PV POWER NT2 JOINT STOCK COMPANY
(NT2: HOSE)
BUSINESS RESULT UPDATE
NT2: BENEFICIAL FROM LOW OIL & GAS PRICE AND EL NINO
NT2 – HOLD
INFORMATION
(06/04/2016)
HOSE
April 6th 2016
Ending the fiscal year of 2015, revenue reached 6,729 billion VND (-5% yoy, 114%
of the target); net income reached 1,142 billion VND (-28% yoy, 182% of the target).
The significant rise in profits came from (1) a spread on the exchange rate was worth
VND 404 bn and (2) VND 658 bn from the retroactive revenue. Excluding (1) & (2),
the actual revenue increased by 5% and profit after tax increased by 22% compared to
2014. In addition, the market price of NT2 rose 48.6% in 2015 and 26.3% from the
beginning of 2016.
Price (VND) 33,300
Outlook for 2016: Thermal power plant will be beneficial from (1) low oil & gas price
expextation which will reduce production costs and (2) a negative outlook for hydro
power plant because of El Nino. NT2 is expected to receive VND 160 bn from the
retroactive revenue in 2016.
Average trading volume
10 days
Market Cap (billion VND)
9,203
Risk: the outstanding balance from the foreign exchange loans is about USD 124
million and EUR 113 million.Consequently, NT2 is exposed to exchange rate risk
Shares outstanding
273,919,843
Conclusion: Forecasted 2016 revenue is 6,840 billion VND (+1.6% yoy); net income is
1,195 billion VND (+5% yoy). 2016 EPS forward is 4,290 VND/share, P/E is 7.8.
Implementing comparable company analysis (PE and EV/EBITDA), the reasonable
share price for NT2 is 35,891 VND/share. Based on the good performance as well as
positive 2016 outlook, we recommend HOLD for NT2 stock
ANALYST
Truong Anh Quoc
taquoc@vcbs.com.vn
(+84) 936 769 702
Financial ratios
2013
2014
2015
2016F
Revenue (billion VND)
5,881
7,065
6,729
6,840
8%
20%
-5%
2%
8
1,591
1,142
1,195
7%
19%
-28%
5%
Equity ( billion VND )
2,560
2,560
2,739
2,739
Debt/Total assets (%)
69%
55%
50%
45%
Gross profit margin (%)
14%
23%
24%
27%
ROA – TTM (%)
0.1%
13%
10%
11%
ROE – TTM (%)
0.3%
37%
24%
22%
EPS - TTM (VND)
0
5,735
4,095
4,290
P/E
0
5.8
8.1
7.8
+/- yoy (%)
Net income ( billion
VND )
+/- yoy (%)
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(VCBS, NT2)
Page | 0
NT2 – 2015 BUSINESS RESULT UPDATE
2015 BUSINESS RESULT
Ending the fiscal year of 2015, revenue reached VND 6,729 bn (-5% yoy, 114% of the target), profit
after tax reached VND 1,142 bn (-28% yoy, 182% of the target). The significant rise in profits came
from (1) a spread on the exchange rate was worth VND 404 bn and (2) VND 658 bn from the
retroactive revenue. Excluding (1) & (2), the actual revenue increased by 5% and profit after tax
increased by 22% compared to 2014.
In 2015, NT2 generated 5.5 billion kWh (+14% yoy); the accumulated capacity until the end of 2015
was 21.3 billion kWh. NT2’s net profit margin was high in 2015 thanks to (1) low oil price which
reduces production costs by 12%, (2) 30% of generated electricity was sold in the Competitive
Generation Market (CGM) with higher price and (3) the slowdown of hydro power plants’ operation
due to the severe el Nino.
Revenue/Net income 2012-2015
(billion VND)
Capacity (MW) / Electricity price
(VND)
8.000
5.600.000
1,40
7.000
5.400.000
1,35
5.200.000
1,30
5.000.000
1,25
4.800.000
1,20
4.600.000
1,15
4.400.000
1,10
6.000
5.000
4.000
3.000
2.000
1.000
-
4.200.000
2012
2013
Revenue
2014
Net income
2015
1,05
2012
2013
Capacity
2014
2015
Electricity price
(NT2)
The gas turbine and combined cycle power plant which were imported from Germany helped NT2
become the most efficient thermal power plant in Vietnam.NT2 was located close to the economic zone
of the South, which was very advantageous since the cost of input gas delivery and power transmission
could be significantly reduced. Also, NT2 is located near the river which is convenient for both
equipment transportation as well as water cooling solution.
