|
Good morning,
Perusahaan Gas
Negara – Some Improvements, But Outlook Still Uncertain
PGN recorded a
quarterly net profit of USD49.8m (2Q17: USD41.2m net loss) due to a 17% QoQ
increase in gas distribution volumes. Its revenue and gross profit were in
line, but bottomline was below our and consensus’ estimates due to high tax
rates. Volume from PLN has recovered, but is still being negotiated for more
flexible off-take and lower prices. As PGN’s distribution business outlook
remains uncertain and challenging, we maintain our NEUTRAL call with a lower
DCF-based IDR1,700 TP (from IDR2,000, 4% upside). This is followed by
corresponding 14.8-14.1% reductions in our FY17F-18F earnings.
¨ Volume
from Muara Tawar has recovered, but is no longer take or pay. Coming from a low
base in 2Q17, Perusahaan Gas Negara’s (PGN) distribution volume – as of 9M17
– saw a 17% QoQ increase. The bulk of the recovery came from Perusahaan
Listrik Negara’s (PLN) Muara Tawar power plant. Recall that its gaspurchase
agreement expired in March (contracted amount of ~100mmscfd at USD7.90/mmbtu)
and volumes were down.
We understand that the off-take agreement
with the Muara Tawar plant is interruptible and no longer attached with a
take or pay provision. The committed off-take volume is now much smaller,
although no exact numbers were disclosed. The agreement is still under
negotiation between PGN and PLN.
¨ QoQ
distribution margin stable, quarterly net profit of USD49.8m. The company
recorded 2Q17 QoQ revenue and gross profit growth of 13.3% and 14.9%
respectively, while bottomline turned a USD49.8m profit (2Q17: USD41.2m net
loss). QoQ gross margin were relatively stable, at 24%.
Based on our calculations, 3Q17’s
distribution spread was also stable at USD2.54/mmbtu. Distribution ASP inched
down from USD8.59/mmbtu in 2Q17 to USD8.56/mmbtu in 3Q17. Oil & gas
production also recorded a bigger gross loss of USD23.6m (2Q17: USD16.2m) on
higher depreciation and depletion.
¨ Populist
policy and weak demand is putting further risks to PGN's margin. With the general
election due in 2019, we believe there is little room for the company to
increase prices next year. Risks of declining ASPs to PLN are still apparent,
due to pressure from the Government to reduce electricity subsidies while
keeping electricity prices low for the mass market.
Notwithstanding, recent moves to reduce gas
selling prices to the industrial sector were called off by the Energy and
Mineral Resources Ministry due to risks to the state budget. That said, we
see high possibility of news related to industrial gas prices being brought
up again in the near future due to the political sensitivity of this issue.
¨ No
clear positive catalysts yet, maintain NEUTRAL. PGN has reduced
its FY17-18 capex target to ~USD300m (from USD500m) and announced a major
reduction in new gas pipe investments. Our revised DCF-based IDR1,700 TP
implies FY18F P/E of 11x. Maintain NEUTRAL. (Norman
Choong, CFA)
Link to daily
report: Indonesia Morning Cuppa 301017
|
|
Media Highlights:
|
|
Corporate
Accident in
Waskita’s Problinggo-Pasuruan toll project
Hero Supermarket
books 57% YoY net income growth
Plantation companies
sees rising profits
|
|
Our
Recent Publication:
|
|
Results Review: Delta Dunia Makmur – Mining
Contracting Volume Growth To Continue
|
|
Economics Update: 2018 State Budget:
Encouraging Investment And Infrastructure For Growth And Equality
|
|
Economics Update: BI Pauses In October
After Easing August-September
Link to report: BI
Pauses In October After Easing August-September
|
|
Company Update: Bekasi Fajar – Waiting On
Guidance For 9M17
Link to report: Bekasi
Fajar : Waiting On Guidance For 9M17
|
|
Company Update: Arwana Citramulia – Revenue
Remains Robust Despite Elevated Costs
|
|
Economics Update: September Exports
Moderate, Imports Pick Up
Link to report: September Exports
Moderate, Imports Pick Up
|
|
Sector Update: Building Materials –
Infrastructure Projects Boost Bulk Cement Sales Growth
Link to report: Infrastructure
Projects Boost Bulk Cement Sales Growth
|
|
Company Update: Ciputra Development – Toning Down Our
Forecasts
|
|
Corporate News Flash: Summarecon Agung –
9M17 Marketing Sales Are In Line With Estimates
|
|
Regional Thematic: Halal – An Earnings
Boost Strategy
|
Best regards,
Andrey Wijaya
Senior Vice President
Research Analyst – Auto, Consumer, Cement
PT RHB Sekuritas Indonesia
Disclaimer: This message is intended only for the use of the individual or entity to whom it is addressed and may contain information that is confidential and privileged. If you, the reader of this message, are not the intended recipient, you should not disseminate, distribute or copy this communication. If you have received this communication by mistake, please notify us immediately by return email and delete the original message. This message is transmitted on the condition that the recipient accepts the inherent risks in electronic data transmission and agrees to release RHB group and RHB Securities from any claim which the recipient may have as a result of any unauthorized duplication, reading or interference with the contents herein. The contents herein are made in the personal capacity of the above-named author and nothing herein shall be construed as professional advice or opinion rendered by RHB group and RHB Securities or on its behalf.
