Vietnam Enterprise - Third Quarter Update

Vietnam Enterprise Investments

03/11/2023 07:05

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RNS Number : 2809S  Vietnam Enterprise Investments Ltd  03 November 2023

3 November 2023

 

Vietnam Enterprise Investments Limited

("VEIL" or the "Company")

 

2023 Update - Third Quarter

 

VEIL is a London listed investment company investing primarily in listed
equities in Vietnam and a FTSE 250 constituent. The Company's NAV performance
for Q3 2023 is set out in this notice.

 

 

Company
Highlights

·          In Q3 2023, VEIL's NAV increased 2.2% over the previous
quarter against a rise of 0.4% for its reference index, the Vietnam Index
("VNI"). Year-to-date, VEIL's NAV and the VNI have both increased by 12.7%.
All in total return US dollar terms.

·          The Company's NAV per share was US$8.85 as of 30
September, and its total NAV was US$1.8bn.

·          In USD terms, the Company's share price decreased 2.9%
for the quarter and has increased 3.2% year-to-date.

·          VEIL's one-year NAV per share performance in US dollar
terms is +0.7%, +31.9% over three years and +23.6% over five years. Over the
same periods, the performance of the VNI was +1.7%, +27.2%, and +18.1%,
respectively.

·          In GBP terms, the Company's NAV per share was £7.25 as
of 30 September (+6.5% for the quarter and -7.9% over one year), and its total
NAV was £1.5bn. The Company's share price increased 1.2% for the quarter and
decreased 6.8% over one year.

·          The Company's discount to NAV averaged 15.8% for the
quarter. As of 30 September 2023, the discount to NAV was 18.2%, compared with
14.0% at the end of Q2 2023 and 10.7% as of 31 December 2022.

·          The Company spent US$12.6mn repurchasing 1,679,469 shares
in Q3 2023, compared with 1,199,216 shares repurchased in Q2 2023.

·          A total of 3,586,058 shares were repurchased YTD to the
end of September. This is 1.7% of shares outstanding as of 1 January 2023. The
accretion to NAV per share from the share repurchases is 0.37%.

·          The Vietnamese dong ("VND") depreciated 3.1% against the
US dollar in Q3 2023 and has depreciated 2.8% year-to-date. The VND
appreciated 1.1% against the GBP pound sterling during the same period and has
depreciated 4.1% year-to-date.

 

Dien Vu, Portfolio Manager of VEIL, commented:

"Vietnam's GDP expanded by 5.3% year-on-year in Q3 2023, putting average
growth at 4.3% in the first nine months of 2023. This expansion can be
attributed mainly to the services sector, which increased 6.3% year-on-year
due to sub-sectors such as accommodation and catering services (+13.2%),
wholesale and retail sales (+9.0%) and transportation and logistics (+8.7%).

"VEIL outperformed the VNI in Q3 2023, and year-to-date ended September 0.03%
behind its reference index. In a turbulent third quarter, the VNI was up 10%
in mid-August and again in early September before declining to end the quarter
flat.

"The third quarter strengthening of the US dollar index from 103.6 to 107
combined with rising 10-year US Treasury yields from 4.1% to 4.8% came as the
Fed signalled rates could remain higher for longer. The Vietnamese dong's 3.1%
depreciation versus the US dollar in the third quarter was broadly in line
with many of its peers, including depreciations of 3.5% in the Thai baht,
Indonesian rupiah and New Taiwan dollar.

 

"The Vietnamese dong remains well-supported by US$16bn of disbursed FDI and
US$22bn trade surplus. The State Bank of Vietnam ("SBV") issued bills
totalling US$5.7bn during the third quarter, leading to the 1-month interbank
interest rate increasing from 0.7-0.8% in early September to 2.5-2.7% in early
October. The Manager believes the devaluation to maintain the VND's
competitiveness and bill issuances are normal operations and not a sign of
policy change; the SBV has undertaken numerous bill issuances in the past as a
means of money supply management. Excess liquidity in the banking sector is
evident, however, as some banks reported a drop in deposit rates of 10-20
basis points.

 

"All 80 companies in the Manager's core investment coverage have reported
their Q3 2023 earnings. Overall, revenue increased by approximately 5% and
EBIT by nearly 9% year-on-year. However, following the 3.1% currency
depreciation, NPAT was affected by increased loan provisions from some large
cap stocks with USD denominated debt and grew by just 0.8%. This underlines
the Manager's view that while the nadir has passed, challenges still exist on
the road to earnings recovery.