VCBS Research Department
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NT2 – 2015 BUSINESS RESULT UPDATE
FINANCIAL HEALTH
Profitability ratios
2014 net income was high because of (1) 404 billion VND of earnings came from the spread of foreign
exchange and (2) 658 billion VND from retroactive revenue. In the period of 2012 – 2013, ROE was
low due to high depreciation when the power plant just started, ROE inceresed in 2014 and decreased in
2015 (24%) due to the lower net income.Also, assets turnover increased from 40% to 58% in the last
four years which indicated capital efficiency. The company also put aside 11.4 billion VND for long
term investment provision in Sopewaco; this company has recorded a loss of 310 billion VND
currently.
Revenue/Total assets
Profitability ratio
70%
40%
35%
60%
30%
50%
25%
40%
20%
ROA
15%
ROE
30%
20%
10%
10%
5%
0%
0%
2012
2013
2014
2015
2012
2013
2014
2015
(NT2)
Debt ratio and liquidity
As usual, a logistics company requires a great amount of capital investment in machinery/equipment,
NT2’s Debt/Total assets ratio is roughly 50% and tend to gradually decrease year over year. Currently,
NT2’s short term debt is around 1,000 billion VND, and long term debt is around 4,800 billion VND.
Whereas, 5,538 billion VND is borrowed from HERMES, CIRR, NEXI and Citibank according to the
credit contract signed on July 2010. Accordingly, NT2 borrowed 215 million USD and 203 million
USD in 9.5 years, interest rates were based on Euribor and Libor which is around 2.8%/year 3.6%/year.
The total outstanding loans at 31st December 2016 is $124 million and €113 million. In case VND
depreciate against USD, NT2 will lose around 25 billion VND for every 1% depreciation of VND.
Whereas, thanks to the economic stimulus program of Europe, EUR/VND exchange rate might not
have significant fluctuation this year, and therefore the foreign exchange risk of Euro loans can be
mitigated.
As estimated, every year, the company has to pay roughly 1,200 billion VND including the loan
pricipal (1,000 billion VND) and interest expense (200 billion VND). With the strong cash flow from
operation activities, NT2 is able to pay off its loan obligation. Without any unexpected events, the
outstanding loans may decrease around 1,000 billion VND/year, and the loan will be completely paid
VCBS Research Department
Page | 2
NT2 – 2015 BUSINESS RESULT UPDATE
off in 5 years. It is expected that 2016 principal and interest will decrease by 10% compared to 2015.
VCBS assumes that the Debt/Total assets ratio will not increase in the near future because NT2 has no
investment plan.
Cash flow from
operation/Loan principal
and interest
Foreign currency debt
Debt/Total assets
80%
2.500.000
70%
5%
60%
2.000.000
50%
1.500.000
48%
40%
47%
1.000.000
30%
500.000
20%
0
10%
VND
0%
USD
2012 2013 2014 2015
2012
2013
2014
2015
Cash flow from operation
Loan principal and interest
EUR
(NT2)
Cash flow from operation
NT2 has a stable cash flow from operation in the period 2012-2015. In general, the company has strong
financial health, stable cash flow as well as ability to pay off due debts.
Cash flow from operation/Net income
2.500.000
2.000.000
1.500.000
1.000.000
500.000
0
2012
2013
Cash flow from operation
2014
2015
Net income
(NT2)
VCBS Research Department
Page | 3
NT2 – 2015 BUSINESS RESULT UPDATE
2016 OUTLOOK
In 2016, NT2 is expected to have significant growth due to:
1. El Niño in 2016 caused severe drought in many areas. Several hydro power plants had to cease their
operations in order to save water for the coming dry season. As a result, power shortage from hydro
power plant will lead to higher capacity from thermal power plants.
2. Vietnam economy is on the recovery process, recently signed free trade agreements such as
FTA/PPT is the catalyst for GDP growth forecast of 6.8% - 7%. Accordingly, the electricity demand
is expected to grow by 12% - 15%. Inadditon, in 2016, NT2 has the opportunity to sell electricity
directly to households and factories according to the liberalization program from EVN.
3. The power plant is located close to the economic zone in the South, which is convenient and
economical for input gas delivery as well as power transmission
4. Input gas price decreased from $6/million BTU to $4/million BTU in 2015. In 2016, oil & gas price
is expected to be low which helps reduce production costs. Since August 2015, NT2’s gas price
contracts will be based on FO oil in Singapore (46% of FO oil price in Singapore).
5. Several thermal power plant projects have been delayed or newly operated which leads to power
shortage across the country, especially in the dry season starting this May.
Based on last year capacity/revenue as well as other growth forecast, NT2 is expected to generate 5,562
billion kWh (+1.1% yoy), targeting 6,840 billion VND in revenue (+1.6% yoy), and 1,195 billion
VND in net income (+5% yoy). Although it is hard for the capacity to have a significant growth, net
profit margin is expected to increase due to low oil & gas price.
In 2016, NT2 and the Ministry of Industry & Commerce will consider the new pricing policy so that
power plant can transfer 100% of the foreign exchange profit/loss to the electricity price. In this case,
NT2 will no longer be exposed to the exchange rate risk. Inaddition, the company is expected to receive
160 billion VND from retroactive revenue in 2016.
