PGAS
Contact our analyst Eka
BUY
7th February 2020
Price Rp1,520
Target price Rp2,200
7th February 2020
Price Rp1,520
Target price Rp2,200
Volume 2019FY and 2020 Target
Valuation: BUY with TP 2,200
- PGAS’s consolidated distribution volume was stable at 988 BBTUD in 2019FY +2.84% YoY, and at the top of the 2019 distribution volume target of 970-990 BBTUD. In December, PGAS and Pertagas recorded declines of 8.12% to 911 and 160 BBTUD respectively because of lower gas consumption from power and industrial customers and pipeline maintenance work in Tanjung Priok power plant as well as the Christmas and New Year holidays.
- PGAS is targeting 2020 Distribution volume in the range 950-980 BBTUD or 3% YoY growth.
- Gas transportation volume in 2019FY was 2,046 MMSCFD down-2.64% from 2018FY. December volume declined 0.26% MoM to 2059 MMSCFD mainly due to lower Pertagas’ volumes in November-December. PGAS is targeting 2020 transmission volume to reach in the range of 1,369 – 1,377 MMSCFD or +1% YoY growth.
- Upstream lifting decreased by -27.3% to 10.41 MMBOE, but PGAS is targeting +6% YoY growth for this segment to the range of 10.5-11.0 MMBOE for 2020.
- PGAS is also targeting the contribution from industrial consumption to increase to 62% from 58%, while power consumption will decrease to 37% from 42% and, city gas will remain steady at 1% of sales volume.
- PGAS plans to decrease their gas price for industry customers in April 2020 following a Government study on decreasing upstream gas prices.
- Currently, PGAS and the Government represented by the Ministry of Energy and Mineral Resources are still discussing win-win solutions.
- PGAS is still advocating for the government to cut upstream costs, for example by writing off the value added tax (PPN) and gas fees.
- PGAS will increase internal efficiency and save on capital expenditure to maintain their margin and we estimate this will result in flat margins this year.
Valuation: BUY with TP 2,200
- A DCF valuation with WACC at 9.88%, gives a target price of IDR 2,200 or 45% upside which is a 17x PE valuation within one year. BUY
