Equity House (USD/barrel) Equity House Avg.year to date...
15
Asiamoney’s 2013 Best Domestic Equity House Sector flash 13 July 2015 Disclosure: Bahana Securities does and seeks to do business with companies covered in its research reports. Investors should consider this report as only a single factor in making their investment decision. Please see the important disclaimer information on the back of this report *Based on consensus’ recent changes ↑ (up), ↓ (down), ↔ (unchanged) 2014 Finance Asia's Best Equity House Alpha Southeast Asia 2014 Best Research Call FMCG Sector Asiamoney's 2013 Best Domestic Equity House 2015 Institutional Investors Highest Ranked Local Research House 2015 Global Banking & Finance Review Best Research House Indonesia Oil & Gas UNDERWEIGHT (Unchanged) Arandi Nugraha E-mail: [email protected] Phone: +6221 250 5081 Ext. 3619 Downstream preference Upstream - Unexciting on oil oversupply & weaker gas demand: In line with our 2015 average oil price assumption of USD60/barrel, Brent oil price has averaged USD59.4/barrel ytd, down 45% y-y, on oversupply (exhibit 3) on weak global conditions/ US inventory levels jumped 22% y-y to 465k barrels (exhibit 6), and as Iraq increased its 2Q15 production to 3.9m b/d (+12% q-q). This caused the Indonesian Crude Price (ICP) to plunge, averaging 42% y-y ytd to USD61.9/barrel. Despite US rig counts having fallen 53% y-y (exhibit 7) to 859, we maintain our oil price assumption on the possible ending of Iran‟s oil embargo and the likely USD appreciation following a potential Fed rate hike. In the Indonesian gas sector, the local market (exhibit 8), accounting for some 54% of volumes, is being impacted by the sluggish domestic economy, resulting in weaker gas demand from industrial users. In 1Q15, MEDC‟s gas sales were down 30% q-q to 98.3bbtu/d, while Conoco Phillips, one of the country‟s biggest gas producers, saw its gas lifting drop 7% q-q to 430mmscfd. Midstream - Policy risk at center stage: For midstream players like PGAS, the spotlight on policy risk comes from industrial users‟ proposal to have lower gas selling prices, which is planned to be scheduled next year by the Economic Affairs Ministry. Based on our sensitivity analysis, every 10% ASP discount (from current ASP of USD9.2/mmbtu), would lower PGAS‟s 2016F earnings by 30% (exhibit 20). Downstream - Rising non-subsidized customers: Under the Jokowi government, prices of mobile gas (mogas) and diesel are no longer capped (exhibit 9) with periodic evaluations depending on movements in currency and global oil prices. Currently, the consumption breakdown between subsidized versus non-subsidized fuels is expected to reach 22%:78% (exhibit 8), compared to 40%:60% prior to the subsidy reduction. By having a no-subsidy system in the market, AKRA has been able to raise the number of subsidized-fuel customers as many energy consumers shift to non-subsidized fuel. Testimony to this was AKRA‟s 1Q15 distribution volumes which grew 15% y-y to 0.5mn kl with the management expecting a further 9% q-q volume increase to 0.6mn kl in 2Q15 (2015F: 2.2mn kl). Underweight on price outlook; Raise AKRA to Buy on 15% price fall At this stage of the market cycle, we retain our sector UNDERWEIGHT on weak price outlook due to soft global economy, particularly China‟s, creating a persistent oversupply condition, which would be exacerbated once Iran is allowed to re-export its oil. Thus, against the aforementioned operating backdrop, we revise down MEDC‟s DCF-based 12M TP to IDR2,300 (from IDR2,800) on higher risk premium (from 6% to 7%). On the flip side, we upgrade AKRA to BUY from Reduce on margin improvement and a 15% share price fall from its recent peak of IDR6,225 in June to currently IDR5,300, pricing in market disappointment in Freeport‟s decision to set up operation in Petrokimia Gresik industrial estate. While we raise AKRA‟s 12M TP to IDR6,100 (from IDR3,700), risks exist in lower-than-expected returns from its industrial/port operations as well as from weaker-than-expected oil prices. Exhibit 1. Key data, 2015F Code CP cap Old New (IDR) Rating TP Rating TP MEDC 2,510 REDUCE 2,800 REDUCE 2,300 PGAS 3,980 HOLD 4,000 HOLD 4,000 AKRA 5,300 REDUCE 3,700 BUY 6,100 Sector Neutral Neutral Source: Bloomberg, Bahana estimates Exhibit 2. Oil prices, June 2014-June 2015 (USD/barrel) 45 55 65 75 85 95 105 115 125 Brent ICP MOPS 92 Avg. year to date Brent : USD59.4/bbl, -45% y-y ICP : USD55.4/bbl, -48% y-y MOPS 92 : USD69.8/bbl, -40% y-y Source: Bloomberg Exhibit 3. Oil production, 1Q14 – 4Q15F (mn b/d) 91.8 92.1 92.7 94.2 94.4 94.7 95.7 95.5 90.3 90.3 91.9 92.9 91.5 91.4 93.9 94.0 87 88 89 90 91 92 93 94 95 96 97 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 World oil supply World oil demand Source: EIA, OPEC, Bloomberg Exhibit 4. Profitability margin, 1Q15 (%) 39.0 32.1 12.2 13.9 21.9 8.4 -1.1 15.7 6.1 -5 0 5 10 15 20 25 30 35 40 45 MEDC PGAS AKRA Gross margin Operating margin Net income margin Source: Bloomberg Exhibit 5. Relative performance to JCI, ytd (26.9) (26.6) (16.7) 35.7 (5) 0 5 10 15 20 (40) (30) (20) (10) 0 10 20 30 40 MEDC PGAS SECTOR AKRA (%) (%) Source: Bloomberg
Transcript of Equity House (USD/barrel) Equity House Avg.year to date...
