Medco Energi (MEDC IJ)
Medco Energi
BUY
Lucrative oil business
Target price (Rp)
Rp1,250
Prior TP (Rp)
Rp1,370
Shareprice (Rp)
Rp1,020
Upside/downside (%)
Net profit declined by 50% but EBIT/EBITDA was up by 50%/86%.
Margins expansion due to higher ASP both oil and gas.
Amman’s phase 7 development is on track.
+22.5
Sharesoutstanding (m)
17,729
Marketcap. (US$ m)
Maintain Buy with lower TP of Rp1,250 (from Rp1,370).
961
Free float (%)
63.3
Avg. 6m dailyT/O (US$ m)
Net profit declined by 50.4% yoy. Medco Energi Internasional posted net profit
amounted to US$41.4mn, down 48.6% yoy. Forming only 23.3%/17.3% of
ours/consensus FY18 estimates. Nevertheless, revenue increased by 42.4% yoy
to US$578.6mn (c. 55% to our FY18 estimates) while EBITDA and operating profit
grew by 50.5% yoy and 86.7% yoy. Earnings was mainly dragged by tax expense
that inclined by 60% yoy as the tax rate stood at 65.3% in 1H18 (vs. 40.5% in
1H17). On quarterly basis, net profit decreased by 41.2% qoq to US$15.3mn
albeit its operating profit and EBITDA grew by 16.2% qoq and 4.3%. Amman still
recorded a net loss of some US$10.6mn due to lower production volume with
higher stockpiles content that erode Amman’s overall margins.
3.8
Price Performance
3M
6M
12M
-27.6
-38.4
32.4
Relative to JCI (%) -31.4
-29.7
29.2
MEDC-Rebase
Jul-18
Jul-18
Jun-18
May-18
Apr-18
Mar-18
Feb-18
Jan-18
1,575 - 593
Feb-18
Dec-17
Dec-17
Oct-17
Nov-17
Sep-17
Aug-17
Oct-17
52w high/low (Rp)
May-18
Absolute (%)
Aug-17
Equity | Indonesia | Mining
Results Note
(Unchanged)
Stock Data
290
270
250
230
210
190
170
150
130
110
90
03 August 2018
(MEDC IJ)
JCI Index-Rebase
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 (%)
0.6
0.9
(42.6)
-
Vs. Consensus (%)
(36.2)
(19.1)
Source: Bloomberg
Operational margins expand due to higher ASP. On operational data, the
company posted relatively stable production rate with oil and gas production was
stood at 82.4 mboepd in 1H18. But the company optimists they could meet their
production target of around 85 mboepd as Block A Aceh gas sales will ramp up in
early August 2018. MEDC posted higher ASP with average realized prices were
US$66.8/bbl (+35.4%yoy) for oil and US$6/mmbtu (+8.6% yoy) for gas. Oil and
gas unit cash costs were US$8.5/bbl, in line with company’s target to maintain
unit cash costs below US$10/bbl. This led the company posted better margins in
1H18, with operating margin of 31.9% (+990bps) and EBITDA margin of 49.3%
(+280bps). Medco Power Indonesia’s gross installed capacity rose 20% yoy to
2,795MW in 1H18 following commercial operation in May of the third and final unit
of phase one of the Sarulla Geothermal facility.
Positive progress from phase 7 development. In 1H18 AMNT has ramped up
phase 7 developments to full capacity and secured its first facility from an
international bank. Amman is in the process of appointing the smelter Front End
Engineering and Design contractor. Operational wise, Amman’s copper/gold
production decreased by 45.8%/77.5% yoy, respectively in 1H18.
Maintain Buy. We trim our earnings forecasts for 2018F by 42.6% to US$102mn
as we revise up our tax rate assumption from previously 50% to 65% in 2018F.
