Credit Suisse: Perusahaan Gas Negara - Strong 2Q10 results on higher selling prices

● PGAS posted 2Q10 recurring net profit of Rp1,885 bn, up 35% QoQ and 56% YoY mainly due to higher selling prices. Its reported net profit of Rp1,435 bn in 2Q10 declined 19% QoQ and 27% YoY due to forex and derivative losses.
● The recurring net profit was above our expectation, at about 53% of our 2010 forecast (and 51% of the consensus estimate), as we expect a better 2H10. Gas ASP of US$6.83 in 2Q10 was above our forecast of US$6.4, while the average gas blended cost of US$2.54 was in line with our 2010 forecast. The positive impact of higher ASP was partially offset by weaker 2Q distribution volumes of 813 mmscfd, down 3% QoQ.
● We expect higher distribution volumes in 2H10 due to a recovery in Conoco volumes. Since June 2010, Conoco volumes have recovered to an average of 340 mmscfd, versus its 2010 contract of 350 mmscfd.
● We increase our forecast for average realised selling price to US$6.6/mmbtu, based on higher realised selling prices achieved in 2Q10. We maintain our positive view and our OUTPERFORM rating on PGAS and our DCF-based target price of Rp5,300.