• Perusahaan Gas (PGN) and the industry association have come into agreement during a meeting with government on the adjustment of gas sales price, the gas surcharge and guarantee of payment.
• Starting from April 1, PGN will start new gas pricing for all industries and commercial costumers in West Java area. Gas selling price for customers using more than 300,000 m3/month is US$4,30/MMBTU+Rp750/m3 or equivalent to approximately US$6,37/MMBTU.
• The company will also implement the application of surcharge amounting to 300% for the volume exceeding maximum contract and payment guarantee to cover 2 months worth of gas usage for all customers.
• This selling price adjustment beat our expectations as we had only expected a 5% hike on selling price in 2H10. This action surely will affect our earnings forecast for PGN with huge potential upgrade for 2010F and 2011F earnings by 6% on the revenue and 13% on the bottom line.
• This action may also prompt our target price on PGN higher by 11% to reach Rp4.939/share. We still maintain Buy on PGN with current 2010F PER of 16.4x and EV/EBTIDA of 10.1x.
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