Funds
Fund Performance
Le Anh Tuan
Lead Portfolio Manager
At a glance
- April was a volatile month as FX pressures continued to dominate the market, the Fed showed no signs of cutting, and another domestic political resignation added to the market’s negative sentiment.
- VEIL’s performance followed the VNI’s drop of 7.8%, but the sell-off did not come as a surprise. We took this opportunity to carry out rebalancing activities, topping up good companies at reasonable prices.
Performance
Fund Commentary
During April’s sell-off we rotated the portfolio into high-conviction names at favourable valuations. Specifically, we topped up on retail players MWG and FPT retail (FRT). A new addition to VEIL in March, FRT continued to outperform the market in April, gaining 1.0% MoM as Q1 results showed a solid turnaround in NPAT of $1.6mn vs a $200k loss in 1Q23, partly due to pharmacy chain Long Chau. Core to our investment case, Long Chau reported Q1 NPAT growth of 68% YoY due to adding 90 new stores YoY, increasing the total to nearly 1,600. We believe both companies will exhibit excellent growth in 2024 as the gradual recovery of domestic consumption and retail confidence comes into effect.
First quarter earnings have been solid across our top holdings. Steel producer HPG’s net revenue was $1.2bn (+16.0% YoY) and NPAT was up 6x at $116mn (from a low base). This was driven by hot rolled coil (HRC) exports tripling, accounting for 40% of consolidated sales vs 15% in 1Q23. HPG cleared all its high-cost input materials, with cheaper input costs likely meaning better earnings prospects. Weak Q1 domestic sales improved in April, with a 4M24 increase of 31.6% YoY from higher demand in infrastructure and residential construction, a positive sign for HPG and our holdings in real estate and banks.
We view April’s challenges as short-term issues that should find a natural equilibrium over the coming year. We believe that, while recognising there may be more volatility in the near term, the major factors driving it are repudiated by the strong earnings results of our holdings.
Stock in Focus: Mobile World Group (MWG)
With a market cap of $3.5bn, Mobile World Group is a leading player in consumer electronics (ICT/CE) and e-commerce, aligning with our investment theme of sector recovery and a growing middle class. Established in 2004, the company has become one of the country’s top retailers, with its grocery chain Bach Hoa Xanh (BHX),founded in 2015, a key driver of future growth.
BHX has been aggressively restructuring over the last 18 months to prioritise profitable revenue growth, closing loss-making stores and focusing on a better quality product mix. This has driven a large increase in traffic and store revenue, gaining market share and positioning it as the number one grocery operator. BHX made significant progress with total sales up 43.6% YoY, driven by a higher mix of fresh products. After streamlining operations and improving cost management, it can now return to store expansion, and we believe will end the year profitable. BHX’s transformation was further emphasised by the successful completion of a 5% private placement to CDH Investments, which we estimate values the chain at $1.5bn. MWG’s ICT/CE segment’s gross profit margin improved from 17% to nearly 20% QoQ, with sales outperforming its competitors. This was reflected in MWG’s strong Q1 revenue of $1.2bn (+16.2% YoY) and net profit of $35mn, up from $1mn in 1Q23 and far exceeding market expectations. We believe MWG is well-placed to potentially surpass its 2024 guidance, increasing our full-year net profit estimates to $125mn, a substantial turnaround from just $7mn in 2023.
