PV POWER NT2 JOINT STOCK COMPANY (NT2: HOSE) NT2 HOLD. BUSINESS RESULT UPDATE April 6th 2016 NT2: BENEFICIAL FROM LOW OIL & GAS PRICE AND EL NINO

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1 PV POWER NT2 JOINT STOCK COMPANY (NT2: HOSE) BUSINESS RESULT UPDATE April 6th 2016 HOSE Price (VND) 33,300 Average trading volume 10 days NT2 HOLD Market Cap (billion VND) 9,203 Shares outstanding 273,919,843 INFORMATION (06/04/2016) NT2: BENEFICIAL FROM LOW OIL & GAS PRICE AND EL NINO Ending the fiscal year of 2015, revenue reached 6,729 billion VND (-5% yoy, 114% of the target); net income reached 1,142 billion VND (-28% yoy, 182% of the target). The significant rise in profits came from (1) a spread on the exchange rate was worth VND 404 bn and (2) VND 658 bn from the retroactive revenue. Excluding (1) & (2), the actual revenue increased by 5% and profit after tax increased by 22% compared to In addition, the market price of NT2 rose 48.6% in 2015 and 26.3% from the beginning of Outlook for 2016: Thermal power plant will be beneficial from (1) low oil & gas price expextation which will reduce production costs and (2) a negative outlook for hydro power plant because of El Nino. NT2 is expected to receive VND 160 bn from the retroactive revenue in Risk: the outstanding balance from the foreign exchange loans is about USD 124 million and EUR 113 million.consequently, NT2 is exposed to exchange rate risk Conclusion: Forecasted 2016 revenue is 6,840 billion VND (+1.6% yoy); net income is 1,195 billion VND (+5% yoy) EPS forward is 4,290 VND/share, P/E is 7.8. Implementing comparable company analysis (PE and EV/EBITDA), the reasonable share price for NT2 is 35,891 VND/share. Based on the good performance as well as positive 2016 outlook, we recommend HOLD for NT2 stock Financial ratios F ANALYST Truong Anh Quoc taquoc@vcbs.com.vn (+84) Revenue (billion VND) 5,881 7,065 6,729 6,840 +/- yoy (%) 8% 20% -5% 2% Net income ( billion VND ) 8 1,591 1,142 1,195 +/- yoy (%) 7% 19% -28% 5% Equity ( billion VND ) 2,560 2,560 2,739 2,739 Debt/Total assets (%) 69% 55% 50% 45% Gross profit margin (%) 14% 23% 24% 27% ROA TTM (%) 0.1% 13% 10% 11% VCBS REPORT VCBS Bloomberg Page: <VCBS><go> ROE TTM (%) 0.3% 37% 24% 22% EPS - TTM (VND) 0 5,735 4,095 4,290 P/E (VCBS, NT2) VCBS Research Department Page 0

2 2015 BUSINESS RESULT Ending the fiscal year of 2015, revenue reached VND 6,729 bn (-5% yoy, 114% of the target), profit after tax reached VND 1,142 bn (-28% yoy, 182% of the target). The significant rise in profits came from (1) a spread on the exchange rate was worth VND 404 bn and (2) VND 658 bn from the retroactive revenue. Excluding (1) & (2), the actual revenue increased by 5% and profit after tax increased by 22% compared to In 2015, NT2 generated 5.5 billion kwh (+14% yoy); the accumulated capacity until the end of 2015 was 21.3 billion kwh. NT2 s net profit margin was high in 2015 thanks to (1) low oil price which reduces production costs by 12%, (2) 30% of generated electricity was sold in the Competitive Generation Market (CGM) with higher price and (3) the slowdown of hydro power plants operation due to the severe el Nino. Revenue/Net income (billion VND) Capacity (MW) / Electricity price (VND) , , ,30 1,25 1,20 1, , ,05 Revenue Net income Capacity Electricity price (NT2) The gas turbine and combined cycle power plant which were imported from Germany helped NT2 become the most efficient thermal power plant in Vietnam.NT2 was located close to the economic zone of the South, which was very advantageous since the cost of input gas delivery and power transmission could be significantly reduced. Also, NT2 is located near the river which is convenient for both equipment transportation as well as water cooling solution. VCBS Research Department Page 1