Asiamoney’s
2013
Best Domestic
Equity House
Sector flash
13 July 2015
Disclosure: Bahana Securities does and seeks to do business with companies covered in its research reports. Investors should consider this report as only a single factor in
making their investment decision.
Please see the important disclaimer information on the back of this report
*Based on consensus’ recent changes ↑ (up), ↓ (down), ↔ (unchanged)
2014
Finance Asia's
Best
Equity House
Alpha
Southeast Asia
2014 Best
Research Call
FMCG Sector
Asiamoney's
2013
Best Domestic
Equity House
2015
Institutional
Investors
Highest Ranked
Local Research
House
2015
Global
Banking & Finance
Review
Best Research
House
Indonesia Oil & Gas
UNDERWEIGHT (Unchanged)
Arandi Nugraha E-mail: [email protected] Phone: +6221 250 5081 Ext. 3619
Downstream preference
Upstream - Unexciting on oil oversupply & weaker gas demand: In
line with our 2015 average oil price assumption of USD60/barrel, Brent oil
price has averaged USD59.4/barrel ytd, down 45% y-y, on oversupply
(exhibit 3) on weak global conditions/ US inventory levels jumped 22% y-y
to 465k barrels (exhibit 6), and as Iraq increased its 2Q15 production to
3.9m b/d (+12% q-q). This caused the Indonesian Crude Price (ICP) to
plunge, averaging 42% y-y ytd to USD61.9/barrel. Despite US rig counts
having fallen 53% y-y (exhibit 7) to 859, we maintain our oil price
assumption on the possible ending of Iran‟s oil embargo and the likely USD
appreciation following a potential Fed rate hike. In the Indonesian gas
sector, the local market (exhibit 8), accounting for some 54% of volumes,
is being impacted by the sluggish domestic economy, resulting in weaker
gas demand from industrial users. In 1Q15, MEDC‟s gas sales were down
30% q-q to 98.3bbtu/d, while Conoco Phillips, one of the country‟s biggest
gas producers, saw its gas lifting drop 7% q-q to 430mmscfd.
Midstream - Policy risk at center stage: For midstream players like
PGAS, the spotlight on policy risk comes from industrial users‟ proposal to
have lower gas selling prices, which is planned to be scheduled next year
by the Economic Affairs Ministry. Based on our sensitivity analysis, every
10% ASP discount (from current ASP of USD9.2/mmbtu), would lower
PGAS‟s 2016F earnings by 30% (exhibit 20).
Downstream - Rising non-subsidized customers: Under the Jokowi
government, prices of mobile gas (mogas) and diesel are no longer capped
(exhibit 9) with periodic evaluations depending on movements in currency
and global oil prices. Currently, the consumption breakdown between
subsidized versus non-subsidized fuels is expected to reach 22%:78%
(exhibit 8), compared to 40%:60% prior to the subsidy reduction. By
having a no-subsidy system in the market, AKRA has been able to raise
the number of subsidized-fuel customers as many energy consumers shift
to non-subsidized fuel. Testimony to this was AKRA‟s 1Q15 distribution
volumes which grew 15% y-y to 0.5mn kl with the management expecting
a further 9% q-q volume increase to 0.6mn kl in 2Q15 (2015F: 2.2mn kl).
Underweight on price outlook; Raise AKRA to Buy on 15% price fall
At this stage of the market cycle, we retain our sector UNDERWEIGHT on
weak price outlook due to soft global economy, particularly China‟s, creating a
persistent oversupply condition, which would be exacerbated once Iran is
allowed to re-export its oil. Thus, against the aforementioned operating
backdrop, we revise down MEDC‟s DCF-based 12M TP to IDR2,300 (from
IDR2,800) on higher risk premium (from 6% to 7%). On the flip side, we
upgrade AKRA to BUY from Reduce on margin improvement and a 15% share
price fall from its recent peak of IDR6,225 in June to currently IDR5,300,
pricing in market disappointment in Freeport‟s decision to set up operation in
Petrokimia Gresik industrial estate. While we raise AKRA‟s 12M TP to
IDR6,100 (from IDR3,700), risks exist in lower-than-expected returns from its
industrial/port operations as well as from weaker-than-expected oil prices.
