Vietnam Holding is excellently positioned to benefit from Vietnam’s export boom through its substantial holding in Gemadept, one of the country’s top two shipping and logistics companies.
Vietnam Holding has carefully constructed a market-leading portfolio, with Gemadept taking a large proportion of it. This portfolio plays into key themes, including Vietnam’s industrialisation, digitalisation, and domestic consumption.
Their approach has earned Vietnam Holding’s portfolio management team members Craig Martin, Thinh Vu, and Thanh Nguyen the coveted AAA rating from Citywire, awarded to the top 10% of UK investment trust managers.
Gemadept is an example of the team’s deft stock selection, which has contributed to the 32% increase in the portfolio’s NAV over the past year. The Vietnam All Share Index benchmark rose 18.4% over the same period.
Vietnam Holding owned 0.7% of Gemadept as of 31 December 2023, and the logistics company accounted for 6.9% of VNH’s portfolio at the end of April 2024.
Booming exports
Gemadept facilitates and benefits from Vietnamese trade. The company has a network of ports throughout Vietnam, supported by an extensive logistics network that includes transportation and storage.
As we all know, logistics companies are at the forefront of economic growth. In the US, the transportation and logistics sector has long been used to gauge the economy’s health and is even a leading indicator of stock market performance.
Gemadept is one of Vietnam’s leading logistics companies and is rightly Vietnam Holding’s second largest position.
Gemadept is front and centre in Vietnam’s economic expansion, both domestically and on the global stage. The billions of dollars of mobile phones exported from Vietnam, 95% of its coffee production and clothing produced for the world’s top brands, among many other goods, will pass through Gemadept’s networks.
The company has ambitious growth plans. To meet Vietnam’s trade demands, Gemadept is expanding several of its ports, including the Gemalink International Port near Ho Chi Minh City, a joint venture with a French logistics company.
Meeting demand
Gemadept’s expansion is driven by soaring demand for shipping and distribution services as the country’s exports rocket. In April, Vietnam’s trade surplus hit a record $8.4bn, and exports to the US were up 19.1%. Booming exports are good news for Gemadept and warrant further expansion of its infrastructure.
Gemadept’s expansion focuses on near-term opportunities as well as longer-term efficiencies.
Having set out a roadmap to reduce carbon emissions, Gemadept is integrating carbon reduction initiatives into its port expansions and broader logistics network. While such initiatives will help reduce emissions, they will also enhance shareholder returns over the long term.
Speaking at the Vietnam ESG Conference in Ho Chi Minh City in May, Nguyen Thi Thu Thao, Gemadept’s ESG champion, explained how the company achieved cost savings through climate-related initiatives.
By installing solar panels on the roofs of cold storage units in the Mekong Delta, the company can achieve 30% of its power requirement through solar, saving money over the long term and reducing carbon emissions.
Gemadept utilisation of Vietnam’s extensive inland water systems to transport goods is notable because it facilitates the delivery of containers in a more environmentally friendly manner.
Supported by a network of inland river docks, Gemadept river ships can carry 250 shipping containers, whereas lorries can hold only two. Avoiding lorries in favour of river ships dramatically reduces the emissions per delivered container.
Over the past 20 years, Gemadept has been one of the top two major players in transporting goods back and forth between the Mekong Delta and Phnom Penh, the Cambodian capital. These shipping routes provide welcome exposure to the Cambodian economic story, which also promises substantial growth in the coming years.
While the company is very active in the nationwide distribution of goods, Gemadept’s control of gateways to international trade produces the most earnings for the company. The six ports located from the north to the south of Vietnam generated the lion’s share of the group’s profit before tax—in the last full-year period, the port business accounted for 78% of profit before tax.
