INTRODUCTION
Overview of the global and Vietnamese oil and gasoline market
The oil market outlook remains uncertain due to the ongoing Russia-Ukraine war and concerns over a global recession, leading to decreased oil demand and rising prices The International Energy Agency (IEA) reports a decline in global oil demand to 99.2 mb/day, down 1.7 mb/d, but anticipates a recovery of 2.1 mb/d in 2023, driven by growth in non-OECD countries The OPEC+ meeting on August 3 aims to strategize for September and beyond Global oil stockpiles are critically low, particularly in China, where refiners have reduced output amid Covid lockdowns Although OECD industrial stocks have partially recovered due to government stock releases, they remain nearly 300 mb below the five-year average The EU's impending embargo on Russian oil could further tighten the market, necessitating demand-side actions to manage consumption and fuel costs, especially in emerging economies where spare capacity is limited The risk of a stalled global economic recovery is significant without strong policy interventions in energy use, as evidenced by a June drop in benchmark crude oil futures of over $20/bbl amid a weakening economic outlook.
As of the latest update, oil prices stood at $96 per barrel, with Brent trading below $100 per barrel This price movement is attributed to tight supply conditions and heightened seasonal demand for oil and its products, leading to an increase in price premiums for physical barrels (IEA, 2022).
Vietnam is experiencing a decline in crude oil and natural gas production due to the depletion of longstanding fields However, the demand for petroleum is projected to rise by more than 3% annually in the near future Encouragingly, several oil and gas projects are beginning to show positive developments and are anticipated to commence construction soon.
Area of the study
This study aims to analyze the performance and assess the intrinsic values of four major Vietnamese companies in the petroleum sector: Petrovietnam Chemical and Services Corporation (PVC), PetroVietnam Technical Services Corporation (PVS), Vietnam National Petroleum Group (PLX), and Binh Son Refining and Petrochemical Company Limited (BSR).
Study objectives
This report aims to offer a comprehensive overview of the Vietnamese petroleum market, providing valuable investment recommendations for investors It includes a macroeconomic outlook for 2022, analyzing key factors such as GDP and CPI, and delves into the petroleum industry in Vietnam Additionally, the report evaluates financial ratios of four selected companies across profitability, gearing, investment, and efficiency categories, culminating in the calculation of intrinsic values to support final investment recommendations.
Methods of the study
The analyst employs a top-down analysis approach, beginning with an evaluation of macroeconomic and industry conditions Following this, the analysis examines the performance of individual companies and provides pricing recommendations based on the outcomes derived from various valuation models.
Sources of data analysed? FS of 4 companies and … ???
Literature survey of related studies?
Organization of the study
This study is structured into five chapters, beginning with an introduction that provides an overview of the global and Vietnamese oil industry The second and third chapters focus on macroeconomic analysis and industry analysis, respectively Chapter four presents an analysis and valuation of four selected companies within the industry Finally, the study concludes with a summary in the fifth chapter.
MACROECONOMICS ANALYSIS
The global economy in 2022
The IMF's World Economic Outlook (2022) indicates a downturn in global economic recovery, with growth expected to decline from 6.1% in 2021 to 3.2% in 2022, largely due to inflation, COVID-19 impacts, and the war in Ukraine The U.S GDP was revised down by 1.4 percentage points, reflecting reduced consumer spending and tighter monetary policy, while China's growth was lowered by 1.1 percentage points due to lockdowns and a real estate crisis Global inflation is projected to reach 6.6% in advanced economies and 9.5% in emerging markets, prompting concerns about tighter financial conditions and potential debt distress The World Bank forecasts a further decline in global growth to 2.9% in 2022 and an average of 3% in 2023-24, exacerbated by the long-term effects of the pandemic and geopolitical tensions Authorities are urged to manage inflation carefully and consider targeted fiscal assistance, while also addressing the urgent need for multilateral action on climate change.
The global oil and gasoline market
Oil prices have surged to their highest levels in six years, signaling a robust recovery in the oil and gas sector Despite this progress, uncertainties loom over market behavior in the coming year, particularly as global demand patterns shift with the anticipated widespread immunization by early 2022 The collaboration between OPEC and other producers is vital to balance supply and demand, ensuring stability in the oil markets In June, Brent crude oil prices rose from $113 to $123 per barrel, driven by limited global supply despite concerns over high inflation and supply shortages Global liquid demand increased by 1 MMb/d to 99.7 MMb/d, with Europe experiencing the most significant rise However, high crude oil prices have fueled inflation in the US, reaching 9% in June, prompting the Federal Reserve to raise interest rates Additionally, the conflict in Ukraine and reduced exports from Libya have further strained supply, complicating the market landscape.
The Vietnamese economy
Vietnam operates under a Communist unitary system, with the Vietnam Communist Party as the sole ruling party The President serves as both the head of state and the military's commander in chief, while the Prime Minister oversees the government Economically, Vietnam embraces capitalism, while maintaining a socialist political framework The country has established diplomatic relations with over 178 nations and collaborates with international organizations such as the UN, WTO, APEC, ASEAN, and the Non-Aligned Movement Despite a historically troubled relationship, Vietnam and the USA currently enjoy improved ties However, a 2020 Human Rights Watch report highlights significant issues regarding human rights and freedom of speech, noting the imprisonment of political opponents and restrictions on public gatherings Corruption remains a critical issue, prompting government efforts to combat it since 2016 Additionally, the Communist Party tightly controls media, leading to censorship of dissenting voices and critical news Addressing political stability is essential for Vietnam's future.
In the second quarter of 2022, the General Statistics Office (GSO) reported a GDP growth of 7.72% compared to the same period last year, marking a significant increase over the growth rates observed from 2011 to 2021 For the first half of 2022, GDP rose by 6.42%, outperforming the growth rates of 2.04% in the first half of 2020 and 5.74% in the first half of 2021.
In 2018 and 2019, the economy experienced growth rates of 7.28% and 6.98%, respectively, with the agriculture, forestry, and fisheries sector expanding by 2.78% and contributing 5.07% to overall growth The processing and manufacturing sector emerged as the primary growth driver, achieving a rate of 9.66%, while the service sector grew by 6.60%, contributing 48.33% to the industry and construction sector's 7.70% growth By the first half of 2022, the agricultural, forestry, and fishery sector accounted for 11.05% of GDP, followed by industrial and construction at 39.30%, and services at 40.63% Economic growth led to increased oil demand, with final consumption rising by 6.06% in the first half of 2021, asset accumulation increasing by 3.92%, exports expanding by 9.10%, and imports rising by 4.41%.
Figure 1: GDP Growth, GSO Customer Price Index (CPI)
In June 2022, the Consumer Price Index (CPI) experienced a monthly increase of 0.69 percent, reflecting a rise of 3.18 percent since December 2021 and 3.37 percent year-over-year When comparing the second quarter of 2022 to the same period in 2021, the average increase was 2.96 percent Additionally, the CPI showed an average rise of 2.44 percent in the first half of 2022 compared to the same timeframe in 2017, while core inflation increased by 1.25 percent.
Figure 2: CPI Growth, GSO Industrial Production Index (IPI)
In July 2022, Vietnam's industrial production saw a significant year-over-year increase of 11.2%, marking the largest growth since May 2021, following a downwardly corrected 9.1% in June 2022 This growth reflects a consistent recovery from COVID-19 impacts, with industrial output rising for the ninth consecutive month Key sectors such as manufacturing (12.8% growth), power and gas supply (8.7%), and waste treatment (9.2%) reported accelerated output increases compared to June, while mining output fell by 1.5%, reversing a prior growth of 5.1% Overall, industrial production rose by 8.8% in the first seven months of 2022 compared to the same period in 2021.
Since 2016, managing interest rates in Vietnam has been challenging due to the economy's heavy reliance on the banking system for medium- to long-term capital, increasing demand for government bonds, and market reactions to global fluctuations The State Bank of Vietnam (SBV) has proactively implemented measures to stabilize and lower interest rates while monitoring both domestic and international market conditions Over this period, the SBV has reduced operating interest rates by 2.2-2.5% annually, with deposit rates for terms under six months lowered by 0.8-1.5% and lending rates for priority sectors decreased by 2.5% In response to the liquidity needs of credit institutions, the SBV has made significant interest rate cuts and maintained appropriate interbank market rates to support reduced capital mobilization and lending rates, while advising institutions to balance their financial capabilities for reasonable lending practices.
