RCS - Vietnam Enterprise - Results analysis from Kepler Trust Intelligence

Vietnam Enterprise InvestmentsAnnouncement

19/09/2024 10:45

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RNS Number : 8772E  Vietnam Enterprise Investments Ltd  19 September 2024

Vietnam Enterprise Investments (VEIL)

19/09/2024

Results analysis from Kepler Trust Intelligence

Vietnam Enterprise Investments' (VEIL) NAV per share rose by 6.9% in the first
half of 2024 in GBP terms, matching the Vietnam Index (VNI), supported by
strong GDP growth and supportive government policies.

New manager Le Anh Tuan strategically rebalanced the portfolio during the
period, reducing highly concentrated positions in some banking and steel
firms, while increasing exposure to retail, software & services, and
manufacturing sectors.

Dragon Capital's analyst team continues to expect profit growth for 2024 to
come in at c. 15-18% across the largest 80 stocks they cover, reflecting a
year of economic recovery which looks unlikely to be derailed by some weakness
in the global economy.

Chairman of the board Sarah Arkle commented: " Earnings per share are expected
to grow in the high teens in 2024, putting the market on a forward price/
earnings ratio of around 12x, which is cheap both relative to Vietnam's recent
history and also relative to other Asian and global markets. At current
valuations the Directors believe that the large and experienced team of
research analysts and the emphasis on high quality companies with clear
earnings visibility should reward investors over the longer term."

Vietnam Enterprise Investments' (VEIL) first half results are encouraging,
with the market rebounding as the Vietnamese economy has grown at a healthy
annualized rate of 6.4%. Dragon Capital's analysts were confident on the
outlook for earnings coming into the year, and their optimism seems to have
been proven well-founded, with strong results reported by key holdings in the
retail and banking sectors.

The second half of the year could see the recovery broaden and get extra
impetus if the Land Law reform has the expected effect. This reform has been
hastened into law earlier than originally planned as the authorities look to
encourage the residential and commercial development the country needs. The
Law should liberalise the pricing of land and facilitate changes of use,
amongst many other things. It also sets a framework for the compensation of
existing land users in respect of land for project development. Tuan Le argues
developers with existing pipelines and land banks should be in the best
position to benefit, and have taken positions on this basis. Additionally, he
expects the trust's two key holdings in the materials sector, steel producers
Hoa Phat Group and Hoa Sen Group, to benefit from increased development and
infrastructure spend. Notably, some of the key underperformers in the first
half came from these sectors, with Tuan Le taking positions in anticipation of
these reforms.

VEIL's shares continue to trade on an attractive discount. Emerging markets as
a whole have been out of favour this year, and it seems that Vietnam is no
different. This is even though the country's economy has been more resilient
in a period in which fears of a slowing US economy and high US rates have
weighed on the emerging markets. We note that US rate cuts would likely
relieve pressure on the Vietnamese currency which has weakened this year, and
so the current market expectation of a "soft landing" would arguably be an
ideal outcome for emerging markets and for VEIL.

Overall we think that VEIL looks like a more attractive position, with a new
manager who has made his mark on the portfolio, lower fees and a board
focussed on closing the discount. Meanwhile the underlying investment case for
Vietnam looks as strong as ever as it continues to deliver high GDP growth in
a world struggling to achieve this.

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