WIKA Coverage

 

This is our first initiate coverage, the star of this week is WIKA. Let's see what our research team says about wika.

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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

 

Company Description

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

 

Positive Catalyst

  • 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

For a more complete research please download our pdf attacment

 

 

 

 

 Disclosures:


Ownership and material conflicts of interest:

The author(s),  or a member of their household, of this report [holds/does not hold] a financial interest in the securities of this company. 

The author(s), or a member of their household, of this report [knows/does not know] of the existence of any conflicts of interest that might bias the content or publication of this report.  [The conflict of interest is…]

Receipt of compensation:

Compensation of the author(s) of this report is not based on investment banking revenue.

Position as an officer or director:

The author(s), or a member of their household, does [not] serves as an officer, director or advisory board member of the subject company.

Market making:

The author(s) does [not] act as a market maker in the subject company’s securities.

Ratings guide:

Banks rate companies as either an OVERWEIGHT, NEUTRAL or UNDERWEIGHT.  AN OVERWEIGHT rating is given when the security is expected to deliver absolute returns of 15% or greater over the next twelve month period, and recommends that investors take a position above the security’s weight in the S&P 500, or any other relevant index.  AN UNDERWEIGHT rating is given when the security is expected to deliver negative returns over the next twelve months, while a NEUTRAL rating implies flat returns over the next twelve months.

Disclaimer:

The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by 

 All contents, research and design are created by Muhammad Noer Fahmi

 

 

 

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