Dragon Capital’s largest fund reports record-high cash holding

Vietnam Enterprise Investments Limited (VEIL), Dragon Capital’s largest fund, reported 8.71% cash-to-asset ratio, or $184.5 million, a record-high in recent years.

VEIL is a closed-end fund trading on the London Stock Exchange’s Main Market. Launched in 1995, it is the longest-running fund focused on Vietnam and one of the largest investing primarily in listed and pre-IPO companies in Vietnam.

As of May 19, VEIL’s net asset value (NAV) reached $2.12 billion, according to its recent report.

In early May, the cash-to-NAV ratio was 5.57%, or $137.8 million. However, as the market entered a strong correction and VN-Index fell precipitously, the fund had sold numerous large-cap stocks, bringing its cash ratio to 6.56% ($140.9 million) on May 12, surpassing the 6.38% in May 2020 when Covid-19 hit.

Since May 5 this year, VEIL has lowered its ownership of VPBank (VPB) from 12% to 11.49% on May 19. The narrowing also occurred in Dat Xanh Group (DXG), falling from 5.23% to 4.11% over the period, lowering the group’s ranking to the seventh place on VEIL’s top 10 holdings.

Similarly, Techcombank (TCB) fell out of the top 10 in VEIL’s portfolio, replaced by Military Bank (MBB) with a proportion of 3.32% ($70.35 million).

In the opposite direction, the fund has increased its ownership in Vinhomes (VHM) from 5.82% to 6.3%, or $125 million to $133.5 million.

VEIL’s largest holdings by May 19 included VPB with 11.49%, followed by Mobile World’s MWG (10.71%), Asia Commercial Bank’s ACB (9.83%), and Hoa Phat Group’s HPG (8.61%).

Overall, banking contributed to the greatest share of VEIL's portfolio, accounting for 30.44%. Real estate came in second with 24.82%, followed by food and beverage with 7.29%.

As of May 19, VEIL’s NAV/shares reached $10.13, down 1.27% from the previous week and 17.04% from the beginning of the year.

Despite the market's dismal performance since the beginning of the year, as well as VEIL’s ongoing growth in cash ratio, Dragon Capital maintained a relatively positive view in a recent report, arguing that the market has dropped to an appealing valuation zone and is showing signs of overselling.

Despite strong selling pressure from poor retail investor confidence, Vietnam’s stock market features compelling fundamental strengths. These include a P/E ratio of 11.4x, much lower than the five-year average of 14.5, as well as a 30% valuation discount versus Vietnam’s regional peers, VinaCapital reported.

Given the macroeconomic stability and growth potential, as well as a low price-to-earnings ratio, investors can leverage opportunities to invest at reasonable prices, Dragon Capital noted.