PGAS
Contact our analyst Eka
Better than expected results, exciting merger, 34% upside.
19th March 2018
Price Rp2,270
Target price Rp3,050
19th March 2018
Price Rp2,270
Target price Rp3,050
Better than expected results
- 2017FY PGAS revenue rose +1.18% to USD. 2.97 billion, +0.3% higher than our forecast for 2017F of USD. 2.96 billion. While net profit fell -53.0% to USD. 143 million from USD. 304.4 million in 2016FY, better than our 2017F estimate of USD 175 million.
- The net profit was caused by higher cost of revenues which increased for oil and gas operations, by +46% yoy to USD 443 million, and for gas distributions +5% to USD 1,624 million, but decreased for Liquid Natural Gas (LNG) cost by -55.4% to USD 85.7 million.
- Finance costs increased due to higher interest from the refinancing of commercial loan to bond in their oil and gas subsidiary.
- As for targets for 2018, we estimate revenue to grow slightly by 1.6% to USD 3.02 billion.
- As of January 2018, the Government has reorganized their Oil and Gas holdings with PERTAMINA as the holding company.
- In the establishment of the new oil and gas holding structure, PGAS and Pertagas have a few options, such as 1). PGAS acquires the shares of Pertagas owned by Pertamina, 2). PGAS acquires Pertagas’ s treasury stock – Pertagas right issue, 3) transfer of the shares of Pertagas owned by Pertamina to the share capital of PGAS, and 4) Merger.
- As of today, we don’t yet know the valuation and the chosen option between PGAS and Pertagas. The decision will be released at the end of March or in April 2018.
- Duri – Dumai with 58 km and Duri – Dumai Transmission with 67 km of pipeline which is a joint venture with Pertagas will start to operate at the end of 2018.
- And ESDM Ministry released PERMEN ESDM No. 4/2018 on the master plan of the natural gas transmission and distribution network, which will benefit PGASasadominantplayerin downstreamgas.
- We maintain our BUY recommendation for PGAS with a DCF valuation with WACC at 8.21%.
- We estimate PGAS shares will rise by 34% to IDR 3,050 within a year. BUY
