Mansek Excelcomindo :1H10 net income up 87%yoy,above ours and consensus (EXCL,Rp4,750,Buy,TP:Rp4,300)

XL Axiata posted in-line top-line of Rp8.33tn,while overachieving on the bottom-line to Rp1.32tn (+87%yoy).There were some cost improvements;the growth in operating costs was only at 8%yoy while top-line grew by 35%yoy.On operating statistics,1H10 subscriber base grew to 35.2mn (+43%yoy, +7%qoq),ARPU at Rp34,000 (6%yoy,-3%qoq).Due to higher than expected performance,we are currently reviewing our forecasts and price objective with an imminent upward bias. Currently,the stock trades at PER10F-11F of 18.2x and 14.1x.

Mandiri Sekuritas Perusahaan Gas : Conoco – Chevron sign gas sales agreement (PGAS, Rp3,825, Buy, TP:Rp4,650)

GSA which will be signed May 18, 2010 agreed on 400 MMSCFD supply with US$0.47/MMBTU toll fee. The agreed supply is higher than previous agreement of 322 MMSCFD. The additional supply is done at the expense, we believe, of PGAS which saw its inflow from Conoco falling to 250-260 MMSCFD, from previously 400 MMSCFD expected. We are still waiting for the comment from PGAS, and whether the 70 MMSCFD balance will be added to PGAS (from reduction of 150 MMSCFD PGAS supply, and additional 80 MMSCFD to
Chevron).

Mandiri Sekuritas Perusahaan Gas : Lowering the volume target? (PGAS, Rp4,150, Neutral, TP:Rp4,650)

In a hearing with House of Representatives yesterday, PGAS, CEO Hendi Prio, is mentioning about a target which is the same as last year, 700-800 MMSCFD. The target is below current guidance of 800-900 MMSCFD. PGAS sold 792 MMSCFD in 2009. Our current model is based on 810 MMSCFD of volume distributed. At Rp4,150, PGAS is trading at 19.2x and 18.1x PER10F and PER11F respectively according to our estimates. We are waiting for company confirmation on the new guidance, however we unlikely change
our forecasts as our current forecasts already 17.4% and 24.5% lower than consensus estimates for FY10 and FY11 earnings.

Mandiri Sekuritas Perusahaan Gas : Pertamina, PGN Form Venture for Terminals, no end to Conoco Phillips shortage (PGAS, Rp4,125, Neutral, TP:Rp4,650)

􀂄 State oil and gas company PT Pertamina and state gas-distribution company Perusahaan Gas Negara have established a joint-venture company to operate a floating terminal in West Java for the receiving and regasification of liquefied natural gas, as well as two future terminals in Medan and East Java. The new company, PT Nusantara Regas, will play a significant role in meeting the rapidly growing domestic demand for gas for electricity generation as well as the manufacturing of fertilizer and related products. Pertamina owns 60% of the company, while PGN owns the remainder. The authorized capital of Nusantara Regas is Rp2tn (US$222mn). The paid-up capital is Rp 500bn. The capacity of the terminal in West Java is around 3 million tons of gas per year and the terminal could begin operating before the end of 2011 (Jakarta Globe)

􀂄 PGN also plan to acquire two gas fields worth US$350mn and has completed the due diligence process. PGN CEO expects to complete the acquisition in 2H2010. No details on specifics of the two gas fields. (www.koran-jakarta.com)

􀂄 Amid a shortage of gas to fuel its power plants, state electricity company Perusahaan Listrik Negara may see its profit fall by 38.6% this year, the utility announced on Wednesday. Setio Anggoro Dewo, PLN’s finance director, told reporters that the company was penciling in potential losses of Rp4tn(US$444mn) on gas shortages.

􀂄 Additionally, local media reported that PLN suffered a shortfall because of a reduced supply from state company Perusahaan Gas Negara. PGN has also suffered shortfalls after two other providers — ConocoPhillips and Pertamina Hulu Energy — cut their supply. ConocoPhillips is only able to deliver 250 MMSCFD of gas from its previous supply volume of 396 MMSCFD. Murtaqi Syamsuddin, PLN’s director of risk management, said the gas shortage could be seen at the Muara Tawar plant in Bekasi, where the supply has fallen from 230 BBTUD (207 MMSCFD) to less than 100 BBTUD (90 MMSCFD). “The gas shortage at the PLN power plant in Muara Tawar itself could cause a loss of Rp 2.4 trillion,” Setio said. (Jakarta Globe)

Mandiri Sekuritas Bumi : FY09 net income below ours and consensus on amortization of US$275mn deferred stripping cost (BUMI, Rp2,300, Buy, TP:Rp4,136)

􀂄 Bumi Resources, said net profit in 2009 fell to $190.5mn because of a $275mn charge on deferred mining expenses. 2009 profit was down by 49% compared with the company’s adjusted $371.7mn net profit in 2008. Included back US$275mn deferred stripping cost, and apply the same tax rate (45%), Bumi 2009 net income was US$434mn, higher than consensus forecast of US$406mn.

