FINANCIAL ANALYSIS MWG MOBILE WORLD INVESTMENT CORPORATION 2018 - 2020 01 Introduction 02 Balance Sheet analysis 03 Income statement analysis 04 Ratio analysis 05 Conclusion & Recommendations MWG - Group 10 Financial analysis Table of Contents 01 Introduction Mobile World Investment Corporation (MWG) is considered one of the top, if not being said number one, retailers in Vietnam It started its journey as a Limited Liability Company in 03/2004 and officially switched to Joint Stock Company in 2007 “MWG operates a variety of concepts, namely “Thegioididong” mobile phone retail chain - possessing approximately 55% of the market share, “Dienmayxanh” consumer electronic chains - owning around 50% of the market share, and “Bach Hoa Xanh” grocery retail chain - accounting for more than 20% Additionally, the brand also invested in a pharmacy chain named “An Khang”, and recently, an agricultural project named “4KFarm”.” MWG has gained paramount achievements throughout the years that it has been operating, by way of illustration, “MWG was proudly named in TOP 50 best big public companies in Asia (voted by Forbes) and the sole Vietnamese representative in Top 100 Asia-Pacific Retailers voted by Retail Asia Magazine and Euromonitor” On top of that, MWG is also entitled as TOP of Vietnamese best performing companies and included for consecutive times in the TOP 50 best places to work in Vietnam With more than 4,500 stores opened across Vietnam, MWG shows no signal of stopping in terms of development Its strategy is quite apparent, consolidating “Thegioididong” and “Dienmayxanh” top positions in the market, simultaneously expanding and earning even more market share not only for the top investments, but also for the other markets MWG - Group 10 Financial analysis MWG joined the Hochiminh Stock Exchange (HOSE) in 07/2014, being labelled also as MWG For the time being, Mr Nguyen Duc Tai - Co-Founder & Chairman of MWC is holding around 63,558,394 MWG’s stocks, which amounts for 2.53% of the total, making him the biggest shareholder Apart from Mr Tai, Mr Tran Kinh Doanh and Mr Dieu Chinh Hai Trieu, members of the Board of Directors, are the second and third largest stockholders, owning 0.99% and 0.8%, respectively 02 Balance Sheet analysis Total asset Overall, it is apparent in figure that MWG has been growing quite rapidly over the 3-year period, tremendously increasing in both Current Assets and Non-current Assets, especially during the transition from 2018 to 2019 In addition, the proportion between the two categories has also been maintained throughout the years and coming nearer to an 80/20 rate However, there is a fluctuation regarding the growth in total assets, as a large margin can be observed between the changes of 2018-2019 and 2019-2020 Current asset In general, MWG’s current assets have experienced an increase in numbers, approximately 49.8% and 6.58% between the three years This could be the result of the strategy that MWG has conducted, which is investing in Short-term financial investments A rise of more than 6000% has been recorded in 2019 for this category and could have led to a downgrade in Cash and cash equivalents and Other current assets, -16.92% and -16.46%, respectively Yet, numbers have proved that MWG’s strategy was a great success, as all of the listings above had grown back significantly in 2020 with percentages reaching near to or even higher than 100% and are expected to continue in the upcoming years Apart from that, after a rise of more than 50% during 2019, Inventories also dropped slightly more than a quarter in the next year The growth that Non-Current Assets experienced was much less fluctuated, as it grew up to 40.96% and 30.13% in 2019 and 2020, respectively Though there is nothing much to say about account receivables-long term, which increased quite steadily, it is not the case for most of the other categories The strategy for NonCurrent Assets of MWG is rather apparent through its figures Fixed Assets is heavily invested, recorded a positive difference of 62.12% in 2019, compared to 2018, accounted for 80% of Non-Current Assets in the same year and more than 83% the next year On the contrary, Long-term financial investments gradually MWG - Group 10 Financial analysis Non - Current asset 02 Balance Sheet analysis became a smaller part of Non-Current Assets It started the 3-year period by accounting for 1.26% in 2018 and ended the period at 0.61% The same pattern happened for Long-term work in progress and Other long-term assets, dropping down to 1.52% and 0.61%, although they both increased in 2020, 51.69% and 2.56%, respectively Total liabilities Generally, as illustrated in figure 2, the liabilities of MWG had been growing in the 3-year period, though not being