PGAS
Contact our analyst Eka
BUY
2nd April 2020
Price Rp 735
Target price Rp1,630
2nd April 2020
Price Rp 735
Target price Rp1,630
Lower Feb Volume and Price
- On March 18, 2020 the government decided to reduce the average gate gas price to US$6/mmbtu starting April 1, 2020. Inline with that, the upstream gas price should be reduced to between US$4-US$4.5/mmbtu, transportation and distribution costs to US$1.5-US$2/mmbtu.
- PGAS’s consolidated distribution volume slightly decreased -1.4% MoM to 876 BBTUD in February. Both PGAS and Pertagas recorded declines because distribution volumes was affected by the Covid-19 outbreak.
- Gas transportation consolidated volume in February was 1,374 MMSCFD, +3.6% MoM. PGAS only transmission volumes declined 33% MoM to 9 BBTUD while Pertagas transmission volume rose +1.6% to 1,366 MMSCFD.
- Upstream lifting increased +1.4% MoM to 20,811 BOEPD.
- We expect the COVID-19 outbreak will result in lower PGAS sales volume especially in 1Q2020.
- Despite volume growth +3% YoY in 2019, PGAS’s revenue decreased slightly -0.56% YoY to US$ 3.37 billion (bn). The result was just 2,7% lower than our forecast. Most of the revenue, 77%, came from Gas distribution at US$ 2.97, up +6,5% YoY.
- Gross profit decreased by -6.27% YoY to US$1.22 bn. Operating income decreased by 15.3% YoY to US$ 546 mn.
- Profit before tax decreased by -52,2% YoY inline with higher other expenses, i.e: (i) higher interest expense of US$ 6.8 mn; (ii.) a forex loss of US$18.4 mn; (iii.) lower interest income of US$28.8 mn from PT Saka Energi Indonesia and PT Kalimantan Java; and (iv.) lower derivative interest income of US$4.5 mn.
- PGAS recorded net income of US$67.6 mn, down -78% YoY from US$ 305 mn in 2018.
- PGAS price is at the lowest level since 2006, but we remain confident in the company fundamental and recommended to Buy.
- A DCF valuation with WACC at 11.7%, gives a target price of IDR 1,630 or 128% upside which is a 19x PE valuation within one year. BUY.