3 FINANCIAL HEALTH Profitability ratios 2014 net income was high because of (1) 404 billion VND of earnings came from the spread of foreign exchange and (2) 658 billion VND from retroactive revenue. In the period of , ROE was low due to high depreciation when the power plant just started, ROE inceresed in 2014 and decreased in 2015 (24%) due to the lower net income.also, assets turnover increased from 40% to 58% in the last four years which indicated capital efficiency. The company also put aside 11.4 billion VND for long term investment provision in Sopewaco; this company has recorded a loss of 310 billion VND currently. 40% 35% Profitability ratio 70% 60% Revenue/Total assets 30% 50% 25% 20% 15% 10% 5% ROA ROE 40% 30% 20% 10% 0% 0% (NT2) Debt ratio and liquidity As usual, a logistics company requires a great amount of capital investment in machinery/equipment, NT2 s Debt/Total assets ratio is roughly 50% and tend to gradually decrease year over year. Currently, NT2 s short term debt is around 1,000 billion VND, and long term debt is around 4,800 billion VND. Whereas, 5,538 billion VND is borrowed from HERMES, CIRR, NEXI and Citibank according to the credit contract signed on July Accordingly, NT2 borrowed 215 million USD and 203 million USD in 9.5 years, interest rates were based on Euribor and Libor which is around 2.8%/year - 3.6%/year. The total outstanding loans at 31 st December 2016 is $124 million and 113 million. In case VND depreciate against USD, NT2 will lose around 25 billion VND for every 1% depreciation of VND. Whereas, thanks to the economic stimulus program of Europe, EUR/VND exchange rate might not have significant fluctuation this year, and therefore the foreign exchange risk of Euro loans can be mitigated. As estimated, every year, the company has to pay roughly 1,200 billion VND including the loan pricipal (1,000 billion VND) and interest expense (200 billion VND). With the strong cash flow from operation activities, NT2 is able to pay off its loan obligation. Without any unexpected events, the outstanding loans may decrease around 1,000 billion VND/year, and the loan will be completely paid VCBS Research Department Page 2

4 off in 5 years. It is expected that 2016 principal and interest will decrease by 10% compared to VCBS assumes that the Debt/Total assets ratio will not increase in the near future because NT2 has no investment plan. Debt/Total assets 80% 70% 60% Foreign currency debt 5% Cash flow from operation/loan principal and interest 50% % 48% 47% % % 10% 0% VND USD EUR 0 Cash flow from operation Loan principal and interest (NT2) Cash flow from operation NT2 has a stable cash flow from operation in the period In general, the company has strong financial health, stable cash flow as well as ability to pay off due debts Cash flow from operation/net income Cash flow from operation Net income (NT2) VCBS Research Department Page 3

5 MW NT BUSINESS RESULT UPDATE 2016 OUTLOOK In 2016, NT2 is expected to have significant growth due to: 1. El Niño in 2016 caused severe drought in many areas. Several hydro power plants had to cease their operations in order to save water for the coming dry season. As a result, power shortage from hydro power plant will lead to higher capacity from thermal power plants. 2. Vietnam economy is on the recovery process, recently signed free trade agreements such as FTA/PPT is the catalyst for GDP growth forecast of 6.8% - 7%. Accordingly, the electricity demand is expected to grow by 12% - 15%. Inadditon, in 2016, NT2 has the opportunity to sell electricity directly to households and factories according to the liberalization program from EVN. 3. The power plant is located close to the economic zone in the South, which is convenient and economical for input gas delivery as well as power transmission 4. Input gas price decreased from $6/million BTU to $4/million BTU in In 2016, oil & gas price is expected to be low which helps reduce production costs. Since August 2015, NT2 s gas price contracts will be based on FO oil in Singapore (46% of FO oil price in Singapore). 5. Several thermal power plant projects have been delayed or newly operated which leads to power shortage across the country, especially in the dry season starting this May. Based on last year capacity/revenue as well as other growth forecast, NT2 is expected to generate 5,562 billion kwh (+1.1% yoy), targeting 6,840 billion VND in revenue (+1.6% yoy), and 1,195 billion VND in net income (+5% yoy). Although it is hard for the capacity to have a significant growth, net profit margin is expected to increase due to low oil & gas price. In 2016, NT2 and the Ministry of Industry & Commerce will consider the new pricing policy so that power plant can transfer 100% of the foreign exchange profit/loss to the electricity price. In this case, NT2 will no longer be exposed to the exchange rate risk. Inaddition, the company is expected to receive 160 billion VND from retroactive revenue in Capacity (MW)/Revenue (million VND) Capacity Revenue (Nguồn NT2) VCBS Research Department Page 4