very constant, as it topped a 54.47% rise in 2019 but only 3.33% in 2020 It is also easy to observe that the domination of Current Liabilities was getting more paramount through time and it also resulted in a minor proportion of Non-Current Liabilities In 2018, Account payable to suppliers and Short-term borrowing started as the two categories that accounted for the most part of Current Liabilities, more than ¾ This remained the same until the end of the period, they even increased and comprised more than 80% of the total However, the two categories were inversely related during the process, as Short-term borrowings went from 32.55% to 53.11% and Account payable to suppliers went from 45.98% to 29.66% This situation could be a consequence of the reconstruction in investment plans, particularly, in Short-term financial investments that was given above in the Current Assets section, MWG needed the money to finance their plan, thus leading to the huge increase, 123.27% in 2019 of Short-term borrowing Apart from that, it is worthy to note that Advances from customers and Payable to employees dramatically increased in 2019 and 2020 This could also be a result of the company’s investments and may be influenced by external factors, such as the Covid-19 pandemic, which may have caused procrastinations in relieving debts MWG - Group 10 Financial analysis Current liabilities 02 Balance Sheet analysis Non-Current Liabilities The instance of Non-Current Liabilities is much more simple, since it has only categories at the beginning in 2018 and ended 2020 with only one Since 2019, Deferred tax liabilities are no longer MWG’s concern and Long-term borrowings became the sole category for Non-Current Liabilities This could be reasonable, as mentioned above, MWG was shifting to a more short-term approach, thus they narrowed down the Non-Current Liabilities so that it can be more easily controlled The figures also made it clearer as Total Non-Current Liabilities went from 6.32% to 3.69% in years, regarding the proportion it made in Total Liabilities Total equity Financial analysis First and foremost, the most noticeable point from the Total Equity board (figure 3) is the rapid rise of Total Stockholder’s Equity, which accumulated an increase over years up to nearly 6.5 billion VND and ended 2020 at more than 15.4 billion VND It is attributed to many reasons, however, the biggest factor could be because of the Undisputed profit after tax, which had accounted for the largest amount of the Total Stockholder’s Equity in 2020, at 67.11% This could explain why there was so much Payables in the Liabilities board above, as the category increased 79.21% in 2019 and 45.32% in 2020, the periods that Payables were also augmented Another noticeable figure is the decrease in Share Capital Although the category’s value is still around 4.4-4.5 billion VND, the proportion it accounted for reduced from 49.37% to 29.27% in years As mentioned above, MWG in these years were focused on funding for short-term investments, thus, selling out stocks could be one of the ways to get financial resources MWG - Group 10 02 Balance Sheet analysis Comparison with competitor Financial analysis As for MWG’s direct competitor, our group has selected Digiworld (DGW) The rival company experienced a great development in all three sections listed in Figure 1, which are Total Assets, Liabilities, and Stock Equity The change between 2019 and 2020 had illustrated DGW's development, as all three sections topped the 25% mark or more, and gained a 392,106,813,945 VND positive increase for its Total Stock Equity in years Nevertheless, MWG’s growth was even more fascinating Compared to DGW, MGW proved its domination in the market as their figures, shown in figure and the charts above, were even more paramount and made DGW’s improvement pale in significance All in all, MWG’s numbers are concrete proof of why MWG is the top retailer in the market right now MWG - Group 10 03 Income statement The Income Statement for MWG respectively in the years 2018, 2019, 2020 provides the information of MWG’s business result with useful information for the domestic and foreign investors as well as the readers Revenue The revenue of MWG mostly comes from its two chains of retailing technology appliances which are DMX and TGDD in 2018 and 2019 But in 2020, apparently, there was a shoot up in BHX revenue by chain from 10.5% in 2019 to 19.3% and account for the loss part of TGDD while DMX still took the lead MWG - Group 10 Financial analysis In 2018, the total sales and services revenue was recorded 87,738 billion VND, this could be considered as MWG success as 2018 is the period of technology appliances in general and smartphones, laptops specifically In the next year, MWG