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PVT – Right time for new capex disbursement – Update

Company Note 14/12/2020    264

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  • We increase our FY20-22F EPS forecasts by 6.7-12.2% to reflect stronger-than-expected revenue in the LPG and refined oil transportation segments.
  • We expect PVT to restart its investment plan soon to take advantage of low vessel prices.
  • We reiterate our Add call with a higher TP of VND15,200.

Market price

Target price

Dividend yield

Recommendation

Sector

VND 13,450

VND 15,200

2.77%

ADD

Tanker Shipping

FY20-22F EPS forecasts lifted by 6.7-12.2%

PVTrans (PVT) reported a 28.1% yoy decline in 9M20 net profit on the back of (1) lower yoy day rate at Dai Hung FSO as the vessel completed maintenance and transformation into FPSO in 9M20, (2) lower transportation charter rates amid weak oil prices and demand, and (3) gross margin contraction across all segments as Covid-19 restrictions led to additional expenses. 9M20 net profit accounted for 77.7% of our FY20F forecast, which we deem ahead of expectation given a strong seasonal 4Q. Therefore, we lift our FY20F EPS forecast by 12.2% yoy, assuming (1) a 7% higher revenue from transporting LPG, which helps increase GPM forecast by 0.3% pt as the LPG segment commands the highest GPM among all transportation segments, and (2) reduced capex in FY20F as PVT delayed most of its investment plan due to Covid-19, which leads to improved cashflow and interest income in the following years.

Low-price environment creates opportunities for fleet expansion

According to Bloomberg data, selling prices of vessels stayed on a downward trend YTD amid the weak demand for oil and gas products. The current price levels are near the trough in 2016-17, which we believe could reverse in FY21F as transportation demand recovers after Covid-19 becomes contained on a global scale. On 7 Dec 2020, PVT announced the acquisition of a relatively young chemical/oil tanker with a capacity of 13,149 DWT. This implies that PVT has restarted its fleet expansion plan to prepare for an expected market recovery in 2021F. We expect the 2020F capex plan of over VND7,400bn to be mainly disbursed in 2021-23F, which includes the purchase of a very large crude carrier (VLCC) in 2021F (~VND1,100bn) and a very large gas carrier (VLGC) in 2022F (~VND1,200bn).

Reiterate Add with a higher TP of VND15,200

We raise our TP to VND15,200 on the back of higher FY20-22F EPS forecasts and DCF valuation rolled to 2021. Our TP is based on an equal weighting of DCF and unchanged P/E of 7.7x in FY21-23F. We remain positive on PVTrans’s outlook, as we expect a resumption in fleet expansion plan and soft recovery in charter rates to result in a FY20-23F net profit CAGR of 5.3%. Potential re-rating catalysts: higher refined oil and coal transportation volumes in FY21F. Downside risks are declines in oil prices.

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