EraBlue – MWG's ambitious game needs more proof
• Compared to the most recent “going abroad” in Cambodia, MWG’s “Erablue” move to cooperate with the large ICT retail chain Erajaya, aiming to penetrate the Indonesian CE market makes more sense when this market is at a stage when it is likely to explode in the near future and has much larger potential market size than both Vietnam and Cambodia.• The “necessary” conditions for Erablue’s success are already there (market factors), however, we believe that Erablue needs additional “sufficient” conditions to compete with traditional mom-and-pop stores, other CE retailers, and especially “online platforms” – currently growing rapidly in Indonesia, to become the “second Dienmayxanh”.
• We believe that Erablue has the potential to capture ~70% market share in the CE pie from other small stores/retail chains, thanks to DMX’s successful formula and the operational experience from Erayaja. However, the chain's growth depends heavily on the speed of converting purchases to e-commerce platform, which have price advantages and are growing "fast" in CE field, similar to the Vietnamese market.
• We recommend that investors closely monitor the pace of store openings and the chain’s specific quarterly financial reports to accurately assess the potential of the Erablue and the level of impact on the overall valuation of MWG (accounting for 45% of the chain's shares).
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