Finland-based equity fund Evli Emerging Frontier Fund has acquired more than 103,850 shares in Vietnam-based electronics distributor Digiworld (HSX: DGW), according to a filing to the Ho Chi Minh City Stock Exchange yesterday. This brings its total stake in the company to 5.14%, equivalent to a total of 2.2 million shares, according to a news report by Vietnam Investment Review.
Based on the stock’s Tuesday closing price of VND 53,800 (USD 2.3), the fund’s stake is worth about VND 117 billion (USD 5 million).
Digiworld, an Information and Communication Technology (ICT) distributor, works with over 30 international tech brands such as Apple, Xiaomi, and Lenovo. With a distribution network of 16,000 points of sale in Vietnam, the conglomerate also offers market expansion services for brands entering the Vietnamese market.
“Digiworld has been growing spectacularly over the past few years, yet its valuation was and still is very cheap, and the market seems to have overlooked the company due to its small size,” said Ivan Nechunaev, senior investment professional at Terra Nova Capital, an investment arm under the Evli Group which is responsible for making investments for the Evli Emerging Frontier Fund.
Riding on the consumption tailwind created by the COVID-19 pandemic, Digiworld has witnessed a 29% increase in revenue and 36% growth in profit year-on-year in the second quarter this year, as reported in Vietnam News Gazette.
Nechunaev added, “In our view, the valuation of such a fast-growing business should be closer to 20-25x P/E (price-to-earnings ratio). Digiworld was exactly what we look for: a great business that is not yet appreciated by the market.”
Meanwhile, the strength of the management team and Digiworld’s focus on sustainability and stakeholder relationships are also the rationales behind the investment.
The fund, introduced by Finland-based asset management firm Evli Group in 2013 , has invested in assets in the equities and equity-linked securities of companies operating in emerging markets such as Malaysia, Indonesia, Vietnam, and Pakistan, according to its website. Its portfolio size has reached USD 101 million in assets as of today, according to Nechunaev.
While Malaysia is the most-invested market in its portfolio, accounting for 26.53% of the total investment, Indonesia and Vietnam are the second and third markets, accounting for 19.11% and 17.99%, respectively. The fund has also invested in Sai Gon Cargo, Binh Minh Plastics, Binh Duong Mineral & Construction, and Khang Dien House.
“Smaller emerging markets and frontier markets (including Vietnam) are very well positioned to deliver outsized returns for stock market investors over the next decade, as their valuations are cheaper than in developed markets, their economic growth is higher, and their labor productivity improvements are larger on a relative basis,” said Nechunaev.