Credis Suisse PERUSAHAAN GAS (PGAS): Above 2Q distribution volume – Upgrade EPS

At Rp4,000- PGAS is trading on 15.2x-13.2x 2010F-11F, 4.0% 2011F Dividend Yield, and implying 33% upside to DCF Rp5,300, therefore we reiterate Buy over 12-months horizon given resilient/defensive earnings quality, strong cash-flow, with next ASP increase is expected in 2012F!

· Fonny Surya (Daily attached): PGAS reported 1H10 distribution volume at 827 mmscfd, implying an average distribution volume of 813 mmscfd for 2Q10, a 3% QoQ decrease, but a 3% increase YoY. PGAS’ volumes came slightly ahead of our forecasts as we had assumed non-recovered volumes from Conoco. Conoco’s volumes had come short, with an average of 275 mmscfd in the months of March-May due to an allocation issue, but has recovered to average of 330 mmscfd in June and July.
· Thus, we revised our distribution volumes from Conoco to average between 350-375 mmscfd from the previous average at 275 mmscfd. We have also revised our IDR/USD exchange rate assumption from Rp9,400 to Rp9,000 for the medium- long-term. Therefore, we upgrade earnings by 5-8% and increase our DCF-based target price from Rp5,000 to Rp5,300. Given PGAS’ strong fundamentals, driven by strong demand, we remain positive on PGAS and maintain our OUTPERFORM rating.