Vinacapital Vietnam Oppo... Share Discussion Threads

[amt] 16/9/2024 12:16

Kenmitch you can put the blinkers on if you like but since I sold down a substantial part of my holding after I became aware just how risky a market Vietnam is the market and VOF have fallen. If you are only interested in observing anything positive and ignoring the risks then that's your decision. However to tell other readers to ignore a different point of view from Aleman is rather short sighted and goes against the idea of discussion which is the idea of these boards.
If Vietnam only had all the good points going for it the market would have gone up, not down. Perhaps you can explain why that is the case.
I still have a holding here but reduced by 90% so I do still have an interest but I am not going to look at everything through Rose tinted glasses.

[kenmitch] 16/9/2024 12:02

silverlandfinance

VOF is on a much bigger discount than VNH and that’s partly because they hold some non quoted investments. But imo both these Trusts are well worth holding as the frequent updates from Aleman here AND the monthly updates and Results comment from the Trusts themselves make clear. Ignore posts from amt; it’s always good to read the well argued case against a share or Investment Trust, but not ill informed nonsense.

btw….there are a lot of Trusts across a range of sectors that are on unusually wide discounts. It’s often a buying opportunity

[aleman] 16/9/2024 11:16

New Global Markets Research forecasts for Vietnamese GDP are 5.8% for 2024 and 6.8% for 2025. These are tweaked from 6.1% and 6.5% after the recent Typhoon.

[amt] 16/9/2024 09:26

It's not unusual especially for high risk investments when the markers are doing badly.

[shaker45] 16/9/2024 08:32

Check other funds - 30% not unusual

[silverlandfinance] 16/9/2024 08:14

Why is there such a discrepancy between the net asset value(over£6) and the share price of £4.60-about 30%?

[aleman] 13/9/2024 12:48

Discount to NAV over 24% now. Historically, this is extreme.

[amt] 10/9/2024 08:25

Well the increased discount hasn't come as much of a shock to me given the state of the markets in general plus being such a high risk market.
Vietnam Market in a rut.

[aleman] 09/9/2024 16:13

As per post 2209, the recent weaker £ versus the Dong, on growing speculation of UK rates cuts (falling Gilt yields), seems to be adding a bit of that shine back to NAV in recent days. There is a little speculation that the strengthening Vietnamese economy and slight rise in CPI might see some modest Dong rate rises in coming months. Typically this might lift the Dong further?


free stock charts from uk.advfn.com

[aleman] 09/9/2024 12:21

NAV is back above £6 and the discount is up to a historically very high 23.6% at 460p.

[hpcg] 09/9/2024 10:25

To be clear Kenmitch I am not at all saying that buybacks in trusts can do much to close discounts. What they are good for is pound cost averaging over the long term where the very mechanism ensures that shares are bought back when they are relatively cheap than relatively expensive. The second element that should be recognised is that they provide daily liquidity. I can safely hold my relatively tiny allocation because I know I can exit in a day if for some reason I had to. For any issue, stock, trust, bond, lack of liquidity can be a killer. It doesn't protect against big market falls, but then nothing does.

As I am here for the long term story the buybacks in the bad times provide juice when the good times arrive. We are in one of the consolidation periods now, but there are likely to be significant gains after it breaks ATH.

[kenmitch] 09/9/2024 09:31

Interesting reply hpcg.

What stands out is that comment that they were disappointed that their buybacks didn’t work in reducing the discount as long ago as 2015! So why are other Trusts still claiming surprise that their recent buybacks haven’t worked and in some cases have resulted in an even bigger discount! Also VOF spent $214million on buybacks and that large sum only saw a 37cents cumulative accretion to NAV.

Haven’t checked but presumably that disappointment is a key reason they are now going for tender offers instead. That’s better for shareholders who get a cash benefit which they don’t with buybacks, but if done regularly it creates the problem outlined by Aleman.

