Potential Sell-Off for MCM Before Listing Date

(SGI) - There are concerns that Moc Chau Cow Milk Joint Stock Company (MCM), a subsidiary of Vietnam Dairy Products Joint Stock Company (VNM), may experience a sell-off before its anticipated listing on HoSE (Ho Chi Minh City Stock Exchange). The company is facing challenges in attracting investors, primarily due to unresolved issues impacting its business performance.

Potential Sell-Off for MCM Before Listing Date

Correlation Between Business Performance and Stock Prices

MCM commenced 2023 with a share price exceeding VND 42,000. However, over the past year, the stock has shown minimal movement and is currently trading at VND 37,000, marking a decrease of about 12% from the beginning of the year. In comparison, VNM is trading at VND 76,000 per share, and International Dairy Product JSC (IDP) at VND 257,000 per share.

MCM stands out as the weakest performer among the three dairy companies listed on the stock exchange. Investors are particularly concerned about the company's ability to improve its gross profit margin, especially in contrast to VNM and IDP, which can benefit from lower prices of imported raw milk powder. MCM, on the other hand, faces a disadvantage as it increases its purchases of raw fresh milk from domestic farmers.

The downward trend in MCM's stock price is attributed to negative expectations regarding its business results, and investors are advised to exercise caution. Securities experts, including Rong Viet Securities Company (VDSC), caution investors to closely monitor MCM's revenue growth rate and carefully choose the appropriate time to invest in the stock.

VDSC's assessment is based on recent business results, where MCM's third-quarter revenue was VND 816 billion (down 1.9%), with accumulated revenue and net profit for the first nine months reaching VND 2,341 billion (down 0.2%) and VND 289 billion (up 5.5%), respectively. MCM has achieved 68% of its revenue target and 79% of its profit target for 2023. However, in the context of a slow economic recovery, doubts persist about MCM's ability to achieve a high revenue growth rate in 2024.

Attracting Investors on HoSE Poses Challenges

Moc Chau Cow Milk Joint Stock Company (MCM), formerly known as Moc Chau Farm, pioneered the livestock farming and industrial milk production industry in Vietnam. Despite its historical significance, MCM is encountering challenges in attracting investors on the Ho Chi Minh City Stock Exchange (HoSE). The company's primary business activities involve the production, processing, and trading of milk and dairy products, as well as the production, processing, and trading of animal feed. MCM also engages in the trading of livestock and livestock supplies.

Situated in Moc Chau, which, alongside Da Lat, is considered rare in Vietnam for its temperate climate, the region is deemed highly suitable for large-scale dairy herds. The favorable climate allows Moc Chau's cows to allocate only 50% of their food for basic bodily activities, with the remainder utilized for pregnancy and milk production—a significant advantage compared to tropical cows, which allocate 75%.

Despite the favorable breeding conditions, MCM's milk yield per cow is comparatively low when compared to industry giants like VNM or TH Milk. The primary reason behind this disparity is the lack of careful selection in breeding, resulting in uneven milk production capacities within the cow herd. This factor has hindered MCM from becoming a major player in the industry, even with its status as the first dairy enterprise in Vietnam with over 65 years of experience. Consequently, VNM acquired MCM in a landmark M&A deal in early 2020.

After listing shares on the Unlisted Public Company Market (UPCoM) at the end of 2020, MCM initially attracted attention in the first two months, showing good liquidity. However, its presence quickly diminished, and the stock rarely made notable movements, even during the market surge in 2021. Recent liquidity for MCM has been notably low, with a trading session recording a transfer of only 4,000 shares.

Despite MCM's submission of an application to list 110 million shares on HoSE, with a corresponding charter capital of VND 1,100 billion, and approval from the 2023 Annual General Meeting of Shareholders, positive changes have been scarce since its return to the Vietnam Dairy Products Joint Stock Company (VNM). Notably, MCM has not actively sourced raw materials and continues to depend on milk purchases from individual farming households.

Given MCM's business performance in 2023, it appears that the stock may face challenges in surprising investors upon its transfer to HoSE. There is speculation that a sell-off may occur before the UPCoM delisting date, as investors seek more promising opportunities rather than tying up capital in anticipation of MCM's relisting on HoSE. An experienced broker emphasizes that MCM has struggled to capture attention even on UPCoM, making it challenging to attract investors on HoSE, which features many stocks with high growth potential.

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