Vietnam Enterprise Investments Regulatory News (VEIL)

29 January 2024

Vietnam Enterprise Investments Limited

("VEIL" or the "Company")

2023 Update - Fourth Quarter

VEIL is a London listed investment company investing primarily in listed equities in Vietnam and a FTSE 250 constituent. The Company's unaudited NAV performance for Q4 2023 is set out in this notice.

Company Highlights

· In Q4 2023, VEIL's NAV decreased 2.0% over the previous quarter against a decline of 1.4% for its reference index, the Vietnam Index ("VNI"). In 2023 overall, VEIL's NAV increased 10.5% and the VNI increased by 11.1%, both in total return US dollar terms.

· The Company's NAV per share was US$8.67 as of 31 December, and its total NAV was US$1.7bn.

· The Company's share price decreased 1.9% over the quarter and rose 1.3% in 2023 overall, both in USD terms.

· VEIL's three-year NAV per share performance is +4.5% and +32.2% over five years. Over the same periods, the performance of the VNI was +1.8% and +31.4%, respectively (all in US dollar terms).

· In GBP terms, the Company's NAV per share was £6.80 as of 31 December (-6.21% for the quarter and +4.1% in 2023), and its total NAV was £1.4bn. The Company's share price decreased 6.1% for the quarter and 4.5% in 2023.

· The Company's discount to NAV averaged 18.7% for the quarter. As of 31 December 2023, the discount to NAV was 18.1%, compared with 18.2% at the end of Q3 2023 and 10.7% as of 31 December 2022.

· The Company spent US$14.3mn repurchasing 2,112,634 shares in Q4 2023, compared with US$12.6mn repurchasing 1,679,469 shares in Q3 2023.

· A total of 5,698,692 shares were repurchased in 2023 for US$40.3mn. This is 2.8% of shares outstanding as of 1 January 2023. The indicative accretion to NAV per share from the share repurchases is 0.62%.

· The Vietnamese dong ("VND") appreciated 0.1% against the US dollar in Q4 2023 and depreciated 2.7% in 2023 overall. The VND depreciated 4.0% against the GBP pound sterling during the same period and depreciated 8.3% in 2023.

Dien Vu, Portfolio Manager of VEIL, commented:

"GDP growth accelerated in Q4 2023 to reach 6.7% year-on-year, culminating in 5.1% for the full year. We forecast 2024 GDP growth of 6.0-6.5%, which will likely be fuelled by our base case resurgence in global demand, stable FDI, rebounding exports, and fiscal spending. We are also factoring in the widely anticipated rate cuts from the Federal Reserve in 2024 to catalyse US re-stocking, which should support Vietnam's exports recovery (down 4.6% in 2023), manufacturing sector and domestic consumption. We believe that supportive domestic monetary policy can continue under the assumptions of well-managed inflation below 4% (this was 3.3% in 2023). Sound macroeconomic fundamentals should help the currency to remain stable, supported by positive external balances, including a record trade surplus of US$28bn and currency reserves of approximately US$89bn.

"In 2023, Asia Commercial Bank ("ACB") was a standout performer for the Company with a Q4 return of 9.7%, resulting in a total share price increase of 27.2% for the year. The bank reported solid net profit after tax ("NPAT") increases of 7.4% in Q4 and 51.0% for the full year. This underscores our high conviction for the company, which, by our assessment, is among the best banks for asset quality and displays excellent risk management.

"Steel manufacturer Hoa Phat Group ("HPG") achieved a stellar performance, with its share price rising 6.6% for the quarter and 51.2% for the year. HPG sold 2.4mn tons of steel products in Q4, +23.2% quarter-on-quarter and +36.7% year-on-year. The company's Q4 announcement showed sales of US$1.4bn, up 29.6% year-on-year, and NPAT of approximately US$121mn, accelerating by 47% quarter-on-quarter. Strong export demand for hot rolled coil and a notable domestic construction steel demand rebound led the Q4 sales uptick. Cheaper domestic input costs and higher provision reversals of forex and inventory also drove the solid performance.

"Mobile World Group ('MWG') faced significant challenges in 2023 due to the downturn in discretionary spending. We believe MWG possesses sound fundamentals, and its market-leading position in the consumer electronics sector looks set to benefit from the anticipated uptick in consumer demand and the smartphone replacement cycle in the latter half of the year. An additional catalyst may occur if the potential IPO of its grocery chain goes ahead in H1 2024.

"To reduce portfolio concentration risk, the Company reduced its Vietnam Prosperity Bank exposure and completed the full exit of Eximbank.

"The Investment Manager currently forecasts EPS growth of 15-18% for the top 80 companies under its research coverage. In particular, banks (which account for 40% of the market) will benefit from expanding net interest margins due to widening deposit and lending rates and an increase in credit demand. The State Bank of Vietnam set a 15% growth target for disbursed credit at the start of 2024. Over the past year, bank deposit rates have nearly halved to an average of 4.7%, and loan rates have dropped to 8-9% from 14-16%.

"The VNI has started 2024 well (up 2.3% as of 25 January in USD terms) and we believe the Company will benefit from the anticipated return to growth in overall corporate earnings, bolstered by sustained fiscal spending and a conducive low-rate environment."

Macroeconomic Commentary

· GDP growth registered at 6.7% year-on-year in Q4 2023 - the highest fourth quarter growth since 2019, making overall GDP growth of 5.1% for the full year 2023. The services sector remained the key driver, expanding 7.3% year-on-year in Q4 and 6.8% year-on-year in 2023, contributing 62.2% to overall GDP growth.

· The industrial and construction sector increased by 7.4% year-on-year in Q4, continuing its recovery from -0.5% in Q1, +2.1% in Q2 and +5.2% in Q3 (all expressed in year-on-year terms). This contributed 28.9% to overall GDP growth.

· Exports and imports rebounded strongly in Q4, by 6.4% and 3.6% year-on-year, respectively. However, for the full-year 2023, exports and imports fell 4.6% and 9.2% to US$355.5bn and US$327.5bn, respectively, leading to a record trade surplus of US$28.0bn.

· FDI disbursement was US$23.2bn in 2023 and registrations US$36.6bn, up 3.5% and 32.1% year-on-year, respectively. Of the FDI registrations, pledges to new projects increased 62.2% year-on-year to US$20.2bn, the highest level over the past six years.

· The manufacturing and processing sector accounted for 64.2% of FDI registrations in 2023, followed by real estate (12.7%) and utilities (6.5%). By country, Singapore was the main source of registrations (18.6%), followed by Japan (17.9%), Hong Kong (12.8%) and China (12.2%).

· Average inflation was 3.25% year-on-year in 2023, comfortably below the Government's target limit of 4.5%. Inflation for the year was mainly driven by education (+7.4%), housing, accommodation and construction (+6.6%), and food, foodstuffs and catering services (+3.4%).

· International visitors to Vietnam totalled 12.6mn people in 2023, 70% of pre-pandemic levels of 18.0mn in 2019.

Top Ten Holdings (57.7% of NAV)

Source: Bloomberg, Dragon Capital

NB: All returns are given in USD terms

For further information, please contact:

Vietnam Enterprise Investments Limited

Rachel Hill

+44 122 561 8150

+44 797 121 4852

rachelhill@dragoncapital.com

Jefferies International Limited

Stuart Klein

+44 207 029 8703

stuart.klein@jefferies.com 

Buchanan

Charles Ryland / Henry Wilson / George Beale

+44 20 7466 5111

veil@buchanan.uk.com

h2Radnor

Iain Daly

+44 20 3897 1830

idaly@h2radnor.com

LEI: 213800SYT3T4AGEVW864