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Tuesday, 14 April 2015
CONSTRUCTION/SECTOR UPDATE
Construction Sector
OVERWEIGHT
March 2015 new contracts: Picking up
Stocks
WIKA
PTPP
WSKT
ADHI
Price
IDR
Target
price IDR
Rec.
3,525
3,900
1,705
3,025
4,000
4,600
2,100
3,700
BUY
BUY
BUY
BUY
JAKPROP relative to JCI Index
Jakprop (LHS)
Relative to JCI Index (RHS)
%
4/13/15
3/16/15
2/16/15
1/19/15
12/22/14
-10
11/24/14
400
10/27/14
0
9/1/14
450
9/29/14
10
8/4/14
500
7/7/14
20
6/9/14
550
5/12/14
30
4/14/14
600
The progress on the new contracts of the four listed state-contractors picked up in
March 2015, with total monthly new contracts reaching Rp10.5tn. PTPP came up with
a positive surprise, booking more than 50% of the total contracts after a slow start.
The figures look promising, especially given the private projects still dominated the
projects portfolio – indicating greater confidence in future demand. Government
projects, by comparison, are still lagging behind given the tender process timeline.
All in all, total new contracts reached Rp16.9tn (+23%y-y) in 1Q15 and PTPP headed
the league table with Rp6.7tn, followed by WIKA (Rp5.0tn), WSKT (Rp2.7tn), and ADHI
(Rp2.5tn). Compared to historical norms, however, the 18% new contracts progress
in 1Q15 is still lagging behind – owing to the lack of government projects. But this
should change in 2Q15F, as new contracts from the government are awarded in
accordance with the timeline of the awarding period. Maintain OVERWEIGHT on the
sector.
PTPP surprisingly headed the league table in 1Q15
Total monthly new contracts picked up in March 2015, reaching Rp10.5tn. PTPP’s performance was
the big surprise as the company booked more than 50% of the contracts awarded (Rp5.6tn) – mainly
thanks to the single high-value project from Mandala City Makassar worth Rp2.5tn. At the same
time, the performance of the other state-contractors also showed a timely improvement, with
monthly new contracts surpassing the Rp1tn figure. In 1Q15, PTPP headed the league table with
Rp6.7tn of new contracts, followed by WIKA (Rp5.0tn), WSKT (Rp2.7tn) and ADHI (Rp2.5tn). Year-todate, most of the projects are still for private property, whereas government projects are still
lagging behind given the tender process timeline. Only PTPP exceeded 20% of its full year new
contracts target in 1Q15, while the overall new contracts in 1Q15 reached only 18% of the full year
new contracts target of Rp94.1tn – lagging slightly behind the historical norms.
Government tenders slightly delay
From before, we had taken the view that there was likely to be a slight hiccup in government tender
projects due to the huge increase in the infrastructure projects allocation this year. More
encouragingly, however, the government has made progress through Presidential Instruction No.
1/2015, under which the tender process for projects offered by the Ministry of Public Works and
Housing has already reached 70%, or 9,578 packages with total contracts value of Rp59tn.
Previously, the government had targeted the completion of the tender process by the end of
March. The delay is mainly due to structural changes in the ministry’s organization and the fact
that some multi-year projects are still awaiting approval by the Ministry of Finance. With
acceleration of the tender process, the government now targets 100% completion by the end of
May 2015. Looking at the timeline, there should be a strong stream of government projects in
2Q15F, we believe.
Joko Sogie
(62-21) 2955 5827
jokos@danareksa.com
Danareksa research reports are also
available at Reuters Multex and First Call
Direct and Bloomberg.
www.danareksa.com
Maintain OVERWEIGHT
After the recent share price corrections in March due to the lack of catalysts, the construction sector
should now attract more interest given the news flow of better new contracts achievement in
March 2015. This should also create stronger market confidence in the theme of accelerated
infrastructure development in Indonesia. We maintain our view that the award of new contracts
to the state-contractors will start to flow at a brisker pace in 2Q15F. All in all, we maintain our
OVERWEIGHT call on the sector with PTPP and WSKT remaining our Top Picks.
Company
Sector
WIKA IJ
PTPP IJ
WSKT IJ
ADHI IJ
Rec.
OVERWEIGHT
BUY
BUY
BUY
BUY
TP
IDR
4,000
4,600
2,100
3,700
PE , x
FY15F FY16F
22.3
25.7
27.2
25.9
13.7
EPS CAGR
FY14-16F, %
ROE
FY15F, %
Gearing
FY 15F,%
27.1
27.7
26.9
25.7
28.1
20.7
15.4
25.8
20.9
20.8
89.0
33.2
114.4
88.9
119.6
18.8
21.5
22.1
21.1
10.3
See important disclosure on the back of this report
14 April 2015
Construction Sector
Exhibit 1. March 2015 new contracts progress (IDR bn)
1Q14
1Q15
New contracts
WIKA
4,712
5,000
PTPP
4,543
6,700
WSKT
3,009
2,700
ADHI
1,500
2,500
Total
13,764 16,900
Market share, %
WIKA
PTPP
WSKT
ADHI
34.2
33.0
21.9
10.9
y-y
%
Mar-14
Feb-15 Mar-15
m-m
%
y-y
%
FY15F*
A/F
6.1
47.5
(10.3)
66.7
22.8
1,604
2,605
860
700
5,769
2,124
1,804
738
5,580
579
1,930
1,108
1,200
4,549 10,514
(15.1)
656.1
233.6
8.3
131.1
12.4
114.2
124.4
71.4
82.2
30,595
27,500
20,837
15,200
94,132
16.3
24.4
13.0
16.4
18.0
29.6
39.6
16.0
14.8
27.8
45.2
14.9
12.1
46.7
16.2
12.7
24.4
17.2
53.1
18.4
11.4
Notes: *Company target
Source: Companies, Danareksa Sekuritas, Bloomberg
Exhibit 2. New contracts picked up in March 2015, but still lagging to high target
2014
2013
2015
18.0
100%
16.0
90%
New contracts progress
Monthly new contracts, IDR tn
2013
14.0
10.5
12.0
10.0
8.0
6.0
4.0
4.5
2015
80%
70%
60%
50%
40%
30%
18%
20%
1.8
2014
2.0
10%
0.0
0%
2%
7%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Companies
Exhibit 3. PTPP surprisingly led the league table in 1Q15 after a slow start
2013
2014
2015
2013
8,000
6,700
1Q new contracts, IDR bn
7,000
6,000
5,000
5,000
4,000
2,700
3,000
2,500
2,000
March new contracts, IDR bn
6,000
2014
2015
5,580
5,000
4,000
3,000
2,000
1,930
1,804
1,200
1,000
1,000
-
WIKA
PTPP
WSKT
ADHI
WIKA
PTPP
WSKT
ADHI
Source: Companies
2
14 April 2015
Construction Sector
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