Power sector tickers prove alluring

The power demand in Vietnam is forecast to grow by 10 per cent per annum during 2018-2020

According to Le The Son, chief accountant of Pha Lai Thermal Power JSC (ticker PPC), the company’s after-tax profit in the fourth quarter is expected to surpass VND100 billion ($4.4 million), driving its full-year profit to approximately VND1 trillion ($43.5 million), a sharp jump compared to one year ago and more than 50 per cent higher than the projected target.

In the first three quarters of this year, PPC raked in VND5.277 trillion ($229.4 million) in revenue and VND878.5 billion ($38.2 million) in after-tax profit, up 14 and 18 per cent on-year, respectively.

By the end of the third quarter of 2018, PPC reported nearly VND1.8 trillion ($78.3 million) in undistributed profit and VND729 billion ($31.7 million) in its investment development fund.

In the group of hydropower production firms, Thac Mo Hydro Power JSC (TMP) emerged as one of the top players after reaching its full-year profit target in the first half of the year.

In the first three quarters, the company reaped VND626.8 billion ($27.2 million) in net revenue and nearly VND320 billion ($14 million) in after-tax profit, up 16 and 31 per cent on-year, respectively. The company has surpassed its full-year profit target by more than 50 per cent.

Similarly, Thac Ba Hydropower JSC (TBC)’s after-tax profit reached VND190.4 billion ($8.3 million), a 15.7 per cent jump against its full-year profit target by the end of the third quarter.

Vinh Son JSC (VSH) posted VND279 billion ($12.1 million) in after-tax profit in the first nine months of this year, a 20 per cent jump on-year, and 1 per cent more than its full-year profit target.

As weather conditions appear favourable in the last quarter, the company hopes it can surpass the full-year profit target by at least 15 per cent.

Power Engineering Consulting JSC (TV2) is also regarded as one of the top performers in the power sector and the Vietnamese stock market alike, as its annual earnings-per-share (EPS) ratio often surpasses VND10,000 ($0.43). Its EPS in the first nine months of this year has exceeded VND13,000 ($0.57).

By virtue of its excellent performance, the company’s ticker closed at VND111,000 ($4.8) on the November 28 trading session, up nearly 70 per cent compared to early 2018.

The Ministry of Industry and Trade (MoIT) has approved the piloting of the Vietnam Wholesale Electricity Market (VWEM) from 2016.

VWEM will begin official operation from 2019, marking a leap in the Vietnamese power sector’s liberalisation process.

According to VNDirect Securities JSC, power demand in Vietnam could grow by 10 per cent per annum in 2018-2020, while not many power plants will be put into operation during the period.

Therefore, the power contribution of hydropower plants is expected to be further increased in the coming years to meet the constantly growing power demand.

VNDirect’s statistics show that the price-per-earnings (P/E) ratio of hydropower production firms’ tickers averaged at 9.2x, much lower than the market average of 15.9x. Meanwhile, their price-to-book ratio (P/B) averages at 1.4x compared to the market average of 2.5x.

Besides, the average dividend ratio of hydropower production firms stands at 8.3 per cent, much higher than the market average of 2.1 per cent.

As the profit growth of firms in diverse business segments tends to be slowing down, power sector tickers, with their rosy growth perspective, proves noteworthy business opportunities to investors.