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PVS [BUY +24.9%] - Potential day rate cut partially offset by termination payment - Update

We lower our target price for PVS by 1% as lower profit from FPSO Lam Son outweighs 90 bps reduction in WACC, but we upgrade to BUY rating on the recent share price drop. Lam Son JOC, a 50:50 JV of PVEP and Petronas Vietnam terminated its contract to lease FPSO Lam Son to PTSC Asia Pacific, a 49:51 JV of Yinson and PVS. We expect PetroVietnam to redeploy FPSO Lam Son but at a lower day rate.