This is our first initiate coverage, the star of this week is WIKA. Let's see what our research team says about wika.
Appealing Order Book Achievement
- Integrated construction company with diversified portfolio business and subsidiaries
- Attractive order book performance with 78.02% achievement until September 2016 worth IDR 67.1 tn
- Strong balance sheet after right issue by the end of October, 2016 worth IDR 6.14 tn
PT Wijaya Karya (Persero), Tbk is an Indonesia SOE’s which focused on engaged in provisioning construction services. Its business is classified into 4 segments consist of infrastructure and building, industry, energy industrial plant and realty product
- Infrastructure development is the main trigger to boost Indonesia economic growth
- Acceleration in infrastructure budget which grow 14.09% CAGR over the last 6 years is a reflection that infrastructure still being government concern to revive the economy
- The implementation of tax amnesty program will attract repatriation funds and provide opportunities for infrastructure sector to grow further
- The repatriation funds will be allocated into infrastructure real sector and its potentially increasing order book for construction company
- Decreasing leverage ratio after right issue due to increasing WIKA’s equity
Valuation and Recommendation
WIKA traded at 26.90x P/E, it higher than P/E industry which traded at 20.59x and higher than competitors such as WSKT, PTPP, and ADHI. But WIKA has EV/EBITDA and PBV which recorded 22.61x and 2.23x respectively, its lower compared with the other competitors.
We think that increasing in sales of 15.42% yoy also order book achievement in 3Q16 still equal with highest P/E for WIKA and the potential of WIKA’s earnings growth in FY16.
We have an overweight rating for WIKA with target price of IDR3,050. Its target price implying 15.80x P/E in FY17 and 22.63% potential upside. Our target price based on blended valuation using DCF, EV/EBITDA and P/E with assume 13.80% of WACC.
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