WIKA
Contact our analyst Revita
28% Upside, Buy
5th February 2021
Current price Rp1895
Target price Rp2430
5th February 2021
Current price Rp1895
Target price Rp2430
Targeting IDR 40 trillion of new contract
As of 11M20, WIKA has total new contracts of IDR 18,3 trillion, 86% of their revised target of IDR 21,38 trillion. Of the new contracts 23,34% come from industry (mostly their subsidiaries), 42,76% from infrastructure and building, 2,84% from property, and 31,06% from energy & industrial plants. WIKA is expecting their 2020F revised new contracts will come from SOEs, 44,79%, private, 22,59%, Govt, 27,30%, and Overseas businesses, 5,31%. As of 11M20, new contracts come from SOE 4,37%, private 60,35%, Government 34,93%. WIKA continues to expand their overseas market presence by securing projects to construct the Multipurpose Sports Complex in the Solomon Islands, which will host Pacific Games in 2023. Other major contracts obtained in 2020 are the construction of rotary kiln electric furnace (RKEF) nickel processing and refining plant production of 3 and 4 with a contract value of Rp 2.8 trillion and US$ 180.39 million. WIKA also received a follow-up project to build the Serang-Panimbang toll road worth Rp 938 billion and the Ameroro Dam project in Southeast Sulawesi worth Rp 538 billion. In 2021, WIKA targets new contracts of IDR 40 trillion. Three projects are expected to be completed in 2021, including Taiwan's MRT Station Sanying Line, Construction & Commissioning (EPCC) TSL Furnace Ausmelt and EPX Ammonium Nitrate Project which is expected to be completed in 1H21 or 2H21. As of 1M2021, WIKA has obtained total new contracts of IDR 1 trillion consisting of 2 projects including the construction of an Army Soldier's office house in Yogyakarta worth IDR 603.35 billion. The second contract is from the WIKA Hutama Karya consortium which is the implementing contractor for the construction of Kretek II Bridge, Bantul, Yogyakart worth IDR 364.6 billion. WIKA's share of ownership is 53%. We believe Wika's focus this year is to continue to achieve its tarrget by maximizing the progress of ongoing projects and accelerating the disbursement of receivables to boost cash flow.
Maintaining DER levels
Wika's Debt to Equity (DER) ratio for 3Q20 was 1,01x compared to Q2 2020 0,77x. Equity has decreased by IDR 19.2 trn in 2019FY to IDR 16.2 trn in 9M20. This decrease in equity is due to the impact of the implementation of PSAK 71, 72 and 73 which increased Impairment Loss Reserves (CKPN). WIKA is working to recover the impairment expenses and improve cash flow so as to reduce future dependence on bank loans. We estimate our DER 2020 and 2021 to average 1,05x.
Valuation: 28% upside, BUY
Using a WACC of 9,6%, we have a target price within one year of IDR. 2430 or trading at 17,6x PER which gives 28% potential upside, maintain BUY.
As of 11M20, WIKA has total new contracts of IDR 18,3 trillion, 86% of their revised target of IDR 21,38 trillion. Of the new contracts 23,34% come from industry (mostly their subsidiaries), 42,76% from infrastructure and building, 2,84% from property, and 31,06% from energy & industrial plants. WIKA is expecting their 2020F revised new contracts will come from SOEs, 44,79%, private, 22,59%, Govt, 27,30%, and Overseas businesses, 5,31%. As of 11M20, new contracts come from SOE 4,37%, private 60,35%, Government 34,93%. WIKA continues to expand their overseas market presence by securing projects to construct the Multipurpose Sports Complex in the Solomon Islands, which will host Pacific Games in 2023. Other major contracts obtained in 2020 are the construction of rotary kiln electric furnace (RKEF) nickel processing and refining plant production of 3 and 4 with a contract value of Rp 2.8 trillion and US$ 180.39 million. WIKA also received a follow-up project to build the Serang-Panimbang toll road worth Rp 938 billion and the Ameroro Dam project in Southeast Sulawesi worth Rp 538 billion. In 2021, WIKA targets new contracts of IDR 40 trillion. Three projects are expected to be completed in 2021, including Taiwan's MRT Station Sanying Line, Construction & Commissioning (EPCC) TSL Furnace Ausmelt and EPX Ammonium Nitrate Project which is expected to be completed in 1H21 or 2H21. As of 1M2021, WIKA has obtained total new contracts of IDR 1 trillion consisting of 2 projects including the construction of an Army Soldier's office house in Yogyakarta worth IDR 603.35 billion. The second contract is from the WIKA Hutama Karya consortium which is the implementing contractor for the construction of Kretek II Bridge, Bantul, Yogyakart worth IDR 364.6 billion. WIKA's share of ownership is 53%. We believe Wika's focus this year is to continue to achieve its tarrget by maximizing the progress of ongoing projects and accelerating the disbursement of receivables to boost cash flow.
Maintaining DER levels
Wika's Debt to Equity (DER) ratio for 3Q20 was 1,01x compared to Q2 2020 0,77x. Equity has decreased by IDR 19.2 trn in 2019FY to IDR 16.2 trn in 9M20. This decrease in equity is due to the impact of the implementation of PSAK 71, 72 and 73 which increased Impairment Loss Reserves (CKPN). WIKA is working to recover the impairment expenses and improve cash flow so as to reduce future dependence on bank loans. We estimate our DER 2020 and 2021 to average 1,05x.
Valuation: 28% upside, BUY
Using a WACC of 9,6%, we have a target price within one year of IDR. 2430 or trading at 17,6x PER which gives 28% potential upside, maintain BUY.
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