Exhibit 1. Key data, 2015F
Code CP
cap
Old
New
(IDR) Rating TP
Rating TP
MEDC 2,510 REDUCE 2,800 REDUCE 2,300
PGAS 3,980 HOLD 4,000 HOLD 4,000
AKRA 5,300 REDUCE 3,700 BUY 6,100
Sector Neutral Neutral
Source: Bloomberg, Bahana estimates
Exhibit 2. Oil prices, June 2014-June 2015 (USD/barrel)
45
55
65
75
85
95
105
115
125
Brent ICP MOPS 92
Avg. year to dateBrent : USD59.4/bbl, -45% y-yICP : USD55.4/bbl, -48% y-yMOPS 92 : USD69.8/bbl, -40% y-y
Source: Bloomberg
Exhibit 3. Oil production, 1Q14 – 4Q15F (mn b/d)
91.892.1
92.7
94.2 94.4 94.7
95.7 95.5
90.3 90.3
91.9
92.9
91.5 91.4
93.9 94.0
87
88
89
90
91
92
93
94
95
96
97
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
World oil supply World oil demand
Source: EIA, OPEC, Bloomberg
Exhibit 4. Profitability margin, 1Q15 (%)
39.0
32.1
12.213.9
21.9
8.4
-1.1
15.7
6.1
-5
0
5
10
15
20
25
30
35
40
45
MEDC PGAS AKRA
Gross margin Operating margin Net income margin
Source: Bloomberg
Exhibit 5. Relative performance to JCI, ytd
(26.9) (26.6)
(16.7)
35.7
(5)
0
5
10
15
20
(40)
(30)
(20)
(10)
0
10
20
30
40
MEDC PGAS SECTOR AKRA
(%)(%)
Source: Bloomberg
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AKRA: Upgrading to BUY (from REDUCE) with a revised up TP of IDR6,100 (from IDR3,700)
At present, we see AKRA as being able to increase its petroleum distribution volumes given demand shift from subsidized to
non-subsidized fuel (exhibit 8). Management believes that volume escalation would mostly come from the general market,
which represents around 25% of total petroleum distribution volumes (exhibit 10). In our view, this, combined with effective
cost management and solid operating execution, provides AKRA with a competitive advantage, which should allow for a gross-
margin improvement (exhibit 12 and 13) to 9% in 2015 (2014: 8%; 1Q15: 12%). Thus, we revise up our 2015-16E EPS by 52-
60% for this year. In line with our higher earnings, we increase our DCF-based 12-month target price (TP) from IDR3,700 to
IDR6,100, which translates to 2015F PE of 26x. Risks to our call: lower-than-expected global oil prices and negative
sentiment stemming from slower than expected development of AKRA‟s industrial estate/port business in East Java.
Exhibit 6. AKRA earnings revisions
Old New Change (%)
IDRbn 2014A 2015F 2016F 2014A 2015F 2016F 2014A 2015F 2016F
Revenues 22,468 19,108 22,092 22,468 20,845 24,991 - 9.1 13.1
Gross profit 1,732 1,461 1,622 1,732 1,950 2,093 - 33.5 29.1
Gross margin (%) 7.7 7.6 7.3 7.7 9.4 8.4
Operating profit 1,063 877 871 1,063 1,251 1,314 - 42.6 50.8
Net Profit 810 600 566 810 914 903 - 52.3 59.5
EPS 208 154 145 208 234 231 - 52.3 59.5
ASP (IDR/liter) 9,674 6,510 6,582 9,674 6,626 7,175 - 1.8 9.0
Sales vol. (mn kl liter) 1.83 2.10 2.43 1.83 2.15 2.44 - 2.0 0.7
Source: Company, Bahana forecasts
Exhibit 7. AKRA IJ 1Q15 results q-q y-y 1Q15/ y-y 3M15/ 2014/ (IDRb) 1Q14 4Q14 1Q15 (%) (%) 1Q15F 3M15 (%) 2015F Cons.
Sales 5,630 5,479 4,801 (12.4) (14.7) 167.5 4,801 (14.7) 25 21 Gross profit 369 501 584 16.6 58.2 584 58.2
General expense 147 228 180 (20.7) 22.8 180 22.8
Operating profit 222 273 403 47.6 81.6 234.4 403 81.6 46 29
Net interest income/(expense) (9) (14) (7) (46.6) (13.0) (7) (13.0)
Forex gain (expenses) 13 14 (8) (159.7) (165.3) - (8) (165.3) Other income/(expense) (2) 99 (6) (106.0) 170.7
(6) 170.7
Taxation (51) (58) (67) 15.8 30.5
(67) 30.5
Minority interest 7 3 (20) (816.2) (401.2) (20) (401.2)
Net profit 180 231 295 27.6 63.8 223.7 295 63.8 49 31
BS & ratio analysis 1Q14 4Q14 1Q15 3M14 3M15 2014A 2015F 2016F Gross margin (%) 6.6 9.1 12.2 6.6 12.2 7.7 7.6 7.3
Operating margin (%) 3.9 5.0 8.4 3.9 8.4 4.6 4.6 3.9
Net margin (%) 3.2 4.2 6.1 3.2 6.1 3.6 3.1 2.6
Inventory Days 22 25 23 22 23 24 18 16
Receivable Days 59 70 75 59 75 70 86 78
Payable Days 58 69 70 58 70 67 77 67
Total cash 613 897 1,145 613 1,145 897 601 653
Total debt 4,557 4,126 3,994 4,557 3,994 4,126 5,834 5,758
Net gearing (%) 73.5 59.9 49.9 73.5 49.9 59.9 93.4 86.8 Source: Company, Bahana forecasts, Bloomberg
Exhibit 8. Subsidized and non-subsidized fuel, 2010 – 2015F
(mn kl)
38.2 41.7 45.0 46.3 46.5
17.9
27.029.7
30.0 31.0 32.0
62.0
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
2010 2011 2012 2013 2014 2015F
Subsidized Non-subsidized
65.271,4
75.077.3 78.5
79.9
Source: AKR Corporindo
Post subsidy removal, proportion of
gasoline should shift from 40/60% to 22/78% due to narrowing disparities between subsidized and non-subsidized fuels
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2014
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Exhibit 9. Subsidy scheme, post January 2015 Classification Gasoline
(RON88/90/92)
Diesel (Solar/HSD) Kerosene
A. Subsidised fuel - √ √
B. Special fuel √ - -
C. General fuel √ - -
Subsidy type
A. Fixed price - - √
B. Fixed subsidy - √ -
C. Distribution
compensation
√ - -
Source: MEMR 2014
Exhibit 10. AKRA’s petroleum distribution segment, 1Q15
Retail distribution 15%
General market (incl. industrial) 25%
Non-coal mining 18%
Coal mining 30%
Power plants 12%
Source: AKR Corporindo
