Perusahaan Gas Negara, Revenue And Net Profit In Line

PGAS’ USD3.0bn in FY13 revenue (+16.5% y-o-y) and USD861m in earnings (-3.4% y-o-y) was inline with our forecasts. However, gross margins were lower at 47.2% vs FY12’s 57.1%, given the slow adjustment on selling prices due to the gas supply price hikes back in Sept 2012 & April 2013. We expect gross margin to normalize at the 46-48% level in the upcoming years from the gradual decline since 2010.

FY13 financial highlights
Perusahaan Gas Negara (PGAS)’s USD3.0bn FY13 revenue (+16.5% y-o-y), well in line to our full-year estimates. The topline growth was mainly on the strong distribution volume of 865m standard cu ft/day (mmscfd) in 4Q13 (+10.9% q-o-q; +6.1% y-o-y). However, gross profits declined 3.7% y-o-y, which translates to gross margins declining to 47.2% (FY12: 57.1%) – the hike in gas selling prices in FY13 was not able to offset the increase in gas supply costs back in Sept 2012 and April 2013.

PGAS’s booked a FY13 forex gain of USD84m, given the USD strengthening against the IDR, which brought pre-tax profits to USD1,125m (-2% y-o-y). Full-year earnings managed to reach the USD861m mark (-3.4% y-o-y), which is within our expectations.

Distribution volume increases but transmission volume declines. PGAS’s FY13’s distribution volume increased 2.1% y-o-y to 824mmscfd, partly derived from additional gas supply from ConocoPhillips (COP US, NR). Meanwhile, transmission volume fell 2.6% y-o-y on lower gas absorption from Singapore and the gas stoppage to Perusahaan Listrik Negara (PLN) back in July 2013.

Gross margin to stabilize; maintain BUY. We expect FY14 distribution volumes to slightly increase by 3.0% y-o-y to 852mmscfd and we assume USD4.20/million metric British thermal units (mmbtu) margin spreads. This is similar to management’s guidance. Despite PGAS’ ventures into upstream oil & gas blocks, its distribution and transmission segments will continue to be PGAS’ main business.

We expect gross profit margin to normalize at the 46%-48% level in 2014 and 2015 respectively. PGAS is currently trading at 11x FY14F P/E, or an 8% discount to its historical forward P/E. We maintain our IDR6,000 TP and BUY call at this current stage.