Elaborated pointers from Morgan Stanley reiterating underweight/sell PGAS last week, July 8.
*Gas constraints and 2012 earnings risk*: Our 2012 EPS estimate is 4% lower than consensus and assumes gas volumes of 895mmscfd. However, we see up to 8% additional downside to our EPS forecast if the 100mmscfd of gas earlier diverted from ConocoPhillips does not return in 2012. We expect new gas supplies in Indonesia to ramp up only in 2013, and with current basins maturing, gas sourcing will remain issue for PGAS in the medium term. *Incremental gas at lower ROE*: PGAS is looking to obtain additional gas through liquefied natural gas supplies, coal bed methane, and acquiring stakes in E&P fields. We estimate the gas ROE from these sources would be a low 12-15%, versus PGAS’s current average of 46%. Also, PGAS’ current transmission business generates an estimated 7% ROE, below its 15.7% COE. *Defensive but unattractive valuations/EBITDA growth*: PGAS, for which we estimate EBITDA growth at a 7% CAGR, 2010-13, trades in line with comparables (which have an estimated 15-18% growth) in P/E and EV/EBITDA terms. Hence, we expect the stock to underperform the broader Indonesian market and other Asian utilities. '+' On Tue, Jul 12, 2011 at 9:01 AM, positif01 <[email protected]> wrote: > Defensive but unattractive valuations. > > '+' >
