PVD: Earnings upgrades ahead following 1H19 results
26/07/2019 - 12:12
Target price: 24,535
Event catalysts and risk
- 1H2019 results provide further evidence of an operational turnaround.
- Four jackup rigs to remain utilized to end-2020.
- PVD is bidding for a deep water project in Brunei in 2020.
- Oil price volatility affects day rates and thus PVD’s business performance.
- The PVEP bad debt recovery process may slow down.
1H19 PATMI reached VND 24 bn vs the VND 307 bn 1H18 net loss. 2Q19 PATMI reached VND 111 bn vs the 2Q18 VND 68.2bn net loss. 1H19 revenue reached 1,941 bn (-28.8% YoY). But stripping out the low-margin one-off VND 865 bn in 1H18 parts-trading revenue, normalized 1H19 revenue was up 4% YoY.
PVD indicates that the four jackup rigs in Malaysia will remain utilized to end-2020, equivalent to 95-97% utilization and slightly better than our conservative 2020 utilization assumption of 93.4%. Also, PVD contracted out a hired rig HAKURYU 11 for a one-year drilling campaign of Idemitsu in Sao Vang Dai Nguyet fields starting from Oct 2019. Management has no update today on the semi-submersible’s (PVD V) bid for the Brunei deep water project in Brunei in 2020, but this should be discussed in Monday’s (Jul 29) analyst meeting.
Sector update. PVD quoted IHS forecasts for rig demand in Southeast Asia to reach 40.5 units for 2020, up from 34.7 units in 2019. Current data indicates that overall market utilization is fluctuating around 80%, up from 66.2% last year.
Reiterate BUY with target price of VND 24,535 bn (implying 0.7x FY2020E PBR) based on our FCFE model and EV/EBITDA multiple approach. We maintain our above-consensus FY2019 PATMI forecast of VND 367 bn (+85.4% YoY). Please refer to our initiation for detail.
Please access the link for our complete report: PVD — 2Q19 results confirm operational turnaround
Analyst: Binh Truong, firstname.lastname@example.org