We maintain our forecast as there are no reasons to change it after reviewing the 1Q14 numbers. We reiterate BUY at TP Rp2.740,- (20% upside), implies 23x P/E FY14. To date, WIKA trades at 19x P/E FY14. We still recommend BUY, due to; I) The 1Q14 revenue and net profit were inline with its historical trend . II) The 1Q14 new contract came on track to reach Rp4,8tn, 19% of ours and the Co’s. III) Its well diversified businesses to manage the risk & maintain its margin. Our top pick for construction sector is PTPP given its attractive valuation at 17x P/E FY14 (2nd lowest) with the strongest FY14 EPSg expectation at +31% YoY. Also, PTPP has achieved the highest new contract value since 2012.
Maintained the Same Margin - WIKA booked Rp2,8tn in its 1Q14 revenue (+6% YoY), 19% of BCf and 20% of cons. Its well diversified businesses helped to offset the declining margin in the infrastructure & building. Hence, the company has been able to maintain its gross margin at ~11% (+20 bps). 1Q14 net profit came to Rp167,5bn (+7% YoY), 23% of BCf and cons. Both of the revenue and net profit were in line with the historical trend, in the range of 18-22% & 20-28%, during 2010-2013.
New Contract Achievement still on Track - Up to 1Q14, WIKA has secured Rp4,8tn new contract, equated 19% of BCf (Rp25,2tn) and the co’s (Rp25,8tn). We still believe that WIKA could reach our full year target as the 1Q14 percentage was inline with its 5-years historical average. Some of the new contract projects are CBD Apartment in Surabaya (Rp634,6bn), Dharma Husada Tower (401,8bn), Sambu Oil Fuel Terminal (Rp740,5bn), Tanjung Uban Gasoline Project (Rp1,1tn) and ITB project for infrastructure procurement (Rp178,7bn).
Maintain 2014F Outlooks - We still maintain our expectation that the infrastructure & building and energy & industrial plant will underpin the 2014F revenue of Rp14,9tn (+25% YoY), with 66% contribution vs 65% in 2013, to come to Rp9,8tn (+11% YoY).
WIKA booked Rp2,8tn in its 1Q14 revenue (+6% YoY), accounted 19% of BCf and 20% of consensus. The infrastructure & building and the industry businesses were the main contributors to the revenue, as it contributed 36% (+510 bps YoY) & 32% (+180 bps YoY), respectively. The company’s well diversified businesses helped to offset the declining margin in the infrastructure & building by -260bps YoY to 8%. Noted that the energy & industrial plant, property and industry margins expanded by +150 bps YoY, +150 bps YoY and +120 bps, respectively. Hence, the company has successfully maintained its gross margin at ~11% (+20 bps). Moreover, operating profit of Rp279,3bn made a fair growth by +2% YoY, while the margin remained the same as the 1Q13 at 10%. All in all, WIKA recorded Rp167,5bn in 1Q14 net earnings, grew by +7% YoY, made 23% of BCf and consensus. Both of the 1Q14 revenue and net profit were in line with the company’s historical trend, as it contributes in the range of 18-22% & 20-28%, respectively, during 2010-2013.
Up to 1Q14, WIKA has secured Rp4,8tn new contract (+2% YoY) or equated 19% of BCf of Rp25,2tn and the company’s targets of Rp25,8tn. We still in the positive outlook that WIKA could reach our full year target as the 1Q14 percentage was inline with its 5-years historical average. Some of the new contract projects are CBD Apartment in Surabaya (Rp634,6bn), Dharma Husada Tower (401,8bn), Sambu Oil Fuel Terminal (Rp740,5bn), Tanjung Uban Gasoline Project (Rp1,1tn) and ITB project for infrastructure procurement (Rp178,7bn).
We still maintain our expectation that the infrastructure & building and energy & industrial plant will underpin the 2014F revenue of Rp14,9tn (+25% YoY), with 66% contribution vs 65% in 2013, to come to Rp9,8tn (+11% YoY). It comes along with the company’s vision to be one of the best integrated EPC and investment company in South East Asia.
We maintain our forecast as there are no reasons to change it after reviewing the 1Q14 numbers. We reiterate BUY at TP Rp2.740,- (20% upside), implies 23x P/E FY14. To date, WIKA trades at 19x P/E FY14. We still recommend BUY, due to; I) The 1Q14 revenue and net profit were inline with its historical trend . II) The 1Q14 new contract came on track to reach Rp4,8tn, 19% of ours and the Co’s. III) Its well diversified businesses to manage the risk & maintain its margin. Our top pick for construction sector is PTPP given its attractive valuation at 17x P/E FY14 (2nd lowest) with the strongest FY14 EPSg expectation at +31% YoY. Also, PTPP has achieved the highest new contract value since 2012.
*M. Dian Octiana is Analyst of PT Buana Capital. This article is part of the Equity Research of PT Buana Capital