Company Announcements

Vietnam Enterprise Investments (VEIL)

27/04/2023

Results analysis from Kepler Trust Intelligence

Vietnam Enterprise Investments (VEIL) has reported results for the year ending 31/12/2022. VEIL generated a NAV total return of -35.7% in US dollar terms, with the VNI benchmark down 34.1%. Vietnam was one of the worst performers during the year for global and domestic factors.

Internally, the market suffered due to the fallout from a crackdown on the bond market and concerns about the real estate sector, both of which affected liquidity. Globally, the fallout of spiraling inflation and interest rates saw risk aversion rise.

However, the Vietnamese economy grew well through the year, with GDP per capita up by 10.8%, and foreign direct investment up by 13.5%. Companies including Apple and Samsung increased their investments in Vietnam, contributing to its move up the value-add curve.

Kepler View

2022 was something of a perfect storm for Vietnam, but in our view it has done nothing to diminish the long-term investment opportunity. Indeed, with the Vietnamese market now trading on low valuations, this could prove to be an excellent time to buy, particularly considering the wide discount available on VEIL's shares.

Vietnam Enterprise Investments (VEIL) is managed by the largest overseas investor in Vietnam, Dragon Capital, which has been investing in the country ever since its market reforms really started taking effect in the mid-1990s - even before the local stock market launched. Dragon Capital's experience, connections and local knowledge has helped VEIL deliver strong outperformance of the local index over the long run, with three year NAV returns of 16.1% versus 7.6%, and five year NAV returns of 11.2% versus 7.0%.

In the short-term, the managers are cautious. They note that a lot of corporate debt matures this year, so there is the potential for balance sheet issues with some companies. Vietnam is also sensitive to global trade and demand from China and the US, and there is some uncertainty around both those major economies. As a result, the managers are focussing on keeping the quality high in the portfolio, tilting towards companies with the strongest balance sheets and excellent corporate governance. However, they hope to see a more settled picture by the end of the year, with the potential for strong earnings growth in 2024.

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