PV GAS - The enterprise reaching highest profit on Vietnam's stock exchange
With the leading position and decisive role in national gas industry, PetroVietnam Gas Joint Stock Company – PV GAS is one of « hot » trademarks on the stock market, attracting interest of domestic and overseas investors.
Recently, there has been some multi-dimensional information on results achieved by PV GAS as well as its development orientation in the future. Some prestigious newspapers in the country had an interview with PV GAS President & CEO – Mr. Do Khang Ninh to answer the issues. Below is the interview content:
Since equitization, PV GAS has achieved positive business results, bringing GAS' position to the top on the exchange stock. However, some opinions said that PV GAS has achieved profits by proprietary trading, buying low and selling high. Could you please explain more about reasons of high growth of PV GAS' profits in recent times?
Gas trading activities of PV Gas include the supply from 3 main systems: Cuu Long, Nam Con Son and PM3 - Ca Mau. Each source has different input gas price.
In particular, output sold to electricity, fertilizer sectors accounts for 95% of total consumption. For these customers, gas prices are approved and defined by the Government according to cost pass through rule: selling price = buying price+ transportation and distribution fees.
PV GAS only receives transportation and distribution fees (approved by the Government) and earns profits from transportation fees, absolutely not from difference between buying low and selling high.
The 5% of remaining gas output is to develop the customer market including industry and traffic & transport sectors, aiming at minimizing environmental pollution, with the gas prices are approved by PVN in compliance with the principle of competing with alternative fuels and increase according to the roadmap to approach world gas prices. In the future, to solve the problem of gas shortage in the country, PV GAS is implementing the project of importing liquefied natural gas (LNG). LNG has high price (03 times higher than present gas price sold to electricity, fertilizer sectors). Therefore, industrial clients are main customers of PV GAS in consuming imported LNG.
In addition, PV GAS' profits also arise from deep processing of gas products to create products with higher value (LPG, Condensate) and other service activities. In order to create products with higher value, PV GAS has invested in infrastructure system including: Processing plants, storage and distribution systems with value of hundreds of millions of US dollars and huge operating and maintenance cost for safe operation system.
Regarding to reporter's question, recent public opinion said that: PV GAS’s profits obtained are from advantages of trading resources by buying low and selling high. I would like to reaffirm that this information is not correct, and affects PV GAS' reputation.
Relating to equitization of PV GAS, some recent information said that the Government has not agreed to sell State capital at PV GAS and intended not to continue equitizating PV GAS. Please tell more information on this issue.
At present, State capital ratio at PV GAS is about 97%. According to the Decision of the Prime Minister on equitization of PV GAS, State capital ratio at PV GAS may be reduced to 75%.
In the meeting conclusion number 384/2013/TB – VPCP on 28/10/2013, the Prime Minister concluded that capital contribution ratio at PV GAS is temporarily kept unchanged at 97% until gas price mechanism was approved. At the 2013 summary meeting of PVN, the Prime Minister agreed to sell 20% after price mechanism was approved.
After 2 years of equitization, PV Gas trademark has become stronger and stronger domestically and overseas, maintaining its position as one of the leading trademarks of the Vietnam National Oil and Gas Group as well as on the stock exchange in terms of profits; significantly contributing to the National budget, together with the Vietnam National Oil and Gas Group helping stabilize macroeconomy of the country. Forbes Magazine has just published 2013 Global 2000 list, in which PV GAS is ranked as one of 2 Vietnamese enterprises in the group of largest public companies in the world, with evaluation criteria based on revenues, profits, assets and market value.
So, equitization process of PV GAS is taking place well and promises to offer much profit to shareholders as well as enterprises.
Could you please tell more about benefits from selling a part of State capital at PV GAS?
Comparing to economic benefits from selling capital, it is obvious that if 20% of State capital at PV GAS is sold and invested in projects, the earning is much greater than dividends from the whole share keeping intact.
Equitization is the advanced model in the world to approach to the market economy; a good capital mobilization channel that is transparent in management, and we can learn technology transfer experience from strategic shareholders...Especially, equitization is more necessary in the present situation of limited state budget.
Since equitization, value of PV GAS has increased from 700 million USD up to nearly 10 billion USD, total value of assets has increased by many times. In fact, PV GAS' shareholders have maximum dividends of 40%/year, while share price is over 100,000 VND/share at present. Accordingly, real value of dividend received by shareholder is only about 4%/year, lower than bank interest rates. Therefore, saying that great profits belonging to shareholders who are organizations, individuals outside the State is not correct.
Some countries in the region such as Malaysia, Thailand, Indonesia..., also have model of gas business operation company similar to PV GAS, in which the State capital only accounts for 50 - 60% of charter capital.
Relating to profit regulation, it is said that reducing capital will lead to difficulty in regulating profits for the State. However, according to the Government's regulation in the Decree No. 71/2013/NĐ – CP, 70% of PVN's profits from dividend payout of PV GAS will be transferred to the State budget. Thus, profit distribution is hardly affected.
Could you please provide some information on business situation of PV GAS in the last 6 months of 2014 and elements affecting business results of PV GAS in the future. What is PV GAS long-term strategy?
During the first 6 months of 2014, PV GAS has operated stably aiming at desired achievements, as reported in the last regular General Meeting of Shareholders. Based on that, and also according to objective forecasts, business activities in the last 6 months and the whole year 2014 will achieve good results. Pre-tax profits are expected to reach over 7,000 billion VND.
Recently, PV GAS has agreed with Vietnam Electricity Group (EVN) on value of final settlement of Nam Con Son gas over Annual Take or Pay volume norm from 2009 to 2013 as the basis to sign additional contracts and record increasing revenues for PV GAS.
In the long term, PV GAS will promote activities of seeking investment in new gas resources, even from abroad; boost LNG import in order not to depend on domestic gas resources.
How do you evaluate GAS in the future?
PV GAS continues to maintain the position as the third largest member company of Vietnam National Oil and Gas Group, recording highest profit on Vietnam’s stock exchange.
Comparing to leading stocks in the market, GAS has many advantages and potential of high growth. If liquidity is at high level, GAS price has many opportunities to increase even higher.
Thank you for this interview today!