by Mandiri Sekuritas
We recently met with the senior management of ENRG to learn more about the companyâ€™s move to acquire a majority stake in CNOOC ONWJ Ltd. Overall, the acquisition may lift proportionate EBITDA estimate by 38% and EPS by 29% for FY12E, based on conservative (zero growth) assumption for the newly acquired asset. With major EPS uplift in 1Q12 coming from the consolidation of CNOOC ONWJ Ltd, and another uplift in 3Q12 coming from the new gas flow from Kangean TSB field, FY12E is set to be a year of major turnaround for the company with a potential quadrupling of EBITDA and a ten-fold increase in EPS. The forecast and valuation table presented below has not accounted for the dealâ€™s EPS accretion that could place the stockâ€™s FY12E P/E at below 8x.
A done deal with positive carry and EPS accretion. The deal has reached financial close with 100% debt financing that should repay itself in three years. The acquired asset yielded US$132mn of EBITDA and US$51mn of net profit in 9M11. Compared to the US$212mn price tag, the deal should give positive carry in terms of operating cash flow to ENRG, enhance its EPS, and improve its debt ratio.
Positive effects on income statement based on proforma analysis.
Had we consolidated CNOOC ONWJ Ltd on a 51% basis to ENRG since 1 January 2011, the 9M11 EBITDA would have been 100% bigger and net profit 360% higher, after taking into account the increased borrowing level and interest expense.
CNOOC ONWJ Ltd is selling its gas at around US$2.65 per mmbtu, currently.
Recently, the head of oil and gas regulator BPMigas urged all domestic gas exploration companies to renegotiate gas selling price upward while suggesting a minimum price of US$5.00/mmbtu.
Importantly, overall debt cost may come down as the deal improves debt service ratios. Based on 100% consolidation, the senior management expects the companyâ€™s net-debt-to-EBITDA to decline to around 3.3x from above 5x pre-deal.
Target Price : Rp 298,-