VietNam Holding — Moving through volatility

VietNam Holding (LSE: VNH)

Last close As at 20/04/2024

GBP3.72

−4.00 (−1.06%)

Market capitalisation

GBP102m

More on this equity

VietNam Holding — Moving through volatility

VietNam Holding (VNH) seeks to capture the growth of Vietnam through an actively managed, high-conviction portfolio of companies. In its October 2022 report, the IMF upped its 2022 GDP growth forecast for Vietnam to 7% from 6% three months ago, while it expects the world to grow at 3.2%. Vietnamese growth paves the way for the continued expansion of domestic consumption and Dynam’s investment team chooses a tightly focused selection of businesses set to benefit from the positive demographic, industrial and urbanisation trends. VNH greatly differentiates itself from global equities and, despite the recent market weakness as Vietnam was not immune to the global markets’ sell-off, has strongly outperformed the MSCI AC World Index over the current manager’s tenure (over four years).

Analyst avatar placeholder

Written by

VietNam Holding

Moving through volatility

Investment trusts
Vietnamese equities

21 October 2022

Price

264p

Market cap

£76.2m

AUM

£92.7m

NAV*

314.0p

Discount to NAV*

15.9%

*Including income. As at 20 October 2022.

Yield

N/A

Ordinary shares in issue

28.9m

Code

VNH

Primary exchange

LSE

AIC sector

Country Specialists: Asia Pacific

Benchmark

VN All Share index

52-week high/low

358.0p

261.0p

423.4p

307.9p

*Including income.

Gearing

Net cash at 30 September 2022

11%

Fund objective

VietNam Holding’s investment objective is to achieve long-term capital appreciation by investing in a diversified portfolio of companies that have high growth potential and an attractive valuation. The fund has experienced several significant changes since September 2017, including a new board and appointment of the current manager, Dynam Capital.

Bull points

ESG considerations are a key part of the manager’s approach.

A very concentrated portfolio (c 20–25 holdings) and mid- to small-cap focus gives investors exposure to less well researched, high-growth companies.

The proactive board is committed to promoting shareholders’ interests.

Bear points

The relatively small market cap of c £76m limits liquidity and increases volatility, to some extent.

Very strong 2021 performance and challenging 2022 markets could limit 2022 return potential to an extent.

The trust has relatively high fees for an LSE-listed trust, but is in line with its two peers, as Vietnamese funds are expensive to run.

Analysts

Victoria Chernykh

+44 (0)20 3077 5700

VietNam Holding is a research client of Edison Investment Research Limited

VietNam Holding (VNH) seeks to capture the growth of Vietnam through an actively managed, high-conviction portfolio of companies. In its October 2022 report, the IMF upped its 2022 GDP growth forecast for Vietnam to 7% from 6% three months ago, while it expects the world to grow at 3.2%. Vietnamese growth paves the way for the continued expansion of domestic consumption and Dynam’s investment team chooses a tightly focused selection of businesses set to benefit from the positive demographic, industrial and urbanisation trends. VNH greatly differentiates itself from global equities and, despite the recent market weakness as Vietnam was not immune to the global markets’ sell-off, has strongly outperformed the MSCI AC World Index over the current manager’s tenure (over four years).

VNH’s cumulative performance (total return)

Source: Refinitiv, Edison Investment Research. Note: Data to end-September 2022.

Why VNH?

According to the manager, VNH is differentiated from its two London-quoted peers (VEIL and VOF). Dynam states that VNH is big enough to be an active and engaged shareholder in portfolio companies, and at the same time nimble enough to find and fund less-known emerging ‘champions’ within Vietnam. While the current discount to NAV of 15.9% is close to the 12-month average of 14.2%, it has narrowed considerably since the tender offer in September 2021 (see Edison’s report) and the ongoing efforts of the board in managing the discount through regular share buybacks. Since September 2021 VNH has bought back c 0.6m shares (c US$1.9m), which has been accretive to NAV per share. Dynam also delivered strong relative performance and an active investor relations programme. The discount touched 4.4% over the past 12 months, and, if markets begin to stabilise, has the potential to narrow again from the current level.

The analyst’s view

We believe this country specialist fund offers investors exposure to a high-growth frontier market with conviction stock ideas across the market cap spectrum. VNH has 23 holdings and the top 10 make up c 66% of the portfolio (at end-September 2022). VNH’s performance relative to the index can be volatile, as it has been over the past 12 months. Despite the current gloomy global macroeconomic outlook, the manager expects VNH’s portfolio to withstand the uncertain times. The team aims to use the c 11% cash within the portfolio to buy into emerging opportunities for the performance to pick up momentum when the global economy turns the corner.

