IP WSKT Results Note 160729 final

29 July 2016
Waskita Karya(WSKT IJ)
Results Note
BUY(Unchanged)
Sustained strong growth
Target price (Rp)
Rp3,400
Prior TP (Rp)
Rp2,500
Shareprice (Rp)
Rp2,800
Upside/downside (%)
+21.4
Sharesoutstanding (m)
13,572
Marketcap. (US$ m)
1H16 performance was above estimates
Continuous construction margin improvement
Outstanding achievement in June 2016
Raise earnings by 8% and TP to Rp3,400
2,893
Free float (%)
34.0
Avg. 6m dailyT/O (US$ m)
7.5
Price Performance
3M
6M
12M
Absolute (%)
19.4
61.4
57.3
Relative to JCI (%)
10.4
47.1
47.0
52whigh/low (Rp)
Outstanding 2Q16 performance. Waskita Karya (WSKT) reported 2Q16 net
profit of Rp459bn (+261% qoq, +188% yoy). The strong earnings were mainly
supported by performance growth of 63% qoq in 2Q16. As a result, gross margin
improved by 243bps qoq to 19.3% and net margin expanded to 13.2% from 8.5%
in 2Q15. 1H16 earnings reached Rp586bn, up 242% yoy, above our estimate as it
formed 34% of our Fy16 earnings. Historically, 1H earnings represent 15% of FY
earnings.
2,800 - 1,550
Strong margin improvement. WSKT’s construction business revenues grew
148% yoy to Rp7.6tn in 1H16, accounting for 95% of its total revenues (vs. 93%
in 1H15). Gross margin improved to 17.8% from 16.3%, making WSKT the
construction company with the highest margin among SOE contractors.
Moreover, we also saw higher recurring income from toll road operations, which
nearly tripled to Rp64.7bn from Rp28.2bn in 3M16, resulting from recent
operations from the Pejagan-Pemalang toll road.
WSKT-Rebase
Jul-16
Jun-16
Jun-16
Apr-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Feb-16
Dec-15
Dec-15
Oct-15
Nov-15
Sep-15
Sep-15
Jul-15
170
160
150
140
130
120
110
100
90
80
Aug-15
Equity | Indonesia | Construction
StockData
JCI Index-Rebase
Major Shareholders
Government of Indonesia
66.0%
Public
34.0%
Estimate Change; Vs. Consensus
Latest EPS (Rp)
2016F
2017F
134.8
191.7
4.6
8.2
23.3
41.3
Vs. Prior EPS (%)
Vs. Consensus (%)
Source: Bloomberg
Eveline Liauw
PT Indo Premier Securities
[email protected]
+62 21 5793 1169
Frederick Daniel
PT Indo Premier Securities
[email protected]
+62 21 5793 1170
Strong new contract growth. WSKT exceeded its own 1H16 new contract
target of Rp40tn, with new contracts achievement of Rp45 in 1H16 (+306% yoy),
accounting for 72% of the FY16 new contract target. We think WSKT’s strong
achievements will continue on the back of the Ministry of Public Works and
Housing’s (PUPR) commitment to absorb more than 94% of the budget by the end
of the year. Note that PUPR’s budget absorption stands at 30.3% until 22 July
2016, thus providing room for more projects to be tendered in 2H16. WSKT’s
orderbook stands at Rp79.7tn in 1H16 (+167.1% yoy). Thus, we believe WSKT
will maintain its strong earnings growth momentum in 2016-17.
Raise earnings by 8% and TP to Rp 3,400. We have increased our FY16 new
contract target to Rp62.4tn from Rp57.1tn on the back of stronger-than-expected
new contract achievement. We have also raised our FY16 and FY17 earnings
forecasts by 5-8% to Rp1.8tn and Rp2.6tn, respectively. We raise our TP to
Rp3,400 (from Rp2,500) on the back of the earnings upgrade and roll over our
valuation base to 2017 (from 2016), as we believe strong earnings performance
from WSKT is likely to persist in 2017. Our new TP implies a PE FY17 of 18x and
21% upside potential from the current price.
