Trimegah (LG)
PGAS BUY TP 3000
PGAS 9M18 results: core profit above consensus, inline our estimate
Net profit 9M18 grew +123% YoY on much higher distribution volume and significant improvement from upstream O&G. PGAS booked 9M18 net profit of USD218 (+123% YoY) which accounts 72% of our estimate (in line) and 90% of consensus' estimate (ABOVE). The strong YoY net profit growth is due to 11% distribution volume increase, 40% Oil and gas revenue growth and margin expansion from upstream oil and gas business (gross margin 25% in 9M18 vs -8% in 9M18).
Excluding non-core items, PGAS 9M18 core profit is USD229mn (75% ours/94% cons)
PGAS booked non-core expense of USD16mn in 9M18 mainly consists of USD31mn forex loss. Taking out the non-core expense, PGAS booked core profit of USD229mn (+111% YoY) that accounts 75% to our estimate (in line) and 94% to consensus (above). The forex loss is due to the translation adjustment of assets in response to USD appreciation. Note that 48% of PGAS' cash is in IDR while the remaining cash is in USD.
3Q18 net profit up 43% QoQ on lower opex amid flat revenue. PGAS booked 3Q18 net profit of USD72mn (+8% QoQ; +52% YoY). As the revenue is relatively flat QoQ, the quarterly increase is mainly due to lower opex (-37% QoQ), also helped by lower effective tax rate (35% in 3Q18 vs 44% in 2Q18). Note that historical data shows that opex in 3Q is usually lower than 2Q. However, operational numbers in 2Q18 remains solid: gas distribution volume increased by 6% QoQ despite slightly lower gas margin spread including LNG cost of USD2.23/mmbtu which is still within company's guidance of margin spread of USD2.2-2.5/mmbtu.
PGAS maintained 2018F guidance amid solid results. In its 9M18 presentation, PGAS maintained its 2018F guidance as follows. Distribution volume of 775mmscfd (0.8% YoY) with margin spread of USD2.2-2.5/mmbtu (+0% to +10% YoY), transmission volume 665mmsdcf (-9% YoY), capex USD400mn, and upstream lifting 35,435boepd (-10% YoY).
Valuation. PGAS trades at 9.7x PE 2018F. Our target price for PGAS is Rp 3,000.
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