1. business and industrial
2. company
3. earnings

Jan 20, 2015
Perusahaan Gas Negara
Sebastian Tobing
Company Focus
([email protected])
Upgrade to Buy
Upgrade to Buy as market has already priced in the negatives
PGAS’ share price has fallen by 13% year-to-date (underperforms JCI by
12%). We think the market has priced in the following concerns: 1) Impact
of oil price decline on its upstream business and potential impairment in
4Q2014 (we reduce reported profit from USD727mn to USD687mn on impairment), 2) Impact of oil price decline on overall gas demand, and 3)
Government intervening in PGAS’ gas distribution selling price, much like it
did in asking SMGR to lower retail cement price by 6%. Note that PGAS'
share price has fallen as much as SMGR (also down 13% ytd) despite govt
price intervention is still a speculation vs. already a reality for SMGR.
1) Impact of oil price decline on its upstream business incl. impairment
PGAS’ recently bought upstream assets include Pangkah block, which produces ~7000bpd (barrels per day) of oil. We calculate that for every USD10/
barrel lower long-term oil price assumption would only reduce valuation by
0.5%. We also highlight that PGAS bought Pangkah block for USD915mn or
8% of market cap versus recent share price decline of 13% ytd.
2) Impact of oil price decline on overall gas demand
There is impact, but not that much (part of the reason why we reduce TP by
9%). Gas competes against diesel, not crude. PGAS' current selling avg
selling price of USD9.5/mmbtu implies USD57/barrel of diesel, which is
roughly equivalent to USD35/barrel of crude oil (5% distributor margin, 10%
tax, and USD15/barrel refinery margin). Also bear in mind that approximately 53% of PGAS' customers are very sticky (state owned + independent
power plants, ceramic factories). Even the price sensitive customers are
likely to be cautious in switching to diesel as they may not be able to get
their gas allocation back if oil price rebounds. In our view, the demand
risk would only become a significant concern if oil price remains
below USD35/barrel for an extended period of time.
3) Government intervening in gas distribution selling price
This risk is more difficult to measure as an argument can be made that the
economy as a whole benefits from lower gas price. PGAS needs to build
more gas infrastructure to justify its gas spread and high ROE. Despite this
risk, the reason we upgrade PGAS is because we think the market has sufficiently priced in this risk. Current share price implies a gas distribution
spread (selling minus purchase price) of USD2.4/mmbtu, 36% lower
than USD3.8/mmbtu spread in 2015.
Reduce target price by 9%; Upgrade to Buy
We reduce target price by 9% to Rp6000, of which 2% due to lower longterm oil price assumption impact (from USD95 to USD75/barrel) on its upstream business, and 7% due to lower long-term growth assumption from
4% to 2.5% (as we turn more conservative on development of new gas
wells, which would impact future volume growth prospects).
Companies Data
Year end Dec
2012
2013
2014F
2015F
2016F
Sales (USDmn)
2,576
3,002
3,391
3,927
4,270
PGAS is a state owned company which
transmitted 878MMScfd and distributed
801 MMScfd of gas in 9M12
BUY
Rp6,000
Company Update
Share Price
Sector
Price Target
Rp5,200
Oil & Gas
Rp6,000 (15%)
Stock Data
Reuters Code
Bloomberg Code
Issued Shares (m)
Mkt Cap (Rpbn)
Avg. Value Daily
6 month (Rpbn)
52-Wk range
PGAS.JK
PGAS.IJ
24,242
126,056
Rp110
Rp6,225 / Rp4,390
Major Shareholders
Republic of Indonesia
Public
57.0%
43.0%
Consensus
EPS
Consensus (Rp)
TRIM vs Cons. (%)
14F
410
(-14%)
Stock Price
V o lum e ( R H S)
(R p)
P r ic e ( L H S )
7 ,0 0 0
Net Profit (USDmn)
891
861
687
807
819
EPS (Rp)
316
429
354
416
422
5 ,0 0 0
19.4%
35.8%
-17.5%
17.4%
1.5%
4 ,0 0 0
211
3 ,0 0 0
EPS Growth (%)
DPS (Rp)
152
215
177
208
P/E (x)
Div Yield (%)
873
1,245
1,483
1,705
1,924
13.0
9.2
13.5
13.7
13.5
4.4%
5.0%
PT Trimegah Securities Tbk - www.trimegah.com
2.9%
3.4%
(m n)
1 00
90
6 ,0 0 0
80
70
60
50
40
30
2 ,0 0 0
BVPS (Rp)
15F
431
(-4%)
20
1 ,0 0 0
J a n -1 4
10
M a r- 1 4
M a y-14
J u l- 1 4
Se p-1 4
N o v -1 4
3.5%
COMPANY FOCUS
1
Figure 1. No change in gas distribution volume
Before
(USDm)
After
1,200
