Funds
Fund Performance
Le Anh Tuan
Lead Portfolio Manager
At a glance
- In July, we increased positions in select banks and real estate stocks at attractive valuations.
- This was funded by reducing positions in steel companies, which are currently facing short-term pressures from dropping output prices.
- VEIL’s portfolio of companies achieved strong 1H24 earnings results, with the FY24 outlook remaining on track despite global market volatility.
Performance
Fund Commentary
We reduced exposure to steel producers in July, executing a short-term tactical rotation out of the sector due to potential near-term margin pressures as global output prices drop. However, our largest holding in the sector, HPG, is still seeing very good sales volume. HPG’s stock price increased 6.2% in 1H24, reflecting its strong financial performance over the period. Net revenue reached US$2.8bn, +25.5% YoY, and NPAT reached US$247mn, +238.0% YoY. This robust recovery indicates a resurgence in public spending and private construction, aligning with our investment theme of infrastructure and real estate recovery. HPG remains a long-term holding for VEIL, with its investment appeal rooted in its dominant market position and expanding production capacity. The government has proposed anti-dumping legislation to address the issue of low-cost steel imports and we believe these short-term headwinds will not affect HPG’s long-term prospects.
Proceeds from this reduction were used to increase our position in VCB in a block deal at a slight discount to market price. The banking sector has been performing well, contributing 0.56% of alpha to VEIL in 1H24. We believe most of the key banking metrics have now bottomed out, and margins should improve as expected Fed cuts will likely reduce FX and policy rate pressures. We also topped up in property developer KDH, again at a slight discount via a block deal. Despite declining 1.0% MoM, the stock price has rallied since the top-up and has performed well this year, increasing 11.0% in 7M24. As one of the safest mid-cap developers with a large land bank, and a strong track record of securing legal approvals and delivering projects, KDH is well-positioned for growth. We forecast 2024 revenue of $141mn NPAT of $33mn, an increase of c.69% and 15% YoY, respectively.
Stock in Focus: Becamex IDC Corporation (BCM)
Established in 1976 as an SOE, BCM has evolved into one of Vietnam’s leading developers of industrial parks (IPs) and urban areas (UAs). Following partial equitisation in 2017, BCM has become known for its strategic focus in Binh Duong, one of Vietnam’s top FDI provinces. BCM’s investment appeal is rooted in its dominant market position in IP development, extensive land bank of approximately 2,000ha, and strategic partnerships. These include the Vietnam-Singapore Industrial Park (VSIP), the largest IP developer in the country, and a 30% stake in IP operator BW Industrial, which has 995ha across 50+ projects. BCM’s ongoing IP expansion is set to add approximately 1,500ha of IP land, and the company’s involvement in the Binh Duong New City project, a major urban development initiative, is expected to further enhance UA land sales in the coming years.
BCM capitalised on its extensive land bank and partnerships, with revenue primarily driven by IP and UA land sales, which accounted for 85% of gross profit in 2023. The company’s strong financial position is reflected in its net debt-to-equity ratio of 1.0x as of 2Q24. BCM’s planned private placement to strategic shareholders, expected to raise c.$590mn, received preliminary approval from the Prime Minister in 1Q24 for execution in 4Q24. This will further support its development pipeline and capital contributions to affiliates, ensuring growth momentum. We believe this will be a significant catalyst for stock price growth, increasing 15.4% MoM in July alone. With its substantial land bank and strategic partnerships, BCM offers significant long-term upside potential. We forecast 2025 NPAT to reach $73mn, +13.1% YoY and EPS growth of 12.1% YoY.
