PVT - Conservative 2024 guidance despite strong YoY Q1 performance, ambitious long-term share capital increase plan - AGM Note
  • 2024-04-15T00:00:00
  • Company Research
  • 112 shareholders (representing 68.79% of total voting rights) attended PVT’s AGM on April 15.
  • Shareholders approved 2024 guidance for revenue of VND8.8tn (-8% YoY) and PBT of VND950bn (-39% YoY). We attribute this to management’s cautious approach as PVT’s actual PBT beat its guidance by 2x over the past ten years.
  • Management shared preliminary Q1 2024 results with PBT of ~VND400bn (+32% YoY; +17% QoQ), equivalent to 20% of our full-year forecast and is in line with our expectation as PVT is usually conservative in estimating preliminary numbers.
  • Shareholders approved a 2023 cash dividend of VND300/share on a share count of 356 million, which is slightly higher than our forecast, and a 2024 dividend at the ratio of 8%(cash or stock has not been determined yet) vs our forecast for VND1,000 DPS.
  • Shareholders approved an investment plan for vessels with parent capex of VND3.1tn, 149% higher than our projection. PVT aims to complete ~70% of its capex guidance in the worst case scenario.This implies an upside potential to our forecast. 
  • PVT is preparing its 2025-2030 business plan in which it has preliminary plans to raise share capital 2x-3x, mainly to significantly expand its fleet to increase its limited ~1% market share in the global tanker market. PetroVietnam Group plans to maintains its 51% stake instead of reducing to 36% as previously decided due to PVT’s strong profit as well as the increasing importance of energy transporting services in global energy security.
  • Management sees risks due to OPEC cuts weighing on transport tonnage, however, tonne-mile demand is still strong due to rising imports from China, structural change in the global tanker market due to the ongoing Russia-Ukraine conflict which could support crude and oil product tanker rates in the next two-three years. According to Alibra in Q1 2024, the crude oil tanker rate was 14% YoY, and the oil product tanker rate was 1% YoY, while we are forecasting these rates to be flat YoY in 2024.

Shareholders approved the company’s conservative guidance for 2024.

  • PVT guides for 2024 revenue of VND8.8tn (-8% vs actual 2023) and profit before tax (PBT) of VND950bn (-39% vs actual 2023), which are equivalent to 75% and 48% of our respective forecasts. We believe these guidance numbers are conservative as PVT has beaten its PBT guidance by 2x over the past ten years.
  • 2024 PBT guidance is 40% higher than the 2023 guidance, which is 4x the average YoY PBT growth guidance ever set in the past seven years. We believe this reflect management’s confidence in the 2024 outlook, supported by 35% total fleet capacity expansion in 2023 and a favorable tanker rates outlook.

Dividend and fund allocation:

  • 2021 stock dividend: PVT is on track to pay a 10% stock dividend in Q2 2024 with an ex-right date of April 11, 2024. This will increase the share capital by 10% from VND3,237bn to VND3,560bn.
  • 2022 stock dividend: PVT plans to proceed with a 10% stock dividend this year. This would further increase the share capital to VND3,916bn.
  • 2023 cash dividend: Shareholders approved a 2023 cash dividend of VND300/share on total outstanding shares of 356 million, which is slightly higher than our projection of VND300/share on total outstanding shares of 323.7 million. 
  • 2024 cash dividend: Shareholders approved an 8% dividend based on par value. However, the type of dividend, cash or stock, has not been determined yet, and will depend on the 2024 results. Management has indicated potential for a higher dividend ratio if the actual profit beats the guidance. We currently forecast a cash dividend of VND1,000/share for 2024. 

PVT released strong preliminary Q1 2024 results, in line with our expectations. Preliminary Q1 2024 PBT of nearly VND400bn (+32% YoY; +17% QoQ). We attribute this strong performance as driven by new contributions of new vessels acquired in 2023, coupled with a higher tanker rate. This preliminary result is equivalent to 20% of our full-year forecast. Historically, PVT's actual profits have always been approximately 10% higher than the preliminary numbers. While we await the official financial statement to have a fuller review, we foresee insignificant risk to our forecasts.

