,328,621) (4,703,597) (5,064,935)
Dividends paid - (561,820) (988,893) (1,276,946) (1,797,306) (2,068,625) (2,506,206)
Total CFF 352,604 42,251 (451,108) (842,903) (1,509,781) (1,925,269) (2,481,840)
Net change in cash 189,015 429,264 231,099 710,759 601,917 899,474 483,150
Beginning cash 303,113 492,128 921,392 1,152,490 1,863,250 2,465,167 3,364,641
Ending Cash 492,128 921,392 1,152,490 1,863,250 2,465,167 3,364,641 3,847,791

Sources: MWG’s Consolidated Financial Statement & Team’s estimates.

APPENDIX 4: KEY FINANCIAL RATIOS:

Ratios 2010A 2011A 2012A 2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Current Ratio 1.19 1.02 1.13 1.36 1.41 1.38 1.36 1.44 1.52 1.63 1.70
Liquidity

Quick Ratio 0.36 0.23 0.23 0.39 0.42 0.45 0.40 0.50 0.56 0.67 0.72
Cash Ratio 0.06 0.07 0.09 0.22 0.23 0.26 0.24 0.32 0.39 0.49 0.54
Cash Conversion Cycle 25.47 25.57 24.35 30.39 30.05 27.03 26.99 26.95 26.76 26.48 26.48
Receivable Turnover 28.89 32.52 40.82 46.66 50.00 54.00 56.00 58.00 59.00 60.00 60.00
Inventory Turnover 8.74 7.28 6.76 7.22 8.30 9.80 9.60 9.70 10.20 10.50 10.50
Payables Turnover 12.62 10.21 9.46 13.05 17.20 21.50 20.80 21.50 24.00 25.40 25.40
Activitiy

Days of Sales Outstanding 12.63 11.22 8.94 7.82 7.30 6.76 6.52 6.29 6.19 6.08 6.08
Days of Inventory on Hand 41.77 50.12 54.00 50.53 43.98 37.24 38.02 37.63 35.78 34.76 34.76
Days of Payable 28.93 35.76 38.60 27.97 21.22 16.98 17.55 16.98 15.21 14.37 14.37
Operting Cycle 54.41 61.34 62.94 58.36 51.28 44.00 44.54 43.92 41.97 40.85 40.85
Total Assets Turnover 4.70 3.51 4.62 4.26 4.47 5.19 5.46 5.71 5.94 5.90 5.88
Fixed Assets Turnover 109.96 47.39 66.45 34.54 36.87 60.98 66.00 81.02 95.77 120.45 134.42
Solvency

Financial Leverage Ratio 4.14 5.06 3.50 2.79 2.48 2.76 2.85 2.66 2.49 2.34 2.23
Debt/Equity Ratio 0.66 1.01 0.86 0.64 0.60 0.73 0.75 0.70 0.64 0.56 0.50
Interest Coverage Ratio 11.94 8.22 3.84 12.89 16.87 17.83 15.14 15.27 14.18 15.02 13.98
ROAA 23.90% 14.85% 7.99% 13.36% 21.57% 24.76% 25.21% 25.19% 25.68% 25.95% 25.01%
ROEA 110.64% 70.77% 32.94% 40.70% 55.90% 65.38% 70.76% 69.00% 65.92% 62.56% 57.16%
Profitability

ROCA 59.25% 40.76% 23.92% 23.47% 35.19% 39.44% 41.56% 41.09% 40.93% 40.42% 38.78%
Gross Profit Margin 18.05% 17.74% 16.20% 14.82% 15.30% 15.40% 15.50% 15.60% 15.70% 15.80% 15.80%
EBITDA Margin 5.73% 4.41% 3.31% 4.00% 5.61% 5.55% 5.44% 5.45% 5.51% 5.58% 5.53%
EBIT Margin 5.57% 4.25% 2.94% 3.64% 5.10% 5.10% 5.10% 5.10% 5.10% 5.20% 5.30%
Net Profit Margin 3.91% 2.94% 1.70% 2.69% 3.92% 3.93% 3.99% 3.99% 4.05% 4.14% 4.12%
CFO/Revenue 1.67% -1.17% -0.36% 1.09% 0.78% 2.00% 2.44% 3.29% 3.61% 4.08% 4.08%
CFO ratios

CFO/NI 42.81% -39.72% -21.43% 40.66% 19.86% 50.83% 61.12% 82.32% 89.14% 98.64% 99.13%
CFO/Total Assets 7.86% -4.10% -1.68% 4.66% 3.48% 10.37% 13.31% 18.78% 21.45% 24.07% 24.00%
CFO/CAPEX 1.11 -0.65 -0.77 0.76 0.52 3.46 3.39 8.01 11.39 22.74 20.70

Sources: MWG’s Prospectus & Team’s estimates.

APPENDIX 5: COMPETITOR ANALYSIS

1. MWJ’s main competitors

Thegioididong has 2 groups of competitors targeting 2 groups of customers with different tastes and incomes: (1) Modern retail
stores (Large chains: FTP shop, Vienthong A, Viettel Stores; Small chains: CellphoneS, Mai Nguyen mobile, Nhatcuong mobile, etc.)
providing genuine products, investing in customer-focused store design and competing mainly by store chain expansion and
promotion. Those chains target above mid-income customers who ask for product genuineness, high quality and good customer
services. MWJ is competing directly with those store chains as they have the same target customers. (2) Traditional retail stores are
indirect competitors providing tax-evaded and/or secondhand mobile devices at much lower prices and mainly competing by pricing
to attract customers with lower income but desiring to experience new technology. Each group of competitor accounts for 50%
market share.

Table: MWJ and competitor comparison

Large chains
Traditional
Thegioididong Small chains
FPT Shop Viettel Store Vien Thong A stores
(MWJ)
FPT Retail – a
Individuals/
Owner MWG subsidiary of FPT - - Individuals
SMEs
Corporation
Market shares in
25% 8% - - - 50%
mobile
Tax-evaded or
Tax-evaded or
Product types Genuine Genuine Genuine Genuine secondhand or
genuine
genuine
Variety of
Variety of Variety of
reputable Variety of Variety of Reputable or
reputable reputable
Product Brands brands reputable brands reputable non-reputable
brands brands
(Samsung, HTC, brands brands
LG, …)
Official, Tax-
Price Official Official Official Official Tax-evaded
evaded
2-10 stores Total 15,000
Number of stores 303 150 106 115
each chain stores
Store area 100-150m2 150-200m2 100-150m2 100-150m2 40-150m2 20-30m2
Revenue in 2013
7,884 2,932 - 2,169 - -
(VND bn)
Revenue/m2 in
288 168 - 173 -
2013 (VND mn)
Number of
provinces/cities Only local
63 62 63 39 Large cities:
with store appearance
Hanoi, HCMC
appearance
Website ranking
75rd 128th 373rd 911th - -
(Alexa)
Website loading
1.5s 4s 5s 4s 3-6s -
speed

Brand Image

Financial
strength

Promotion

Customer services quality (1-4 points from low to high quality)

Overall
 Delivery

Product
change/return
policy
Installment
policy

Warranty

Convenience and
variety of
payment
methods
Online
purchasing
(website design
and functions)
Source: Company data, Team estimates.

Firstly, we will analyze in much detail the competitiveness of FPT Shop – MWG’s biggest and direct competitor at this time and in the
future. MWG and FPT Shop compete directly store by store: many stores of them have nearby or opposite location. FPT Shop’s
strategy is also similar to MWG’s in many aspects. Owned by FPT Retail, a subsidiary of FPT Corporation - the largest technology firm
in Vietnam, FPT Shop has strong financial support. FPT Shop has the second largest market share of the mobile phone retail market
phone with 8%, which may be further increased as a result of its continual network expansion.

Table: FPT Shop performance and forecast (2012-2015)

VND million 2012A 2013A 2014F 2015F

Number of Store 50 100 150 200
Revenue 1,026,000 2,932,000 5,278,000 7,389,000
Growth rate 186.00% 80.00% 40.00%
Net income -35,000 -32,000 40,000 160,000
NPM -3.41% -1.09% 0.76% 2.17%
Source: FPT Retail forecast

FPT Shop and its chain stores was founded in 2008, but it was until 2012 when FPT Retail begun expanding the chain to provide
phones, tablets, laptops and accessories. With the plan to open 50 new stores per year, until now FPT Shop has 150 stores spreading
over 63 provinces. Each FPT Shop store is designed with 100-200m2 area, including Icorner - showcase store of Apple products. After
an initial market entry strategy to sacrifice profits in order to increase revenue, in the first half of 2014 FPT Shop started to generate
profit and profit margins are expected to increase in the coming years when the stores are matured.

