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Vietnam Holdings grows by a third with ‘dilutive’ share issue

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Vietnam Holdings grows by a third with ‘dilutive’ share issue

Vietnam Holding (VNH), the AIM-listed, Cayman Islands-based investment company, has expanded by over a third after shareholders grabbed their last chance to buy cheap shares under a warrant offer made two years ago.

However, the issue of nearly 20 million new shares has ‘diluted’ the underlying value of each share by 8.4%, a move that the company has indicated it will not repeat.

In June 2015 Vietnam Holdings issued warrants to shareholders giving them the right to buy one new share for every three they owned on three dates: 1 June 2016, 1 December 2016 and 1 June 2017.

The final date enabled investors to buy shares at  $1.998 compared to their market price of $2.15.

As a result the company issued 19.98 million new shares which began trading on 8 June. The money raised from investors boosted its market value to $156 million (£122 million) although the increase in the number of shares means the amount of assets held by each share has fallen.

The ‘dilution’ effect means the net asset value (NAV) of each share has been lowered 8.5% to $2.694 from $2.944 per share.

Numis Securities analyst Charles Cade said this was a ‘significant dilution to net asset value’ but added: ‘Encouragingly, the board has indicated that it will not issue shares on a dilutive basis in future.’ 

Vietnam Holding stands out from its rivals the £911 million Vietnam Enterprise Investments (VEIL) and £734 million VinaCapital Vietnam Opportunity (VOF) by investing more in medium-sized companies under $300 million. It also uses leaves out stocks that fail to meet its environmental, social and corporate governance standards.

Its charges are high, with a total expense ratio of 2.8%, or 6.1% including performance fees, in its last financial year to 30 June 2016

In dollar terms the share price has delivered a 17.5% total return over the past 12 months behind a 20.8% rise in the Vietnam index.


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