Vietnam Enterprise Investments (VEIL)

30/04/2024

Results analysis from Kepler Trust Intelligence

Vietnam Enterprise Investments (VEIL) has reported strong results for the 2023 financial year, ending 31/12/2023. The NAV per share rose 10.5% in dollar terms, marginally behind the 11.1% of the VN Index. In sterling terms, returns were lower, at 4.1% versus 5.3%. Over three years, VEIL has outperformed the index by 2.6%.

2023 was a year of recovery following a tumultuous year, in which Vietnam delivered GDP growth of 5.1% with modest inflation of 3.3%. Some volatility in the equity market emerged towards the end of the year as US yields spiked, but the local index has since staged a recovery into early 2024.

On 01/02/2024, Le Anh Tuan was appointed Lead Portfolio Manager of VEIL, succeeding Vu Huu Dien, who is transitioning to a new position at Dragon Capital group. The company will also see a new chairman of the board from July, as Sarah Arkle will succeed Gordon Lawson. Gordon has served on the board for ten years as an independent director and as such will be stepping down from the board.

Kepler View

Vietnam continues to have huge attractions in the current global environment. Its young and educated workforce and low labour costs are supporting one of the highest GDP growth rates in the world. Inwards investment is encouraged by the country's strong relations with both China and the USA, which allows it to play significant roles in the manufacturing chains of both of the world's two largest economies. It is government reform and investment that is driving this rapid growth. However, this rapid change is bringing some political volatility too, with the resignation of the President and the chairman of the national assembly in 2024 as a part of Vietnam's ongoing anti-corruption probe. While it seems prudent to expect further such volatility, and for this to affect markets at times, we think this looks like growing pains and not indicative of any change of political direction. The managers note that over the past year authorities have hastened investment in infrastructure, and made moves to loosen banking credit restrictions as well as loosen regulation on credit and on land use. Vietnam is undergoing a significant shift of direction and culture, and while the underlying trajectory towards greater economic freedom and development remains intact, we think it will drive exciting investment returns.

In that light, this looks like an interesting time to be considering an investment in VEIL. The shares have been volatile, like the underlying markets, with exceptional returns in 2021 being followed by a sharp sell off in 2022. Currently, the underlying market looks attractively valued versus regional peers. The team have the largest 80 listed companies on a forward P/E of 9.6x versus 14.4x for Thailand, 13.9x for Indonesia and 13x for Malaysia. Meanwhile they anticipate mid-teens profit growth for 2024. VEIL's shares themselves trade on a discount of 17.2% at the time of writing. All-in-all this looks like an opportunity to buy at cheap valuations a company with a track record of delivering high returns when the trend shifts.

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