PGAS Apr2020

PGAS

Contact our analyst Eka

BUY
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.

2019FY Result: Lower than expected

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.

Valuation: Maintain BUY with TP 1,630

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.