Results analysis from Kepler Trust Intelligence

RNS Number : 2397Z

Vietnam Enterprise Investments Ltd

13 September 2022

 

Vietnam Enterprise Investments (VEIL)

13/09/2022

Results analysis from Kepler Trust Intelligence

Vietnam Enterprise Investments (VEIL) has reported its half year results for the period ending 30 June 2022. In a tough period for markets globally, VEIL delivered a NAV total return of -20.1%. This was 1.1% ahead of the trust's benchmark, the VN Index, which fell by -21.2% in the six-month period. That outperformance was partly the result of the trust's overweight positions to the consumer discretionary and software & services sectors.

Vietnam has considerable potential appeal for many investors, even taking into account the headwinds of the current macroeconomic environment. GDP growth looks like it could hit the government's target of 6.5% - 7.0% in 2022 and inflation, currently at 4%, is much more muted relative to other developed and emerging markets. VEIL's managers believe the portfolio is set to achieve earnings per share growth of approximately 20% this year, despite the high-base effect of a substantial 58% increase in 2021.

The chairman of the board, Gordon Lawson noted these strengths, saying: "We believe that Vietnam continues to offer one of the strongest structural growth outlooks among developing economies, led by industrialisation and urbanisation and strong domestic consumption. We think that this is where investors will see long-term growth, even with various pressures that might arise from global concerns. VEIL is confident of its ability to continue to identify the best companies for long-term business growth, profitability, and solid management."

Kepler View

Vietnam Enterprise Investments (VEIL) offers investors dedicated exposure to the fast-growing Vietnamese economy. The trust managers run a high conviction strategy, sifting through a universe of over 1,600 companies to produce a portfolio that is typically made up of 25-30 stocks, with the top three holdings currently accounting for approximately a third of the portfolio. The managers believe increasing incomes, urbanisation and consumer spending in Vietnam are likely to drive returns in the portfolio, which is why they tend to be overweight to financials, retail and consumer goods.

The first half of the year has undoubtedly been a tough period for VEIL and emerging markets as a whole. Inflation, the war in Ukraine and recessionary fears have all acted as substantial headwinds to the trust's performance despite Vietnam's robust economic numbers and EPS growth averaging 26%. However, performance has improved since the end of the reporting period, with the trust's NAV up almost 7% from the end of June to 08 September. The share price has lagged behind, rising less than 2% over the same period.

Looking forward, there is plenty to be optimistic about as the case for Vietnam remains strong. GDP growth looks set to remain much stronger than other emerging markets, with 7% a real possibility this year, given the 6.4% expansion in the first half of the year and Vietnam's tendency to deliver a stronger H2. Inflation - currently at around 4% - has not impacted the country as severely as it has in other countries around the world.

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