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PVD – FY20 results beat expectation – Update

Company Note 09/02/2021    332


  • PVD reported VND184bn in FY20 net profit, flat yoy, mainly driven by bad debt provision reversal and strong performance of affiliates.
  • We reiterate Hold and increase TP slightly to VND22,900.

Market price

Target price

Dividend yield



VND 21,200

VND 22,900




4Q20 performance hurt by sluggish regional drilling market

PVD’s 4Q20 net revenue declined 40.7% yoy and net profit fell 57.6% yoy due to the lingering effects of the regional capex cut in the oil and gas sector in 2020. Although rig utilization rate improved from 55% in 3Q20 to 71% in 4Q20, this was still lower than the 95% rate seen in 4Q19. In addition, average day rate fell 4.3% yoy and there was lower workload in the well services segment (revenue -31.2% yoy).

Affiliate income and provision reversal supported FY20 results

The company reported a 4.0-pts contraction in FY20 GPM, despite the 19.9% yoy growth in full-year revenue, due to the contribution of 3 leased rigs which commanded quite low GPM (2-3%) and additional expenses incurred relating to Covid-19. However, the company managed to keep full-year net profit flat yoy at VND184bn, thanks to (1) VND105bn provision reversal on bad debt collection (vs. VND0.6bn in FY19), and (2) a two-fold increase in income from affiliate (especially Baker Hughes) to VND216bn. Net profit exceeded our FY20 forecast by 12.6% as we assumed a higher effective tax rate and higher loss from minority shareholders.

Another contract award solidifying FY21F outlook

On 22 Jan, PVD announced to sign a contract with JVPC for a drilling program at Block 15-2 off Southern Vietnam comprising of 3 firm wells and 1 option well, which would be served by PVD III rig after its current contract with Kris Energy. So far, two out of four of PVD’s owned jack-up rigs have confirmed jobs for 1H21F. We expect drilling demand to improve from a trough in 4Q20, supported by a resilient oil price which has stayed over US$50/bbl since Dec 2020.

Reiterate Hold at slightly higher TP of VND22,900

We raise our FY21-23F EPS forecasts by 2.6%-7.7% as we tweak our forecasts and lower the income tax rate assumption in line with FY20 numbers. Thus, our multiple-based TP is raised slightly by 1.8% to VND22,900, based on target FY21-23F P/BV of 0.7x. Upside risks to our forecasts are a higher-than-expected oil price and improved liquidity of the market which could boost stock price. Downside risks are slow bad debt collection and lower-than-expected jack-up utilisation rate.

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