MASAN

MEMBER

Bi Thi Dim Thu

Dng Th Hin Trang
Nguyn Qunh Trang
V c Tr
Bi Thanh Xun

OUTLINE
1.
2.
3.
4.
5.
6.

INTRODUCTION
RISK PROFILE
COST OF CAPITAL
OPTIMAL CAPITAL STRUCTURE
DIVIDEND POLICY
CONCLUSION

INTRODUCTION

Nguyn Qunh Trang

Masan Group Corporation

(HOSE: MSN)
was founded in 1996 and is headquartered in Ho Chi Minh
city.
Its subsidiaries include Masan Food (consumer
staples),Techcombank (financial services) and Masan
Resources (mining). The group launched on the Ho Chi
Minh Stock Exchange on 5 November 2009
Masan manufacture and distribute a range of food and
beverage products.
Nguyn Qunh Trang

Risk Profile

V c Tr

Risk Profile
Financial Risk:
+ Liquidity risk
. Probability: The current ratio (a liquidity ratio) that measures a company's
ability to pay short-term and long-term obligations declined significantly from 345.9 to
139.26 in the period between 2011 and 2014.
. Impact: The companys ability to pay short-term debts is not stable longterm strategies and financial position will be affected directly.
+ Market risk
. Probability: the company cannot guarantee to maintain the competitive
advantages at the present and in the future because Masan Group will compete with
some domestic and foreign companies in the same target with directly competitive
strategies in the corporation and in each subsidiary. Moreover, Masan Food also have
trouble in building brands image, goodwill, pricing, distribution systems and the
diversity of products.
. Impact: Competition may lead to an increase in advertising costs and
promotion activities or policies made unfair price competition These costs can be
reduced margins and made negatively impact on the business activities.
V c Tr

+ Interest rate risk

. Probability: Masan Company and subsidiary have many long-term loans with
mostly floating rate. Hence the business results of these companies have a lot of
interest rate risk. In case of large-scale debt, when interest rates rise, the cost of
borrowing for the Masan Group (MSN) will rise significantly that means pre-tax profit
of the Group will be reduced correspondingly.
. Impact: Interest rate and foreign exchange rate risk may cause Masan
Groups interest expense and financial expense increase which affect directly to the
effectiveness of profit because interest rate and currency are not be able to predict in
the future and these are potential risk can cause loss for the Group and the Company.
+ Credit risk
. Probability: Credit risk is the risk of loss of principal or loss of a financial
reward if a customer or counter party fails to repay a loan or does not meet
contractual obligations to the Group and company, and mainly arises from the
account receivables and other receivables.
. Impact: Accounts receivable increase sharply, 15.5% (from 314,209 to
5,176,907) the Group must prepare allowance for doubtful debts for trade and
other receivables the Masan group and the Company manage this provision
inappropriately.
V c Tr

 Non-Financial risk
+ Business risk
. Probability: Business risk is the risk that relates to a characteristic activity of the
Group and the Company. Masan consumer has been core business of the Masan Group.
. Impact: Masan consumer run FMCG product, but there have been a lot of foreign
companies investing into FMCG. In addition, these companies are highly competitive price
and cost. Masan consumer will face with the volatility of price and input cost leading to the
increase in the price of product and packaging price negative financial situation and
revenue.
+ Strategic risk
. Probability: The uncertainty in the assessment of value, power, potential
profitability as well as determine the weaknesses, risks, unpredicted factors and legal
responsibility of target companies. The Masan Groups strategy is M&A and the expansion
the market shares through its subsidiaries. Unanticipated changes in business activities,
industry economic conditions affecting to the assumption in the analysis and valuation M&A.
. Impact: Techcombank is a joint company of Masan Group, so Techcombanks
activities is out of controlling to Masan Group. Therefore, if Techcombanks activities has
problem, it may cause negatively to Masan Groups financial situation.
Masan Food extend its market share through FMCG products (fish sauce, soya sauce, instant
noodles etc). Masan Food may face with the failure in strategic extension toV
new
market
c
Tr
leading to the influence on revenues, business outcome and the companys prospect.

+ Reputation risk

. Probability: Reputation risk is the risk that threatens the Group and the
Companys fame. Reputational risk may occur in many ways such as the actions of
the Group and the Company directly affect, the behaviors of employees indirectly
happen. In addition, joint venture partners or suppliers are also considered the
primary factors that affect to the reputation of company.
. Impact: Masan food can be faced with customers accusations related to
food safety hygiene problem, and litigation costs certainly arise leading to the
reduction in Masans rate of return. In addition, the Masan foods business
operation can be seriously affect from the information published publicly on
industry reports or health research reports which contain negative information
relating to Masans products. Such adverse information would reduce the
consumption of Masans products in short-term, long-term. Certainly, it will
severely the Masan Groups reputation.

V c Tr

COST OF
CAPITAL

Bi Th Dim

COST OF CAPITAL
Cost of equity : CAPM model
Re= Rf + *(Rm- Rf) = 7% + 0.898*(8.19% -7%)= 8.07%

Cost of debt:
Cost of debts=Percentages of loans (over total debt)
Rd1(borrowing)+Percentages of bonds(over total
debt)Rd2(bonds)
=19.06% x 6%+80.94% x 8.35%=7.9%

Bi Th Dim

COST OF CAPITAL
Cost of capital
WACC= E/(D+E)Re + D/(D+E)Rd(1-Tc)
=63.55%8.07%+37.45%7.9%1-25.3%=7.3%
-> the cost of capital would be used to discount futurecash
flow from potential projects and other opportunities
->should financing track to follow a combination of the
debt and equity

Bi Th Dim

Optimal capital
structure
MASAN GROUP

Bi Thanh Xun

Tax rate
The company effective tax rate in 2015 is 25.3%. Masan is
belonged to consumer goods, with a lot of products from
food and beverage. These products are essential for
human life and therefore its sector is does not have high
tax. The amount of tax expense just equal 2.6% of total
revenue in 2015.

