VietNam Holding — Steady outperformance and solid fundamentals

VietNam Holding (LSE: VNH)

Last close As at 10/10/2024

GBP3.88

−4.00 (−1.02%)

Market capitalisation

GBP106m

More on this equity

Research: Investment Companies

VietNam Holding — Steady outperformance and solid fundamentals

VietNam Holding (VNH) posted a solid net asset value (NAV) per share total return (TR) in the first seven months of 2024 (7M24) of 14.5% in US dollar terms, which was ahead of the Vietnam All Share Index’s (VNAS’s) return of 8.1%. Over the last 10 years, VNH has delivered a c 10% return pa and consistently outperformed VNAS by c 3pp pa. The index in turn performed ahead of both emerging and frontier markets averages. Vietnamese equities offer a combination of undemanding valuations (a 20% discount to 10-year historical average based on one-year forward multiples) and solid earnings outlook, with LSEG Data & Analytics consensus expectations of 28% EPS growth over the next 12 months for local equities and 6% GDP growth in Vietnam in 2024. VNH’s shares trade at a 10% discount to NAV.

Milosz Papst

Written by

Milosz Papst

Director, Financials

Investment Companies

VietNam Holding

Steady outperformance and solid fundamentals

Investment companies
Vietnam

19 August 2024

Price

362.0p

Market cap

£98.5m

NAV*

£109.5m

US$1.2968/£

NAV per share*

402.5p

Discount to NAV

10.1%

*As at 19 August 2024.

Yield

0.0%

Ordinary shares in issue

27.2m

Code/ISIN

VNH/GG00BJQZ9H10

Primary exchange

LSE

AIC sector

Country Specialists

52-week high/low

399.0p

277.0p

421.3p

316.9p

Gearing

Net cash at 31 July 2024

2%

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 been managed by Dynam Capital since July 2018.

Bull points

Portfolio size allows the manager to be nimble and swift with reallocations, resulting in meaningful alpha.

Shareholders have an option to redeem their shares at NAV.

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

Bear points

The relatively small market cap limits liquidity and the pool of potential investors.

Investments in frontier markets are inherently risky.

The trust has relatively high fees for an LSE-listed trust. Nevertheless, it delivers above-average returns post fees.

Analysts

Milosz Papst

+44 (0)20 3077 5700

Michal Mordel

+44 (0)20 3077 5700

VietNam Holding is a research client of Edison Investment Research Limited

VietNam Holding (VNH) posted a solid net asset value (NAV) per share total return (TR) in the first seven months of 2024 (7M24) of 14.5% in US dollar terms, which was ahead of the Vietnam All Share Index’s (VNAS’s) return of 8.1%. Over the last 10 years, VNH has delivered a c 10% return pa and consistently outperformed VNAS by c 3pp pa. The index in turn performed ahead of both emerging and frontier markets averages. Vietnamese equities offer a combination of undemanding valuations (a 20% discount to 10-year historical average based on one-year forward multiples) and solid earnings outlook, with LSEG Data & Analytics consensus expectations of 28% EPS growth over the next 12 months for local equities and 6% GDP growth in Vietnam in 2024. VNH’s shares trade at a 10% discount to NAV.

VNH five-year performance against VNAS, MSCI Frontier, MSCI Emerging

Source: LSEG Data & Analytics, Edison Investment Research. Note: Total returns in pounds sterling.

Why invest in Vietnam?

Vietnam’s growth continues to be fuelled by foreign direct investment (FDI) inflows, predominantly in manufacturing as global giants are diversifying their supply chains (GDP growth was 5.1% in 2023, ahead of neighbouring countries). Strong economic growth paired with favourable demographics translates into rapidly growing domestic spending. We anticipate that a potential upgrade to emerging markets by global index makers could result in a meaningful influx of new capital and investors to the market and a re-rating of the Ho Chi Minh City Stock Exchange (HOSE).

VNH’s nimble investment strategy proves successful

VNH positions its portfolio to benefit from the three main macrotrends it sees in Vietnam: industrialisation, the rise in domestic consumption and urbanisation. This accounted for 92% of the portfolio at end-July 2024 (including banks as a play on broad economic growth). VNH’s manager has identified a list of 60–80 investable stocks in Vietnam, within which the trust rotates its portfolio around 20–30 stocks. This approach and its small size allow VNH to quickly reposition its portfolio and the manager estimates VNH can liquidate its portfolio within a month. It allows the manager to swiftly seize market opportunities, which we believe has been an important contributor to its outperformance versus the broader market.

VNH: A play on key secular trends in Vietnam

Vietnam continues its solid GDP growth, with 6.4% growth in H124 and LSEG Data & Analytics consensus currently implying 6% for 2024. Growth was driven by returning demand for ‘made in Vietnam’ products, with the export of manufactured, processed industrial goods increasing by 15.4% y-o-y in the 7M24 and accounting for 84.6% of the total export value. The fastest growth was seen in electronics, with computers, electronic products and components expanding by 30% yoy and cameras, camcorders and components increasing by 52% y-o-y. VNH positions its portfolio to benefit from key secular drivers underpinning economic growth in Vietnam (see Exhibits 1 and 2). For more background on VNH, watch our recent interview with Craig Martin, executive chairman of Dynam Capital (VNH’s investment manager).