Exhibit 11. AKRA’s distribution volumes (in kl), 1Q10 – 1Q15
in kl
255
287
392 397
491 471
574
430
487
537 563
488 485 491
533
413
383
383 387
367
454
200
250
300
350
400
450
500
550
600
Non-subsidized
Source: AKR Corporindo
Exhibit 12. AKRA’s cost of gasoline, 1Q13 – 1Q15
(IDR) (USD/barrel)
9,684 9,784
10,649
11,684 11,847
9,784 10,649
12,245
12,804
9,147
8,480
9,793
10,715 10,718
9,006 9,240
7,915
5,921
113
103 110
109 108 110 103
77
55
-
20
40
60
80
100
120
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
USD/IDR IDR/liter Brent price
Source: AKR Corporindo, Bloomberg
Post the subsidy reform, RON 88 (premium) is no longer under a fixed-price system with periodic evaluation depending on movements
of the exchange rates and oil prices
Post fuel subsidy removal, contribution from the general market segment should increase according to AKRA’s management
Historically, AKRA’s distribution volumes had the propensity to rise in 2Q-3Q as customers boost
production output post the rainy season
Based on our estimates, the fall in AKRA’s cost of gasoline has not been as steep as the drop in Brent prices in 4Q14-1Q15 due to IDR weakness
Bahana Securities – Equity Research – Oil and gas sector update
2014
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Exhibit 13. AKRA’s petroleum distribution margin, 1Q13-1Q15
USD/liter
7,739 7,162
7,918
8,950 9,299
8,774 8,671
7,513
5,484
8,418 7,967
8,812
10,000 10,310 10,030 10,019
9,064
6,937
262 317 247 528 529 687 764 896 901
-
2,000
4,000
6,000
8,000
10,000
12,000
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
ASP MOPS CM
Source: AKR Corporindo
MEDC: Sluggish operating performance; Revised down TP to IDR2,300 (from IDR2,800)
On 24 June 2015, Donggi-Senoro LNG (DSLNG), Indonesia‟s fourth LNG plant (exhibit 16), post Tangguh, Bontang and Arun,
saw its first gas distribution amounting to 145mmscfd from the Senoro field, run by a Joint Operating Body (JOB): Pertamina
Medco E&P Tomori Sulawesi. The first cargo shipment is expected in the next 30-40 days with the Senoro field gradually
producing natural gas until it reaches production capacity of 310mmscfd. Although the LNG market is currently in a downtrend
on a y-y basis (Platts Japan/Korea Marker June avg. down 41.3% y-y to USD7.60/mmbtu), we believe DSLNG could be a
positive catalyst for MEDC‟s performance once the oil and gas sector recovers. On the back of sluggish operating performance in
oil and gas sales in 1Q15 (exhibit 15), we expect MEDC to experience a tough 2015. While we make no changes to our earnings
forecasts and maintain our REDUCE rating, we revise down our DCF-based 12-month TP from IDR2,800 to IDR2,300 on the
back of a higher risk premium of 7% (prior: 6%), translating to 2015F PE of 27.7x. Upside risks to our call are higher-than-
expected oil and gas sales volumes and prices.
Exhibit 14. MEDC IJ 1Q15 results q-q y-y 1Q15/ y-y 3M15/ 3M15/ (USDm) 1Q14 4Q14 1Q15 (%) (%) 1Q15F 3M15 (%) 2015F Cons.
Sales 189 199 128 (35.8) (32.6) 117 128 (32.6) 18 16 Gross profit 99 72 50 (31.0) (49.6) 50 (49.6)
Operating expense 38 49 32 (35.3) (16.9) 32 (16.9)
Operating profit 60 23 18 (21.6) (70.5) 74 18 (70.5) 11 9
Other income/(expense) (16) (16) (14) 17.1 16.7 (14) 16.7
Taxation (37) (6) (5) 9.0 85.0 (5) 85.0
Minority interest (2) (0) (1) na (3,095.
6)
31.9 (1) 31.9
Net profit 3 1 (1) na na (146) (1) na (18) (4)
BS & ratio analysis 1Q14 4Q14 1Q15 3M14 3M15 2014A 2015F 2016F Gross margin (%) 52.1 36.3 39.0 52.1 39.0 36.1 36.0 36.1
Operating margin (%) 31.8 11.4 13.9 31.8 13.9 21.4 21.8 26.6
Net margin (%) 1.6 0.3 (1.1) 1.6 (1.1) 1.3 1.1 1.6
Inventory Days 44 27 53 44 53 29 28 28
Receivable Days 68 56 89 68 89 59 47 47
Payable Days 118 66 126 118 126 70 64 64
Total cash 374 207 274 374 274 207 319 193
Total debt 1,151 1,106 1,126 1,151 1,126 1,106 1,496 1,927
Net gearing (%) 85 99 93 85 93 99 186 244 Source: Company, Bahana forecasts, Bloomberg
AKRA experienced improved margins in 4Q13-1Q15 due to tighter control over pricing (no volume discounts) and customer
selections (e.g. greater cautiousness when dealing with coal companies)
Bahana Securities – Equity Research – Oil and gas sector update
2014
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Exhibit 15. MEDC’s oil and gas sales volumes, 1Q12 - 1Q15
(mn b/d) (bbtu/d)
155 154 153154
155 153
161 160156
134
150
141
98
29
3030
30
25 25
25
26
22
21
2222
20 95
105
115
125
135
145
155
165
20
22
24
26
28
30
32
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
Oil sales Gas sales
Source: MEDC Exhibit 16. Indonesia LNG plants
Source: Directorate General of Oil and Gas, 2012
Exhibit 17. Crude oil inventory, July 2014 – June 2015
(barrels)
340,000
360,000
380,000
400,000
420,000
440,000
460,000
480,000
500,000
DOE crude oil total inventory
Source: Bloomberg, Bahana
1Q15 oil-sales volumes declined 7% y-y, while gas sales plunged 37% y-y
DSLNG, Indonesia’s fourth LNG plant, making its debut in supplying the market on 24 June 2015
On the oil side, a 28% spike in crude oil inventory ytd is impacting oil prices, making for a tough recovery,
although ...