Management shared its positive view on the 2024 transportation outlook:

  • Crude oil & Oil product/chemical transportation: Regarding the overseas market, PVT expects the market outlook to be positive in 2024 as tonne-miles demand growth continues to outpace tanker supply growth. Regarding the domestic market, PVT anticipates lower transportation volume than 2023, due to the Binh Son Refinery conducting 48-day maintenance in H1 2024. We do not view this development as having material impact due to the company deploying its tankers to operate in the overseas route, potentially capitalizing on the favorable time charter rate, which will offset the YoY lower earnings from crude transportation for BSR.
  • LPG transportation: PVT anticipates the market in 2024 to be softer than 2023 due to supply and demand growth being nearly balanced. As a result, the VLGC time charter rate has dropped sharply since January 2024. However, PVT does not face the risk of lower freight rates, as PVT's two VLGC ships (Very Large Gas Carrier) have secured a 2-year time charter rate contract, from June 2023 to June 2025, which is higher than the current rate.
  • Dry bulk transportation: PVT expects the market to continue recovering and anticipate its dry bulk transportation to turn profitable in 2024 vs posting losses in 2023.

Ambitious capacity expansion plan for 2024, following a year of significant expansion in 2023. PVT plans to acquire about three to five new vessels in 2024 for the parent company, with the parent capex plan totaling USD132mn (VND3.1tn), which is 149% higher than our current 2024 projection of USD53mn. The company usually plans for an ambitious capex plan at the beginning of the year to get shareholders’ approvals in advance, so that the company can execute this plan whenever the market conditions are favorable. Management shared that they focus on the oil product tanker and Aframax segments, aiming to acquire two to three vessels for the parent company. This is due to these segments being more profitable (per PVT’s management’s view), with lower investment capex compared to other segments. 

Figure 1: PVT’s 2024 capex plan for parent company


Capacity

Budget (USDmn)

Estimated capex of one 10-year old vessel*

Investment project 1

 

 

 

Gas/LPG Carrier: 1 VLGC

72,000 - 85,000 cbm
 (47,000 - 55,000 DWT)

58

55

Crude transport: 1 Aframax

80,000 - 120,000 DWT

58

Oil product/chemical transport: 2 Medium Range (MR)

45,000 - 55,000 DWT

26

Investment project 2

 

 

 

Oil product/chemical transport: 1 Petrochemical tanker

10,000 - 25,000 DWT

22

23

Dry bulk carrier: 1 vessel

25,000 - 75,000 DWT

22

Investment project 3

 

 

 

Crude transport: 1 Aframax

80,000 - 120,000 DWT

52

58

Oil product/chemical transport: 2 Medium Range (MR)

45,000 - 55,000 DWT

26

Total (USDmn)

 

132

 

Total (VNDbn)**

 

3,102

 

Source: PVT, Vietcap. (*: Vietcap collects vessel prices in the second-hand market. These estimated capital expenditures are indicative, they do not serve as an alternative to a comprehensive valuation or PVT guidance); (**: PVT estimates total investment cost at 1 USD = 23,500 VND) (The highlighting in red indicates PVT's priorities.)

Shareholders approved PVT’s proposal to adjust its business lines, which includes (1) removing “Old vessel demolition” and “Services of sending workers to work abroad”, and (2) adding “Vessel management consultancy.” These adjustments are administrative updates to reflect PVT's actual services. Therefore, we anticipate that these changes will not significantly alter PVT’s operations.

PetroVietnam Group (PVN) plans to maintain a 51% stake in PVT and PVT aims to increase share capital in the long term by two to three times. PVT's management prioritizes increasing share capital by 2025-2030 to support fleet expansion. In PetroVietnam's new restructuring plan, it decided to retain its 51% ownership in PVT instead of reducing it to 36% as previously planned. PVT holds a strategic position within PetroVietnam's ecosystem, as well as a vital role in domestic oil & gas transportation and national energy security.

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