Monthly Update

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

[phone]

[phone]

[e-mail]         

Jefferies International Limited

Stuart Klein                                                                                                                        

[phone]

[e-mail] 

Buchanan

Charles Ryland / Henry Wilson / George Beale

[phone]

[e-mail]

h2Radnor

Iain Daly

[phone]

[e-mail]

LEI: 213800SYT3T4AGEVW864

 

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