Vietnam Enterprise Investments Limited (VEIL) Monthly Report – March 2025

Performance

Fund Commentary

While the sharp early April sell-off technically fell outside this reporting period, the underlying pressure had already begun to build in March. Anticipating increased volatility around the US tariffs, we raised approximately $100mn in cash in the days leading up to the announcement to improve liquidity and preserve flexibility for potential rebalancing. This ensured we were able to respond quickly amid growing uncertainty.

While the scope and magnitude of US tariffs remains uncertain, Vietnam’s shift toward domestically led growth – focusing on consumption, infrastructure, monetary easing, and private sector reform – continues to support our positioning in banks, retail, real estate, and infrastructure plays. These allocations reflect our long-term conviction in Vietnam’s structural growth story, including urbanisation and supply chain diversification, which should remain intact assuming tariff differentials stay favourable. In response to recent developments we marginally reduced our industrial park exposure to mitigate the risk of a potential slowdown in FDI, but continue to prioritise earnings visibility, pricing power, and sectors set to benefit from pro-growth domestic policy.

FPT was the biggest laggard, with March foreign outflows of $155mn bringing its YTD total to $267mn. This selling occurred despite February reporting showing 20% revenue and 25% profit growth YoY – supporting our view that the move was sentiment-driven, not fundamental. Having trimmed FPT and MWG in late 2024 on high valuations, we remain confident in both as core long-term holdings. We also took advantage of a rare opening to initiate a $20mn position in retail bank VIB via an accelerated book-build, following the exit of strategic shareholder Commonwealth Bank of Australia. The bank’s growing digital and consumer lending footprint aligns well with our view of Vietnam’s evolving domestic growth model.

Stock in Focus: Vietnam International Bank (VIB)

Established in 1996, VIB is a leading commercial bank with a market cap of ca. $2.3bn. The bank serves over 6 million clients (around 10% of the adult population) through an extensive nationwide network. Its customer base is primarily affluent and in the 25-40 age group, positioning VIB for long-term growth. As of FY24, retail lending made up 80% of total loans vs the sector average of 35-40%, with a balanced portfolio comprising 49% mortgages, 21% business loans, 12% auto loans, and 9% secured loans and cards, underscoring its strong foothold in the retail segment.

In FY24, customer lending grew 22% YTD, reaching $15.5bn. However, Net Interest Income (NII) fell 10% YoY to $651mn, due to narrower margins from higher funding costs. Total Operating Income (TOI) declined 7% YoY to $799mn, driven by lower fee income and reduced trading gains. Profit Before Tax (PBT) dropped 16% YoY to $350mn, reflecting elevated provisioning levels. While these provisions weighed on short-term profitability, they signal a prudent approach to risk management and should strengthen asset quality over the long term.

For 2025, VIB targets total assets of $21.4bn (+13% YoY) and credit outstanding of $18.9bn (+22% YoY), including loans, corporate bonds, and debt purchases. It also aims to grow PBT by 22% to $432.1mn, broadly in line with our 21% forecast. The bank is currently trading at a FY25 P/E of 6.6x and P/B of 1.2x, representing a 20% discount to its 5-year average and offering an attractive valuation given its retail strength and growth outlook.