by LE MY - TRUONG DANG 10/07/2024, 02:38

A shock for TV2

Power Engineering Consulting JSC No. 2 (HoSE: TV2) is deeply expected by stock investors as it bids for the $2.42 billion Song Hau 2 thermal power project.

However, the story did not have the predicted happy conclusion, leading TV2 shares to lose momentum as a "super stock."

The Sad Ending

The Song Hau 2 thermal power project is one of the significant projects in the power sector. For comparison, one of the largest projects in the power industry is the Nhon Trach 3 and Nhon Trach 4 power plant project - the first LNG-fueled project in Vietnam, with a capacity of 1,500MW and a total investment of $1.4 billion.

TV2 shares lose their momentum to become a "super stock

Meanwhile, TV2 and Sunway Construction (Malaysia) have inked an agreement for the Song Hau 2 thermal power project, which includes a 2,012MW development package valued at around $2.42 billion. TV2's contract value alone in this partnership is expected to be over 45%, or roughly $1 billion. As a result, this initiative was intended to serve as a springboard for TV2, generating significant income and sustaining high growth for several years, at least until 2028.

However, due to Ink Group Berhad - the project's investor, failing to arrange financing, there was a delay in fulfilling financial obligations and compensation costs for resettlement. Recently, the Ministry of Industry and Trade issued a document notifying Song Hau 2 Power Co., Ltd. about the termination of the project's BOT contract. As a result, all expectations of contributing thousands of billions of dong to TV2's revenue have "gone down the drain."

Excluding the Song Hau 2 thermal power project, the "portfolio" of projects expected to contribute revenue to TV2 from now until 2025 will only have a few left. These include projects where TV2 not only contributes investment capital but also provides services, officially starting in 2022, such as the 20MW biomass power plant project in Hau Giang (total investment of VND 875 billion, TV2 as the EPC general contractor, providing O&M services) and the Thac Ba 2 hydropower project with a capacity of 18.9MW (total investment of VND 709 billion, TV2 providing project management and construction supervision services). According to VCBS's assessment, these contracts will help increase TV2's service revenue growth in the 2023-2025 period. However, it should be noted that the contribution will not be significant compared to the expectations that the Song Hau 2 thermal power project promised to bring.

Losing "Super Stock" Momentum

From 2023 to the first half of 2024, TV2 stock did not have the time and conditions to unleash the momentum from project expectations to become a "super stock." However, TV2 surged sharply from May 2024 until now, with an increase of 50% from the bottom. The upward trend showed no signs of stopping as liquidity remained abundant until the "shock" of the project's termination.

The stock market saw TV2 shares build up but no purchasers after the Ministry of Industry and Trade issued document 4579/BCT-ĐL to end the project on July 1, 2024. TV2 stock peaked on June 10, 2024, at VND 53,100/share, after many sessions of significant selling, leaving millions of shares in excess. TV2's market price fell to VND 40,450 per share at the conclusion of trade on July 5.

According to the book value, TV2 shares are currently at VND 19,920/share. Many investors worry that without new drivers, TV2 could potentially be driven straight down to the lowest price level in more than three years, around VND 20,000/share.

However, it must also be noted that besides the projects where TV2 plays the role of EPC contractor (including the now-terminated Song Hau 2 project), TV2 has many other business segments that can generate revenue, and these segments also have advantages. For example, TV2's operation management segment is forecast to have good profit margins and continue to grow with a series of new power plants coming into operation as Power Plan VIII is approved.

TV2 has also benefited from Power Plan VIII, making major investments in power sources and the grid. It now provides full services ranging from design, consultation, and EPC general contracting to power plant operation for nearly all forms of power sources. As a result, TV2 might face a significant burden.

In 2024, TV2 expects overall revenue of about VND 1,272 billion, a 16% rise over the previous year, while pre-tax profit is predicted to remain flat year on year, hitting VND 66 billion - excluding projections from the Song Hau 2 project. According to TV2's declaration at the Annual General Meeting of Shareholders, the predicted income for the first half of 2024 surpasses VND 400 billion, with full-year results expected to exceed expectations.

Mr. Nguyen Chon Hung, Chairman of the Board of Directors of TV2, also stated that besides the Song Hau 2 project, TV2 will pursue many different projects and fields related to bidding and foreign partners, not just targeting projects within Power Plan VIII.

Therefore, placing trust in a single project to invest in stocks could very well lead investors to "taste bitterness." On the contrary, a cautious and thorough evaluation of value and business prospects will help avoid unpredictable shocks from companies with "stories," as well as unexpected market impacts.