Currently negotiation between PGAS and regulator BP Migas and other stakeholders is in process, and uncertainty remains for PGAS’s future profitability, if PGAS does not pass on the hike to end customers. Post 1H11 results we recalculate our estimates to factor in lower distribution volume, and higher gas cost estimates, resulting in lower target price of Rp3.600 (WACC 11.2%, LTG 2%) based on DCF method, giving 27% upside potential. Despite the upside, uncertainty that engulf PGAS’s future profitability has prompted us to change our call to HOLD recommendation.
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