Updates on business activities. Singapore's Energy Market Authority (EMA) has conditionally awarded Medco Power Global, a subsidiary of MEDC, along with PacificLight Renewables Pte Ltd and Gallant Venture Ltd, a contract to supply 600 MW of green, solar-based electricity. The project (currently in the feasibility study phase) has a total capacity of 1500 MW (900 MW for local use), and there are plans to increase the capacity by up to 1.5 times, with an expected operational date of 2028. Furthermore, the company is set to finalize the sale of its working interest (31.88%) in Block 12W (ChimSao), an oil production field in Vietnam operated by Harbour Energy, by the end of 2023. Additionally, in August 2023, the company signed an agreement (CSPA) to acquire a 20% non-operating participating interest in a production asset located in the Middle East (the operator will retain majority ownership and operational control), and the transaction is expected to conclude by the end of 2023.

A sudden boost from AMMN; re-rating is imperative. AMMN’s share price has shot up +230.48% since its IPO to IDR 5,800 (the largest gain among big-cap stocks listed on JCI). While we are confident with its future prospects (despite a potential slight hiccup in 2Q23), we should take a closer look at MEDC, which controls a 21.09% stake in AMMN. We estimate that MEDC purchased its stake in AMMN for USD 511 million, and with the tremendous gain, we expect MEDC to book an unrealized gain of USD 4.6 billion in 3Q23, boosting its full-year net profit to USD 4.9 billion. We have yet to book this in our forecast as it is still subject to further audit.

Favorable outlook in 2H23. With the global oil price bouncing back to USD 91/bbl, we have a favorable outlook for MEDC’s O&G and power businesses. Given the possibility of further supply cuts from OPEC+ and lower US oil inventory, we decided to raise our oil price assumption for 2023 to USD 85/bbl. We raise our 2023/2024 net profit forecast to USD 348 million/ USD 304 million, mainly due to commodity surge and potential increase in power supply.

BUY, TP IDR 2,200. We maintain our bullish view on MEDC, giving it a BUY and an upgraded SOTP-based TP of IDR 2,200, reflecting 5.3x FY24F EV/EBITDA. We implement a 50% discount in our valuation, as the potential AMMN-related gain hasn’t been booked yet. Main Risks: Lower-than-expected O&G prices and lifting volume.