PVT announced Q1 20 results with VND1,578bn in revenue (-15.3% yoy) and VND67bn in NPATMI (-54% yoy).
- Total sales declined due to the trading segment while the core business – transportation, posted a slight growth of 1.4% to VND1,156bn. The oil & gas services segment increased by 15.3% to VND271bn.
- The gross margin was down from 14.7% (Q1 19) to 14.3%. However, the gross margin plunged from 19.5% to 14.1% if excluding the trading sales. As a result, the gross profit dropped 17.9% yoy to VND226bn in Q1 20.
- Exchange rate losses of VND28bn from higher USD.
- G&A revenue rose from 2.6% to 3%.
- More accrued expense (mainly for vessel maintenance) to be converted in Q1 20 in our opinion.
Transportation segment hit by high raw material prices
The gross margins of the transportation segment dropped significantly from 16.5% to 11.7% as PVT’s fleets ran under the spot contract, which were affected by the high input material (sulfur oil price increased significantly), according to IMO 2020. Both LPG and oil product tankers saw lower margins since half of the fleets operated within the spot rate. But the impact has been lower as sulfur oil price fell (3 times from its peak in January) since March due to the pandemic.
Overall, the transportation segment slightly increased by 1.4%, lead by the growth in LPG and oil products tankers. The revenue of crude oil tankers was down as there were only 5-6 routes for Binh Son Refinery Plants (BSR), compared to 7-8 in the same period last year. From 2020, BSR plans to increase the imported crude oil volume because the domestic sources can not fulfill the plant’s demand.
PVT will consider lowering capex for 2020 due to the pandemic. Bulk shipping is being hurt the most so investment for this segment is likely to be delayed.
New lower rate for FSO Dai Hung Queen
At the end of May, the current contract for Dai Hung Queen will be renewed. In this low oil price environment, we think that the new rate applied for FSO Dai Hung Queen will be adjusted downward, compared to the current of US$56,000 per day. So we assume that the new day rate will be down 18%. Following that, the revenue of FSO Dai Hung Queen is projected to decrease from VND483bn to VND433bn. 2020 oil and gas services sales is forecast at VND954bn.
Q2 20 and 2020 forecast
In Q2 20, we believe that the revenue will be lower than Q1 20 due to the low demand, but profitability will improve as gross margin will no longer be low and PVT is not expected to incur FX loss. We forecast sales and NPATMI at VND1,488bn and VND76bn, respectively in Q2 20 based on these assumptions.
Revenue of the transportation segment should be VND1,018bn with a gross margin of 13% as PVT remains the spot contract for its current fleet to enjoy the favourable rate as well as low input price (low sulfur oil). Revenue of oil and gas services at cVND256bn with the same gross margin as in Q1 20. PVT will cut G&A expenses.
For 2020, we revise down our previous forecast. Sales and NPATMI will be VND7,012bn (-9.6% yoy) and VND440bn (-36.3% yoy), respectively. EPS 2020 is forecast at VND1,336 and the target price remains the same at VND11,890 per share. Buy.