Indonesia: PT Pertamina (Persero), Mitra Adiperkasa and more

We are initiating coverage on PT Pertamina (Persero), a vertically integrated oil & gas (O&G) company in Indonesia.

We view Pertamina as “Low Risk” on our LARA scale, primarily driven by the company’s strategic importance to Indonesia and its status as a state-owned enterprise (100% owned by the government). Pertamina is the state holdco for Indonesia’s O&G assets, and the government’s vehicle for managing retail fuel prices. We like the company’s vertically integrated operations and large scale. It owns most of Indonesia’s refineries, fuel stations and gas pipelines. Pertamina’s O&G production is expected to rise towards 1,000 mboepd in FY 2022 (FY 2020: 863 mboepd), following the takeover of the Rokan block in November 2021. Credit metrics are healthy, with Net Debt/EBITDA of slightly over 1x. Negatively, the government requires Pertamina to sell petroleum products at subsidised prices. As a result, the company will incur losses if Brent exceeds USD 60/bbl. While the government subsidises the revenue shortfall, these subsidies are paid in arrears, which impacts the timing of cash inflows.

Our Credit Bias is “Stable”. Rising O&G prices will likely support the upstream segment, and help offset the regulated low selling prices of the downstream segment.

We recommend to “Hold” the PERTIJ notes.

• Mitra Adiperkasa’s results this week confirm a strong recovery is in place, with improving margins and growth across all verticals and a return to profitability for FY2021. 
• Growth was evident in both online and offline channels as the company’s unified retail strategy continues to yield strong results plus inventory levels improved dramatically QoQ in 4Q2021.
• Mitra Adiperkasa (MAPI IJ) remains a key proxy for the retail recovery in Indonesia and has remoulded itself to changing consumer behaviour. Valuations remain attractive versus historical levels. 

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Greenland Hong Kong Holdings
5. Evergrande

and more…