WEGE
Contact our analyst Revita
66% upside. BUY
2nd February 2022
Current price Rp175
Target price Rp290
Current price Rp175
Target price Rp290
Targeting 157% YoY new contract growth
WEGE is targetting new contracts for 2022 of IDR 7.1 trillion, significantly higher, +157%, than last year. The increase is due to the postponement of new contracts from 2021 such as Public Facilities contracts, Educational Facilities, and Office projects from SOEs. Most of the expected new contract targets are SOE and Government projects, with Government representing 53,62%; SOEs 32.58%; and Private companies 13.79%. The composition shows that WEGE is continuing to focus on projects which have strong funding. As of 2021FY, based on project segment, contracts are 41% public facilities, 37% commercial, 18% residential and 4% office. With carryover contracts of IDR 9.06 trillion from last year, and new contracts ahead, we expect WEGE will see a revenue increase this year compared to last year and we target CAGR revenue growth in 2022F compared to 2020A of 17% with an increased burn rate compared to 2020A’s 19%.
Margin to increase
In 2022, WEGE is optimistic growth will return as their strategy is now to book contracts from government, state-owned and private projects that have strong funding to reduce receivables. WEGE also targets projects which can use Precast, and Modular to accelerate the construction process. In addition WEGE will also use new technologies such as BIM (Building Information Modeling) to improve performance. With these strategies, we estimate wege's net profit margin in 2022 will continue to improve to 7.95%, which is much better compared to 2020A’s 5.45%.
Valuation: 66% upside
Based on DCF, with a WACC of 12,5%, we revise our target price to IDR. 290/share or trading at 9,06x PER. With 66% upside, we retain our recommendation to BUY.
WEGE is targetting new contracts for 2022 of IDR 7.1 trillion, significantly higher, +157%, than last year. The increase is due to the postponement of new contracts from 2021 such as Public Facilities contracts, Educational Facilities, and Office projects from SOEs. Most of the expected new contract targets are SOE and Government projects, with Government representing 53,62%; SOEs 32.58%; and Private companies 13.79%. The composition shows that WEGE is continuing to focus on projects which have strong funding. As of 2021FY, based on project segment, contracts are 41% public facilities, 37% commercial, 18% residential and 4% office. With carryover contracts of IDR 9.06 trillion from last year, and new contracts ahead, we expect WEGE will see a revenue increase this year compared to last year and we target CAGR revenue growth in 2022F compared to 2020A of 17% with an increased burn rate compared to 2020A’s 19%.
Margin to increase
In 2022, WEGE is optimistic growth will return as their strategy is now to book contracts from government, state-owned and private projects that have strong funding to reduce receivables. WEGE also targets projects which can use Precast, and Modular to accelerate the construction process. In addition WEGE will also use new technologies such as BIM (Building Information Modeling) to improve performance. With these strategies, we estimate wege's net profit margin in 2022 will continue to improve to 7.95%, which is much better compared to 2020A’s 5.45%.
Valuation: 66% upside
Based on DCF, with a WACC of 12,5%, we revise our target price to IDR. 290/share or trading at 9,06x PER. With 66% upside, we retain our recommendation to BUY.
Previously
