TV2 [NOT RATED] - A leading engineering consultancy for power plants - Company Report
  • 2021-07-21T00:00:00
  • Company Research

- TV2 provides key services: (1) consultancy, (2) engineering, procurement & construction (EPC) contracting services and (3) power plant O&M, which combined to contribute ~95% of TV2’s net profit in 2020. In addition, TV2 has invested in renewable power projects since 2018.
- TV2 is a beneficiary of Vietnam’s increased focus on renewable energy and LNG. According to the draft of power master plan VIII (PDP VIII), the Government is guiding for renewable energy capacity to jump ~70% and LNG/gas-fired capacity to soar 80% in the next five years.
- As an engineering consultant, TV2 has advantages in selecting efficient projects for its investment portfolio. TV2 has a 25% stake in the Son My 3.1 solar power plant and Tan Thuan wind farm, which we believe will bring stable dividends to TV2 in the future.  
- TV2 guides for 2021 revenue of VND3.7tn (USD160mn; +10% YoY) and net profit of VND270bn (USD12mn; +3.0% YoY), which will be driven by EPC construction of the Tan Thuan wind farm - phase 1. TV2 has historical track record of surpassing its guidance.
- TV2 had an ending cash balance of VND1tn (USD43mn) and net gearing of -71.4% at end-Q1 2021, which could allow the company to expand its investment in new power projects.
- TV2’s valuation looks attractive at a trailing P/E of 9.0x and EV/EBITDA of 3.4x — lower than its regional peers — while it outperforms its peers in terms of financial capacity and ROE.
 

PDP VIII will be approved in H2 2021, which we believe could accelerate the progress of power plant projects and bring more engineering consultancy jobs. TV2 has the advantage of being a subsidiary of EVN (51% stake), thus it has opportunities to approach new power projects. EVN’s potential stake divestment to 30% will help to bolster TV2’s long-term growth.

TV2 has bright outlook as an EPC contractor for wind & LNG power plants. Over the past five years, TV2 had an EPC backlog of ~USD500mn for projects with a total capex of USD3bn. TV2 is bidding for a potential backlog of ~USD900mn for projects with a total capex of USD5bn over the next five years, which mainly includes wind and LNG projects. Moreover, 10,000 MW of wind power capacity has been approved in the revised PDP VII. The draft PDP VIII also targets for Vietnam’s wind power capacity to reach 18,010 MW by 2030. TV2 is also bidding for a giant LNG-fired project (Long Son complex-phase 1; USD1.3bn) and the Quang Tri coal-fired power plant (USD2bn).

Power investments to be materialized in the medium term. TV2 has a 25% stake in the Son My 3.1 solar power project (projected IRR of 20%, per TV2) and Tan Thuan wind farm (projected IRR of 16%, per our estimates). We expect these associates will pay sustainable dividends moving forward. TV2 also plans to invest in the Long Son LNG power complex – phase (1,200 MW), the Thac Ba 2 hydropower plant and biomass projects (105 MW) in the Mekong Delta.