PVS: AGM Notes — Potential Backlog Expansion
28/06/2019 - 14:57
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We attended PVS’s AGM on 28 June, at which management discussed its previously-released 1H19 results and full-year guidance. Prelim 1H19 PBT of VND 650bn represents 93% of full-year guidance of VND 700bn in PBT (down 11.2% YoY). Management did not convince us (or, we think, other meeting participants) that such conservative full-year guidance is likely to be accurate given the solid YTD run-rate. Also, several significant projects were named that could potentially be added to its existing project backlog.
- 1H2019 preliminary PBT increased by 18.5% YoY.
- The company’s disclosed project backlog reaches out until 2021.
- Several additional projects could potentially be added to the backlog.
- E&P activities may be disrupted by geopolitics.
- Inspections could cause further delays to E&P projects.
- Oil price fluctuations could impact stock price performance.
PVS reiterated its modest FY2019 guidance of VND 13 trillion in revenue (down 11.2% YoY) and VND 700bn in PBT (down 28.3% YoY), mainly attributable to M&C projects including Sao Vang Dai Nguyet and Gallaf–Al Shaheen. We think these targets are quite modest given preliminary 1H19 PBT of VND 650bn (+18.5% YoY), which is equivalent to 93% of its annual guidance.
PVS’s short-term workload is relatively certain. The project backlog to 2021 includes Sao Vang Dai Nguyet (USD 600mn), Gallaf–Al Shaheen (USD 300mn), LNG Thi Vai (USD 200mn), and Long Son Refinery (USD 300mn). In the longer term (2022 and beyond), management are confident on adding projects to its backlog including Block B (USD 1.3bn), Nam Con Son 2 Phase 2 Gas Pipeline (USD 500mn), Nam Du–U Minh (USD 100 mn), and Salman Development (USD 500 mn). PVS’s main competitive advantage in the domestic market is its large area (345 ha) of supply bases throughout the country.
Valuations & yield. The AGM included the approval of a 23% payout of FY2018 earnings, equivalent to a cash dividend yield of 3.1%. PVS is trading at 0.9x PBR.
20190627 PVS AGM