PETROLEUM INDUSTRIAL AND CIVIL CONSTRUCTION JOINT STOCK COMPANY (PXI)

Transcription

1 Sector: Construction / Construction Materials PETROLEUM INDUSTRIAL AND CIVIL CONSTRUCTION JOINT STOCK COMPANY (PXI) OVERVIEW Potential of petroleum construction is still quite high. Annually, PetroVietnam will invest billion to billion in construction activity. This is an advantage for industrial construction field of Company. Competitive advantage by being a member of the PetroVietnam. The company is appointed to implement many industrial and civil construction projects in petroleum industry More than m2 of long lease state land Vung Tau is an advantage for PXI to diversify its activities into the field of real estate, take advantage of its construction activity and civil industrial Revenue structure of the Company will be gradually shifted to segment of real estate business which will contribute more in the operation results of the Company, estimated at about 30% of total revenue each year. RECOMMENDATION: HOLD Expected price (VND): Current price (VND): week high 52 week low Market: STOCK DATA n/a n/a HOSE Par value (VND): 10,000 Number of outstanding share: Market value (bil VND): 999 EPS 2009 (VND) SHAREHOLDER INFORMATION Source: PXI KEY FINANCIAL FIGURES Target F 2011F 2012F 2013F 2014F 2015F Total assets (bil dong) ,024 1,190 1,488 1,825 2,212 2,659 Owner's equity (bil dong) ,162 Revenue (bil dong) 534 1,078 1,500 1,800 2,160 2,592 3,110 3,732 Profit after tax (bil dong) EPS (dong/share) 2,952 2,780 3,273 2,338 2,454 2,335 2,335 2,413 ROA 3.5% 2.2% 5.6% 5.9% 5.8% 5.8% 5.8% 5.9% ROE 29.5% 26.5% 16.9% 18.0% 15.6% 14.5% 14.0% 13.9% P/E P/B Source: PSI Research Please read the disc

2 FINANCIAL SUMMARY F Current assets 175,622,786, ,128,231, ,441,949, ,551,079,294 Cash and cash equivalent 1,336,797,898 42,218,244,790 34,431,376,854 44,760,789,910 Short-term investment Short-term account receivable 77,434,309, ,870,508, ,544,440, ,283,390,153 Investory 94,139,268, ,020,559, ,484,670, ,030,071,341 Others short-term assets 2,712,410,372 5,018,918,903 5,981,462,312 7,476,827,890 Non-current assets 24,535,184,444 52,662,385,718 48,576,768, ,142,162,173 Long-term account receivable Fixed assets 17,302,071,969 37,851,348,233 31,929,262, ,829,905,450 1.Tangible fixed assets 17,302,071,969 37,851,348,233 31,929,262, ,829,905, Financial rent assets Intangible fixed assets Construction in progress Real estate investment Long-term investment - 5,000,000,000 10,000,000,000 10,000,000,000 TOTAL ASETS 200,157,970, ,790,617, ,018,717,838 1,023,693,241,466 LIABILITIES 186,227,649, ,148,816, ,084,313, ,269,677,929 Current liabilities 186,227,649, ,937,635, ,628,674, ,908,709, Short-term borrowing and liabilities ,000,000,000 33,000,000, Account payables- trade 25,660,440, ,417,500, ,426,401, ,250,000, Advance from customers 27,956,857, ,298,778, ,071,825, ,286,190,084 Long-term liabilities - 211,181,053 7,455,639,467 20,360,968, Long-term liabilities and borrowing ,000,000, Account payables-seller EQUITY 13,930,320,678 49,641,800,397 50,934,404, ,423,563,538 Owner'squity 13,934,609,154 50,000,000,000 52,528,846, ,560,097, Owner equity 18,870,761,349 50,000,000,000 50,000,000, ,000,000, Retain profit (4,936,152,195) - 2,528,846,471 36,269,324,346 Other funds and resource (4,288,476) (358,199,603) (1,594,442,255) 2,863,466,217 Minority interest TOTAL LIABILITIES 200,157,970, ,790,617, ,018,717,838 1,023,693,241, F 1.Total revenues - 533,653,602,465 1,077,603,233,944 1,500,000,000,000 2.Less sales deductions - - 1,416,669-3.Net sales - 533,653,602,465 1,077,601,817,275 1,500,000,000,000 4.Cost of goods sold - 499,553,039,980 1,018,469,613,329 1,395,000,000, Gross profit - 34,100,562,485 59,132,203, ,000,000, Financial Income - 290,365, ,509,317 18,500,000,000 Interest from short-term deposit Financial Expense - 2,785,612, ,935, ,829,317 Exchange rate difference Loan cost - 2,785,612, ,935, ,829, Selling expense Management expense - 14,872,773,552 41,316,065,915 45,447,672, Net operating profit - 16,732,541,157 17,652,711,605 77,470,498, Other income - 741,522,656 2,376,395,738 2,732,855, Other expense - 310,333,885 3,661,194,425 3,844,254, Profit/(loss) from other activities - 431,188,771 (1,284,798,687) (1,111,399,048) 14.Profit before tax - 17,163,729,928 16,367,912,918 76,359,099, Income tax - current - 2,402,922,189 2,467,463,526 19,089,774, Income tax- deferred Profit/(loss) from joint venture Profit after tax - 14,760,807,739 13,900,449,392 57,269,324,346 Minority interst Net profit of parent company shareholders - 14,760,807,739 13,900,449,392 57,269,324,346 EPS (dong) - 2,952 2,780 3,273 Reports of PSI are available on our website 2

