WIKA
Contact our analyst Revita
69% Upside. BUY
1st September 2020
Current price Rp1240
Target price Rp2100
Current price Rp1240
Target price Rp2100
Revised target
With the current conditions, WIKA has revised its new contract target to IDR. 21 trillion or down -68% from the initial target of IDR. 65 trillion. As of 1H20, WIKA has received total new contracts of IDR 3,42 trn which is 15,98% of their revised target of IDR. 21,38trn. Of the new contract 55,5% come from industry (mostly their subsidiaries), 34,9% from infrastructure and building, 9,1% from property, and 0,49% 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%. WIKA’s top contracts already received include Harbourn Road Toll Road (Ancol – Pluit) 6,5 trn, Palu Coal Fire Power Plant 2,08 trn, Lhoksumawe Titan Singapore Cooking Oil Industry 2,04 trn, Serpong – Balaraja Toll Road 890 bn, Semarang – Demak toll road (27 km) 861,27 bn. This year growth will be slow but steady. As in our previous report, while this current condition, if it lasts longer, could affect WIKA’s new contract, the company still has carry over contracts in the order book. Wika's focus for the 2nd semester of this year is to achieve its new net profit target by maximizing the progress of ongoing projects and accelerating the disbursement of receivables to boost cash flow.
Toll road progress
In 1H20, the progress of WIKA’s large toll road projects is as follows: Cengkareng – Kunciran toll road worth IDR 2,48 trn has reached 86,11% completion. Serang – Panimbang toll road worth IDR. 3,31 trn has reached 65,90% completion. High Speed Railway Jakarta –Bandung with 4 stations and 1 depot worth IDR 15,68 trn has reached 51,47% completion.
Maintaining DER levels
Wika's Debt to Equity (DER) ratio for 2019 was 2.23x and has increased further in Q2 2020 to 2.70x as the equity has decreased by IDR 19.2 trn to IDR 16.2 trn. 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 DER 2020 and 2021 to average 2.32
Valuation: 69% upside, BUY
Using a WACC of 9,6%, we have a target price within one year of IDR. 2100 or trading at 15,3x PER which gives significant potential upside, maintain BUY.
With the current conditions, WIKA has revised its new contract target to IDR. 21 trillion or down -68% from the initial target of IDR. 65 trillion. As of 1H20, WIKA has received total new contracts of IDR 3,42 trn which is 15,98% of their revised target of IDR. 21,38trn. Of the new contract 55,5% come from industry (mostly their subsidiaries), 34,9% from infrastructure and building, 9,1% from property, and 0,49% 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%. WIKA’s top contracts already received include Harbourn Road Toll Road (Ancol – Pluit) 6,5 trn, Palu Coal Fire Power Plant 2,08 trn, Lhoksumawe Titan Singapore Cooking Oil Industry 2,04 trn, Serpong – Balaraja Toll Road 890 bn, Semarang – Demak toll road (27 km) 861,27 bn. This year growth will be slow but steady. As in our previous report, while this current condition, if it lasts longer, could affect WIKA’s new contract, the company still has carry over contracts in the order book. Wika's focus for the 2nd semester of this year is to achieve its new net profit target by maximizing the progress of ongoing projects and accelerating the disbursement of receivables to boost cash flow.
Toll road progress
In 1H20, the progress of WIKA’s large toll road projects is as follows: Cengkareng – Kunciran toll road worth IDR 2,48 trn has reached 86,11% completion. Serang – Panimbang toll road worth IDR. 3,31 trn has reached 65,90% completion. High Speed Railway Jakarta –Bandung with 4 stations and 1 depot worth IDR 15,68 trn has reached 51,47% completion.
Maintaining DER levels
Wika's Debt to Equity (DER) ratio for 2019 was 2.23x and has increased further in Q2 2020 to 2.70x as the equity has decreased by IDR 19.2 trn to IDR 16.2 trn. 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 DER 2020 and 2021 to average 2.32
Valuation: 69% upside, BUY
Using a WACC of 9,6%, we have a target price within one year of IDR. 2100 or trading at 15,3x PER which gives significant potential upside, maintain BUY.
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