Bi Thanh Xun

Added discipline

2011

2012

2013

2014

2015

Debts

35.80%

57.77%

61.69%

58.60%

62.27%

Equity

64.20%

42.23%

38.31%

41.40%

37.73%

Masan is on the way to restructuring their capital, they begin

to add more debts. In 2015, the proportion of debts in total
capital is double equity. It will give more supervisors to the
company performance. Increasing in debt will reduce the
ability

of

manager

to

pursue

effectively than dividend increase.

wasteful

activities

more

Bi Thanh Xun

Bankruptcy costs

Administrative
cost
Long live

2011

2012

2013

406.374

727.529

889.580

10,622,8

14,015,5

12,721,2

2014
1,048,35

2015
1,664,51

8
28,398,

7
34,654,

79
48
83
911
499
33,572,6
38,699,2
46,502,1
52,965,
71,849,
TOTAL
ASSET 2011
2012
2013
2014
2015
19
56
41
100
700
10,575,24 12,105,98 16,346,57 55,554,44
7,239,003
Revenue
9
9
6
5
Cash and
assets

cash

9,573,593

5,718,717

5,698,563

5,166,415

8,324,476

equivalent
Bi Thanh Xun

Agency costs

Intangible
asset

2011

2012

2013

2014

2015

983,239

863,516

1,288,672

1,798,696

7,001,665

Intangible assets increased suddenly from 2011 to 2015,

especially in 2015. Compared to 2011, the intangible asset
increase from 983,239 to 7,001,665, nearly 612%. It implies
that there is high probability of agency costs since lenders
will have a tougher time monitoring how the money is used.
High agency costs also mean that company should borrow
less.
Bi Thanh Xun

Financial Flexibility
The main product of Masan is food and beverage (soy
sauce, instant noodle ) currently stand in maturity stage
of business cycle. Thats why the company must develop
new products to promote the sales of this sector. Animal
feed makers is decreasing now since more farmer apply
closed

process

to

naturally

create

food

for

animal.

Therefore, the company future is quite uncertain, Masan

should value financing flexibility more and borrow less.
Bi Thanh Xun

Dividend Policy
MASAN GROUP

Dng Th Hin Trang

Dividend Policy
History of Masan Dividend
Policy

Masan Group (MSN) has not pay dividend to shareholders

although average undistributed profit was about 6,000 billion.

With unpaid dividend policy from MSN shares but business activities
work efficiently, the M&A projects still implemented steadily and
stable stock.

Shareholders and investors agreed with Masan reasons, which is

reinvested in other M&A projects.

In 2015, Masan issued 12 million ESOP shares, equivalent to 1.63%

of outstanding shares of the company.
Dng Th Hin Trang

Some qualitative factors affect

dividend policy
Investment
Opportunities

Masan group used the entire amount of capital and undistributed

profits to reinvest and make more of a merger and acquisition (M&A).

Beverage industry
Masan purchased 50.3% of Vinacafe's shares in 2011. In 2013, Masan
continued to buy 24.9% shares of Vinh Hao Mineral Water (63.5% of
ownership).

Agricultural industry
Masan was expanded in 2011 by buying 40% of shares of livestock food company
(Proconco, 94 million USD)the second largest in the livestock food industry,
holds about 10% market share in the country.

In 2015, the most notable activities of Masan is signed strategic

partnership agreement with Singha Asia. Moreover, Singha signed $
1.05 billion investment to acquire 25% share of Masan Consumer
Holdings (MCH), and $50 million to acquire 33.3% share of Masan
Dng Th Hin Trang
Brewery.

Some qualitative factors affect

dividend policy
Stability of Earning

The business of food and beverage sector grew by 4.7% in 2015, the
growth rate of 20.5% from Vinacafe and beer business grew more than
three times in 2015.

Nutri-Science Masan contributed 1,624 billion in EBITDA, because of the

launch of new products applied by Bio-ceramic technology the top of
highest gross profit margin in domestic market.

EBITDA of Masan in 2015 reached 6,687 billion (the growth rate of

70.6%). Masans EBITDA margin reached 46.5% due to cost reductions and
improved mineral recovery rates.

Pro forma net income reached 2,992 billion in 2015 (the growth rate of
54.3% compared with 1939 billion in 2014).

After accounting 612 billion amortization of goodwill related to M&A

Dng Th Hin Tran

Some qualitative factors affect

dividend policy
Stockholder
Characteristics

Major shareholders include: Masan Corporation (32.53%), Sunflower

Construction Company Limited (13.37%), Orchid Capital Investments
Pte. Ltd (6.40%), Private Equity New Markets II K/S (5.76%).
On the basis of institutional and individual shareholders: Masan
Group has 2,145 shareholders, of which 1,999 individual shareholders
holding 129,498,775 shares representing 17,34%; and 146 are
institutional shareholders holding617,219,086 shares, representing
82.66%.
On the basis of domestic and foreign shareholders: As of 31 December
2015, Masan Group has 1,814 domestic shareholders holding
509,586,695 shares representing 68.24%; and 331 foreign shareholders
holding 237,131,166 shares, representing 31.76%.
Dng Th Hin Trang

Q&A