3 INVESTMENT POSITIVES Competitive advantages as a member of PetroVietnam. The company is appointed to implement many industrial and civil construction projects in petroleum industry. In 2009, the Company's total revenue reached billion, accounting for nearly 30% of total revenue proportion of PetroVietnam Construction Joint Stock Company (PVX). Current market of the company is in Vung Tau, Ho Chi Minh City and surrounding areas. Potential of petroleum construction is still quite high. Annually, PetroVietnam will invest billion to billion in basic construction activity to enhance research activity, increase the annual oil and gas reserves, the development of downstream projects. This is an advantage for industrial construction field of Company. Advantage in land: with more than m2 of land in the city of Vung Tau, company can expand its business in real estate. Land area lies mainly at 30/4 Road, a major road leading into Vung Tau, is indeed potential for real estate businesses of the Company. Experience in the construction sector will also help the company have many advantages in real estate projects. INVESTMENT RISKS Risk of fluctuation in raw materials cost. The company operates in the field of industrial and civil construction, so taking major proportion in total costs of production and business activities is prices of raw materials (steel, sand, gravel, cement, concrete...). Fluctuations in building materials market will directly affect the efficiency of production and business of the Company. BUSINESS OPERATION ASSESSEMENT PXI activities in the field of construction and civil industry. The company's main activities is to build high buildings, engineering object in the oil industry, in addition company also participate in activities such as trade business such as building materials and special products, however, turnover of this filed is negligible. High building construction is the activity in long-term development strategy of the company. Under the plan, until 2015, the Company will account for 10-15% market share nationwide in construction of buildings higher than 30 floors, especially ones with steel infrastructures. Currently, company is building the Phu My Hung Finance Center with 34 floors high, which is expected bring more than 235bil dong revenue in bil VND total revenue Construction of factory, building object in petroleum industry is the key activity of company since its start in operation. As a member of PVX, company received much support from parent corporations as well as from PVN. Currently, the company focus on ground leveling as well as constructing, building projects in the petroleum industry such as Oil and gas processes Factory, the industrial electricity gas projects, gas product storage, industrial parks, and petroleum services center. In the future, this activity will account for 50% of total revenue of the company along with other sources of revenue from the civil construction and Reports of PSI are available on our website 3

4 real estate business. The company also plans till 2015 will have enough capacity to combine with domestic and foreign bidders to participate in bidding and construction works in the petroleum industry in the form of EPC contract. Business activity of real estate is an activity that the company is aiming to take advantage of their land. More than m2 of state long lease land mainly situated in 30/4 Road, one big road leading to Vung Tau, will be advantage of companies in developing real estate projects. PXI also have trade and production activity such as commercial concrete, construction materials business, providing equipment in the oil industry, but the proportion of revenue from these activities is negligible (only 0.56% of total revenue in 2009). Graph 1 Revenue structure of company 100% 99% 0.1% 0.2% 0.2% 0.1% 0.0% 1.2% 98% 97% 96% 95% 94% 93% 99.8% 99.7% 98.6% 92% F Others Finance Income Sale revenue Cost of goods sold accounts for more than 93% total cost of production and business activities of PXI, in the construction materials, costs account for decisive percentage. This shows that fluctuations in raw material prices have a direct impact to business operations of PXI. G&A expenses also take over nearly 4% in the cost structure, this is a reasonable level compared to the industry average, but the company can actively manage these expenses better to raise profit margin. Financial expenses accounted for a small proportion (0.05%) meaning company use less debt and under not much pressure of borrowing costs when financial market volatiles. Materials for the company's operations mainly are building materials. This is a direct factor to influence the production and business activities of enterprises. Overall, company manages and forecast quite well the fluctuations, combines with the signing of construction contracts which consider inflation rate during construction. Advantage of company is to receive credit support from providers with large quotas and preferential payment time. This created more favorable situation for capital cycle of PXI Reports of PSI are available on our website 4

