PVT – 3Q20 results slightly ahead of expectations – Earnings Flash

• 3Q20 pretax profit came in better than expected, up 6.2% yoy despite the 51-day maintenance shutdown of key customer Dung Quat refinery.
• Maintain Add and TP, pending fuller disclosure of segment numbers.

3Q20 results not as bad as expected

• 3Q20 net revenue increased 6.5% yoy on higher trading revenue, which offset the 4.8% yoy decline in revenue from core activities (transportation and FSO/FPSO). Revenue from core activities declined on the back of (1) lower day rate for Dai Hung FSO since 2Q20; (2) lower crude oil volume from its key customer Dung Quat refinery as the plant carried out a 51-day maintenance from 12 Aug to 1 Oct; and (3) subdued charter rate at Dung Quat refinery from Apr to Sep 2020.
• Blended GPM contracted only 0.5% pts yoy, which we deem as better than expected given the maintenance at Dung Quat refinery. Transportation GPM even expanded 3.1% pts yoy, possibly thanks to (1) lower cost for very-low sulphur fuel oil (VLSFO) which benefitted vessels running international routes, and (2) increasing demand for coal imports (Vietnam’s coal imports surged 68.4% yoy in 3Q in terms of volume).
• 3Q20 pretax profit rose 6.2% yoy to VND222bn; but due to a 25.9% yoy jump in tax expenses, net profit fell 22.2% yoy to VND108bn.
  9M20 net profit beat expectations at 77.7% of our full-year forecast

9M20 net profit fell 28.1% yoy and accounted for 77.7% of our FY20 forecast. This is slightly ahead of expectations, as delays in vessel acquisition in

• 9M20 resulted in 9M net interest income and end-Sep cash balance that were higher than our forecasts. 9M20 capex was only VND2bn, significantly less than 9M19 capex of VND1,470bn and our FY20 forecast of VND1,238bn.
• We think PVT could reignite its tanker investment plan in 4Q20F, as the selling prices of vessels have corrected to more favourable levels. According to data on Bloomberg, prices for 10-year old very large crude carrier (VLCC) and Aframax tankers have both plunged ~17% YTD, and are now close to PVT’s target purchase prices in its FY20 guidance.

Reiterate Add, with unchanged TP

• Our TP is based on 50:50 combination of DCF and target 2020-22F P/E of 7.7x.
• A potential re-rating catalyst is higher coal transportation volume in FY21F as new coal-based power plants come into operation. Downside risk: decline in oil prices as that would hamper the recovery of charter rates and transportation demand.

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