Introduction

Masan Group is another name for Masan Group Corporation or Masan Group Joint Stock Company. One of Vietnam’s major business conglomerates is this one. Masan Group’s headquarters are located in District 1 in Ho Chi Minh City, Vietnam. Masan Group, on the other hand, operates factories and a number of brands throughout Vietnam. Fast moving consumer products and resources in Vietnam are the primary business sectors that Masan Group concentrates on. Fast moving consumer goods (FMCG), especially foods and seasonings, are Masan’s most well-known industry. The goal of Masan in the FMCG sector is to have at least one of its products in every Vietnamese household. With the lofty objective of becoming the top corporate organization in Vietnam, Masan has been evolving steadily over the past few years.

Masan’s inclusion in the Top 50 Listed Companies in Vietnam 2023 list (Forbes Vietnam, 2023) is one of the company’s proudest accomplishments. in the sector of consumer products. In 2022, Masan’s sales revenue totaled VND 76,189 billion, with a profit of around VND 21,035 billion. In 2022, Masan had liabilities totaling about VND 104,706 billion and assets totaling about VND 141,343 billion (Masan Group, 2022).

Key features of bonds & the interest rate of bonds

Masan was able to secure and draw down the largest offshore syndicated loan of USD 600 million at a rate of 2.9% over the US Dollar Secured Overnight Financing Rate (“SOFR”) in 2022 despite the difficult capital raising environment in a five-year maturity. The deal strengthened Masan’s balance sheet and the terms of the deal reflected strengthening financial conditions in the company’s primary consumer and retail divisions. At the end of 2022, when the bond market was calmed, Masan was able to issue bonds for VND 4,200 billion locally. Although the new loan will raise liquidity and lengthen the company’s repayment schedule, it will not have a substantial impact on the leverage ratio.

The bonds of the Masan Group demonstrate that one of the most efficient ways to obtain additional funding from other sources for a firm when it needs it to maintain its operations is through bonding. The bond is an obligation that belongs to someone, who may be a single individual, a group of people, or an organization. The corporation, which has issued bonds, must repay bondholders with the promised interest at some point in the future..

There are 2 factors related to the interest rate of bond: the bond’s terms and the collateral. Firstly, the same as the banking system, the longer the bond’s terms are, the higher interest rates are for investors, and vice versa, the shorter the bond’s term are, the lower interest rates are for investors. The bond’s terms maybe 1 year, 2 years, 3 years or 5 years,.. depending on the decision of the issued company. For example, Masan Group’s bond which has issued in quarter 1/2023, was a 5-year-bond term have the floating interest rate equalling the sum of 4.1%/year and the average referenced interest rate of banks in Vietnam in 12 months. Secondly, the collateral of bonds is the one that the investors should consider when buying bonds. Collateral of a bond divides bond into 2 types: secured collateral bond and unsecured collateral bond. The bond which has secured collateral is highly considerable for the investors. The secured collateral maybe the assets of that company which are used for a mortgage for the payable ability of the company. Normally, the bonds with secured collateral have lower on the interest rate than the bonds with unsecured collateral. However, in some cases, the reputation of the company is the most important factor for the investors to invest in the company’s bond. For instance, due to the high reputation, the bonds of Masan Group are always without warrants and collateral, but many investors still choose to invest on Masan Group’s bonds with a reasonable interest rate. The explanation is about beliefs of the investors. They always believe that Masan Group will develop in the future and cannot bankrupt, so buying Masan Group’s bonds is a good choice for them.

The value and the risk of the bond

There is a principle of investment: the higher the profit is, the greater the risk is. On the market, there are many kinds of high-interest rate bonds, but without collateral or with the collateral which can be the stock of that company or future real estate,… When the business of the company is on a downtrend, the stock of the company will be dropped dramatically; or the future real estate of the company cannot be completed, so those collateral are not better than the bonds without collateral. Therefore, the best collateral of one company is its reputation and the ability to run the business and pay back to the investors.

Hence, investing in bonds requires the analysis and strictly consider of the investor about the payable of that issued company. Firstly, the investors can concentrate about the collateral of bonds, whether they are believable and validate or not. Secondly, the investors should consider  the purpose of the bond: expanding business, investing in a new project, or debt restructuring, and predict on the future of the company when they issue the bonds for that purpose: whether the business of them increases or not. Finally, investing in different bonds reduce the risk of losing all money.