Starting later, FPT Retail learn much from MWJ’s business model, which is to open stores continuously, develop online channel and
sell cheap phone cards to attract more customers to the stores. However, the quality of customer service at FPT Shop is not as good as
MWJ. There were a number of customers complaining about the attitude of FPT Shop’s staff. Moreover, according to our survey, with
2 stores of MWJ and FPT Shop located on Thai Ha street, the number of customers entering MWJ was much more than that in FPT
Shop.

In terms of coverage, the number of FPT Shop stores is only a half MWJ. Number of stores of MWJ in Hanoi and Ho Chi Minh City also
overwhelmed that of FPT Shop.

Table: Number of stores of MWJ and FPT Shop in Vietnam and two largest cities

Total Ho Chi Minh City Ha Noi

Current number MWJ 303 59 35
of store FPT Shop 150 34 20

Source: Company data, Team estimates.

In 2014, FPT Shop will also follow properly its plan of 50 new stores. Meanwhile, MWJ’s plan is to open only 30 stores, but realizing
many favorable market conditions, the firm has opened 86 additional stores this year. MWJ managers see the importance of the
coverage and strategically take advantage of low interest rates, low rental fees, and reducing corporate income tax.

The difference in brand name and customer service quality of the two companies is reflected in the difference between their
Revenue/m2. Two store chains both increased the number of stores by 50% in the first 10 months of 2014, but Revenue/m2 of FPT
Shop was only 75% of MWJ.

Table: Revenue/m2 of MWJ and FPT Shop

2013A 2014F
Number of MWJ 217 338
store FPT Shop 100 150
Revenue/m2 MWJ 288 315
(million) FPT Shop 195 235
Source: Company data, Team estimates.

However, FPT Shop has a competitive advantage because of its parent company – FPT Retail – is the third distributor for Apple
products in Vietnam and exclusive distributor for ASUS Zenfone. However, this is not a big threat to MWJ because FPT Shop is the
exclusive distributor for only one product, and MWG is negotiating with Apple’s managers to distribute Apple products.

In conclusion, from the above comparison, our team can see that MWJ outperforms FPT Shop in many aspects. MWJ has
unsurpassed customer service, more visionary and strategic managers, and outperforming revenue.

Other competitors also have weaker competitiveness than MWG. Viettel Store has large store chain but poor customer services.
Vien Thong A has large store chain and fairly good customer services but store chain appearance over the nation is limited. Small
chains having several modern stores in big citites and investing in customers services, but they are not a significant threat to MWG.
About small stores which are MWG’s indirect competitors because of different target customers, MWG will be able to win their
market shares when customer preferences change in response to higher incomes in the coming years.

2. EWJ’s main competitors

Dienmay.com operates in the South of Vietnam where the competition is fierce. Different from mobile retail industry, main
competitors of Dienmay.com are only large retailers who mainly compete in prices and race to introduce the same or more attractive
promotions. We will mention those retailers based in the South, who are direct competitors of Dienmay.com.

Table: MWJ and competitor comparison

Dienmay.com Nguyen Kim Pico Cho Lon

The North of
Main business The South of The South of
Vietnam, Ho Chi The South of Vietnam
location Vietnam Vietnam, Hanoi
Minh City (HCMC)
Market shares 1.8% 11.3% 3.65%
Number of
15 22 5 22
supermarkets
Supermarket 1,000-1,200m2 2,500-4,000m2 2,000-4,000m2 4,000m2
area 1-2 floors 3-5 floors 2-5 floors 1-2 floors
Revenue in 2013
1,615 10,417 3,317 3,500
(VND bn)
Revenue/m2 in
135 38 61 27
2013 (VND mn)
Number of
provinces/cities 10 13 2 16
with appearance
Website ranking
586th 310th 449th 570th
(Alexa)

Brand Image

Financial
strength
 Services quality

Promotion

Customer services quality (1-4 points from low to high quality)

Overall

Delivery

Product
change/return
policy

Warranty

Convenience and
variety of
payment
methods
Online
purchasing
(website design
and functions)
Source: Company data, Team estimates.

EWJ and its competitors are competing vey fiercely on all aspects. Nguyen Kim has the competitive advantage over EWJ because of its
strong relationship with suppliers, thereby having a wide range of products with highly discounted prices. By expanding business to
the provinces outside of HCMC, EWJ can avoid direct competition with Nguyen Kim. Pico has larger market share than EWJ despite
the same level of brand image and service quality; however, as Pico has little appearance over the nation, especially the South, EWJ
can compete with Pico to win customers. Lastly, EWJ is expected to compete well against Cho Lon thanks to better customer services.
APPENDIX 6.1: REVENUE FORECAST OF MWG
1. REVENUE FORECAST OF MWG:
MWG’s Revenues are driven from 2 factors: (1) SSSG (Same store sales growth) and (2) openings of new stores. Therefore, we
forecasted numbers of stores and revenues of stores in MWG’s retail chains to derive MWG’s Revenues:
MWG’s Revenues = Revenues of EWJ’s chain + Revenues of MWJ’s established chain + Revenues of MWJ’s C-Shop chain
Number of stores in MWG’s retail chains: EWJ will have 52 stores in its chain by 2018. In 2014-2016 period, while MWJ is
forecasted to have 400 stores in urban areas and in 2016-2018 period, it will conduct an expansion plan in rural areas to have 850 C-
shops and gain pioneer position in these potentially untapped markets.
Revenues of stores in MWG’s retail chains: According to MWG’s CEO, revenue of a new store can achieve revenue of a mature one
after 2 years. Therefore, we seperately forecasted revenues of each chain in year (t) based on total revenues of 3 types of stores:
mature stores – opened from year (t-2) backwards, immature stores – opened in year (t-1) and new stores – opened in year (t).
Because of the dissimilarity in size of stores, we calculated revenue per square meter (Rev/m2) and total areas of each type of stores
to derive their revenues.
Revenues of each chain in year (t)= Revenues of mature stores + Revenues of new stores + Revenues of immature stores
Revenues of a type of store in year (t) = Rev/m2 of in year (t) * Total Areas in year (t)
2. REVENUE FORECAST OF MATURE STORES:
We used revenue structure and Rev/m2 of a mature store in based year 2013 (because there is no new store opened in 2013 so we
assume that all stores are mature in this year) to forecast Rev/m2 of a mature store in year (t) with the formula:
Rev/m2 of a mature store in year (t) = Rev/m2 of a mature store in year (t-1) * Same store sales growth (SSSG) in year (t)
SSSG comes from the increasing demand of customers for products that MWG offers. Therefore, we projected the growth rate of
market demand for each product lines which are Phones, Laptops, Tablets, CE&DA (Consumer Electronics and Domestic Appliances)
and other accessories. (For revenue forecast of each product lines, see APPENDIX 6.2). After combining growth rates with the % of
each product lines in MWJ’s and EWJ’s revenue structures, we derived SSSG of a mature store:
Total Revenues in year (t) = ∑[𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐨𝐟 𝐞𝐚𝐜𝐡 𝐩𝐫𝐨𝐝𝐮𝐜𝐭 𝐥𝐢𝐧𝐞 𝐢𝐧 𝐲𝐞𝐚𝐫(𝐭) ∗ 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐠𝐫𝐨𝐰𝐭𝐡 𝐨𝐟 𝐭𝐡𝐞 𝐩𝐫𝐨𝐝𝐮𝐜𝐭 𝐥𝐢𝐧𝐞 𝐢𝐧 𝐲𝐞𝐚𝐫(𝐭 − 𝟏)]
𝐓𝐨𝐭𝐚𝐥 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐨𝐟 𝐚𝐥𝐥 𝐩𝐫𝐨𝐝𝐮𝐜𝐭 𝐥𝐢𝐧𝐞𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭)
Same store sales growth of a mature store in year (t) = −𝟏
𝐓𝐨𝐭𝐚𝐥 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐨𝐟 𝐚𝐥𝐥 𝐩𝐫𝐨𝐝𝐮𝐜𝐭 𝐥𝐢𝐧𝐞𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭−𝟏)

