Medco Energy (MEDC IJ)

Transcription

1 Medco Energy (MEDC IJ) BUY (Unchanged) 04 May 2018 Results Note Equity Indonesia Mining Stock Data Target price Prior TP Shareprice Rp1,370 Rp1,370 Rp1,170 Upside/downside (%) Sharesoutstanding (m) 17,729 Marketcap. (US$ m) 1,488 Free float (%) 63.3 Avg. 6m dailyt/o (US$ m) 5.3 Price Performance 3M 6M 12M Absolute (%) Relative to JCI (%) w high/low (Rp) 1, May17 May17 Jun17 Jul17 Jul17 Aug17 Sep17 MEDCRebase Major Shareholders Encore Energy PTE LTD 35.7% Credit suisse Group 20.7% Mitsubishi UFJ 15.0% Estimate Change; Vs. Consensus 2018F 2019F Latest EPS (USD Cents) Vs. Prior EPS (%) Vs. Consensus (%) (13.3) (26.3) Source: Bloomberg Hasan PT Indo Premier Sekuritas Sep Oct17 Nov17 Nov17 Dec17 Jan18 Jan18 Feb18 Mar18 JCI IndexRebase Apr18 Apr18 Blessed by oil price Net profit dropped by 39.6% yoy due to higher tax rate. Improvement on ASP led to margins expansion. Block A Aceh will increase gas production rate in 2H18. Maintain Buy and TP of Rp1,370. Net profit declined by 39.6% yoy in 1Q18. Medco Energi Internasional posted net profit amounted to US$26mn, down 39.6% yoy. Forming only 12.6%/10.9% of ours/consensus FY18 estimates (below expectation). Nevertheless, the company s operating profit of around US$111.9mn (+.7% yoy) is inline with our estimate (achv. 28.5%). The main reason of this negative result mainly resulted by higher tax rate in 1Q18 of around 60.5% which was much higher compared to 1Q17 of some 36.6%. Revenue was recorded increased by 37.4% yoy on the back of higher ASP in 1Q18. On quarterly basis, the company posted solid improvement from a net loss around US$36mn in 4Q17 to net profit US$26mn in 1Q18. Margins expansion from higher ASP in 1Q18. On operational data, the company posted slightly lower production rate in 1Q18, oil and gas production was stood at 88.3 mboepd in 1Q18, down 6% yoy due to lower demand from gas customers. MEDC posted higher ASP with average realized prices were US$63.3/bbl (+22.7%yoy) for oil and US$5.7/mmbtu (+3.6%yoy) for gas. This led the company posted better margins in 1Q18, with gross margin of 52.5% (+2bps) and operating margin of 38.7% (+340bps). Production from MPI in 1Q18 was 593 GWh, 36% above 1Q17 following commercial operation of the Sarulla geothermal development unit I and II in March and October The third and final unit of the phase one development is expected to reach commercial operation by midmay. Block A will contribute to higher production in 2H18. We believe the company could ramup their production rate in 2H18 as the Block A Aceh will reach its full 58 bbtud by the end of 2Q18. Also, oil price maintain upward trend on the back geopolitical risks from possible new U.S. sanctions againts Iran supported the market albeit U.S production rate almost hit 11mn bpd. Thus, we maintain our production and ASP assumption in 2018/19F. Maintain Buy and TP. At this juncture, we maintain our earnings forecasts for 2018/19F and TP of Rp1,370 as we suspect the company s tax rate will back to normal level in the following quarter. MEDC trades at 7.4x FY18F PE and 6.7 FY19F PE. We reiterate our Buy rating to the counter as our target price offer 17.1% potential upside from the current share price. Risks to our call include: Lower oil price, lower demand and projects delays. Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (US$Mn) ,049 1,094 1,133 EBITDA (US$Mn) EBITDA Growth (%) Net Profit (US$Mn) EPS (US$Cents) EPS Growth (%) (198.2) (28.7) Net Gearing (%) PER (x) PBV (x) EV/EBITDA (x) Share Price Closing as of : 03May2018

2 Fig. 1: Gas sales and price trend Fig. 2: Oil price movement A 16A 17A 18F 19F Gas sales (mmscfd) Avg gas price (US$/mmscfd) Oil price Fig. 3: Revenue and EBITDA trend Fig. 4: Production volume US$mn 1, 70 1, Revenue EBITDA 19F Total production (mboepd) Fig. 5: Margins trend Fig. 6: MEDC s net profit 60.0%.0% 40.0% 30.0% 20.0% 10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 15A 16A 17A 18F 19F EBITDA margin Operating margin Net margin US$mn % () () (10.0) (1) (20.0) () (30.0) (2) (40.0) Net profit Net margin 2

3 Year To 31 Dec (US$Mn) 2016A 2017A 2018F 2019F 2020F Income Statement Net Revenue ,049 1,094 1,133 Cost of Sales (3) (5) (519) (540) (548) Gross Profit SG&A Expenses (98) (151) (139) (145) (151) Operating Profit Net Interest () (108) (90) (84) (90) OthersNet PreTax Income Income Tax (63) (140) (138) (153) (170) Net Income Balance Sheet Cash & Equivalent Receivable Inventory Other Current Assets Total Current Assets 1,134 1,975 1,912 2,029 2,044 Fixed Assets Net 926 1,176 1, Goodwill Non Current Assets 499 1,033 1,156 1,174 1,191 Total Assets 3,597 5,161 5,140 4,923 4,859 ST Loans Payable Other Payables Current Portion of LT Loans Total Current Liab , Long Term Loans 1,522 2,182 2,197 2,161 2,125 Other LT Liab Total Liabilities 2,707 3,758 3,735 3,342 3,079 Equity Retained Earnings ,136 Minority Interest Total SHE + Minority Int ,316 1,404 1,582 1,780 Total Liabilities & Equity 3,597 5,074 5,140 4,923 4,859 3

4 Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Cash Flow Net Income (Excl.Extraordinary&Min.Int) Depr. & Amortization (26) Changes in Working Capital (306) 169 (332) (81) (86) Others 2 71 (191) (158) 104 Cash Flow From Operating (344) Capital Expenditure (86) (879) (3) (53) (52) Others (547) (13) Cash Flow From Investing (634) (892) Loans (286) (285) Equity (1) Dividends 45 (46) (33) (52) (57) Others (166) (28) 345 (279) (147) Cash Flow From Financing (617) (489) Changes in Cash (245) (220) (61) Financial Ratios Gross Margin (%) Operating Margin (%) PreTax Margin (%) Net Margin (%) ROA (%) ROE (%) ROIC (%) Acct. Receivables TO (days) Acct. Receivables Other TO (days) Inventory TO (days) Payable TO (days) Acct. Payables Other TO (days) Debt to Equity (%) Interest Coverage Ratio (x) Net Gearing (%)

5 Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta Indonesia p f INVESTMENT RATINGS BUY : Expected total return of 10% or more within a 12month period HOLD : Expected total return between 10% and 10% within a 12month period SELL : Expected total return of 10% or worse within a 12month period ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. DISCLAIMERS This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.