LIQUEFIED PETROLEUM GAS SECTOR SECTOR OVERVIEW

Transcription

1 LIQUEFIED PETROLEUM GAS SECTOR SECTOR NOTE Jan 2012 Listed corporations Petrolimex Gas JSC. Petro Vietnam Southern Gas JSC. Petro Vietnam Northern Gas JSC. MT Gas JSC. An Pha S.G. Petrol JSC. PetroVietnam Gas city investment & development JSC. Unlisted corporations Dai Viet Energy JSC. FGas Petrol JSC. Nam Viet Petrol Hong Moc Manufacture, Trade and Service Private Enterprise Van Loc LPG Export-Import and Trade JSC. Thanh Tai Gas JSC. SECTOR OVERVIEW Liquefied petroleum gas (LPG) in Vietnam is mainly used for household, industrial production, transportation and raw materials of petrochemical segment. Infrastructure system. In order to carry out gas distribution, there are an infrastructure system including 32 LPG storage tanks with total capacity of 97,800 m 3 (corresponding to 46,000 tons), 1 cold storage ship with capacity of 43,000 m 3, 20 ports for LPG import-export, 160 LPG filling stations with capacity of ton/month/station and 10 LPG filling stations for transportation vehicles. Value chain of the sector. Gas corporations play a role as distributors for endproduct LPG. Gas is supplied firstly from wholesalers who are domestic producers or LPG importers, LPG then is allotted to industrial/household users through agents/outlets. Business model of LPG sector in Vietnam Source: BVSC o Domestic supply. Vietnam has two LPG producers who can meet around 40% - 50% of domestic demand, including Dinh Co GPP (230,000 tons) & Dung Quat refinery (350,000 tons). LPG is auctioned every year, but in fact, there are just several LPG distributors who can approach to this source. The reason is that these factories are under management of affiliates of Petro Vietnam, PVN gives priority to its subsidiaries (such as PV Gas Trading, PGS, PVG and Anpha Petrol) when purchasing LPG. o Import. In order to meet the rest of demand (50% - 60%), Vietnam has had to import LPG from the neighboring countries, such as Thailand, Singapore, Indonesia, and so on. Following to the Decree 107, there are nearly 25 out of 70 gas businesses who have met requirements to import LPG. The business conditions for LPG import require a quite big investment. Businesses have to 800 m3 storage tank, at least 300,000 gas holders or 3,000 m2 warehouse. Analyst Nguyen Le Ngoc Khoa (+084 8) nguyenlengockhoa@baoviet.com.vn Demand. LPG is mainly consumed in South and North of Vietnam. Growth of demand was very high at 30% in period and around 11% in period According to a latest forecast by Ministry of industry and Trade, LPG demand in 2012 is expected to grow by 6% - 7% compared to previous year. Please see important disclosure and analyst certification at the end of this report

2 LPG consumption under region LPG consumption over years North, 30% Central, 4% South, 66% 1,400,000 1,200,000 1,000, , , , , % 40% 30% 20% 10% 0% -10% E LPG consumption (tons) Consumption growth (%) Source: BVSC compilation Source: PV Gas, MOIT, and BVSC compilation CURRENT SITUATION LPG price volatility. Even if LPG price is controlled by the Government, domestic price usually fluctuates after the world price. The reason is that Vietnam does not have large storage tanks to import directly a big amount of LPG from large export markets, such as Middle East or Russia. Therefore, it has not enough LPG reserve source to stabilize the market. Moreover, import from intermediary countries also makes the domestic LPG price higher. Fierce competition in the sector. There are too many participants on the market, which makes the market uncontrollable. In order to speed up consumption, wholesalers and general agent usually give a large discount for LPG agents. For this reason, the profit margin of the wholesalers is now quite low compared to other sectors. Competition from substitute fuels, especially in industrial usage segment. Many industrial producers have changed their fuel from LPG to other fuel, such as natural gas or biomass because of seeking lower cost. CNG, a quite new economic fuel, is very attractive due to its price determined based on a 20% discount of the LPG price. Fortunately, increase of natural gas price and limitation of source of supply is restricting its development. 2

