We maintain our BUY
recommendation and adjust our earnings post rights issuance, which translates
to a new TP of IDR2,950 (from IDR3,370, 24% upside) based on 22x FY17F P/E.
Imminent signing of the HSR project and LRT Greater Jakarta is likely to boost
Wika’s orderbook. Having said that, we increase our orderbook FY16F-17F
estimates to IDR85trn and IDR103trn respectively. We also increase our FY17F
NPAT growth to 68.4%, as the company plans to ramp up its investment in
infrastructure projects in order to rake in a higher orderbook.
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| Wijaya Karya Persero - Moving On Up |
¨ Post rights issue. Wijaya Karya Persero (Wika) has successfully completed IDR6.1trn rights issuance including IDR4trn from the Government with a high subscription rate. Previously, it set the rights issue price at IDR2,180 and issued 2.82bn new shares. 30% would be allocated for working capital, while 70% is likely to be used for infrastructure investments, capital injection to subsidiaries and land bank enlargement. The company aims to increase its infrastructure investments to several sectors such as power plants, water pipe networks and toll roads. Hence, we estimate that the company ought to allocate IDR6trn capex to support its business. As a result, we see that its NDER would be around 0.3x next year. We see that the company ought to therefore still have a plenty of room to stretch its balance in order to capture higher growth.
¨ Orderbook. Kereta Cepat
Indonesia China (KCIC) has reached an agreement to sign financial facilities
with China Development Bank (CDB) by the end of this year. Hence, the
IDR15.8trn High Speed Railway (HSR) project would likely be signed this month
along with the IDR5trnLight Rail Transit (LRT) Inner City Jakarta project. This
would boost Wika’s orderbook. Given those additional new projects, we upgrade
our FY16F’s new contracts estimate to IDR50trn (Figure 5). We also see that
potential new projects would be higher than our initial expectation next year
due to its healthier balance sheet to support Wika’s infrastructure
investments. Having said that, we increase our FY16F-17F total orderbook
estimates to IDR85.5trn and 103.5trn respectively.
¨ Robust growth. We also see stronger
growth after the rights issuance as orderbook would be bulking up. Furthermore,
the company is targeting to recognise 20% of HSR contract value to revenue,
while most of LRT Inner City Jakarta’s civil work ought to be completed next
year to support Asian Games in August 2018 in Jakarta. Consequently, we expect
Wika’s NPAT growth is likely to hit 68.4% YoY (Figure 5) and a stable gross
margin at 11.8% in FY17F. Note that our lower EPS in FY16F-17F is due to the
dilution from the rights issuance’s proceeds.
¨ BUY with TP of IDR2,950.After rights
issuance, we maintain our BUY recommendation with a new TP of IDR2,950 based on
unchanged P/E of 22x FY17F, its 3-year average historical forward P/E. The key
downside risks to our call are a delay in the HSR project and
slower-than-expected land acquisition. (Dony
Gunawan)
Link to report: Wijaya Karya Persero : Moving On Up
Link to Daily report: Indonesia Morning Cuppa - 091216
