PGAS May2020

PGAS

Contact our analyst Eka

BUY
12 May 2020
Price Rp 895
Target price Rp1,240

2020 Target Revised

As many of PGAS’ customers such as restaurants, shopping malls, hotels, and steel manufactures, have shut down business due to the Covid-19 outbreak and there is lower demand from regional and domestic industrial and commercial electricity costumers, PGAS lowered their distribution volume target for 2020 to 900-925 BBTUD from 950-980 BBTUD.
PGAS also lowered their operating expenses and capital expenditure for 2020 and will implement efficiency programs to cut operating expenses to US $ 460 million - 530 million or 25%-35% from the 2020 budget. PGAS will also cut capital expenditure to US$ 350 million - 500 million from US$ 500 million – 700 million.
As the company target has been revised and based on the 1Q2020 results we lower our PGAS revenue target to US$ 3.6 billion down 4% from 2019FY.

Lower 1Q2020 Volume

PGAS’s consolidated distribution volume was stable +0.2% YoY to 882 BBTUD in 1Q2020. The impact of Covid-19 is starting to show up QoQ, with power industry consumption down to 342 BBTUD from 423 BBTUD in 4Q2019 and a decline in the retail segment from 571 BBTUD in 4Q2019 to 534 BBTUD.
Gas transportation consolidated volume in March was 1,328 MMSCFD, -3,34% MoM. Lower gas transportation volume MoM is inline with lower gas demand from major customers.
Upstream lifting also decreased, with oil gas lifting down-28% QoQ to 20,798 BOEPD. Crude oil decreased by -43% QoQ to 3,124 BOEPD, gas decreased by -26% QoQ, LPG decreased by -53% QoQ, and LNG decreased by -19% QoQ. Lower lifting volume was also impacted by the crash in oil prices.

1Q2020 Result: Lower than expected

Lower gas demand from covid-19 meant PGAS’s revenue decreased slightly -0.28% YoY to US$ 874 million (mn).
Gross profit slightly increased by 0.7% YoY to US$ 287 mn from a slight decrease in cost of revenue by 0.7%. Operating income increased 6% YoY to US$ 172 mn.
Profit before tax decreased by -21.8% YoY, because of the foreign exchange loss of USD 63 mn.
PGAS net income of US$47.8 mn was down -26.6% YoY from US$ 65.1 mn in 1Q2019.

Valuation: Maintain BUY with TP 1,240

Our DCF valuation with WACC at 7.95%, gives a target price of IDR 1,240 or 38.5% upside which is a 10x PE valuation within one year. Maintain BUY