Bahana Securities – Equity Research – Oil and gas sector update
2014
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Exhibit 18. US rig counts, January 2014 – June 2015
(rig count)
0
500
1,000
1,500
2,000
2,500
US horizontal US vertical US directional
Source: Bloomberg, Bahana
PGAS: Not without risks; HOLD on 31% share price drop from recent peak
With PGAS functioning as a support for infrastructure development and a gauge for Indonesia‟s economic growth, its performance was hit on both sides in terms of supply and demand. On the demand side, 1Q15 industrial consumption fell 8% q-q to 773mmscfd on lower-than expected GDP growth (4.7% y-y) as well as a deceleration in electricity demand
growth (2.6% y-y vs 7.58% y-y in 1Q14). Domestic industries represented 97% of PGAS‟ sales. On the supply side, Conoco Phillips, one of PGAS‟s gas suppliers, reported a 7% q-q lower gas production output to 430mmscfd due to unfavorable sector performance. Currently, PGAS also faces policy risk, mainly on the possibility of the government lowering industrial gas selling prices. To help measure the impact of lower gas selling prices, we have conducted a sensitivity analysis (see exhibit 20). Based on our study, an ASP cut of 10% would impact PGAS‟ 2016F net income by 30%. Thus, we see downside risk to our call, although we maintain our HOLD rating for now as PGAS‟ share price has decreased 31% from its peak back in
January. Upside risk to our call would be better-than-expected gas-sales volumes due to Indonesia‟s improved economy. Exhibit 19. PGAS IJ 1Q15 results q-q y-y 1Q15/ y-y 3M15/ 3M15/ (USDm) 1Q14 4Q14 1Q15 (%) (%) 1Q15F 3M15 (%) 2015F Cons.
Sales 804 895 696 (22.2) (13.4) 123 696 (13.4) 19 19 Gross profit 297 363 223 (38.4) (24.8) 223 (24.8)
Operating expense 85 150 71 (52.8) (17.0) 71 (17.0)
Operating profit 212 212 153 (28.2) (27.9) 73 153 (27.9) 16 16
Net interest income/(expense) 1 (25) (15) (39.0) na (1,920.
7)
(15) na (1,920.
7)
Forex gain (expenses) (6) 32 (2) (107.4)
(107.4)
(61.5) (2) (61.5) Other income/(expense) 19 (31) 15 (147.8)
(147.8)
(24.3) 15 (24.3)
Taxation (49) (52) (40) (22.3) (17.2) (40) (17.2)
Minority interest (0) (5) 1 (112.2)
(112.2)
na
23,674.
3
1 na
23,674.
3
Net profit 177 131 109 (16.5) (38.1) 88 109 (38.1) 14 15
BS & ratio analysis 1Q14 4Q14 1Q15 3M14 3M15 2014A 2015F 2016F Gross margin (%) 36.9 40.5 32.1 36.9 32.1 43.0 39.8 39.6
Operating margin (%) 26.3 23.7 21.9 26.3 21.9 28.8 26.0 25.5
Net margin (%) 22.0 14.6 15.7 22.0 15.7 21.2 20.7 19.8
Inventory Days 3 7 8 3 8 7 6 3
Receivable Days 34 33 34 34 34 32 32 33
Payable Days 37 25 35 37 35 27 30 35
Total cash 1,170 1,216 1,150 1,170 1,150 1,216 1,227 1,299
Total debt 1,404 1,892 2,145 1,404 2,145 1,892 1,725 1,619
Net gearing (%) 9 23 33 9 33 23 15 9 Source: Company, Bahana forecasts, Bloomberg
Exhibit 20. PGAS sensitivity analysis, 2016F earnings
Average selling price (USD/mmbtu)
ASP changes (%)
Net income (USDmn)
Net income change (%)
9.24 - 656
8.32 -10 459 -30
7.39 -20 260 -60 Source: Bahana estimates
... prices have declined 6% despite a significant reduction in US rig counts
We estimate that for every 10% discount on gas ASP, PGAS’s 2016F
net income would drop by 30%
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Exhibit 21. Oil and gas: Policy risks
No. Policy Status Impact
1. Possible reduction on gas selling price
Plan Negative on PGAS
2. Permits simplification Plan Positive for investment landscape
3. Reduction of oil & gas blocks up for biddings
Plan Less exploration and lower production
4. Work contracts from production-to-revenue based
Plan Negative for MEDC
5. Gas agregator establishment Plan Positive impact for PGAS
6. Open access for gas pipelines Signed Limited impact for PGAS for now
Source: Bahana
Exhibit 22. Indonesia natural gas utilization, 2014
(%)
Export sales 46.5
Industry 19.2
Fertilizer 8.8
Power plant 14.0
Others 11.5
Source: SKK Migas
Exhibit 23. PGAS distribution volumes, 1Q13 – 1Q15
(mmscfd)
833827
808
824
876 866
860867
796
740
760
780
800
820
840
860
880
900
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
Distribution
Source: Perusahaan Gas Negara
Currently, The Ministry of Coordinating Economic Affairs plans to push discussions on gas price reduction to 2016
According to SKK Migas, around
53.5% of Indonesia’s natural gas utilization is distributed to domestic markets, making ...
