Fact sheets October
October was a month in which global stock markets were significantly under pressure, a direct consequence of escalating geopolitical tensions. This was evident in the downward movements of the MSCI World by 2.85%, MSCI Emerging by 3.85%, and MSCI Frontier with a correction of 5.76%.
However, the TCM Global Frontier Fund proved to be more resilient to this trend and managed to limit the decline to just 2.13% for the month of October, measured in total return in euro. Since the beginning of the year, the fund's return is +5.91%, thus showing outperformance compared to the Frontier Markets index tracker, which has decreased by 0.41%.
This month it was noticeable that the Vietnamese stock market, particularly the Ho Chi Minh Stock Index, underwent a correction. It dropped by 11.7% due to the global 'risk-off' sentiment and the ongoing uncertainty about the financing of some large real estate companies. Many Vietnamese invest with collateral, which led to forced sales due to margin calls, thus accelerating the decline. Quang Ngai Sugar (QNS), one of our largest Vietnamese investments in the fund, saw a decrease in value of 11.5%. Nonetheless, this company still has a robust return of 30% since the beginning of the year.
QNS is a Vietnamese company specialized in the production of sugar and soy products. In the third quarter of 2023, the company reported a net profit of 506 billion VND, which is a significant increase of 60% compared to the same period last year. Net revenue increased by 7% to 2.467 trillion VND, mainly due to a 50% increase in sugar sales, although soy sales decreased by 10%. The net profit was 8% higher than preliminary estimates and exceeded analysts' expectations by 11%. Given the expectation that sugar prices will remain high and considering the attractive valuation of the stock with a price-earnings ratio of 7.8 and a dividend yield of 6.5%, we remain positive about this investment.
Contrary to Vietnam, the stock market sentiment in Pakistan was particularly positive. The Karachi Stock Index rose by 14.35% over the past month, with the share of Meezan Bank standing out with an impressive increase of 26.5%. This Pakistani financial institution reported a profit growth of 103% over the first nine months of the year. The future looks bright for Meezan Bank, especially because of the low costs of deposits, a strong position in the context of the current high-interest rates. With a double-digit capital adequacy ratio (CET-1/CAR) of 11.7% and 11.4% respectively, the bank is in an excellent capital position, which could pave the way for possible higher dividend payouts. Despite an increase of 29% since the beginning of the year, the share of Meezan Bank remains attractively priced with a price-earnings ratio of just 2.6 and an expected dividend yield of 15.7% for 2024.
Another notable development within our portfolio is Fondul Proprietatea in Romania, which paid out an exceptional dividend of 80%. The return on Fondul (including dividend) so far this year is 33.6%, which significantly contributes to the performance of the TCM Global Frontier Fund.
Fondul Proprietatea is a publicly-traded investment company set up by the Romanian state and serves as compensation for citizens who lost property under communist rule. The company has a diversified portfolio, consisting of shares in Romanian energy, telecom, and industrial companies. Recently, Fondul made a substantial profit by selling shares in Hidroelectrica as part of its IPO, which yielded an amount of about 2 billion USD. This revenue was used to pay out the generous super dividend.
The IPO of Hidroelectrica S.A. itself was a historic success; with a raised sum of RON 8.73 billion and a market capitalization of RON 46.77 billion, approximately 10 billion USD, it was not only the largest IPO in Romania to date but also the third largest in Europe in 2023.
We remain invested in Fondul Proprietatea, as the stock still offers an attractive discount of 30% compared to the net asset value of the underlying companies. This indicates that there is still room for growth and that it is a valuable component of our investment strategy.
More news about Vietnam, Africa and the Global Frontier fund can be found in the latest fact sheets of the equity funds:
TCM Global Frontier High Dividend Equity
TCM Vietnam High Dividend Equity
TCM Africa High Dividend Equity