TIDMVEIL
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 GBP7.25 as of
30 September (+6.5% for the quarter and -7.9% over one year), and
its total NAV was GBP1.5bn. 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 One-year
Return % Return %
Vietnam Prosperity
1 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
================== =================== ===== ===== ========= =========
Asia Commercial
4 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
Jefferies International Limited
Stuart Klein
Phone: +44 207 029 8703
stuart.klein@jefferies.com
Buchanan
Charles Ryland / Henry Wilson / George Beale
Phone: +44 20 7466 5111
veil@buchanan.uk.com
Radnor Capital Partners
Iain Daly
Phone: +44 20 3897 1830
id@radnorcp.com
LEI: 213800SYT3T4AGEVW864
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