REG - Vietnam Enterprise - Monthly Update

Prosperity BancsharesAnnouncement

16/11/2021 08:05

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RNS Number : 5083S  Vietnam Enterprise Investments Ltd  16 November 2021

16(th) November 2021

Vietnam Enterprise Investments Limited

("VEIL" or the "Company")

 

Monthly Update

+6.5% NAV Return for October and 47.1% in 10M2021

 

 

Vietnam Enterprise Investments Limited ("VEIL") is a closed-end investment
fund investing primarily in listed equity in Vietnam and a FTSE 250
constituent. The Company's NAV performance for October 2021 is set out in this
notice.

 

Company Performance

·    As of 31 October 2021, VEIL's NAV increased by 6.5% over the previous
month (compared with 7.7% for its reference index, the Vietnam Index) in US$
terms

·    YTD the Company's NAV has increased 47.1%, compared with the Vietnam
Index which has increased 34.1%

·    All of VEIL's top ten holdings rose although six of the ten
underperformed the Index, mainly due to a relative underperformance in the
banking sector

 

 

Economic Overview

·      The Vietnamese economy showed signs of recovery in October as
lockdowns eased, although leading indicators were still mixed. The Investment
Manager expects normalisation will still take some time.

·      The appreciating Vietnam Dong indicates underlying strength in
the economy.

·      FDI ("Foreign Direct Investment") continues to come into the
country, with US$1.87bn disbursed in October, US$15.2bn YTD (according to the
General Statistics Office of Vietnam), the Manager's full-year target of
US$19bn looks quite realistic, comparable with US$20bn last year.

·      Inward remittances look set to increase over last year's US$17bn.

·      COVID is still problematic in a few places, but data indicates
vaccinations are rapidly containing the spread.

·      A meaningful fiscal package is being discussed by the Government
to help stimulate the economy further.

 

 

Dien Huu Vu, the Portfolio Manager of VEIL commented:

 

"October started and finished strongly off the back of the reopening up of the
economy and news of a potential economic stimulus package, respectively. The
market closed the month on record-highs in the Vietnam Index, which had daily
liquidity of $1.2bn across its three exchanges, also boosted by solid Q3
earnings growth and remains one of the best performing markets in Asia. VEIL
is heavily weighted in banks and we believe valuation and share price
performance in the sector will likely diverge further in the near future as 3Q
and 4Q results separate the better banks from the weaker.

 

Looking ahead to 2022, we believe stock selection within the banking sector
will become more critical when assessing value/growth metrics, accelerating
credit expansion and provisions being unwound. This presupposes that our
forecast of a broad-based macro recovery pans out, helped by the expected
fiscal stimulus to help Vietnam's economy return to its high growth rate,
which we believe will be positive for equities."

 

 

October Commentary

 

Vietnam's stock market continued rising as the lockdown in key cities such as
Ho Chi Minh City were eased in October.  VEIL's NAV gained 6.5% for the
month, trailing the Vietnam Index, by 1.2%. Whilst all of VEIL's top ten
holdings rose, relative performance varied, with six of the top ten holdings
underperforming the Vietnam Index.  The biggest contributors to VEIL's
relative performance were Hoa Phat Group ("HPG") and Vinhomes ("VHM"), whilst
the banking sector was generally relatively weak during October.

 

Sentiment in HPG improved as its 3Q21 earnings results pleasantly surprised
the market.  For the quarter, HPG posted earnings of US$455m, up 174% over
the last year, despite very difficult market conditions during the lockdown
period.  The company started 4Q21 on a strong note as the reopening of the
economy boosted demand for steel.  HPG also reported its second highest ever
monthly sales volume of 968,000 tonnes in October.  Robust demand has also
enabled the company to gradually increase its selling prices for key products,
such as construction steel, by around 3% in October, suggesting a potentially
strong end to FY2021.

 

Similarly, Vinhomes' Q3 earnings results also provided a major boost to
sentiment in its share price as the biggest residential developer in Vietnam
booked a profit of US$495m, up 89% over the year.  The strong earnings were
driven by bulk sales of its key projects such as Ocean Park and Grand Park,
which were more than enough to offset the otherwise weak handover and
pre-sales due to the lockdown.

 

The banking sector has been a weak spot for the market in general since the
start of the fourth wave of the COVID-19 pandemic, primarily due to concerns
about the possible creation of non-performing loans (NPLs).  Whilst an uptick
in NPLs is inevitable, the degree of their increase as well as the impact on
asset quality and earnings will vary from bank to bank.

 

 

VEIL Top 10 Holdings

 

     Company                  Sector               Vietnam Index %  NAV %  Monthly Change %
 1   Hoa Phat Group           Materials/Resources  4.7              14.0   8.0
 2   Vietnam Prosperity Bank  Banks                1.7              11.4   4.0
 3   Asia Commercial Bank     Banks                1.6              9.4    4.6
 4   Mobile World             Retail               1.7              9.2    2.9
 5   Vinhomes                 Real Estate          6.8              7.0    9.2
 6   Vietcombank              Banks                6.6              6.1    0.9
 7   Vingroup                 Real Estate          6.7              5.8    8.9
 8   FPT Corporation          Software/Services    1.6              4.9    4.2
 9   Techcombank              Banks                3.3              3.9    4.1
 10  Novaland                 Real Estate          2.9              3.6    7.2

 

 

 

For further information, please contact:

 

Vietnam Enterprise Investments Limited

Rachel Hill

Phone: +44 122 561 8150

Mobile: +44 797 121 4852

rachelhill@dragoncapital.com (mailto:rachelhill@dragoncapital.com)
 

 

Jefferies International Limited

Stuart
Klein

Phone: +44 207 029 8703

stuart.klein@jefferies.com (mailto:stuart.klein@jefferies.com)

 

Buchanan

Charles Ryland / Henry Wilson / George Beale

Phone: +44 20 7466 5111

veil@buchanan.uk.com (mailto:veil@buchanan.uk.com)

 

LEI: 213800SYT3T4AGEVW864

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