Vietnam Holding doubles benchmark as top tech stock FPT soars
Vietnam Holding (VNH ) has more than doubled the benchmark return in just a year, with half the outperformance driven by just one company.
Recent full-year results from the £108m investment company show it grew net asset value (NAV) by 23.6%, more than double the 9.5% increase in the Vietnam All-Share index.
This cemented the fund’s outperformance of the index over one, three, five, 10 and 15 years, and propelled the Dynam Capital managers, Vu Quang Thinh, Craig Robert Martin, and Nguyen Thanh to a top AAA rating in the Citywire Investment Trust Manager Ratings.
The share price rose 43% over the period thanks to the combination of NAV increases and a significant narrowing of the share price discount to below 5%, helped by buybacks.
FPT Corp, one of Vietnam’s largest IT services companies, is the fund’s largest position at 14.7% of assets and it generated more than half of the portfolio’s outperformance as the shares rose 31.5% in the first half of the financial year and by another 57.2% in the second half.
The managers said that the ‘rapid rise’ was driven by growth in the company’s digitalisation business internationally, but ‘also by investor enthusiasm about potential partnerships with big global players such as Nvidia’.
‘This excitement is fuelled by the solid performance from its core business segments, which have contributed to a 21% year-on-year increase in revenues for the past six months ending 30 June 2024 and a 22% rise in profits over the same period,’ they said.
That progress has excited investors with FPT trading at 24 times earnings compared to a multiple of 10 times six years ago. The re-rating was partly driven by the spinoff of its electronics retail business FRT in 2018.
‘FPT has been a long-term portfolio hold, returning a 10-times gain on our initial investment cost,’ said the managers.
The trio take a concentrated approach to the portfolio with the top 10 stocks making up 63.2% of assets with investments made along core, but interconnected, themes of industrialisation, urbanisation, and domestic consumption.
Industrialisation has been boosted by global manufacturers de-risking their supply chains with a shift away from sole reliance on China. Although the fund has previously invested in manufacturers, ‘We have chosen to get most of our exposure to [industrialisation] over the past few years through business-to-business “linkages” mostly through industrial parks and logistic companies’.
This includes the third-largest holding Gemadept, a port operations and logistics group that also owns a 30% stake in air-cargo company Saigon Air Cargo. Semiconductors are transported from Vietnam by air and ‘as the US Chip Act makes deeper impacts over the coming years, favouring friendly shores such as Vietnam, the country’s air cargo services will be in even greater demand’.
Urbanisation in Vietnam is expected to rise from 37% in 2022 to 40% this year, the levels reached by China in 2000 before doubling over the next 20 years. The Vietnam government is forecasting the urban population will boom to more than 50% by 2030, fuelling the need for housebuilding.
Overall, the managers believe Vietnam’s economy is ‘at an inflection point’ and the consumer sector will grow rapidly. While domestic consumerism has been dampened since the pandemic, Thinh and his colleagues have been adding back into the consumer sector, returning Mobileworld to the second-largest portfolio position over the period.