Impacts of economic factors on the oil companies should be addressed
Recent changes in interest rates have significantly impacted the financial landscape Refinancing interest rates have decreased from 6% to 4% per year, while re-discount rates have dropped from 4% to 2.5% annually Additionally, the interest rate for purchasing papers through open market operations has also fallen from 4% to 2.5% Overnight lending interest rates for interbank electronic payments and loans to address capital shortfalls in the State Bank of Vietnam's clearing have reduced from 7% to 5% per year Furthermore, the maximum short-term lending interest rate in VND for priority sectors has decreased from 6% to 4.5% The maximum interest rate for VND demand deposits and deposits of less than one month has fallen from 0.8% to 0.2%, while the maximum interest rate for VND term deposits from one to less than six months has decreased from 5% to 4%.
Figure 4: Interest rate, tradingeconomics.com, SBV SOCIAL
Vietnam, with a population of approximately 97 million, exhibits a diverse religious landscape, where 73% of the population identifies as non-religious, while Buddhism (14.9%), Christianity (8.5%), Hoahaoism (1.5%), and Caodaism (1.2%) comprise the remainder The average life expectancy is notably high, reaching 93 years for males and 81 years for females, and the official language is Vietnamese While Vietnamese people are generally known for their kindness and friendliness, the burgeoning middle class is projected to reach 26% by 2026 However, some visitors have expressed dissatisfaction due to experiences of mistreatment and overpricing, contrasting with others who have enjoyed their time in the country Vietnam faces significant socioeconomic challenges, including an aging population and an increasing wealth gap that persists despite the nation's economic advancements.
Impacts of social factors on the oil companies should be addressed
The Vietnamese government is focused on developing a robust tech workforce by establishing specialized tech institutions, implementing attractive policies for foreign investors, and fostering a vibrant startup ecosystem This strategic approach aims to enhance the local and foreign talent pool in the tech industry.
Vietnam is home to approximately 700 IT companies specializing in infrastructure, hardware, and software development It ranks as the eighth-largest global provider of IT services, particularly in financial technology, software outsourcing, e-commerce, and artificial intelligence However, the country faces a significant challenge with a shortage of trained professionals, even as numerous tech companies continue to relocate their production facilities to Vietnam.
Impacts of technology factors on the oil companies should be addressed
INDUSTRY ANALYSIS
Oil and Gasoline industry in Vietnam
The oil and gas sector is vital to Vietnam's economy, with companies like Petrovietnam and Petrolimex playing significant roles in national development and contributing substantially to export revenue This sector attracts foreign investment, bringing in capital and advanced technology In 2021, Vietnam's crude oil production was approximately 10.97 million tonnes, reflecting a 4.4% decline from the previous year, continuing a trend of decreasing output since 2015 due to diminishing yields from aging oil fields and exploration challenges However, gasoline consumption is expected to gradually recover post-pandemic, with an average annual growth rate exceeding 3%, likely resulting in increased crude oil imports in the near future.
In 2022, gas and petroleum usage in Vietnam is expected to rebound after a decline caused by the Covid-19 pandemic, which significantly impacted the economy and reduced demand for petroleum in 2020 and 2021 According to the Ministry of Industry and Trade, Vietnam experienced a steady average annual increase of 3% in domestic petroleum consumption from 2015 to 2019.
Vietnam's petroleum and gas consumption is projected to rebound from 2022, following a 3% annual growth from 2015 to 2019, despite a decline during the Covid-19 pandemic in 2020 and 2021 Recent developments in oil and gas projects, particularly the Block B - O Mon project, are showing positive signs, with construction expected to commence in late 2022, which will be a key growth driver for the sector Vietnam has established various oil and gas agreements, including product sharing contracts (PSC), joint operating company contracts (PC), business cooperation contracts (BCC), and joint ventures (JV) The majority of exploration activities are concentrated in three sedimentary basins: Nam Con Son, Red River, and Cuu Long, with major international firms like ExxonMobil, Shell, and Chevron actively engaged in PSC contracts with Petrovietnam.
List of large gas and oil blocks in Vietnam
Table 1: List of large gas and oil block in Vietnam
No Name Tank - Block Operating company Main exploited products Output/day
1 Bach Ho Cuu Long – 09-1 VietsovPetro Crude oil 10.500 tons
Su Tu Vang, Su Tu
Cuu Long – 15-1 Cuu Long Joint
3 Te Giac Trang Cuu Long – 16-1
Hoang Long Joint Operating Company
4 Lan Tay – Lan Do Nam Con Son –
06-1 Rosneft Company Natural gas 9.5 million m3 of gas
11-2 KNOC Natural gas 3,4 million m3 of gas
Bien Dong Joint Operating Company
Natural gas 5 million m3 of gas
Malay – Tho chu- PM3-CAA
Repsol Malaysia Natural gas 5,6 million m3 of gas
List of companies operating in this industry
Table 2: List of Vietnamese oil and gas companies
PJT (HOSE) PVP (Upcom) PDV (Upcom)
BSR (Upcom) Gas and oil distribution PLX (HOSE)
OIL (Upcom) PPY (HNX) PSH (HOSE) POB (Upcom) Low-pressure gas distribution
PGC (HOSE) PGD (HOSE) PGS (HNX) PVG (HNX) CNG (HOSE) Supplement service PXS (HOSE)
PXT (HOSE) PVB (HNX) PVC (HNX) PET (HOSE)
Five forces analysis
The oil and gas industry is a specialized and capital-intensive sector with limited market competition Due to the high barriers to entry, businesses in this field face minimal threats from new entrants In Vietnam, petroleum-related activities are regulated and overseen by PVN, further reducing the risk of new competitors entering the market.
The oil and gas industry plays a crucial role in everyday life, providing essential energy sources that remain in demand despite price increases Consumers may reduce their consumption slightly, but they cannot entirely forgo these vital resources Additionally, government regulation limits the influence of buyers on business operations, minimizing potential threats to companies within the sector.
The power of suppliers poses significant challenges for businesses in the oil and gas industry, particularly in Vietnam, which continues to rely on oil imports from foreign companies Domestic refineries and petrochemical plants are not yet functioning at full capacity, leading to fluctuations in the local oil market in the latter half of 2022 Given the current global political climate, the timeline for stabilizing oil prices remains uncertain, and it is unclear when global oil supply and demand will return to pre-pandemic levels.
Threat of substitutes, degree of rivalry
The oil and gas industry remains resilient against threats from new entrants and buyer power, as these resources are essential commodities While alternative energies like LNG, LPG, and CNG exist, they cannot fully replace oil and gas, underscoring the continued importance of these traditional energy sources.
The oil industry is characterized by intense rivalry among a few large organizations, making it challenging for companies to maintain profit margins due to the need to align prices with competitors and comply with government regulations Additionally, fierce competition for access to oil reserves further intensifies the rivalry within the sector.
COMPANY ANALYSIS
Binh son refining and petrochemical joint stock company
Binh Son Refining and Petrochemical Joint Stock Company was established on September 5, 2008, under decision number 1018/QD-DKVN The company's headquarters is situated at 208 Hung Vuong, Tran Phu, in Quang Ngai City, Quang Ngai Province.
Website https://bsr.com.vn/vi/trang-chu
Vietnam Oil and Gas Group , 92.13%
Yurie Asset Manageme nt Inc , 0.02%
Dung Quat Oil Refinery, initiated in 2005 with an investment of USD 3 billion, specializes in refining crude oil into gasoline and other finished products The facility boasts a designed capacity of 6.5 million tons of oil annually.
Vietnam's Dung Quat Oil Refinery, managed by Binh Son Refining and Petrochemical Joint Stock Company (BSR), plays a crucial role in the country's oil supply, producing 148,000 barrels per day, which accounts for approximately 35% of Vietnam's demand Established in 2008 by the Vietnam Oil and Gas Group (PVN), BSR successfully held an IPO in 2018 and trades on the UPCoM stock exchange The refinery's primary products, including gasoline and finished oil, are predominantly distributed in the Central and Southern regions, comprising 90% of its output As a national key project with an investment exceeding $3 billion and a processing capacity of 6.5 million tons of crude oil annually, Dung Quat not only supports Vietnam's refining and petrochemical industry but also serves as a training ground for high-quality professionals in the sector.