Growth rate of products(%) Revenue of product (VND billion) Total

EWJ SSSG
Phones Laptops Tablets CE&DA Phones Laptops Tablets CE&DA Revenues

2013 543.58 81.40 58.94 930.89 1,614.80

H1/2014 35.30% -1% 145.70% 17.80% 735.46 80.58 144.82 1,096.59 2,057.45 27.4%
2014 35.3% -2.0% 160.0% 16.0% 735.46 79.77 153.25 1,079.83 2,048.31 26.8%
2015 29.5% -5.0% 37.9% 13.0% 952.20 75.78 211.39 1,220.21 2,459.58 20.1%
2016 13.3% -5.0% 29.5% 12.0% 1,078.75 71.99 273.80 1,366.63 2,791.18 13.5%
2017 11.5% -5.0% 19.1% 11.0% 1,202.91 68.39 326.01 1,516.96 3,114.27 11.6%
2018 10.9% -5.0% 16.7% 12.0% 1,333.43 64.97 380.53 1,699.00 3,477.93 11.7%
Growth rate of products(%) Revenue of product (VND billion) Total
MWJ SSSG
Phones Laptops Tablets CE&DA Phones Laptops Tablets CE&DA Revenues
2013 4,975.25 745.00 539.49 1,624.30 7,884.04
H1/2014 35.30% -1% 145.70% 40.49% 6,731.52 737.55 1,325.52 2,282.05 11,076.64 40.5%
2014 35.3% -2.0% 160.0% 41.6% 6,731.52 730.10 1,402.66 2,300.14 11164.42 41.6%
2015 29.5% -5.0% 37.9% 28.0% 8,715.30 693.60 1,934.78 2,943.50 14,287.18 28.0%
2016 13.3% -5.0% 29.5% 14.9% 9,873.56 658.92 2,506.07 3,383.30 16,421.85 14.9%
2017 11.5% -5.0% 19.1% 12.1% 11,010.00 625.97 2,983.85 3,793.61 18,413.44 12.1%
2018 10.9% -5.0% 16.7% 11.4% 12,204.59 594.67 3,482.92 4,224.97 20,507.15 11.4%

H1/2014 (Repored) 2014 In 2014, it is stated in report of firm that in the first half of 2014, same store sale
SSSG SSSG SSSG SSSG growth (SSSG) of an mature store of MWJ and EWJ are 50% and 30% respectively,
Calculated Reported Calculated Reported which was higher than estimation for the whole market (40.5% and 27.4%). We
EWJ 27.40% 30% 26.80% 29.50% assessed that these rates are quite reasonable thanks to market leader position so in
MWJ 40.50% 50% 41.60% 51.60% 2014, SSSG is projected to be higher than our estimation by the same proportion as
the first half of the year and they will be 51.6% and 29.5% for MWJ and EWJ. Since
2015, the urban market will be filled up with more MWG stores and its competitors
and all prime places in urban areas have been occupied, SSSG will cannot be higher
than market figure so team estimate will be applied.
3. REVENUE FORECAST OF IMMATURE AND NEW STORES:
According to MWG’s Prospectus, Rev/m2 of a new store and an immature store is 65% and 86% of Rev/m2 of a mature store,
respectively, Therefore, we made the assumption that:
(1): From its 2nd year of operations towards, Rev/m2 of a new store will be equal to Rev/m2 of a mature store.
100%+65%
(2): Rev/m2 of an immature store in MWJ = = 82.5% of Rev/m2 of a mature store and
2
100%+86%
Rev/m2 of an immature store in EWJ = = 93% of Rev/m2 of a mature store
2
(3): Rev/m2 of new stores is divided by 2 to compensate new stores opened in the different time of a year:
Re/m2 of a mature store∗65%
Rev/m2 of a new store in MWJ = and
2
Re/m2 of a mature store ∗86%
Rev/m2 of a new store in EWJ =
2
(4): C-Shop chain in rural area will have the same figures as established MWJ chain. (*)
(*) For C-shop chain in rural area, in our evaluation, it will be more difficult to accelerate the plan this year so we can only expect that this
chain will be aggressively opened in 2016 and completed with 850 shops by 2018. Rev/m2 of a C-shop is lower than Rev/m2 a store in
urban areas due to people’s lower income. (For more information about C-shop analysis, see APPENDIX 6.3)
MWG’s Revenues are finally forecasted as shown as in the table below:
2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
MWG Revenues (VND Million) 9,498,849 15,962,590 28,579,578 41,286,411 53,282,141 63,433,558 71,413,905 76,087,197
% YoY Growth 28.80% 68.05% 79.04% 44.46% 29.05% 19.05% 12.58% 6.54%
MOBILE WORLD JSC (Telecommunications Equipment Industry)
Revenues 7,884,045 13,561,348 23,641,189 32,490,692 40,670,361 48,171,431 54,488,863 58,146,652
Annual growth - 72.01% 74.33% 37.43% 25.18% 18.44% 13.11% 6.71%
MWJ Stores in Urban areas
Revenues 7,884,045 13,561,348 23,641,189 31,888,355 38,280,530 43,320,822 47,646,901 50,500,627
Annual growth - 72.01% 74.33% 34.88% 20.05% 13.17% 9.99% 5.99%
No. of Normal Stores (Avr. Areas = 125 m2) 216 335 370 400 400 400 400 400
No. of Flagship Stores (Avr. Areas = 400 m2) 1 3 7 10 10 10 10 10
Total Areas (m2) 27,400 43,075 49,050 54,000 54,000 54,000 54,000 54,000
Revenue per m2 288 315 482 602 753 892 1,009 1,077
Same store sales growth of mature store (SSSG) - 51.60% 27.97% 14.94% 12.13% 11.37% 10.00% 6.00%
Total mature areas (m2) 26,375 27,400 27,400 43,075 49,050 54,000 54,000 54,000
Revenue per m2 of Mature Stores 288 436 558 642 719 801 881 934
Total new areas (m2) -1,600 15,675 5,975 4,950 0 0 0 0
Revenue per m2 of New Stores - 101 181 209 234 260 286 304
Total immature areas (m2) 2,625 0 15,675 5,975 4,950 0 0 0
Revenue
Revenuesper m2 of Immature
differences Stores
(accounted for pro-rating - - 461 529 594 661 727 771
revenues of flagship stores from small stores) 4,904 21,830 42,998 55,172 53,821 53,458 52,800 50,880
C-SHOP in Rural areas
Revenues - - - 602,337 2,389,831 4,850,609 6,841,962 7,646,025
Annual growth - - - - 297% 103% 41% 12%
No. of stores (Avr. Areas = 1000 m2) - - - 300 600 850 850 850
Total Areas - - - 15,000 30,000 42,500 42,500 42,500
SSSG - - - 0.00% 12.13% 11.37% 10.00% 6.00%
Total areas of mature stores (m2) - - - 0 0 15,000 30,000 42,500
Revenue per m2 of mature stores - - - 124 139 154 170 180
Total areas of new stores (m2) - - - 15,000 15,000 12,500 0 0
Revenue per m2 of new Stores - - - 40 45 50 0 0
Total areas of immature stores (m2) - - - 0 15,000 15,000 12,500 0
Revenue per m2 of immature stores - - - - 114 127 140 0
ELECTRONIC WORLD JSC (Consumer Electronics Industry)
Revenues 1,614,804 2,401,242 4,938,389 8,795,719 12,611,780 15,262,127 16,925,042 17,940,545
Annual growth 0.00 48.70% 105.66% 78.11% 43.39% 21.01% 10.90% 6.00%
No. of Stores (Avr. Areas = 1000 m2) 12 18 32 46 52 52 52 52
Total Areas 12000 18000 32000 46000 52000 52000 52000 52000
Revenue per m2 135 133 154 191 243 294 325 345
SSSG 0.00% 29.50% 20.08% 13.48% 11.58% 11.68% 10.00% 6.00%
Total mature areas (m2) 4000 12000 12000 18000 32000 46000 52000 52000
Revenue per m2 of Mature Stores 135 174 209 237 265 296 325 345
Total new areas (m2) 0 6000 14000 14000 6000 0 0 0
Revenue per m2 of New Stores 0 52 90 102 114 127 140 148
Total immature areas (m2) 8000 0 6000 14000 14000 6000 0 0
Revenue per m2 of Immature stores - - 195 221 246 275 303 321

Sources: MWG’s Financial Report and Team estimates

APPENDIX 6.2: REVENUE GROWTH FORECAST OF MWG’S PRODUCT LINES
We forecasted same store sales growth of a mature store by estimating market growh and revenues of of all product lines in MWJ and
EWJ, which are Phones, Tablets, Laptops, CE&DA (Consumer Electronics&Domestic Appliances) and other accessories. We assumed
other acccessories, which supports Phones, Tablets, Laptops and CE&DA, will have the revenue growth embedded in those main
product lines.
1. REVENUE GROWTH FORECAST FOR MOBILE PHONES:
We forecasted the revenue of mobile phones in Vietnam with the formula:
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐒𝐞𝐥𝐥𝐢𝐧𝐠 𝐏𝐫𝐢𝐜𝐞 𝐨𝐟 𝐚 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞 𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭)𝐱 𝐍𝐨.𝐨𝐟 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞𝐬 𝐬𝐨𝐥𝐝 𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭)
Revenue of mobile phones in year (t) =
𝐌𝐚𝐫𝐤𝐞𝐭 𝐒𝐡𝐚𝐫𝐞𝐬 𝐨𝐟 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭)

𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐒𝐞𝐥𝐥𝐢𝐧𝐠 𝐏𝐫𝐢𝐜𝐞 𝐨𝐟 𝐚 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞 (𝐢𝐧 𝐭𝐡𝐞 𝐰𝐨𝐫𝐥𝐝)𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭)∗𝐔𝐒𝐃/ 𝐕𝐍𝐃 𝐄𝐱𝐜𝐡𝐚𝐧𝐠𝐞 𝐫𝐚𝐭𝐞
 Purchasing Power Ratio = , which is calculated using global
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐒𝐞𝐥𝐥𝐢𝐧𝐠 𝐏𝐫𝐢𝐜𝐞 𝐨𝐟 𝐚 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞 (𝐢𝐧 𝐕𝐢𝐞𝐭𝐧𝐚𝐦) 𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭)
and Vietnam’s historical data in 2012-2013 period (Bloomberg & Gfk). According to Gfk, in 2015 Vietnam will still be in the top-10
biggest markets in terms of revenue growth of mobile phones. Because Vietnam is a developing country catching up with the
global trend of increasing demands for smartphones, we assumed that Purchasing Power Ratio will decline from 1.52 (in 2013) to
1.41 (in 2013) to 1.31 in 2014 and stabilize from then. Forecasted results are shown below:
2,013 2014F 2015F 2016F 2017F 2018F
Smartphones - Average Selling Price in the World (USD) 334 287 269 251 235 220
Exchange Rate USD/VND 21,036 21,246 21,458 21,672 21,889 22,107
Smartphones - Average Selling Price in Vietnam (VND) 4,620,800 4,325,520 4,402,229 4,157,182 3,925,776 3,707,250
Smartphones - Purchasing Power Ratio 1.52 1.41 1.31 1.31 1.31 1.31

Sources: Bloomberg, Gfk, General Statistics Office and Team estimates

𝐍𝐨.𝐨𝐟 𝐈𝐧𝐜𝐫𝐞𝐚𝐬𝐞𝐝 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞 𝐔𝐬𝐞𝐫𝐬 𝐍𝐨. 𝐨𝐟 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞 𝐔𝐬𝐞𝐫𝐬 𝐢𝐧 𝐲𝐞𝐚𝐫 (𝐭)
 No. of Smartphones sold in year (t) = + . No. of Smartphone Users in
𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐲𝐞𝐚𝐫 (𝐭)𝐚𝐧𝐝 (𝐭−𝟏) 𝐒𝐦𝐚𝐫𝐭𝐩𝐡𝐨𝐧𝐞 𝐂𝐡𝐚𝐧𝐠𝐢𝐧𝐠 𝐂𝐲𝐜𝐥𝐞
Vietnam from 2015 to 2018 is calculated with the assumptions that people with purchasing ability will own smartphones in
2018 (No. of Non-mobile phone users in Vietnam potential market size in 2018 = 0). The calculation resulted in about 47.78
million Smartphone Users (which is 70% of Total Mobile Phone Users) in 2018. According to IDC, Smartphone Users will
account for 78% of Mobile phone Users in 2018, therefore 70% Smartphone Users rate is a reasonable forecast for a developing
country with huge market demands like Vietnam.
From the historical data of Gfk, we calculated the Changing Cycle for Smartphones was 4.35 years in 2013, respectively.
Because of rapid decreasing rate of Average Selling Price of Smartphones in Vietnam, we have 2 assumptions: (1) Smartphone
Changing Cycle will gradually decrease and stabilize at 2 years from 2018 towards and (2) people will not replace their feature
phones with other feature phones as smartphones become great alternatives.
 % Market Shares of Smartphones in Vietnam are adjusted based on % Market Shares of Smartphones in the world which has a
similar trend. In 2018, we forecasted that Smartphones will account for 93% of mobile phone market shares in Vietnam.
Forecast of Revenue growth for mobile phones are finally derived as shown in the table below:
2,013 2014F 2015F 2016F 2017F 2018F
Vietnam - Total Population 89,710,000 91,421,835 92,918,333 94,431,143 95,960,442 97,506,411
Vietnam - Potential Market Size 61,510,648 63,446,388 64,113,650 66,101,800 67,172,310 68,254,488
Group 2: Smartphone Users 17,942,000 24,185,579 31,415,688 38,603,451 43,662,001 47,778,141
% Market Shares of Total Users 35% 42% 49% 58% 65% 70%
Smartphones - Changing Cycle (Years) 4.35 3.75 3.23 2.78 2.28 2.00
Smartphones - Total Units Sold 7,000,000 11,028,112 14,717,905 18,488,370 21,989,888 25,947,141
Smartphones - Average Selling Price (VND) 4,620,800 4,325,520 4,402,229 4,157,182 3,925,776 3,707,250
Smartphones - Total Revenues (VND Millions) 32,345,600 47,702,321 64,791,591 76,859,525 86,327,369 96,192,543
% Market Shares of Total Revenues 80% 87% 89% 91% 92% 93%
Mobile Phones - Total Revenues (VND Millions) 40,432,000 54,704,496 72,799,541 84,461,016.49 93,834,097 102,945,787
% YoY Growth 35.30% 33.08% 16.02% 11.10% 9.71%
CAGR (Compounded Annual Growth Rate) 2014-2018 17.12%

Sources: Bloomberg, IDC, Gfk, Google Report and Team estimates

2. REVENUE GROWTH FORECAST FOR INFORMATION TECHNOLOGY (IT) PRODUCTS (DESKTOP PCs, LAPTOPS & TABLETS):
Total sales of those products made up total IT spending of Vietnamese. Revenues of these products are correlated because they are
substitutes:
 Total IT spending is computed from data on revenue of PCs and tablets in 2012-2014 (Gfk report and team estimates). In 2014-
2018, based on ANZ’s forecast of 10% growth in national income per capita, we expect that in 2015-2016 IT spending growth rate
is 10% as IT products are normal goods, then in 2017-2018 it will slow down to 7% due to lower demand.
 Revenue of desktops is expected to decrease due to its obsolescence (IDC forecast), after the abnormal recovery in 2014 resulted
from Microsoft’s termination of Windows XP.
 Revenue of laptops is forecasted based on 2 components: (1) sales volume of laptops and (2) price of laptops, and which will
both decrease due to intense competition with tablets (Gartner report).
 Revenue of tablets is calculated after deducting Revenues of desktops and laptops from IT spending because (1) tablets are
substitutes to those PCs as the working devices and (2) only few Vietnamese have both tablet and PC due to limited incomes.
After the hot trend in the previous years, tablets will unfortunately exhibit a decrease in the revenue growth rate due to (1) lower
untapped demand and (2) longer renew cycle.
Forecast of Revenue growth for IT products are finally derived as shown in the table below:
IT GROUP 2012A 2013A 2014F 2015F 2016F 2017F 2018F
IT Group spending (VND Million) 24,569,714 26,609,000 32,729,070 36,001,977 39,602,175 43,562,392 47,918,631
IT Group growth rate - 8.30% 23.00% 10% 10% 10% 10%
DESKTOP PCS 2012A 2013A 2014F 2015F 2016F 2017F 2018F
Revenue of Desktop PCs 14,544,307 13,988,262 13,708,496 13,023,072 11,720,764 10,548,688 9,493,819
Revenue growth of Desktop PCs - -4% -2% -5% -10% -10% -10%
LAPTOPS 2012A 2013A 2014F 2015F 2016F 2017F 2018F
Sales volume units 707,342 753,028 774,828 813,569 854,248 879,875 906,272
Sales volume growth - 6.46% 2.89% 5% 5% 3% 3%
Average Selling Price (VND Million) 11.76 11.40 11.01 10.46 9.73 9.05 8.41
Price Change -3.06% -3.44% -5% -7% -7% -7%
Revenue of Laptops (VND Million) 8,320,000 8,586,000 8,530,254 8,508,928 8,308,968 7,959,161 7,624,080
Revenue growth of Laptops - 3.20% -0.65% -0.25% -2.35% -4.21% -4.21%
TABLETS 2012A 2013A 2014F 2015F 2016F 2017F 2018F
Sales volume units 149,862 499,040 1,457,870
Sales volume growth - 233.00% 192.13%
Average Selling Price (VND Million) 11.38 8.09 7.20
Price Change -29% -11%
Revenue of Tablets (VND Million) 1,705,407 4,034,738 10,490,320 14,469,977 19,572,442 25,054,543 30,800,732
Revenue growth of Tablets - 137% 160% 38% 35% 28% 23%

