PGN -PGAS

Macroeconomic

According to the World Bank in 3/2013 the economic growth of Indonesia will grow at 5.3 %. The nation is still having good expectation for investment. Our economic growth is driven by larger domestic consumption that contributes more than 50 % of total GDP. The challenges are still at our inflation rate, current account deficit and currency exchange rate.

One of vulnerable thing in Indonesia is the capital inflow from abroad that could change currency rate and capital market index level. Our market capitalization is only 60 % of GDP. This is lower than others nations at south East Asia such as Malaysia at 270 %, Thailand at 170 % and Philippines at 140 %.  The majority of Capital inflow from global market seems act as speculative investor which tends to invest in short time. They seem investing money not based on fundamental analysis but they tend to use technical analysis. As sample commonly emerging market does not have good stability in politic, especially in election year.  They could differentiate their stock value with derivative transaction to beat rupiah exchange rate down or up.

In other side the capital inflow could also as a good sign that the circumstances in Indonesia will be better then they will do profit taking once their stock price increase.  

In May 2014, the IHSG index exceeds level of 5000, huge capital inflow amounting to USD 184 million gets inside to Indonesia through capital market. The impact to our economic is not too significant but I think investor will remove their money if the politic circumstances will not be stable in the future especially after president election party. The rupiah exchange rate may decline.  

In global industry the oil price is affected by its production. Commonly the production of oil is affected by geopolitical issues in Middle East such as Iran, Israel, Persian Gulf and etc.

Another problem in Indonesia is our policy in subsidized oil that spends a lot of cost. If the subsidized oil is suddenly no longer exists the inflation rate will jump. in order to anticipate the condition Government has been done energy conversion from oil in to gas. Public transportation is starting to use gas as its fuel.

Based on data in the 2008 -2012 Indonesia was a net importer of oil which means its consumption exceeds its production. It was inversely with natural gas industry in Indonesia which is experiencing surplus. The production exceeds our consumption.

The gas consumption will be higher at the future as our government policy would like to reduce its subsidy in oil consumption. The natural gas industry will take more portions in producing energy and fuel consumption for public transportation.

Perusahaan Gas Negara

The revenue of the company in 2013 is 16.3 % higher compared to previous year. The gross profit margin is lower than 2012 from 57 in to 47 percent. The decline may be caused by gas price. Because of that net profit margin and EBITDA decline.

The majority of the revenue is from sale the natural gas to its client. PGN buys gas from pertamina and its join operation company to other company. In May 2013, the company buy asset of oil and gas property through its subsidiary SEI in ketapang, bangkanai and ujung pangkah. In 2012 its asset of oil and gas property is zero. PGN starts to act as gas exploration and production in 2013.

PGN has huge amount of cash and restricted cash, it is suitable with the nature of business of oil and Gas Company which is usually having huge of cash, depletion and depreciation and also huge tax.

The revenue in the future will be higher than 16 % as its acquisition in three blocks at java and Kalimantan. I just did stress test that revenue increase 5 % and the capital expenditure is 5 % of sales the company will reach similar earning per share at 0.04 the same as earning per share in 2012. I used same gross margin, activity ratio and I did adjustment the company will pay the short term debt off in 2013. If you are interested to my model, you could send sms to me.

The company has short term debt in bank Sumitomo Mitsui and bank of Tokyo Mitsubishi, the each amount is USD 200 million and USD 100 million.