Monthly Update

RNS Number : 5588B

Vietnam Enterprise Investments Ltd

14 February 2022

 

14 February 2022

Vietnam Enterprise Investments Limited

("VEIL" or "the Company")

Monthly Update

0.2% NAV Return in January 2022

Vietnam Enterprise Investments Limited ("VEIL") is a closed-end fund investing primarily in listed equity in Vietnam, and a FTSE 250 constituent. The Company's NAV performance for January 2022 is set out in this notice.

Fund Performance

· As of 31 January, VEIL's NAV increased 0.2% over the previous month vs. a decline of -0.5% for its reference index, the Vietnam Index, both in US$ terms.

· VEIL's NAV per share was US$12.23 at the end of January, total NAV was US$2,603m (£1,941m)

· VEIL's share price decreased by -2.9% in January and its discount to NAV as of 31 January was 18.5%

· Over the course of the month, the Company bought back 671,835 shares to be held in treasury, compared with 50,000 shares bought back in December 2021.

· Five of the Company's top ten holdings increased in December, four of these were banks.

· Sentiment in the banking sector was boosted by solid Q4 2021 earnings and robust provisional full-year earnings.

· Vietcombank was VEIL's top performer, up 13.8% at the end of January.

· The main detractor for performance was steel manufacturer and VEIL's top position, Hoa Phat Group, after its quarterly results failed to meet market expectations for the first time in two years.

Economic Overview

· January exports rose 8.0% year-on-year to US$30.8bn, while imports increased 11.5% to US$29.5bn, making a trade surplus of US$1.3bn

· It is understood a significant export backlog is in place, this helped drive Vietnam's PMI (Purchasing Manager's Index) up to 53.7, from 52.5 in December and its highest level since April 2021 (all figures from IHS Markit).

· The new Samsung S22 is due to be launched on 25 February. It is the latest flagship model manufactured in Vietnam. In 2021, approximately 60% of Samsung handsets were manufactured in Vietnam according to company reports.

· Overall, the Index of Industrial Production ("IIP") rose by 2.4%, within this the IIP for the manufacturing sector rose 2.8%.

· Total State revenue and expenditures reached US$8.0bn (-3.2% YoY) and US$5.0bn in January, respectively, resulting in a fiscal surplus of US$3.0bn (according to Ministry of Finance estimates).

· The Government has laid out guidelines for execution of the Five-Year Plan, which calls for average GDP growth of 6.5-7.0% p.a. in 2021-25. 

· Foreign visitors increased 11.2% year-on-year after Vietnam piloted the resumption of select international flights.

· At the date of this release, more than 75% of Vietnam's population of 97m are double-vaccinated and approximately a quarter of the population have received a third dose.

Dien Huu Vu, the Portfolio Manager of VEIL commented:

"The Vietnam Index fell by a marginal 0.49% during January (USD terms), which compared well on a global level. Vietnam's markets had their own share of volatility, falling almost 6% early in the month, but the decline was reversed soon enough, and overall sentiment was good. Average daily turnover increased 2.9% month-on-month to US $1.2bn on the H o Chi Minh Stock Exchange and totalled US $1.4bn  o n Vietnam's three exchanges combined.

Following the 4Q 2021 reporting and with most results in, listed companies posted Q4 EPS growth of +20.6% year-on-year.  This brought the full-year number to +42%, reflecting the fast pace of recovery in H1 before the Q3 lockdown.  As the reopening of Vietnam's continues, concerns on the quality of bank assets subsided, and sentiment in the sector should be further boosted by robust Q4 2021 and full-year 2021's earnings.

On an economic front, services have been the really encouraging area, January retail sales were up 6.7% month-on-month and 1.3% year-on-year - we see any increase being positive, and with VAT being cut from 10% to 8% we believe certain services, including food and beverage, are well-positioned to keep rebounding as this reduction should support domestic demand.  Vietnam also plans to fully reopen its borders from Q2 2022, priming the long-depressed tourism and hospitality industry.

US economic data shows that recovery is underway in the United States, but with an inflationary toll, and many commentators are expecting at least five Fed rate hikes this year.  This will pressure emerging market yields, so the Vietnam Government - already set to increasing spending in 2022 - may see its domestic borrowing costs rise. This could feed through the system and put rates up, but the Investment Manager expects not by more than 50 bps. The Investment Manager also expects the rate of exchange between the Vietnam Dong and the US Dollar to be steady due to Vietnam's conservative fiscal and monetary policies, low foreign debt, and external account surpluses.

January Commentary

Vietcombank ("VCB"), market cap US$18.3bn (at month-end), led the banking sector with a double-digit return in January as the bank posted solid numbers with a 14% year-on-year growth in earnings for Q4 2021 and 19% year-on-year for 2021. Their non-performing loan (NPL) ratio well controlled at 0.64% and loan-loss reserve (LLR) ratio expanded to over 400%, demonstrating that VCB is able to deliver robust growth numbers even with high conservatism in maintaining its asset quality.

Dat Xanh Group ("DXG"), a midcap real estate developer and leading property brokerage company in Vietnam with market cap of US$897 (at month-end), fell -2.6%. This appeared to be caused by a wider decline across small and midcap developers despite DXG's solid financial position, having posted its highest ever net revenue and second highest ever net earnings in 2021, at US$439m and US$50m, respectively.

Hoa Phat Group ("HPG") an integrated steel manufacturer with market cap US$8.2bn (at month-end) had disappointing quarterly results for the first time in two years, despite a 72% year-on-year and 16% quarter-on-quarter growth in sales for Q4 2021. HPG's profit fell 29% quarter-on-quarter, highlighting the rising input price headwinds faced by steel companies in Vietnam. Overall for 2021, HPG delivered strong results, with annual revenue of US$6.6bn and PAT US$1.5bn (+65% and +156% year on year, respectively), becoming only the second listed Vietnamese company ever to post a net profit of over US$1bn.

Top Ten Holdings (72.6% of NAV)

	Company	Sector	Vietnam Index %	NAV %	Monthly Change %
1	Hoa Phat Group	Materials/Resources	3.3	11.1	-8.4
2	Vietnam Prosperity Bank	Banks	2.9	11.1	3.1
3	Asia Commercial Bank	Banks	1.6	9.9	0.9
4	Mobile World	Retail	1.7	9.5	-1.8
5	Vietcombank	Banks	7.4	6.8	13.8
6	Vinhomes	Real Estate	6.2	6.6	-1.4
7	Vingroup	Real Estate	6.5	5.2	2.7
8	Dat Xanh Group	Real Estate	0.4	4.2	-2.6
9	Techcombank	Banks	3.3	4.2	6.4
10	FPT Corporation	Software/Services	1.4	4.0	-3.1

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]  

LEI: 213800SYT3T4AGEVW864

 

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