Vietnam Holding investing in industrialisation, urbanisation and consumerism

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Fundamentally we think that companies that pay back to society and have better governance will do well and get a better rating. A number of investors are attracted to our ESG and are engaged on that.

Craig Martin, chairman of Dynam Capital (the fund’s manager)

About Vietnam

“Vietnam defeated the Chinese many years ago, they defeated the French and defeated the Americans,” says Craig Martin, chairman of Dynam Capital.

“And it looks like it is round one to Vietnam against the coronavirus.”

Martin is attempting to distil down the dogged determination and dynamism of this Southeast Asian nation of 100mln people that can’t be summed up in a spreadsheet or an analysts’ report.

Coronavirus is a case in point – 268 people infected and no fatalities in the first three months of the pandemic. Boris Johnson, who had a brush with death as a result of the virus, and his cabinet must be wondering how this feat was achieved.

Cynics will point out Vietnam is a one-party command economy where the population has been willing to sacrifice civil liberties for safety in the teeth of the pandemic.

However, it is emblematic of the stoic resilience of the Vietnamese, according to Martin, whose Dynam Capital runs VietNam Holding, which is dedicated to sustainable investment in the country.

Martin has more than two decades’ worth of experience and insights and reckons Vietnam is approaching an economic inflexion point – hitting US$3,000 per capita GDP (gross domestic product).

Crossing the Rubicon

For China, Vietnam’s neighbour, 2008 marked the point at which it became an emerging consumer economy rather than purely one based on a hand to mouth agrarian subsistence; now, Vietnam’s emergence from its chrysalis may be imminent.

Vietnam was at US$2,556 per capita in 2018. According to the latest available figures this is estimated to have grown to US2,740 last year. This means 2020 could be the year the magic number is achieved.

Under Dynam’s stewardship, VietNam Holding has built up investments in 20-30 local companies that tap into the industrialisation and urbanisation of the country as well as the consumerism that comes with growth.

ESG focus

Around half are in the small- and mid-cap arena, and there is a very real and tangible focus on environmental, social, and governance investing, known as ESG for short.

“Fundamentally we think that companies that pay back to society and have better governance will do well and get a better rating,” says Martin. “A number of investors are attracted to our ESG and are engaged on that.”

That focus on small- and mid-caps means the Dynam team overseeing VietNam Holding has uncovered pocket rockets that are growing at 20-30% a year. And it is also tuned in to some of the bigger firms too, giving the portfolio balance.

How it’s doing

VietNam Holding’s net asset value (NAV) rose 1.1% in March, extending the gain in the first quarter of 2021 to 10.4%. Since the start of the financial year in July 2020, the NAV per share has risen 53.1%.

The company revealed the findings of its latest independent carbon footprint assessment, which shows that its portfolio was 41% less carbon-intensive than its benchmark, the VN All Share Index, for each US$100 invested in the year ending December 31, 2019.

The assessment was conducted by Vietnam Energy and Environment (VNEEC), a climate change specialist firm in Ha Noi City, which established that the carbon footprint of the VietNam Holding portfolio is 18,003 tCO2e compared with an investment of the same size in VN All Share (30,396 tCO2e).

Dynam Capital, the trust’s manager, has been increasing the holdings in the banking sector throughout the pandemic given the attractive valuations and strong growth potential in an under-banked country.

Vietnam’s eCommerce potential is also huge, the manager added, with less than 40% of the population currently having a bank account.

The manager added it expects 23% earnings per share growth year-on-year in 2021 from the trust’s portfolio with accelerated public investment as many projects suspended in 2020 due to the pandemic are set to resume next year.

Total assets increased to US$138,5mln on 31 December 2020, from US$117.7mln on 30 June. Total Comprehensive Income was US$40.5mln in the six-month period, compared to US$2.6mln in the corresponding period in 2019.

The share price at the end of March was 209p or close to its record high, while the net asset value per share was 251.2p.

What the investment manager says: Dynam Capital

“It is essential that we track our progress in low-carbon investing and keep a pulse on how companies across sectors are dealing with upcoming regulations on reporting on GHG [greenhouse gas] emissions and reductions. VNEEC, which uses an internationally recognised methodology for the reports, will release the findings for 2020 in June.” 

 

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