made a great effort to keep its performance by accomplishing 103,485 billion VND of revenue, which is a nearly 18% increase in the same period compared to the year before Nevertheless, the following year could be considered a disaster to the Vietnamese economy generally and MWG particularly with the appearance of the Covid-19 pandemic The revenue for the year 2020 only marked 109,801 billion VND, which is only a 6.1% increase compared to 2019 Alongside, the net revenue had noted an increase of 18.1% from 2018 to 2019, but from 2019 to 2020, it fell off to 6.24%, which is a large deduction although the goods returns in 2020 are not as high as in 2019 03 Income statement Cost of goods sold On the other hand, DGW showed only a little fluctuation in their COGS as it constantly marked at between 93% and 94% Compared to its competitors, Digiworld corporation has a very high COGS and nearly recorded any deduction in the same period This could be a minus point to DGW as the COGS is nearly as high as the revenue, it can reduce the profit that DGW can make It also makes the investors consider the probability if they are about to invest in DGW As a whole, DGW cost price is much higher than MWG, therefore, its profit, apparently, is not as high as MWG MWG - Group 10 Financial analysis Cost of goods sold (COGS) is the term used for the direct costs relating to producing or importing the goods As announced in the income statement, there is a slight decrease in the cost of goods sold year after year From 2018 to 2020, MWG’s COGS reduced from about 81.2% to 77% 03 Income statement EXPENSE On the other hand, the total expense of DGW witnessed a constant figure as its expense dropped from 4.46% in 2018 to only 4.44% in 2020, which shows a staticity This could be interpreted by the expense for financial expenses and administrative expenses remaining nearly unchanged while selling expenses only increased a little bit in 2019 In general, it is apparent that MWG’s total expenses account for the larger part of DGW’s total expenses However, MWG still takes the lead in making profit in comparison to DGW by maintaining the cost of goods sold well DGW needs to make more effort on downsizing its cost of goods sold MWG - Group 10 Financial analysis A quick look at the expense in the income statement, there was not much fluctuation from 2018 to 2019, but from 2019 to 2020, there is a sudden raise from 14.6% to 17.65% and most of it came from the business management expense as MWG tended to open more stores in 2020 Its total stores increased from 3039 stores in 2019 to 4059 stores in 2020, which is about 30% of added stores Besides, the non-operating profit expense also increased due to the appearance of Covid-19, MWG focused more on making profit from doing financial activities 04 Ratios analysis 4.2.4 Compare with DGW Figure Figure Compared with MWG’s competitor, DGW, overall, asset turnover of MWG was lower than that of DGW in 2019 and 2020 (approximately 44% to 73%) In fact, the higher the asset turnover rate, the more successfully the company can obtain income from the assets, which means that in this case, DGW was more efficient than MWG in selling its assets However, between 2018 and 2020, MGW outperformed DGW in terms of receivables turnover, especially at the end of the period, the ratio of MWG was much greater than that of DGW (around 514%) This meant that MWG performed better in collecting debt MWG - Group 10 Financial analysis While MWG experienced a downward trend in inventory turnover in all years, the inventory turnover of DGW witnessed a significant upward trend (increased from 4.24 in 2018 to 5.46 in 2019 and reached the peak at 14.19 at the end of period) According to data, it illustrates that DGW managed inventories much more effectively than MWG did 04 Ratios analysis 4.3 Long term solvency Figure 10 4.3.1 Total debt ratio Calculated by dividing total liabilities to total assets, it is used to show how well the company pays off its debt With MWG, the company’s total debt ratio was 0.681, 0.709, 0.664 in 2018, 2019 and 2020, respectively The ratios slightly change but overall was remains stable It shows that MWG is doing really well in terms of controlling its liabilities and assets Its ratio also does not surpass after years which means that the company doesn't have the risks of paying its debt by assets Following by the formula of EBIT divided to interest expense This type of ratio is used to predict how well the company can deal with its interest payment, the larger numbers show the better ability a company has to cover its interest by its earnings before tax Overall, MWG not having a large number for time interest earned ratio, but the company capable of keep the ratio remain stable (8.866, 