Exploring Opportunities Beyond O&G
Key Takeaways :
• MEDC is an energy and natural resources sector across Southeast Asia, operating in three areas of business primarily based in Indonesia: 1) oil and gas exploration; 2) clean power; 3) copper mining. The company is committed to ESG practices and aims to achieve net zero by FY60F.
• Over the past few years, MEDC has expanded its portfolio through acquisitions to increase the company's earnings, such as the acquisition of ConocoPhillips. In FY23F, MEDC has planned for further integration of Corridor block and cost savings, as well as Senoro Phase 2 project and Natuna exploration as the other key focuses.
• MEDC through AMNT operates the Batu Hijau Mine, a tier-one reserve of gold and copper, which produces a high-grade copper concentrate. The ongoing phase 7 and 8 and the Elang Project could significantly boost MEDC's earnings.
• MEDC has invested aggressively in upstream gas projects and operates 11 IPPs using gas, geothermal, mini-hydro, and solar PV as energy sources. The company is currently constructing Bali Solar PV and Ijen Geothermal Phase 1, while also waiting for a final investment decision (FID) for the 670 MWp Solar Power export project from Pulau Bulan in Riau to Singapore.
• We initiate coverage on MEDC with a BUY rating and TP of IDR1,450/share implying 1.4x EV/EBITDA and 1.4x PBV and is currently traded close to STD-1.5 of its 5-year EV/EBITDA mean.
• Downside risks : 1) normalization of oil and gas price; 2) high interest rate; 3) denomination of USD towards IDR; 4) increased raw materials costs.
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