PGAS
Contact our analyst Eka
Hold
21st April 2021
Price Rp 1200
Target price Rp 1375
21st April 2021
Price Rp 1200
Target price Rp 1375
Expecting higher volumes
2020FY Results: Bellow Expectation
Valuation: HOLD, with TP 1,375
- In 2020, PGAS revenue declined by 25% YoY to US$ 2.88 billion driven by declines in almost all busines segments except revenue from fibre optic rental (+5.5% YoY). For the 4Q2020, revenue increased +7.7% QoQ to US$ 735 million compared to 3Q2020’s US$ 682 million with higher revenue from gas transmission.
- In January – February 2021, demand showed an improvement with gas distribution volume in February 2021 up 3.3% MoM and better than November and December 2020. Upstream lifting is also showing an improvement in February, up 74% MoM to 24,035 BOEPD.
- Gas transportation volume in February decreased -1.73% MoM to 1,187 MMSCFD.
- Following the demand improvements in early 2021, we expect conditions will continue to improve this year.
2020FY Results: Bellow Expectation
- PGAS recorded a net loss of US$ 264 million in 2020FY, which is bellow our positive expectation for 2020. In the 4Q2020, PGAS experienced a net loss of US$ 318 million and the net profit margin fell to -43.3%.
- This is inline with the decrease of PGAS’s revenue in 4Q2020 -29% YoY to US$ 734.4 million, and a 2020 decrease of -25% YoY to US$ 2.88 billion because of the weak revenue in 2Q2020.
- Cost of revenue also dropped -22% YoY in 2020 and -18% in the 4Q2020 as gas commercial volumes were lower. But gross profit still decreased -51% YoY to US$ 166.4 million in the 4Q2020 from lower revenue. For 2020 gross profit also decreased -31% YoY to US$ 854 million.
- Operating income declined 44.3% YoY to US$ 304 million in 2020 mainly driven by the lower gross profit.
- PGAS made a tax provision in 2020 of US$ 278.3 million for VAT tax disputes for tax years 2012 and 2013. The impact was a lower net profit.
- We are conservative on 2021F profit expectations as provisioning will weigh, as well as the implementation of lower gas distribution margins by the government.
Valuation: HOLD, with TP 1,375
- Our DCF valuation with WACC at 8,6%, gives a target price of IDR 1,375 or 15% upside which is a 35x PE valuation within one year. We downgrade our recommendation to hold.