NISP Flat growth for Perusahaan Gas Negara (PGAS, Rp4,000)

· During 1H10, Perusahaan Gas Negara revenue was up by 5.7% YoY to Rp 9.52tn from Rp9.01tn. However net income was unchanged from Rp3.21tn from Rp3.19tn. The results satisfied market expectation, making up 48.7% and 51.0% of full year revenue and net income expectation.
· On quarterly basis, sales were strong, growing by 12.3% QoQ to Rp5.04tn. However net income declined by 19% QoQ to Rp1.43tn as the company recorded forex loss and higher interest expense in this quarter.
· Partial factor to the flat growth was due to the company’s revenue which were in US$, had been adversely affected by the strengthening Rupiah. However management admits that due to unchanging supply, it also expects flat growth or single-digit growth for the full year.
· PGAS is trading at 2011F PER of 12.6x and EV/EBITDA of 7.5x.