Wijaya Karya Lifted By Coveted Portfolio Of Projects
Investment Merits
WIKA’s strong ties with the national power and oil & gas (O&G) companies make it the frontrunner to secure high-margin engineering, procurement and construction (EPC) projects. Strategic ownership of precast manufacturer WIKA Beton ensures consistent supply despite increasingly tight raw materials market. Widest net margins among other national construction companies (5.0% in FY13F), net cash position enables the Group to aggressively meet human resource needs
Company Profile
Wijaya Karya is a diversified construction services provider engaged in civil engineering, EPC, industrial concrete manufacturing, real estate, and marketing & distribution of coal, asphalt, concrete steel and other construction materials.
Highlights
Diversified businesses ensure high profitability. WIKA’s revenue is mainly derived from civil and building construction works (41%), EPC projects (30%), precast manufacturing (19%) and property development 8%). The rest of its revenue comes from the sale and trading of industrial products like automotive spare parts and liquefied petroleum gas (LPG) tubes. As over 50% of its revenue is driven by high-margin non-construction sources, we expect the Company to book a 5.0% net margin in FY13F, 140bps-200bps higher than other state-owned enterprise (SOE) construction players like PT Pembangunan Perumahan Tbk (PTPP, BUY, TP IDR1,700) and PT Waskita Karya Tbk (WSKT, Not Rated).
Indonesia’s EPC market leader. Through the Indonesian Economic Masterplan 2011-2025 (MP3EI), the Government has allocated the highest portion of its development budget for energy infrastructure (worth USD70.4bn in investments between now and 2025). This commitment has catapulted demand for EPC works in Indonesia since 2010. WIKA’s original expertise as an electrical contractor, plus its robust working relationship with the State Power Company Perusahaan Listrik Negara (PLN), has allowed it to command a 64% share of the EPC market among the domestic players – way ahead of the second largest contractor, PTPP, which has 17%.
The most coveted portfolio in the industry. In 1HFY13, WIKA was awarded some of the most high-profile infrastructure projects in the country, such as the CP104& CP105 underground sections of the Jakarta Mass Rapid Transit (MRT) initiative (the Company also holds a 15% stake in the IDR3trn project) and the Jakarta Soekarno Hatta Terminal 3 expansion (where it holds a 37% stake in the IDR4.7trn works). These wins have led WIKA to book IDR9trn worth of new contracts in 1HFY13.