􀂄 Bumi’s production volumes rose 19.5% to 63.1Mt, with volume sales of 58.4Mt (vs 2008: 51.5Mt), while its costs decreased to $28.3/ton from $33.11 in 2008. However, a lower average sales price in 2009, of $61/ton, down from $73/ton in 2008, contributed to a 4.7% drop in revenue to $3.22bn. In 2010 Bumi is aiming to sell 64Mt of coal at an average price $67 /ton. In 1Q10 Bumi has produced 16 Mt, up 41.6% from the same period in 2008. As to what Bumi can make in 2010 net income, that really depends on their plan to below operating line activities such as plan to reduce debt of US$1.1bn through debt to equity swap and the placement of its subsidiary (Bumi Resources Mineral, a non-coal holding company).

Mandiri Sekuritas Perusahaan Gas : Price increase did not suffice potential increase in COGS (PGAS, Rp4,175, Neutral, TP:Rp4,650)

􀂄 PGAS formally announced the increase of an average 15% (our calculation is 15.8%) from US$5.49/MMBTU to US$6.36/MMBTU. However, post coverage of gas shortage (with several assumptions), we conclude that the increase is just enough to cover the average increase in cost of gas.

􀂄 Assumptions that we use: a flow of 900 MMSCFD (maximum flow previously guided by PGAS), a deficit of 150 MMSCFD (as stated by PGAS CEO in various sources, today). We use US$2.6/MMBTU as average cost of gas for 750 MMSCFD (current flow with low cost, a cost PGAS has for 900 MMSCFD if there is no shortage), and US$5.4/MMBTU as gas price to cover the deficit. Our calculation showed an increase in average cost of gas from US$2.6MMBTU to US$3.07/MMBTU. That is an increase of 17.9%.

􀂄 Coupled with strengthening Rupiah we might saw a decline in profits. As PGAS charged in US$, and Rupiah 1Q10 (9264/US$) was 11% stronger than FY09 average of 10,396, we might see a drop in operating profits. Therefore it emphasizes our Neutral recommendation for PGAS. At Rp4,175, PGAS is trading at 19.6x and 18.4x FY10F and FY11F PER, respectively.

Mandiri Sekuritas Perusahaan Gas : Tariff will increase 15% from April 1, 2010, will input price follow (PGAS, Rp4,225, Neutral, TP:Rp4,650)

􀂄 In a mediation facilitated by Ministry of Industry, PGAS stood on its plan to raise its gas tariff by an average of 15%. PGAS applied a different pricing to different industry e.g. food and beverage industry tariff was US$3.8/MMBTU now US$4.1/MMBTU, while steel industry now is US$6.7/MMBTU. PGAS reasoned that its input cost now is US$5/MMBTU. PGAS will also apply a surcharge of 300% for gas consumed exceeding the quota, and PGAS required two months upfront payment (Investor Daily)

􀂄 As has been written in our note yesterday, we are confidence of PGAS ability to raise its tariff. However, now our concerns have moved on to the supply availability and potential threat of input price increase. Conoco Phillips 400 MMSCFD supply to PGAS was priced at US$1.85/MMBTU signed in 2007. PGAS would be the least priority for Conoco to supply as their price is the cheapest. PGAS can not demand the agreed supply as the agreement is based on the gas availability. We have a Neutral recommendation for PGAS. At Rp4,225/share, PGAS is traded at 19.8x, and 18.7x PER10F and PER11F, respectively

Mandiri Sekuritas Perusahaan Gas : Cancels its plan to ration gas among Indonesian industries (PGAS, Rp4,250, Buy, TP:Rp4,350)

􀂄 Following the government’s intervention, state-owned gas company Perusahaan Gas Negara (PGAS) has backed down from a plan to reduce the amount of natural gas it allocates to domestic industry and to charge them drastically higher prices if they wanted to buy more than their allotted amount. Benny Wahyudi, director general of agriculture and chemical industries at the Industry Ministry, said on Saturday that PGAS would not proceed with a plan to cut the allocation to domestic industry by 20% and to charge industrial buyers three times more than the regular price if they wanted more gas than they were allocated, he said

􀂄 Domestic industrial buyers are due to sign two-year gas-supply contracts with PGAS today. Late on Thursday, the gas distributor announced it was cutting the allocations and pushing up prices, provoking a widespread outcry from industrial buyers. The reason for PGAS’s announcement is that the gas distributor is itself facing a gas shortfall. Two of its suppliers — PT Pertamina Hulu Energi and ConocoPhillips — are having difficulties securing enough gas to meet their supply contracts with PGN.

