REG - Vietnam Enterprise - Monthly Update

Prosperity BancsharesAnnouncement

14/02/2022 08:15

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RNS Number : 5588B  Vietnam Enterprise Investments Ltd  14 February 2022

14 February 2022

 

Vietnam Enterprise Investments Limited

("VEIL" or "the Company")

 

Monthly Update

0.2% NAV Return in January 2022

 

 

Vietnam Enterprise Investments Limited ("VEIL") is a closed-end fund investing
primarily in listed equity in Vietnam, and a FTSE 250 constituent. The
Company's NAV performance for January 2022 is set out in this notice.

 

Fund Performance

·    As of 31 January, VEIL's NAV increased 0.2% over the previous month
vs. a decline of -0.5% for its reference index, the Vietnam Index, both in US$
terms.

·    VEIL's NAV per share was US$12.23 at the end of January, total NAV
was US$2,603m (£1,941m)

·    VEIL's share price decreased by -2.9% in January and its discount to
NAV as of 31 January was 18.5%

·    Over the course of the month, the Company bought back 671,835 shares
to be held in treasury, compared with 50,000 shares bought back in December
2021.

·    Five of the Company's top ten holdings increased in December, four of
these were banks.

·    Sentiment in the banking sector was boosted by solid Q4 2021 earnings
and robust provisional full-year earnings.

·    Vietcombank was VEIL's top performer, up 13.8% at the end of January.

·    The main detractor for performance was steel manufacturer and VEIL's
top position, Hoa Phat Group, after its quarterly results failed to meet
market expectations for the first time in two years.

 

Economic Overview

·      January exports rose 8.0% year-on-year to US$30.8bn, while
imports increased 11.5% to US$29.5bn, making a trade surplus of US$1.3bn

·      It is understood a significant export backlog is in place, this
helped drive Vietnam's PMI (Purchasing Manager's Index) up to 53.7, from 52.5
in December and its highest level since April 2021 (all figures from IHS
Markit).

·      The new Samsung S22 is due to be launched on 25 February. It is
the latest flagship model manufactured in Vietnam. In 2021, approximately 60%
of Samsung handsets were manufactured in Vietnam according to company reports.

·      Overall, the Index of Industrial Production ("IIP") rose by 2.4%,
within this the IIP for the manufacturing sector rose 2.8%.

·      Total State revenue and expenditures reached US$8.0bn (-3.2% YoY)
and US$5.0bn in January, respectively, resulting in a fiscal surplus of
US$3.0bn (according to Ministry of Finance estimates).

·      The Government has laid out guidelines for execution of the
Five-Year Plan, which calls for average GDP growth of 6.5-7.0% p.a. in
2021-25.

·      Foreign visitors increased 11.2% year-on-year after Vietnam
piloted the resumption of select international flights.

·      At the date of this release, more than 75% of Vietnam's
population of 97m are double-vaccinated and approximately a quarter of the
population have received a third dose.

 

Dien Huu Vu, the Portfolio Manager of VEIL commented:

 

"The Vietnam Index fell by a marginal 0.49% during January (USD terms), which
compared well on a global level. Vietnam's markets had their own share of
volatility, falling almost 6% early in the month, but the decline was reversed
soon enough, and overall sentiment was good. Average daily turnover increased
2.9% month-on-month to US$1.2bn on the Ho Chi Minh Stock Exchange and
totalled US$1.4bn on Vietnam's three exchanges combined.

 

Following the 4Q 2021 reporting and with most results in, listed companies
posted Q4 EPS growth of +20.6% year-on-year.  This brought the full-year
number to +42%, reflecting the fast pace of recovery in H1 before the Q3
lockdown.  As the reopening of Vietnam's continues, concerns on the quality
of bank assets subsided, and sentiment in the sector should be further boosted
by robust Q4 2021 and full-year 2021's earnings.

 

On an economic front, services have been the really encouraging area, January
retail sales were up 6.7% month-on-month and 1.3% year-on-year - we see any
increase being positive, and with VAT being cut from 10% to 8% we believe
certain services, including food and beverage, are well-positioned to keep
rebounding as this reduction should support domestic demand.  Vietnam also
plans to fully reopen its borders from Q2 2022, priming the long-depressed
tourism and hospitality industry.

 

US economic data shows that recovery is underway in the United States, but
with an inflationary toll, and many commentators are expecting at least five
Fed rate hikes this year.  This will pressure emerging market yields, so the
Vietnam Government - already set to increasing spending in 2022 - may see its
domestic borrowing costs rise. This could feed through the system and put
rates up, but the Investment Manager expects not by more than 50 bps. The
Investment Manager also expects the rate of exchange between the Vietnam Dong
and the US Dollar to be steady due to Vietnam's conservative fiscal and
monetary policies, low foreign debt, and external account surpluses.

 

 

January Commentary

 

Vietcombank ("VCB"), market cap US$18.3bn (at month-end), led the banking
sector with a double-digit return in January as the bank posted solid numbers
with a 14% year-on-year growth in earnings for Q4 2021 and 19% year-on-year
for 2021. Their non-performing loan (NPL) ratio well controlled at 0.64% and
loan-loss reserve (LLR) ratio expanded to over 400%, demonstrating that VCB is
able to deliver robust growth numbers even with high conservatism in
maintaining its asset quality.

 

Dat Xanh Group ("DXG"), a midcap real estate developer and leading property
brokerage company in Vietnam with market cap of US$897 (at month-end), fell
-2.6%. This appeared to be caused by a wider decline across small and midcap
developers despite DXG's solid financial position, having posted its highest
ever net revenue and second highest ever net earnings in 2021, at US$439m and
US$50m, respectively.

 

Hoa Phat Group ("HPG") an integrated steel manufacturer with market cap
US$8.2bn (at month-end) had disappointing quarterly results for the first time
in two years, despite a 72% year-on-year and 16% quarter-on-quarter growth in
sales for Q4 2021. HPG's profit fell 29% quarter-on-quarter, highlighting the
rising input price headwinds faced by steel companies in Vietnam. Overall for
2021, HPG delivered strong results, with annual revenue of US$6.6bn and PAT
US$1.5bn (+65% and +156% year on year, respectively), becoming only the second
listed Vietnamese company ever to post a net profit of over US$1bn.

 

 

Top Ten Holdings (72.6% of NAV)

 

     Company                  Sector               Vietnam Index %  NAV %  Monthly Change %
 1   Hoa Phat Group           Materials/Resources  3.3              11.1   -8.4
 2   Vietnam Prosperity Bank  Banks                2.9              11.1   3.1
 3   Asia Commercial Bank     Banks                1.6              9.9    0.9
 4   Mobile World             Retail               1.7              9.5    -1.8
 5   Vietcombank              Banks                7.4              6.8    13.8
 6   Vinhomes                 Real Estate          6.2              6.6    -1.4
 7   Vingroup                 Real Estate          6.5              5.2    2.7
 8   Dat Xanh Group           Real Estate          0.4              4.2    -2.6
 9   Techcombank              Banks                3.3              4.2    6.4
 10  FPT Corporation          Software/Services    1.4              4.0    -3.1

 

 

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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