Vietnam Holding reports ‘excellent’ first six months

Vietnam Holding (VNH FOLLOW) has reported an “excellent first six months” as Net Asset Value (“NAV”) per share rose by 38.7% in USD terms while its share-price rose by 24.7% in GBP terms.

In its half-year report, the closed-end fund unveiled that total assets had risen to $138.5m during the six month period to 31 December 2020 while total comprehensive income came in at $40.4m, a significant increase on the $2.5m generated in the prior 2019 period.

The Company said daily liquidity had also ‘significantly’ improved with an average daily trading volume of c.117,000 shares, compared with c.35,000 shares in the previous year with its price reaching ‘record levels’ by period-end.

The emergence of Vietnam as a Significant Trading Partner

The group cited Vietnam’s resiliency throughout the pandemic as it raised its profile as a major trading partner in the world, most notably as a manufacturing alternative to China.

“Vietnam is bearing the fruit of tackling the pandemic head-on and opening up its economy relatively quickly compared with other countries around the world,” the group noted.

Despite the country witnessing further outbreaks of COVID-19 in late July 2020, the fourth quarter of 2020 still saw “a remarkable rebound and an acceleration in economic growth.”

The company noted that its overweight position in HPG, a leader in Vietnam’s construction steel and steel pipe industry, has been a leading contributor to the Fund across its portfolio. 

HPG reported net revenue and earnings up 41.1% year-on-year and 78.2% year-on-year, respectively for 2020. The company said the group is forecasted to maintain double-digit growth in 2021 and 2022 based on its favourable market position and competitive unit cost.

Gemadept, a relatively recent addition to the portfolio in 2020, rose strongly in support of increased prices at its main ports. Its volume throughput grew by an average of 25% per annum over the last decade, as Vietnam has grown its manufacturing for export base. 

The Fund also said NAV particularly benefited by its increased allocation to the Banking sector with Vietnam’s Banking sector standing “out unlike in many developed countries right now.”

Its largest position in the banking sector is Vietin Bank, currently the country’s third largest bank by assets with market share of 11.4% in loans and 10.2% in deposits, it noted.

The company told investors that this new portfolio position is trading at a compelling valuation with a 2021 price to earnings ratio of 8.8x and price-to-book ratio of 1.3x.

2H21 Outlook

“Although the global risks due to COVID-19 still linger - despite the positive news on vaccines - we could not feel more positive about Vietnam moving into 2021,” it noted.

Research from institute QuotedData has described Vietnam’s response to the pandemic as ‘very effective’, something reflected by the IMF’s latest prediction that it will post positive GDP growth of 1.6% for 2020, rising to 6.7% this year and averaging 7% for 2021 to 2025. 

The group said Vietnam is now the largest member in the MSCI FM Indices which could attract around $400m net flow within a year. The group added that whilst short-term risks remain, the strength of forecast corporate earnings growth supports this market optimism.

The group said it expects 23% earnings per share growth year-on-year in 2021 across its portfolio. It highlighted to investors that it is “already seeing accelerated public investment as many projects suspended in 2020 due to the pandemic are set to resume next year.”

It also anticipates strong money inflows to come from foreign direct investment as well in this respect and looks to the Regional Comprehensive Economic Partnership (RCEP) to further boost exports to major markets in Asia, including South Korea, Japan and China.

Vietnam said expectations for long-term economic growth ahead ‘remain strong’ with standard Chartered forecasting the next two years above the 30-year average 6.7% annual GDP growth.

Shares in the group have increased by nearly 9% since the beginning of 2021 as Vietnam’s ‘road to recovery continues to stand out compared with other countries around the world’.

VNH price chart

Reasons to Follow VNH

Vietnam Holding is a London-listed closed-end fund which is domiciled in Guernsey, aims to provide investors with long-term capital appreciation by investing in a concentrated portfolio of high-growth companies in Vietnam that demonstrate strong ESG awareness. 

In recent weeks, VNH reported to investors a double-digit increase in its NAV for the month of February 2021 after a period of economic momentum and social stability in Vietnam. 

It said in a recent statement that Vietnam's ‘road to recovery continues to stand out compared with other countries around the world’ with retail sales seeing a 8.2% year-on-year climb while manufacturing has maintained a strong gain for the first two months of 2021. 

This was demonstrated through exports and imports which rose 24.7% Y-o-Y and 26.4% Y-o-Y, respectively, according to Vietnam's General Statistics Office. In particular, exports grew across all major markets, including the US, China, EU, ASEAN, Japan and South Korea. 

VNH said Vietnam's now ‘more visible vaccination rollout plan’ which started recently, is likely to boost the hospitality and tourism sectors in coming months as the government opens borders to foreign travellers with proven vaccinations and the Ministry of Health distributes the 150 million doses it has said will arrive by the end of 2021 or early 2022. 

Research from institute QuotedData has described Vietnam’s response to the pandemic as ‘very effective’, something reflected by the IMF’s latest prediction that it will post positive GDP growth of 1.6% for 2020, rising to 6.7% this year and averaging 7% for 2021 to 2025. 

In fact, Dynam Capital, the partner-owned business which is Vietnam Holding’s manager, believes that Vietnam will be one the 20 largest economies in the world by 2050, it stated. 

According to the research, Dynam has already tilted the portfolio towards sectors such as banking - where exposure has moved from around 10% to 25% - and in higher-quality real estate, which the group believes are well-positioned to capture the benefits of this growth. 

‘This strategy has already reaped some rewards, as VNH’s banking stocks have been amongst its stronger performing holdings as markets have recovered,’ it told investors. 

Specifically, the report highlighted that VNH’s portfolio of high-growth companies in Vietnam ‘should come at an attractive valuation and demonstrate strong ESG awareness.’ 

It said the company achieves this by investing primarily in publicly-quoted Vietnamese equities, but stated that ‘it can also invest in unlisted companies and can hold the securities of foreign companies if a majority of their assets and/or operations are based in Vietnam.’ 

The research said Vietnam benefits from ‘a number of structural growth drivers’ that suggest it is well-positioned for further economic expansion for years to come. These factors include Vietnam’s increasingly open economy and its well-diversified foreign trade partners. 

“We are now one year on from when the World Health Organisation named COVID-19 a Global Pandemic: the world is still adjusting to life (and sadly death) as a result of the virus. 2021 has started strongly for Vietnam and the Fund's NAV and share price have touched all-time highs,” the company told investors earlier this month.

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