6 2016 activities NT2 plans to issue 3 million ESOP shares for employees - 1.1% of the chartered capital. With 274 million shares outstanding in the market, the risk of diluted EPS after the share issuance is not significant. In addition, although the company confirmed that minimum dividend yield in 2016 will be 20%, we expect that the actual dividend yield will not be lower than 22%. NT2 continues to complete the procedures for the project Nhon Trach 2 expansion which has the capacity of 750MW-800MW. The power plant is planned to be built on a 20,000 ha land with the total investment of around $900 million. When completed, the power plant is expected to generate roughly 5 billion kwh and consume about 840 million m3 of gas per year. The Board of Directors continues evaluating the project Extracting CO2 from power plant exhaust. Accordingly, NT2 will extract CO2 from the exhaust during electricity generation process. The project compromises to generate economic efficiency and reduce CO2 pollution one of the most important factors that foreign investors will consider before making investment. Currently, Vietnam still imports CO2 from China with high costs. Exhaust from NT2 is advantageous for extracting CO2 because of (1) high CO2 content 5% and (2) higher purity compared to exhaust from coal-power-plant. The company will consider the Misting-cooling-system project in order to add 40 MW to the current capacity. The project is expected to upgrade the power plant capacity with lowest costs around $ /MW (construction expenditure for a new power plant is around $1 million/mw). PRICING METHOD Comparable company analysis Implementing comparable company analysis (PE and EV/EBITDA), the reasonable share price for NT2 is 35,891 VND/share. Company Price (VND/share) Shares outstanding (million) Market Cap (billion VND) EV/EBITDA PE PPC 18, , NBP 19, BTP 16, , NT2 33, , TMP 27, , Average (VCBS) VCBS Research Department Page 5

7 Reasonable share price for NT2: Method Price (VND/share) Weight PE analysis 28,499 25% EV/EBITDA analysis 38,355 75% Reasonable price 35,891 (VCBS) CONCLUSION Recommendation: Hold NT2 is expected to growrapidly in 2016 due to (1) a negative outlook for hydro power plant because of drought and (2) low oil & gas price which will reduce production costs. Also, it is expected that NT2 will receive 160 billion VND in 2016 from retroactive revenue. Currently, NT2 is exposed to the exchange rate risk with outstanding loans of $124 million and 113 million. In case VND depreciates against USD, NT2 will lose around 25 billion VND for every 1% depreciation of VND against USD. Based on last year capacity/revenue as well as other growth forecast, 2016 revenue is expected to reach 6,840 billion VND (+1.6% yoy), net income is 1,195 billion VND (+5% yoy). EPS forward is 4,290 VND/share, P/E is 7.8. Implementing comparable company analysis (PE and EV/EBITDA), the reasonable share price for NT2 is 35,891 VND/share. We recommend HOLD for NT2 stock. APPENDIX VCBS Research Department Page 6

8 Income statement F 2017F 2018F 2019F 2020F Revenue 6,729 6,840 6,856 7,341 7,461 7,583 Cost of goods sold 5,088 4,985 5,082 5,551 5,841 5,984 Gross profit 1,642 1,856 1,774 1,790 1,620 1,600 General & Admin expenses Operating income 1,495 1,650 1,568 1,570 1,396 1,372 Financial income/expense EBIT 1,385 1,419 1,487 1,486 1,313 1,289 Interest expense EBT 1,142 1,195 1,287 1,314 1,147 1,152 Income tax expenses Net income 1,142 1,195 1,287 1,314 1,147 1,152 Attributable to parent company 1,142 1,195 1,287 1,314 1,147 1,152 Balance sheet F 2017F 2018F 2019F 2020F Cash and cash equivalent 1,109 1,311 1,971 2,406 2,886 3,710 Account receivables 1,464 1,612 1,615 1,730 1,758 1,787 Inventories Other current assets (27) (25) (29) (27) (27) (28) Current assets 2,981 3,334 4,003 4,595 5,128 5,993 Tangible fixed assets 7,624 6,682 6,387 6,243 6,150 6,348 Other fixed assets Non-current assets 8,664 7,867 7,522 7,433 7,335 7,546 Total assets 11,645 11,201 11,525 12,028 12,462 13,539 Account payables Short term debt 1,054 1,091 1,102 1,102 1,102 1,102 Payables to employees Other payables Current liabilities 2,023 1,700 1,711 1,755 1,765 1,776 Long term debt 4,812 3,938 2,826 1, Long term provision Non-current liabilities 4,853 3,949 2,837 1, Liabilities 6,876 5,648 4,548 3,490 2,400 1,788 Capital 2,739 2,739 3,287 3,944 4,733 5,680 Undistributed earnings 1,950 2,734 3,610 4,513 5,249 5,991 Owner s equity 4,768 5,553 6,976 8,537 10,063 11,751 Total resources 11,645 11,201 11,525 12,028 12,462 13,539 (VCBS, NT2) VCBS Research Department Page 7

