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Monday, 15 June 2015
CONSTRUCTION/SECTOR UPDATE
Construction Sector
OVERWEIGHT
May 2015 contracts: Still no surprises
Stocks
Price
IDR
Target
price IDR
Rec.
WIKA
PTPP
WSKT
ADHI
2,660
3,490
1,635
2,040
4,000
4,600
2,150
3,700
BUY
BUY
BUY
BUY
JAKPROP relative to JCI Index
Jakprop (LHS)
Relative to JCI Index (RHS)
%
600
30
23
550
16
500
9
450
2
6/12/15
5/15/15
4/17/15
3/20/15
2/20/15
1/23/15
12/26/14
11/28/14
10/31/14
9/5/14
10/3/14
8/8/14
7/11/14
-5
6/13/14
400
The new contracts from the four state contractors still didn’t show any surprises in
May 2015. In total, there were 4.9tn of new projects awarded during the month –
pretty much flat on a historical comparison. Private projects continued to dominate
since government disbursement will be skewed toward the second half of the year.
In 5M15, the total new contracts awarded reached Rp24.6tn, or up 17%y-y, still driven
by PTPP (+45%y-y) and ADHI (+53%y-y). Interestingly, the state contractors have
mentioned that they have several sizeable unsigned lowest-bid government projects
in the pipeline. Thus, the monthly new contracts in June and August may potentially
provide the first indication of the government’s infrastructure spending. Maintain
OVERWEIGHT. PTPP and WSKT remain as our Top Picks in the sector.
May 2015: PTPP continues to outperform
The total new contracts awarded in May 2015 were still flat given the lack of a boost from the
awarding of government projects. In May, the amount of new contracts among the four state
contractors still failed to impress with the total only reaching Rp4.9tn, yet, up 38%m-m and 6%yy. PTPP continued to outperform its peers thanks to several high-rise private property projects,
while the performance of WIKA and WSKT still lagged behind its targets. All in all, in 5M15, the total
new contracts awarded reached Rp24.6tn, or up 17%y-y, still driven by the better performance of
PTPP (+45%y-y) and ADHI (+53%y-y). WIKA and WSKT, however, failed to reach 30% of their fullyear targets as of May – unlike in the past. Nonetheless, both companies can still turn things around
given that WIKA has Rp5.9tn of unsigned projects in the pipeline whilst WSKT has several sizeable
toll road projects worth Rp5-7tn to be awarded in 2H15F.
Waiting for a positive surprise
Danareksa research reports are also available at Reuters Multex and First Call Direct and Bloomberg.
As of April, the budget absorption at the Ministry of Public Works was only 4% – although by the
end of May the figure had improved to 8.2%. Given that the tender progress is now nearly
completed – reaching 90% at the end of May – the Minister has expressed hopes that there will
be a significant increase in the budget absorption in June to 15-20%. Nevertheless, budget
absorption will still be skewed to the second half of the year as the potential influx of government
projects will be started in either June or August. To recall, for this year, the Ministry of Public Works
has a total budget of Rp118.5tn (+66%y-y), of which around Rp94.6tn will be allocated for project
capex. Regarding the 2016F budget, at a recent hearing with the House of Representatives, the
Ministry of Public Works requested a total budget of Rp126tn. In our view, with only a 6% increase
in the budget, the Ministry will mainly focus on improving the realization rate during this period.
We believe that this year’s realization rate may only reach 80% at best, or Rp95tn (+33%y-y). As such,
the 2016F budget may still show a 33%y-y improvement over this year’s realization. The final
decision on the budget proposal will be revealed on August 16 in the presidential speech.
Joko Sogie
(62-21) 2955 5827
[email protected]
Danareksa research reports are also
available at Reuters Multex and First Call
Direct and Bloomberg.
Government projects a lesson in patience
The monthly new contracts performance in June and August will be worth waiting for, we believe,
since these months will potentially provide the first indication of the government’s plans to boost
infrastructure spending. The July figures, however, will be seasonally low due to the impact of the
Idul Fitri holidays. Nonetheless, if the monthly figures reach above Rp7-8tn, we believe that this
will show that the long-awaited infrastructure spending has finally started to take off. All in all,
we maintain our OVERWEIGHT stance on the construction sector which is grounded in expectations
of stronger performance in 2H15F.
Company
Rec.
Sector
OVERWEIGHT
WIKA IJ
BUY
PTPP IJ
BUY
WSKT IJ*
BUY
ADHI IJ
BUY
TP
IDR
4,000
4,600
2,150
3,700
PE , x
FY15F FY16F
20.5
19.4
24.4
29.1
9.2
EPS CAGR
FY14-16F, %
ROE
FY15F, %
Gearing
FY 15F,%
33.2
27.7
26.9
50.0
28.1
18.8
15.4
25.8
13.1
20.8
71.3
33.2
114.4
17.9
119.6
15.6
16.3
19.7
19.6
6.9
Notes: *post-rights
www.danareksa.com
See important disclosure on the back of this report
15 June 2015
Construction Sector
Exhibit 1. May 2015 new contracts progress
New contracts, Rp bn
WIKA
PTPP
WSKT
ADHI
Total
5M14
5M15
y-y, %
May/14
Apr/15
May/15
m-m, %
y-y, %
FY15F*
A/F*
FY15F**
A/F**
6,123
6,744
5,151
3,000
21,018
5,514
9,800
4,700
4,600
24,614
(9.9)
45.3
(8.8)
53.3
17.1
768
1,243
1,631
1,000
4,642
627
1,100
1,100
740
3,567
637
2,000
1,000
1,300
4,937
1.7
81.8
(9.1)
75.7
38.4
(17.0)
60.9
(38.7)
30.0
6.4
30,595
27,500
20,837
15,200
94,132
18.0
35.6
22.6
30.3
26.1
22,853
22,168
21,825
13,460
80,305
24.1
44.2
21.5
34.2
30.7
29.1
32.1
24.5
14.3
22.4
39.8
19.1
18.7
16.5
26.8
35.1
21.5
17.6
30.8
30.8
20.7
12.9
40.5
20.3
26.3
Market share, %
WIKA
PTPP
WSKT
ADHI
Source: Companies, Danareksa Sekuritas
Exhibit 2. Still no surprises in May’s new contracts progress
2014
2013
2015
100%
16.0
90%
New contracts progress
Monthly new contracts, Rp tn
2013
18.0
14.0
12.0
10.0
9.7
8.0
6.0
70%
60%
50%
40%
26%
17%
20%
3.6
2.0
21%
7%
10%
1.8
2015
80%
30%
4.9
4.5
4.0
2014
2%
0%
0.0
Jan Feb Mar
Apr May Jun
Jul
Aug Sep
Jan Feb Mar Apr May Jun
Oct Nov Dec
Jul Aug Sep Oct Nov Dec
Source: Companies
Exhibit 3. PTPP continued to outperform its peers in May
2013
2014
2015
2013
8,000
5,514
4,700
4,600
4,000
May new contracts, Rp bn
9,800
10,000
5M new contracts, Rp bn
2015
2,500
12,000
6,000
2014
2,000
2,000
1,500
1,300
1,000
1,000
637
500
2,000
-
WIKA
PTPP
WSKT
ADHI
WIKA
PTPP
WSKT
ADHI
Source: Companies
2
15 June 2015
Construction Sector
Exhibit 4. Public Works budget and realization
Budget
Revised Budget
Realization
Ministry of Public Works, Rp tn
140
126
119
120
95
100
85
71
80
60
40
20
2008
2009
2010
2011
2012
2013
2014
2015F
2016F
Source: Ministry of Finance
3
15 June 2015
Construction Sector
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