June 2018

— 05.07.2018

A stronger dollar and fear of a US-China trade war kept the Vietnam stock market soft: VN Index lost 1.1% in June, the third month of correction in a row. Liquidity declined, but foreigners’ net selling slowed down to a net USD 2.5 mn. The correction has brought the P/E ratio of the VNX Allshare Index (481 companies from HOSE and HNX) down to a relatively attractive valuation of 13.3x as of June 29th, a lower valuation than Thailand’s SET (16.1x) and Indonesia’s JCI (19.9x). This presents a good buying opportunity to profit from a strong economy showing 7% GDP growth and 20% EPS growth.

PYN Elite fund declined 2.1% in June, dragged down by CEO, CII, KDH, and banks. However, the fund’s valuations have become more attractive. For its core holdings comprising 87% of the fund, the 2018 P/E ratio is 9.2x and the dividend yield is 5.4%.

Our top holding MWG rose 7.3% in June despite the broader retail sector falling 1.2%. Due to strong sales of consumer electronics, MWG reported 5M2018 revenue of VND 37,080 bn (+43% YoY), and net profit after tax of VND 1,289 bn (+44% YoY). There are already 156 Bach Hoa Xanh grocery stores with monthly sales per store of over VND 800 mn, out of a total 372 stores. Gross profit margin for Bach Hoa Xanh was 16% in May 2018, up from 14% in 1Q2018 and on track to reach 18% in the next 6 months.

Vietnam is still in a macroeconomic sweet spot. Headline 1H2018 GDP hit 7.1%, the highest level since 2011, putting Vietnam on track for 7% growth in 2018. Vietnam GDP was driven by the healthy expansion of the industrial and construction sector, and the services sector. Despite the market selloff, foreigners continue to invest in Vietnam. Total pledged 1H2018 FDI was USD 20.3bn (+5.7% YoY) and USD 8.4 bn was disbursed (+8.4% YoY). 1H2018 exports remained solid at USD 114 bn (+16% YoY), and Vietnam welcomed 8 mn international visitors (+27% YoY) in the first six months of the year. In June, PMI jumped from 53.9 in May to 55.7. All these data make us more confident in the Vietnam stock market.

PYN_Elite_Review_June_2018.pdf