PVS_Waves at the bottom of the river_BSC_Company Update_EN

Valuation
We recommend Holding PVS. On 27/03/2018, PVS was traded at VND 21,600/share, equivalent to PE 2018 = 11.94x. If temporarily removing the revenue from Red Dragon Fish (Ca Rong Do) project in 2018 (estimated at VND 3,000 billion), PE 2018 = 13.56x (equal the avarage of the peers in same sector in the region)
Forecast business results
We estimated revenue in 2018 of PVS is at VND 17,039 billion (+1.35% yoy), EAT of PVS's parent company reaches VND 889 billion (+12.2% yoy), EPS 2018 = VND 1,809 (assuming 10% of the bonus and welfare fund with the current number of shares). 27/03/2018, PVS were traded at 21,600, equivalent to PE 2018 = 11.94x. If excluding revenue from the project in 2018, EAT of PVS shareholders in 2018 = VND 791 billion (-1.2% yoy), PE 2018 = 13.56x.

Catalyst
Deploying the Golden Star Project (Sao Vang Dai Nguyet), worth over USD 500 million, implemented from 2019 to 2021

Investment risk
• Unfavorable price of oil
• Large projects are stopped or delayed
• Problem of receivables from Long Phu 1 thermal power plant

Company Updates
The business results have not improved significantly. Most of the segments have no revenue spike in 2018. The construction engineering sector is dependent on three big projects: Red Dragon Fish (about VND 3,000 billion), Golden Star (about VND 2-3,000 billion), and Long Phu 1 thermal power plant (VND 700 billion)
Port Services, 2017 revenue was VND 1,339 billion (-7.87% yoy), gross profit of 2017 was VND 325 billion (+18% yoy, accounting for 40.15% of total gross profit of PVS)
Ship Services, 2017 revenue was VND 2,048 billion (-2.67% yoy), gross profit of 2017 was VND 185 billion (-28.61% yoy, accounting for 22.83% of total gross profit of PVS)
Mechanical and construction services, 2017 revenue reached VND 8,272 billion (-11.64% yoy), gross profit margin was only 1.92% which was lower compared to 2016, gross profit of 2017 was VND 158 billion (-26.63% yoy, accounting for 19.6% of total gross profit).
About FSO/FPSO segment, 2017 revenue reached VND 2,957 billion (-9.64% yoy), gross profit of 2017 was VND 133 billion (-4% yoy, accounting for 16.47% of total gross profit).
The issuance of additional shares. The company has completed the procedure and submitted to the ministry for approval, currently waiting for the comments from PVN.