8.735, 8.780 in years), which can be concluded that MWG still having control in paying it interest, and take information from total debt ratio it clearly to see that MWG having no trouble in take over debt MWG - Group 10 Financial analysis 4.3.2 Times interest earned ratio 04 Ratios analysis 4.3.3 Cash coverage ratio Also measuring how well the company pays its interest but slightly different from the TIE ratio is that now we calculate the amount of available cash will be used to pay Cash coverage ratio formula is using EBIT plus depreciation expense and divides the sum to interest expense MWG has quite equal numbers for 2018 and 2019 (11.525 and 11.159) but we see an increase of about 1.211 (from 11.159 to 12.370) in 2020 The company already doing well with paying interest in cash and according MWG’s financial report, in 2020 the company having a lot more investment cash than the previous year leading to the increase in cash coverage ratio 4.3.4 Compare with DGW Figure 11 It is clear to see that DWG is also doing well in terms of keeping their ratio stable in 2018 to 2019 but they better than MWG in 2020 with increasing almost 60% for time interest earned ratio and cash coverage ratio DWG is similar to MWG in terms of keeping their debt to asset ratio stable and under for all years With TIE ratio and cash coverage ratio DWG has a leap in 2020 but its number still remains lower than MWG (except 2020’s time interest earned ratio) Overall, DWG is not having a better ratio than MWG but they are still doing well with keeping ratios of paying debt stable every year and have potential of having outstanding profit MWG - Group 10 Financial analysis Figure 10 04 Ratios analysis 4.4 Profitability Figure 12 4.4.1 Net profit margin Net profit margin or simple net margin, determines the amount of net income or profit earned as a proportion of revenue, calculated by the formula of net income over net sales Net profit ratio is the most important indicator for a company's financial health According to the chart, MWG has a low net margin but its ratio is simply equal after years Despite having a low ratio MWG still makes large profits every year (over 23 thousands billion VND in 2020) Return on equity (ROE) and return on assets (ROA) are two of the most essential metrics for assessing how well a company's management team manages the capital entrusted to it Despite the two different ratios, their formulas are quite similar While ROE is calculated by dividing net income to shareholder’s equity, ROA formula is net income over total assets MWG - Group 10 Financial analysis 4.4.2 ROA and ROE 04 Ratios analysis It is clear to confirm that MWG is borrowing capital funds to expand business by seeing that MWG’s ROE ratio is significantly larger than its ROA The company’s ROE is slightly down but MWG is still doing a really good job because ROE at about 20% is a good sign, in this case, the company’s ratio has decreased but it still remains at 28.4% The ROA of MWG has decreased by about 2% in 2020 4.4.3 Compare with DGW Figure 12 Figure 13 Financial analysis MWG is quite similar to DGW, having an outstanding ROE ratio DWG also does better, when they manage to increase ROE ratios by almost times from 2018 to 2020 Almost identical with ROE growth rate, DWG is also doing well with pushing their ROA ratios as well as net profit margin To conclude, despite the ratio gap with MWG, DGW still manages to control and slowly improve their numbers every year, having a potential to develop stronger in the future MWG - Group 10 04 Ratios analysis 4.5 Market value ratio 4.5.1 Price-to-earnings ratio P/E ratio evaluates the relationship between the price of the stock and the EPS The evaluation also means the price that the investors are willing to dedicate to get the profit earned on a share According to figure 14, from 2018 to 2019, the P/E ratio of MWG witnessed an increase from 10.04 to 13.16, this means that the investors were believing in the growth potential of MWG’s stock price However, in the following year, this ratio seems to decelerate and only increase for a tiny amount from 13.16 to 13.74 This could be explained due to the EPS of the stock, the EPS of the years 2019 and 2020 witnessed more or less no change However, there was a slight increase from the stock price, which made the P/E ratio become higher for a little bit In contrast, DGW experienced the entire increase from 2018 to 2020, from the ratio of 18.879 to 26.694 Within these years, DGW's EPS also raised at the same pace, but the P/E ratio still increase, thus, the price per DGW shares must have been believed to have a magnificent increase As a matter of fact, from the price of 10,450 VND at the beginning of 2020, DGW’s shares price has reached its peak to the