I think too many Trusts worry too much about discounts and instead of trying ways like tender offers and buybacks to try and fail to reduce the discount, they would do better to focus on using spare cash investing in their portfolios.

Regardless of all this, I ‘ve held both VOF and VNH for most of this Century except for selling temporarily (too late!) in the covid crash. They’ve both proved to be superb investments, albeit with VNH way outperforming VOF.

And with promotion to full Emerging Market status from current frontier market coming in time that could well give the share prices a good boost along with, in the case of VOF, of a big narrowing of the discount. Both VOF and VNH could even go to premiums then with imo VOF having the edge because there’s a wider discount to correct.

[hpcg] 08/9/2024 16:31

kenmitch - in which case the discount to NAV for a trust and by summation many trusts is that investors are not interested in buying them. In which case why should it continue on for years? Why should trusts continue as an investment vehicle at all if people don't want to use them? The NAV per share in VOF has performed much better than VEIL. It has been growing its NAV in absolute terms this year, though the big moves are highly correlated with the market it operates in. It continues to outperform the index. One thing it isn't really doing is getting smaller. It can grow its absolute shareholder equity and reduce its share count at the same time. The company has been able to vastly decrease the share count whilst still growing its absolute size.

RNS Monthly NAV
"The Company announces that, for the month ended 31 October 2018, its unaudited, estimated NAV was USD 989.28 million or USD 5.26 per share. The Sterling equivalent as at that same date was GBP 774.27 million or GBP 4.11 per share."

Market update and NAV RNS
"VinaCapital Vietnam Opportunity Fund Ltd ('VOF', the 'Company') announces that on 23 May 2014, pursuant to the share buyback authority granted to the Company's Board of Directors on 25 October 2011, Visaka Holdings Limited, a wholly-owned subsidiary of the Company, purchased 410,875 Ordinary Shares of USD0.01 each at an average price of USD2.3136 per share.

Following this transaction, VOF has spent USD163.4 million overall repurchasing 85,150,086 shares which are held as treasury shares and have reduced the total voting rights in the Company to 239,460,173. The total number of shares acquired since November 2011 represents 26.23 percent of the Company's 324,610,259 ordinary shares in issue. As a result of the Company's share buyback programme, VOF has recorded USD0.33 in cumulative accretion, equating to an 11.1 percent benefit to VOF's net asset value per share."

Passage from the 2015 annual report:
"Every statement I have written has contained an expression of disappointment that the discount to NAV remains too high. This year’s is no exception. While we have continued to buy shares back and the Investment Manager has taken an active approach to spreading the ‘VOF message’, the impact has been less than your Board would like. This year, we bought back USD47.3 million of stock, adding 5 cents to NAV per share and, since the inception of the buyback programme in November 2011, the total value of shares bought back amounts to USD214 million with a cumulative accretion to NAV per share of 37 cents."

[riskvsreward] 08/9/2024 11:39

Sorry, don’t know why the post is duplicated. But deleted the duplication.

[riskvsreward] 08/9/2024 11:36

The fact doesn’t support the argument of painting the merits of buyback with one brush. My view is that a good investment is a good investment, no matter who buys it so buyback is a good thing. And the opposite is true as well so buyback is bad only when the business is a bad one. For trust buyback is normally really bad for the fund manager so it should be applauded if they do it for the benefit of the shareholder.

[kenmitch] 08/9/2024 11:25

Strongly agree Aleman. It’s so obvious that it’s buybacks and redemptions (and not dividends) that are shrinking Trusts until they become too small. And it’s not as if the buybacks are working as too many Trusts are finding out the hard way as their discounts widen even further despite their buybacks to reduce them! Dividends reward investors with real cash, and are welcomed by sensible investors who understand the downside of buybacks, and not just the theory of them!

The key point though in Aleman’s post is the unintended and concerning negative results of buybacks and redemptions; I.e shrinking Trusts to the point where it threatens their continuing existence.

