WEGE
Contact our analyst Revita
More than 100% upside.
14th August 2018
Current price Rp222
Target price Rp488
Current price Rp222
Target price Rp488
Higher Burn Rate
- After the DBG (WIKA group) merger with WEGE in 2016, WEGE has booked contracts from private companies & from SOEs and the Government. With these additional contracts, WEGE’s burn rate, the ratio of sales to order book jumped to 20% in 1H18 compared to 13% in 1H17. The burn rate is targeted to improve above 30%, increasing sales further as Government projects are sold faster than other projects as they’re based on monthly progress.
- Based on project, as of 1H18, private contributes 59%, SOE 30.9%, and Govt. 11%.
- WEGE is on track to deliver higher profits . As of 1H18, WEGE managed to book revenues of IDR. 2,4 trillion or 84% growth yoy with a bottom line of IDR. 181.1 billion or 70% growth yoy.
- WEGE will continue strengthening its business not only in building construction but also in recurring income from concessions and investments.
- Investment projects in 2018-2019 come from office towers in Jakarta & Surabaya, airport buildings in Banten, Hotels in Bandung, Regional hospitals in Sidoarjo. WEGE is targeting new contracts in 2018 of IDR. 7,83 trillion with 7M18 new contract of IDR. 5,89 trillion compared to IDR. 3,1 trillion in 1H18. There are several big new contracts in 7M18, including Transpark Cibubur, Syamsudin Noor Airport – Banjarmasin, and Benhill central Jakarta.
- We maintain our belief a mix of projects from construction to investment and concessions will improve WEGE’s future profitability.
- With improvements in burn rate, our bottom line is slightly revised within 2018-2019 to average CAGR of 46%.
- With business expansion & entry into concession and investment projects, WEGE’s bottom line will improve. We are targeting a TP within one year of 488 or 4.99 x PER. With significant upside, we maintain our recommendation to BUY.
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