Downward revisions on our earnings forecasts has led to our DCF-based TP
decrease to Rp1,250 (from Rp1,370), MEDC trades at 12.9x FY18F PE and 8.2x
FY19F PE. With 22.5% potential upside from the current share price MEDC
remains a Buy.
hasan@ipc.co.id
Year To 31 Dec
Revenue (US$Mn)
EBITDA (US$Mn)
EBITDA Growth (%)
Net Profit (US$Mn)
EPS (US$Cents)
EPS Growth (%)
Net Gearing (%)
PER (x)
PBV (x)
EV/EBITDA (x)
+62 21 5793 1168
Source: MEDC, IndoPremier
Hasan
PT Indo Premier Sekuritas
Refer to Important disclosures in the last page of this report
2016A
600
273
24.4
185
1.0
(198.2)
198.6
7.3
1.9
9.7
2017A
926
400
46.9
132
0.7
(28.7)
159.5
10.2
1.5
6.6
2018F
1,049
523
30.6
102
0.6
(23.0)
175.9
12.9
1.1
5.1
2019F
1,094
543
3.8
161
0.9
58.1
139.2
8.2
1.2
4.9
2020F
1,133
568
4.7
180
1.0
12.1
116.1
7.4
1.0
4.7
Share Price Closing as of : 2-August-2018
MEDC IJ Results Note
Fig. 1: Gas sales and price trend
Source: MEDC, IndoPremier
Fig. 3: Revenue and EBITDA trend
Source: MEDC, IndoPremier
Fig. 5: Margins trend
Source: MEDC, IndoPremier
Refer to Important disclosures in the last page of this report
Fig. 2: Oil price movement
Source: MEDC, IndoPremier
Fig. 4: Production volume
Source: MEDC, IndoPremier
Fig. 6: MEDC’s net profit
Source: MEDC, IndoPremier
2
MEDC IJ Results Note
Year To 31 Dec (US$Mn)
2016A
2017A
2018F
2019F
2020F
Income Statement
Net Revenue
600
926
1,049
1,094
1,133
Cost of Sales
(350)
(505)
(519)
(540)
(548)
Gross Profit
251
421
530
554
585
SG&A Expenses
(98)
(151)
(139)
(145)
(151)
Operating Profit
Net Interest
Forex Gain (Loss)
Others-Net
153
269
390
408
434
(100)
(108)
(139)
(141)
(151)
0
0
0
0
0
208
135
43
56
79
Pre-Tax Income
260
295
294
323
362
Income Tax
(63)
(140)
(192)
(163)
(182)
0
0
0
0
0
185
132
102
161
180
Cash & Equivalent
231
661
477
477
360
Receivable
535
635
678
767
857
70
89
82
85
86
298
590
572
556
540
1,134
1,975
1,809
1,885
1,843
926
1,176
1,082
726
627
0
0
0
0
0
499
1,033
1,156
1,174
1,191
3,597
5,161
5,036
4,779
4,658
Minorities
Net Income
Balance Sheet
Inventory
Other Current Assets
Total Current Assets
Fixed Assets - Net
Goodwill
Non Current Assets
Total Assets
16
42
42
42
42
Payable
105
140
0
141
143
Other Payables
345
747
174
181
184
Current Portion of LT Loans
395
365
500
250
0
861
1,294
851
614
369
1,522
2,182
2,197
2,161
2,125
ST Loans
Total Current Liab.
Long Term Loans
324
283
688
567
585
2,707
3,758
3,735
3,342
3,079
Equity
256
499
499
499
499
Retained Earnings
631
672
656
793
935
3
145
145
145
145
891
1,316
1,301
1,437
1,579
3,597
5,074
5,036
4,779
4,658
Other LT Liab.
Total Liabilities
Minority Interest
Total SHE + Minority Int.