BSR has a concentrated shareholder structure, with PVN as the majority shareholder, owning over 92% of the shares and controlling the company's business activities PVN supports BSR's operations by supplying domestically sourced crude oil However, PVN plans to divest 49% of its stake in BSR, reducing its ownership to 43.13% This divestment initiative, launched in early 2018, has yet to attract a strategic investor BSR operates two subsidiaries and has investments in two affiliates within the oil and gas sector that bolster its business Notably, the Petroleum Housing and Trading Joint Stock Company, in which BSR holds an 83.26% stake, distributes plastic resins and offers logistics services, while Central Petroleum Biofuel Joint Stock Company, with a 61% stake, produces and wholesales ethanol biofuels for blending with gasoline at the Dung Quat factory.
The operation of Vietnamese oil refineries is related to ensuring energy security, so the issuance of permits and construction is under the management of the State
PV Building BSR - BF PMS PVOS
With the dung quat factory expansion project, BSR will:
1 Increase capacity by 30% to 8.5 million tons / year (up 2 million tons / year)
2 Sour oil refining both diversifies input sources and reduces raw material costs because sour oil prices are cheaper than sweet oil prices by $10-15 per barrel
3 Improve the quality of all products to EU5 to meet government requirements and increase competitiveness From the time of construction, Dung Quat factory has considered the expansion plan (phase 2), so the current factory structure has parts connected to phase 2 After the upgrade, the quality of all BSR gasoline and oil products will be upgraded to EU5
Table 4 Product of BSR after expansion
• Sweet crude oil (90-95% revenue expense)
• 85% from domestic resources (Bach Ho Mine, Black Lion Mine, White Rhinoceros); 15% imported from Azerbaijan, the USA, Nigeria
• Refining crude oil into finished petroleum products
• Dung Quat Oil Refinery (Designed Capacity: 6,5 million tons/y; Performance Capacity: 6,9 million tons/ y)
• Refined Oil (95% of revenue): Diesel products, LPG, Jet A1 petroleum, Fo oil
• Petrochemical product: Polypropylene plastics resin
As of now, Vietnam has two operational oil refining enterprises: Binh Son Refining and Petrochemical Joint Stock Company, established in 2009, and Nghi Son Refinery and Petrochemical Joint Stock Company, which began operations in the third quarter of 2018 Together, these companies fulfill approximately 80% of the country's gasoline and oil demand, with BSR holding a significant 35% market share.
- Dung Quat Oil Refinery Expansion Upgrade Project
- Investment project to build 110/22KV power station connecting EVN to nmld
Product Unit Current Factory After expansion
Consumed raw oil Million of barrel/day 148,000 192,000
Oil Refining Product 99% 99.4% 99.7% 99.6% 99.3% Producing Package and Trading
Oil refining products are the primary source of profitability, consistently contributing at least 99% of total revenue and utilizing approximately 98% of total assets From 2020 to 2021, the share of revenue from packaging and trading services rose from 0.6% to 0.9% Additionally, BSR concentrates exclusively on the domestic market for its revenue generation.
In 2020, the revenue from oil refining products dramatically decreased by about
The Covid-19 pandemic significantly impacted the company's profits, leading to a 44% decline Between early 2020 and April 16, 2020, crude oil prices plummeted from $64 per barrel to $28.2 per barrel, marking a substantial 56% decrease This drop was primarily driven by an oversupply of oil amidst dwindling demand, as reported by the US Energy Information Administration.
In 2020, the Energy Information Administration (EIA) projected a 10% decrease in global crude oil demand due to the economic impact of the COVID-19 pandemic Concurrently, oil supply surged after OPEC and Russia could not agree on production cuts during their meeting on March 6, 2020, prompting Saudi Arabia to take retaliatory measures.
Arabia and Russia are set to increase crude oil production, impacting global oil prices Oil refining companies, like BSR, typically maintain a crude oil inventory for about 30 days to ensure continuous production However, when crude oil prices plummet, selling prices decrease while production costs remain high, adversely affecting profitability The EIA predicts that the average Brent oil price will drop to $43.30 per barrel in 2020, a 32% decline from 2019 Consequently, BSR incurred a loss of approximately 55 billion VND in 2020 due to falling crude oil prices.
Table 6: BSR’s expense Expense analysis
COGS 93,381,314 60,183,940 98,850,991 55,111,266 72,239,470 Selling/General/Admin Expenses, Total 1,012,735 644,344 922,264 451,259 973,344
The main expense is COGS, followed by SG&A which includes Selling/ General/ Administrative Expenses and Labor & Related Expenses From 2019 to
In 2020, the company effectively managed its costs, with SG&A expenses decreasing by approximately 30%, from 922,264 million VND to 644,344 million VND, largely due to the cost-cutting measures implemented during the Covid-19 pandemic In 2021, while costs increased, revenue growth lagged behind at 55% compared to 74% Additionally, interest expenses accounted for less than 0.5% of total expenses, indicating that BSR's estimated cost of debt stands at around 5%.
Table 7: BSR’s profitability ratios Profitability ratios
Pretax ROA 9.2% 11.3% (5.2%) 5.7% - 12.8% x Leverage (Assets/Equity) 2.31 1.78 1.80 1.58 1.70 1.85
From 2017 to 2021, BSR's profitability ratios consistently fell below the industry median, with gross margin declining from 11.2% to 7.6% and EBITDA dropping from 12.9% to 8.7% This trend suggests that BSR's profits are not as robust as those of its competitors, indicating a potential need for cost-cutting measures in both goods sold and operating expenses Additionally, BSR's reinvestment rate is notably higher than the industry median, raising concerns about the sustainability of such practices, as the substantial allocation of profits for reinvestment may be disproportionate compared to its peers.
Table 8: BSR’s liquidity ratio Liquidity ratios
Current Ratio 1.22 1.65 1.47 2.08 1.83 1.79 Times Interest Earned 8.7 15.9 (9.4) 8.0 - 15.0 Cash Cycle (Days) 35.4 42.6 63.9 41.9 - 49.6
BSR consistently demonstrates strong liquidity ratios that exceed the industry median, indicating its ability to manage short-term debt obligations effectively However, in 2020, the company faced a negative times interest earned due to a decline in EBIT, primarily caused by a significant drop in revenue from the Covid-19 pandemic and the adverse effects of global oil prices, all while still incurring regular operating expenses and unexpected litigation costs Despite these challenges, BSR's cash cycle remains above the industry median, signaling a positive aspect of its operations as it efficiently converts resources into cash flow.
Table 9: : BSR’s Leverage ratios Leverage ratios
% LT Debt to Total Capital 15.8% 2.0% 6.9% 12.9% 17.6% 19.7% (Total Debt – Cash) / EBITDA 1.39 - - 0.21 - 0.25
Between 2017 and 2021, the company's debt/equity ratio improved from 0.42 to 0.29, primarily due to a significant reduction in long-term debt, which fell from 9,566,220 million VND to 942,639 VND This decrease is also evident in the long-term debt's share of total capital, dropping from 19.7% to 2% Compared to the industry median, all leverage ratios of BSR are lower, indicating a reduced risk of insolvency and a lighter debt obligation relative to its peers.
Table 10: BSR’s Operating ratios Operating ratios
Between 2017 and 2021, BSR's accounts receivable (A/R) ratio showed an upward trend, indicating improved efficiency in collecting receivables, with A/R Days at 38.1, lower than the industry median of 40.1 days in 2021 This suggests a favorable position for the company; however, BSR lacks a bad debt allowance, reflecting a less cautious approach compared to its industry peers.
Table 11: P/E of BSR’s Peers Price Multiples Model
Ratio PVS PLX PVC Mean
Market price/ earig per share
The suggested Market value of BSR’s equity
The average market value of equity 116,529,270.58
Table 13: FCFE model of BSR
Based on 2 valuation method, price of BSR is below
Method Price Weight Price * Weight
Petrovietnam Technical Services Corporation (PTSC)
Petrovietnam Technical Services Corporation (PTSC) is a highly reputable company specializing in oil-related services and equipment Headquartered in the PetroVietnam Tower in Ho Chi Minh City, Vietnam, PTSC is recognized for its reliability and expertise in the industry.
Company’s Website https://www.ptsc.com.vn/
Vietnam Oil and Gas Group
J.P Morgan AssetManagement(Singapore) LimitedVan Eck AssociatesCorporation
Petrovietnam Technical Services Corporation (PTSC), established in 1993 through the merger of PSC and GPTS, is the sole government enterprise specializing in oil and gas technical services Initially focused on offshore support vessels, port operations, and manpower supply for oil and gas contractors, PTSC has evolved over nearly 30 years to become a leading firm in the industry In addition to its effective business operations, PTSC is actively involved in various social initiatives.