Sources: Bloomberg, IDC, Gfk, Google Report and Team estimates

3. REVENUE GROWTH FORECAST FOR CE&DA (CONSUMER ELECTRONICS & DOMESTIC APPLIANCES):
For the whole market, the growth of this sector is slowing down with 14.9% in 2013. It witnessed around 17.8% (21.4% and 14.8%
for CE and DA respectively) in first half of 2014 because of World Cup phenomena and Tet holiday. The highest growing segment was
TV sets with 30.7%, growth rate for whole year 2014 and later years will decline when World Cup is over (14% and falling slightly
afterward, BMI). Vietnam also has shown the strong demand for fridge and air-condition which increased by double-digit growth rate
(17%) and will remain until the end of the year. In total, growth rate of 2014 will be 16% and decrease to 13% in 2015 because of no
special events. In following years, due to effects of increasing competition and the fall in price, the growth rate will decline slightly to
11% in 2017 but in years of special event as in 2018, growth rate will increase by a small margin to reach 12%. Mature growth from
2020 will be at 9.6% as forecasted for the whole world (Bloomberg).
APPENDIX 6.3: C-SHOPS ANALYSIS

Urban in Rural in Rural in Rural in

2014 2014 2016 2018
Average expenditure for non- food goods/person (VND Million) 22.5 12.3
Average price (VND Million) 2.08 1.13 1 0.89
Area of store (m2) 125 50 50 50
Revenue per store (VND Million) 30,709 4200 6160 7615
No. of phone sold per store 14,799 3,702 6146 8598
Revenue per m2 (VND Million) 245.68 84 123 152
Profit Margin (%) 3.00% 3% 3% 3%
Profit (VND Million) 921 126 185 228
CAPEX (VND Million) 1500 400 400 400

Sources: Team estimates

People living in rural areas have price priority because of low income: they can only pay for smartphone under VND 2 million and
often buy used-phone sold in small local stores. Because of lower level of consumption and affordability, While each mature store of
MWJ has revenue of around VND 31 billion per year from selling phones, we estimate that each C-shop in rural areas in maturity stage
will generate VND 6.7 billion per year on average (VND 200-500,000 per month according to MWG) in 2014.
If MWG continues to open C-shops this year, these stores will generates GPM of 10-13%, lower than stores in urban areas because of
low consumption of accessories, which brings the highest GPM. SG&A expenses will also be higher because of undeveloped platform
for construction and transportation. We expect only NPM of 3% for C-shop stores. With a profit of around VND 200 million, a C-shop
store will need more than 3 years to recover CAPEX of around VND 400 million, while it is less than 2 years for a store in urban area.
MWG announced the the plan of capturing around 50% market share of rural area by opening 700-1,000 C-shops in 2 years. In reality,
this year, expansion plan to rural areas is still in testing process and there has been only 5 C-shops opened. Along with our analysis
above showing low profitability and longer payback period, this reflects the difficultties in accelarating the plan in near furture so we
believe that the plan can only continue in the next 2 years (starting from 2016) after finishing expansion plan in urban area and
figuring out the right way to make rural stores reach expected level of NPM as high as established stores in urban area. The rate of
opening will also be slower so MWG will complete the plan in 3 years to be conservative.
In 2018, the ambitous plan of gaining 50% market share of rural area is quite achievable by opening 850 C-shops, which will help
MWG sell around 7 million phones (8598 phones/mature shop) and generate around VND4.85 billion equivalent to 8% of revenue in
2018.
APPENDIX 7: DISCOUNTED CASHFLOW METHOD (DCFM)
APPENDIX 7.1 WACC COMPUTATION APPENDIX 7.2 BETA COMPUTATION

Leveraged Unleveraged
WACC COMPUTATION Company D/E Ratio Tax rate
Beta beta
Variable Value Explanation Erajaya Swasembada (ERAA) 1.84 62.9% 25.0% 1.25
Risk free rate (RFR) 6.35% 31 Oct 2014 10-years Government Bond Tiphone Mobile (TELE) 0.95 98.3% 25.0% 0.55
Trikomsel Oke (TRIO) 1.08 268.9% 25.0% 0.36
Current risk premium for
5.00% Yay Mart PCL (JMART) 1.00 135.5% 20.0% 0.48
mature equity market
Moblie World Group (MWG) 0.7543 60.2% 22.0% 0.51
According to estimates of Professor A. Damodaran in
Country risk premium for
11.06% 2014. Sources: Team estimates
Vietnam
Equity Risk Premium for
Formula:
16.06% Unleveraged beta = Leveraged beta/[1+(1 - tax rate)*D/E]
Vietnam (ERP)
MWG Beta is estimated by computing unleveraged beta of
each peer. Then, we use peer median of 4 unleveraged
Raw Beta 0.75 Unleveraged beta of MWG is assumed to equal the
betas as MWG unleveraged beta to compute MWG
leveraged beta. median of 4 peer unleverage betas.
Adjusted beta 0.84 Adjused beta = Raw beta * 2/3 + 1/3
Cost of equity (Ke) 19.78% Using CAPM formula, Ke = RFR + adjusted beta*ERP
MWG's debt has maturity of 1-3 months. MWG cost of
debt equal Current depossit interest rate for 1-3 months
Cost of debt (Kd) 8.00% term ( 5%) plus Average NIM of commercial bank (3%).
Note: NIM is Net interest margin, the difference between
interest rate bank charge for loans and deposits.
From 2016, Tax rate will be reduce to 20% applied for
Marginal tax rate (T) 20.00% medium and large firm, according to Circular issued by
Industrial and Commercial Ministry in 2014.
After-tax cost of debt 6.40% After-tax cost of debt = Kd*(1-T)
Weight of equity (We) 66.67% We = 1 - Wd
Wd is computed from MWG targeted D/E ratio of 50%,
Weight of debt (Wd) 33.33% which is assumed to equal company's D/E ratio at the end
of 2020, the last year in forecast period.
WACC 15.32% WACC = Ke*We+(1-T)*Kd*Wd

Sources: Team estimates

APPENDIX 7.3 FORECAST OF FREE CASH FLOW TO FIRM (FCFF)
Components 2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Period - 0.17 1.17 2.17 3.17 4.17 5.17 6.17
WACC - 15.50% 15.50% 15.50% 15.50% 15.50% 15.50% 15.50%
CFO 103,930 124,252 571,127 1,007,377 1,752,041 2,288,844 2,914,855 3,105,554
CAPEX (137,616) (239,936) (164,962) (296,754) (218,758) (200,916) (128,204) (150,058)
Interest expense after tax 20,132 37,638 63,747 111,261 142,360 186,131 201,643 230,757
FCFF (13,554) (78,046) 469,912 821,885 1,675,643 2,274,059 2,988,295 3,186,253
Growth rate of FCFF - - - 75% 104% 36% 31% 6.62%
Discounted factor of FCFF - 98% 85% 73% 63% 55% 47% 41%
PV of FCFF - (76,194) 397,200 601,488 1,061,745 1,247,565 1,419,409 1,310,349
Sources: Team estimates
APPENDIX 7.4 TERMINAL VALUE ASSUMPTION APPENDIX 7.5 NET DEBT
FCFF COMPUTATION NET DEBT COMPUTATION
Approach used Perpetuity Components QII/2014
FCFF Terminal Growth rate 3.06% Debt 241,912
Cost of capital (WACC) 15.32% Prefered stock -
FCF in last forecast period (2020) 3,186,253
Cash and Cash
FCF in the year 2021 3,283,879 equivalent 303,111

Terminal value at 2020 (mil VND) 26,794,018 Net debt -61,199

Number of period 6.17 Sources: Team estimates
Present value of Terminal value 11,124,798
Sum of Present value of FCFF 2014-2020 6,001,554
Enterprise value (mil VND) 17,126,351
Net debt (61,199)
Equity value 17,187,550
Number of outstanding shares 106,623,809
Equity value per share (VND) 161,198

Sources: Team estimates

APPENDIX 8: CAPEX FORECAST
2014
In VND Millions 2014F 2015F 2016F 2017F 2018F 2019F 2020F
QI-IIA
Cash from buying Assets -58,718 -241,936 -167,082 -299,011 -221,174 -203,501 -130,970 -153,018
Cash from selling Assets 1,047 2,000 2,120 2,258 2,416 2,585 2,766 2,960
CAPEX -57,671 -239,936 -164,962 -296,754 -218,758 -200,916 -128,204 -150,058
Inflation Rate 1.80% 5.50% 6.00% 6.50% 7.00% 7.00% 7.00% 7.00%
CAPEX of a new m2 store MWG 12.00 - - - - - - -
Number of New Mobile World's Normal Stores 30 119 35 30 0 0 0 0
Number of New Mobile World's Flagship Stores 0 2 4 3 0 0 0 0
Number of New Mobile World's C-Shop - - - 300 300 250 0 0
Number of New Consumer Electronics' Stores 0 6 14 14 6 0 0 0
CAPEX for opening New stores MWG 45,000 214,500 138,000 251,000 153,000 100,000 0 0
CAPEX for maintaining business 13,718 27,436 29,082 48,011 68,174 103,501 130,970 153,018
Total m2 mature stores MWG 39,400 39,400 39,400 61,075 81,050 115,000 136,000 148,500
CAPEX for maintaining a m2 of business 0.35 0.70 0.74 0.79 0.84 0.90 0.96 1.03

