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Thursday , 16 Nov 2017 02:28

PT WASKITAKARYA(PERSERO) TBK

Pursuit of a stellar earning’s growth

 

WSKTmanaged to book stellar earning’s growth of 175.2% YoY in 9M17 and beat ourFY17 estimate of Rp2.4 trillionby 6.1%. Net revenue grew by 103.7% YoY to Rp28.5 trillion thanks to Terbanggibesar - KayuAgung, Jakarta - Cikampek, Cibitung - Cilincing, Cinere - Serpong toll road projects.  Furthermore, GPM grew by 248 bps YoY to 19.8% mostly due to increasing profitability in precast business from 24% in 9M16 to 27% in 9M17 as the result of precast sales in LRT Palembang project. As of 9M17, it has secured Rp44.5 trillion of new contract and accounting for 74.2% of its new contract target in 2017F of Rp60 trillion.  Hence, we maintain our BUY call to the stock with target price at Rp3,300/share. 

 

Stellar performance exceeding estimates

WSKT has managed stellar performance which the total revenue grew by 103.7% YoY to Rp28.5 trillion thanks to Terbanggibesar - KayuAgung, Jakarta - Cikampek, Cibitung - Cilincing, Cinere - Serpong toll road projects.This result was mainly supported by construction and precast business revenue which grew by 98.4% and 219% YoY, respectively.  GPM grew by 248 bps YoY to 19.8% mostly due to increasing profitability in precast business from 24% in 9M16 to 27% in 9M17 as the result of precast sales in LRT Palembang.  On more positive notes,net profit grew 175% YoY to Rp2.57 trillion mainly due to strong revenue growth and better than expected interest income of Rp327 billion (+159% YoY) which came from shareholder loan to its subsidiaries.Historically, this is the first time for the company that 9M17’s earning result has beat our full year estimates of Rp2.4 trillion. 

 

FY18F outlook: Focus on its huge order book

Current order book has reached IDR124.5tn as of 9M17, including IDR44.5tn of new contracts or formed 74.2% of the management’s full year target of IDR60.0tn. The 9M17 order book grew 19.7% YTD from IDR104.0tn in FY16. As such, WSKT still has around IDR105.5tn of contracts on its pipeline in 2018F.  On balance sheet wise,total interest-bearing liabilities spiked to IDR35.5tn (Vs. IDR21.7tn in 2016), mainly from additional IDR12tn bank loan. Consequently, net gearing level increased to 233% YoY to 1.3x. WSKT’s operating cash flow is still negative at -Rp5.1trillion (higher than previous quarter of -Rp4 trillion) due to higher cash paid for interest expense of Rp1.3 trillion.

 

Maintain BUY rating – Target price at Rp3,300 per share

Based on our DCF-10 year valuation, we generate the fair equity value of WSKT at Rp3,300 per share which represents a 2018F PER target of 12.29x and EV/EBITDA target of 9.55x. Based on yesterday’s closing price, WSKT was trading at an attractive valuation of 10.45 PER and 7.31x EV/EBITDA 2018F indicating that our fair value offers a hefty 51.3% upside potential. Hence, we maintain our BUY recommendation to the stock.

 

Key Risks: delay on divestment plan and high gearing level.

 

 

Financial Summary

 (Rp billion)

 2015A

 2016A

 2017F

2018F

2019F

 Revenue

14,153

23,788

34,463

44,040

52,605

 EBITDA

1,546

3,377

4,979

6,346

7,380

 Net profit

1,047

1,713

2,423

3,089

3,616

 EPS (Rp)

90

147

209

266

311

 PER (x)

24.95

15.26

9.13

7.16

6.12

 BVPS (Rp)

822

953

1,132

1,356

1,614

 PBV (x)

2.74

2.36

1.68

1.41

1.18

 EV/EBITDA (x)

18.35

11.03

6.66

6.57

5.95

 Dividend yield (%)

0.80

1.31

2.19

2.79

3.27

RoE (%)

16.91

16.62

20.01

21.38

20.97

 

Source: Company data and Lotus Andalan Research