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Marked outperformance from Vietnam Holding during H2 2015

VietNam Holding has announced its interim results for the six months ended 31 December 2015. During the period, the company’s NAV rose 6.6% and its share price rose 6.4% both beating the Vietnam All Share Index, which fell 2.6%. The discount widened modestly during the period from 13.0% to 14.1% but the board say that they aim to see the discount, which was 17.7% twelve months ago, further reduced over time. During the period the company repurchased 2.1m shares.

The announcement does not provide much detail on individual holdings contributions to the company’s out performance of its benchmark or of portfolio activity during the period. However, there is some commentary on outlook. The managers say that Vietnam is closely linked to China – geographically, politically, culturally and economically and that, because of this, the recent China developments loom large. However, they also say the country is performing much better than China (in 2015 its GDP growth has accelerated to 6.7%, in contrast to China’s deceleration). The managers say that, in their view, Vietnam continues to move in the right direction with the bulk of its economic policymaking decisions. These includes new free trade agreements, the steady if slow recovery from its recent non-performing loan problems, its improved attention to infrastructure development and its willingness to involve the private sector, and the attempt to improve the rate of privatisation of state-owned enterprises.

However, the managers say that Vietnam needs to allow, or indeed force, the disposal of bad debts to new owners from both the government’s bad debt warehouse (the Vietnam Asset Management Corporation, VAMC) and from the banks themselves, and to adopt a more vigorous and effectual approach to privatisation for drearily-run state-owned enterprises. The managers believe that these two efforts alone would truly amount to a new revolution for Vietnam’s economy.

With regards to Vietnamese listed equities, the managers say that they observe a very positive trend in earnings per share. They say that, for a universe of 84 listed companies, representing 88% of the Ho Chi Minh Stock Exchange market capitalization, the Bloomberg consensus EPS growth for 2016 is projected at 19%. For 2017, a slightly smaller available sample of 55 companies totaling 81% of the market capitalization shows EPS growth well above 30%. This compares to their own EPS growth forecast for the company’s portfolio of 22% in 2016 and 15% in 2017.

Marked outperformance from Vietnam Holding during H2 2015 : VNH

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