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Good morning,
Elnusa company visit
– Earnings to recover in 2H17
We have visited PT
Elnusa (ELSA IJ, Not Rated) yesterday to get some colors of its 2H17-FY18F
outlook after a dismal 1H17. It has secured a meaningful land seismic
contract and deployed its drilling rig since Jun-July and expect these new
developments to lift FY17F earnings into the region of IDR150-200bn (1H17:
IDR14bn), translating into FY17F PER of 11-8.5x at current price.
We believe it is
about time for a bottom fishing given a better 2H17 outlook. Further, being a
subsidiary of PERTAMINA, the recovery of job flows from Mahakam block after
the Total – PERTAMINA transition and a significant boost of ELSA’s given
contracts/ earnings thereafter will likely lift share prices, although the
exact timing is hard to gauge.
¨ 1H17 net margin
declined on lower revenue from upstream and downstream O&G support
segment.
Elnusa’s 1H17 revenue grew 16% YoY but gross profit saw a YoY decline of 51%,
driven by 10-15% drop of revenue from these segments, segmental gross margins
were also lower due to the expiry of higher margins contracts at Mahakam
block and the non-deployment of its drilling rig during 1H17.
Elnusa
managed to increase the given fuel distribution volume from PERTAMINA, with
this segment’s revenue/gross profit grew 75/65% YoY but it was insufficient to
make up for the other segments due to inherently lower margins (single digit)
of this business segment.
¨ Revenue and margins
of upstream segment to improve in 2H17. Elnusa has secured a land seismic
at West Papua (working from July 2017 to 1H18) and another Marine Seismic
contract at Aceh (working from August-Nov 2017) with a indicative contract
value of IDR3-4tril. Its drilling rig was also employed by PERTAMINA EP at
East Kalimantan from Jun-Des 2017.
Management
guided gross margins of 15-20%, meanwhile, trying to further increase the
fuel distribution quota of PERTAMINA.
¨ Mahakam block
handover is a big medium term catalysts. Contracts from Mahakam block used
to contribute more than 50% of revenue in both upstream/downstream support
services in FY14-16 and saw a significant decline due to the Mahakam block
handover. Elsa targeted FY18F net profit of at least IDR200bn without
improvement from Mahakam, however, expect net profit to swing back to
IDR300bn when job flows of Mahakam kicks in next year, Elnusa expects higher
job flows from PERTAMINA due its subsidiary status.
The
handover proves to be lengthy so far due to conflict of interests between
TOTAL and PERTAMINA, that said, the block contributes to 20% of the nation’s
total natural gas output and national’s interest is at stake.
¨ Key risks are
Mahakam handover delay in FY18F and margin squeeze. Elnusa’s share
price has corrected 50% YTD and given a better outlook going forward,
downside should be limited. That said, FY18F earnings growth will be limited
if job flows from Mahakam Block does not recover.
Elnusa
acknowledge that contract margins from PERTAMINA were higher than foreign oil
and gas players, whose are increasingly sensitive on production costs after
the new gross split PSC regime. (Norman
Choong, CFA)
Link to daily
report: Indonesia Morning Cuppa 130917
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Company Update:
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Bumi Serpong Damai (BSDE IJ, BUY, TP:
IDR2,650), Acquisition Of Office Property Units
BSD announced that
its wholly-owned subsidiary PT Duta Cakra Pesona, has signed an agreement
with PT Purimas Sasmita – Golden Agri Resources’ (GGR SP, NEUTRAL, TP:
SGD0.39) wholly-owned subsidiary, which is also part of PT Sinar Mas Group –
for a transfer of property units in Jakarta worth USD107.5m (equivalent to
IDR1,408.9bn). We make no changes to our earnings at this juncture. Maintain
BUY with a TP of IDR2,650 (44% upside) implying 50% discount to RNAV.
¨ The transfer. The objects in the
transfer agreement are the rights of strata title ownership of Sinarmas MSIG
Tower located at Jalan Jenderal Sudirman Kavling 21, Setiabudi subdistrict,
South Jakarta with a total area of 36,874.49 sqm, located on levels 18-39 and
level 47. The value of this transaction is IDR1,408.96bn (equivalent to
USD107.5m).
¨ Fair purchase. Using the
information, we estimate that the selling price is approximately
IDR38.2m/sqm. We believe this is fair as based on our channel checks, the
asking price of strata-title office space in the same area is IDR38-52m/sqm.
Based on our discussion with management, this purchase has been fully paid
using the company’s cash and would go into its investment property as
recurring revenue that would contribute ~IDR90bn pa or equivalent to ~1% of
total revenue.
¨ Maintain BUY. We make no changes
to our assumptions. We maintain our BUY recommendation on Bumi Serpong Damai
(BSD) on the back of a 25% CAGR net profit growth forecasted for FY16-19, as
well as expectations of an improvement in the real estate sector. (Yualdo Tirtrakencana)
Link
to report: Bumi Serpong Damai : Acquisition Of Office Property Units
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Best regards,
Andrey Wijaya
Senior Vice President
Research Analyst – Auto, Consumer, Cement
PT RHB Sekuritas Indonesia
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