Capacity (MW)/Revenue (million VND)
5.800.000
8.000.000
5.600.000
7.000.000
5.400.000
6.000.000
MW
5.200.000
5.000.000
5.000.000
4.000.000
4.800.000
3.000.000
4.600.000
4.400.000
2.000.000
4.200.000
1.000.000
4.000.000
2012
2013
Capacity
2014
2015
Revenue
(Nguồn NT2)
VCBS Research Department
Page | 4
NT2 – 2015 BUSINESS RESULT UPDATE
2016 activities
NT2 plans to issue 3 million ESOP shares for employees - 1.1% of the chartered capital. With 274
million shares outstanding in the market, the risk of diluted EPS after the share issuance is not
significant. In addition, although the company confirmed that minimum dividend yield in 2016 will be
20%, we expect that the actual dividend yield will not be lower than 22%.
NT2 continues to complete the procedures for the project “Nhon Trach 2 expansion” which has the
capacity of 750MW-800MW. The power plant is planned to be built on a 20,000 ha land with the total
investment of around $900 million. When completed, the power plant is expected to generate roughly 5
billion kWh and consume about 840 million m3 of gas per year.
The Board of Directors continues evaluating the project “Extracting CO2 from power plant exhaust”.
Accordingly, NT2 will extract CO2 from the exhaust during electricity generation process. The project
compromises to generate economic efficiency and reduce CO2 pollution – one of the most important
factors that foreign investors will consider before making investment. Currently, Vietnam still imports
CO2 from China with high costs. Exhaust from NT2 is advantageous for extracting CO2 because of (1)
high CO2 content – 5% and (2) higher purity compared to exhaust from coal-power-plant.
The company will consider the “Misting-cooling-system” project in order to add 40 MW to the current
capacity. The project is expected to upgrade the power plant capacity with lowest costs – around
$400.000 /MW (construction expenditure for a new power plant is around $1 million/MW).
PRICING METHOD
Comparable company
analysis
Implementing comparable company analysis (PE and EV/EBITDA), the reasonable share price for NT2
is 35,891 VND/share.
Company
Price
(VND/share)
Shares
outstanding
(million)
Market Cap
(billion VND)
EV/EBITDA
PE
PPC
18,800
318.1
5,981
8.3
8.2
NBP
19,800
12.9
255
2.9
6.2
BTP
16,700
60.5
1,010
5.7
8.7
NT2
33,200
273.9
9,094
4.7
4.2
TMP
27,500
70
2,100
3.7
7.41
5.1
7.0
Average
(VCBS)
VCBS Research Department
Page | 5
NT2 – 2015 BUSINESS RESULT UPDATE
Reasonable share price for NT2:
Method
Price (VND/share)
Weight
PE analysis
28,499
25%
EV/EBITDA analysis
38,355
75%
Reasonable price
35,891
(VCBS)
CONCLUSION
Recommendation: Hold
NT2 is expected to growrapidly in 2016 due to (1) a negative outlook for hydro power plant because of
drought and (2) low oil & gas price which will reduce production costs. Also, it is expected that NT2
will receive 160 billion VND in 2016 from retroactive revenue. Currently, NT2 is exposed to the
exchange rate risk with outstanding loans of $124 million and €113 million. In case VND depreciates
against USD, NT2 will lose around 25 billion VND for every 1% depreciation of VND against USD.
Based on last year capacity/revenue as well as other growth forecast, 2016 revenue is expected to reach
6,840 billion VND (+1.6% yoy), net income is 1,195 billion VND (+5% yoy). EPS forward is 4,290
VND/share, P/E is 7.8. Implementing comparable company analysis (PE and EV/EBITDA), the
reasonable share price for NT2 is 35,891 VND/share. We recommend HOLD for NT2 stock.