9 NT BUSINESS DISCLAIMER RESULT UPDATE DISCLAIMER This report is designed to provide updated information on the fixed-income, including bonds, interest rates, some other related. The VCBS analysts exert their best efforts to obtain the most accurate and timely information available from various sources, including information pertaining to market prices, yields and rates. All information stated in the report has been collected and assessed as carefully as possible. It must be stressed that all opinions, judgments, estimations and projections in this report represent independent views of the analyst at the date of publication. Therefore, this report should be best considered a reference and indicative only. It is not an offer or advice to buy or sell or any actions related to any assets. VCBS and/or Departments of VCBS as well as any affiliate of VCBS or affiliate that VCBS belongs to or is related to (thereafter, VCBS), provide no warranty or undertaking of any kind in respect to the information and materials found on, or linked to the report and no obligation to update the information after the report was released. VCBS does not bear any responsibility for the accuracy of the material posted or the information contained therein, or for any consequences arising from its use, and does not invite or accept reliance being placed on any materials or information so provided. This report may not be copied, reproduced, published or redistributed for any purpose without the written permission of an authorized representative of VCBS. Please cite sources when quoting. Copyright 2012 Vietcombank Securities Company. All rights reserved. CONTACT INFORMATION Tran Anh Tuan, CFA Head of Research tatuan@vcbs.com.vn Truong Anh Quoc EquityAnalyst taquoc@vcbs.com.vn (+84) VIETCOMBANK SECURITIES COMPANY Ha Noi Headquarter Ho Chi Minh Branch Da Nang Branch Phu My Hung Transaction Unit Giang Vo Transaction Unit Can Tho Representative Office Vung Tau Representative Office An Giang Representative Office Dong Nai Representative Office Hai Phong Representative Office Binh Duong Representative Office Floor 12th & 17th, Vietcombank Tower, 198 Tran Quang Khai Street, Hoan Kiem District, Hanoi Tel: (84-4) ext: 140/143/144/149/150/151 Floor 1 st and 7 th, Green Star Building, 70 Pham Ngoc Thach Street, Ward 6, District No. 3, Ho Chi Minh City Tel: (84-8) Floor 12 th, 135 Nguyen Van Linh Street, Thanh Khe District, Da Nang City Tel: (84-511) ext: 801/802 Lawrence Sting Building, 801 Nguyen Luong Bang Street, Phu My Hung Urban Zone, District No. 7, Ho Chi Minh City Tel: (84-8) Floor 1 st, Building C4 Giang Vo, Giang Vo Ward, Ba Dinh District, Hanoi Tel: (84-4) Floor 1 st, Vietcombank Can Tho Building, 7 Hoa Binh Avenue, Ninh Kieu District, Can Tho City Tel: (84-710) Floor 1st, 27 Le Loi Street, Vung Tau City, Ba Ria - Vung Tau Province Tel: (84-64) /75/76/77/78 Floor 6 th, Nguyen Hue Building, 9/9 Tran Hung Dao Street, My Xuyen Ward, Long Xuyen City, An Giang Province Tel: (84-76) F240-F241 Vo Thi Sau Street, 7 th Block, Thong Nhat Ward, Bien Hoa City, Dong Nai Province Tel: (84-61) Floor 2 nd, 11 Hoang Dieu Street, Minh Khai Ward, Hong Bang District, Hai Phong City Tel: (+84-31) Binh Duong Route Phu Hoa Ward Thu Dau Mot City - Binh Duong Province Tel: ( ) VCBS Research Department Page 8