 

"In Q3 2023, Mobile World Group's ("MWG") share price increased by 18.8%,
however, the stock is still down 18.7% over one-year, which the Manager
believes is reflective of weak investor sentiment on consumption. MWG cleared
the excess inventory it was holding in H1 2023, and the revenue increase of
just 3% quarter-on-quarter (to US$1.2bn in Q3) was in line with the Manager's
expectations as MWG continues to spend aggressively on sales and marketing to
capture market share opportunistically. In the first nine months of the year,
MWG recorded revenue of US$3.5bn (-18.4% year-on-year) and NPAT of US$3mn
(-97.2%) due to reduced operating margins.

 

"Asia Commercial Bank ("ACB") reported NPAT growth of 12.6% year-on-year (to
US$343mn) as it saw a significant boost in non-interest income, expanding by
109.2% year-on-year. ACB's share price decline of 4.0% in Q3 2023
underperformed the overall banking sector increase of 3.5%, although this is
understandable after a strong H1 2023 when it returned 20.5% against a rise of
11.2% in the VNI. In August, VEIL divested 40% of its position in ACB (held
continuously by the Company since 1996) via an off-market transaction
commanding a 7% premium, 3% higher than ACB's all-time high.

 

"Residential property stocks fell 24% year-on-year although increased 3.6%
quarter-on-quarter. VEIL's real estate holding Vinhomes ("VHM") was a notable
laggard, decreasing by 19.8% in Q3 2023. At US$1.3bn, NPAT fulfilled 107% of
the Manager's full-year forecasts due to faster than anticipated unit handover
of some major projects. The Manager believes the recent drop in stock price is
attributable to the uncertainty felt by investors in the wider Vingroup family
of stocks rather than in VHM itself, which is regarded as one of the strongest
names in the property market.

 

"Global challenges are widely anticipated going into 2024 and will likely
impact Vietnam's economy. Nevertheless, the Manager expects the country's
macro stability will be maintained due to its solid external position, low
USD-denominated debt (35% of GDP) and low government debt (38% of GDP). On the
domestic front, the Manager expects fiscal spending, credit growth and
disbursement, and consumer recovery to materialise. The Manager has positioned
VEIL's portfolio to benefit from sectors such as technology, banks, retail,
food and beverage, property, oil & gas, and steel, and expects earnings
per share growth of over 20% from VEIL's portfolio next year."

 

Macroeconomic Commentary

·    GDP growth registered at 5.3% year-on-year in Q3 2023 and 4.2% for
the first nine months of the year. The services sector grew by 6.2% in Q3 to
average 6.3% year-to-date and contributed 68.6% to overall GDP growth.

·    The industrial and construction sector increased by 2.4% in the first
nine months, contributing 22.3% to GDP, of which the processing and
manufacturing industry increased by 2.0%, the lowest increase over the same
period since 2011-2023.

·    In the first nine months of 2023, exports totalled US$259.7bn and
imports US$238.0bn, down 8.2% and 13.8% year-on-year, respectively. The YTD
trade surplus is US$21.7bn, compared to a US$6.8bn surplus at the same stage
of 2022.

·    FDI disbursement to the end of September was US$15.9bn, up 2.2%
year-on-year. Meanwhile, registered FDI increased 7.7% to US$20.2bn in this
period.

·    Average inflation for the first nine months of 2023 was 3.2%.

·    In the first nine months of the year, total retail sales rose 7.3%
year-on-year in real terms.

·    International visitors to Vietnam totalled 8.9mn in the first nine
months of the year, which although 4.7 times higher than the same stage of
2022, only accounts for 69% of the 2019 numbers.

 

Top Ten Holdings (61.6% of NAV)

 

     Company                  Sector               NAV %  VNI %  Q3 2023 Return %  One-year Return %
 1   Vietnam Prosperity Bank  Banks                11.1   3.2    5.9               18.2
 2   Hoa Phat Group           Materials/Resources  8.7    3.4    -2.5              21.6
 3   Vietcombank              Banks                7.6    10.9   0.1               38.4
 4   Asia Commercial Bank     Banks                7.4    1.9    -4.0              15.5
 5   Mobile World Group       Retail               6.2    1.7    18.8              -18.7
 6   FPT Corporation          Software/Services    5.7    2.6    23.0              33.0
 7   PetroVietnam Gas         Energy               4.4    3.9    17.5              0.5
 8   Vinhomes                 Real Estate          3.9    4.4    -19.8             -12.0
 9   Vinamilk                 Food & Beverage      3.5    3.4    4.7               5.9
 10  Khang Dien House         Real Estate          3.1    0.5    2.7               14.1

     Vietnam Index            -                           -      0.4               1.7

Source: Bloomberg, Dragon Capital

NB: All returns are given in USD terms

 

 

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)

 

Radnor Capital Partners

Iain Daly

Phone: +44 20 3897 1830

id@radnorcp.com (mailto:id@radnorcp.com)

 

 

LEI: 213800SYT3T4AGEVW864

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