PT MEDCO ENERGI INTERNASIONAL Tbk STOCK VALUATION

• Main Author: Adhiguna, Dibya
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/33261
• Institution: Institut Teknologi Bandung

MEDC as oil and Gas Company faced two main challenges, first is oil price volatility and the second is declining on the oil production. Due to the effect of oil price volatility, MEDC share price decline significantly from highest Rp. 965 in 2014 to lowest Rp. 167 in the beginning of 2016 and Rp. 380 in the beginning 2017. The other challenge experience by MEDC is declining on the oil production due to production still rely on the mature oil field and lack of new reserve discovery. To overcome this problem, in 2016 MEDC management decided to doing several strategic acquisition In 2016, MEDC complete the acquisition of a 40% operated interest in the South Natuna Sea Block B PSC in November. The second acquisition is increasing the ownership in Block A Aceh gas development. Beside the acquisition of new oil and gas field, MEDC management also doing strategic acquisition by completed the acquisition of a 41.1% indirect interest in PT Newmont Nusa Tenggara in November. This active strategic acquisition leave problem in MEDC balance sheet position and makes MEDC become highly leverage. In this research, to valuate MEDC share prices author will use Free Cash Flow to Firm (FCFF) model. According to Damodaran, this method applicable for firms which have leverage which is too high or too low, and expect to change the leverage over time. This method suitable with MEDC condition that experience high leverage condition. The FCFF calculation using annualized cash flow and five year cash flow projection. The discount rate used in this research using weighted average cost of capital. The oil price assumption used in this calculation is USD 70/barrel and the gas prices based on the MEDC gas selling contract with the customer. The analysis result conclude that MEDC share price has still opportunity to give positive return for the investor. The result of this research calculation, intrinsic MEDC share price is Rp 1,135/share, there is still potential 40% upside for investor. Based on this situation the Investor still has opportunity to get return if invest in MEDC share. So the author give recommendation to buy MEDC share price because there is still potential 40% upside for the investor.