WIKA Site Visit & Analyst Meeting Notes

We just visited one of WIKA’s project site, Soekarno-Hatta Terminal 3 Ultimate (T3U). Here are our key takeaway points:

Soekarno-Hatta Terminal 3 Ultimate is the extension of the existing Terminal 3 and meant to be the capacity extension to the currently over-capacity Soekarno-Hatta airport.

The project is worth IDR4.7trn and the construction is being done by a consortium of companies such as WIKA (42%), Waskita Karya at 38% (WSKT IJ), PT Pembangunan Perumahan at 15% (PTPP IJ), and PT Jaya Tekhnik at 5% (JTI, Non-Listed).

The T3U is designed with the capacity of 25 million passengers per year. The construction is targeted to be completed by June 2015. The existing Terminal 3 is only 34,000 m2 and it will be 320,000 m2 once it has finished.

WIKA’s scope work for this projects include the designing for the overall international & domestic building, structural foundation construction work, architectural construction work, Mechanical and electronical works, interior works, and etc. The Terminal 3 Ultimate will also be able to land Jumbo Airbus 380 aircrafts.

Here are our takeaway points during the analyst meeting:

There has been some concerns regarding the company’s ability to achieve its target new contract this year due to the uncertainty of project owners during presidential election period. However, we have been informed by the management that WIKA has gained ~IDR11.4trn of new contracts up to end of August 2014. The additional new contracts include ~IDR1.2trn of contract to build office tower & residence in Myanmar and USD120m to build malls in Kuching, Malaysia. Therefore, the management is still maintaining their target new contracts achievement of IDR25trn this year.

On another note its property subsidiary, PT Wika Realty, has expressed their intention to go public possibly in 2015. Currently Wika realty has 126 hectares (ha) of undeveloped landbank with 23 ha of developed landbank. Wika Realty is targeting ~IDR2trn from IPO fund, but it is still in due diligence process.

We see that going forward, the recently acquired Sarana Karya (SAKA) will become one of the key booster for WIKA. This is because the company is currently the largest producer of natural asphalt with 40m tonnes of reserve. Based on the forecast shown by the management, SAKA is projected to have 24% net margin. That will be a very good margin considering that WIKA only booked 4.8% net margin in FY13.

Meanwhile the precast subsidiary, PT Wijaya Karya Beton (WTON IJ, BUY, TP: IDR1,260) is maintaining its schedule to buildadditional precast production facilities in Lampung, 1 facility to cater for Wika Kobe, 1 facility in Cilegon to cater its joint venture market with Krakatau, and the recently acquired precast company in Batam, PT Citra Lautan Teduh. Therefore, we maintain our estimate that the company will have a total production capacity of 2.35m tonnes by 2014 and will be effective starting in 2015. We are currently reviewing our forecast for WIKA but we still maintain our call and estimate for WTON with BUY and TP of IDR1,260.