Few stock markets can match the record of Vietnam's over the last five years, with shares in the country having delivered more than 200% over that period.

Shares in Vietnam Holding (VNHq), one of three investment trusts focused on the country, have risen even further over that period.

But the last year has been less stellar, with its shares trailing rivals as a dilutive issue of warrants and a rally that has left the mid- and small-cap stocks it favours trailing.

Fresh from a boardroom shake-up, portfolio strategy manager David Kadarauch joined us in the Citywire studio to argue there is still more to come from Vietnam's stocks.

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Daniel Grote: Hello, I’m joined today by David Kadarauch, who is on the investment management committee at Vietnam Holding investment trust. David, thanks for joining us.

David Kadarauch: Thank you for having me.

DG: Now there’s been quite a lot going on with the life of the trust in recent months. In September you had a fairly big boardroom shake-up. How has the impacted the way you are running assets for shareholders.

DK: I think it’s had quite an exhilarating effect on us, actually. We had quite a convoluted structure before to our business, that at times made our decision-making process a little bit slower than what would ideally be the case and we have restructured ourselves internally in recent months with a view to being able to have a much faster lead time between idea germination and actually buying a stock.

DG: What kind of changes could there be further along the line? We’ve seen with one of your peers VinaCapital, that that’s made the move from the Cayman Islands to Guernsey, from AIM to a main London listing and started paying a dividend. Could that sort of change be on the agenda?

DK: A change in the domicile of the fund is a possibility and it’s under consideration by the board. Our investment committee in terms of our actual buying and selling of stocks has become a smaller one, and one which operates more informally and more quickly, and I suspect there could be other changes that the board decides upon, it’s a new board, in the coming weeks and months.

DG: Vietnam has been a phenomenal performer over the last five years, and your trust has delivered some pretty good returns. I guess the issue has been really over the last year where you’ve lagged the index. I mean, one of the issues has been this dilutive exercise of warrants in the summer. Is this something that’s likely to happen again?

DK: No, we will not be having any more warrant issues. The warrant issues as you suggest, have been dilutive towards our net asset value per share performance this year. They’ve cost us 11 or 12 percentage points of performance. Another factor that’s been an important drag for us has been the general global trend of growth stocks outpacing value stocks this year, and we are a value investor, right from our inception 11 years ago.

DG: You mention in the latest factsheet, you talk about some of the drags and you mention stocks like VietJet and SAB where you haven’t got involved and those have really caught investors’ imaginations. What’s held you back?

DK: Well, as a value investor, we have to be very comfortable about two things in particular. One is a credible, long-term, earnings per share growth story for the company we’re looking at, and combined with valuations, PE being the simplest one, but by no means the only one, being very attractive.

DG: And so these stocks that are coming to the market, they’re just too expensive?

DK: In many cases, yes. Having said that, we’ve made some mistakes, where we haven’t been involved where we should have been and I think it’s fair to say that we’ve adjusted over the past few months to a new market reality where IPOs are coming thick and fast and we have to make absolutely sure that valuations that ostensibly don’t appear attractive really are as unattractive as they first appear when one peers underneath the rocks and checks them out properly.

DG: What’s going to be the catalyst to enable your investment style to come back into favour in Vietnam?

DK: Ultimately, styles come and go, and what we’ve seen now is a growing divergence this year in the valuation gap between big stocks and smaller stocks. So the gap in valuation between the top 30 stocks in Vietnam and the 70 below the 30, so numbers 31 to 100, has widened to more than a 40% discount for the latter compared to the former.

DG: Which, to be clear, that’s what you own – you’re the 31 to 100, the smaller and the mid-caps.

DK: That’s right, our weighting in those stocks is higher than for the big ones, that’s right.

DG: I mean, Vietnam generally as an investment story, it’s done very well over the last five years and some investors might think have all the returns been and gone, but you’re obviously still bullish…

DK: Five years ago the market was really unambiguously cheap. The trading PE of the VNAS was about 11 times. That multiple is now just over 16 times. I think within the next 18 to 24 months, there’s easily another 50% or so on the index until we reach valuations that are unattractive.

DG: Well David, thanks a lot for your time.

DK: Thank you very much.