DBS Perusahaan Gas Negara (Rp3,700; Rec and TP under review; PGAS IJ)

3Q09 earnings above estimate

Perusahaan Gas Negara (PGAS) reported its 3Q09 earnings of Rp1,154bn, down 43% q-o-q and came in above our estimate. Earnings decrease mostly caused by lower FX gain in 3Q09 compared to 2Q09 period. Stripping out the FX figure, core earnings increased modestly by 4% q-o-q.

Total revenue is flat q-o-q while production cost is lower by 2% q-o-q, thus gross profit also edged up slightly by 2% q-o-q. Flat top line performance was due to relatively flat gas sales price and tariff coupled with only modest growth in volume. Gas distribution rose 3% q-o-q while gas transmission volume remained flat.

PGAS net gearing in 3Q09 remained firm at 0.70x while its cash balance stood at Rp5,889bn with an operating cash flow of Rp5,385bn.

We are currently reviewing our forecasts to incorporate better than expected results, notably on the gas distribution volume which was higher than our estimate and put our target price and recommendation under review.