Figure 9: PVS’s key milestones Company structure
PVS operates with a functional company structure, where the Shareholder meeting is the highest authority Shareholders elect trustworthy individuals to the Board of Directors, which in turn selects the Board of Supervisors, followed by the Board of Management The company is organized into several divisions, including Industrial, Planning and Investment, Technical and Operations, Legal, Financial and Accounting, Human Resources, and Commercial and General Administration.
Vietnam Oil and Gas Group 51.38%
J.P Morgan Asset Management (Singapore) Limited 0.80%
Sumitomo Mitsui DS Asset Management Company, Limited 0.40%
IBK Asset Management Co., Ltd 0.17%
Legal & General Investment Management Ltd 0.12%
Nikko Asset Management Asia Limited 0.05%
Mirae Asset Global Investments Co., Ltd 0.04%
Grantham Mayo Van Otterloo & Co LLC 0.03%
Mirae Asset Global Investments (USA) LLC 0.01%
Vietnamese Organizations Vietnamese IndividualForeign Organizations Foreign Individual
Petrovietnam Technical Services Corporation stands out as a leading provider of oil and gas technical and industrial services, establishing itself as a significant brand in the regional market The company specializes in a range of core services that cater to the needs of the industry.
Installation, Operation and Maintenance offshore facilities
Seismic, GEO, Survey and ROV
PTSC currently operates 12 subsidiaries and 6 affiliated companies across various sectors, primarily focusing on oil and gas technical and industrial services The company's business model is primarily divided into two key areas: ports, storage, and logistics, as well as the construction of offshore oil and gas facilities Additionally, PTSC possesses specialized facilities for seismic survey services in oceanic environments, which will be explored in further detail below.
PTSC is dedicated to supporting clients in the oil and gas exploration sector in Vietnam, along with other regional industries, by managing and operating a network of eight ports and supply bases The company is also committed to ongoing investments aimed at expanding this infrastructure across the North and Central regions.
South of Vietnam, with a total area of 360ha and more than 2,700m of wharf
PTSC operates not only ports but also owns Floating Storage and Offloading (FSO) and Floating Production Storage and Offloading (FPSO) units These systems are increasingly utilized as the primary solution in offshore oil and gas production across various regions worldwide.
A floating production system, or FPSO, takes fluids
(including crude oil, water, and a variety of other substances) from a subsea reservoir by risers
Topside production equipment onboard efficiently separates fluids into crude oil, natural gas, water, and contaminants The crude oil stored in the FPSO's tanks is then transferred to shuttle tankers for sale or further refining onshore.
PTSC offers reliable and long-term strategic services through its fleet of FSO/FPSOs, essential for oil field operations The company currently owns or co-owns six units: FSO Orkid, FPSO Ruby II, FSO Bien Dong 01, FPSO Lam Son, FSO Golden Star, and FSO MV12 With a total capacity of 3,167,695 barrels, PTSC's FSO/FPSOs operate in diverse regions, serving both domestic and international clients.
PTSC operates a diverse fleet of 19 oil and gas service vessels, including tug boats, anchors, dynamic positioning vehicles, survey diving support vessels, fire-fighting vessels, and standby rescue/field support vessels The entire fleet is managed by a skilled and experienced Vietnamese crew, ensuring high-quality service and operational efficiency.
Construction of oil and gas offshore
Mechanical engineering, construction and installation of offshore projects is one of the crucial services that significantly boost
PTSC's revenue and profitability are bolstered by its extensive facilities, including ports, warehouses, and specialized equipment such as cranes and towing/lifting machinery The company actively supports oil and gas project construction across key locations in Vung Tau and Quang Ngai, enhancing its operational capabilities and market presence.
Thanh Hoa in order to carry out the projects, … that always fulfill the demands of the client, including:
Major construction site in Vung Tau covers nearly 160 hectares Additionally, PTSC owns fabrication yards with an area of more than 40 hectares in Quang Ngai and Thanh Hoa
The wharf systems in Thanh Hoa, Quang Ngai, and Vung Tau are designed to meet the demands of launching oil and gas components Notably, the Vung Tau wharf system spans about 1,000 meters and features three specialized skids for constructing and launching high-end oil and gas components weighing 6,000 tons, 15,000 tons, and 25,000 tons, capable of handling distribution loads exceeding 50 tons per square meter.
Modern investments have been made in the synchronous and coordinated systems of factories, warehouses, and building sites: fitting workshop (150,000m2), covered workshop (19,000m2), and cleaning/spraying workshop (8,000m2), a painting studio (3,500m2)
In the oil and gas industry, a wide range of vehicles, machinery, and tools are utilized for project fabrication, including cranes weighing between 50 and 550 tons, forklifts, welding equipment, generators, air compressors, and specialized tools PTSC also provides essential offshore services such as transportation, hookup, installation, maintenance, repair of offshore projects, and seismic survey services Recently, PVS has upgraded its barges to better meet client demands for PTSC services, featuring major facilities like the PTSC Offshore 01 accommodation barge, which accommodates 300 occupants, and the 5,000-ton PTSC 01 barge, along with a mechanical and maintenance workshop.
PTSC employs advanced technology services, including Remote Operated Vehicles (ROVs), to ensure that all operations are conducted efficiently and effectively.
The ship is equipped with a drilling system for geotechnical investigation at sea and a 4- point winch system
Capable of performing geological surveys at the water level up to 1,000m and oceanographic surveys in different sea areas on Vietnamese and regional continental shelf
ROV Panther Plus 911 and ROV Panther Plus 954 are used for taking surveys and repairing subsea works The vehicles can go as deep as 2,000m underwater
ROV Quasar Compact 007 is used for taking surveys and repairing subsea works The vehicle can go as deep as 2,000m underwater
And these are FSO/FSPO that PTC owns/co-owns to for leasing now:
No Name of FSO/FPSO Capacity (Barrel) Operating field
2 FPSO Ruby II 645,000 Hong Ngoc
3 FSO Bien Dong 01 350,000 Hai Thach – Moc Tinh
4 FPSO Lam Son 350,000 Thang Long – Dong Do
5 FSO Golden Star 777,695 Sao Vang Dai Nguyet
Since its establishment in 1993, PTSC has consistently maintained its status as a leader in Vietnam's oil and gas sector The company has been recognized multiple times by the Vietnam National Oil and Gas Group, the Government, and the State, receiving prestigious accolades in 1993, 1994, 1997, 1999, 2001, and 2002 Notably, PTSC was honored with the emulation flag by the Vietnam General Confederation of Labor and the Government for its outstanding contributions to the oil and gas industry.
Vietnam National Petroleum Group (Petrolimex)
Vietnam National Petroleum Group, commonly known as Petrolimex, is the largest oil distributor in Vietnam In addition to its core petroleum distribution, the company engages in logistics and investment to enhance its value chain Currently, Petrolimex operates 43 member units that directly trade petroleum across all 63 provinces and cities in the country.
Company’s Website https://www.ptsc.com.vn/
Established on January 12, 1996, the Vietnam National Petroleum Group, originally known as the Petrol and Grease Corporation, underwent significant transformation, including equitization and a successful IPO on the Hanoi Stock Exchange (HNX) in 2011 By 2017, the company was officially listed on the Ho Chi Minh City Stock Exchange (HOSE) under the ticker PLX Petrolimex specializes in the import-export and trading of petroleum, refining and petrochemicals, transportation, and capital investment in related enterprises, as well as other legally permitted business activities Currently, Petrolimex operates through 43 member units that directly trade petroleum across 63 provinces and cities in Vietnam.
The Vietnam National Petroleum Group, Petrolimex, utilizes a divisional organizational structure, which is typical for large corporations with multiple subsidiaries and diverse business activities This structure allows each division to function independently, managing its own resources and budget for specific projects, thereby enhancing operational efficiency and flexibility.
Subsidiaries, branches, and offices possess the autonomy to manage their production and business operations, allowing them to implement policies that are tailored to the specific characteristics of their local markets This flexibility enables them to respond effectively to market demands and enhance overall performance.
Cons: lack of connection, communication between individual departments and possible variations between accounting practices or tax implications
Table 22: Major shareholders of PLX
Member of management Council Position Number of shares
Mr Pham Van Thanh Chairman 347,686,364 26.87%
Mr Toshiya Nakahara Non-executive member 103,528,476 8%
Mr Nguyen Thanh Son Member 90,571,466 7%
Mr Le Van Huong Member 90,571,466 7%
Mr Tran Ngoc Nam Management Board
Table 23: Shareholder structure of PLX
Shareholder Number of shares Percent
Committee for Management of State Capital at
The concentration of stock ownership in Vietnam is notable, with nearly 76% held by the State This situation is largely attributed to the establishment of the Vietnam National Petroleum Group, Petrolimex, under Decree No 09/BTN on January 12, 1956, by the Ministry of Industry and Trade Recently, the equitization of the Vietnam Oil and Gas Group has facilitated the expansion of its operational scope, leading to the generation of additional revenue streams for the company.
