Funds
Fund Performance
Le Anh Tuan
Lead Portfolio Manager
At a glance
- The market rebounded in May with VEIL increasing by 4.7%, slightly ahead of the VNI’s 4.3%, led by gains in the materials and consumer discretionary sectors.
- We proceeded with our rebalancing by selectively allocating to promising names in the consumer, materials, and real estate sectors.
- FX pressures persisted but we are encouraged by the recent weakening DXY and domestic gold prices.
Performance
Fund Commentary
We continued to rebalance the portfolio in May by strategically rotating between our banking holdings, trimming those with strong performance and topping up in names we feel have more room to run. We also increased exposure to mid-cap property developers, anticipating the upcoming legislation in August to aid sector recovery by year-end. We introduced Nam Long Group (NLG) to our portfolio, a standout among mid-cap developers due to its sizeable and ready-to-go land banks, proven execution capabilities, and a low-risk profile. We forecast NLG will achieve 2025F revenue of 284mn, a YoY growth of 30% with NPAT and EPS growth of 28%. We also topped up in MWG, taking advantage of its exclusion from the Diamond ETF and its strong growth prospects from increasing CE sales, BHX profitability and overall retail segment recovery.
FDI is tracking ahead of 2023, presenting a bullish outlook for industrial sectors. On this basis we increased our position in IDC, a mid-cap industrial park (IP) developer known for its high-quality assets and effective management team. IDC’s substantial land banks are located in prime areas, enhancing their appeal. IDC leases its land in phases, aligning with demand before clearing new blocks to maintain inventory. This phased approach ensures IDC meets demand without extending cash flow, and avoids the high costs of maintaining a fully clear land bank. IDC is forecast to return 17% revenue growth in 2024 and 35% NPAT and EPS growth, with a forward PE 10.9x. These projections are supported by a substantial backlog of unrealised profits from the handover of over 200ha in 2023 and 1Q24. IDC’s 470ha Tan Phuoc 1 IP project has now completed its legal paperwork, with guidance to start development in 2024 and land sales from Q3 2025, ensuring a sustainable long-term growth trajectory for the company.
Stock in Focus: Hoa Phat Group (HPG)
Established in 1992, HPG is Vietnam’s largest steel producer with a market cap of $7.3bn, specialising in construction steel, hot rolled coil (HRC), steel pipes, and agriculture. HPG’s investment appeal lies in its dominant market position, expanding production capacity, and expansion initiatives that drive significant revenue. HPG’s Dung Quat Steel Complex has two phases. Phase 1 produces 5.6mn mt/year of construction steel and HRC. Phase 2 should start operations in Q1 2025, doubling total current capacity with a focus on HRC and c.1mn mt of high-quality construction steel. The new furnaces in Phase 2 are larger, resulting in lower energy consumption, reduced material waste, and higher operational stability, likely resulting in more consistent, higher-quality and higher-margin products. Phase 2 prioritises HRC, which can be sold domestically and internationally, targeting markets such as the US, EU, Southeast Asia, and Mexico. HPG plans to expand into the Middle East, South America, and Africa, reducing concentration risk and potential anti-dumping tariffs.
HPG reported Q1 revenue of $1.2bn (+16% YoY) and NPAT of $113mn (+622% YoY from a low base). HRC sales grew 67% YoY and construction steel by 10% YoY (vs. a 2% sector decline), with domestic market share for construction steel growing by a record 37%. In April, HPG delivered 923k mt of finished steel (+71% YoY and +20% MoM), with construction steel volume at 471k mt (+120% YoY and +24% MoM), driven by recovering demand. We anticipate HPG to lead the sector recovery and continue to capture market share, forecasting 2025F PE at 9.9x with EPS growth of 48.7% YoY.
