pvs - bcpt ban viet

8/10/2019 Pvs - Bcpt Ban Viet

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Hoa Phat Group (HSX: HPG)

Market leading steel producer

11

Copyright Viet Capital Securities

Que Ngo

Analyst

[email protected]

Tel: +844 6 2626 999 ext. 194

Petro Technical Services Corp (PVS)

The beginning of the upward cycle
mailto:[email protected]:[email protected]


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PVSThe beginning of up cycle

2

Company overview PVS is the leading provider of petroleum non-drilling

technical services

The Company has six core businesses, includingSeismic Survey, Marine Service, Production Service,

Supply Base and Ports, Mechanical & Constructions,

and Operation & Maintenance, which complete the

integrated one-stop shop for O&G operators

Investment thesis Robust growth thanks to 1) Dominating position in

core businesses driven by organic growth strategy, 2)

Successfully exploit the monopoly position in supply

base, 3) Full-range non-drilling technical services for

O&G operators , and 4) Increasing O&G activities from

upstream to downstream

Risks Inherent risks in O&G operation

Sizeable supply bases mostly depend on Vietnam O&Gprospect

Adverse oil price movement may stall E&P activities

Market Cap US$1.2B Rating BUY

Avg 30-day trade value US$8M Targetpx VND60,800

Foreign ownership 28% Div yld 3.2%

Key Financial Metrics 2011A 2012A 2013A 2014F

Revenues (VND bn) 24,313 24,595 25,419 28,675

NPAT (VND bn) 1,419 1,169 1,576 1,875

Op. profit margin (%) 5.1% 4.8% 7.6% 7.6%

NPAT margin (%) 5.8% 4.8% 6.2% 6.5%

EPS, fully dil. (VND) 5,714 3,925 3,524 4,194

EPS growth (%) 23.8% -31.3% -10.2% 19.0%

Dividend/Share (VND) 2,000 1,500 1,200 1,200Dividend yld (%) 5.5% 4.1% 3.3% 3.2%

EV / Sales 0.4 0.4 0.5 0.5

EV / EVBITDA 2.9 2.9 3.6 3.6

Price / Cashflow 3.4 0.0 0.0 0.0

Price / Earnings 6.4 9.3 8.6 8.9

Price / Book 1.5 1.7 1.6

Return on assets (%) 7.0% 6.0% 7.5%

Return on equity (%) 27.2% 18.2% 19.2%

Debt-to-equity (%) 85.8% 57.7% 36.3%

Note: NPAT = net profit after tax and minority interest


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3

Company Overview- An O&G non-drilling technical service provider

- ONE STOP-SHOP: A well blended business model

- High concentration of revenue and profit in core business

Content


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Operating in one of the five key sectors of PVN

4

PVN

Exploration &Production

Technicalservices &

Transportation

Gas pipeline &Petroleum

Trading

Refining,Petrochemical &

FertilizerPower Others

PVS

PVD

PVC

PVT

PVEP

Vietsovpetro

GAS

PV Oil

BSR

DPM

DCM

PV Power PVF

PVI

PET

Others


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A well blended business model

5

1. Seismicsurvey and

ROV

2.Mechanical&

Construction

3. Operation&

Maintenance

4. Marine

services

5. ProductionServices

6. Supplybase & Ports

1. Provide 2D & 3D seismic and

geophysical surveyto evaluate O&G

potential and ROV system for underwater

reparation & maintenance

2. Offshore engineering and

constructionservices

3. ProvideO&M services for

offshore structures

4. Provide offshore service

vessels for E&P activities

5. Provide specialized

tankers, named FPSO/FSOfor

serving oil production

6. Provide supply base, ports,

and al related logistic

services for O&G operators

Source: Based on PVSs website

ONE-STOP SHOP SERVICE


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The four biggest businesses contribute almost 90%to revenue

6

Source: Based on revenue figures in PVS 2013 financial statement

25,417

10,031

5,318

4,763

2,241

-

5,000

10,000

15,000

20,000

25,000

30,000

Total M&C Marine

services

ROV O&M Supply base Production

service

Others

VND bn

35.2%

20.1%

18.8%

14.1%

5.6%

4.1%2.2%

100%

Revenue contribution by segment Seismicsurvey

M&C

O&M

Marineservices

FSO/FPSO

Supplybase


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and almost 80% to gross profit, as high-margin supply base gains contribution

7

2,669

475

762

426

435

329

-

500

1,000

1,500

2,000

2,500

3,000

Total M&C Marine

services

ROV O&M Supply base Production

service

Others

VND bnGross profit contribution by segment

100% 17.8%

28.6%

16.0%

16.3%

12.3%

6.6%

2.5%

Source: Based on revenue figures in PVS 2013 financial statement

Seismicsurvey

M&C

O&M

Marineservices

FSO/FPSO

Supplybase


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8

Sustainable Competitive AdvantagesOne-stop O&G non-drilling technical services

Dominate in core businesses thanks to determined organic growth

Exploit the monopoly position in supply base

Benefit from O&G growing demand from upstream to downstream

Content


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1. Seismic Geophysical Survey and ROV servicesThe first brick for E&P activity

Largest fleet of two

2D/3D seismicvessels and twosurvey vessels

Extensive fleet ofdeepwater ROVsystems

Solutions forseismic and

geophysicalsurvey and

subseaservices

9

Binh Minh 2D seismic survey vessels


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1. Seismic Geophysical Survey and ROV services (Cont.)