Sources: MWG Propectus and Team estimates

Explanation: CAPEX for maintaining 1 m2 of stores each year was computed based on the released data of the first half of 2014 and is
forecasted to increase because of inflation. We assumed that new stores and immature stores do not need CAPEX for maintenance,
which is buying new equipments or store repairment. Based on MWG Propectus and information collected from MWG Investor
Relations Manager, we estimated the number of new stores:
 MWJ plans to open 184 new normal stores and 9 flagship stores in urban areas from 2014 to 2016. In 2016, the total number of
normal stores will be 400 and flagship stores will be 10. MWG is also expected to open 850 C-shops in rural areas in 2016-2018
period, after they complete the testing period which is conducted from 2014.
 EWJ could not complete the plan of opening 12 stores in 2014 with current speed. MWG has just opened only 3 EWJ stores after
10 months of 2014. However, we expect MWG will speed up the openings of new EWJ stores in 2015 and 2016. Number of EWJ’s
stores will reach 52 at 2017.
The amount of CAPEX for each new store is taken from MWG Prospectus, except CAPEX for new C-Shop (estimated to be VND 400
million per store, considering the differences in store area and the rents between urban and rural areas).
CAPEX per store (VND Million)
Mobile World JSC Normal store (125 m2) 1,500
Mobile World JSC Flagship store (400 m2) 3,000
Mobile World JSC C-Shop (50 m2) 400
Electronic World JSC store (1000 m2) 5,000-5,500
Sources: MWG Propectus and Team estimates
CAPEX Forecast is finally derived, using this formula:

𝐂𝐀𝐏𝐄𝐗 𝐟𝐨𝐫 𝐨𝐧𝐞 𝐍𝐮𝐦𝐛𝐞𝐫 𝐨𝐟 𝐂𝐀𝐏𝐄𝐗 𝐟𝐨𝐫 𝐓𝐨𝐭𝐚𝐥 𝐀𝐫𝐞𝐚𝐬 𝐨𝐟

Total CAPEX = ∗ + ∗
𝐜𝐥𝐚𝐬𝐬𝐢𝐟𝐢𝐞𝐝 𝐧𝐞𝐰 𝐬𝐭𝐨𝐫𝐞 𝐜𝐥𝐚𝐬𝐬𝐢𝐟𝐢𝐞𝐝 𝐧𝐞𝐰 𝐬𝐭𝐨𝐫𝐞 𝐦𝐚𝐢𝐧𝐭𝐞𝐧𝐚𝐧𝐜𝐞 𝐩𝐞𝐫 𝐦𝟐 𝐌𝐖𝐆′𝐬 𝐦𝐚𝐭𝐮𝐫𝐞 𝐬𝐭𝐨𝐫𝐞𝐬

(Classified store: Stores that fall into one of 4 types: MWJ normal store, MWJ flagship store, C-shop, EWJ store)
APPENDIX 9: OTHER VALUATION ASSUMPTIONS
VALUATION ASSUMPTIONS
ITEMS 2010A 2011A 2012A 2013A 2014F 2015F 2016F 2017F 2018F 2019F 2020F
OPERATING ASSUMPTIONS
Revenue Growth 43.71% 91.28% 36.89% 28.80% 68.05% 79.04% 44.46% 29.05% 19.05% 12.58% 6.54%
COGS Margin 81.95% 82.26% 83.80% 85.18% 84.70% 84.60% 84.50% 84.40% 84.30% 84.20% 84.20%
Gross Profit Margin 18.05% 17.74% 16.20% 14.82% 15.30% 15.40% 15.50% 15.60% 15.70% 15.80% 15.80%
SG&A Margin (included D&A) 12.48% 13.50% 13.26% 11.17% 10.20% 10.30% 10.40% 10.50% 10.50% 10.50% 10.50%
Interest expense/Average Debt 14.39% 13.88% 16.19% 5.94% 7.00% 7.00% 8.00% 8.00% 9.00% 9.00% 10.0%
D&A as % of Fixed Asset prior year - 34% 24% 31% 29.84% 29.84% 29.84% 29.84% 29.84% 29.84% 29.84%
Tax Rate 25% 25.00% 25.00% 25% 22.00% 22.00% 20.00% 20.00% 20.00% 20.00% 20.00%
WORKING CAPITAL ASSUMPTIONS
Receivable Turnover 28.89 32.52 40.82 46.66 50.00 54.00 56.00 58.00 59.00 60.00 60.00
Inventory Turnover 8.74 7.28 6.76 7.22 8.30 9.80 9.60 9.70 10.20 10.50 10.50
Account Payable Turnover 12.62 10.21 9.46 13.05 17.20 21.50 20.80 21.50 24.00 25.40 25.40
CAPITAL STRUCTURE ASSUMPTIONS
Short-term Borrowings 3.30% 5.56% 5.31% 5.40% 5.42% 5.14% 4.86% 4.58% 4.30% 4.02% 3.81%
Dividend Payout Ratio 0.00% 0.00% 0.00% 0.00% 0.00% 50.00% 60.00% 60.00% 70.00% 70.00% 80.00%
Debt/Equity Ratio 65.90% 100.86% 85.84% 64.13% 60.20% 73.50% 75.50% 69.55% 63.75% 55.59% 50.00%
Target Debt/Equity Ratio 50.00%
 ASSUMPTIONS EXPLANATION
ITEMS EXPLANATION
SG&A Margin SG&A expense is expected to increase sharply in the last 6 months of 2014 compared to the first 2 quarters
because of increasing marketing and labor expense for the ambitious expansion plan which will open 1 MWJ
stores each 2 days and 12 EWJ stores. Moreover, MWG has to pay huge bonuses package for BOD member due
to the performance that exceeds the target profit. In conservative view about MWG increasing scale, we
suppose SG&A margin will increase 0.1% each year before remaining at 10.5% from 2018.
D&A (Depeciation
D&A is computed based on historical average percentage of prior year fixed asset.
and Amortization)
Interest expenses Interest expense is calculated based on expected % Interest expense/Average Debt, considering the company
strategy on debt management, current and future trend of interest rate.
Tax rate According to government regulation on corporate income tax.
Inventories Inventories is calculated by forecasting Inventories Turnover Ratio.
Short-term
Account Short-term account receivable is calculated by forecasting Receivables Turnover Ratio.
Receivable
Short-term Short-term borrowing is forecasted as percentage of revenue. This percentage is expected to decrease year by
Borrowings year when MWG financial position improve in the future. However, short-term debt still play an important role
in financial management because it can reduce the company cost of capital.
Account Payble Account Payble is calculated by forecasting Payble Turnover Ratio.
Fixed asset Fixed asset is calculated using formula: Fixed asset of year t = Fixed asset of year (t-1) + Cash from buying
asset of year t – D&A of year t – Cash from selling asset of year t
Dividend payout Cash dividend is paid from 2015 with payout ratio of 50% Net Income due to strong position of cash, and then
ratio increase in the following year, reach 80% in 2020. Then, dividend payout ratio is expected to remain constant
at 80% in residual to keep MWG grow at 3.06%, based on our method of terminal growth rate computation
Other accounts Prepaid expense: as % of COGS
Financial Income: as % of Revenue
Other income/loss: as % of Revenue
Profit for minority shareholder: as % of Earning after tax
Other current asset: as % of Revenue
Other non-current asset: as % of Total non-current assets
Unearned Revenue: as % of Revenue
Salary payable: as % of Revenue
Accrual expense: as % of Revenue
Other current liabilities: as % of Revenue

Forecast of Operating Ratios:

