The recent case of one MSN subsidiary allegedly marketing uncertified vegetables under the label of Vietnamese Good Agricultural Practices (VietGAP) in their Winmart supermarkets and Winmart+ convenience stores has caused much concern.
Leading corporation
The Masan Group Joint Stock Company was established in 2004 with the original name as Ma San Maritime Joint Stock Company. In 2009, MSN changed its name to Masan Group JSC and listed its shares on HoSE in the same year. Although officially established in 2004, when taking into account the establishment and operations of major shareholders, subsidiaries, and predecessor companies, then MSN has actually been operating since 1996.
The MSN Group company started as a spice factory in Ho Chi Minh City, and now has become one of the leading corporations in Vietnam, with 84 subsidiaries and affiliates, spanning from food production, supermarkets and convenience stores, financial services to mining operations. The MSN Group is divided into three separate segments managed by three legal entities, namely, Masan Horizon which controls the meat and minerals segment; The CrownX which operates the retail and consumer goods sector; and The Sherpa which looks after the Food and Beverage (F&B) and technology segment.
In recent years, the MSN Group has become known to many people because of a series of popular acquisitions, such as acquiring an 87.34% stake in VinCommerce, a unit that manages WinMart and WinMart+ stores. This deal was valued at about VND 5,400 bln. Later the MSN Group bought 85% shares of Phuc Long Heritage, an enterprise that owns the Phuc Long F&B chain, and 70% of Mobicast shares, a company that owns the Reddi virtual mobile network. According to statistics, the total amount of money the MSN Group has spent to acquire these three brands is about VND 8,900 bln.
Earlier, the MSN Group had spent a huge amount of money to buy a series of brands, such as Vinacafe Bien Hoa, Masan Resources, Vinh Hao, Vissan, Cholimex, and NET Detergent. However, ambitions for acquisitions by the MSN Group have not yet stopped even after a multitude of companies acquired. Currently, Mr. Danny Le, General Director of MSN, is looking at the possibilities of investing in the fields of logistics, supply chains, and fintech, to promote the group's e-commerce segment. If the MSN Group continues to encroach on these new business segments, then the Group may well become a major international corporate brand.
In order to have the capital to carry out more acquisitions, the MSN Group had issued bonds to mobilize VND 10,000 bln in four installments in 2020. All of them have three-year terms that will mature in 2023. By January 2021, MSN will continue to offer an additional VND 4,000 bln of bonds to the public. The MSN subsidiaries also have outstanding bonds with a total value of tens of thousands of billion dong. For example, the Nui Phao Mining and Mineral Processing Company Limited is circulating VND 6,300 bln, WinCommerce has VND 4,500 bln, Masan High-tech Materials has VND 3,000 bln, and Masan Consumer Holdings has VND 2,100 bln.
In addition to bonds, the MSN Group has also raised large amounts of capital from corporations such as the SK Group, Alibaba, Baring Private Equity Asia, TPG, Abu Dhabi (ADIA), and Seatown Holdings. The total capital that the MSN Group has received in 2021 is estimated at USD 2.3 bln, nearly equal to the total capital received by MSN during the eleven years since listing on HoSE , valued at about USD 2.4 bln. Another source of money mobilized by the MSN Group was the decision to sell the animal feed business to De Heus Vietnam, which brought in around USD 600 mln to USD 700 mln.
Mounting debts
At the end of the second quarter, financial debts of the MSN Group stood at VND 56,872 bln, of which 54% was in short-term debt. Specifically, MSN bank loans are at VND 21,872 bln, outstanding bonds are at VND 34,479 bln, and the bonds debt of the parent company is around VND 19,500 bln. Among the above bonds, there are bonds worth VND 14,000 bln that will mature in March and August 2023, and some bonds worth VND 4,000 bln are due to mature in January 2024.
To have money to repay these bonds, the MSN Group recently planned to privately issue two lots of corporate bonds with a total value of VND 1,500 bln, with a term of 60 months and the interest rate for the first two periods fixed at 9.5% per year. The remaining interest periods have floating interest rates equal to 3.975% per year, and the average reference interest rate is applicable to savings deposits in Vietnam dong with a term of 12 months announced by Vietinbank, Vietcombank, Agribank, and BIDV on the relevant interest rate determination date.
In the context that the bonds market is facing many difficulties, the MSN Group plan to issue bonds to pay off its near-maturity bonds debt will not be as easy as in previous issuances. In addition to unpredictable difficulties, the MSN Group also has to face negative reviews about its business situation and activities, for instance those concerning its pig breeding and pork segment.
According to a report on the retail industry recently released by Mirae Asset Securities (MAS), the retail industry is forecast to maintain a recovery until the end of 2022. This brings an optimistic picture for most businesses, especially the MSN Group with a strong expansion and restructuring strategy for the Vinmart retail chain. However, MAS still revised down MSN full-year 2022 net profit forecast due to weaker-than-forecast meat consumption and a policy of faster-than-expected expansion of retail stores.
It is even more difficult now when recently, the Winmart supermarket chain was discovered to selling uncertified vegetables in the market under the VietGAP label. A representative of the Masan Group explained this incident by saying that the company has a good and ethical business policy as they fully comply with food hygiene and safety regulations under strict quality control procedures to ensure the health of consumers.
Nonetheless, such an explanation was not sufficient enough and the Winmart supermarket chain saw a wave of consumers boycotting the store. After this incident when hundreds of consumers turned away from Winmart stores, profits of the MSN Group fell significantly. Previously, the MSN Group had set a rather conservative business target for 2022 of total revenue of VND 90,000 bln to VND 10,0000 bln, up by 1.5% to 12.8%, but profit-after-tax is expected to be at VND 6,900 bln to VND 8,500 bln, down by 15.8% to 31.6%.