Year To 31 Dec
Revenue (RpBn)
EBITDA (RpBn)
EBITDA Growth (%)
Net Profit (RpBn)
EPS (Rp)
EPS Growth (%)
Net Gearing (%)
PER (x)
PBV (x)
Dividend Yield (%)
EV/EBITDA (x)
Source : WSKT, IndoPremier
Refer to Important disclosures on the last of this report
2014A
10,287
640
23.7
502
52
0.0
52.2
54.3
9.6
0.4
40.2
2015A
14,153
1,261
96.9
1,048
77
49.8
15.0
36.3
3.9
0.3
29.0
2016F
20,928
2,022
60.4
1,829
135
74.6
48.8
20.8
3.3
0.4
16.0
2017F
28,298
2,915
44.1
2,601
192
42.2
33.0
14.6
2.7
0.8
11.5
2018F
35,940
3,967
36.1
3,858
284
48.3
25.1
9.9
2.2
1.2
8.5
Share Price Closing as of : 27-July-2016
WSKT Results Note
Fig. 1: WSKT’s new contract
Fig. 2: WSKT’s orderbook
(Rp bn)
(Rp bn)
50,000
45,652.0
45,000
90,000
79,679.0
80,000
40,000
70,000
35,000
32,084.0
60,000
51,700.0
30,000
50,000
22,645.0
25,000
40,000
20,000
15,000
9,769.0
10,000
32,700.0
30,000
12,264.0 13,359.0
20,000
18,831.0
21,996.0
14,501.0
5,511.0
10,000
5,000
-
2010A
2011A
2012A
2013A
2014A
2015A
Source : WSKT, IndoPremier
2012A
2013A
2014A
2015A
1H16
Source : WSKT, IndoPremier
Fig. 3: Revenue to grow CAGR 37% 2014-18F
Toll road revenue
2011A
1H16
Buildings rental
Sales precast
Fig. 4: margin improvement should continue…
Construction services
Gross profit
(Rp bn)
Gross margin
(Rp bn)
40,000
6,000
CAGR 2014-18F: 37%
35,000
14.4%
14.5%
15.0%
16%
13.6%
14%
5,000
30,000
10.8%
12%
4,000
25,000
20,000
3,000
15,000
2,000
10%
8%
6%
4%
10,000
1,000
2%
5,000
-
0%
2014A
2014A
2015A
2016F
2017F
2015A
2016F
2017F
2018F
2018F
Source : WSKT, IndoPremier
Source : WSKT, IndoPremier
Fig. 5: Operating profit to grow CAGR 49% 2014-18F
Operating profit
Fig. 6: Net profit to grow CAGR 63% 2014-18F
Net profit
Operating margin
Net margin
(Rp bn)
(Rp bn)
5,000
4,500
10.9%
4,000
3,500
11.5%
14%
3,000
12%
2,500
10.7%
12.2%
10.0%
10%
8.5%
3,000
8.7%
9.2%
10%
7.4%
2,000
12%
8%
8%
1,500
2,500
6%
4.9%
6%
2,000
1,500
1,000
4%
500
2%
4%
1,000
2%
500
-
0%
2014A
2015A
2016F
2017F
2018F
Source : WSKT, IndoPremier
Refer to Important disclosures on the last of this report
-
0%
2014A
2015A
2016F
2017F
2018F
Source : WSKT, IndoPremier
2
WSKT Results Note
Fig 7. 2Q16 earnings
6M16
6M15
YoY
2Q16
1Q16
QoQ
Consensus
6M16/
consensus
Ours
6M16/ ours
Revenue
8,084.6
3,984.3
103%
5,013.1
3,071.5
63%
23,382.0
35%
20,034.4
40%
Gross profit (before JO)
1,489.9
481.2
210%
970.2
519.6
87%
3,143.7
47%
2,879.0
52%
Operating profit
1,237.8
368.4
236%
854.1
383.7
123%
2,423.0
51%
2,164.0
57%
586.3
171.6
242%
458.9
127.4
260%
1,483.0
40%
1,749.0
34%
(In Rpbn)
Net profit
6M16
6M15
2Q16
1Q16
FY16
FY16
Gross Margin
18.4%
12.1%
19.4%
16.9%
13.4%
14.4%
Operating margin
15.3%
9.2%
17.0%
12.5%
10.4%
10.8%
7.3%
4.3%
9.2%
4.1%
6.3%
8.7%
Net Margin
Source : WSKT, IndoPremier
Fig 8. Changes in earnings forecast
(Old)
(New)
(%) change
2017F
2016F
2017F
2016F
2017F
20,034.4
26,260.2
20,927.8
28,297.9
4.5%
7.8%
Gross profit
2,879.0
3,819.0
3,021.0
4,110.4
4.9%
7.6%
Operating profit
2,164.0
2,981.0
2,286.8
3,259.5
5.7%
9.3%
1,749.0
2,404.0
1,829.3
2,601.3
4.6%
8.2%
14.4%
14.5%
14.4%
14.5%
10.8%
11.4%
10.9%
11.5%
8.7%
9.2%
8.7%
9.2%
2016F
Revenue
Net income
Margins
Gross margin
Operating margin
Net margin
Source : WSKT, IndoPremier
Refer to Important disclosures on the last of this report
3
WSKT Results Note
Year To 31 Dec (RpBn)
2014A
2015A
2016F
2017F
2018F
Income Statement
Net Revenue
10,287
14,153
20,928
28,298
35,940
Cost of Sales
(9,178)
(12,232)
(17,907)
(24,187)
(30,552)
Gross Profit
1,109
1,921
3,021
4,110
5,388
SG&A Expenses
(431)
(518)
(752)
(874)
(1,047)
678
1,403
2,269
3,236
4,341
(140)
(267)
(272)
(370)
(346)
Operating Profit
Net Interest
Forex Gain (Loss)
Others-Net
Pre-Tax Income
(3)
13
0
0
0
221
249
351
446
753
756
1,398
2,348
3,313
4,749
(254)
(350)
(519)
(712)
(891)
0
0
0
0
1
502
1,048
1,829
2,601
3,858
Cash & Equivalent
1,700
5,522
1,670
2,585
3,477
Receivable
2,991
5,719
6,534
8,461
10,068
Income Tax
Minorities
Net Income
Balance Sheet
604
826
989
1,515
1,890
5,055
6,639
9,085
12,172
14,825
10,349
18,706
18,278
24,733
30,259
622
1,923
2,676
3,055
3,181
0
0
0
0
0
1,564
9,258
10,203
10,972
11,663
12,542
30,309
31,781
39,604
46,174
ST Loans
1,917
1,628
1,858
2,512
3,191
Payable
2,572
8,773
0
11,691
12,701
Other Payables
3,239
3,259
3,609
4,311
5,054
Inventory
Other Current Assets
Total Current Assets
Fixed Assets - Net
Goodwill
Non Current Assets
Total Assets
Current Portion of LT Loans
Total Current Liab.