975
1,000
824
861
824
1,015 1,015
975
861
800
600
400
200
2013
2014
2015
2016
Source: Company, Trimegah estimate (2014-16)
Figure 2. DCF-based target price
2016
2017
2018
2019
2020
2021
2022
1E
2E
3E
4E
5E
6E
7E
1
2
3
4
5
6
7
EBIT (1-tax)
859
876
868
842
911
1,025
1,025
Depreciation
373
395
414
414
413
268
264
(345)
(345)
(295)
(275)
(321)
(321)
(321)
Capex + Inv. in Assoc
Increase (Dec.) in WC
Free cash flow
PV
5
4
3
(1)
(4)
(4)
1
892
931
990
981
999
968
969
835
814
810
750
715
648
607
Discounted FCF 2016-2022
US$ mn
5,178
Invested Capital (2020)
US$mn
2,821
Terminal EV
US$ mn
11,163
PV of Terminal EV
US$ mn
6,535
- Minority interest
US$ mn
251
- Debt
US$ mn
1,953
+ Cash
US$ mn
2,060
+ Investment in Associates
US$ mn
122
Net Asset Value
US$ mn
11,691
NAV per share
Rp
6,028
Fair market Value
6,000
Rel. to current price
15.4%
Source: Company
PT Trimegah Securities Tbk - www.trimegah.com
COMPANY FOCUS
2
Income Statement (USDmn)
Balance Sheet (USDmn)
Year end Dec
2012
2013
2014F
2015F
2016F
Revenue
2,576
3,002
3,391
3,927
4,270
16%
16%
13%
16%
9%
Gross Profit
Opr. Profit
1,472
998
1,418
909
1,463
1,004
1,622
1,064
1,675
1,074
EBITDA
1,188
1,102
1,273
1,416
1,447
Other asset
48%
36%
32%
-9%
10%
Total asset
ST debt
Revenue Growth (%)
EBITDA Growth (%)
Net Int Inc/(Exp)
6
5
(40)
(53)
(45)
Gain/(loss) Forex
50
84
0
0
0
94
127
(55)
45
45
1,148
1,125
909
1,056
1,074
Other Inc/(Exp)
Pre-tax Profit
Tax
(233)
(231)
(186)
(216)
(220)
Year end Dec
Cash and equivalents
Other curr asset
Net fixed asset
2012
2013
2014F
2015F
2016F
1,567
1,319
1,640
1,975
2,376
416
461
423
461
486
1,694
2,270
3,406
3,418
3,406
231
313
315
340
365
3,908
4,363
5,784
6,194
6,632
99
414
0
0
0
Other curr liab
473
886
506
544
573
LT debt
840
612
2,045
1,953
1,903
Other LT Liab
241
138
138
138
138
182
219
251
287
322
Minority Int.
Extra. Items
(24)
0%
(33)
0%
(37)
0%
(33)
0%
(35)
0%
Minority interest
Total Liabilities
1,636
2,690
2,635
2,614
2,646
Reported Net Profit
891
861
687
807
819
Shareholders Equity
2,545
2,876
3,307
3,731
4,171
Core Net Profit
792
712
751
791
803
629
293
(405)
22
472
12%
-10%
5%
5%
2%
Total cap employed
3,174
3,169
2,902
3,752
4,644
Net Working capital
1,511
895
1,557
1,892
2,288
939
1,026
2,045
1,953
1,903
growth (%)
Dividend per share
152
growth (%)
Dividend payout ratio
215
177
208
211
41%
-17%
17%
2%
1
1
1
1
0
Cash Flow (USDmn)
Net (debt) / cash
Debt
Key Ratio Analysis
Year end Dec
2012
2013
2014F
2015F
2016F
Core Net Profit
792
712
751
791
803
Profitability
Depr / Amort
189
193
269
352
373
Gross Margin (%)
57.1%
47.2%
Chg in Working Cap
174
63
73
(0)
5
Opr Margin (%)
38.7%
30.3%
EBITDA Margin (%)
46.1%
Core Net Margin (%)
Others
CF's from oprs
Capex
Others
(16)
1,140
(159)
(140)
829
(207)
(27)
1,065
(1,405)
48
1,191
(364)
51
1,232
(361)
(91)
(460)
(2)
(25)
(25)
CF's from investing
(250)
(667)
(1,407)
(389)
(386)
Net change in debt
(81)
185
1,019
(92)
(50)
Others
(353)
(516)
(356)
(375)
(395)
CF's from financing
(434)
(331)
663
(467)
(445)
Net cash flow
Year end Dec
2012
2013 2014F
2015F
2016F
43.2%
41.3%
39.2%
29.6%
27.1%
25.2%
36.7%
37.5%
36.0%
33.9%
30.8%
23.7%
22.1%
20.1%
18.8%
ROAE (%)
40.3%
30.0%
27.7%
25.6%
22.8%
ROAA (%)
19.4%
19.2%
14.0%
12.5%
12.3%
Net Debt to Equity (x)
0.2
0.1
(0.1)
0.0
0.1
Net Debt to EBITDA (x)
0.5
0.3
(0.3)
0.0
0.3
46.3
41.6
15.7
12.8
13.2
Stability
Current ratio (x)
Interest Coverage (x)
456
(168)
321
335
401
Efficiency
Cash at BoY
1,141
1,567
1,319
1,640
1,975
A/P (days)
63
36
36
36
36
Cash at EoY
1,567
1,319
1,640
1,975
2,376
A/R (days)
28
26
26
26
26
Free Cashflow
1,202
958
(59)
1,051
1,091
Inventory (days)
5
5
5
5
5
Interim Result (USDmn)
Capital History
3Q13
4Q13
1Q14
2Q14
3Q14
Sales
709
800
842
862
810
Gross Profit
339
374
339
397
366
Opr. Profit
211
217
234
274
244
Net profit
184
219
177
193
222
Gross Margins (%) 47.8%
46.7%
40.3%
46.0%
45.2%
Opr Margins (%)
29.7%
27.1%
27.8%
31.8%
30.1%
Net Margins (%)
26.0%
27.3%
21.0%
22.4%
27.4%
PT Trimegah Securities Tbk - www.trimegah.com
Date
15-Dec-03
IPO@Rp1,500
COMPANY FOCUS
3
PT Trimegah Securities Tbk
Gedung Artha Graha 18th Floor
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Jakarta 12190, Indonesia
t. +62-21 2924 9088
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