5 Graph 2 Expense structure of company 100% 0.1% 0.3% 0.3% 99% 98% 97% 96% 2.8% 0.5% 3.8% 0.0% 3.0% 0.0% 95% 94% 93.6% 94.5% 93.0% 93% F Others expense/revenue Selling expense/revenue COGS/Revenue Management expense/revenue Financial expense/revenue Current revenue structure of PXI has more than 99% from construction activity, revenue from industrial production and trade accounts for a small proportion. Looking at the company's current projects, it can be seen that in future revenue structure of PXI will has many changes, construction proportion will account for only about 70% from 2012 afterwards, the rest will from under-construction real estate projects includes residential complexes, offices for rent and condominiums in Vung Tau. They are expected to begin selling activity from the end of this year. By the end of first quarter 2010, the company announced quite impressive revenue, reaching billion, equivalent more than 35% of 2009 and reach nearly 25.5% of 2010 plan. The completion of plan of billion this year is in company s capacity. If material market is not fluctuated, the ability to overcome plan is very positive. 2,500,000,000,000 Graph 3 Revenue and profit of Company 2,000,000,000,000 1,500,000,000,000 1,000,000,000, ,000,000, F 2011F 2012F Revenue Profit after tax Reports of PSI are available on our website 5

6 INDUSTRY ASSESSEMENT In recent years, Vietnam construction industry contributes significantly to economic growth. Value of the construction industry is estimated at nearly $ 6 billion in 2009, accounting for about 5.2% of the total GDP of Vietnam. Although industry s scale in GDP is not much but it has created momentum for the growth of some industries such as real estate, building materials, manufacturing, basic materials production, as well as other industries when there is requirement for production and business expansion. The growth rate of this industry is very high with over 10% per year. This is in favorable conditions for firms in the industry to develop in the future. Growth speed of the construction industry also depends on the growth rate of total social investment, fluctuations in in-put material prices, volatility of the real estate market. In past years, capital investment both inside and outside the country had strong growth with an average growth rate of 6% per year, investment accounts for 34% of GDP annually. In 2010, the projected growth rate of total investment is about 3%, increase to $ 624,392 billion. Total value of construction industry is about 125,500 billion; growth rate this year is estimated at 23.93% due to the recovery of the economy in which the construction industry is the leading field with strong recovery. Strategic development of the petroleum industry clearly states that PVN will strongly perform research activities, increase the annual oil and gas reserves, and develop downstream projects. Accordingly, many oil and gas processing projects, toil depots, wharves, warehouses, workshops, infrastructure, trade center, home office... will be built and upgraded. As in report of PVN, Annually, PetroVietnam will invest billion to billion in construction activity. This is an advantage for industrial construction field of Company. FINANCIAL SITUATION ANALYSIS Quick ratio is relatively good if considering in construction industry. The ratio increased gradually over the period shown the capability to manage debts of company, cash flow over the years. PXI's capital structure in 2009 shows that companies can use more financial leverage. If looking at the ratio of total debt over total assets of 88%, it can lead to concerns about the company may face higher financial risks. But when analyzing the structure of company s liabilities, the accounts payable for buyers and prepaid accounted for 71% of the total liabilities, showing company uses sources from our partners as well as from its customers quite well. Rate of loan on total debt is very low (6% in 2009) resulting the company has not much pressure of loan expense as well as the payment of these loans. Reports of PSI are available on our website 6

