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STOCK RECOMMENDATION - JAKARTA. The growth prospects of PT Perusahaan Gas Negara Tbk (PGAS) are expected to be limited. Inside Gunvor and insignificant business development are the reasons.
Head of Equity Research Kiwoom Securities Indonesia Sukarno Alatas said the impact of 'Force Majeure' with Gunvor could potentially suppress performance in 2024. This could potentially reduce LNG sales volume as Gunvor is one of PGAS's largest LNG buyers.
According to Sukarno, the 'force majeure' incident requires PGAS to find new buyers for LNG previously allocated to Gunvor, which could increase operating costs.
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"Furthermore, force majeure can increase LNG market uncertainty and negatively impact prices and demand," he told Kontan.co.id, Friday (8/3).
Head of Research Yuanta Securities Chandra Pasaribu also agrees that this could suppress PGAS's performance. Because the company is expected to continue to respect and fulfill the contract even though it is possibly not profitable in business terms.
"Therefore, PGAS has set aside US$ 4.4 million in September 2023 to cover these losses," he said.
In addition, Chandra sees PGAS's capital expenditure (capex) as still relatively limited due to the lack of significant business development. He mentioned that some are concentrated in transmission and gas networks (jargas) which contribute relatively little compared to the gas distribution business.
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Based on the September 2023 financial report, the transmission segment contributed revenue of US$ 200.13 million, or equivalent to 7.43% of total revenue. Meanwhile, PGAS recorded a total revenue of US$ 2.69 million.
"Therefore, there are no significant catalysts that can drive growth from PGAS," he said.
Chandra also said the limited growth potential is due to PGAS's business development being largely determined by the growth of the targeted distribution volume of 4% in 2024.
So the impact will be very limited on the company's profit growth.
Upstream lifting, as the second largest contributor, is expected to decrease production by 11% (according to guidance from PGN) due to declining reserve quality. "This makes the growth opportunities from PGAS limited," he explained.
Sukarno continued, that high global LNG prices can also suppress margin profits. Then, competition from other gas companies and other alternative sources affects market share, as well as exchange rate fluctuations.
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Head of Research Mega Capital Securities Cheril Tanuwijaya added the pressure on PGAS's performance is also influenced by the company's limited cash, so it is offering the Fasken Block. "Global gas price fluctuations also create uncertainty," he continued.
Therefore, analysts believe the growth prospects of PGAS's performance tend to be limited. It is estimated that its growth is around 4%, in line with the company's guidance.
From the stock, Sukarno noted, the current price of PGAS is traded at 6 times PE and PBV below 1 time or at 0.61 times, so the price is relatively cheap.
Therefore, Sukarno recommends a trading buy for PGAS with a minor price target of Rp 1,200. Meanwhile, Cheril recommends a hold with a price target of Rp 1,200. As for Chandra, he gives a neutral rating for PGAS with a price target of Rp 1,220.
