WEGE
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Huge Huge Upside
23rd March 2020
Current price Rp133
Target price Rp380
Current price Rp133
Target price Rp380
Huge contract growth
WEGE is targeting new contracts in 2020F to grow 54% to IDR 14.9 trn compared to IDR 9.7 trn in 2019A with 75% contributed by the Government and SOE projects. 2019’s new contracts decreased from an initial target of IDR 11 trn due to IDR 2.3 trn of write offs from private projects. Despite the lower than expected contracts, cash payments from Government and SOE contracts boosted operating cash flow from IDR 108 bn in 3Q19 to IDR 1.49 trn in the 4Q. Both of these efforts are designed to help mitigate any risk from implementation of the new IFRS 9 accounting treatment starting this year
As of 2019FY, the customer profile of WEGE’s contracts was dominated by SOE (64%), followed by Government (27%) and private (9%). The targeted 2020 customer profile is Government (42%), SOE (38%) and Private (20%). Carry over projects were also dominated by Government and SOEs such as the Jakarta International Stadium and Taman Ismail Marzuki (TIM) revitalization. We believe WEGE will be able to maintain sales growth in 2020 due to the improved repeat order contracts and several large new contracts.
As of March 2020, WEGE has received new contracts of IDR 256 billion consisting of Construction such as BI Palangkaraya IDR 182 bn and Mandiri Denpasar IDR 68.82 bn, Concession contracts IDR 0.29bn, Modular contracts worth IDR 1.89 bn and WIKA Pracetak Gedung worth IDR 3.8bn. In addition, WEGE has received an additional new contract for hospitals in Galangan in connection with the Corona virus of around IDR 50 – 100 bn. In terms of Corona virus impact, WEGE has see. no impact on their projects at this time
Valuation: Significant upside
After some adjustments due to the 2019 results and new IFRS implementation, we have a new one-year target price of IDR380/share, which is equal to a PER of 7.08x. With significant upside potential, our recommendation remains BUY.
WEGE is targeting new contracts in 2020F to grow 54% to IDR 14.9 trn compared to IDR 9.7 trn in 2019A with 75% contributed by the Government and SOE projects. 2019’s new contracts decreased from an initial target of IDR 11 trn due to IDR 2.3 trn of write offs from private projects. Despite the lower than expected contracts, cash payments from Government and SOE contracts boosted operating cash flow from IDR 108 bn in 3Q19 to IDR 1.49 trn in the 4Q. Both of these efforts are designed to help mitigate any risk from implementation of the new IFRS 9 accounting treatment starting this year
As of 2019FY, the customer profile of WEGE’s contracts was dominated by SOE (64%), followed by Government (27%) and private (9%). The targeted 2020 customer profile is Government (42%), SOE (38%) and Private (20%). Carry over projects were also dominated by Government and SOEs such as the Jakarta International Stadium and Taman Ismail Marzuki (TIM) revitalization. We believe WEGE will be able to maintain sales growth in 2020 due to the improved repeat order contracts and several large new contracts.
As of March 2020, WEGE has received new contracts of IDR 256 billion consisting of Construction such as BI Palangkaraya IDR 182 bn and Mandiri Denpasar IDR 68.82 bn, Concession contracts IDR 0.29bn, Modular contracts worth IDR 1.89 bn and WIKA Pracetak Gedung worth IDR 3.8bn. In addition, WEGE has received an additional new contract for hospitals in Galangan in connection with the Corona virus of around IDR 50 – 100 bn. In terms of Corona virus impact, WEGE has see. no impact on their projects at this time
Valuation: Significant upside
After some adjustments due to the 2019 results and new IFRS implementation, we have a new one-year target price of IDR380/share, which is equal to a PER of 7.08x. With significant upside potential, our recommendation remains BUY.
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