VietNam Holding Limited ("VNH" or the "Company")
Monthly Investor Report
A report detailing the activities of the Company for the month November 2020 has been issued by Dynam Capital Limited, the investment manager of the Company. Electronic copies of the report have been made available to shareholders on the Company's website and a summary of the report is included below.
It is hard to imagine a country coming out of the chaos of Covid-19 shining. Nevertheless, Vietnam is making headlines once again for containing the virus and achieving exceptional export growth, while much of the Western world endures a worsening second wave and further economic pains. Consumption and manufacturing in Vietnam has gained momentum month after month since May. Exports increased +8.8% and imports jumped +13.4 year-on-year respectively in November despite setbacks for many manufacturers due to the extreme storms and flooding. Key drivers of the strong export growth are phones and parts, but demand has picked up in all markets over the past month with textiles and seafood exports to the EU increasing, for example. Retail sales also made a significant come back in November increasing by 8.5%.
The Fund is up +28.2% fiscal year-to-date outperforming the VNAS, which is up +24.4%. The Fund has benefited from our increased weighting in banks, balanced allocation in industrials and some profit taking from telecoms. Vietin Bank (CTG), currently the country's third largest bank by assets with market share of 11.4% in loans and 10.2% in deposits, is new to our portfolio this year and trading at a compelling valuation with a 2021 price to earnings ratio of 11.4x and price-to-book ratio of 1.3x. Another contributor is VPB, one of the most profitable lenders in Vietnam with an ROE average of 24% in the past five years. It has a 55% market share of the consumer lending business in Vietnam and a clear focus on the unbanked population which is estimated at around 65% of adults in the country. It also was one of the first banks in Vietnam to apply Basel II, the Bank for International Settlements' (BIS) international capital adequacy standards.
Our overweight in HPG, the leader in Vietnam's construction steel and steel pipe industry, has been a significant contributor to the Fund this year. HPG reported amazing business results with net revenue and earnings up +40.8% YoY and 56.4% YoY respectively for the first nine months of 2020. Its products can compete fairly with regional peers, including China, thanks to its fully integrated value chain and effective cost control at its Dung Quat Steel Integrated Complex. It is forecasted to maintain double-digit growth in 2021-2022 based on its market position and competitive unit cost. Our overweight in PNJ, the well-known jewellery producer and retailer in Vietnam, has also paid off this year and we expect that to continue in 2021. The jewellery market in Vietnam is forecast to grow two digits having benefited from the fast-growing middle-affluent class and changing consumer preference from traditional savings to modern fashion. PNJ is a well-respected brand and its management is aiming to be a top regional player.
Although the global risks due to Covid-19 still linger (despite the positive news on vaccines), we could not be more positive about Vietnam moving into 2021. The country has stood out for its handling of the crisis and strong macro conditions are paving a good foundation for future growth. Vietnam is now the largest member in the MCSI FM Indices, given Kuwait's upgrading, and this could attract around USD 400 million net flow within a year. We also expect 20% EPS growth YoY in 2021 for the portfolio. In addition, we are already seeing accelerated public investment as many projects suspended in 2020 due to the pandemic are set to resume next year. We anticipate strong money inflows to come from foreign direct investment as well in this respect and look to the Regional Comprehensive Economic Partnership (RCEP) to further boost exports to major markets in Asia, including South Korea, Japan and China.
We wish you all a safe Christmas and a prosperous New Year.
For more information please contact:
Dynam Capital Limited
Craig Martin Tel: +84 28 3827 7590
Corporate Broker and Financial Advisor Tel: +44 20 7220 0500
William Marle / Giles Rolls