PVD_BUY_TP 29550_Upside 17__Seize The Opportunity_BSC Company Update

Valuation

§  We recommend BUY for PVD with a 2021 target price of VND29,550/share, +17% from the March 5, 2021 price based on the EV/EBITDA method with a forward coefficient of 13.5x.

Forecast of business results

§  BSC forecasts that revenue and net profit in 2021 will be VND 5,034 billion (-4% yoy) and VND 212 billion (+17% YoY), 2021 FW EPS= 325 VND/share assuming (1) operating efficiency The operating price of the jack-up rig improved from 77% (2020) to 87%, and (2) The day rates of the jack-up rig remained at USD 61 thousand/day.

Investment Thesis

§  Jack-up rigs have many job opportunities in 2021 thanks to many new domestic drilling programs expected to be implemented, thereby improving the operational efficiency.

§  TAD drilling rig signed a long-term contract, bringing secure jobs for PVD in the period of 2021 - 2026 and helping to improve PVD's revenue, profit and cash flow.

Risks

§  Operators terminate drilling contracts earlier than expected.

§  PVD unsuccessfully bid for PVD II rig in 2021, making the average performance of jack-up rigs lower than expected.

Company Update

§  PVD's revenue and net profit in 2020 will reach VND 5,227 billion (+20% yoy) and VND 181 billion (+5% yoy), respectively, due to (1) the number of leased rigs reached 1.7 rigs (compared to 0.3 rigs in 2019), (2) Estimated day rates of the jack-up rig +4.4% yoy, (3) Profit from joint ventures and associates is VND 217 billion (+96% yoy), and (4) a reversal of 107 billion provision for bad debts during the year.

§  Up to now, 5/6 rigs owned by PVD have secured jobs in 2021.