15% increase in gas price effective April 1, 2010 subdued lower distributed gas volume (-3.3%QoQ) and giving 12.7% qoq increase in revenue and 16.4% QoQ in operating profit. Post the impact of increase, no short-term catalysts until mid-2012 where PGAS expected to have 180MMSCFD (equity accounted) new supply from West Java FSRT JV with Pertamina. We upgraded our estimates on lower than estimated COGS, resulted in new target price of Rp5,260/share. Admittedly, catalysts are limited, and therefore news on progress in the FSRT project are much needed.
A thicker margin. PGAS recorded a gross margin of 65.7% in 2Q10, up from 60.8% in 1Q10, and 59.3% in 1H09. An increase in average gas price of 8.6% in Q2 to US$6.84/MMBTU helped beefed up the margin. 20% composition of IDR in PGAS tariff resulted in higher ASP in USD terms compared with US$6.3/MMBTU, PGAS indicated. Transmission and fiber optics was up 8.5% QoQ to Rp424bn.
No short-term catalysts seen. PGAS is currently implementing a thorough FSRT (Floating Storage Regasification Terminal) tendering process to avoid any tender dispute. Due to this, a discount have to be applied for the 2012 target of completion to prevent over optimistic expectation. There were also scant progress in gas fields’ acquisitions and additional supplies from gas producers. PGAS CEO, Hendy P. Santoso quoted by Bloomberg, said that he saw limited additional supply in 2011
Rising target price. We revised down our cost of gas on improved gas supply from Conoco Phillips (CoPhi). As CoPhi volume has improved, cost of gas have to be lowered since CoPhi’s gas is priced at US$1.85/MMBTU which is lower than average cost of gas of US$2.53/MMBTU. Our new target price of Rp5,260/share is 13.1% higher than our previous target price.
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