... weaker industrial activities
having affected PGAS distribution volumes, as ...
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Exhibit 24. PGAS industrial customers, 1Q15
Source: Perusahaan Gas Negara
Exhibit 25. Oil and gas sector summary
MEDC PGAS AKRA SECTOR
2015F 2015F 2015F
Recommendation REDUCE HOLD BUY
Target price 2,300 4,000 6,100
Price 2,510 3,980 5,300
Upside/downside (%) -8% 1% 15%
Shares outstanding (m) 3,339 24,213 3,905
Market cap (IDRb) 8,464 103,632 22,062 134,159
Market cap (USDm) 635 7,780 1,656 10,071
3m turnover (IDRb)/(USDm) 5.5/0.4 4.6/0.3 22.5/1.7
30avg daily volumes (m) 1.7 33.7 0.9
PE (x) 30.2 11.8 22.6 -
PE (x) @TP 27.7 11.8 26.1 206.57
PBV (x) 0.7 2.5 3.5 1.22
EV/EBITDA (x) 6.4 7.0 16.2 6.09
Net gearing (%) 104.5 0.2 49.5
BVPS (IDR/share) 3,395 1,606 1,533 1,383.00
EPS (IDR/share) 83 338 234 84.24
EPS growth (%) -18 -13.2 12.8 15.83
ROAA (%) 15.2 10 6.2 3.34
ROAE (%) 25.2 21.8 14.2 4.91
Growth (%)
Revenue -3.5 -1.2 -7.2 (2.33)
Gross profit -3.7 -14.8 12.6 (9.59)
Operating profit -1.9 -19.9 17.6 (12.60)
Net profit -20.0 -13.2 12.8 (9.35)
Margin (%)
Gross profit 36.0 37.1 9.4 32.48
Operating profit 21.9 23.3 6.0 20.37
Net profit 1.2 18.6 4.4 15.17
Source: Bloomberg, Bahana estimates
Based on stock prices as of 10 July 2015
... domestic industrial consumption represented 97% of PGAS’ sales
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AKR Corporindo (AKRA)
Source: Company, Bahana estimates
Arandi Nugraha ([email protected]) +6221 2505081 ext. 3619
Year to 31 December 2012 2013 2014 2015F 2016F
PROFIT & LOSS (IDRb)
Sales 21,674 22,338 22,468 20,845 24,991 Gross profit improvements on higher sales volumes
Gross profit 1,261 1,368 1,732 1,950 2,093 EBITDA 1,092 1,020 1,396 1,556 1,950 Depreciation 228 252 333 306 636 EBIT 864 768 1,063 1,251 1,314 Net interest income/(expense) (17) (38) (77) (121) (187) Forex gain/(losses) - - - - - Other income/(expense) (37) 3 8 (2) 14 Pre-tax profit 810 733 993 1,127 1,141 Taxes (191) (117) (203) (242) (268) Minority interest 30 33 20 28 30 Net profit 649 648 810 914 903
BALANCE SHEET (IDRb) Cash and equivalents 1,885 820 897 854 871 Cash maintenance amid ...
Trade receivables 3,224 4,352 4,351 4,533 5,331 Inventories 1,415 1,823 935 710 997 Fixed assets 3,177 4,227 4,390 4,770 6,419 Other assets 2,086 3,411 4,220 3,812 3,636 Total assets 11,788 14,633 14,792 14,680 17,254 Interest bearing liabilities 3,033 5,146 4,126 3,815 4,314 Trade payables 3,959 3,735 4,067 3,340 4,716 Other liabilities 586 389 637 579 590 Total liabilities 7,578 9,270 8,831 7,734 9,621 Minority interest 173 590 571 961 1,061 Shareholders' equity 4,037 4,773 5,391 5,985 6,572
CASH FLOW (IDRb) EBIT 864 768 1,063 1,251 1,314
... elevated level of 2016F
capex amounting to IDR1.4tn for power plant project
Depreciation 228 252 333 306 636 Working capital (853) (1,828) 1,657 (681) 136 Other operating items (215) (56) (267) (337) (411) Operating cash flow 25 (863) 2,786 538 1,675 Net capital expenditure (1,225) (2,335) (1,245) (273) (2,285) Free cash flow (1,201) (3,198) 1,542 265 (610) Equity raised/(bought) - - - - - Net borrowings 2,034 2,113 (1,019) (312) 500 Other financing (278) 20 (446) 4 127 Net cash flow 555 (1,065) 77 (42) 17 Cash flow at beginning 1,330 1,885 820 897 854 Cash flow at end 1,885 820 897 854 871
RATIOS ROAE (%) 16.5 13.5 14.3 14.2 12.4
Gross margin improvement, partly helped by IDR weakness