In the scenario of Masan Group’s bonds, the value and the risk of this bond are analyzed below:

Firstly, the risk of Masan Group’s bonds is quite clear: no warranty and no collateral. That means nothing can prevent the customer from the risk of loss. Furthermore, the purpose of Masan Group’s bonds issued in March 2023 was debt restructuring which means they raised money to pay back to the previous investors who invested in Masan Group’s bonds in 2020 (Masan, 2023), Besides, there are many common risks when investing on bonds: interest rate risk, inflation risk, liquidity risk,… Therefore, from those analytical data, Masan Group’s bonds are quite risky.

However, the interest rate of Masan offering is reasonable. The floating interest rate equalling the sum of 4.1%/year and the average referenced interest rate of banks in Vietnam in 12 months is attractive to many investors. Although they raised money for debt restructuring, they still earned a reputation because they were able to pay back the previous investors. Eventually, Masan Group does business in FMCG from production to the sale which cannot be affected so much by any market volatility, war, downturn, or pandemic,…, since humans always has a high demand for FMCG, especially foods and beverages which is the necessity for living. Therefore, it is reasonable for investors to choose to believe in Masan and invest in their bonds.

Time value of money (TVM)

Money loses some of its purchasing power over time. This means that it would not be feasible to purchase the same quantity of any good at a later time with a currency note of the same denomination as it would be possible to do so today. There are two possible methods to make up for this decline. The first is to lower consumption because a smaller quantity can be bought with the same amount of money, and the second is to raise the amount of money needed to buy the same amount of the product. Time value of money refers to this decline in the purchasing capacity of money and its value over time. The idea of time value of money can also be used to determine which investment option will yield the greatest return on investment out of all those that are accessible. The idea is also helpful for calculating the rate of return when both the present and future value of a cash flow are known (Shrotriya, 2019).

For the situation of the company-issued bonds, in the present, they need money for their variable purpose, but the only target is maintaining the business and achieving more profit. Hence, bonding is the method for raising funds from the community. For the situation of the investors, in the present, they have money, but they do not know how to earn more money from their current money. Therefore, investing in bonds is the common way for earning money. Corporate bond always offers investors a stable interest rate, which is higher than the bank interest rate and more stable than investing in stock.

To prove this statement, in the scenario that the investor buys the bonds of Masan Group with the given interest rate is the sum of 4.1% and the average referenced interest rate of the bank, suppose that the referenced interest rate will be about constantly 7% per year. The duration of Masan’s bonds is 5 years, so if using the formula FV_n = PV(1+k)ⁿ , with PV as the present value of the investment, FV_n as the future value of the investment, k is the interest rate, and n is the number of years. After 5 years, the future value of investment in Masan’s bonds will be about 29% higher than the future value of saving money at the bank. However, the disadvantage is the period of the bank can be 1 year, which means after each 1 year, the interest and the deposit are available for withdrawal. It is more flexible than investing in 5-year-Masan bonds. Actually, the investor can trade their bonds before the maturity date, but the liquidity of the bond is quite low.

Overall, the purpose of business is only about increasing the profit and preventing slippage. The bond is the safe and stable connection to maintain the win – win approach among the company and their investor. In which, the company releasing the bond will receive money for their purposes without losing control of the business. The investors will have a higher interest rate than normal and a safer place to earn money from their own money than other kinds of investment.

References

Forbes Vietnam. (2023). The best Vietnamese 50 listed companies. Retrieved 22 August 2023 from https://thepangroup.vn/forbes-votes-the-best-vietnamese-50-listed-companies-77.htm

Masan Group. (2023). Annual Report 2022. Retrieved 22 August 2023 from https://masangroup-cms-production.s3-ap-southeast-1.amazonaws.com/iblock/997/99756934bb80a36c16a06c073447068b/53e47f938d49c2c0248861101db56ba1.pdf

Masan Group. (2023). Masan Secures up to USD650 million Syndicated Loan Pays Down VND3,000 billion in Bonds. Retrieved 22 August 2023 from https://www.masangroup.com/news/press-releases/Masan-Secures-up-to-USD650-million-Syndicated-Loan-Pays-Down-VND3000-billion-in-Bonds.html

Shrotriya, V. (2019). Time Value Of Money – The Concept And Its Utility. Retrieved 21 August 2023 from https://www.researchgate.net/publication/337464889_TIME_VALUE_OF_MONEY_-THE_CONCEPT_AND_ITS_UTILITY