Monthly Update

Vietnam Enterprise Investments Ltd

14 November 2023

 

14 November 2023

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 NAV performance for October 2023 is set out in this notice.

Company Performance

·    As of 31 October, VEIL's NAV decreased 13.0% over the previous month against a fall of 11.7% for its reference index, the Vietnam Index ("VNI"), both in total return USD terms. The Company's NAV per share was US$7.70 and its total NAV was US$1.6bn.

·    VEIL's share price decreased 13.1% in October and has declined 10.3% year-to-date, both in USD terms.

·    VEIL's three-month NAV per share performance in USD terms is -18.9%, +2.5% over one year and +11.0% over three years. Over the same time periods, the performance of the VNI was -18.5%, +2.8% and +9.6%, respectively.

·    In GBP terms, VEIL's NAV decreased 12.4% over the previous month and has declined 2.8% year-to-date. The Company's NAV per share was £6.35 as of 31 October and its total NAV was £1.3bn. The GBP share price decreased by 12.6% for the month and has declined 11.1% year-to-date.

·    The share price discount to NAV as of 31 October was 18.4%, compared with 18.2% at the end of September and 10.7% as of 31 December 2022.

·    The Company repurchased 1,207,118 shares in October, compared with 1,158,987 shares repurchased in September. Year-to-date to 31 October, 4,793,176 (2.3% of shares outstanding as of 1 January 2023) have been repurchased. The accretion to NAV per share from the share repurchases is 0.52%.

·    The Vietnamese dong ("VND") depreciated 1.1% against the USD in October and has depreciated 4.0% year-to-date. The VND depreciated 1.0% against the GBP in October and has depreciated 5.2% year-to-date.

Dien Vu, Portfolio Manager of VEIL commented:

"The VNI's total decline of 17.5% in September and October cancelled out the market and the Company's YTD gains. The Manager believes the drop in valuations across the portfolio has been sentiment driven. This view may be supported by the market's recovery of 8.9% in the first seven trading days of November. The Vietnamese market is not immune from global sentiment and is subject to further pressure from domestic policy decisions.

"Of note in this regard is the State Bank of Vietnam's ("SBV") decision to remove an estimated excess US$9bn in financial system liquidity since late September via open-market operations. The move dampened local investor sentiment who mistakenly interpreted it as a return to monetary tightening after the SBV's 150 basis point rate cuts earlier in the year. However, during the latter half of October, the SBV injected US$2.5bn of liquidity into the system.  Rather than an augur of a hawkish SBV, the Manager believes the move reflects their objective to maintain a sufficient war chest to protect the value of the currency. The VND depreciated 1.1% against the USD in October and follows a 0.9% depreciation in September. The Manager maintains the viewpoint that the VND is fundamentally solid and the SBV will continue its focus on growth with economic stability.

"Despite the mark-to-market volatility, the Manager has not observed any substantial deterioration in the core fundamentals of VEIL's holdings and would like to highlight the following companies:

"Mobile World Group ("MWG") declined 29.0% in October as third quarter earnings reported that revenue declined 16% YoY to US$3.5bn in the nine months to 30 September. However, MWG's market share in Apple products increased to 42% from 30% the previous year, and non-Apple products increased to 58% from 50%. MWG's management has indicated that they expect profit margins to recover in 2024, partly due to optimising truck capacity and other operational efficiencies in the supply chain for their grocery store division with c.2,000 outlets. The Manager believes the October fall in MWG's share price was more likely influenced by early rumours over its potential removal from a $665m exchange traded fund of which MWG is a 12.5% weight, although this review is not due until April 2024.

"Vinhomes ("VHM") declined by 15.1% despite strong Q3 results. NPAT of US$1.3bn for the first nine months of the year fulfilled 107% of the Manager's full-year forecast for 2023. The October share price decline was in part due to a large volume of sell orders placed in the market on 26 October as investors hedged against its parent company Vingroup's US$250m five-year exchangeable bond placement with the option to convert into VHM shares.

"Hoa Phat Group's ("HPG") October sales continued to recover and were up 7.4% month-on-month and 23.7% year-on-year. Production cuts in China benefitted both Vietnamese steel prices and demand, and we expect sales momentum will continue at a steady rate, supported by the Governments infrastructure drive and gradual recovery of the property market. With clear signs of earnings recovery and HPG's furnaces now operating at 85% capacity, the Manager anticipates over 40% EPS growth in 2024 whilst the price to book ratio is currently at around a 20% discount to its three-year average."

Top Ten Holdings (62.6% of NAV)

	Company	Sector	NAV %	VNI %	Monthly Return %	One-year Return %
1	Vietnam Prosperity Bank	Banks	11.4	3.3	-8.7	23.7
2	Hoa Phat Group	Materials/Resources	8.6	3.3	-13.4	48.6
3	Vietcombank	Banks	8.5	11.9	-1.7	41.0
4	Asia Commercial Bank	Banks	8.3	2.0	-3.0	15.6
5	FPT Corporation	Software/Services	5.9	2.6	-11.4	30.6
6	Mobile World Group	Retail	5.2	1.4	-29.0	-25.4
7	PetroVietnam Gas	Energy	4.2	3.6	-16.3	-13.3
8	Vinhomes	Real Estate	3.8	4.2	-15.1	-12.4
9	Vinamilk	Food & Beverage	3.4	3.5	-9.2	-7.8
10	Khang Dien House	Real Estate	3.4	0.6	-4.6	40.1
	Vietnam Index	-		-	-11.7	2.8

Source: Bloomberg, Dragon Capital

NB: All returns are given in USD terms

For further information, please contact:

Vietnam Enterprise Investments Limited

Rachel Hill

Phone: [phone]

Mobile: [phone]

[e-mail]         

Jefferies International Limited

Stuart Klein                                                                                                                        

Phone: [phone]

[e-mail] 

Buchanan

Charles Ryland / Henry Wilson / George Beale

Phone: [phone]

[e-mail]

Radnor Capital Partners

Iain Daly

Phone: [phone]

[e-mail]

LEI: 213800SYT3T4AGEVW864

 

END