Receivables Turnover: Supported by the clear historical increasing trend and discouraged policies of install payments, Receivable
Turnover is expected to improve in the forecast period. The reason is that the total amount of Account Receivable ranges from 2.5-4%
of Revenues, but only 0.5% is receivable from buyers, other components are advanced payments from suppliers and receivable from
employees which are not closely depend on revenue, leads to the lower rate of receivable growth than revenue growth. Thus, the Days
Sales Outstanding decreases to 6.08 days when Receivable Turnover stay at 60 times in 2020.
Inventories Turnover: Inventory increases along with larger volume orders and the massive expansion of stores system from 2014
to 2018, but at the lower rate than growth of COGS (Cost of Goods Sold) due to the widening appearance of MWG and the growth of
market demand, which give MWG the flexibility in Inventory management.
MWG has completely freed its slow-selling inventory in 2013, which resulted in the improvement of Inventory Turnover compared to
2013. Since 2016, when MWG start opening C-shop at rural areas, company has to buy more inventories to avoid out of stock then
Inventory turnover will decrease slightly. In 2018 and 2019, it increases back again when MWG finish opening new stores and then
remain the same in 2020.
Payable Turnover: The decline of DSO (Days of Sales Outstanding) and DOH (Days of Inventory on Hand) enabled MWG to improve
its Operating Cycle. The faster company collects cash since their purchase, the sooner they get enough cash to pay supplier in order to
receive deeper payment discount, while still remaining Cash Conversion Cycle. Therefore, the Payable Turnover is expected to
increase most of the year in forecasted period.
APPENDIX 10.1: MULTIPLE PRICING METHOD (MPM)
October 31, 2014 P/E EV/EBITDA
CAGR Net Net income
Market Cap Revenue 2013 P/E P/E EV/EBITDA EV/EBITDA
Company Country ROE 2013 Income growth rate
(mnUSD) (mnUSD) trailing forward trailing forward
2010-2013 2014F
Erajaya Swasembada (ERAA) Indonesia 245 1212.5 13.1% 15.3% -6.7% 8.88 9.31 7.61 7.69
Tiphone Mobile (TELE) Indonesia 539 310.9 23.7% 35.1% 30.1% 15.20 13.21 14.53 11.92
Trikomsel Oke (TRIO) Indonesia 497 998.9 26.0% 61.1% 6.0% 14.37 11.32 14.34 13.10
Yay Mart PCL (JMART) Thailand 220 987.6 24.0% 70.9% 6.2% 17.84 14.92 14.51 14.19
Peer median 371 993.25 23.8% 48.1% 6.1% 14.79 12.27 14.43 12.51
Moblie World Group (MWG) Vietnam 530 446.3 40.7% 32.4% 114% 22.63 18.07 16.12 12.68

Sources: Bloomberg and Team estimates

APPENDIX 10.2: MARKET CAPITALIZATION & REVENUES APPENDIX 10.3: RETURN ON EQUITY
OF MWG AND PEERS IN 2013 (USD MILLION) OF MWG AND PEERS (%)

Sources: Team estimates

Sources: Team estimates
APPENDIX 10.4: P/E MULTIPLIERS APPENDIX 10.5: EV/EBITDA MULTIPLIERS

P/E Trailing Forward EV/EBITDA Trailing Forward

Target P/E 14.79 12.27 Target EV/EBITDA 14.43 12.51
EBITDA 704,760 896,165
EPS 4,667 5,875
EV 10,167,199 11,208,215
Price from P/E 69,003 72,071 Net debt (61,199) 373,365
Weight for year 30% 70% Equity value 10,228,397.53 10,834,850
Target Price VND 71,151 Number of
106,479,273 106,623,809
outstanding shares
Equity value per share 96,060 101,618
Weight for year 30% 70%
Target Price VND 99,950

Sources: Team estimates Sources: Team estimates

APPENDIX 10.5: TARGETED PRICE FOR MPM
Method P/E EV/EBITDA
Price VND 71,151 VND 99,950
Weight for method 50% 50%
Target Price for Multiples Method VND 85,551

Sources: Team estimates

APPENDIX 11: CORPORATE GOVERNANCE

Firstly, we assess MWG’s Corporate Governance (CG) on 5 criteria in OECD’s Principles of CG, and we will base on those Principles to
evaluate the quality of MWG’s CG.

1. The Rights of Shareholders and Key Ownership Functions: We assess that most of shareholders’ rights are guaranteed under
MWG’s CG:
 Basic shareholder rights are protected and facilitated: Shareholders have available access to material information from
Company Charter, Code of CG, and Prospectus as well as annual/quarterly Financial Statements, Governance Reports, and
Resolutions of Shareholder Meeting, which are provided on a regular and timely basis.
 The rights of shareholders in General Meeting are guaranteed: Sufficient information about place, time, issues to be
decided, rules of the meeting and voting procedures is provided well before the meeting. Shareholders have the right to vote,
ask questions as well as raise their opinions or objection to the propose resolutions. Questions of shareholders in the meeting
are respected and written in the meeting minutes.
 Shareholders can participate effectively in key CG decisions: Dividend policy is transparent and legally enforced by
shareholder voting. There is fair treatment in the acquisition of new share dividend. Shareholders can vote and raise their
opinions about the remuneration policy for key personnel.
2. The Equitable Treatment of Shareholders: MWG’s CG pays attention to maintain equitable rights of shareholders and protect
minority shareholders’ rights, even though there are several limitations:
 Equitable rights: MWG recognizes equitable rights and benefits of every class of shares. Any preferred stocks or rights must
be approved by the shareholder meeting.
 Mechanism to protect minority shareholders’ rights: Nomination right is ensured: Group of individual investors
holding over 5% of shares can nominate BOD members. Large shareholders cannot abuse their advantages to harm other
shareholders’ benefits. However, practical actions to protect minority shareholder interest are not clear.
 Related-party transactions are publicized by documents to shareholders. Any transactions potentially damaging company
benefits are prevented. However, there is not clear whether BOD needs to seek shareholders’ approval for large transactions.
3. The Role of Stakeholders in CG: MWG recognizes the rights and important roles of stakeholders to its business:
 The company respects legal rights of stakeholders including banks, debtors, employees, consumers, suppliers, community and
others who have related benefits to MWG. The company also cooperates actively with banks, debtors and suppliers. It provides
information about business performance, financial situation. MWG encourages those stakeholders’ perspective about the
business and other important decisions.
 MWG also pays attention to employees and strives for the coherence between company and employee interest. The company
provides incentives for employees such as equity plan, pension plan, staff training, and safety and welfare.
4. Disclosure and Transparency: Various types of documents provide insights into company’s business and CG:
 MWG provides financial reports and CG report on half-year and full-year basis. While the financial reports provide a whole
picture of company business, the half-year CG report is lack of material information about performance of Supervisory Board
and independent directors.
 Company website for disseminating information provides equal, timely and available access to relevant information.
5. The Responsibilities of the Board: BOD, BOM and Supervisory Board fulfill their main responsibilities. However, there are
problems of separation of management and ownership and lacking independent directors.
 BOD and BOM: BOD includes eight members. BOM has three members, but two out of three members concurrently hold
director and manager positions, which may trigger conflict of interest.
 Responsibilities of the board includes business plan and management; establishing nominating and voting procedures for
new BOD members; and developing remuneration policy for board members and key personnel.
 Competence of board members: There is sufficient information about board members including their competence and
concurrent positions in other companies. Members of BOD and BOM also have much knowledge and experience to ensure
efficient management for company’s business and CG. Especially, Chairman/CEO, Mr. Nguyen Duc Tai, has strong commitment
and tight connection with the company. He also possesses strong expertise and rich business experiences. He applies high
ethical standards.
 Supervisory Board is established to monitor board performance with three members, one of which is independent. However,
other members were BOD members in the recent one year, which may affect the independence of their monitoring and
judgment over the BOD’s performance.
 Remuneration: Board members’ remuneration is tied with long-term interests of the company and its shareholders because
the remuneration for efficient management is company’s stocks.
 Separation of management and ownership: The separation is not guaranteed as Mr. Nguyen Duc Tai is holding both
Chairman and CEO positions, starting from 17th May, 2014 due to Mr. Tran Le Quan’s resignation. This may engender potential
conflicts of interest. However, being a significant minority shareholder, he cannot influence the decisions of shareholders.
 Moreover, with 10 years of dedication to MWG’s success as well as the strong commitment to protect interests of shareholders
and employees, Mr. Tai will act on the long-term interests of shareholders
 Independent directors: Currently, there is only 1 independent director in the BOD, which does not meet the Ministry of
Finance’s regulations on CG ruling at least a third of BOD is independent directors. This reduces the level of independent and
objective decisions about corporate manners as well as the objective judgment on the performance of the board and
management.

Table: MWG’s Corporate Governance score Figure: IFC’s weights on 5 CG Criteria

Source: Team estimates Source: IFC

We assess the overall quality of MWG’s CG by scoring the five criteria above. The weight for each criterion is based on the 2012
Corporate Governance Scorecard of International Finance Corporation (IFC). Maximum point for each criterion is 100.

MWG’s final score is 54.6 over 100, which is much higher than the average score of 42.5 of 100 listed companies (with market
capitalization making up 80% of HOSE’s market capitalization). MWG’s score is also higher than its competitor – FPT (47.6) – and
other 4 technology companies (38.9). Thus, we reckon that MWG’s corporate governance is relatively good as compared to the
market. However, according to OECD’s CG score range as shown in table below, MWG’s corporate governance needs considerable
improvement to meet international standards. We believe that after IPO the CG system will further be improved to attract new
investors.

