BNP Paribas PGAS Doubled gas supply means more growth

Doubled gas supply means more growth
Higher supply to Muara Tawar power plant The growth story for PGAS is cemented by a higher supply to PLN.Starting last week, gas supply to the Muara Tawar power plant doubled to 170-180 mmscfd, inline with our expectations. The higher supply to PLN
will be the main boost to revenue this year, and we expect total supply to PLN to reach 210 mmscfd or 30% of total volume this year, supported by additional supply to Cilegon and Tanjung Priok power plants in 2H09. In our view, the main growth factors for PGAS’ 2009 earnings will be higher distribution volume and IDR depreciation. Expectations of ASP increase are minimal, at 1.8% to USD5.60/mmbtu this year.

Short term risk – 2008 forex loss – BUY maintained
Short term risk on PGAS’ price performance would be higher-thanexpected forex loss on PGAS’s USD and JPY debt. While we already reserved significant IDR1.3t forex loss in our 2008 forecast, our bottom line is 20% below consensus forecast. Any higher-than-expected loss could trigger selling pressure. However, we believe this is an opportunity to accumulate shares, given PGAS’ solid LT value.

We maintain our BUY call and PGAS remains as one of our top pick given its solid business model. Our DCF based TP of IDR2,600 offers 22.4% upside.