New gas price
Following the company’s meeting with the Ministry of Industries’ officials and Industry Associations, PGAS announced that by April 1, 2010 it will start new gas pricing for all industrial and commercial customers. New gas price will be equivalent to about US$6.36/mmbtu (or US$4.30/mmbtu + Rp743/m3). The new gas price reflected about 15.6% increase from US$5.5/mmbtu. This will be applied for customers with monthly usage of more than 300,000 m3.
Location and volume-based pricing
The adjustment will be in accordance to the location of the customers and the monthly gas utilization, PGAS said. We are yet to obtain the details of tariff per
location. Note that the company’s SBU distribution area 1 consisting of Banten, West Java, and Jakarta is its largest customers accounting for 70.6% of total 9M09 gas distribution.
Room for adjustment
Given the different cost of gas from the LNG-sourced and the non-LNG, we envisage room for price adjustment. PGAS has planned of LNG receiving terminals in West Java (team up with Pertamina) and North Sumatra (100%) while we also understand that Pertamina may build LNG receiving terminal in East Java.
FY09 results
We expect FY09F net profit to hit Rp4,903b (FY08: Rp634b) and core profit of Rp4,041b (FY08: Rp2,448b) on revenues of Rp17,145b (FY08: Rp12,794b). At the meantime, market consensus called for FY09F revenues and net profit of Rp17,321b and Rp5,735b, respectively.
Maintain BUY, target price upped to Rp4,850
Factoring the new gas price, we therefore raise our year-end TP to Rp4,850 and maintain our BUY recommendation on PGAS. Starting on April 2010, we will transfer our coverage to Andrey Wijaya.
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