“The growth in the next 5 years of The Gioi Di Dong will be placed on the shoulders of Bach Hoa Xanh. Currently, Bach Hoa Xanh does not have a large market share, so there are still many expansion opportunities. Even in the provinces where Bach Hoa Xanh is present, as well as areas that have not been reached like the Central and Northern regions,” that’s the sharing of Mr. Nguyen Duc Tai, Chairman of The Gioi Di Dong Investment Joint Stock Company (stock code: MWG) in a recent meeting with investors.
Bach Hoa Xanh was established in 2015, currently operating more than 1,700 retail stores specializing in food and consumer goods mainly in the South. In 2023, the unit made a major breakthrough by reaching breakeven point.
In 2024, MWG sets a target for the Bach Hoa Xanh chain to contribute about 30% of revenue, achieve double-digit revenue growth, increase market share, and start making profits from 2024. This year, the retail group is also planning to open new Bach Hoa Xanh stores selectively to ensure efficiency, continue to grow revenue from existing stores, and optimize costs, especially logistics costs, to be profitable for the whole year at the company level.
In a recent meeting with new investors, Mr. Pham Van Trong, CEO of Bach Hoa Xanh, shared that in the fast-moving consumer goods and food retail sector, customers are shifting from traditional shopping channels to modern channels. The number of young customers is increasing and the life of consumers is becoming busier.
“Bach Hoa Xanh has seen this context and also shifted its business model to embrace this trend,” said Mr. Pham Van Trong. CEO of Bach Hoa Xanh believes that the essential consumer goods industry will remain stable and consumers tend to reduce consumption due to the impact on income.
Inside a Bach Hoa Xanh store.
Mr. Trong said that Bach Hoa Xanh is expected to be profitable starting from this year and gradually increase over time. In order to do that, MWG will increase the product portfolio at its stores, focusing on quality, safety, and customer shopping experience to drive revenue. Second, Bach Hoa Xanh will focus on cost control, including logistics and operational costs.
Bach Hoa Xanh also expects to generate VND 2 billion/store revenue per month. This is also an achievable target. In many areas, a Bach Hoa Xanh store has already achieved this target. However, in 2024, the chain is expected to open new stores, so the target may not be reached for some stores.
The CEO of Bach Hoa Xanh also said that the chain still has many opportunities for profit margin growth. However, the company still maintains a strategy that focuses on revenue growth first and absolute profit to achieve a profitable target. A profit margin of 20%-25% is no longer a target, but a must for Bach Hoa Xanh.
The Gioi Di Dong still plans to expand in the Ho Chi Minh City market. Explaining this, Mr. Trong said that the demand of Ho Chi Minh City consumers is still very high and there are still many places where Bach Hoa Xanh is not yet present. “For example, in District 7 or District 4, there is a high population density but a limited number of stores. Therefore, we still decide to expand the chain in Ho Chi Minh City,” said Bach Hoa Xanh CEO.
Completing the sale of Bach Hoa Xanh shares in the first half of 2024
One of the issues that shareholders are concerned about Bach Hoa Xanh is the sale of shares of this chain. Investment Director and Shareholder Relations Le Thi Thu Trang said the company has also announced information about the sale of Bach Hoa Xanh shares, up to a maximum of 10% of the capital by private placement.
“We expect to complete this transaction in the first half of 2024. However, we are still in the process of implementation, but due to confidentiality commitments, the company cannot share more information with investors,” said Ms. Trang. Ms. Le Thi Thu Trang also added that during the recent Lunar New Year holiday, Bach Hoa Xanh chain recorded an average revenue of VND 1.8 billion per store.
Recently, according to information from Reuters, CDH Investments from China is negotiating to acquire a minority stake of the Bach Hoa Xanh chain from The Gioi Di Dong Investment Joint Stock Company (MWG). If an agreement is reached, the valuation of Bach Hoa Xanh could reach $1.7 billion.
Sources say CDH, one of the largest investment companies in China, is also the leading candidate to buy up to 10% of Bach Hoa Xanh shares after defeating competitors.
“CDH Investment intends to acquire from 5% to 10% of Bach Hoa Xanh shares,” the source said. The negotiations are still ongoing and it is uncertain whether they will be successful or not.
