Voksel Electric King of Cables

VOKS is the undisputed leader in manufacturing aluminum and fiber optic cables in Indonesia. The company is a major supplier to PLN and TLKM, making it the main beneficiary of the Government’s megaprojects in power and telco, which are worth at least USD4.5bn in opportunities to the company for the next 10 years. VOKS is trading at 7.0x 2013 P/E.

Benefiting from high demand for cables, while its focus on B2G & B2B propels net margins. VOKS is the undisputed leader in producing aluminum and fiber optic cables. 50% of its total FY12 revenue came from government projects (of which 40% was from the state power company (PLN) for medium voltage aluminum cables and 10% was from PT Telekomunikasi Indonesia Tbk (TLKM) for fiber optics. VOKS’ mechanical and electrical contractor subsidiaries have helped generate 35% of its revenue in FY12, with high-profile business-to-business (B2B) projects such as commercial complexes like Kuningan City, Central Park, and Senayan City in Jakarta.

Unlike other cable producers, which are at the mercy of a crowded business-to-consumer ‘free-market’, low-voltage copper cable prices and uncertain demand, VOKS’ focus on business-to-government and B2B markets have helped it to maintain the highest net margins in the industry.

A USD4.5bn opportunity
On top of TLKM’s Second Palapa Project in Eastern Indonesia (a mega-plan to increase Indonesia’s broadband penetration to 100% by 2015 and disburses at least USD105m annually), PLN is undergoing its second 10,000MW power project within the MP3EI masterplan. The Government will disburse USD29bn between now and 2021 for electricity transmission & distribution development, of which ~15% is allocated for cable procurement, an industry in which VOKS is a market leader.

Cheaply valued despite solid prospects
The company offers a 25% ROE over its net cash position. It is targeting topline and bottomline growth of 18%-19% in FY12-FY13, which we think is rather conservative in view of the potential PLN project pipeline. After being dormant post-1997 Asian financial crisis, VOKS is now trading at a mere 7.0x 2013 P/E.