Score range Quality classification

<50 N/A
50-59 Pass
60-69 Satisfactory
70-79 Good
80-89 Very good
90-100 Excellent
Source: www.oecd.org
APPENDIX 12: INVESMENT MATRIX RISK

Sources: Team estimates

APPENDIX 13: MWG’S KEY PERSONNEL
Name/Title Qualifications and Other Work Other Relations
BOD
· Bachelor degree of Finance and Accounting, University of Economics, Ho Chi
Nguyen Duc Tai
Minh City
Chairman & CEO - Founder · MBA at CFVG
Holding 1.93% shares · Head of Strategic Development department of S-Fone Family holds 1.4%
1
· BOD member of MWJ · Business & Marketing Director of MWJ shares in MWG
· Chairman of BOD of EWJ
· BOD member of Retail World Investment
Advisory Ltd, Co, holding 14.49% shares in MWG
Tran Kinh Doanh · Bachelor degree of Economics, University of Economics, Ho Chi Minh City
Member –Founder · Sale Director of the South of Lavie Vietnam Ltd, Co
2
Holding 0.68% shares · Sale Director of URC Vietnam Ltd, Co
· CEO of MWJ.
Dang Minh Luom · Bachelor degree of Business Administration
Member · Head of Human Resource Department of Huu Nghi and Nutifood Companies
3
Holding 0.19% shares
· Head of MWG’s Human Resource Department
Tran Le Quan · Bachelor Degree
Member –Founder · Manager of Repairing and Warranty Department of Sony Ericsson
Holding 1.25% · CEO of ANBA Warranty Company of Sony Ericsson Family holds
4 · Chairman of BOD of MWJ 1.22% shares in
· BOD member of EWJ MWG
· Chairman of BOD of Tri Tam Ltd. which hold
10.87% shares
· Bachelor Degree of Information Technology of University of Natural Sciences,
Dieu Chinh Hai Trieu
Ho Chi Minh City
Member – Founder · Technology Director of MWJ and MWG
Family holds
Holding 1.01% shares · CEO of Thien Ma, one-member Import and Export Company
5 1.03% shares in
· BOD member of MWJ
MWG
· BOD member of EWJ
· Director of Son Ban Ltd, Co, holding 3.04% shares
in MWG
Christopher E. Freund · Bachelor Degree
Member · Investment management expert in Templeton Fund Vietnam and Singapore
6 · CEO of Mekong Capital Ltd. holding 14.32% · Portfolio Management Director and Vice President of Templeton Assets
shares in MWG Management Ltd
· Member of BOD of Minh Hoang JSC
Robert Alan Willett · Bachelor Degree
· Executive Vice President and then CEO and Information Technology Director
Member – Independent Director
of Best Buy International
7
· Chairman of 5 companies: MetaPack, Occa Home and Eagle Eyes Solution
Holding 0.20% shares
Group PLC (Europe), iCelero and Reunify (USA)
· Advisory of BOD of Sabanci Holdings (Turkey)
Thomas Lanyi · Bachelor Degree
Member · Director of Templeton Assets Management Ltd
8
· Authorized representative of CDH Electric Bee · Director of Mekong Capital Ltd
Limited holding 15.84% shares · Director of CDH Investment Advisory Pte Ltd
BOM
Nguyen Duc Tai
1 · As mentioned As mentioned
CEO
Vu Dang Linh · Bachelor degree
2 Financial Director · Chief Accountant of 4 companies: Vinagal, Steel Joint Venture Company,
Holding 0.17% shares Trimax Delivery Joint Venture Company, and Newviet Dairy
Dieu Chinh Hai Trieu
3 Technology Director · As mentioned As mentioned
Holding 1.01% shares
SUPERVISORY BOARD
Tran Huy Thanh Tung · Bachelor degree
Head of Supervisory Board · Chief Accountant of Mabuchi Moto Vietnam Ltd, Co
Family holds
Hold 1.28% shares · Financial Director of MWJ
1 0.64% shares in
· BOD member of MWJ
MWG
· BOD member of EWJ
· Director of Tran Huy Advisory Ltd, Co, holding
3.04% shares in MWG
Hoang Xuan Thang · Bachelor Degree
Member · Head of Supply Chain and Marketing Department of MWJ
2
Holding 0.05% shares
· Head of Internal Control Department of MWJ
Nguyen Khanh Van · Bachelor degree
Member - Independent · Finance Master, Houston University, USA
3 · ACCA qualification
· Audit and Advisory at PriceWaterHouseCoopers Ltd, Co
· Investment Advisory at Mekong Capital Ltd, Co

Sources: MWG Prospectus

APPENDIX 14: SENSITIVITY ANAYLYSIS
We use Sensitivity Analysis to mesure the change in the value of MWG’s share when we change one or two important
input which are most likely to have biases.
APPENDIX 13.1: Target D/E Ratio and GPM sensitivity
In VND TARGET D/E
138,504 35% 40% 45% 50% 55% 60% 65%
12.30% 48,077 49,333 50,559 51,757 52,927 54,070 55,187
13.30% 75,131 77,023 78,870 80,673 82,433 84,151 85,828
14.30% 102,184 104,713 107,181 109,588 111,938 114,231 116,469
GPM 15.30% 129,238 132,404 135,491 138,504 141,443 144,311 147,110
16.30% 156,292 160,094 163,802 167,419 170,948 174,391 177,752
17.30% 183,345 187,784 192,113 196,335 200,453 204,472 208,393
18.30% 210,399 215,474 220,423 225,250 229,959 234,552 239,034
Sources: Team estimates.
APPENDIX 13.2: Interest expense/debt ratio and SG&A Margin sensitivity
In VND INTEREST EXPENSE / DEBT
138,504 4% 5% 6% 7% 8% 9% 10%
7.20% 206,430 206,513 206,597 206,683 206,769 206,857 206,947
8.20% 183,921 184,017 184,114 184,213 184,314 184,416 184,520
9.20% 161,181 161,292 161,405 161,520 161,637 161,756 161,877
SG&A
10.20% 138,110 138,239 138,370 138,504 138,640 138,779 138,920
MARGIN
11.20% 114,541 114,690 114,842 114,998 115,156 115,318 115,483
12.20% 90,171 90,342 90,517 90,696 90,880 91,068 91,261
13.20% 64,391 64,581 64,776 64,978 65,185 65,398 65,618
Sources: Team estimates.
APPENDIX 13.3: Cost of equity and FCFF terminal growth rate sensitivity
In VND COST OF EQUITY
138,504 16.78% 17.78% 18.78% 19.78% 20.78% 21.78% 22.78%
0.06% 141,604 134,566 128,206 122,434 117,175 112,367 107,956
1.06% 148,352 140,477 133,411 127,039 121,267 116,016 111,223
FCFF
2.06% 156,299 147,381 139,444 132,339 125,946 120,166 114,918
TERMINAL
3.06% 165,796 155,548 146,517 138,504 131,349 124,926 119,132
GROWTH
4.06% 177,344 165,361 154,926 145,764 137,659 130,443 123,981
RATE 5.06% 191,691 177,374 165,090 154,440 145,125 136,912 129,622
6.06% 209,992 192,420 177,620 164,991 154,094 144,603 136,265
Sources: Team estimates.
Explaination: We conduct 3 Sensitivity analysis tables, these lead us to the following conclusions:
 GPM has the largest impact on the valuation result, MWG share price varies from VND51,757to VND225,250 when the
forecasted GPM increase from 11.3% to 18.3%. This can be explained by the unique characteristics of Retail Industry,
in which a small change in GPM can lead to a significant change in the company profitability.
 SG&A margin has a large effect in share price because it accounts for a significant weight in cost structure. Therefore,
the rise of SG&A margin could strongly decrease company net profit and share value.
 Both Cost of equity and FCFF terminal growth rate have quite significant effect on the share value. However, in the
worst case of these two factors as in APPENDIX 13.3, DCF Model still shows us the undervalued MWG share price,
compared with market price.
 The assumption of Target D/E ratio does not affect too much in our valuation. Share price just change in a small
amount each time target D/E ratio change 5%.
 Interest expense/Debt ratio has nearly zero effect on valuation result, due to low short-term debt strategy of MWG.
We conclude that GPM and SG&A margin are two most sensitive factors in our DCF valuation, which can lead to huge
changes in targeted price. Therefore, the success of MWG and the value of MWG share will depend significantly on how
well the firm control (1) COGS, Inventories and relationships with suppliers to have a good GPM and (2) Selling and
administrative expenses, especially when MWG has larger business scale.
Disclosures:
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