The performance of Perusahaan Gas Negara Tbk (PGAS) is predicted to be suppressed by weak earnings growth and uncertainty of some regulations in the gas business. DBS Vickers is expecting PGAS revenue to only increase 3.07 percent to USD 3.02 billion and net profit to decline 45.39 percent to USD 166 million.
In the second quarter of 2017, PGAS posted a net loss amounting to USD 47 million because depreciation and amortization is higher than expected, surging 80 percent yoy to USD 172 million.
William Simadiputra, Analyst of DBS Vickers, said upstream business is the main cause of the company’s declining performance. PGAS also recorded a higher cost of funds amounting to USD 48 million from the bond issuance to finance upstream business. “Uncertainty in this business inhibits performance prospects unless the oil price can
reach USD 70 per barrel,” said William in his research.
Downstream business in natural gas distribution is still on expectations. The company’s gas distribution volume reached 749 mmscfd in the first half of 2017 with an average gas price of USD 8.59 per mmbtu. DBS Vickers is also projecting PGAS to reach USD 3.21 billion with net profit of USD 247 million in 2018.
In the past month, PGAS dropped 14.7 percent to IDR 1,885. DBS Vickers recommended HOLD for PGAS and lowered its target price from IDR 2,700 to IDR 1,900. (*)