􀂄 PGAS said last week that ConocoPhillips might only be able to deliver 250 MMSCFD this year from its South Sumatra field, well below the 390 MMSCFD it was contracted to provide. PLN primary energy director Nur Pamudji said that Muara Karang power plant gas supply had dropped from 200 million cubic feet per day to 100 million cubic feet per day since March 1.The government has arranged for PGAS to secure additional gas from Pertamina Hulu Energi, a unit of state oil and gas company PT Pertamina, by extending a contract up to June 2010. Pertamina Hulu Energi spokesman
Ali Mundakir told that the contract, originally set to expire this month, was extended until June. (Jakarta Globe & various)

􀂄 Net tally a deficit of 75MMSCFD, to be compensated by price increase. The supply cut came from the expiration of ONWJ (-45 MMSCFD) and fall in ConocoPhillips supply (-140MMSCFD, contracted 390 MMSCFD, current supply 250MMSCFD). The solutions are ONWJ (+20MMSCFD, extended until June 2010), and Medco Singa field (+50MMSCFD), and ConocoPhillips pledge (+40 MMSCFD, to 290 MMSCF). Net deficit is 75 MMSCFD. Our FY0F distribution flow estimate is 893MMSCFD (deficit is 8.3% of our FY09 estimate).

􀂄 Deficit of 75 MMSCFD, a 18.5% drop in net profit, and 18.1% in operating profit. Running at 53% EBITDA margin impact on profitability around double the drop in volume assuming everything else remain the same. Our current forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively. Hence therefore we expect minimal changes to our forecast as we only assume a 5% price increase for 2010. At Rp4,250/share, PGAS is trading at 17.9x 2010F PER, and 18.6x 2011F PER.

Mandiri Sekuritas Perusahaan Gas : Supply cut, short term bad, long term good (PGAS, Rp4,050, Buy, TP:Rp4,350)

􀂄 Economic Ministers yesterday and today will continue to discuss the gas supply shortage. PGAS is also discussing with the government on how to maintain the delivery from South Sumatera Gas Fields in the level that they received in January of this year, which was more than 370 MMscfd average for the month. PGAS reported that gas flow from Conoco Philips now averaging 250-260 MMSCFD. PGAS is demanding Conoco Phillips (CoPhi) to supply gas to its agreed amount of 396-412 MMSCFD.

􀂄 Bisnis Indonesia reported supply from CoPhi is diverted to Chevron for oil lifting. Chevron initially plan to have a supply of 322 MMSCFD in 2010 (2009 Chevron got 402 MMSCFD from CoPhi). Because of this supply to Muara Karang power plant was reduced by 50 MMSCFD. Another story was CoPhi diverting its gas to Singapore, due to lack of gas flow frow CoPhi fields in South Jambi. Total flow diverted to Singapore was 40MMSCFD. However, it was denied by Director General for Oil and Gas, Evita Legowo, According to Evita, the decline was due to under delivery from Pagardewa (Pertamina field) (- 70MMSCFD).

􀂄 We conclude that the decline could be somewhat in the range of 70-90 MMSCFD or 10% of our distributed 2010 PGAS volume of 890MMSCFD. However on the positive note : (1) this could help PGAS raise prices as Singapore paid US$12.5/MMBTU for South Jambi, (2) pressure to government for approve Suban III for domestic. PGAS has not changed its volume forecast for 2010 (between 800-900MMSCD) but acknowledge there could be an increase in average cost of gas, the amount of which has not been determined.

􀂄 We currently have a Buy recommendation with Rp4,350 target price. At Rp4050, PGAS 17.0x and 17.7x PER10F and PER11F, respectively. We are maintaining our current forecast of FY10E and FY11E net income of Rp5,393bn and Rp5,198bn, respectively, Our forecast are 13.4% and 29.1% below Bloomberg consensus for FY10E and FY11E of Rp6,226bn and Rp7,327bn, respectively.