7 F Liquidity ratio Current ratio Quick ratio Capital structure ratio Total liabilities/total assets 93% 88% 92% 67% Total liabilities/owner's equity 1337% 744% 1162% 200% Operation ratio Total assets turnover Trade receivable turnover Trade payable turnover Inventory turnover Profitability turnover Profit after tax/revenue % 1.29% 3.82% Profit after tax/owner's equity 0.00% 46.44% 27.64% 29.19% Profit after tax/total assets 0.00% 4.77% 2.62% 6.87% Operating profit/revenue % 1.64% 5.16% Share raio EPS - 2,952 2,780 1,909 Book value/share 7,384 10,000 10,506 11,285 In both 2008 and 2009, inventory turnover increased continuously in PXI, this is the result of management method innovation as well as improving the quality of staff and employees of the Company. Except for accounts receivable turnover has decreased slightly but remained at safe levels. PXI's profitability ratio declined in 2009 compared with 2008, but we think that they will increase again in The reason is that in 2009, the Company began implementing several projects in the construction of high office buildings and apartment complex, thus require a large amount of capital, however these projects have not yet brought back profit. Expected in 2010 when these projects generate revenue, company s profitability ration will rebound. Overall, the ratio of profit after tax on equity of 30% is quite impressive figure in the construction industry in PXI s asset structure mainly is current assets, accounting for 90% of total assets. In current assets, short-term accounts receivable take major proportion, accounts for about 65% shortterm assets. Short-term receivables of the company mainly are amount receivable according to the progress of construction contracts (over 52%), which is also specific points in the asset structure of construction companies, accounts receivable also take more than 43% of accounts receivable. The Company has no short-term investments in financing at the end of 2009, which helps companies avoid the risk of financial capital market which was quite volatile recent times. Reports of PSI are available on our website 7

8 HUMAN RESOURCES Board of Directors, Deputy of Managers of Company including those with much experience in management as well as expertise in industrial and civil construction. Middle management team of the company is well-educated, experienced with proven expertise in PVN. According to the assessment of consulting organization, leader team of PXI are skillful ones and have been challenged by many years working in the industry. It is the intangible advantages of the company which most of companies don t have. On 30/3/2010, the total number of employees of the company is Graph 4 Labour structure of Company Gender Number (people) (30/03/2010) Propotion Man 2, % Woman % Education level Master 4 0.2% Bachelor % Colleges % Intermediate % Vocational labour 2, % Total 2, % Average salary (dong/person) 6,404,820 Overall, the key employees of companies are paid attention, selected and trained to ensure the human resource development for long-term SOME PROJECTS AND CONTRACTS OF COMPANY No Name Contract parter Value (bil dong) I Signed contract in Ground leveling for Sao Mai Bến Đình Sao mai- Ben Dinh Construction 138 dock warehouse Investmnet Joint Stock Company 2 16ha ground leveling for Thi Vai dock PV Gas 105 warehouse 3 Vung Tau Petroleum Hotel PVN Suction line for Nhon Trach electricity Nhon Trach electricity pland 's Boad of 107 plant Manager 5 Phu My Hung Financial Center Petroland Vietsopetro management office Vietsopetro 306 II Signed contracts in Constructing PCShipyard building objects PetroVietnam Marine Shipyard JT Company Dragon Building PV Gas Building at 43 Mac Dinh Chi, HCM City PVFC Nhon Trach electricity No plant Nhon Trach electricity pland 's Boad of 352 Manager 5 Expand Vietsopetro medical center Vietsopetro 84 6 Working place at Vietsopettro Vietsopetro 86 Reports of PSI are available on our website 8

9 The current contract of PXI is from transition contract since 2009 and a new contract in 2010, along with industrial production which is expected to bring approximately billion in revenue. Besides, real estate projects in Vung Tau are also expected to put into operation in 2010, and also contribute to the company revenue. Revenue from real estate operation of the Company will increase in future, we predict will account for 30% of company revenue from 2010 afterward No Projects Description Selling process 1 Apartment complex at 242 Nguyen Huu Canh, Vung Tau 2 Complex of bulding and office at No Nguyen Huu Canh, Vung Tau 2 building with 25 floors, 2 basements, trade center and apartment (387 bil.dong) One 19 floors building, includes apartment and offices (274 bil dong, PXI contribure 40%) Apartments are sold in 3 years, start 2010, price of 3 mil/m2, retail space for rent with price of 6 USD/m2/month Apartments are sold from 2010 to 2014, price is 3 mil/m2, retail space for rent with price of 6 USD/m2/month. 3 Complex ò trade & service center, office, and luxury apartment, Vung Tau FINANCIAL FORECAST 36 floors building, with trade & service center, office, medial, kindergarden, and aprtmnet (780 billion dong, PXI contribute 45% as investor ) Apartment for sale at 18 tr/m2, office for rent at 6 USD/m2/month, selling process from 2012 to 2016 Based on information collected about business operations of the PXI, the forecasts on the development of construction industry, petroleum sector development plan,... we cautiously forecast result of business activities of PXI as follows: Revenue in 2010, we rely on the results of the signed contracts and new-signed contracts, COGS of company is quite stable. The other business operations revenue will also increase from 2010, when condominium project at 242 Nguyen Huu Canh - Vung Tau and Complex of apartment and office at 02 Nguyen Huu Canh - Vung Tau are ready for sales. Company will sell 75% of the apartments at 242 Nguyen Huu Canh - Vung Tau and 15% of the Complex projects at 02 Nguyen Huu Canh - Vung Tau, and bring revenue of about 200 billion dong Turnover from financial activities were calculated based on the progress of capital withdraw, shares investment in others companies, bank deposits every year on the balance sheet. Financial cost based on forecasted short-term and long-term loan on annual balance sheet accounting. Detail assumptions: Revenue growth from 2010 to 2015 follows the plans of the Company, and from 2016 afterwards stabilizes at 5% per year. Ratio of capital/revenue will be at 93%, Reports of PSI are available on our website 9