PLX primarily focuses on petroleum trading while strategically investing in subsidiaries and affiliated companies across various sectors, including transportation, petrochemicals, liquefied petroleum gas, and warehousing, all of which support its core business operations The company's integrated petroleum supply chain is designed to enhance efficiency and streamline processes within these key areas.
As a leading enterprise in petroleum trading and transportation, PLX specializes in high-quality petroleum products, including Euro 5 standard RON 95 gasoline and DO 0.001S-V diesel Amid the rising global gasoline prices driven by the Russia-Ukraine conflict, PLX has experienced significant fluctuations in its fuel prices The latest price list for Petrolimex products, updated on August 27, reflects these changes in the market.
Table 24: Main products of PLX
Maintain productivity of the engine Improve the environment health
Benzen Reduce harmful emissions Improve the environment health
Aromatics Reduce ultra-fine emissions
Petrolimex dominates the Vietnamese petroleum market with approximately 50% market share, making it the leading enterprise in petroleum trading Over the past four years, the company has consistently achieved a stable growth rate of over 5% annually Additionally, Petrolimex stands out as the only petroleum company in the domestic market that can supply high-standard clean fuel sources, including Euro 5 Diesel (DO 0.001S-V) and Euro 95 Ron gasoline (RON 95-IV).
In 2021, Petrolimex successfully launched a non-cash payment project and introduced a new brand identity across its network of petrol stations, highlighting the Group's commitment to innovation and modernization in the fuel industry.
In 2021, businesses focused on enhancing their headquarters to boost operational efficiency and improve the working environment Investing in petrol stations became essential for effective business operations During the year, PLX launched 55 new stores, closed 13, and invested in the renovation and upgrade of 180 existing locations, while also implementing in-store pickup applications.
In 2022, the company plans to leverage its existing projects, such as the solar battery initiative and the 775 Giai Phong data center Additionally, Petrolimex is prioritizing the launch of new sales points in Lien Khuong and Phu Quoc to enhance progress in the southern provinces The company is also working closely with EVN to expedite the implementation of LNG projects in My Giang, Khanh Hoa.
Renovating the cement car oil factory Bac Giang Petroleum depot
Improve the fire protection system of the whole warehouse
Nghi Huong oil storage tank and storage system
Repairing expanding and the central chemist at Nha Be Petroleum Depot
Figure 25: PLX’s compositions of consolidated revenue
Between 2017 and 2019, the Vietnam National Petroleum Group, Petrolimex, experienced consistent revenue growth Although the Group ceased providing insurance services in 2018, resulting in a minor annual revenue loss, this change had a negligible impact on overall earnings However, in 2020, Petrolimex faced a significant revenue decline of 34.6% compared to 2019, primarily due to the Covid-19 pandemic, which prompted countries to implement strict lockdown measures.
Eliminations (56,333,014) (34,143,992) (31,752,199) (20,155,825) (28,874,287) Goods & Other Serivces 5,267,761 2,496,779 560,701 1,867,959 2,352,131 Transportation Service 12,521,128 8,918,147 8,855,160 6,941,503 7,358,542
Gas Products 3,761,180 3,261,120 3,169,732 2,824,679 3,362,912 Petrochemical Products 6,164,464 6,434,374 6,160,046 5,608,435 6,868,374 Gas & Petroleum 180,249,072 204,966,046 202,610,086 126,831,900 177,940,932
From 2017 to 2021, the consolidated revenue of petroleum companies, including Petrolimex, faced significant challenges due to the COVID-19 pandemic As demand for petroleum sharply declined while oil refineries continued operations, an oversupply emerged, leading to a drastic drop in global oil prices, even reaching negative levels due to storage shortages This situation resulted in a substantial revenue decrease for petroleum businesses worldwide However, by 2021, as the pandemic was brought under control, Petrolimex began to show more positive revenue trends compared to 2020, signaling a gradual recovery from the previous sharp decline.
Figure 26: PLX’s total operating expense
Total Operating Expense from 2017 - 2021 (Million Dong)
Figure 27: PLX’s compositions of total expenses
In 2020, Petrolimex Group experienced a notable decline in both revenue and operating expenses, primarily due to the impacts of the Covid-19 pandemic, which caused a sharp drop in sales revenue and a corresponding reduction in the cost of goods sold As the economy began to recover in 2021, with fewer restrictions and a resurgence in gasoline demand, the Group saw a rebound in revenue and an increase in the cost of goods sold Additionally, this year marked a significant rise in selling, general, and administrative expenses as the Group invested more in maintaining operational quality and supporting its workforce.
Interest Expense, Net - Operating 570,685 865,488 791,224 706,153 602,475 Depreciation/Amortization 696,467 735,609 770,549 860,929 902,396 Selling/General/Admin Expenses,
Compositions of Total Expenses from
Cost of Revenue Selling/General/Admin Expenses, TotalDepreciation/Amortization Interest Expense, Net - OperatingOther Operating Expenses, Total
Figure 28: Profitability groups of PLX
In 2020, key financial indicators for the Vietnam National Petroleum Group showed significant abnormalities, primarily due to the impact of the Covid-19 pandemic Both the EBITDA Margin and Operating Margin experienced a marked decline as revenue from petroleum trading dropped considerably compared to the previous year, largely as a result of government-imposed lockdown measures aimed at controlling the outbreak.
Petrovietnam Chemical and Services Corporation (PVChem)
Petrovietnam Chemical and Services Corporation (PVChem), previously known as Drilling Mud Corporation, is a Vietnam-based company specializing in supplies, services, and equipment for oil exploration and refining The company offers a range of products, including drilling mud, drilling additives, and specialized oil well cement.
Company’s Website http://pvchem.com.vn/
PetroVietNam Chemical & Services Corporation, known by its stock code PVC, was established in 1990 and has since grown to have an authorized capital of 500 billion dong With a vision to become Vietnam's leading chemistry distributor, PVC aims to excel in technical services for the oil industry and beyond The company's mission focuses on delivering oil chemistry-related products and services that generate value for customers, shareholders, and employees alike.
Figure 33: Key milestones of PVC
•PVChem was established under the name Petroleum Chemicals and Drilling Fluids Company
•Listed on Hanoi Stock Exchange
•Transform the operating model into a Parent - Subsidiary
•Revenue reached to thousands of billions
•Renamed to current name (PVChem)
•First year in 5 years planning
PVChem employs a hybrid structure that combines functional and geographical elements, effectively minimizing the drawbacks of both approaches while leveraging their advantages The organization is organized into distinct departments, including functional, dependent accounting, independent accounting, and affiliate entities Each department operates under a clear chain of command, with team members reporting to department heads, who then update top management on their areas' performance This structural design offers three key benefits: it allows employees to concentrate on overarching business objectives, reduces inter-departmental competition, and enables all team members to maximize their potential.
PVChem operates through various geographical offices, including locations in Ha Noi, Vung Tau, Ho Chi Minh City, and Laos This strategic distribution of offices provides numerous operational advantages and enhances the company's overall effectiveness.
Strong collaborative teams at each location
Close communication with local customers
Serve local need better and tailor their approach to the local market
Encourage positive competition between different departments
Petrolimex owns approximately 3.6 million shares, representing 36% of the company's total shares Despite a maximum foreign ownership limit of 49%, foreign shareholders currently hold only 0.5% of PVC's shares Additionally, institutional shareholders make up 41.4% of the remaining 58.6% of the company's ownership structure.
Currently, PVChem is focusing on developing all three of its activities: technical services, sales, and production Each subsidiary or company associated with
PetroVietnam Chemicals and Services Corporation operates through specialized functions across various sectors, including Drilling Fluids and Services Co., Ltd (DMC) located in Vung Tau, which primarily focuses on technical services and trading in oil and gas This strategic alignment among subsidiaries fosters a cohesive supply chain, enhancing the corporation's ability to deliver comprehensive products and services in the oil and gas industry.