10

0.0%

8.9%

12.9%

8.9%

10.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

1,000

2,000

3,000

4,000

5,000

6,000

2010 2011 2012 2013 1H14

VND bn

Revenue

GP

GPM


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2. Marine servicescover full period of field exploration and development

Largest fleet ofAHTS vessel,

DP vessel, tugboat, diving

support vessel

Hire morevessels from

foreign players

Experiencedcaptains and

crew

95% ofmarketshare

11


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2. Marine services (Cont.)

12

10.0% 9.4%

10.7%

13.2%

9.1%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

0

1,000

2,000

3,000

4,000

5,000

6,000

2010 2011 2012 2013 1H14

VND bn

Expanding GPM with CAGR 17%, double sales revenue CAGR of 9%

Revenue

GP

GPM


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3. Production services (FPSO/FSO)

13

Largest fleet ofFPSO/FSO

Replace the

need ofinvestingpipeline

Suitable forsmall-scale

fields

Cost-effective

solution foroil

operators


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3. Production services (FPSO/FSO)

14

Name

Total investment

(mn USD) Ownership Contract length Contractor

FSO MV 12 180 33%

20072014

Plus 23 one year option

Korea National Oil

Corporation

FSO Orkid 169 49% 2009 - 2019 Talisman Malaysia

FPSO Ruby II 300 60% 2010 - 2020 Petronas

FSO Bien Dong 1 149 51% 2013 - 2023 Bien Dong JOC

FPSO Lam Son 400 51% 2014 - 2024 Lam Son JOC


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3. Production services (FPSO/FSO) (Cont.)

15

0.0%

32.2%

18.7%

16.0%

8.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

200

400

600

800

1,000

1,200

2010 2011 2012 2013 1H14

VND bn

Revenue

GP

GPM

Outstanding Rev. CAGR of 121% from 2011 - 2013

Note: Excluding profit sharing from PVSs JV in production services


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4. Supply Base & Port ServicesMonopoly base owner in O&G

16

NHON HOI REFINERY

NGHI SON REFINERY

CAN THO REFINERY

DUNG QUAT REFINERY

LONG SON REFINERY

VUNG RO REFINERY

Current

Approved & Financed

Approved but not financed

NAM VAN PHONG

Nationwidedeepwater

supply baselocated incore O&Gactivities

Modern

facilities andskillful

workforce

Logistic

heart forO&G

operators

VUNG TAU( 2 ports)

DA NANG

( 2 ports)

HAI PHONG

( 2 ports)


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4. Supply Base & Port Services (Cont.)

17

26.4%27.0%

26.7%23.6%

21.1%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

200

400

600

800

1,000

1,200

1,400

1,600

2010 2011 2012 2013 1H14

VND bn

Revenue

GPGPM

Solid Rev. CAGR of 15% from 2010 - 2013


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5. Mechanics & Construction

18

Engineering Procurement Construction Installation

Target to conquer 100% ofrepair and 30% of new building

demand, translating to 20% ofoffshore market share

Unit: USD mn 2012 2013 2014

Offshore O&G work 597 981 897

Refinery - - 11

Thermal Power Plant - - 50

Total 597 981 957


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5. Mechanics & Construction (Cont.)

nt + Construction 19

2.6%

3.5%

0.0%

4.7%4.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2010 2011 2012 2013 1H14

bn VND

Revenue

GP

GPM

0% margin due to provision booked for excess

cost in Ethanol Dung Quat project

Improving GM with FY10-13 CAGR of 25% vs. Revs CAGR of 7%


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6. One-Stop ServicesT&I, HUC, O&M

Oil &Gas

projects

Operation &Maintenance

Transportation,installation, hook

up,commissioning ,

and repair

Manpower supply

Materials &equipment supply

20

6 O S S i &I HUC O& (C )


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6. One-Stop ServicesT&I, HUC, O&M (Cont.)

nt + Construction 21

7.5%

10.6%

14.9%

19.4%

13.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2010 2011 2012 2013 1H14

bn VND

Revenue

GP

GPM

Improving GM with FY10-13 CAGR of 18% vs. Revs CAGR of -10%

B fit f O&G i d d f t


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Benefit from O&G growing demand from upstream

22

0

2

4

6

8

10

12

14

16

320

340

360

380

400

420

440

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Crude oil production ('000/bpd)

Natural gas production (bcm)