The manager’s view and performance

Dynam highlights in its annual report to end-June 2022 (AR22) that despite Vietnam’s ongoing growth and economic resilience this year, its equity market was not immune from the sell-off as global markets declined. In addition to weak sentiment across the globe, Vietnamese equity market performance has been negatively affected by domestic concerns in the areas of real estate and corporate bond markets. As more than half of Vietnamese listed companies are banks and real estate, the market sell-off hit both the broader market and VNH. Nevertheless, VNH’s performance was stronger than its benchmark. Exhibit 1 shows a -2.4% NAV total return (TR) for VNH over the 12 months to end-September 2022, better than the -6.2% TR for the VN All Share Index.

The share prices of telecommunications (12% of the portfolio at end-September 2022) and retail (18%) holdings within VNH’s portfolio held up better than the market, as they were less affected by the global macroeconomic risks, such as the strengthening US dollar, central banks’ monetary tightening, ongoing implications from the war in Ukraine and other geopolitical tensions around the world. Although Dynam believes that Vietnamese banks will face a less favourable business environment in 2023, those in the portfolio have healthy balance sheets and attractive valuations for the long term. The real estate sector, where VNH remains underweighted (7% versus 19% for the index), was the worst performing sector in Vietnam's stock market in September due in part to increased scrutiny of bond issuances by Vietnamese regulators, credit quota from some banks and pending reviews of real estate laws.

VNH performance

Exhibit 1 presents VNH’s performance relative to its two closest peers. With the current manager having been appointed in July 2018, the one- and three-year NAV TRs are the most relevant, where VNH ranks second for both periods. VinaCapital Vietnam Opportunity Fund (VOF) has c 20% in unlisted and private investments, and another c 20% in public equity with private terms, and arguably, these parts of the portfolio cushioned its performance. Private equity valuations might move differently to listed companies’ valuations, and in this case have held up better, helping VOF’s performance.

VNH has a different mix of sectors, compared to its two peers, but all three funds currently have high exposure to cyclicals (at end-September 2022). VNH’s top four sectors are banks (25%), retail (18%), industrials (14%) and telecommunications (12%). Vietnam Enterprise Investments (VEIL) is more overweight banks (30% versus 25% for VNH, and 40% for the VN All-Share Index) and has much more real estate (23% versus 7%, and 19% for the index), while all other sectors are represented in VEIL at less than 10%. VOF’s highest weighting is in real estate (27%), followed by a 20% weighting in financial services (including banks) and 15% in the materials sector.

While VNH’s ongoing charges are highest of the three funds (smaller funds tend to incur higher charges), in 2020 the board removed the performance fee for a 25bp increase in the management fee to 1.75% pa on NAV below $300m and 1.5% on NAV between $300m and $600m. The board notes that the initiative lowers the total expense ratio of the fund by c 80bp on a forward-looking basis.

Exhibit 1: Country specialist – Vietnam peer group*

% unless stated

Market cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (cum-fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield (%)

VietNam Holding

76.2

(2.4)

43.0

66.6

379.0

(15.9)

2.73

No

89

N/A

Vietnam Enterprise

1,189.0

(7.4)

36.6

78.9

472.6

(16.9)

1.90

No

98

N/A

VinaCapital Vietnam

721.3

3.4

58.4

80.6

340.1

(20.3)

1.66

Yes

99

2.2

Simple average

662.2

(2.1)

46.0

75.4

397.2

(17.7)

2.10

95

N/A

Rank

3

2

2

3

2

1

1

3

N/A

VN All Share Index

-6.2

35.4

63.5

254.5

Source: Morningstar, Bloomberg, Refinitiv, Edison Investment Research. Note: *Performance data to end-September 2022. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.


General disclaimer and copyright

This report has been commissioned by VietNam Holding and prepared and issued by Edison, in consideration of a fee payable by VietNam Holding. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by VietNam Holding and prepared and issued by Edison, in consideration of a fee payable by VietNam Holding. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on VietNam Holding

View All

Investment Companies

VietNam Holding — Introducing redeemable shares

VietNam Holding_resized

Investment Companies

VietNam Holding — Consistently outperforming the market

VietNam Holding_resized

Investment Companies

VietNam Holding — Investing for the long term

Nanoco — Progress in both organic and non-organic activity

During FY22, Nanoco began to scale up its programme to deliver nanomaterials to its major European customer. It also made good progress in its legal action against Samsung for wilful infringement of its IP, with a positive judgement from the inter partes reviews (IPRs) on the five patents in the case. Importantly, the £5.4m raised in June extends the cash runway for nanomaterial development and scale-up activities into CY25, which is beyond the point Nanoco expects organic activities to be self-financing.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free