PVChems operates in three key fields, maintaining stable market positions over the years In Drilling Services, PVC holds approximately 70% of the national drilling fluid market share, with a goal to sustain or exceed this level For Industrial Services, PVC aims for a revenue growth target of 10-15% annually over the next five years Currently, PVChems' cleaning services represent 20% of the market, while water treatment and environmental consulting services also account for 20% Additionally, mining support services capture about 20-30% of the market share Looking ahead, PVChems plans to expand its offerings in oil and gas exploitation, including well treatment and enhanced oil recovery (EOR), which is expected to increase its market share beyond the current 20%.
In 2021, PVChem invested a total of VND 120 billion to establish member units, including VND 30 billion for PVChem-Tech Co., Ltd and VND 90 billion for the Oil and Gas Services and Drilling Fluids Co., Ltd The company is currently engaged in several major projects during the implementation phase.
Figure 37: Major projects of PVC
From 2017 to 2020, we saw the revenue of PetroVietnam Chemicals and
Services Corporation has experienced a continuous decline due to challenges in production and business operations Since 2017, falling crude oil prices have significantly impacted the drilling fluid services market.
Project to produce recycled PET chips from scrap PET plastic bottles
Industrial gas production project using the cold heat source of PVGas's
Thi Vai LNG storage project
PP Filler Masterbatch/Compound production project from Dung Quat
In recent years, major contractors like PVEP, POC, and SongHong have faced challenges, including a halt in drilling activities and a continuous decline in service prices, leading to reduced efficiency in their operations Consequently, businesses have adjusted their revenue plans downward for 2017, anticipating lower performance than the previous year Despite some improvements, only a limited number of sectors managed to meet or surpass their revenue targets in 2018 and 2019.
The year 2020 posed significant challenges for petroleum-based businesses due to the COVID-19 pandemic, which drastically reduced travel and mobility PVChem was similarly affected; however, its diverse production and business lines, along with proactive prevention and support measures from previous years, helped mitigate the impact As a result, PVChem's revenue in 2020 experienced only a slight decline of approximately 3.8% compared to 2019.
In 2021, as businesses returned to normal post-COVID-19, the demand for chemicals, drilling fluids, and consulting services in drilling and construction surged, leading to a significant revenue increase for PVC, which rose by 27.43% compared to 2020 The service sector alone generated 850 billion VND, achieving 106% of its annual plan across drilling fluid, industrial, and technical services, with contracts highly valued by clients In the business sector, PVC's earnings reached 1,900 billion VND, surpassing the yearly target at 126% The company ensured a stable supply of chemical services for oil and gas operations, featuring an increasingly diverse portfolio sourced from imports, domestic suppliers, and self-blending.
In the manufacturing sector, PVC achieved a production output of 12,647 tons, exceeding the annual target by 105% The company specializes in traditional products like G Cement, Silica Flour, and Bentonite, catering to petroleum service companies in Vietnam Additionally, PVC collaborates with research partners to innovate in additive manufacturing, thereby enhancing the value of its bentonite products.
Figure 39: PVC’s compositions of Total expense
Figure 40: PVC’s total operating expenses
The total operating expenses of PetroVietnam Chemicals and Services Corporation closely mirror the company's revenue trends Due to various challenges, the business experienced a decline in revenue, which subsequently resulted in a decrease in the cost of goods sold and overall expenses Additionally, starting in 2017, the company's projected revenue has been lower than previous years.
Compositions of Total Expenses (Million Dong)
Cost of Revenue, Total Selling/General/Admin Expenses, Total Depreciation/Amortization Interest Exp.(Inc.),Net-Operating, Total
In 2020, PVChem faced significant challenges due to the COVID-19 pandemic, which led to a sharp decline in demand for chemical products and resulted in the lowest realized revenue of the year Despite this, the company successfully implemented cost-saving measures, achieving a total cost reduction of VND 2.5 billion, exceeding their plan by 109% Additionally, while operating expenses—including selling, administrative, and general expenses—were reduced over the years, businesses had to invest more to maintain a safe working environment for employees during the pandemic.
We see a strong increase in 2019 in all 3 indicators: gross margin, EBITDA margin, and Operating Margin
CONCLUSION
This report aims to provide reliable financial advice, recommending four companies as strong buys due to their future upside potential The global economy is expected to face its largest decline in over 80 years, with GDP slowing from 5.7% in 2021 to 2.9% in 2022, primarily due to reduced pent-up demand, inflation, and geopolitical disruptions like Russia's invasion of Ukraine Meanwhile, the oil and gas industry has seen a significant recovery, with prices hitting six-year highs, though future market behavior remains uncertain In Vietnam, a socialist republic led by the Communist Party, GDP is projected to grow by 7.72% in 2021, with the first half of 2022 showing a 6.42% increase, reflecting a robust middle class that is expected to represent 26% of the population by 2026 The oil and gas sector, particularly Petrovietnam, plays a crucial role in Vietnam's economy, contributing significantly to export earnings and attracting foreign investment, despite a 4.4% decline in crude oil production to 10.97 million tonnes in 2021.
From FCFE and P/E model, the summary of valuation is below:
Symbol Ticket Price Recommendation Upside
Our recommendations for the four companies are grounded in their financial positions and valuation models, but these could shift due to factors like significant revenue changes, rising commodity prices affecting profit margins, or management changes Accurately predicting future economic conditions is challenging, and stock market investments carry inherent risks Investors aim to maximize returns while minimizing risks, making the selection of the right asset mix essential Focus on reputable companies with stable cash flow and consider stocks with high dividend yields for added support In today's volatile economy, thorough evaluation of businesses is crucial to identify those capable of consistently delivering strong financial performance and shareholder returns.
1 Anh Nguyen (2021) Loi nhuan cua Petrolimex giam manh nhung nang luc tai chinh van ở nguong tot, Bnews
PVC’s Annual Reports from 2017 to 2021, CaFef
3 Bong Mai (2021) Doanh nghiep xang dau lai đam nua đau nam 2021, Tuoi Tre Newspaper
4 BSR’s Annual Reports from 2017 to 2021
5 BSR’s Financial Reports from 2017 to 2021
6 Dan Le, 2022, Petrolimex: Dong hanh voi nguoi dan ca nuoc trong kho khan, Chinh Phu Newspaper
7 IEA (2022), Oil Market Report - July 2022, IEA, Paris https://www.iea.org/reports/oil- market-report-july-2022
8 Information of Products that PVC offer, official website of PVChem
9 Introduction of PLX, official website of Petrolimex
10 McKinsey (2022),Snapshot of global oil supply and demand: June 2022
12 P.V (2021) PTSC dat moc 4 trieu gio lam viec an toan tai Du an Hoa dau Long
13 P.V (2021) PTSC-Tron giai phap, ven niem tin, Huong toi linh vuc dien gio ngoai khoi, PetroTimes
14 Petrolimex (2022) HDBank va Petrolimex phat hanh sieu the dong thuong hieu
4 trong 1 đung vao “Ngay khong tien mat” cua Ngan hang Nha nuoc Viet Nam, official website of Petrolimex
15 Petrolimex (2022) Petrolimex trien khai thanh toan the khong tiep xuc Visa tai mang luoi ban le xang dau tren toan quoc, official website of Petrolimex
16 Phan Ha (2022) Du an Kho chua LNG Thi Vai hoan thanh 95% khoi luong cong viec, Ba Ria – Vung Tau
17 PLX’s Annual Reports from 2017 to 2021
18 PLX’s Bussiness field: Petroleum, official website of Petrolimex
19 PLX’s Financial Reports from 2017 to 2021
21 PVC’s Financial Reports from 2017 to 2021, CaFef
23 PVS’s Annual Reports from 2017 to 2021
24 PVS’s beta, other peers’ P/E, Fireant
25 PVS’s Financial Reports from 2017 to 2021
27 Sławomir JANISZEWSKI (2011), “How to perform discounted cash flow valuation?” Foundations of Management,
28 Tai nguyên và Moi truong Newspaper (2020) PVChem - 30 nam chuyen minh but pha
29 Tai nguyen va Moi truong Newspaper (2021) PVChem trien khai du an san xuat
PET Chip tai che tu rac thai nhua
30 Thanh Cong (2022) PVChem nin lai nam 2022, PetroTimes Vietnam Petroleum Association Magazine
31 Thanh Cong (2022) PVChem: Phat trien vi moi truong va loi ich xa hoi,
PetroTimes Vietnam Petroleum Association Magazine
32 Tung Duong (2021) PVChem: Da san sang cho buoc chuyen minh moi,
PetroTimes Vietnam Petroleum Association Magazine
33 Tung Duong (2022) PVChem day nhanh tien do thuc hien cac du an san pham hoa dau moi, PetroTimes Vietnam Petroleum Association Magazine
34 Van Toan (2022) PTSC M&C trung thau Du an Gallaf – Giai doan 3, PTSC
35 http://rgi- documents.s3.amazonaws.com/145d2574cc9863e8d652c7b4ab01bce83a8425 7a.pdf
36 https://www.pvn.vn/Pages/detailv4.aspx?NewsIDn2a7149-6916-4fa5-80ad- 2953a83a9bfd
38 https://www.oil-price.net/
39 https://www.opec.org/opec_web/en/publications/338.htm
40 https://www.oecd-ilibrary.org/energy/market-report-series-oil_25202707
41 https://www.aa.com.tr/en/economy/global-oil-supply-up-in-june-international- energy-agency/2636015
42 https://marketresearch.biz/report/fennel-seeds-oil-market/
43 https://www.ibisworld.com/global/market-research-reports/global-oil-gas- exploration-production-industry/
FCFE Model: According Sławomir JANISZEWSKI (2011) : “The
Discounted Cash Flow (DCF) valuation assesses a company's future cash generation capabilities, providing a realistic appraisal of its value However, this method is highly sensitive to the assumptions underlying financial projections DCF can illustrate various scenarios—optimistic, pessimistic, and realistic—based on differing assumptions, allowing for a reasonable valuation range One specific DCF approach, Free Cash Flow to Equity (FCFE), evaluates the actual value of a stock by measuring equity cash consumption, revealing the cash available for equity holders for reinvestment, debt repayment, and other uses.
