Upcoming O&G Projects to Help Secure Solid Earnings Growth Outlook. Going into FY24F, RAJA is on target to meet our forecasts, supported by three massive initiatives: (1) 8% participating interest of 55,000 mbopd from Jabung block (Figure 9), generating additional USD 2.6 million per annum to EBITDA; (2) First gas-in to the EHK (RAJA’s subsidiary)-INKP gas pipeline network (11.7 km, Figure 9) with USD 45 million in annual revenue for the next ten years; (3) 1.8 MMSCFD natural gas compression capacity (expandable to 3 MMSCFD with the addition of new facilities) from a new CNG mother station in Grobogan (Figure 9). It is estimated that the mother station will generate USD 4.5 million per annum for RAJA, with potential annual growth of up to 7% YoY, supported by the potential increase in compression capacity and CNG demand in Central Java and surrounding areas.

 

Strong EPS Growth of +47% yoy in FY24. Going forward, with the three O&G projects mentioned above and other projects in the future, we see a robust earnings outlook for RAJA, with revenue forecast of USD 181 million in FY24F (+21% yoy). We also project RAJA to improve its overall EBITDA margin to 45% on the back of greater contribution from upstream businesses (yielding higher margins), boosting its EBITDA to USD 82 million in FY24F (+38% yoy). Regarding its bottom line, we forecast RAJA to book USD 25 million in FY24F, reflecting an EPS growth of +47% yoy. However, with more projects being rolled out, RAJA will have to spend massive amounts of capital, forcing the company to take more loans, which will raise its net gearing ratio, although we believe the impact will remain manageable.

 

Maintain BUY, Raise TP to IDR 2,200. As we roll over our valuation to FY24F-FY25F, we maintain our BUY rating on RAJA with a higher TP of IDR 2,200 (SOTP-based), implying an FY24F EV/EBITDA of 8.5x. We are confident that RAJA will maintain its growth momentum, backed by its solid management as displayed by the company’s rising and above-average ROAE (market: 10.7%). Downside risks: Lower-than-expected operating metrics and negative sentiment from lower oil & gas prices.