WEGE
Contact our analyst Revita
11% upside. BUY
8th December, 2023
Current price Rp85
Target price Rp95
Current price Rp85
Target price Rp95
New contracts in 10M23 increased by +301%
Up to 10M23, WEGE secured a total of IDR 3.3 trillion new contracts, a significant increase compared to 1H23, IDR 826 billion. This growth was driven by a substantial contract from the IKN project, specifically the ASN residential contract worth IDR 1.63 trillion. The majority of the new contracts are still dominated by the government (85%) due to the lower risk. In terms of project ownership, WIKA Group has a small share (0.04%), with 99.96% coming from external projects, showcasing WEGE's independence from WIKA Group. Residential projects continue to dominate at 59.69%, mainly from IKN projects, followed by public facilities (25.69%), office (12.38%), and commercial (2.25%). Based on the 10M23 results, we have adjusted our target new contracts to IDR 4.92 trillion, down by -10% YoY. We estimate revenue growth in 2024F to be 20% CAGR compared to 2022A, with a new burn rate target of 18%.
Bottom line decline
As of 9M23, WEGE's revenue increased +54% YoY, with 3Q23 up +94% YoY or +6% QoQ. However, the bottom line recorded a decline of -77% YoY, with 3Q23 down -87% YoY or -52% QoQ. The decline is mainly due to high COGS caused by delays in new contracts. Contracts acquired in 1H23 were postponed to 9M23. We have revised our net profit target for 2023-2024 down compared to 2022FY, anticipating contract delays in the election year, suppressing net profit. The next year's margin reduction can be attributed to increased costs and a decrease in the burn rate.
Dhoho Airport project
The Dhoho airport project, a venture of PT Surya Dhoho Investama, a GGRM subsidiary, with PT Angkasa Pura 1 as its operator, involves WEGE in a landmark project worth IDR 1.87 trillion, targeted for completion by the end of November. Originally scheduled for 1Q23, the project's completion was postponed to November 24, 2023, due to design changes. WEGE's scope of work includes 22 buildings, such as the main building, ancillary structures, infrastructure facilities, and MEP work. As of November 15th, during a site visit, WEGE was engaged in the finishing stages of this project.
Valuation: 11% upside
After adjustments from the 9M23 results, our new target price is set at IDR 95 per share, equivalent to a trading multiple of 5.75x PER. With an 11% upside, we revise our target to a HOLD recommendation.
Up to 10M23, WEGE secured a total of IDR 3.3 trillion new contracts, a significant increase compared to 1H23, IDR 826 billion. This growth was driven by a substantial contract from the IKN project, specifically the ASN residential contract worth IDR 1.63 trillion. The majority of the new contracts are still dominated by the government (85%) due to the lower risk. In terms of project ownership, WIKA Group has a small share (0.04%), with 99.96% coming from external projects, showcasing WEGE's independence from WIKA Group. Residential projects continue to dominate at 59.69%, mainly from IKN projects, followed by public facilities (25.69%), office (12.38%), and commercial (2.25%). Based on the 10M23 results, we have adjusted our target new contracts to IDR 4.92 trillion, down by -10% YoY. We estimate revenue growth in 2024F to be 20% CAGR compared to 2022A, with a new burn rate target of 18%.
Bottom line decline
As of 9M23, WEGE's revenue increased +54% YoY, with 3Q23 up +94% YoY or +6% QoQ. However, the bottom line recorded a decline of -77% YoY, with 3Q23 down -87% YoY or -52% QoQ. The decline is mainly due to high COGS caused by delays in new contracts. Contracts acquired in 1H23 were postponed to 9M23. We have revised our net profit target for 2023-2024 down compared to 2022FY, anticipating contract delays in the election year, suppressing net profit. The next year's margin reduction can be attributed to increased costs and a decrease in the burn rate.
Dhoho Airport project
The Dhoho airport project, a venture of PT Surya Dhoho Investama, a GGRM subsidiary, with PT Angkasa Pura 1 as its operator, involves WEGE in a landmark project worth IDR 1.87 trillion, targeted for completion by the end of November. Originally scheduled for 1Q23, the project's completion was postponed to November 24, 2023, due to design changes. WEGE's scope of work includes 22 buildings, such as the main building, ancillary structures, infrastructure facilities, and MEP work. As of November 15th, during a site visit, WEGE was engaged in the finishing stages of this project.
Valuation: 11% upside
After adjustments from the 9M23 results, our new target price is set at IDR 95 per share, equivalent to a trading multiple of 5.75x PER. With an 11% upside, we revise our target to a HOLD recommendation.
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