# Vietnam Enterprise Investments NAV outperforms reference index in Q3

- Link: https://www.directorstalkinterviews.com/vietnam-enterprise-investments-nav-outperforms-reference-index-in-q3/4121131948
- Published: 2023-11-03T07:20:14+00:00
- Author: Amilia Stone

**Vietnam Enterprise Investments Limited** (LON:VEIL) has announced its 2023 third
quarter update.

VEIL is a London listed investment company investing primarily in listed equities
in Vietnam and a [FTSE 250](https://www.directorstalkinterviews.com/news/ftse-250)
constituent. The Company’s NAV performance for Q3 2023 is set out in this notice.

**Company Highlights                                                            **

·          In Q3 2023, VEIL’s NAV increased 2.2% over the previous quarter against
a rise of 0.4% for its reference index, the Vietnam Index. Year-to-date, VEIL’s 
NAV and the VNI have both increased by 12.7%. All in total return US dollar terms.

·          The Company’s NAV per share was US$8.85 as of 30 September, and its total
NAV was US$1.8bn.

·          In USD terms, the Company’s share price decreased 2.9% for the quarter
and has increased 3.2% year-to-date.

·          Vietnam Enterprise Investments’ one-year NAV per share performance in
US dollar terms is +0.7%, +31.9% over three years and +23.6% over five years. Over
the same periods, the performance of the VNI was +1.7%, +27.2%, and +18.1%, respectively.

·          In GBP terms, the Company’s NAV per share was £7.25 as of 30 September(
+6.5% for the quarter and -7.9% over one year), and its total NAV was £1.5bn. The
Company’s share price increased 1.2% for the quarter and decreased 6.8% over one
year.

·          The Company’s discount to NAV averaged 15.8% for the quarter. As of 30
September 2023, the discount to NAV was 18.2%, compared with 14.0% at the end of
Q2 2023 and 10.7% as of 31 December 2022.

·          The Company spent US$12.6mn repurchasing 1,679,469 shares in Q3 2023,
compared with 1,199,216 shares repurchased in Q2 2023.

·          A total of 3,586,058 shares were repurchased YTD to the end of September.
This is 1.7% of shares outstanding as of 1 January 2023. The accretion to NAV per
share from the share repurchases is 0.37%.

·          The Vietnamese dong (“VND”) depreciated 3.1% against the US dollar in
Q3 2023 and has depreciated 2.8% year-to-date. The VND appreciated 1.1% against 
the GBP pound sterling during the same period and has depreciated 4.1% year-to-date.

> **Dien Vu, Portfolio Manager of Vietnam Enterprise Investments, commented:**
> “Vietnam’s GDP expanded by 5.3% year-on-year in Q3 2023, putting average growth
> at 4.3% in the first nine months of 2023. This expansion can be attributed mainly
> to the services sector, which increased 6.3% year-on-year due to sub-sectors such
> as accommodation and catering services (+13.2%), wholesale and retail sales (+
> 9.0%) and transportation and logistics (+8.7%).
> “VEIL outperformed the VNI in Q3 2023, and year-to-date ended September 0.03% 
> behind its reference index. In a turbulent third quarter, the VNI was up 10% in
> mid-August and again in early September before declining to end the quarter flat.
> “The third quarter strengthening of the US dollar index from 103.6 to 107 combined
> with rising 10-year US Treasury yields from 4.1% to 4.8% came as the Fed signalled
> rates could remain higher for longer. The Vietnamese dong’s 3.1% depreciation 
> versus the US dollar in the third quarter was broadly in line with many of its
> peers, including depreciations of 3.5% in the Thai baht, Indonesian rupiah and
> New Taiwan dollar.
> “The Vietnamese dong remains well-supported by US$16bn of disbursed FDI and US
> $22bn trade surplus. The State Bank of Vietnam (“SBV”) issued bills totalling 
> US$5.7bn during the third quarter, leading to the 1-month interbank interest rate
> increasing from 0.7-0.8% in early September to 2.5-2.7% in early October. The 
> Manager believes the devaluation to maintain the VND’s competitiveness and bill
> issuances are normal operations and not a sign of policy change; the SBV has undertaken
> numerous bill issuances in the past as a means of money supply management. Excess
> liquidity in the banking sector is evident, however, as some banks reported a 
> drop in deposit rates of 10-20 basis points.
> “All 80 companies in the Manager’s core investment coverage have reported their
> Q3 2023 earnings. Overall, revenue increased by approximately 5% and EBIT by nearly
> 9% year-on-year. However, following the 3.1% currency depreciation, NPAT was affected
> by increased loan provisions from some large cap stocks with USD denominated debt
> and grew by just 0.8%. This underlines the Manager’s view that while the nadir
> has passed, challenges still exist on the road to earnings recovery.
> “In Q3 2023, Mobile World Group’s (“MWG”) share price increased by 18.8%, however,
> the stock is still down 18.7% over one-year, which the Manager believes is reflective
> of weak investor sentiment on consumption. MWG cleared the excess inventory it
> was holding in H1 2023, and the revenue increase of just 3% quarter-on-quarter(
> to US$1.2bn in Q3) was in line with the Manager’s expectations as MWG continues
> to spend aggressively on sales and marketing to capture market share opportunistically.
> In the first nine months of the year, MWG recorded revenue of US$3.5bn (-18.4%
> year-on-year) and NPAT of US$3mn (-97.2%) due to reduced operating margins.
> “Asia Commercial Bank (“ACB”) reported NPAT growth of 12.6% year-on-year (to US
> $343mn) as it saw a significant boost in non-interest income, expanding by 109.2%
> year-on-year. ACB’s share price decline of 4.0% in Q3 2023 underperformed the 
> overall banking sector increase of 3.5%, although this is understandable after
> a strong H1 2023 when it returned 20.5% against a rise of 11.2% in the VNI. In
> August, VEIL divested 40% of its position in ACB (held continuously by the Company
> since 1996) via an off-market transaction commanding a 7% premium, 3% higher than
> ACB’s all-time high.
> “Residential property stocks fell 24% year-on-year although increased 3.6% quarter-
> on-quarter. VEIL’s real estate holding Vinhomes (“VHM”) was a notable laggard,
> decreasing by 19.8% in Q3 2023. At US$1.3bn, NPAT fulfilled 107% of the Manager’s
> full-year forecasts due to faster than anticipated unit handover of some major
> projects. The Manager believes the recent drop in stock price is attributable 
> to the uncertainty felt by investors in the wider Vingroup family of stocks rather
> than in VHM itself, which is regarded as one of the strongest names in the property
> market.
> “Global challenges are widely anticipated going into 2024 and will likely impact
> Vietnam’s economy. Nevertheless, the Manager expects the country’s macro stability
> will be maintained due to its solid external position, low USD-denominated debt(
> 35% of GDP) and low government debt (38% of GDP). On the domestic front, the Manager
> expects fiscal spending, credit growth and disbursement, and consumer recovery
> to materialise. The Manager has positioned VEIL’s portfolio to benefit from sectors
> such as technology, banks, retail, food and beverage, property, oil & gas, and
> steel, and expects earnings per share growth of over 20% from VEIL’s portfolio
> next year.” 

