Giken Sakata

Giken Sakata: OSK DMG highlights Giken's favourable position, given that its oil sale price to Pertamina is fixed till Oct (likely to remain unchanged thereafter). In the past three years, when oil prices fluctuated between US$100-120/bbl, the state purchase price was held steady at US$105/bbl. In a similar fashion, while DMG expects a downward adjustment of this purchase price next year, it is likely to land within the US$70-90/bbl range. At US$70/bbl, adjusting for the current exchange rate of IDR12,400/USD, Giken’s sale price will only fall 9%. At US$80/bbl, the sale price is 5% higher and house expects Pertamina to maintain the current contract terms. In other words, Giken is insensitive to oil prices for at least the next 22 months. OSK DMG maintains BUY and TP of $0.65 (150% upside).