Funds
Fund Performance
Le Anh Tuan
Lead Portfolio Manager
At a glance
- After our recent portfolio restructuring activities, the rebalancing is now near completion, and we are now comfortable with the stock and sector weightings.
- The fund is now well-positioned to capture alpha as the market and economy improve, underpinned by strong H1 economic data.
- This was reflected by VEIL’s gain over the VNI by 0.9% in June and is now at parity with a 6.0% return YTD.
Performance
Fund Commentary
While still maintaining an overweight position, we have finished trimming our high-concentration names. We have topped up in companies operating in sectors we believe are best positioned to outperform the market, such as banking, retail, manufacturing, property, and industrial parks. In Q2, the retail sector was the biggest alpha contributor. Our rotation into MWG and FRT proved fruitful, generating returns of 19.9% and 10.5% respectively, contributing to the portfolio’s outperformance. We have high conviction in the sector and expect it to continue its recovery, bolstered by domestic consumption growing 8.8% in Q2, VAT cuts, minimum wage increases, and tourism revival. The IT sector also added significantly to VEIL’s performance, with FPT rising 26.3% in Q2 and 12.2% in June following NVIDIA’s delegation and $200mn partnership with FPT.
The property sector faced challenges, with a 14.6% decline in Q2 due to slow pre-sales and weak earnings. However, we remain optimistic about a
sector recovery in H2 as the new land law comes into effect, expecting delayed projects to resume. We maintain an overweight position in select
residential developers, having increased our exposure to KDH and added NLG which have large land banks and new launch pipelines.
We remain confident that 2024 will be a year of growth and recovery, with H1 GDP coming in strong at 6.4%. Despite FX pressures and potential inflation rises, we believe macro headwinds are unlikely to derail Vietnam’s current growth path. We are also looking at engaging in several capital-
raising activities as credit demand continues to rise and remain ready to take advantage of potential capital market opportunities as they occur.
Stock in Focus: Vietnam Prosperity Bank (VPB)
Established in 1993, VPB is one of Vietnam’s leading banks, with a market capitalisation of $6.1bn. They operate a vast network of branches with the highest customer base in Vietnam of 20 million people, approximately 30% of the adult population. The bank’s customers are notably young, with 35% aged 18-30 and 75% under 45, positioning VPB for long-term value creation. VPB’s five-year performance has been marked by a CAGR of 11.1%, driven by strong credit growth at 24.1% CAGR and effective OPEX optimisation, resulting in some of the lowest staff and asset expenses among its peers. VPB was one of the first movers in the consumerlending segment and now dominates 60% of the market through FE Credit.
2023 was a bad year for VPB but we anticipate a turnaround. Earnings were adversely affected by weakened net interest margins (NIM) due to high funding costs and weak credit demand, along with elevated non-performing loans (NPLs). However, VPB had strong performance in 1Q24, with NPAT of $140mn (+40.7% YoY). This was driven by a rebound in top-line growth and improved contributions from FE Credit, which has undergone significant cost restructuring with an approximate 30% reduction of employees. The lending arm’s credit disbursement is also recovering at $408mn in 1Q24 vs $268mn in 1Q23. We anticipate it to become profitable in 1H24, acting as a key catalyst for growth. SMBC’s $1.5bn strategic placement last year elevated VPB to one of the most well-capitalised banks in Vietnam, with a CAR of 16%. We like VPB’s strong market positioning, and expected recovery of FE Credit, NIM, and credit growth leads us to estimate 2024 revenue growth of 23% and NPAT and EPS growth of 42%.
