REG - Vietnam Enterprise - Monthly Update

Vietnam Enterprise InvestmentsAnnouncement

14/03/2024 07:15

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RNS Number : 8429G  Vietnam Enterprise Investments Ltd  14 March 2024

14 March 2024

 

Vietnam Enterprise Investments Limited

("VEIL" or "the Company")

 

Monthly Update

 

VEIL is a London-listed investment company investing primarily in listed
equities in Vietnam and a FTSE 250 constituent. The Company's unaudited
performance for February 2024, in which NAV per share rose 6.2% (in USD
terms), is set out in this notice.

 

 

Tuan Le, recently appointed Lead Portfolio Manager of VEIL commented:

 

"VEIL had a strong February with NAV per share increasing by 6.2%, with all
the portfolio's top ten holdings ending the month registering share price
gains, supported by a favourable macroeconomic backdrop.

 

"The Purchasing Managers' Index stayed above 50 for the second month in a row
after five consecutive months of contraction, with a 5.7% year-on-year
increase in the Index of Industrial Production for the first two months of
2024. Total exports rose 19.2% year-on-year to US$59.3bn, while imports
increased less by 18.0% to US$54.5bn. New export orders continued to rise,
with meaningful growth registered in major markets with which Vietnam has
recently upgraded diplomatic relations, such as the US and Japan, both surging
34% year-on-year.

 

"Retail sales grew 5.0% year-on-year in the first two months of the year,
driven by increased demand over the Tet holiday and tourism, which confirms
the recovering domestic consumption trend. FDI disbursement over the same
period reached US$2.8bn, up 9.8%, building on a strong 2023 base which
underscores Vietnam's increasingly established appeal as a key alternative for
investors diversifying from China.

 

"Both lending and deposit rates continued to drop to record lows, with current
12-month deposit rates averaging 4.5-5.0%, down considerably from the 2023
peak of more than 11%. This adjustment likely contributed to the 24.8%
month-on-month spike in liquidity on the Ho Chi Minh City Stock Exchange to
US$828mn, highlighting the equity market's allure over fixed-term deposits.
The Vietnam Index also surpassed last years' high of 1,245 points, climbing to
1,252 points by the end of the month.

 

"The Ministry of Finance reported a 21.8% year-on-year increase in domestic
investment and development (including infrastructure) spending to US$2.4bn in
the first two months of 2024. This push looks set to reinvigorate the
materials sector, especially steel, and aligns with our expectation of
increased demand spurred by infrastructure initiatives. VEIL's top holding,
Hoa Phat Group ("HPG"), is Vietnam's largest steel producer, with 35% market
share in construction steel and 28% in steel pipes. HPG invited investors to
visit its new hot rolled coil ("HRC") plant at the end of March, which is due
to open in early 2025. HRC is the company's most profitable line, and this
expansion is set to increase annual HRC production from 3.4mn to 8.0mn tons
over the next 12-24 months. In the first two months of 2024, HRC volumes
doubled due to rising demand, helping total sales volume to rise 26.9%
year-on-year.

 

"VEIL's strategic 5x overweight position (2.5% vs 0.5% of the Vietnam Index)
in real estate developer Khang Dien House ("KDH") aligns with our projection
of a recovery in the sector. KDH's +12.1% increase in February was due in part
to the recent amendments to the Land Law, which prioritises developers with
ready landbanks for project approvals. With one of the largest landbanks in
HCMC, KDH is well-positioned to lead the sector revival. These comprise five
separate projects including c.1,400 apartments in 2024, a 110ha industrial
park extension starting in 2025, and a major 329ha mixed-use project starting
in 2026.

 

"The Government's tech drive includes a programme for IT enrolment and it is
yielding tangible benefits, particularly for FPT, Vietnam's leading software
services company. Management reported that recruitment is becoming easier and
plans to hire up to 3,000 additional engineers this year, doubling the 2023
figure of approximately 3,000 to 6,000. This is underpinned by an anticipated
22-25% growth in global IT revenue for 2024, with Japan projected as the
fastest-growing market at 35%. FPT's recent acquisition of Next Advance
Communications, a Japanese IT services firm, is a strategic move that
establishes a solid foothold in Japan. This sets a clear path towards
achieving its US$1bn revenue target in Japan by 2027 from US$388mn in 2023,
approximately 38% of its global IT revenue."

 

 

Company Performance

·    As of 29 February, VEIL's NAV increased by 6.2% over the previous
month against a gain of 6.6% for its reference index, the Vietnam Index
("VNI"), both in total return USD terms. The Company's NAV per share was
US$9.32 and its total NAV was US$1.9bn.

·    VEIL's share price increased 2.3% in February and 4.8% year-to-date,
both in USD terms.

·    VEIL's three-month NAV per share performance in USD terms is +11.4%,
+20.1% over one year and -0.2% over three years. Over the same time periods,
the performance of the VNI was +13.0%, +20.0% and +4.7%, respectively.

·    In GBP terms, VEIL's NAV increased 7.0% over the previous month and
8.4% year-to-date. The Company's NAV per share was £7.37 as of 29 February
and its total NAV was £1.5bn. The GBP share price increased by 3.0% for the
month and 5.6% year-to-date.

·    The share price discount to NAV as of 29 February increased to 20.2%,
compared with 17.1% at the end of January. On 31 December 2023 the discount
was 18.1%.

·    The Company purchased 740,269 shares in February, compared with
386,103 shares purchased in January. Year-to-date to 29 February, 1,126,372
(0.56% of shares outstanding as of 1 January 2024) were purchased.

The accretion to NAV per share from the share repurchases was 0.13%
year-to-date to 29 February.

·    The Vietnamese dong ("VND") depreciated 0.9% against the USD in
February and 1.6% year-to-date. The VND depreciated 0.9% against the GBP in
February and 1.2% year-to-date

 

 

Top Ten Holdings (60.0% of NAV)

 

     Company                  Sector               NAV %  VNI %  Monthly Return %  One-year Return %
 1   Hoa Phat Group           Materials/Resources  9.9    3.6    10.7              49.6
 2   Asia Commercial Bank     Banks                9.0    2.2    7.7               32.5
 3   Vietnam Prosperity Bank  Banks                8.8    3.1    1.6               18.3
 4   Vietcombank              Banks                7.3    10.8   8.9               18.6
 5   FPT Corporation          Software/Services    6.4    2.7    12.9              53.7
 6   Mobile World             Retail               4.2    1.3    1.7               12.5
 7   Techcombank              Banks                4.1    2.9    21.0              53.7
 8   Military Bank            Banks                3.6    2.5    10.0              59.3
 9   Vinhomes                 Real Estate          3.4    3.7    3.6               0.9
 10  PV Gas                   Energy               3.3    3.5    1.7               -10.3

     Vietnam Index            -                           -      6.6               20.0

Source: Bloomberg, Dragon Capital

NB: All returns are given in USD terms as of 29 February 2024

 

 

For further information, please contact:

 

Vietnam Enterprise Investments Limited

Rachel Hill

+44 122 561 8150

+44 797 121 4852

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

 

Jefferies International Limited

Stuart
Klein

+44 207 029 8703

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

 

Buchanan

Charles Ryland / Henry Wilson / George Beale

+44 20 7466 5111

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

 

h2Radnor

Iain Daly

+44 20 3897 1830

idaly@h2radnor.com (mailto:idaly@h2radnor.com)

 

 

LEI: 213800SYT3T4AGEVW864

 

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