Resiliency of the Midstream Gas Leader
Key Takeaways :
• The Ministry of Energy and Mineral Resources and SKK Migas plan to redirect East Java's gas surplus of 500 MMSCFD as a result of on-stream gas productions, such as Jambaran Tiung Biru (JTB) project, to Central Java to meet its increasing industrial gas demand, projected to rise to 63 MMSCFD by FY27F.
• Construction of the Cirebon-Semarang (Cisem) phase 1 network is expected to be completed by Aug-23, expanding gas reach to 400,000-600,000 additional households. Thus, PGAS's gas sales and transmission volumes are projected to increase to 939.6 BBTUD and 1,427.8 MMSCFD in FY23E, respectively.
• PGAS plans to establish the Arun LNG Terminal as Asia's leading LNG hub, responding to a predicted surge in LNG demand in non-OECD Asia-Pacific countries.
• The rise in Indonesia's natural gas price (HGBT) does not significantly impact PGAS's financial performance, the gas transmission is only a passthrough. As a result, PGAS's FY23E revenue is forecasted to rise slightly to USD3.7 billion. However, the EBITDA and net profit are expected to decrease to USD1.1 billion and USD304.9 million, respectively.
• We recommend BUY for PGAS IJ at a TP of IDR1,600, implying EV/EBITDA of 2.9x in FY23E. Downside risks include: 1) lower industrial demand; 2) higher lifting costs; 3) high interest rates; 4) production reduction from the potential divestment of the Fasken Block.
MNCS Research
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