Long Term Loans
Other LT Liab.
Total Liabilities
Equity
Retained Earnings
Minority Interest
Total SHE + Minority Int.
Total Liabilities & Equity
0
5
5
5
5
7,728
13,665
12,947
18,520
20,950
1,246
5,333
5,408
4,653
4,648
719
1,607
1,907
2,472
3,061
9,693
20,605
20,262
25,644
28,660
1,889
7,614
7,614
7,614
7,614
954
1,933
3,596
5,886
9,290
6
157
308
460
611
2,849
9,704
11,519
13,960
17,515
12,542
30,309
31,781
39,604
46,174
Source : WSKT, IndoPremier
Refer to Important disclosures on the last of this report
4
WSKT Results Note
Year to 31 Dec
2014A
2015A
2016F
2017F
2018F
501
1,048
1,829
2,601
3,857
37
140
247
321
374
266
(58)
(1,996)
1,987
(817)
(542)
(427)
1,581
(1,936)
(2,234)
262
703
1,661
2,973
1,180
(1,224)
(9,135)
(1,945)
(1,469)
(1,191)
45
(328)
(124)
(200)
(195)
(1,180)
(9,463)
(2,070)
(1,669)
(1,386)
Loans
1,540
3,804
304
(101)
673
Equity
59
5,385
0
0
0
(110)
(100)
(166)
(312)
(454)
Cash Flow
Net Income (Excl.Extraordinary&Min.Int)
Depr. & Amortization
Changes in Working Capital
Others
Cash Flow From Operating
Capital Expenditure
Others
Cash Flow From Investing
Dividends
Others
Cash Flow From Financing
Changes in Cash
318
974
90
309
340
1,806
10,062
228
(103)
559
889
1,302
(181)
1,201
353
FinancialRatios
10.8
13.6
14.4
14.5
15.0
Operating Margin (%)
6.6
9.9
10.8
11.4
12.1
Pre-Tax Margin (%)
7.3
9.9
11.2
11.7
13.2
Net Margin (%)
4.9
7.4
8.7
9.2
10.7
ROA (%)
4.7
4.9
5.9
7.3
9.0
ROE (%)
19.2
16.7
17.2
20.4
24.5
ROIC (%)
10.9
10.0
10.9
13.4
17.2
Acct. Receivables TO (days)
71.3
92.4
87.7
76.4
73.4
Acct. Receivables - Other TO (days)
23.3
19.9
19.2
20.3
20.6
Inventory TO (days)
20.5
17.1
19.7
19.3
17.9
Payable TO (days)
96.7
169.3
165.6
144.6
145.7
0.0
0.0
0.0
0.0
0.0
111.0
71.8
63.1
51.4
44.8
0.3
0.2
0.2
0.1
0.1
52.2
15.0
48.8
33.0
25.1
Gross Margin (%)
Acct. Payables - Other TO (days)
Debt to Equity (%)
Interest Coverage Ratio (x)
Net Gearing (%)
Source : WSKT, IndoPremier
Refer to Important disclosures on the last of this report
5
Head Office
PT INDO PREMIER SECURITIES
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167
INVESTMENT RATINGS
BUY
: Expected total return of 10% or more within a 12-month period
HOLD
: Expected total return between -10% and 10% within a 12-month period
SELL
: Expected total return of -10% or worse within a 12-month period
ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analysts’ personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any
responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for
general circulation. Any recommendations contained in this document do not have regard to the specific investment objectives, financial situation and the
particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or
sell any securities. PT. Indo Premier Securities or its affiliates may seek or will seek investment banking or other business relationships with the companies in this
report.