A couple of years ago on this blog I mentioned the frequency of articles might slow down a bit as I had covered the main topics I had originally set out to explore. I have at least posted about once every 3 months with a quarterly overview on the latest developments in the Vietnam stock market and economy.
I might be even less active again over the next year at least. I feel I have covered the general reasons why Vietnam stocks have good potential to outperform most other equity markets in the world. Therefore, I don’t want to feel I am getting too repetitive in future articles.
On a Substack I have where articles are free to read, occasionally I might write about emerging markets and / or markets like Vietnam. Generally though it is more focused on Australian / global stock market issues. The Substack link is here below:
Value Investing For A Living ’s Substack | Event Driven Investing | Substack
Going forward for the next year or two, maybe its just a case of being patient waiting for Vietnam stocks to hopefully be given emerging market status, and the market being more appreciated by investors.
One blog post I did want to cover before a break though is on the topic of the VinaCapital Vietnam Opportunity Fund (VOF LSE).
is VinaCapital Vietnam opportunity fund a buy?
Last week when I was looking at their November month end report, I noticed it cited a current discount to NAV of a huge 26%.
The below chart shows how this is at an extreme.
It is also a little unusual, in the context of Vietnam stocks posting solid years of gains in 2023 & 2024.
Up until last month, it appears the board has done little in terms of buying back its own stock. Admittedly, in the November report they did discuss how they ramped up the buy back.
VinaCapital Vietnam opportunity fund buyback / continuation vote
This honestly seems like a no brainer for the board when the fund is over USD one billion in size and shares trade at more than a 25% discount to NAV. If they could buy back about a tenth or so of their own shares at around this level over a 12-month period it can be a risk free way of adding a few percent growth to the NAV per share each year.
Why then is this not attempted? I am not so sure.
On an unrelated point, another random fact is that some may note that this would shrink the size of the fund, and that VinaCapital earn a fee based off the size of the AUMs.
If other shareholders happen to read this and feel the same way I suggest they let the board know. Also if readers out there happen to have investment mandates that tend to search for these deeply discounted closed end funds, maybe take a closer look at VOF here. In particular perhaps, those involved in funds that are willing to engage with boards to close the discount.
One of the larger shareholders already seem to want different action from the board, and voted accordingly in late 2023.
I covered all this in a bit more detail on Seeking Alpha. Like I have done in the past I can provide a link and a small snippet of the article.
Whether you can read the full article if you are not a Seeking Alpha member might depend on if you have free access to limited number of articles or not. If you really want to read but can’t access, feel free to also send me a message I can send out a certain number of gifted links with full access.
Looking at the longer-term performance of VOF though, there does not appear to be good reasons why it should trade at greater than a 25% discount to NAV.
Below is the link to my recent Seeking Alpha article, and then the part of the article more specifically discussing this discount and lack of buyback in recent years.
VinaCapital Vietnam Opportunity Fund (VOF) shoud buyback more shares
Why Vietnam Opportunity Fund must review the discount to NAV problem again
As highlighted earlier above, VOF notes it may conduct buybacks of its own shares “when the Board believes it is in the best interests of shareholders to do so”.
On previous occasions when I covered VOF here it has tended to trade in the 15 -20% discount to NAV range.
At last month end, VOF reported the shares closed at a huge 26% discount to NAV. VinaCapital in this November fact sheet report also mentioned that “we deployed USD 12 million in share buybacks during the month to help narrow the gap.”
It seems to have taken the board a long time to appear serious in terms of their attitude to buying back their own shares when it is in the best interests of shareholders.
For example, looking at their shares on issue over the last five years, the buyback appears to be quite modest.
Source: VOF annual report 2024
Other shareholders would appear to think that way. For example, taken from the recent 2023 AGM results, note that:
“The Company’s second largest shareholder, representing approximately 23% of the votes cast at the AGM (11% of the total issued share capital), voted for Resolution 14, the discontinuation of the Company.“
Interestingly, back in 2015, shareholders in another VinaCapital fund (VinaLand) voted against its continuation. It had to gradually wind up, you can read some of the details from this 2016 Edison research report. At least a positive from this example was it showed in the end VinaCapital are conservative when it comes to their valuations on unlisted holdings.
Back to VOF, the next continuation vote is set for 2028. If they want to avoid a repeat of the VinaLand experience, it seems obvious to buy back a lot more stock than they have done over the last five years.
