Maybank Kim Eng analysed the ambitions of FPT Retail as it has been expanding retail technology and drugstore.
Betting on F.Studio
Mrs. Nguyen Bach Diep- Chairman cum Chief of Executive Officer of FPT Retail presented a brief plan which is to extend the chain of FPT store to investors in a meeting. She said that FPT Retail is opening about 100 stores/year from 2018 to 2020, which helps the sum of stores reach 700 and stop at this number. “ The criterion of opening store is very simple. This is wherever the stores of competitors have average turnover 3 billion dong/ month, FPT store is definitely founded in there” said she.
However, FPT Shop, F.Studio or Chau Long drugstore chain, what is the motivation to make FPT Retail growth? In the first six months, turnover of FPT Retail got 7.480 billion dong, which increased 17.7% as compared with the same period last year, profit after tax was 147 billion dong, which increased 29.8 % as compared with last year.
After six-year implement duration, FPT Retail become the second biggest retailer in Vietnam in digital technology and technology products with 473 stores throughout 63 provinces. According to schedule to 2020, FPT Retail is going to expand sum of F.Studio from 12 to 102. Betting on F.Studio chain has several inherent risks; however, it is not denied this trading strategy could boost turnover.
In 2018, the economic growth is forecasted to get 6.9% as well as this one in last year got 6.81%; the microeconomic basic stands on solid foundation. Since the income per capita rises, people expect that living expenses continue augmenting. Business Monitor International anticipated optimistically that in the next five year, more 6 million families will be added in group with income from 5,000 to 10,000 USD, living expense will increase by 47% until 2019. The Apple brand is still attractive but it not as same as it was.FPT Retail is going to anticipate being exclusive store chain which trades Apple products and some utilities services coming under the method such as AAR (Apple Authorized Reseller), APR (Apple Premium Reseller) và I-Corner. FPT Retail has advantage in sustainable economic growth of Vietnam.
In US market, revenue growth of Apple as well as Iphone went down in the last few years. In 2017, turnover of Apple was 229 billion dollar and increased 6.3% as compared with one last year. Therefore, FPT Retail enhances and diversifies products in F.Studio instead of betting on all products of Apple. This makes purchase optimized from the customers.
Additionally, development of e-commerce raised the competition with masterbrand such as LAZADA, TIKI.
Staying abreast of drugstore
To keep abreast of pharmacy, Board of FPT Retail showed the schedule to “winden” Long Chau drugstore chain that only concentrates on medicine and healthy products. According to specialists, this trading model is both eco-friendly and suitable for shopping culture of Vietnamese.
In Ho Chi Minh City, over 10 pharmacies of FPT Retail was operated and 20 drugstores is going to be founded in this year as FPT Retail spent about 300 billion dong to invest them. After 4 years, the sum of pharmacies will reach 400 stores. The receipt of Long Chau drugstore chain is higher than others’ one in Vietnam market.
As reported by the estimate, every Chau Long store recorded the monthly turnover of over VND 3 billion while in Pharmacity chain, monthly revenue got around VND 150 million; in Phano chain, it got over VND 400 million; in Eco, it reached VND 580 million; in An Khang chain, it exceeded about VND 750 million. Vietnam’s pharmaceutical market was valued to be inviting because the general population is large, life expectancy is increasing and acknowledge of health is gradually improved.
Although the charge of average spending medicine is in group 3 (fastest growth rate group) in 17 countries which have evolution of pharmaceutical industry, it can not reach 40 USD/person/year, which is only one-second as high as the one of pharmacing countries.
The potential development of this industry is still encouraged. If it is used in effective ways, this will be a great trading resource to make occupy pharmaceutical industry and rise up to international market. As consonance with forecast of BMI, in 5 years (2017-2021) growth rate of average expense all over Vietnam is going to be 11.5%/year. Though it is lower than the one in duration 2012-2016 ( 15.6%); it is higher than others as compared with 6-9% growth rate of average spending in pharmacing countries, 4-7% its in the entire world (based on forecast of IMS Market Prognosis).
From 2017 to 2021, prescription drug is estimated to rise 11.9%/year, which is higher than its in competitive market. At the moment, FPT Stock is being transaction at Price to Earning Ratio with the accumulated of 12 months is 16.7x when this one of other countries in our area is 22.6x. Now, the price is reflected many factors: (i) the profit margin got 2.9%, which was lower than 6.8% of the international area; (ii) leverage ratio is at high standard 4.4x when it is only 2.5x. Nevertheless, it is better to have cash flow in 33 days as opposed to 37.2 days.
*( Analysis of Mayban Kim Eng has only advisory value for investors)
According to Nhip cau dau tu News