Realizing MWG Gains

— 10.01.2020

At the end of November, we agreed on a block trade where we halved our MWG stake by selling seven million shares at a good premium compared to the stock market price. As the purchase price deviated from the stock market price, the transaction was made as an off-market trade and in these cases the regulatory process always takes a long time. We have only received money from the trade this week. The Vietnamese stock market has been an underperformer in recent weeks and we are working on to make new purchases with the cash we got recently. During the waiting period for the MWG transaction we already were as a buyer tentatively looking into some new block deals.

After the transaction, MWG´s share in PYN Elite portfolio is around 8%, and the remaining MWG shares are valued in the portfolio at normal market price.

We remain very positive about the outlook for MWG. The main reasons for implementing the trade were:

  • We wanted to make room in the portfolio for potential increases in other equities. The portfolio may only hold two stocks at a time that represent more than 10% but less than 20%. We have now vacated that second place and currently TPB is the only positioned more than 10%.
  • Unrealized returns are realized only when they are traded, and the risk of loss of unrealized returns must always be considered in the portfolio risk scenarios.
  • The modernization efforts of the Vietnamese securities market will at some point eliminate the off-market practice for FOL shares and their premia.
  • MWG’s earnings have recently outperformed overall sales growth and may, at worst, result into a period of slower profit growth.

We have determined ideas for re-investing our cash into underperforming equities that have a significant potential return over the coming years in relation to the downside risks of these shares.