10 the average in the construction industry and is also consistent with the historical accounting data of the Company Management expenses take over about 3% of total revenue Fixed assets increased as planned, the depreciation period is expected to 7 years on average, straight line method Registered capital will increase from 300 billion in 2010 to 600 billion in 2014 Dividend at 7% per year till 2015, from 2016 afterwards is 10% per year. Target F 2011F 2012F 2013F 2014F 2015F Total assets (bil dong) ,024 1,190 1,488 1,825 2,212 2,659 Owner's equity (bil dong) ,162 Revenue (bil dong) 534 1,078 1,500 1,800 2,160 2,592 3,110 3,732 Profit after tax (bil dong) EPS (dong/share) 2,952 2,780 3,273 2,338 2,454 2,335 2,335 2,413 ROA 3.5% 2.2% 5.6% 5.9% 5.8% 5.8% 5.8% 5.9% ROE 29.5% 26.5% 16.9% 18.0% 15.6% 14.5% 14.0% 13.9% P/E P/B Graph 5 Growth scale of company Graph 6 Revenue, profit growth 2,000,000,000,000 1,800,000,000,000 1,600,000,000,000 1,400,000,000,000 1,200,000,000,000 1,000,000,000, ,000,000, ,000,000, ,000,000, ,000,000, F 2011F 2012F 2013F Total assets Owner's equity 3,000,000,000, % 7.00% 2,500,000,000, % 2,000,000,000, % 1,500,000,000, % 3.00% 1,000,000,000, % 500,000,000, % % F 2011F 2012F 2013F Sale revenue Gross profit Gross profit margin Reports of PSI are available on our website 10

11 KHUYẾN CÁO SỬ DỤNG This material has been prepared by Research department PetroVietnam Securities Joint Stock Company. The information contained in this material is collected from reliable resources and has been carefully evaluated. Opinions, estimates, and projections constitute the current judgment of the author as of the date of this report. PetroVietnam Securities Joint Stock Company has no obligation to update, modify or amend this report or to otherwise notify reader thereof in the event any matter stated herein, or any opinion, projection, forecast or estimate set forth herein changes or subsequently becomes inaccurate, except if research on the subject company is withdrawn. Prices and availability of financial instruments also are subject to change without notice. This report is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction or as an advertisement of any financial instruments. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. PetroVietnam Securities Joint Stock Company may have relationships with the subject company in this report and may have conflicts of interests with investors. This material is the property of PetroVietnam Securities Joint Stock Company. Actions such as printing, copying or modifying the content without permission are considered illegal. PETROVIETNAM SECURITIES INCORPORATED Research Department Director of Department Pham Thai Binh - binhpt@psi.vn Research Analyst: Truong Tran Dung dungtt@psi.vn Market & Macroecon omic Resea rch Sector/Company Analysis Le Thanh Hoa hoalt@psi.vn Ngo Hong Duc ducnh@psi.vn Ngo Thi Khanh Chi chintk@psi.vn Nguyen Minh Hanh hanhnm@psi.vn Truong Tran Dung dungtt@psi.vn Doan Thi Van Anh anhdtv@psi.vn Nguyen Anh Tuan tuanna1@psi.vn Ho Thi Thanh Hoan hoanhtt@psi.vn Reports of PSI are available on our website 11