The Price/Earnings (P/E) ratio, as defined by Aswath Damodaran in 2001, serves as a standardized measure for stock valuation by utilizing common variables like earnings, cash flows, book value, or revenues This earning multiple is essential for investors seeking to assess the value of stocks effectively.
Financial Statement items forecast is based on their percentage to sales and 5 – year average basic Terminal growth rate is the GDP terminal growth rate of Vietnam forecasted by PwC
In valuation models, the Free Cash Flow to Equity (FCFE) is prioritized as it effectively represents the intrinsic value of a stock through the income approach In contrast, the Price-to-Earnings (P/E) ratio contributes less to valuation accuracy due to its variability across companies within the same industry, making the average P/E insufficient for reflecting a stock's true intrinsic value.
Binh Son Refining and Petrochemical Joint Stock Company
Over the past five years, sales have experienced an average growth of approximately 21%, with projections indicating a rise to 30% in the coming year due to anticipated increases in global oil prices, positively affecting the revenue of oil and gas companies The U.S Energy Information Administration forecasts that in 2022 and 2023, the spot price of Brent crude oil will fluctuate between $95 and $105 per barrel In the long term, the terminal growth rate for sales is expected to stabilize at 21%, while the annual depreciation and amortization rate is projected to remain at 5%.
Total Revenue 57,959,113 101,080,035 131,448,300 159,052,443.12 192,453,456.18 Cost of Revenue, Total - 0,183,940 - 93,381,314 - 116,988,987 -141,556,674 -171,283,576
Gain (Loss) on Sale of Assets 795 0
Net Income Before Taxes -2852427 6940677 7,167,465 8,668,319 11,544,430 Provision for Income Taxes -5,700 -257,137 -367,053 -443,913 -591,201 Net Income After Taxes -2858128 6683540 6,800,412 8,224,406 10,953,228
Total Inventory 8,386,689 10,358,096 15,596,742 18,872,057.64 22,835,189.74 Prepaid Expenses 155,769 294,802 417,176 504,783.31 610,787.80 Total Current Assets 29,927,123 44,438,881 53,469,490 64,698,083 78,284,680
Intangibles, Net 282,697 218,025 629,765 779,846.94 990,098.38 Intangibles - Gross 810,944 816,205 1,364,383 1,650,903.57 1,997,593.31 Accumulated Intangible
Total Current Liabilities 20,407,345 26,940,445 31,455,645 38,061,330.79 40,123,567.00 Total Debt 3,022,122 942,639 19,647,690.82 23,773,705.89 28,766,184.13
Common Stock, Total 31,004,996 31,004,996 31,004,996 31,004,996 31,004,996 Common Stock 31,004,996 31,004,996 31,004,996 31,004,996 31,004,996
Other Equity, Total 3,834,495 8,241,171 24,056,464 35,987,941 30,312,198 Total Equity 34,867,393 45,808,341 61,893,835 75,249,306 71,296,596
Cost of equity using CAPM model
Country Default Spreads and Risk Premiums” that updated in January 2022
Market risk premium 7.8% According to Damodara http://pages.stern.nyu.edu/~ adamodar/New_Home_Pag e/datafile/ctryprem.html
Beta 1.80 Covanriance(VN- index,BSR)/Var (VN index)
Cost of equity 14.3% R = Rf + Beta*Market risk premium
Terminal growth rate 5.1% The World in 2050- PwC
Petrovietnam Technical Services Corporation Assumption
Financial Statement items forecast is based on their percentage to sales and 5 – year average basic Below is some other assumptions:
PTSC can fulfill all their projects and follow their plan
Politics events will only last in 2022: Zero Covid policy of China, Russia – Ukraine war, monkeypox
Freight will continue to anchor at high level
Revenue of PVS is expected to grow 30% in 2022, 20% in 2023 and 10% in
2024 because in half of 2022, it has already grown 38% when compares last year
Revenue 20,179,914 14,220,792 18,487,030 22,184,436 24,402,879 COGS 19,401,748 13,344,787 17,331,393 20,797,671 22,877,439 Gross Profit 778,166 876,005 1,155,637 1,386,764 1,525,440 SG&A 881,237 845,887 901,542 1,081,850 1,190,035
Income - Operating -503,496 -642,729 -900,772 -1,080,926 - 1,189,018 Interest Exp.(Inc.) -447,740 -597,109 -856,194 -1,027,433 - 1,130,176 Unusual Expense
Expense 19,859,443 13,618,950 17,619,740 21,143,688 23,258,057 Operating Income 320,471 601,842 867,290 1,040,748 1,144,822 Gain (Loss) on Sale of Assets 8,274 11,736 7,965 9,558 10,514
Income Taxes 314,633 138,045 328,368 394,042 433,446 Net Income After
Cash and Short Term Investments 8,522,940 8,423,979 8,582,936 9,033,875 9,363,409 Total Receivables, Net 5,539,067 4,500,393 5,610,334 6,732,400 7,405,640 Total Inventory 2,111,276 2,160,558 1,505,282 1,806,339 1,986,973 Prepaid Expenses 404,222 335,075 550,847 661,016 727,118 Other Current Assets, Total 25,614 25,614 73,258 87,909 96,700 Total Current Assets 16,603,118 15,445,618 16,322,657 18,321,539 19,579,840 Property/Plant/Equipment, Total - Net 3,349,543 3,152,030 3,952,213 4,702,655 4,952,921
Long Term Investments 5,139,367 4,908,477 6,098,141 7,347,769 7,917,546 Note Receivable - Long Term 91,432 152,282 85,866 103,040 113,344 Other Long Term Assets, Total 1,074,335 1,021,102 1,874,796 3,525,404 4,836,797 Total Assets 26,279,277 24,692,997 28,358,487 34,030,185 37,433,203
Accrued Expenses 6,177,991 4,293,157 4,677,337 5,612,804 6,174,085 Notes Payable/Short Term Debt 1,413,694 2,425,176 2,526,448 3,031,737 3,334,911 Current Port of LT Debt/Capital Leases 734,646 711,102 723,601 868,322 955,154 Other Current liabilities, Total 1,476,536 1,196,505 1,477,306 1,772,768 1,950,044 Total Current Liabilities 9,802,866 8,625,940 9,404,692 11,285,630 12,414,193
The financial data reveals significant trends in various categories over the years Deferred income tax liabilities have increased from 473,726 to 797,158, while minority interest has grown substantially from 1,208,371 to 1,752,311 Other liabilities have shown a steady rise, totaling 1,127,345, compared to 804,489 initially Total liabilities have escalated from 738,567 to 1,321,937, indicating a growing financial obligation Shareholders' equity has also seen a notable increase, rising from 2,314,079 to 3,863,583 Common stock has surged dramatically from 14,133,727 to 37,433,203, accompanied by a slight rise in additional paid-in capital, which reached 9,363,409 Retained earnings have improved from 5,539,067 to 7,405,640, while treasury stock has fluctuated, ending at 1,986,973 Additionally, unrealized gains have increased from 404,222 to 727,118, reflecting a positive financial outlook.
