• We attended TV2’s annual general meeting (AGM) on June 14, 2024, along with 96 shareholders (representing 74.4% total voting rights). Overall, TV2’s management shares its strong belief in meeting the Song Hau 2 project’s (SH2P) financing deadline by June 30, 2024. Additionally, TV2 emphasized its proactive strategy in seeking more opportunities across all business segments.
• TV2 set conservative 2024 guidance, which does not include SH2P, with revenue of VND1,272bn (USD50.4mn; +20% YoY) and PBT of VND66bn (USD2.6mn; +0% YoY). These fulfill 82% and 66% of our respective 2024 forecasts in the scenario excluding SH2P. Per management, preliminary H1 2024 revenue is VND400bn (USD15.7mn; 31% 2024G), completing 26% of our full-year forecast without SH2P, in line with our expectation.
• Shareholders approved the cash dividends for 2023 & 2024 at 10% par value (VND1,000/share), in line with our expectations.
• Potential issuance of the financing closure for SH2P by the deadline. According to Mr. Nguyen Chon Hung, TV2’s Chairman, in order to meet the financing closure deadline by June 30, 2024, the project needs to receive (1) the facility agreement (financial terms & conditions), (2) letter of offer by the financial sponsors, and (3) the first drawdown payment (FDP). He shared that the first two criteria are met and Toyo Group is waiting for the last one – FDP.
• Overall, we currently see insignificant changes to our earnings forecasts for TV2 in 2024, pending a more comprehensive review. From 2026 onwards, we see potential slight upside in NPAT and valuation, coming from potential higher-than-expected O&M segment revenue and other pronounced renewable power investment projects such as the Tan Thuan 3 and An Dong 1 wind power projects.

Bright outlook in the commencement of the Song Hau 2 Project. One of the main focuses of TV2 in 2024 is to support Toyo Ink Group Berhad, SH2P’s sole investor, to break ground on SH2P by the June 30, 2024 deadline. TV2 has been supporting Toyo in its financing activities and actively working on preparatory work for the commencement of SH2P. So far, the project has achieved some significant milestones, including successfully securing USD980mn from i-Power Solutions Pte Ltd (a financial institution) for the EPC activities (announced on June 7, 2024) and the Grid Connection Agreement with the National Power Transmission Corporation (EVNNPT) on grid connection to the Vietnam National Power system through the 500kV switchyard of the Song Hau Power Complex (announced on June 12, 2024). 

Potential issuance of the financing closure for SH2P by the deadline. According to Mr. Nguyen Chon Hung, TV2’s Chairman, in order to meet the financing closure deadline by June 30, 2024, the project needs to receive (1) the facility agreement (financial terms & conditions), (2) letter of offer by the financial sponsors, and (3) the first drawdown payment. He shared that the first two criteria are met, waiting for the last one - FDP. He also shared his understanding that the FDP minimum requirement is ~USD120mn. Aside from the USD980mn announced recently, Mr. Hung shared that SH2P is waiting for a potential ~USD2.1bn of additional financing (loans & equity), which will help meet the financing deadline, but an official announcement has not yet been disclosed. We believe these are significantly positive developments supporting the high chances of SH2P’s commencement, pending the official disclosure.

Shareholders approved the conservative 2024 guidance without Song Hau 2’s contract. TV2 guides 2024 revenue of VND1,272bn (USD50.4mn; +20% YoY) and PBT of VND66bn (USD2.6mn; +0% YoY). These fulfill 82% and 66% of our respective 2024 forecasts in the scenario excluding the Song Hau 2 Project. We attribute TV2’s conservative guidance to 1) lower-than-expected revenue in 2023 and ongoing concerns when the new pricing mechanism for renewable energy which has not yet been released and 2) management’s track record of setting conservative guidance. We note that since 2016, TV2’s actual performance has beaten its guidance by an average of 27% p.a. Per management, the preliminary H1 2024 revenue is VND400bn (USD15.7mn; 31% 2024G), completing 26% of our full-year forecast without SH2P. Due to the nature of TV2’s services, revenue is usually recorded at the end of the year. Management believes that the H1 revenue result indicates the positive potential of beating its guidance. Therefore, we see insignificant changes to our earnings forecast, pending a fuller review.

Shareholders approved the 2023 cash dividend at 10% par value, which is in line with our expectation of VND1,000/share. For 2023, shareholders approved the allocation of 40.4% NPAT towards the bonus & welfare fund (VND21.5bn; ~2.7x vs 15% NPAT for 2022) and 20% of NPAT towards the investment & development fund (VND10.6bn vs none for 2022). We note that the bonus & welfare fund of 40% of 2023 NPAT is higher than our current forecast of 10% of NPAT. From our understanding, the higher allocating percentages is due to the increase in TV2’s employee headcount, as well as its management seeing benefits in retaining talent, while the absolute amount of PBT is flat YoY.

Shareholders approved the 2024 cash dividend, at 10% par value, in line with our expectation of VND1,000/share. Additionally, TV2 proposed to allocate 20% of 2024 NPAT to the investment & development fund and an amount equal to, but not higher than, three-month salary towards the bonus & welfare fund for 2024 vs our forecast of 10% of NPAT, in line with our expectation. TV2’s management expressed its hope for an even higher cash dividend if the company performs well and generates higher-than-expected profits. 

Shareholders approved the capex plan of VND46.4bn (USD1.8mn; +126% YoY) & financial investment plan of VND27.1bn (USD1.1mn; +25% YoY). The approved capex is for (1) improvement and expansion of office and employee residences in operating provinces (VND21bn), (2) expansion of the employees’ housing in Thu Duc City (VND9bn), (3) a provision for improvement of the PECC2 Tower (VND5bn), and for TV2’s three branches. Meanwhile, regarding the financial investment, TV2 plans to continue disbursing to ongoing projects such as Thac Ba 2 Hydropower (~19MW), Hau Giang Biomass (20MW), Tra Vinh Biomass (25MW), Tan Thuan Wind power phase 3 (25MW), as well as the new projects – Nui To I & Nui To II Biomass power plants (2x30MW). For the longer term, TV2 also updated that they have potential stake in An Dong 1 (50 MW) wind power project, which have passed investment policy and are undergoing the financing process. From our understanding, these renewable projects are a potential source of dividend income for TV2, as well as opportunities for O&M service in the future. 

O&M segment expansion is one of TV2’s targets over the long-term. TV2’s management expressed its goal to increasingly expand the O&M services scope, by virtue of (1) its expertise in providing O&M services for several power plants (current total of 30 power plants with over 4,500MW capacity), (2) its focus in applying technology in O&M activities, facilitating real-time and remote decision-making, and (3) the prospective stable source of revenue over a long period. Evidentially, for the first 5M 2024, TV2 has signed several O&M contracts both for domestic and international power plants for ~170 MW capacity from the power plants in Tay Ninh (110 MW), and hydropower plant in Laos (60MW). In the future, TV2 will continue seeking more O&M opportunities and its management is optimistic that VND1tn revenue from this segment starting 2026 is not impossible. We thus see slight upside potential for 2026 earnings forward from this higher-than-expected O&M segment, while insignificant changes to that of 2024F & 2025F.

Powered by Froala Editor