Vietnam Enterprise Investments Limited (VEIL) has released its annual results for the 12 months ending 31 December 2023.
- VEIL has reported a NAV per share return of 10.5% over 2023, slightly below the Vietnam Index’s 11.1% gain, both in US$ total return terms. Over a 3-year period, VEIL still outperformed the Vietnam Index by 2.6%. VEIL reported a share price return of -4.5% (in GBP) however, reflecting its widening discount.
- VEIL’s returns reflected both the prospects of its underlying holdings, and the inherent strength of Vietnam’s economy, with the region reporting a 5.1% increase in GDP over 2023, one of the highest growth rates worldwide.
- At a portfolio level, the Material & Resources, Software & Services, and Banking sectors performed well. However, the Retail and Real Estate & Construction sectors detracted from relative performance. The three largest contributors to returns were Hoa Phat Group, a steel conglomerate, Vietnam Prosperity Bank, and Asia Commercial Bank. The managers are expecting mid-teens profit growth on average over 2024 for Vietnam’s major companies.
- VEIL ended the year on a 18.1% discount, widening from 10.7% the year prior. The board was proactive in defending VEIL’s discount, repurchasing 5.7 million VEIL shares in 2023, worth $40.3m, representing 2.79% of outstanding shares. This resulted in a 0.62% accretion to NAV per share.
- ESG remains a key part of VEIL’s approach. Over the year VEIL’s portfolio weighted average carbon intensity was 143 tonne CO2e/$M revenue, 31% lower than the Vietnam Index. VEIL engaged with 100% of investee companies on ESG issues.
- Additional market developments could result in further foreign inflows. The investment manager remains confident in identifying attractive enterprises with sustainable profitability and good governance.
- VEIL announced a reduction in the management fee to a flat 1.5% of NAV, effective July 1, 2024.
- In February 2024, Le Anh Tuan succeeded Vu Huu Dien as lead portfolio manager.
- The chair Gordon Lawson will retire at the end of June 2024 and Sarah Arkle will take over as chair. Charles Cade was appointed as a new independent non-executive director in October 2023.
Le Anh Tuan, VEIL portfolio manager, commented:
“After a tough 18 month period, investors should be able to look forward to a much brighter outlook in 2024. In terms of the macroeconomic outlook, Vietnam’s stability remains a strong point for the economy with inflation remaining manageable, averaging 3.3% in 2023, and the foreign exchange rate relatively benign. Much of the Government’s focus is now on growing the economy. From a monetary perspective, Vietnam is now in full-easing mode with the interest rate falling back to 2022 level. The SBV has also granted full credit growth quota to the banks from the start of the year instead of on a quarterly basis, ensuring there is no shortage of capital for the local economy. After fiscal spending hit a record high in 2023 of US$27.8 billion, the Government once again put forward an ambitious plan of fiscal spending of over US$28 billion. At the same time, various task forces of top-ranking Government officials, some of whom were set up in 2023, were asked to directly work with local corporates to resolve the legal issues that have historically hamstrung private investments. For 2024, the Government has set a GDP growth target of 6.0%. Whilst there might be some remnants of challenging times earlier on in the year, VEIL believes investors can look forward to an accelerating growth outlook for Vietnam in 2024.
“In 2023, despite negative EPS growth in Dragon Capital’s Top-80 of -4.3%, the VN Index TR$ was still +11.1%, reflecting improving investor sentiment on the outlook for the economy. We anticipate mid teens EPS growth for 2024 for the Top-80, whilst its price to forward EPS ratio trades at just 9.6x. In VEIL’s view, a very attractive growth and value profile compared with Vietnam’s regional peers. The portfolio is now well positioned in the key sectors that should benefit from the macro backdrop of a boost in public and private investment as well as a material recovery in consumption in 2024.”