APPENDIX
VCBS Research Department
Page | 6
NT2 – 2015 BUSINESS RESULT UPDATE
Income statement
2015
2016F
2017F
2018F
2019F
2020F
Revenue
6,729
6,840
6,856
7,341
7,461
7,583
Cost of goods sold
5,088
4,985
5,082
5,551
5,841
5,984
Gross profit
1,642
1,856
1,774
1,790
1,620
1,600
146
205
206
220
224
228
1,495
1,650
1,568
1,570
1,396
1,372
65
56
60
58
59
59
1,385
1,419
1,487
1,486
1,313
1,289
183
161
132
102
73
43
1,142
1,195
1,287
1,314
1,147
1,152
60
63
68
69
93
93
Net income
1,142
1,195
1,287
1,314
1,147
1,152
Attributable to parent company
1,142
1,195
1,287
1,314
1,147
1,152
2015
2016F
2017F
2018F
2019F
2020F
Cash and cash equivalent
1,109
1,311
1,971
2,406
2,886
3,710
Account receivables
General & Admin expenses
Operating income
Financial income/expense
EBIT
Interest expense
EBT
Income tax expenses
Balance sheet
1,464
1,612
1,615
1,730
1,758
1,787
Inventories
288
287
292
319
336
344
Other current assets
(27)
(25)
(29)
(27)
(27)
(28)
Current assets
2,981
3,334
4,003
4,595
5,128
5,993
Tangible fixed assets
7,624
6,682
6,387
6,243
6,150
6,348
673
775
724
749
736
743
Non-current assets
8,664
7,867
7,522
7,433
7,335
7,546
Total assets
11,645
11,201
11,525
12,028
12,462
13,539
Other fixed assets
Account payables
611
153
153
164
167
170
1,054
1,091
1,102
1,102
1,102
1,102
Payables to employees
30
47
47
51
51
52
Other payables
359
455
456
489
497
505
Current liabilities
2,023
1,700
1,711
1,755
1,765
1,776
Long term debt
4,812
3,938
2,826
1,724
623
-
41
11
11
12
12
12
Non-current liabilities
4,853
3,949
2,837
1,736
635
12
Liabilities
6,876
5,648
4,548
3,490
2,400
1,788
Capital
2,739
2,739
3,287
3,944
4,733
5,680
Undistributed earnings
1,950
2,734
3,610
4,513
5,249
5,991
Owner’s equity
4,768
5,553
6,976
8,537
10,063
11,751
Total resources
11,645
11,201
11,525
12,028
12,462
13,539
Short term debt
Long term provision
(VCBS, NT2)
VCBS Research Department
Page | 7
NT2 – 2015 BUSINESS
RESULT UPDATE
DISCLAIMER
DISCLAIMER
This report is designed to provide updated information on the fixed-income, including bonds, interest rates, some other related. The VCBS analysts
exert their best efforts to obtain the most accurate and timely information available from various sources, including information pertaining to market
prices, yields and rates. All information stated in the report has been collected and assessed as carefully as possible.
It must be stressed that all opinions, judgments, estimations and projections in this report represent independent views of the analyst at the date of
publication. Therefore, this report should be best considered a reference and indicative only. It is not an offer or advice to buy or sell or any actions
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CONTACT INFORMATION
Tran Anh Tuan, CFA
Truong Anh Quoc
EquityAnalyst
Head of Research
taquoc@vcbs.com.vn
tatuan@vcbs.com.vn
(+84) 936 769 702
VIETCOMBANK SECURITIES COMPANY
http://www.vcbs.com.vn
Ha Noi Headquarter
Floor 12th & 17th, Vietcombank Tower, 198 Tran Quang Khai Street, Hoan Kiem District, Hanoi
Tel: (84-4)-39366990 ext: 140/143/144/149/150/151
Ho Chi Minh Branch
Floor 1st and 7th, Green Star Building, 70 Pham Ngoc Thach Street, Ward 6, District No. 3, Ho Chi Minh City
Tel: (84-8)-3820 8116
Da Nang Branch
Floor 12th, 135 Nguyen Van Linh Street, Thanh Khe District, Da Nang City
Tel: (84-511)-3888991 ext: 801/802
Phu My Hung Transaction Unit
Lawrence Sting Building, 801 Nguyen Luong Bang Street, Phu My Hung Urban Zone, District No. 7, Ho Chi Minh City
Tel: (84-8)-54136573
Giang Vo Transaction Unit
Floor 1st, Building C4 Giang Vo, Giang Vo Ward, Ba Dinh District, Hanoi
Tel: (84-4)-37265551
Can Tho Representative Office
Floor 1st, Vietcombank Can Tho Building, 7 Hoa Binh Avenue, Ninh Kieu District, Can Tho City
Tel: (84-710)-3750888
Vung Tau Representative Office
Floor 1st, 27 Le Loi Street, Vung Tau City, Ba Ria - Vung Tau Province
Tel: (84-64)-3513974/75/76/77/78
An Giang Representative Office
Floor 6th, Nguyen Hue Building, 9/9 Tran Hung Dao Street, My Xuyen Ward, Long Xuyen City, An Giang Province
Tel: (84-76)-3949843
Dong Nai Representative Office
F240-F241 Vo Thi Sau Street, 7th Block, Thong Nhat Ward, Bien Hoa City, Dong Nai Province
Tel: (84-61)-3918815
Hai Phong Representative Office
Floor 2nd, 11 Hoang Dieu Street, Minh Khai Ward, Hong Bang District, Hai Phong City
Tel: (+84-31) 382 1630
Binh Duong Representative Office
314 Binh Duong Route – Phu Hoa Ward – Thu Dau Mot City - Binh Duong Province
Tel: (+84-650) 3855 771
VCBS Research Department
Page | 8