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Driven by sanguine investor sentiments, the market cap of the Indonesian construction sector has expanded by 280% since 2012, outpacing its EPS growth potential of 18%-22% for 2013F. We propose a bellwether report to consider amid potentially weaker sentiments, while we continue to have a positive outlook on construction companies. At present, defensive stock picks.

We are re-instating coverage on TOTL with a BUY and IDR1,060TP The company is currently trading at 17.7x and 13.4x 2012E & 2013E PER compared to the industry at 18.8x and 14.3x. We like TOTL’s operations for the following reasons: 1) robust order book growth on the back of loyal customer base, 2) direct contracting.

We re-instate coverage on Wijaya Karya (WIKA) with a strong BUY and IDR1,600 TP, reflecting a potential 16% upside from its current price. As we roll over our valuation to FY13, we base this TP on a 14.6x target PER over its FY14 EPS. The company’s long-standing relationship with state oil & gas company Pertamina.

We re-instate coverage on Wijaya Karya (WIKA) with a strong BUY and IDR1,600 TP, reflecting a potential 16% upside from its current price. As we roll over our valuation to FY13, we base this TP on a 14.6x target PER over its FY14 EPS. The company’s long-standing relationship with state oil & gas company Pertamina.