Exhibit 1: VNH’s portfolio split by industry (July 2024)

Exhibit 2: VNH’s portfolio split by theme (July 2024)

Source: VNH

Source: VNH

Exhibit 1: VNH’s portfolio split by industry (July 2024)

Source: VNH

Exhibit 2: VNH’s portfolio split by theme (July 2024)

Source: VNH

New investments are pouring into Vietnam

Increasing diplomatic ties between Vietnam and the US, Japan and Australia are strengthening Vietnam’s role in global trade and supporting the outlook for continuous export growth. This is reflected in accelerating FDI inflows, with registered capital for new projects increasing 36% y-o-y in the 7M24, after a record year of disbursements in 2023 of US$23bn. VNH invests in companies forming the ecosystem around Vietnam’s manufacturing base. This includes, for example, its second-largest holding PV Technical Services (7.6% of NAV, up from 4.4% at end2023), which provides technical services for increasing offshore wind power generation. PV Technical Services delivered H124 revenue and net income growth of 10% and 13% y-o-y, respectively. Another example is Gemadept (fourth-largest holding at 5.7%, down by 0.8pp), a port operator that recorded revenue and net income growth of 21% and 62%, respectively. Overall, VNH’s exposure to the industrialisation theme amounts to 46% of NAV as at end-July 2024.

On the other hand, the utilisation of the public spending budget was low in H124 (29.4% of the 2024 budget, while still 5% higher y-o-y nominally). According to Bloomberg, the deceleration of public spending is likely associated with the caution of officials amid the ongoing anti-corruption campaign, which resulted in the resignations of two out of the four top government officials, the president and the chairman of the National Assembly. Following the appointment of their successors and the resulting reduction in political uncertainty, the government has confirmed its plans to accelerate spending in H224 to reach 95% of the budget by the end of the year.


Significant growth in disposable income

The average income in Vietnam has increased by 7% pa over the last 10 years in US dollar terms and there is a significant influx of people in cities. This benefits consumer-facing companies, as well as banks offering housing finance and investment products. Banks remain VNH’s largest industry exposure (27% as at July 2024) and include four out of VNH’s 10 largest holdings, with strong share price growth in 7M24 (see Exhibit 3). Dynam Capital expects credit growth in 2024 to be around 13–15% and that the Vietnamese government will continue to ease monetary and fiscal policy throughout the second half of the year. VNH has a 13% exposure to retail, including Mobile World Investment, which is an omnichannel retailer. The company reported a surge in profits in H124 to US$83m (compared to US$1.6m in H123) and, after a 50% share price rally in the 7M24, it has become the third-largest portfolio company (7.3% of NAV).

VNH maintains a concentrated, high-conviction portfolio

As at end-July 2024, the top 10 companies represent 65% of VNH’s portfolio, slightly up from 62% at end-2023. The largest company remains FPT Corporation (13.5% of NAV), which is the biggest IT services company in Vietnam. In the 7M24, FPT delivered a 55% share price increase, supported by solid results (H124 net profit up 21% y-o-y) and good newsflow (eg the announcement of an AI factory in strategic partnership with chip giant NVIDIA). VNH has used the opportunity to partially realise its profits on FPT. Dynam Capital recently hosted a webinar with FPT to discuss Vietnam’s role in the global AI and semiconductor supply chain.

Exhibit 3: VNH top 10 exposures at end-July 2024

Company

July 2024

December 2023

Exposure change

7M24 performance
(in Vietnamese dong)

FPT Corporation

13.5%

14.9%

(1.4pp)

55%

PV Technical Services

7.6%

4.4%

3.2pp

7%

Mobile World Investment

7.3%

N/A

N/A

50%

Gemadept

5.7%

6.5%

(0.8pp)

17%

Techcom Bank

5.4%

N/A

N/A

51%

MB Bank

5.3%

5.6%

(0.3pp)

34%

Hoa Phat Group

5.3%

N/A

N/A

7%

IDICO

5.2%

5.5%

(0.3pp)

21%

Asia Commercial Bank

5.2%

4.9%

0.3pp

22%

Vietnam Prosperity Bank

4.7%

N/A

N/A

4%

Total top 10

65.2%

61.5%

3.7pp

55%

Source: VNH, LSEG Data & Analytics, Edison Investment Research. Note: N/A when not in top 10 exposures at end-December 2023.

Exhibit 4: VNH’s discrete performance versus public markets (%)

12 months ending

VNH (equity)

VNH (NAV)

VNAS

MSCI World

MSCI EM

MSCI Frontier Markets

31/07/20

(16.0)

(25.8)

(20.6)

(25.1)

0.5

(0.3)

31/07/21

59.2

87.8

80.1

56.1

26.3

14.2

31/07/22

29.1

12.0

2.2

3.4

2.7

(8.3)

31/07/23

(4.6)

(2.3)

(5.5)

(5.5)

7.3

2.9

31/07/24

27.5

14.3

3.2

(3.8)

17.8

6.9

Source: VNH, LSEG Data & Analytics, Edison Investment Research. Note: Total returns in pounds sterling.

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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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

Latest from the Investment Companies sector

View All Investment Companies content

Research: Oil & Gas

Kolibri Global Energy — Longer laterals are a potential game changer

Kolibri Global Energy (KEI) reported Q224 results that saw double-digit increases across all financial and operating metrics on a y-o-y basis, with production and EBITDA up 37% and 40%, respectively. Sequentially, EBITDA fell 7%, while netback was 5% higher at US$40/bbl. KEI has started drilling three new 1.5-mile lateral wells, slated for completion in early Q4. If successful, these wells could potentially see an up to 1.5x increase in production rates and lead to a change in the field development plan. We have updated our valuation to US$6.9/share as we await more details about the performance of the new wells and KEI’s next steps. The potential change in field development strategy is yet to be priced in by the market.

Continue Reading

Subscribe to Edison

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

Sign up for free