GAS – Tailwind is blowing – Update

• FY21 net profit (NP) grew 10.4% yoy to VND8,673bn, mainly driven by strong Singapore fuel oil (FO) price (+64% yoy).
• We expect dry gas sales volume to strongly rebound 27.6%/9.3% yoy in FY22-23F following the recovery in gas-generated electricity mobilization.
• Reiterate ADD with a higher target price (TP) of VND143,100.

Slow recovery in 4Q21 due to low dry gas sales volume

GAS reported a 30% yoy growth in 4Q21 net revenue to VND20,177bn thanks to the surge in energy prices which offset to the decrease in both dry gas sales volume and LPG volume (-25% yoy and -8% yoy, respectively). In 4Q21, G&A expenses surged 107% yoy to VND528bn as the company booked a provision expense of VND368bn, while net financial income dropped 25% yoy. Consequently, 4Q21 net profit rose 13.8% yoy to VND1,964bn.
For FY21, NP only grew 10.4% yoy to VND8,673bn, fulfilling 91.1% of our full-year forecasts due to: (1) lower contribution of dry gas segment (-18.4% yoy), and (2) higher-than-expected G&A expenses due to incurring provision expenses and costs related to Covid-19 prevention.

We raise our average Brent oil price assumption on a tight oil market

Brent oil price recorded a fresh new high since October 2014 at above US$90/bbl as the tight oil market. We see the capacity constraints among OPEC members and geopolitical tensions in Eastern Europe could exacerbate this situation, and keep oil supply tight over the near term. Hence, we raise our average Brent oil price assumption from US$78/bbl to US$83/bbl in FY22F.

Dry gas sales volume is expected to recover from 2022 onwards

After hit hard by Delta outbreak in 2021, we expect dry gas sales volume to strongly increase by 27.6%/9.3% yoy in FY22-23F on the back of: (1) the recovery in gas-generated electricity demand, and (2) new gas streams from Su Tu Trang phase 2, Dai Nguyet field and LNG Thi Vai terminal. For long-term, the kick off of Block B project from 2H22F as expected would be the pedestal for the company growth. Generally, we forecast GAS’s NP to grow 32.7%/11.4% yoy in FY22-23F, respectively.

Reiterate ADD with a higher TP of VND143,100

We slightly raise our TP by 9.4% compared to previous forecast, on the back of: (1) rolling forward our DCF valuation to 2022, and (2) lower FY22-23F EPS forecasts by 3.4%-2.9% but raise FY24F EPS forecast by 2.0% as we update new dry gas sales volume and oil price assumptions. Re-rating catalyst is higher oil price. Downside risks come from the decline in oil price and lower-than-expected dry gas sales volume.

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