ROAA (%) 6.4 4.9 5.5 6.2 5.7 Gross margin (%) 5.8 6.1 7.7 9.4 8.4 EBITDA margin (%) 5.0 4.6 6.2 7.5 7.8 EBIT margin (%) 4.0 3.4 4.7 6.0 5.3 Net margin (%) 3.0 2.9 3.6 4.4 3.6 Payout ratio (%) 18.3 65.0 50.0 40.0 40.0 Current ratio (x) 1.4 1.2 1.1 1.2 1.2 Interest coverage (x) 15.6 6.9 7.7 6.7 5.2 Net gearing (%) 28.4 90.6 59.9 49.5 52.4 Debts to assets (%) 25.7 35.2 27.9 26.0 25.0 Debtor turnover (days) 54 70 70 78 77 Creditor turnover (days) 70 64 71 64 74 Inventory turnover (days) 25 31 16 14 16
MAJOR ASSUMPTIONS
ASP (IDR/liter) 8,048.4 8,698.9 9,673.7 6,625.7 7,175.0 Improvement on petroleum sales volumes as consumers purchase non-subsidized fuel
growth (%) 10.0 8.1 11.2 (31.5) 8.3
Petroleum sales vol. („000kl) 2,149.0 2,031.5 1,831.2 2,146.2 2,444.7
growth (%) 5.4 (5.5) (9.9) 17.2 13.9
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Medco Energy Year to 31 December 2012 2013 2014 2015F 2016F PROFIT & LOSS (USDmn) Sales 904 887 751 725 872 Gross profit 402 365 271 261 336 EBITDA 340 349 258 247 315 Depreciation 79 102 97 88 84 EBIT 260 248 161 158 232 Net interest income/(expense) (95) (77) (71) (86) (110) Forex gain/(losses) - - - - - Other income/(expense) 32 21 22 26 42 Pre-tax profit 197 192 111 98 164 Taxes (156) (154) (98) (86) (144) Minority interest (6) (3) (4) (3) (5) Extraordinary gain / (loss) (22) (22) 1 - - Net profit 13 12 10 8 14
BALANCE SHEET (IDRbn) Cash and equivalents 525 270 207 319 193 S-T investments 312 253 269 269 269 Trade receivables 147 144 102 93 112 Inventories 37 37 39 36 41 Fixed assets 120 86 89 85 81 Other assets 1,515 1,742 1,998 2,089 2,488 Total assets 2,656 2,532 2,702 2,890 3,184 Interest bearing liabilities 1,350 1,032 1,186 1,496 1,927 Trade payables 95 95 92 81 94 Other liabilities 367 509 504 622 502 Total liabilities 1,813 1,635 1,782 2,199 2,523 Minority interest 8 12 10 13 18
Shareholders' equity 835 885 911 678 643
CASH FLOW (IDRbn) EBIT 260 248 161 158 232 Depreciation 79 102 97 88 84 Working capital (9) (30) 35 (4) (12) Other operating items (25) (6) (37) 118 (42) Operating cash flow 306 313 256 360 261 Net capital expenditure (316) (207) (338) (232) (311) Free cash flow (10) 105 (83) 128 (49) Equity raised/(bought) - - - - - Net borrowings 69 (302) 194 310 431 Other financing (263) (59) (174) (412) (260) Net cash flow (204) (255) (63) 26 122 Cash flow at beginning 729 525 270 207 233 Cash flow at end 525 270 207 232 355
RATIOS ROAE (%) 1.5 1.5 1.1 1.1 2.1 ROAA (%) 0.5 0.5 0.4 0.3 0.5 EBITDA margin (%) 37.6 39.4 34.3 34.0 36.2 EBIT margin (%) 28.8 27.9 21.4 21.9 26.6 Net margin (%) 1.4 1.4 1.3 1.2 1.6 Payout ratio (%) 25.7 40.3 40.0 40.0 40.0 Current ratio (x) 2.6 2.0 1.6 1.4 1.7 Interest coverage (x) 2.7 3.2 2.2 1.8 2.1 Net gearing (%) 98.8 86.1 107.5 186.2 244.3 Debts to assets (%) 50.8 40.8 43.9 53.3 60.5 Debtor turnover (days) 59 59 49 47 47 Creditor turnover (days) 69 66 70 64 64 Inventory turnover (days) 27 26 30 28 28
MAJOR ASSUMPTIONS ASP oil (USD/barrel) 111 108 97.8 60.0 64.7 Growth (%) (2.0) (2.8) (9.6) (38.7) 7.9 ASP gas (USD/mmbtu) 3.8 5.1 5.6 5.9 6.6 Growth (%) 1.3 33.6 9.1 5.0 12.6 Production per day (MBOED) 67 62 55 66 75 Avg. exchg. rate (IDR/USD) 9,374 10,819 12,385 12,700 12,700
Source: Company, Bahana estimates
Lower 2015F earnings on expected lower oil price
2015F total assets should slightly increase on …
... capex amounting to USD232m in 2015F
Higher net gearing in 2015-16F ...
