PT Wijaya Karya Beton Tbk. —IPO REPORT—

PT Wijaya Karya Beton Tbk (the Company) was spun off in 1997 as a different entity by PT Wijaya Karya (Persero) Tbk. The Company is considered to be the most prominent player amongst precast concrete producer with a production capacity of 2 million tons per annum (2012 data). The Company’s presence are in the major islands in Indonesia, ranging from Sumatera to the Sulawesi.

The Company will offer a maximum of 2.045.466.600 new shares to the Public or equivalent to 23.47% of enlarged capital.

Compared to its publicly listed peer, the Company currently has almost three times the number of factories in operations (co. 8 factories vs. peer 3 factories) and four times the production capacity (2 mtpa vs. 0.5 mtpa).

By 2013, the Company operates 8 factories; 5 situated in the Java Island, 2 in the Sumatra Island and a factory in the Sulawesi Island. In addition to those existing factories, the Company is planning to add a number of new factories in both old and new market (Borneo Factory). With the multiple plants in operations, it ensures the two utter most important trait that the Company holds, punctuality and stability of supply.

Product-wise, the Company produces an array of prestressed concrete (PC) products. The products are namely; PC Poles, PC Piles, Bridge Concrete, Railway Concrete, Retaining Wall, Hydro Structure, Marine Structure, Building and Housing Concrete and lastly Other Concrete. The Company’s holds 43% of market share for all types of precast concrete in Indonesia.

Financial Overview

In FY13, the Company’s total Asset is booked at Rp 2.9 tn, growing at a rate of 26% CAGR in 2011 to 2013. In 2013, the Company issues Medium Term Notes series I with a nominal amount of Rp 366 bn. This MTN has a maturity date in the 15th of November in 2015. Total Asset majorly consist of Liabilities with FY13 Debt to Equity Ratio at 3x.

In FY13, the Company’s top line grew by 46.4% YoY booked at Rp 287.9 bn, vs. FY12 result of Rp 265 bn. Total Operating Expense was up by 50% YoY but this did not deter the Company’s bottom line performance. Operating income up by 45% YoY, amounting to Rp 336 bn, vs. Rp 231 bn in FY12 despite hikes in operating expenses. The Company generates Rp 242 bn of Net Profit in FY13, 36% YoY. EPS grew 34.5% YoY to Rp 36.16 in FY13,vs. Rp 26.89 in FY12.

Looking at the Company’s profitability, management was able to keep both ROA and ROE at a stable level. ROA/ROE in FY12 was at 11%/35% and it went up in FY13 to 13%/36%. The growth is sustainable as it on the back of 45% YoY increase in FY13 Operating Income and is not due to one off items such as surges in Other Income.

Initial Public Offering

A maximum of 2.045.466.600 new shares will be offered by the Company, or 23.47% of free float. IPO offer price ranges at Rp 470 - Rp 630 per share. WIKA Beton is to raise Rp 961.4 bn to Rp 1.29 tn from IPO. The proceeds are to be used as follows:

1. 85% of the proceeds will be utilized to expand the Company’s operations consisting of:

    a. 18.5% for the processing stage of materials required by the quarries such as mining the materials.
    b. Approximately 39.5% for the construction of the new factories in the South of Lampung, Pasuruan and the Eastern part of Borneo.
    c. 19.5% for the capacity expansion of the existing factories. The capacity expansion is pushed by the ever rising market demand and the 5% capacity increase target per   annum.
    d. 19.4% of the proceed will support the expansion of the Company’s Service business segment such as the purchase of inner boring machines and post tensioning machines.
    e. Lastly, 3.2% is to support the formation of the Mould Making division.

2. Approximately 15% are to be used as working capital such as supporting operational activities, purchase of materials and salaries and allowance.

At the indicative price range of Rp 470 - Rp 630, the offering price implies 14F PER of 14x - 17x, based on underwriters earnings estimates. The Company’s market capitalization will approximately be between Rp 4.09 tn to Rp 5.5 bn.