Total Liabilities & Equity
Source: MEDC, IndoPremier
Refer to Important disclosures in the last page of this report
3
MEDC IJ Results Note
Year to 31 Dec
2016A
2017A
2018F
2019F
2020F
Net Income (Excl.Extraordinary&Min.Int)
185
Depr. & Amortization
263
132
102
161
180
96
(26)
391
(306)
135
169
(332)
(81)
(86)
166
Cash Flow
Changes in Working Capital
2
71
(141)
(101)
157
492
(398)
369
394
(86)
(879)
(3)
(53)
(52)
(547)
(13)
205
67
67
(634)
(892)
202
13
15
Loans
353
656
149
(286)
(285)
Equity
(1)
194
0
0
0
Dividends
45
(46)
(33)
(26)
(41)
(166)
(28)
296
(331)
(201)
231
776
412
(643)
(527)
(245)
375
216
(261)
(118)
Gross Margin (%)
41.7
45.5
50.5
50.6
51.6
Operating Margin (%)
25.5
29.1
37.2
37.3
38.3
Pre-Tax Margin (%)
43.4
31.9
28.0
29.5
32.0
Net Margin (%)
30.8
14.2
9.7
14.7
15.9
Others
Cash Flow From Operating
Capital Expenditure
Others
Cash Flow From Investing
Others
Cash Flow From Financing
Changes in Cash
Financial Ratios
ROA (%)
5.7
3.0
2.0
3.3
3.8
ROE (%)
23.2
11.9
7.8
11.7
11.9
7.5
5.0
4.2
5.9
6.7
ROIC (%)
85.6
74.8
74.2
88.5
108.4
144.2
155.9
154.4
152.7
153.2
6.3
6.3
6.1
6.5
6.4
Payable TO (days)
95.1
88.4
96.7
93.3
94.4
Acct. Payables - Other TO (days)
92.4
99.2
77.9
34.3
34.7
217.1
196.7
210.5
170.6
137.3
0.7
0.5
0.5
0.5
0.5
198.6
159.5
175.9
139.2
116.1
Acct. Receivables TO (days)
Acct. Receivables - Other TO (days)
Inventory TO (days)
Debt to Equity (%)
Interest Coverage Ratio (x)
Net Gearing (%)
Source: MEDC, IndoPremier
Refer to Important disclosures in the last page of this report
4
Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167
INVESTMENT RATINGS
BUY
: Expected total return of 10% or more within a 12-month period
HOLD
: Expected total return between -10% and 10% within a 12-month period
SELL
: Expected total return of -10% or worse within a 12-month 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.
BUY
Lucrative oil business
Target price (Rp)
Rp1,250
Prior TP (Rp)
Rp1,370
Shareprice (Rp)
Rp1,020
Upside/downside (%)
Net profit declined by 50% but EBIT/EBITDA was up by 50%/86%.
Margins expansion due to higher ASP both oil and gas.
Amman’s phase 7 development is on track.
+22.5
Sharesoutstanding (m)
17,729
Marketcap. (US$ m)
Maintain Buy with lower TP of Rp1,250 (from Rp1,370).
961
Free float (%)
63.3
Avg. 6m dailyT/O (US$ m)
Net profit declined by 50.4% yoy. Medco Energi Internasional posted net profit
amounted to US$41.4mn, down 48.6% yoy. Forming only 23.3%/17.3% of
ours/consensus FY18 estimates. Nevertheless, revenue increased by 42.4% yoy
to US$578.6mn (c. 55% to our FY18 estimates) while EBITDA and operating profit
grew by 50.5% yoy and 86.7% yoy. Earnings was mainly dragged by tax expense
that inclined by 60% yoy as the tax rate stood at 65.3% in 1H18 (vs. 40.5% in
1H17). On quarterly basis, net profit decreased by 41.2% qoq to US$15.3mn
albeit its operating profit and EBITDA grew by 16.2% qoq and 4.3%. Amman still
recorded a net loss of some US$10.6mn due to lower production volume with
higher stockpiles content that erode Amman’s overall margins.
