Perusahaan Gas Negara
Edwin pang / Research Analyst / 852 2101 6406 / [EMAIL PROTECTED]
Rating: Assuming coverage with OUTPERFORM
Target Price: Rp16,209 (13,680)
EPS: Up
Upside: 33%
New report: Back to basics
· PGN may have lost the full autonomy of setting industrial gas prices,
but rising domestic gas prices are inevitable in a higher for longer oil price
environment and under Indonesia energy diversification goals.
· We estimate up to 90% of Indonesias potential gas resource (~15-17
bcf/d) may be left untapped if the gas price cap is set below US$9/mmbtu. Our
gas price cap is set at US$9/mmbtu.
· We assume the current gas price of US$5.5/mmbtu to rise gradually to
reach the cap over the period of 8 years, taking into account its loss of
pricing autonomy and regulatory risks.
· The stock has underperformed YTD; execution risks are priced in as
SSWJ is completed by 4Q08. Market is likely to focus on its secured volume
driven earnings growth as we move into 2008.
· We assume coverage of PGN with an OUTPERFORM rating, with a 12-month
DCF based TP of Rp16,209/share. Our TP has room for upside if 1) gas prices
rises faster than our assumption, 2) if the oil price cap is set higher than
US$9.0/mmbtu.
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