Company update:
Waskita Karya (WSKT IJ, BUY, TP: IDR3,750),
Stellar Performance To Continue
Waskita Karya (WSKT IJ, BUY, TP: IDR3,750),
Stellar Performance To Continue
We
continue to like Waskita, as it has the strongest earnings visibility among its
peers, supported by toll road investments that should prolong its robust
performance. The company also has a strong revenue growth outlook that is
sustainable for three years. We expect earnings to grow 34.7% YoY in FY17,
backed by its toll road projects. We maintain our BUY call on the stock, with a
new TP of IDR3,750 (from IDR3,675, 43% upside) based on 23x FY17F P/E.
¨
Strong
orderbook. We
upgrade our estimate of Waskita Karya Persero’s (Waskita) new contracts to
IDR65trn (+103.1% YoY) for this year, on the back of its currently substantial
new contract wins. It has signed IDR59trn worth of new contracts YTD, mainly
for toll road projects. We also expect Waskita to score IDR40trn in new
contracts next year, with contracts worth IDR86trn carried over to 2018. Hence,
its total orderbook may reach IDR123trn next year – which may be sufficient to
sustain revenue for the next three years. As such, this leads to Waskita having
the strongest earnings visibility among its peers.
¨
Sturdy
results for 9M16.Waskita’s
earnings jumped to IDR935bn (133% YoY) in 9M16, in line with and making up
58%/57% of our/consensus estimates respectively. Revenue surged 89%YoY,
supported by strong new contract wins up to 9M16.
¨
Revenue
grew 18%QoQ or 72% YoY in 3Q16, while net profit stood at IDR348bn (-24% QoQ,
+52%YoY). Its gross margin fell to 15.8% in 3Q16, from 19.3% in 2Q16. We think
that Waskita may continue to book a decent performance in 4Q16, supported by
toll road projects.
¨
Robust
growth. We
expect earnings to grow 66.3%/34.7% YoY in FY16/FY17 respectively, backed by
toll road projects. Currently, Waskita has 14 toll road projects, with about 12
currently under construction. Furthermore, the company plans to acquire five
new toll roads, which should add to its orderbook in 2017.
¨
State-owned
infrastructure financing company, Sarana Multi Infrastruktur (SMI) and the
national pension fund (PT Taspen Persero) will inject capital via the Waskita
Toll Road (WTR) to help the company develop toll roads across the country.
Having said that, we expect the company’s cash flow to improve after the cash
injection.
¨
Key risks
to
our call are delays in the land acquisition process, a cut in the Government’s
infrastructure budget and tighter cash flow for its toll road operations.
¨ Maintain BUY. We fine-tune our earnings estimates and maintain BUY with a new TP of IDR3,750. Our TP is based on an unchanged FY17F P/E of 23x, +1SD from the industry’s 4-year average rolling forward P
¨ Maintain BUY. We fine-tune our earnings estimates and maintain BUY with a new TP of IDR3,750. Our TP is based on an unchanged FY17F P/E of 23x, +1SD from the industry’s 4-year average rolling forward P
Kindly click the following link for the full report: Waskita Karya : Stellar Performance To Continue
Best regards,
Dony Gunawan
Assistant Vice
President
Research Analyst – Construction
PT. RHB Securities
Indonesia