price of 140,000 VND, which is about 14 times increase within years This could be considered as the success to technology appliances retail in general and to Digiworld Corp specifically MWG - Group 10 Financial analysis Figure 14 04 Ratios analysis 4.5.2 Price-to-book ratio Figure 15 Price-to-book ratio (P/B) is used to compare the market share price to the book value share price of the stock The higher the P/B ratio is, the more expectations from the market that the company will have good results in the future and viceversa It is apparent in the figure 15 that the MWG’s P/B ratio witnessed a downtrend from 4.17 to 3.48 This means that although the company operated well and constant, the growth rate of the company cannot adapt to the investor’s expectations As the P/B ratio became lower, the investors are not willing to spend much for a share In general, although the market cap of MWG is much greater than DGW, DGW shows itself as a company that the investors should invest in because it will bring more profit to them in the future by its stable performance MWG - Group 10 Financial analysis Contrastingly, the DGW’s P/B ratio experienced the ascension through the same period It increased from 4.01 to 7.2 This shows that the investors are willing to pay a high price for a DGW’s share because the corporation may have had the potential to grow and the investors believed in that 05 Conclusion & Recommendations In conclusion, after researching information about the financial statements of two companies including Mobile World Investment Corporation (MWG) and Digiworld Corp (DGW), we can gain a better insight of both corporations and how they can attract investors Generally, DGW appeared to be superior in more categories compared to MWG in terms of liquidity ratios (both companies had favourable current ratios but DGW outperformed), quick ratio (DGW company had fewer liquid assets than liabilities), asset turnover ratio (DGW was more efficient than MWG in selling its assets), inventory turnover (they managed inventories much more effectively than their competitors), long-term solvency (they are still doing well with keeping ratios of paying debt stable every year and have potential of having outstanding profit), price-earnings ratio (DGW could create more benefits) Some recommendations would be that MWG could open more service and increase customer experiences, moreover, they can open more stores on their potential chain to increase more revenue and profit In addition, MWG can find the best suppliers in order to reduce the COGS to increase the PAT and make the financial ratios better For DGW, they can promote their prospects and keep up their best performance in selling and supplying technology appliances Digiworld so far has made their company a great deal to gamble MWG - Group 10 Financial analysis On the other hand, MWG is currently making good use of and managing its assets Furthermore, revenue generated from shareholders' equity was found to be profitable during the research period However, there are several drawbacks to consider, including the fact that the ROE ratio indicated suggests debt misuse, which could both benefit and put the company at risk in the long run APPENDIX Figure Financial analysis MWG - Group 10 APPENDIX Figure MWG - Group 10 Financial analysis APPENDIX Figure Financial analysis MWG - Group 10 APPENDIX 2018 2019 Figure MWG - Group 10 Financial analysis 2020 APPENDIX Source: Vietstock.vn Figure Financial analysis MWG - Group 10 REFERENCE Financial analysis di ĐộNg, C T C P T G (2021) General Introduction - Investor Relationship website WMG Công ty Cổ phầ n Thế Giới Di Động https://mwg.vn/eng/company/introduction V (n.d.) MWG: CTCP Đầ u tư Thế giới Di động - MWI CORP - Hồ sơ doanh nghiệp VietstockFinance https://finance.vietstock.vn/MWG/ho-so-doanhnghiep.htm Vụ T T D (2020, November 10) Khoảng cách tăng trưởng Bách hóa Xanh với thị trường: ‘Dài tận số ’ Báo Thanh Niên https://thanhnien.vn/khoang-cach-tang-truong-cua-bach-hoa-xanh-voi-thitruong-dai-tan-3-con-so-post1010658.html MWG - Group 10 VIDEO LINK https://www.youtube.com/watch?v=UIf3Y0aDos&ab_channel=MaiH%E1%BB%93Nh%E1%BA%ADtMinh ... more than ¾ This remained the same until the end of the period, they even increased and comprised more than 80% of the total However, the two categories were inversely related during the process,... Price-to-book ratio (P/B) is used to compare the market share price to the book value share price of the stock The higher the P/B ratio is, the more expectations from the market that the company will... proof of why MWG is the top retailer in the market right now MWG - Group 10 03 Income statement The Income Statement for MWG respectively in the years 2018, 2019, 2020 provides the information of