Stock Valuation of Indonesian Natural Gas Company in the Middle of Global Economic Slowdown

摘要

2015 is a difficult year as the economic slowed down has made most industries suffer in their core business activities. Nevertheless, Indonesian stated-owned company, PT. Perusahaan Gas Negara (Persero) Tbk (PGN), announced their infrastructure project plan. The project consist of 12 pipelines infrastructure development for distribution and transmission with the total length of 1,685 km. PGN also stated that the project will be funded without burdening the government infrastructure budget. Despite the unconducive economic condition, the analysis shows a bright long-term prospect in natural gas industry indicated by the good demand growth and Indonesia's stable economic growth. The prospect of natural gas industry in Indonesia is also stimulated by President Joko Widodo's megaproject in establishing infrastructure of electric supply for about 35,000 MW with the potential natural gas power plant contribution of 13,649 MW. The review has been conducted by using DCF with FCFF, P/E ratio and EV/EBITDA multiple and concluded PGAS's fair price of IDR 4.639,20 with potential upside of 84.8% from the market price of IDR 2,510 (2 Mei 2016), P/E ratio of 12.9 (discount 34.7%) which shows the PGN's sentiment in natural gas industry is weak and EV/EBITDA multiple of 8.4 (premium 24.2%) which shows a PGN's better performance compared to its peer companies. The calculation of optimal capital structure has been conducted and came to the conclusion that PGN is currently in its optimal capital structure.