Increase O&G

production from

upstream until 2017

Increase E&P activities to

push up production


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24/31

The 3 main risks to our investment thesis


25/31

The 3 main risks to our investment thesis

25

RISKS MITIGATING FACTORS

Inherent risk

Dependent on O&G projects

Oil price movement vs. E&P activities

_ Weather condition & accidents & property

damagesdelay project completion

_ Supply base segment growth slows or become

underutilized if refinery plant construction is

delayed or canceled

_ Core businesses face contraction if VN O&G

activities is frozen

Strategic positioning to tackle demand

from nearby IZ

Enhanced capabilities of manpower and

facilitates to bid for regional projects

Historically won EPC/EPCI contracts for

India, Malaysia, and Brunei

Current FSO/FSPO vessels are

securely contracted for the full life ofoil field

_ Adverse oil price movements

slow down inE&P activitieslow demand & growth for

FSO/FPSO & marine services

Insured against fire/damage for itsproperty & business failure

Content


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26

Valuation & RecommendationAttractive pricing against regional and local peers

Representative stock for O&G sector with cheap pricing and upside potentia

Content

Forward PER = 8 9x 65% upside potential to regional peers of 14 7x


27/31

Forward PER = 8.9x65% upside potential to regional peers of 14.7x

27

Ticker DESCRIPTION

Mkt Cap

(USD)

Forward

P/E (x) ROE (%) P/B (x)

EV/EBITDA

T12M (x)

PVS VN Equity 783.9 8.9 22.7 2.0 3.3

DEHB MK Equity Offshore maintenance services 972.8 12.8 19.8 4.6 18.7

AMRB MK Equity Marine services to offshore O&G 428.6 10.8 12.5 1.9 19.7

002469 CH

Equity

Engineering design & general

contracting of petrochemical

refining projects 640.1 15.8 14.0 4.0 13.3

002554 CH

Equity

Design & develop O&G field

development &provide

engineering services 1,009.8 28.2 8.1 4.8 60.2

1623 HK Equity oil field equipment and services 963.0 9.8 14.4 2.1 13.3

1251 HK Equity Integrated oil business 771.8 9.6 17.8 2.6 10.5

SAKP MK Equity

full fledged upstream O&G

company 7,861.0 14.4 15.2 2.3 16.6Median 928.0 12.8 14.4 2.6 16.6

Weighted Average 1,793.7 14.7 14.9 2.8 19.7

Forward PER = 8 9x 61% upside potential to domestic peers of 14 3x


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Forward PER = 8.9x 61% upside potential to domestic peers of 14.3x

28

Ticker DESCRIPTION

Mkt Cap

(USD) P/E (x) ROE (%) P/B (x)

EV/EBITDA

T12M (x)

PVS VN Equity 783.9 8.9 22.7 2.0 3.3

PVD VN EquityPETROVIETNAM DRILLING ANDWE 1,325.6 10.8 23.1 2.7 6.8

PVT VN Equity

PETROVIETNAM

TRANSPORTATION 187.1 13.0 7.7 1.3 6.9

PXS VN Equity

PETROLEUM EQUIPMENT

ASSEMBLY 57.6 8.1 21.3 1.9 4.9

GAS VN Equity PETROVIETNAM GAS JOINT STOCK 10,191.1 14.8 33.6 6.1 8.5

Median 756.3 11.9 22.2 2.3 6.8

Weighted average 2,940.3 14.3 31.9 5.6 8.3

Stellar performance in 1H14


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Stellar performance in 1H14

29

1H performance Reasons

-

500

1,000

1,500

2,000

1H13 2H13 1H14

Gross profitOthers

M&C

M&E

Ports

ROVFSO

Maritime service

+16.7%

VND bn

1. The number of service vesselsincreased by 8%

2. All supply bases operated profitably

3. Completion of key O&M projects

4. New operation of FPSO Lam Son from

June 2014-

5,000

10,000

15,000

1H13 2H13 1H14

VND bn RevenueOthers

O&M

M&E

Supply base

ROV

Production services

Marine services

+13.6%

-

200

400

600

800

1,000

1,200

1H13 2H13 1H14

NPAT

+45.6%

2H strong outlook


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2H strong outlook

30

2H outlook Catalyst for our forecast

1. The number of service vessels keep

increasing2. Gross profit margin expansion thanks

to 2 new service vessels

3. All supply base operate profitable

without losses as in previous years

4. New operation of FPSO Lam Son from

June 2014

0

500

1,000

1,500

2,000

1H13 2H13 1H14 2H14F

VND bn Others

O&M

M&E

Supply base

ROV

Production services

Marine services

+16.7%

+15.2%

-

5,000

10,000

15,000

20,000

1H13 2H13 1H14 2H14F

VND bn Others

O&M

M&E

Supply base

ROV

Production services

Marine services

+13.6%

+12.2%

-

200

400

600

800

1,000

1,200

1H13 2H13 1H14 2H14

NPAT

+45.6%

+11.9%

Yes. We are bullish !!!


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Yes. We are bullish !!!

31

Upside (*) Par 62% 67% 39%

EPS 4,194 4,407 3,526

EPS growth % 19% 25% 0%Implied P/E 9.7 8.9 10.6

(*): excluding dividend of VND1,200/share

Valuation scenarios Methodology (base case)

Weighted avg.

Forward PE of

regional peers 14.7

Forward PE of

local peers 14.3

Weighting 50%

Target PE for

PVS 14.5

0

10,000

20,000

30,000

40,000

50,000

60,00070,000

Today Base case Best case Worst case

60,80063,900

51,100

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