[hpcg] 08/9/2024 10:55

I would argue it is the payment of dividends that is bad for trusts. They should be compunding their money. That is what a buyback at much less than NAV does whereas a dividend is just leakage. Berkshire Hathaway is the prime example. VEIL, which I sold out of recently is an accumulation fund but its NAV per share progress is very disappointing.

[aleman] 03/9/2024 10:09

The rise of the £ against the Dong - about 10% in the last 12 months - has taken a little of the shine off VOF's sterling NAV when converted from the rise in the Vietnamese stockmarkets, (particularly in a spell in early August). I imagine the £ will not rise another 10% in the next year and might even reverse slightly, depending on rate decisions. (Vietnamese inflation is 4.4% and its base interest rate 4.5%.)

[aleman] 03/9/2024 09:51

I see VNH has had 16% of shareholders apply to redeem their shares. A few years of that and there'll be no fund left to manage. It seems unwise to me. Numerous investment trusts are operating buy-backs to manage discounts that see their investment base slowly shrink. There have been a few mergers recently where trusts ended up too small to cover the management expense base. Buy-backs and redemptions will be part of the reason for the shrinkage. I think the investment trust sector is eating its tale with these policies. It used to be illegal for directors to meddle with their own share price and there has been a bill launched in the USA to make buy-backs illegal again. I don;t think it's expected to pass a the moment but who knows?

[aleman] 02/9/2024 11:01

Henderson Far East Income IT has been selling down its VOF holding over the last 18 months or so to to the tune of a few £million or more (not enough detail in their data to be clear). I doubt it's a major influence on the VOF share price but it won't have helped. They have actually been building a large exposure to a frothy Indian market at the same time (P/E 24 to 29, depending on source, and earnings growth slowing). I'm not sure that will turn out to be wise on their part in time. Prospects here look far better to me.

[aleman] 28/8/2024 15:53

Stronger GDP growth is predicted to lift the VNI index over 20% by end of 2025 (with bias to property and banking which might see VOF outperform).



VN-Index is forecast to reach 1,330-1,350 points by the end of 2024, up 19% over the same period, 14.2 x P/E with market profit expectations to grow 18%.

Real estate has the highest price increase potential of 38.7% driven by the positive impact of the new land law taking effect from next August. This also supports the steel sector’s potential price increase of +35.1%, which has been driven by strong export growth.

The recovery momentum of the real estate industry and abundant FDI capital flows will also help the banking industry group, which has the potential to increase prices by 19.5%, achieve its high credit growth target this year. Besides, with an average P/B of about 1.7 x, the bank’s valuation does not seem to fully reflect the forecast ROE.
For 2025, EQT VN forecasts that the Fed is expected to cut interest rates 3 times in 2025; USD strength DXY index weakened following the Fed’s interest rate cut trend. Domestically, economic growth continues to improve. Vietnam’s GDP is forecast to grow by 6.5-7.0% in 2025, driven by domestic consumption and private sector investment.
It is forecast that the profits of businesses listed on HoSE will grow by 15-17% in 2025 thanks to the positive improvement trend of the economy. VN-Index will reach 1,580-1,600 points by the end of 2025, (14.8 x P/E; ~ equivalent to 5-year average P/E), VN-Index’s growth potential is 1718.5%.

[aleman] 27/8/2024 11:51

VNI still hovering under its 4-year high but the Hanoi/midcap index is rising nicely. I'm surprised were not above a £6 NAV again yet but I suppose that is down to the strong £, which almost certainly will not last.

[hpcg] 23/8/2024 15:08

Some good coverage of the new Vietnam premier in the Economist last issue. He is rated very much a capitalist.

[aleman] 23/8/2024 13:57

VNI up again but still not quite a 26-month high yet. Smallcap and midcap indices have looked a bit more positive again this week again after some previous profit-taking, though.

[aleman] 20/8/2024 11:04

1272 close for VN index after another strong day. The 1300 level it failed to break a couple of months ago was a 2-year high.