3.8
Price Performance
3M
6M
12M
-27.6
-38.4
32.4
Relative to JCI (%) -31.4
-29.7
29.2
MEDC-Rebase
Jul-18
Jul-18
Jun-18
May-18
Apr-18
Mar-18
Feb-18
Jan-18
1,575 - 593
Feb-18
Dec-17
Dec-17
Oct-17
Nov-17
Sep-17
Aug-17
Oct-17
52w high/low (Rp)
May-18
Absolute (%)
Aug-17
Equity | Indonesia | Mining
Results Note
(Unchanged)
Stock Data
290
270
250
230
210
190
170
150
130
110
90
03 August 2018
(MEDC IJ)
JCI Index-Rebase
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 (%)
0.6
0.9
(42.6)
-
Vs. Consensus (%)
(36.2)
(19.1)
Source: Bloomberg
Operational margins expand due to higher ASP. On operational data, the
company posted relatively stable production rate with oil and gas production was
stood at 82.4 mboepd in 1H18. But the company optimists they could meet their
production target of around 85 mboepd as Block A Aceh gas sales will ramp up in
early August 2018. MEDC posted higher ASP with average realized prices were
US$66.8/bbl (+35.4%yoy) for oil and US$6/mmbtu (+8.6% yoy) for gas. Oil and
gas unit cash costs were US$8.5/bbl, in line with company’s target to maintain
unit cash costs below US$10/bbl. This led the company posted better margins in
1H18, with operating margin of 31.9% (+990bps) and EBITDA margin of 49.3%
(+280bps). Medco Power Indonesia’s gross installed capacity rose 20% yoy to
2,795MW in 1H18 following commercial operation in May of the third and final unit
of phase one of the Sarulla Geothermal facility.
Positive progress from phase 7 development. In 1H18 AMNT has ramped up
phase 7 developments to full capacity and secured its first facility from an
international bank. Amman is in the process of appointing the smelter Front End
Engineering and Design contractor. Operational wise, Amman’s copper/gold
production decreased by 45.8%/77.5% yoy, respectively in 1H18.
Maintain Buy. We trim our earnings forecasts for 2018F by 42.6% to US$102mn
as we revise up our tax rate assumption from previously 50% to 65% in 2018F.
Downward revisions on our earnings forecasts has led to our DCF-based TP
decrease to Rp1,250 (from Rp1,370), MEDC trades at 12.9x FY18F PE and 8.2x
FY19F PE. With 22.5% potential upside from the current share price MEDC
remains a Buy.
hasan@ipc.co.id
Year To 31 Dec
Revenue (US$Mn)
EBITDA (US$Mn)
EBITDA Growth (%)
Net Profit (US$Mn)
EPS (US$Cents)
EPS Growth (%)
Net Gearing (%)
PER (x)
PBV (x)
EV/EBITDA (x)
+62 21 5793 1168
Source: MEDC, IndoPremier
Hasan
PT Indo Premier Sekuritas
Refer to Important disclosures in the last page of this report
2016A
600
273
24.4
185
1.0
(198.2)
198.6
7.3
1.9
9.7
2017A
926
400
46.9
132
0.7
(28.7)
159.5
10.2
1.5
6.6
2018F
1,049
523
30.6
102
0.6
(23.0)
175.9
12.9
1.1
5.1
2019F
1,094
543
3.8
161
0.9
58.1
139.2
8.2
1.2
4.9
2020F
1,133
568
4.7
180
1.0
12.1
116.1
7.4
1.0
4.7
Share Price Closing as of : 2-August-2018
MEDC IJ Results Note
Fig. 1: Gas sales and price trend
Source: MEDC, IndoPremier
Fig. 3: Revenue and EBITDA trend
Source: MEDC, IndoPremier
Fig. 5: Margins trend
Source: MEDC, IndoPremier
Refer to Important disclosures in the last page of this report
Fig. 2: Oil price movement
Source: MEDC, IndoPremier
Fig. 4: Production volume
Source: MEDC, IndoPremier
Fig. 6: MEDC’s net profit
Source: MEDC, IndoPremier
2
MEDC IJ Results Note
Year To 31 Dec (US$Mn)
2016A
2017A
2018F
2019F
2020F
Income Statement
Net Revenue
600
926
1,049
1,094
1,133
Cost of Sales
(350)
(505)
(519)
(540)
(548)
Gross Profit
251
421
530
554
585
SG&A Expenses
(98)
(151)
(139)
(145)
(151)
Operating Profit
Net Interest
Forex Gain (Loss)
Others-Net
153
269
390
408
434
(100)
(108)
(139)
(141)
(151)
0
0
0
0
0
208
135
43
56
79
Pre-Tax Income
260
295
294
323
362
Income Tax
(63)
(140)
(192)
(163)
(182)
0
0
0
0
0
185
132
102
161
180
Cash & Equivalent
231
661
477
477
360
Receivable
535
635
678
767
857
70
89
82
85
86
298
590
572
556
540
1,134
1,975
1,809
1,885
1,843
926
1,176
1,082
726
627
0
0
0
0
0
499
1,033
1,156
1,174
1,191
3,597
5,161
5,036
4,779
4,658
Minorities
Net Income
Balance Sheet
Inventory
Other Current Assets
Total Current Assets
Fixed Assets - Net
Goodwill
Non Current Assets
Total Assets
16
42
42
42
42
Payable
105
140
0
141
143
Other Payables
345
747
174
181
184
Current Portion of LT Loans
395
365
500
250
0
861
1,294
851
614
369
1,522
2,182
2,197
2,161
2,125
ST Loans
Total Current Liab.