**Macroeconomic Commentary**

·    GDP growth registered at 5.3% year-on-year in Q3 2023 and 4.2% for the first
nine months of the year. The services sector grew by 6.2% in Q3 to average 6.3% 
year-to-date and contributed 68.6% to overall GDP growth.

·    The industrial and construction sector increased by 2.4% in the first nine 
months, contributing 22.3% to GDP, of which the processing and manufacturing industry
increased by 2.0%, the lowest increase over the same period since 2011-2023.

·    In the first nine months of 2023, exports totalled US$259.7bn and imports US
$238.0bn, down 8.2% and 13.8% year-on-year, respectively. The YTD trade surplus 
is US$21.7bn, compared to a US$6.8bn surplus at the same stage of 2022.

·    FDI disbursement to the end of September was US$15.9bn, up 2.2% year-on-year.
Meanwhile, registered FDI increased 7.7% to US$20.2bn in this period.

·    Average inflation for the first nine months of 2023 was 3.2%.

·    In the first nine months of the year, total retail sales rose 7.3% year-on-
year in real terms.

·    International visitors to Vietnam totalled 8.9mn in the first nine months of
the year, which although 4.7 times higher than the same stage of 2022, only accounts
for 69% of the 2019 numbers.

**Top Ten Holdings (61.6% of NAV)**

|   | **Company** | **Sector** | **NAV %** | **VNI %** | **Q3 2023 Return %** | **One-year Return %** | 
| 1 | Vietnam Prosperity Bank | Banks | 11.1 | 3.2 | 5.9 | 18.2 | 
| 2 | Hoa Phat Group | Materials/Resources | 8.7 | 3.4 | -2.5 | 21.6 | 
| 3 | Vietcombank | Banks | 7.6 | 10.9 | 0.1 | 38.4 | 
| 4 | Asia Commercial Bank | Banks | 7.4 | 1.9 | -4.0 | 15.5 | 
| 5 | Mobile World Group | Retail | 6.2 | 1.7 | 18.8 | -18.7 | 
| 6 | FPT Corporation | Software/Services | 5.7 | 2.6 | 23.0 | 33.0 | 
| 7 | PetroVietnam Gas | Energy | 4.4 | 3.9 | 17.5 | 0.5 | 
| 8 | Vinhomes | Real Estate | 3.9 | 4.4 | -19.8 | -12.0 | 
| 9 | Vinamilk | Food & Beverage | 3.5 | 3.4 | 4.7 | 5.9 | 
| 10 | Khang Dien House | Real Estate | 3.1 | 0.5 | 2.7 | 14.1 | 
|   | 
| _ _ | _Vietnam Index_ | _–_ | _ _ | _–_ | _0.4_ | _1.7_ |

_Source: Bloomberg, Dragon Capital_

_NB: All returns are given in USD terms_

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