WTON
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55% upside
4th December 2019
Current price Rp 452
Target price Rp 700
4th December 2019
Current price Rp 452
Target price Rp 700
Contracts on track
- WTON is on track to achieve new contracts of IDR 9 tn in 2019, up 18% compared to last year and matching the prediction from our previous report. Due to the general elections, WTON’s new contracts in 3Q19 fell 11% YoY to IDR 4.798 but increased 77% QoQ.
- As we expected, the 2H19 will be better than 1H19. In 4Q19, WTON will receive more projects from parent WIKA Group. For FY2019, WTON has targeted that contracts from WIKA will make 40% of the total, up from 23% in 9M19 as part of a group synergy program. This will be reflected in 2020 revenue.
- As of 9M19, the top 3 customers of WTON are WIKA Group 23.2%, PT Bosowa marga Nusantara 15%, and PLN 12.1%. Out of IDR 4.8 tn new contracts, the top 10 projects are worth IDR 1.5 tn, of which the largest is in the Pekanbaru-Padang toll road worth IDR 691 bn, while the other smaller projects can still contribute significantly to WTON's profit. We believe WTON will be able to achieve their full year target despite the slowdown in 1H19 as evidenced by the fast rising yoy growth trends.
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Capacity upgrade
Raw material business
New precast houses
Valuation: 55% upside
- Precast capacity is targeted to increase from 3.6mn to 4mn tons mostly in the existing plant. In addition, WTON will have a new plant in Pekanbaru and 2 new mobile plants in Pekanbaru and Medan that will supply mostly ready mix to support the Pekanbaru-Padang toll road projects.
- Beside supplying precast to the Pekanbaru toll road project, the Pekanbaru plant will also support the precast market in Central Sumatera.
Raw material business
- WTON’s sales are still mainly on the production side, but another of WTON’s business lines, raw materials, will be targeted for growth in the future.
- WTON will have two new quarries in Cimalaka and in Cibeber, West Java. The sand will be used to supply the HSR project. These new quarries are a part of WTON’s strategy to provide raw materials for the new projects particularly from WIKA.
New precast houses
- On the engineering side, WTON has some new innovative precast concrete products as a result of its own R&D.
- One of the results is a product called RWB01, a one-floor precast type 36 frame structure house which will only take 1 week and 6 workers to construct. This RWB01 model will be used in a project in Villa Kebun Raya Estate, Bogor.
Valuation: 55% upside
- At WACC of 8.9%, we maintain our one-year target price of IDR 700/share, which indicates 12.5x PER. A 55% upside is expected. Maintain BUY.
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