Long Term Loans
324
283
688
567
585
2,707
3,758
3,735
3,342
3,079
Equity
256
499
499
499
499
Retained Earnings
631
672
656
793
935
3
145
145
145
145
891
1,316
1,301
1,437
1,579
3,597
5,074
5,036
4,779
4,658
Other LT Liab.
Total Liabilities
Minority Interest
Total SHE + Minority Int.
Total Liabilities & Equity
Source: MEDC, IndoPremier
Refer to Important disclosures in the last page of this report
3
MEDC IJ Results Note
Year to 31 Dec
2016A
2017A
2018F
2019F
2020F
Net Income (Excl.Extraordinary&Min.Int)
185
Depr. & Amortization
263
132
102
161
180
96
(26)
391
(306)
135
169
(332)
(81)
(86)
166
Cash Flow
Changes in Working Capital
2
71
(141)
(101)
157
492
(398)
369
394
(86)
(879)
(3)
(53)
(52)
(547)
(13)
205
67
67
(634)
(892)
202
13
15
Loans
353
656
149
(286)
(285)
Equity
(1)
194
0
0
0
Dividends
45
(46)
(33)
(26)
(41)
(166)
(28)
296
(331)
(201)
231
776
412
(643)
(527)
(245)
375
216
(261)
(118)
Gross Margin (%)
41.7
45.5
50.5
50.6
51.6
Operating Margin (%)
25.5
29.1
37.2
37.3
38.3
Pre-Tax Margin (%)
43.4
31.9
28.0
29.5
32.0
Net Margin (%)
30.8
14.2
9.7
14.7
15.9
Others
Cash Flow From Operating
Capital Expenditure
Others
Cash Flow From Investing
Others
Cash Flow From Financing
Changes in Cash
Financial Ratios
ROA (%)
5.7
3.0
2.0
3.3
3.8
ROE (%)
23.2
11.9
7.8
11.7
11.9
7.5
5.0
4.2
5.9
6.7
ROIC (%)
85.6
74.8
74.2
88.5
108.4
144.2
155.9
154.4
152.7
153.2
6.3
6.3
6.1
6.5
6.4
Payable TO (days)
95.1
88.4
96.7
93.3
94.4
Acct. Payables - Other TO (days)
92.4
99.2
77.9
34.3
34.7
217.1
196.7
210.5
170.6
137.3
0.7
0.5
0.5
0.5
0.5
198.6
159.5
175.9
139.2
116.1
Acct. Receivables TO (days)
Acct. Receivables - Other TO (days)
Inventory TO (days)
Debt to Equity (%)
Interest Coverage Ratio (x)
Net Gearing (%)
Source: MEDC, IndoPremier
Refer to Important disclosures in the last page of this report
4
Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167
INVESTMENT RATINGS
BUY
: Expected total return of 10% or more within a 12-month period
HOLD
: Expected total return between -10% and 10% within a 12-month period
SELL
: Expected total return of -10% or worse within a 12-month 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.