PGAS Apr2021

PGAS

Contact our analyst Eka

Hold
21st April 2021
Price Rp 1200
Target price Rp 1375

Expecting higher volumes

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.