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Vietnam

PetroViet Nam Transportation: Decline in the transportation and FSO/FPSO segments, cut FV, reiterate Buy

  • 4Q2019 results: Decline in the transportation and FSO/FPSO segments

  • 2020 prospects: Keep expanding the fleets but growth to subside

  • We lower our 2020 earnings forecast by 27%, and lower our target price 4% to VND11,890 per share.

Vu Tran
Vu Tran

Oil & Gas, Fertilizers

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Rong Viet
1 April 2020
Published byRong Viet

4Q2019 results: Decline in the transportation and FSO/FPSO segments

  • 4Q2019 sales remained stable at VND1,983bn, compared to the same period last year. Excluding commercial sales, 4Q2019 revenue decreased by 3.8% YoY to VND1.479bn. The transportation segment recorded VND1,186bn in revenue, down 6.2% YoY while FSO/FPSO posted VND272bn, down 31.8% YoY.
  • 4Q2019 gross margin declined from 17.0% (in 4Q2018) to 21.6% because of the transportation segment. The main reason may come from higher expenses and low charter rates. As a result, the gross profit plunged 21.3% to VND325bn.
  • 4Q2019 NPATMI decreased by 14.4% YoY to VND190bn.

2020 prospects: Keep expanding the fleets but growth to subside

PVT will continue to expand its fleet in 2020 at a total cost of USD318mn. However, we believe that PVT will only fulfill part of its plan. Investments will focus on crude oil tankers as well as LPG tankers.

With the initial effects of COVID-19, transport demand has slowed down, affecting the crude oil and oil product tankers in 1Q2020. In addition, the maintenance of the Dung Quat plant and higher crude oil imports from this plant will also greatly affect PVT's business, although Nghi Son’s plant is expected to operate more stably in 2020. Besides, IMO 2020 is also a factor causing higher operating costs. Based on these assumptions, we project 2020 revenue and net profit for the parent company to be VND7,516bn (-2.9% YoY) and VND 544 bn (-20.1% YoY), respectively. With a 10% stock dividend, the 2020 EPS is estimated at VND1,652. Of noted, we have not counted the extra profit from selling the Athena vessel in 2020.

Valuation and recommendation

Higher crude oil imports from Binh Son and COVID-19 will hit the 2020 bottom line. Moreover, the slump in oil prices has impacted the stock price. As a result, we lower our 2020 earnings forecast by 27%, compared to the number in our 2020 strategy report and the target price is adjusted down 44% to VND11,890 per share.

However, PVT is running a good business. The company will not pay a 2019 cash dividend to save money for future investment. From a low base of 2020, PVT will easily grow in 2021. In the long term, the growth driver will come from the fleet expansion. With an expected return of 51.5%, compared to the closing price on March 31, 2020, we reiterate our BUY recommendation on PVT.