RCS - Vietnam Enterprise - Results analysis from Kepler Trust Intelligence

Vietnam Enterprise InvestmentsAnnouncement

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RNS Number : 8765G  Vietnam Enterprise Investments Ltd  30 April 2025

Vietnam Enterprise Investments (VEIL)

30/04/2025

Results analysis from Kepler Trust Intelligence

Vietnam Enterprise Investments (VEIL) has reported strong results for the
financial year ending 31/12/2024. The NAV total return was 14.3% in GBP terms,
ahead of the 12.1% total return of the VNI Index. The share price total return
was lower though, at 9.9%, as the discount widened.

The strong returns follow the appointment of Tuan Le Anh as lead portfolio
manager in February 2024. A more diversified portfolio and an increase in
mid-cap exposure helped deliver the improved relative performance.

Strong earnings growth in the Vietnamese market drove prices higher, and
outweighed the impact of foreign investor outflows in the light of negative
investment sentiment towards emerging markets.

Kepler View

Last year's strong results owed much to the restructuring work Tuan Le did
upon taking over management responsibilities. He added 13 new positions and
sold five, whilst boosting the allocation to eight high-conviction holdings.
Meanwhile 19 higher-beta stocks were trimmed. The portfolio thereby became
more diversified, and more exposed to key areas of conviction. On a sector
level, this means financials, real estate, consumer discretionary materials
and IT. On a market cap level, this means the small and mid-cap names. The
combined weight of these positions at the end of the year was 9.9% versus an
overall weight of 5.5% in those names in the index. These positions
contributed 6.7 percentage points to overall performance in 2024, driving the
excess returns versus the benchmark. Notably, Vietnam Enterprise Investments
(VEIL) outperformed in each quarter of 2024, which the managers attribute to
the more balanced portfolio positioning.

Early 2025 has seen greater uncertainty for the outlook for Vietnam after
President Trump's initial proposals of surprisingly high tariffs on the
country, of 46%. Negotiations are ongoing, and it seems likely it is Trump's
intention to iron out a deal which will see a lower final rate. Nonetheless,
tariffs do create challenges. The Dragon Capital team note that the direct
impact on company revenues will be limited, although there are secondary
impacts to consider, and overall high expectations for GDP growth this year
may have to come down slightly. They note that on the plus side, tariffs are
incentivising the Vietnamese authorities to accelerate the shift to
domestic-driven growth, while support packages are expected to offset any
negative impacts. The team still expect the market to deliver high single
digit earnings growth in 2025, even after the impact of tariffs and they note
the portfolio has very little direct exposure to impacted sectors.

In our view, the prospect of tariffs has highlighted to investors the risks of
being over-exposed to US assets and is leading to a rebalancing of investor
portfolios back into the regions and countries that have long been overlooked.
It could therefore be that the emerging markets, including Vietnam, start to
see foreign investors come back in. Vietnam's foreign ownership levels hit
10-year lows at the end of 2024. VEIL's board has been substantially refreshed
over the past year, with a new chair and two new directors appointed with
knowledge of the London and Asian markets. The management fee has been cut,
the funds committed to buybacks have been substantial, and the 100%
conditional tender offer is a weighty commitment. With the shares on a
discount of c. 21% at the time of writing we think Vietnam and VEIL looks
attractive as a cheap recovery play.

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