Wijaya Karya No Upside From MRT Project

WIKA’s consortium won CP104 & CP105 underground sections of the Jakarta MRT project, an IDR450bn addition to its orderbook but a mere 0.9% addition to the company’s topline annually for 2012-2017. Despite the high-profile nature of the project, we see no upside to WIKA’s FY13E earnings. Maintain NEUTRAL at IDR2,500 TP. The company is trading at a 24.5x 2013 P/E – a 22% premium to the sector.

Project win expected; no changes to FY13E earnings
It was announced yesterday that WIKA, along with partners Obayashi, Shimizu, and Jaya Konstruksi (JKON, Not Rated), has won the CP104 and CP105 underground sections of the high-profile Jakarta MRT project. CP104 and CP105 are valued at ~IDR1.5trn each, putting WIKA’s total revenue booking from the project (for its 15% stake) at IDR450bn. The amount is to be spread over the next four years until the project’s completion in 2017, or a mere 0.9% contribution to the company’s FY13E topline at IDR12.3trn.

WIKA has unofficially guided for 6%-8% gross margin from the project, translating to negligible contributions to the bottomline. Note that the company has included this project win in its FY13 orderbook and earnings projection. Thus, we deem our FY13E earnings (at 8% above the company’s guidance) in line with this latest event.

First-mover strategy in transportation infrastructure, potential win for CP101-103 elevated sections. We always highlight that we like WIKA’s strategic direction, including its first-mover push in Indonesia’s transportation infrastructure projects despite slim margins at present. This is the same approach that the company has adopted with Indonesia’s engineering, procurement and construction (EPC) developments three years ago, for which its dominance is now undisputed.

WIKA expects to win at least one elevated (above ground) MRT section tender, where it is part of a consortium with Tokyu Corporation. At a 40% working interest, WIKA expects to add ~IDR600bn to its orderbook by year-end.
Maintain NEUTRAL at IDR2,500 TP. All in, we see no fundamental changes in the company’s FY13E performance despite the jolly news. WIKA is currently trading at 24.5x 2013 P/E, a 22% premium to the industry.