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PGS - CNG divestment improves PGS’s financial capability

​In Q12016, PGS achieved a record profit after tax with VND 184.6 billion (+452% yoy) thanks to the completion in CNG Vietnam divestment. However, revenue and profit after tax of parent company (excluding financial profit) in Q1/2016 significantly deteriorated with -12.7% yoy and -50.3% yoy, equivalent to VND 842 billion and VND 21 billion. The decline in core business activities resulted from low crude oil prices in Q12016 with the bottom of 10 years. Therefore, average selling price of gas dropped by 7.6% in 2016, negatively affected revenue and gross profit.

With extra ordination gain from CNG divestment, PGS improved its financial capability to enhance profitability and business efficiency through M&A deals with other LPG companies. We believe this is the most suitable strategy for PGS in order to expanse business activities.

According to the Company, dividend for 2016 will reach 30%, equivalent to dividend yield of 15%. PGS has gone through the process to make the advance payment with 15% for 2016 and 6% for 2015 in Q22016. The remaining 15% is expected to be an attractive factor and could be paid out at the end of this year.

LPG prospects has demonstrated no significant improvement while CNG segment has only one additional major customer (Samsung CE). Consequently, we believe that growth prospects of PGS’s business results will maintain at low level. The appropriate price for PGS stock is forecasted at VND 20,600/share based on FCFE and P/E valuation method. RongViet Research recommends to ACCUMULATE in INTERMEDIATE