... to support increased oil and
gas production
Arandi Nugraha ([email protected]) +6221 250 5735 ext: 3619
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Perusahaan Gas Negara Year to 31 December 2012 2013 2014 2015F 2016F PROFIT & LOSS (USDmn) Sales 2,580 3,002 3,409 3,418 3,793 Gross profit 1,472 1,418 1,465 1,297 1,409 EBITDA 1,208 1,265 1,269 1,207 1,232 Depreciation 189 331 286 379 354 EBIT 1,018 934 982 828 878 Net interest inc./(expense) 6 5 (50) (57) (55) Forex gain/(losses) 50 84 47 47 47 Other income/(expense) 74 43 (1) 59 79 Pre-tax profit 1,148 1,066 979 878 949 Taxes (233) (228) (231) (199) (237) Minority interest (24) (33) (25) (20) (21) Net profit 891 805 723 659 690
BALANCE SHEET (USDmn) Cash and equivalents 1,567 1,319 1,216 1,100 1,151 S-T investments 117 87 93 93 93 Trade receivables 259 280 325 328 364 Inventories 2 15 65 23 26 Fixed assets 1,694 2,246 3,902 4,255 4,421 Other assets 269 371 615 613 612 Total assets 3,908 4,318 6,215 6,412 6,666 Interest bearing liabilities 939 1,026 1,892 1,725 1,619 Trade payables 189 158 138 230 259 Other liabilities 426 462 1,222 1,244 1,259 Total liabilities 1,553 1,647 3,252 3,200 3,137 Minority interest 157 182 196 196 196 Shareholders' equity 2,197 2,489 2,767 3,016 3,332
CASH FLOW (USDmn) EBIT 1,018 934 982 828 878 Depreciation 189 331 286 379 354 Working capital 160 37 368 154 5 Other operating items (201) (473) (740) (169) (188) Operating cash flow 1,166 829 897 1,191 1,049 Net capital expenditure (148) (866) (1,896) (731) (519) Free cash flow 1,019 (37) (999) 460 530 Equity raised/(bought) (35) - - - - Net borrowings (154) 87 866 (167) (106) Other financing (404) (298) 30 (409) (374) Net cash flow 426 (248) (103) (115) 50 Cash flow at beginning 1,141 1,567 1,319 1,216 1,100 Ending cash flow 1,567 1,319 1,216 1,100 1,151
RATIOS
ROAE (%) 45.3 34.3 27.5 22.8 21.8 ROAA (%) 24.4 19.6 13.7 10.4 10.6 Gross margin (%) 57.1 47.2 43.0 38.0 37.1 EBITDA margin (%) 46.8 42.1 37.2 35.3 32.5 EBIT margin (%) 39.5 31.1 28.8 24.2 23.2 Net margin (%) 34.5 26.8 21.2 19.3 18.2 Payout ratio (%) 51.7 56.8 56.8 56.8 56.8 Current ratio (x) 4.2 2.0 1.7 1.3 1.4 Interest coverage (x) 47.2 42.7 13.0 10.0 11.1 Net gearing (%) nc nc 0.2 0.2 0.1 Debts to assets (%) 24.0 23.8 30.4 26.9 24.3 Debtor turnover (days) 37 34 35 35 35 Creditor turnover (days) 62 36 40 40 40 Inventory turnover (days) 1 3 4 4 4
MAJOR ASSUMPTIONS Distribution vol. (mmscfd) 807 824 865 844 947 growth % 1.5 2.1 5.0 (2.5) 12.2 Distr. ASP (USD/mmbtu) 8.0 9.2 9.2 9.4 9.4 growth % 14.1 14.5 0.1 0.2 -
Source: Company, Bahana estimates
Arandi Nugraha ([email protected]) +6221 2505081 ext. 3619
Sales to decline on lower distribution volumes in 2015F
Trade receivables should
remain intact, with potential upside in 2016F on higher distribution volumes if the economy were to recover
Capex allocation for transmission and distribution projects
Lower gross margin on LNG purchases
Lower distribution volumes in 2015F, before rising in 2016F on economic improvement
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Research: +62 21 250 5081
Andre Natala Susanto
[email protected] Associate
ext 3601
Chandra Widjanarka
[email protected] Analyst
ext 1252
Harry [email protected]
Senior Associate DirectorHead of Research
Strategy, Consumer
ext 3600direct: +62 21 250 5735
Dealing Room: +62 21 527 0808 (Foreign Institutional)
Teguh Hartanto
[email protected] Director
Deputy Head of Research
Banks, Cement, Aviationext 3610
Leonardo Henry Gavaza, [email protected]
Senior Research ManagerAuto, Heavy equipment, Telco
ext 3608
Chandra Widjanarka
[email protected] Analyst
ext 1252
+62 21 250 5508 (Domestic Institutional)
Ashish Agrawal
[email protected] President
Institutional Equity Salesext 2550 / 2553
Reynard Poernawan
[email protected] Equity Sales
ext 2528
John M. Dasaad
[email protected] Sales
ext 2549
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[email protected], Surabaya Branch
ext 7250
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[email protected] Sales
ext 2548
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[email protected] President
Institutional Equity Salesext 2552
Michael W Setjoadi [email protected]
Research AnalystConsumer, Poultry
ext 3613
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[email protected] Sales
ext 2543
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[email protected] AnalystIndustrial Estate
ext 3614
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[email protected] Trader
ext 2525
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[email protected] Executive
ext 2541
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[email protected] Trader
ext 2554
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[email protected] Associate
ext 3693
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[email protected] Analyst
Propertyext 3620
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[email protected] AnalystTransportation
ext 3616
Wendy [email protected]
Research AnalystConsumer, Media
ext 3606
Research AnalystCement, Infratructure,Toll roads
ext 3605
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[email protected] Analyst
ext 3609
+62 31 535 2788 (Surabaya Branch)
Arandi [email protected]
Research AnalystCoal, Metals, Oil & Gas
ext 3619
Head of Equity Sales & TradingInstitutional Equity Sales
ext 2545
Made Ayu Wijayati
[email protected] Executive
ext 3607
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[email protected] Associate
ext 3611
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[email protected] Associate
ext 3601
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[email protected] Manager
ext 3612
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ext 3618
Bagus Adi Yoga Prawira
[email protected] Associate
ext 3604
Head Office Surabaya Branch
Graha Niaga, 19th Floor Wisma BII, Ground Floor
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Indonesia Indonesia
Tel. 62 21 250 5081 Tel. 62 31 535 2788
Fax. 62 21 522 6049 http://www.bahana.co.id Fax. 62 31 546 1157
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Bahana Securities – Equity Research – Oil and gas sector update
2014
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