WEGE
Contact our analyst Revita
41% upside.
19th December 2019
Current price Rp298
Target price Rp420
Current price Rp298
Target price Rp420
Profit still on track
WEGE is on track to deliver higher profits yoy as we predicted in our previous report despite the slowdown during the election. Although 9M19 revenue was down 13% yoy, the bottom line still grew 5% YoY. The decrease in revenue was because WEGE chose to let go risky projects rather than losing capital. To overcome the issue, WEGE has been adding new contracts from clients with lower risk, such as SOEs. This can be seen in the customer profile which shows that WEGE’s contracts during 9M19 were dominated by SOE (58%), followed by private companies (35%) and the government (7%), while the targeted customer profile was SOE (51%), private (29%) and the government (20%). As of 9M19, WEGE won new contracts with a total value of only IDR5.2 trillion out of the targeted IDR11.9 trillion. The balance will be achieved through several new projects which can be recognized as 2019 sales even though they were obtained in November. In addition, there are some new big contracts from private companies that will be delayed slightly into early 2020. We believe WEGE will be able to grow sales faster in 2020 due to the improved political situation and several large new contracts.
JV with Patrajasa
Following the success of the concession business as featured by De Braga Hotel Bandung and Mandiri Proklamasi building, WEGE together with PT Patra Jasa and PT WIKA Realty formed a joint venture company (JV) under the name of PT Patra Wijaya Realtindo, in which WEGE has a 10% share, WIKA Realty 30% and Patra Java 60%. The first project that the JV will develop is the Pakubuwono. The JV is the second one WEGE formed after the JV between WEGE and PT WIKA Pracetak Gedung (WPG), a subsidiary of WEGE called WEGE Solusi Proklamasi in which WEGE has 90% shares. WEGE Solusi Proklamasi later acted as the developer, building management service provider, and operator of Bank Mandiri’s assets in Jakarta.
Valuation: 41% upside
After some adjustments due to the 9M19 results, we estimate a one-year target price of IDR420/shares, which means the share will be traded at a PER of 7.08x. With 41% upside potential, our recommendation remains BUY.
WEGE is on track to deliver higher profits yoy as we predicted in our previous report despite the slowdown during the election. Although 9M19 revenue was down 13% yoy, the bottom line still grew 5% YoY. The decrease in revenue was because WEGE chose to let go risky projects rather than losing capital. To overcome the issue, WEGE has been adding new contracts from clients with lower risk, such as SOEs. This can be seen in the customer profile which shows that WEGE’s contracts during 9M19 were dominated by SOE (58%), followed by private companies (35%) and the government (7%), while the targeted customer profile was SOE (51%), private (29%) and the government (20%). As of 9M19, WEGE won new contracts with a total value of only IDR5.2 trillion out of the targeted IDR11.9 trillion. The balance will be achieved through several new projects which can be recognized as 2019 sales even though they were obtained in November. In addition, there are some new big contracts from private companies that will be delayed slightly into early 2020. We believe WEGE will be able to grow sales faster in 2020 due to the improved political situation and several large new contracts.
JV with Patrajasa
Following the success of the concession business as featured by De Braga Hotel Bandung and Mandiri Proklamasi building, WEGE together with PT Patra Jasa and PT WIKA Realty formed a joint venture company (JV) under the name of PT Patra Wijaya Realtindo, in which WEGE has a 10% share, WIKA Realty 30% and Patra Java 60%. The first project that the JV will develop is the Pakubuwono. The JV is the second one WEGE formed after the JV between WEGE and PT WIKA Pracetak Gedung (WPG), a subsidiary of WEGE called WEGE Solusi Proklamasi in which WEGE has 90% shares. WEGE Solusi Proklamasi later acted as the developer, building management service provider, and operator of Bank Mandiri’s assets in Jakarta.
Valuation: 41% upside
After some adjustments due to the 9M19 results, we estimate a one-year target price of IDR420/shares, which means the share will be traded at a PER of 7.08x. With 41% upside potential, our recommendation remains BUY.
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