Medco Energi International (MEDC IJ)
No Surprises in FY24-25 guidance
- During the Capital Market Day event, MEDC unveils flat O&G production target, with a 10% growth in power sales from Ijen Geothermal in FY25.
- Medco Power aims to grow an additional 504MW+ 2,025MWp by FY30 through Pulau Bulan Solar PV, Ijen Geothermal, and DEB expansion.
- We maintain a Buy rating with an unchanged SOTP-based TP of Rp1,700.
FY25 guidance: a conservative growth outlook
In FY25, MEDC aims for a flat oil & gas production of 145-150 mboepd, and a 10% growth in power sales to 4.5GWh (from 4.1GWh in 2024) contributed by Ijen Geothermal, slated for COD in 1Q25. Mgmt also guides for flat FY25 capex at US$430mn, but with higher allocation in O&G of US$400mn (from US$350mn in FY24) and cash cost stay at <US$10/boe. However, it has added new guidance, namely an ROE target of >15%, which is higher than our estimate of 12%. Additionally, MEDC has announced an interim dividend of Rp15.75/share (vs. Rp15/share in FY23), implying a dividend yield of 1.3%
Ample room for growth for Medco power
Medco Power operates within 3 main pillars that consist of Geothermal, Gas to power, and Solar PV. Currently, its own capacity stands at 882MW+51MWp, with an additional 504MW+2,025MWp targeted for FY30. The majority of the growth is expected from the Pulau Bulan Solar PV (600MW) which just obtained a conditional license in Sep24 and will proceed to FID by end of FY25 and COD slated for FY28. The project will be a consortium with PacificLight Renewables and Gallant Venture with a gross project cost of US$3bn and US$300mn net equity capex. With a target export of 600MW to Singapore, it plans to build 2.7GWp of solar panel along with battery storage system. Other key projects are Ijen geothermal (110MW), and DEB expansion (~215MW).
Expanding existing O&G reserves through exploration
MEDC divides its assets under 2 criteria, namely value delivery assets and growth assets. Value delivery are assets that are being explored further to increase production capabilities, which includes Block B Natuna, Corridor, and Bualuang. Natuna’s Forel and W. Belut block will commence in 2H24 and will add up to c.31mboepd for MEDC (vs. 12mboepd in FY24F). Meanwhile, Corridor is exercising seismic surveys to detect nearfield opportunities, with an increase of c.18mboepd in 2034. MEDC has growth assets that is targeted to be monetized such as Oman 48, which currently has ongoing seismic study in 4Q24, Senoro-Toili’s phase 2B, which is expected to produce an additional 75mmboe, Bangkanai with an incremental growth volume of 81mmboe, and Tanzania, which has had numerous successful offshore discoveries.
We maintain our Buy rating; no surprises in guidance
We maintain our Buy rating on MEDC and an unchanged SOTP-based TP of Rp1,700. Key risks are lower oil prices and AMMN’s financial performance.
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