VietNam Holding (LSE: VNH)

Last close As at 17/05/2024

GBP3.82

0.00 (0.00%)

Market capitalisation

GBP105m

VietNam Holding is an investment company, which holds a concentrated high-conviction portfolio of Vietnamese stocks. Its shares have been listed on the London Stock Exchange since its inception in 2006 with the ticker VNH and the portfolio has been managed by Dynam Capital since 2018. The portfolio size allows the manager to be flexible in the portfolio selection and rotation. VNH makes distributions to its shareholders through regular share buybacks. It has also introduced an innovative annual redemption feature.

Equity Proposition

1) Vietnam enjoys several secular macroeconomic tailwinds

Vietnam is attracting significant foreign direct investment (FDI) inflows, predominantly in manufacturing as global giants are diversifying their supply chains. Vietnam has adopted an open trade policy, tightening its relationships around the globe and trade represents twice Vietnam’s GDP. Vietnam is also a ‘young’ country, with median population age of 32.5 years and an employment to population ratio of 73% (compared to the global average of 55%). Strong economic growth, paired with favourable demographics, translates into a rapidly growing middle class and domestic spending.

2) VNH invests in high-conviction stocks in a dynamic market

VNH seeks out small and medium companies that have the potential to double their earnings in four to five years, as well as best-in-class blue chips. It invests solely in companies meeting their strict criteria regarding ESG practices, in particular with respect to disclosures and market communication. This creates a relatively narrow investable universe of 60–80 stocks (out of c 400 quoted on the Ho Chi Minh City Stock Exchange), of which VNH selects between 25–30 to actively trade in, with its portfolio turnover at around 30–40% in any given year. This translates to a high active share against Vietnam’s All-share index (normally around 75%).

3) VNH is committed to improving environmental, social and corporate governance (ESG) aspects

ESG criteria are at the forefront of VNH’s investment strategy. Despite investing in minority stakes, VNH has an active approach to helping its portfolio companies improve their ESG credentials. VNH’s and Dynam Capital’s representatives regularly advise portfolio companies and participate in many related conferences and events. VNH has been a signatory of the United Nations Principles for Responsible Investing since 2009. The CIO of Dynam Capital is co-founder of the Vietnam Institute of Directors. Finally, the ESG profile of VNH’s portfolio is periodically evaluated by an independent advisor.

4) VNH’s manager focuses on Vietnam’s industrialisation, urbanisation and rise in domestic consumption

The strong FDIs in Vietnam’s manufacturing sector has driven the country’s industrialisation and the development of a large ecosystem of supporting businesses. VNH has exposure to the theme predominantly through industrial parks and logistic companies. A prime example of this is Gemadept, an operator of eight ports as well as a vast logistics network. Growing urbanisation creates additional demand (and in turn investment opportunities) across a broad variety of sectors, including housing, transportation and convenience stores. VNH benefits from this trend primarily through investments in real estate developers and banks. Finally, VNH’s strategy is to seize opportunities arising from the growth in disposable income of Vietnam’s population and the associated increase in sales of retail chains.

5) VNH is nimble, focused and performing well

VNH significantly outperformed Vietnam’s equity markets in each calendar year in the period 2020–2023, highlighting the investment manager’s stock picking expertise. According to Dynam Capital, VNH’s nimble size allows it to be dynamic within the investment environment. The manager’s ability to swiftly reposition VNH’s portfolio is illustrated by its 2022 activity, when it sold its stakes in the main housing developers, thus avoiding the worst of the turmoil that later hit some of the companies within this sector.

Latest Insights

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VietNam Holding — Introducing redeemable shares

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Equity Analyst

Milosz Papst

Milosz Papst

Director, Financials

Michal Mordel

Analyst, Investment trusts

Key Management

  • Craig Martin

    Portfolio Manager

Share Price Performance

Price Performance
% 1M 3M 12M
Actual 0.5 3.2 46.9
Relative (5.1) (6.8) 35.4
52 week high/low 382.0p/258.0p

Overview

VietNam Holding (VNH) posted a solid net asset value (NAV) per share total return (TR) in 2023 of 15.8% (22.4% in US dollar terms), outperforming the Vietnam All Share index (VNAS), which posted an 11.7% return, and its direct peers. The investment manager remains confident that 2024 will be strong for Vietnamese equities, underpinned by average 20% y-o-y expected earnings per share (EPS) growth. VNH recently introduced a share redemption facility (on top of regular share buybacks), which allows shareholders to redeem their shares at NAV each September. We believe that this has contributed to the recent narrowing of VNH’s share discount to NAV to 3.0% compared to its three-year average of 14.1%.

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