3 PETROLIMEX GAS JOINT STOCK COMPANY PGC (HSX) Price (Jan 12 th, 2012) VND 4,600 Mkt. cap bn VND Outstanding shares mm shares 34.4 Free-float mm shares 20.5 Enterprise value bn VND Performance in 30 days % Avg. vol. in 30 days 000 shares 24.2 Foreign ownership % 7.6 Dividend Yield % 10.9 PGC had been a subsidiary of Petrolimex before it was privatized in 2003 and then was listed on HSX in The Company imports, exports and trades LPG and related products, such as storage tanks, cylinders and valves, for industrial and consumer usage. PGC (Petrolimex gas brand) now is one of the biggest LPG distributors in Vietnam with market share of 20%.. It also owns a large infrastructure with total 7,200 tons of storage tanks that are allocated in all three regions in the country. PGC plans to build a new storage tank in Da Nang and expands its storage tank in Can Tho (500 tons). PGC has an advantage from wide distribution system of its parent corporation (Petrolimex). Hence, their products can be distributed over the country. Moreover, import LPG from overseas is easier than other competitors thanks to existing infrastructure of Petrolimex. PETROVIETNAM SOUTHERN GAS JOINT STOCK COMPANY PGS (HNX) Price (Jan 12 th, 2012) VND 17,000 Mkt. cap bn VND Outstanding shares mm shares 38.0 Free-float mm shares 7.8 Enterprise value bn VND 1,205.0 Performance in 30 days % Avg. vol. in 30 days 000 shares Foreign ownership % 6.4 Dividend Yield % 11.8 PGS is an affiliate of PetroVietnam Gas. PGS accounts for 30% of market share of LPG sector in the South. From 2009, the Company has begun to develop a new business line Compressed natural gas which contributed around 50% of gross profit for PGS in PGS recently acquired some LPG companies to raise their market share. They expect to occupy 50% of market share in the South in In order to carry out the plan, PGS completed two LPG storage tanks in Dung Quat and Go Dau with total capacity of 7,500 tons in Besides, they established a joint-venture with Marubeni (Japan) to develop the largest LPG storage tank in Long An with the capacity of 84,000 tons. Thanks to a member of PetroVietnam Gas, PGS is usually given priority to buy LPG from Dinh Co GPP and Dung Quat, which occupies around 75% of input. Besides, PGS also receives regularly financial support from PV Gas for their investment projects. PETROVIETNAM NORTHERN GAS JOINT STOCK COMPANY PVG (HNX) Price (Jan 12 th, 2012) VND 9,300 Mkt. cap bn VND Outstanding shares mm shares 27.7 Free-float mm shares 17.7 Enterprise value bn VND Performance in 30 days % Avg. vol. in 30 days 000 shares Foreign ownership % 7.2 Dividend Yield % 19.9 PVG occupies 25% - 30% of market share in the North. Average growth rates of revenue and profit of PVG are quite high at 76% and 90% respectively in period Similar to PGS, LPG input of PVG is from Dinh Co & Dung Quat (accounting for 75% of input). PVG is using 3 storage tanks with total capacity of nearly 5,900 tons. The Company is constructing a new 3,000 tons storage tank in Da Nang and plan to expand two tanks in Hai Phong & Ha Tinh by 6,000 tons in PVG also receive lots of support from PV Gas in term of finance and stability of gas input. However, profit margin has been very low, even lower than industry average. Moreover, low debt ratio and cash liquidity is weaknesses of PVG. 3

4 MT GAS JOINT STOCK COMPANY MTG (HSX) Price (Jan 12 th, 2012) VND 3,100 Mkt. cap bn VND 37.2 Outstanding shares mm shares 12.0 Free-float mm shares 5.6 Enterprise value bn VND 37.2 Performance in 30 days % Avg. vol. in 30 days 000 shares 17.7 Foreign ownership % 1.0 Dividend Yield % 25.8 ASP (HSX) Price (Jan 12 th, 2012) VND 3,600 Mkt. cap bn VND 82.2 Outstanding shares mm shares 22.8 Free-float mm shares 9.3 Enterprise value bn VND Performance in 30 days % 5.3 Avg. vol. in 30 days 000 shares 9,3 Foreign ownership % 13.3 Dividend Yield % n/a MTG, a LPG distributor (MT Gas brand), was established in Their domestic market share is at 4%, but they dominate in the South. MTG also established the joint-venture Vinabenny (with PGS and Marubeni) to build the cold storage tank in Long An. However, MTG does not include LPG importers list. It means that MTG have to buy from wholesalers as Petronas Vietnam, PV Gas Trading. AN PHA S.G. PETROL JOINT STOCK COMPANY ASP is the biggest private LPG distributor in Vietnam. ASP owns good facilities, including total 3,100 tons of storages, 4 gas tankers, filling stations and distribution channel (through a distribution system of Binh Minh corporation). Thus, they are not only a LPG distributor but also providing transportation service and warehouse leasing for the companies in the sector. With Gia Dinh and Anpha Petrol brands, ASP is holding 12% of market share in VN. Although ASP is not a member of PV Gas, ASP has been one of four distributors for LPG product of Dung Quat. This is one of significant advantages of ASP compared to their competitors, even Petrolimex gas. PROPOSAL Most of the company in the sector is trading below book value, except PGS. The reasons are that (1) it is affected by downtrend in general of the market; (2) the fierce competition in the sector has led to very low profit margin. However, in the future, we expect Decree 107 will restore order for the sector. Small and weak LPG wholesalers, who cannot meet the new business conditions from Decree, will be downgraded to agents. Thanks to this, level of unfair competition between wholesalers will also reduce. Besides, Vietnam will approach the cheaper LPG source from major LPG export markets when the large storage tank projects finished, especially Thi Vai storage tank project which will complete at the end of this year. Based on these one, we think that this time is good for the strategic investment purpose. In general, PGS, PVG, PGC are the good stocks in terms of share price, market share, and infrastructure conditions. However, the problem is that state (represented by PV Gas or Petrolimex) owns a large amount of share and therefore they influence significantly on these companies. MT Gas has stake in the biggest LPG storage tank project in Vietnam, therefore they can raise their storage ability in the future. However, they are small and are not in the LPG importer list. ASP holds a considerable market share in the North and the South, especially Hanoi and HCMC. They also have the good infrastructure for LPG distribution. Consequently, we think that ASP is better to consider. 4

5 ANALYST CERTIFICATION I, Nguyen Le Ngoc Khoa, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. GENERAL DISCLAIMER The report is not done by requirement of any institution or individual. Investors should use information, analysis, comment in the report as a reference source before making own investment decision. The report is for the purpose of providing information and does not intend to advice readers to buy, sell any securities. Investors should refer to other sources of consultancy before making investment decision. The information contained in this report is verified carefully, BVSC takes no responsibility with regard to the accuracy or completeness of any information contained here. Viewpoint and analysis in the report can be changed without notification. The report is a property of BVSC and under copyright protection. Infringement of copy, change and reprint of the report without permission of BVSC is illegal. BVSC owns the copyright on the report. BAO VIET SECURITIES COMPANY RESEARCH DEPARTMENT Head office 8 Le Thai To, Hoan Kiem Dist, Hanoi Tel: (844) Fax: (844) Ho Chi Minh Branch 233 Dong Khoi, Dist.1, Ho Chi Minh City Tel: (848) Fax: (848)