Total Equity 16,603,118 15,445,618 16,322,657 18,321,539 19,579,840 Total Liabilities & Shareholders' Equity 3,349,543 3,152,030 3,952,213 4,702,655 4,952,921
Cost of equity using CAPM model
Country Default Spreads and Risk Premiums” that updated in January 2022
Market risk premium 7.8% According to Damodara http://pages.stern.nyu.edu/~adamodar/Ne w_Home_Page/datafile/ctryprem.html
Beta 1.57 Covanriance(VN- index,PVS)/Var (VN index) Data from 8/7/2013 to 8/7/2022
R = Rf + Beta*Market risk premium
Terminal growth rate 5.1% The World in 2050- PwC
Vietnam National Petroleum Group Assumption
Financial Statement items forecast is based on their percentage to sales and 5 – year average basic Below is some other assumptions:
Oil price maintains high till the end of 2022
Russia – Ukraine war will only last in 2022
OPEC, OPEC+ will find the way to increase the global oil supply or another substitute energy (maybe solar)
All other items in income statement will be stated as a certain percent of revenue we stated that the revenue growth rate of PLX will be 70% in 2022 (half year of
2022, this number is 78%), 30% in 2023 and 20% in 2024
In the analyzed financial data, revenue has shown a consistent upward trend, increasing from 123,918,650 to 448,488,029 over the five-year period The cost of goods sold (COGS) also rose significantly, from 113,878,713 to 414,102,951, resulting in a gross profit growth from 10,039,937 to 34,385,077 Selling, general, and administrative expenses (SG&A) increased from 8,469,957 to 23,239,029, while depreciation expenses grew from 860,929 to 2,216,576 Interest expenses fluctuated, starting at 706,153 and ending at 1,942,537, with investment income reflecting negative values throughout the period Total operating expenses rose from 122,727,251 to 438,173,952, leading to earnings before interest and taxes (EBIT) increasing from 1,191,400 to 10,314,077 The gain on the sale of assets and other net income contributed positively, resulting in earnings before taxes (EBT) climbing from 1,409,581 to 10,910,029 After accounting for income tax provisions, net income after taxes increased from 1,252,572 to 8,993,852, with minority interest adjustments leading to a final net income growth from 988,465 to 7,959,122.
Cash and Short Term Investments 19,170,905 18,024,917 13,222,252 12,831,165 15,180,061 Total Receivables, Net 8,726,692 8,992,401 12,816,575 15,861,548 20,233,858 Total Inventory 9,399,531 13,160,650 15,295,957 18,384,745 18,661,694 Prepaid Expenses 477,709 598,013 1,019,265 1,325,045 1,590,054 Other Current Assets, Total 21,982 21,488 50,206 65,268 78,321 Total Current Assets 37,796,819 40,797,469 42,404,257 48,467,771 55,743,987 Property/Plant/Equipment, Total -
Intangibles, Net 2,182,250 2,259,861 3,506,298 4,558,187 5,469,824 Long Term Investments 4,302,827 5,411,959 5,615,807 7,300,549 8,760,659 Note Receivable - Long Term 30,924 26,880 93,479 121,522 145,827 Other Long Term Assets, Total 2,666,504 2,669,575 27,375,113 42,245,410 53,111,829 Total Assets 61,106,213 64,297,848 103,717,995 134,833,394 161,800,073 Liabilities (VND Millions)
Accounts Payable 11,909,925 15,937,061 24,327,608 31,625,890 37,951,068 Accrued Expenses 1,681,496 1,583,892 2,591,912 3,369,485 4,043,382 Notes Payable/Short Term Debt 14,411,869 0 22,228,273 28,896,754 34,676,105 Current Port of LT Debt/Capital
Other Current liabilities, Total 7,086,687 3,509,209 8,351,186 10,856,542 13,027,850 Total Current Liabilities 35,399,675 34,834,615 37,695,804 41,415,351 45,878,806 Total Long Term Debt 1,299,472 995,939 24,686,859 39,682,112 51,438,149
Minority Interest 2,963,504 3,206,224 4,936,676 6,417,679 7,701,215 Other Liabilities, Total 250,845 220,539 414,232 538,501 646,202 Total Liabilities 39,943,314 39,268,928 67,745,243 88,068,816 105,682,579 Shareholders Equity (VND
Common Stock, Total 12,938,781 12,938,781 22,784,648 29,620,043 35,544,052 Additional Paid-In Capital 4,988,376 7,359,059 3,956,869 5,143,930 6,172,715 Retained Earnings (Accumulated
Deficit) 2,760,573 3,391,071 7,888,977 10,255,670 12,306,804 Treasury Stock - Common (750,648) (232,858) - 2,378,434 - 3,091,965 - 3,710,357 Unrealized Gain (Loss) (1,294,726) (1,294,726) - 2,298,758 - 2,988,386 - 3,586,063 Other Equity, Total 2,520,543 2,867,593 6,019,454 7,825,290 9,390,348 Total Equity 21,162,899 25,028,920 35,972,755 46,764,582 56,117,498 Total Liabilities & Shareholders'
Cost of equity using CAPM model
Country Default Spreads and Risk Premiums” that updated in January 2022
Market risk premium 7.8% According to Damodara http://pages.stern.nyu.edu/~adamodar/ New_Home_Page/datafile/ctryprem.ht ml
Covanriance(VN- index,PLX)/Var (VN index)
Cost of equity 8.75% R = Rf + Beta*Market risk premium
Terminal growth rate 5.1% The World in 2050- PwC
Petrovietnam Chemical and Services Corporation Assumption
Financial Statement items forecast is based on their percentage to sales and 5 – year average basic Below is some other assumptions:
PVChems can operate exactly with their plan
The oil price will maintain at high level in this year
Oil price will be adjusted in the following years
With these assumption, we stated that revenue growth rate of PVC in 2022,
2023, 2024 is 20%, 15% and 10% These number maybe too high when compare with past CAGR But based on reality that in half of 2022, revenue of PVC has grown 28%
Total Operating Expense 2,146,615 2,747,889 3,291,554 3,785,287 4,163,815 Operating Income 32,090 28,422 40,019 46,022 50,625 Gain (Loss) on Sale of Assets 2,092 0 786 904 994
Provision for Income Taxes 11,644 10,468 12,521 14,399 15,839 Net Income After Taxes 20,885 24,117 27,651 31,798 34,978 Minority Interest (15,501) (17,122) - 18,656 - 21,455 - 23,600
Cash and Short Term Investments 443,676 431,405 310,189 240,310 141,379 Total Receivables, Net 820,562 901,096 975,283 1,012,575 1,063,833
Total Current Assets 1,451,121 1,607,285 1,600,057 1,601,158 1,602,312 Property/Plant/Equipment, Total - Net 163,829 144,002 479,291 862,093 1,155,264
Note Receivable - Long Term 3,047 2,929 125,245 126,032 126,635 Other Long Term Assets, Total 33,311 27,183 164,342 170,993 176,092 Total Assets 1,673,539 1,802,657 2,643,598 3,040,138 3,344,152
Accrued Expenses 201,276 239,426 304,377 350,034 385,037 Notes Payable/Short Term Debt 126,542 101,156 151,251 173,939 191,333 Current Port of LT Debt/Capital Leases 371,770 507,982 565,342 650,143 715,158 Other Current liabilities, Total 0 0 159,742 183,703 202,073 Total Current Liabilities 115,369 121,928 193,571 222,607 244,867 Total Long Term Debt 814,957 970,492 1,374,283 1,580,426 1,738,469
Additional Paid-In Capital 443,676 431,405 310,189 240,310 141,379 Retained Earnings (Accumulated Deficit) 820,562 901,096 975,283 1,012,575 1,063,833 Treasury Stock - Common 163,776 255,404 280,243 308,779 353,657 Unrealized Gain (Loss) 23,106 19,380 34,342 39,494 43,443
Total Equity 1,451,121 1,607,285 1,600,057 1,601,158 1,602,312 Total Liabilities & Shareholders' Equity 163,829 144,002 479,291 862,093 1,155,264
Cost of equity using CAPM model
Country Default Spreads and Risk Premiums” that updated in January 2022
Market risk premium 7.8% According to Damodara http://pages.stern.nyu.edu/~a damodar/New_Home_Page/ datafile/ctryprem.html
Beta 1.92 Covanriance(VN- index,PVC)/Var (VN index)
Cost of equity 13.04% R = Rf + Beta*Market risk premium
Terminal growth rate 5.1% The World in 2050- PwC