Despite the weak financial performance of Perusahaan Gas Negara (PGN) in 2015 there are signs that a rebound is on the way. If we go back to the fourth quarter of 2015 - when Indonesia's economic growth accelerated to a pace of 5.04 percent (y/y) - demand for gas from the industrial sector and from state electricity firm Perusahaan Listrik Negara (PLN) increased. As a result PGN's revenue rose 7.8 percent (quarter-on-quarter) to USD $779 million in Q4-2015, particularly supported by a 7 percent (q/q) rise in distribution volume to 841 mmscfd in Q4-2015. Meanwhile, PGN's EBIT and EBITDA rose 68 percent (q/q) and 26 percent (q/q), respectively in Q4-2015.

Meanwhile, transmission volume of PGN in Q4-2015 stood at 855 mmscfd, up 10 percent (q/q) supported by the start of operations of the Kalimantan-Java transmission pipeline that accounted for 75 mmscfd of the company's total transmission volume in the last quarter of 2015. The company's cash margin rose to USD $3.05 per mmbtu in Q4-2015 from USD $2.92 per mmbtu in the preceding quarter. In line with the higher cash margin, the cost of gas fell 3.2 percent (q/q), while the average selling price remained flat at USD $9.1 per mmbtu.

The performance of PGN in the fourth quarter of 2015 provides optimism about the company's performance in 2016, particularly given global oil prices have shown a rising trend in Q1-2016 (after touching 12-year lows in January 2016). Therefore it will be interesting to learn the company's Q1-2016 corporate earnings report.

Securities and investment company Samuel Sekuritas Indonesia has put its target price for PGN's shares at IDR 3,400 each. On Thursday (14/03) the company's shares fell 1.32 percent to IDR 2,615.

Future Projection Financial Performance Perusahaan Gas Negara:

     2014    2015   2016F   2017F
Net Revenue  3,253.4  3,068.8  3,174.0  3,585.0
Revenue Growth (%)      8.4     (5.7)      3.4     13.0
EBITDA  1,023.0    800.0    817.0    868.0
EBITDA Margin (%)     35.2     30.6     29.4     28.3
Net Income    711.2    401.2    370.0    399.0
Net Income Margin (%)     24.4     15.4     13.3     13.0
P/E Ratio (x)      6.3     11.2     12.1     11.3
EV/EBITDA      4.2      5.4      5.3      5.0
P/BV (x)      1.6      1.6      1.5      1.4
Net Gearing (x)      0.3      0.5      0.4      0.3
ROE (%)     26.3     15.1     13.2     13.4
ROA (%)     11.5      6.3      5.8      6.0

in million US dollar unless otherwise stated
Source: Samuel Sekuritas Indonesia (24/03/2016)

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