15 March 2018

Wijaya Karya (WIKA IJ)

Results Note
BUY (Unchanged)
Stock Data Healthiest balance sheet among peers
Target price (Rp) Rp2,900
Earnings of Rp1.2tn (+13.5% yoy), slightly below market expectation
Prior TP (Rp) Rp2,900
Equity | Indonesia | Construction

Highest operating cash flow of Rp1.9tn with Low debt level

Shareprice (Rp) Rp1,745
Upside/downside (%) +66.2 Distinct contract achievement of Rp10.5tn as of mid March 2018
Sharesoutstanding (m) 8,970 Maintain Buy with unchanged TP of Rp2,900
Marketcap. (US$ m) 1,138
Free float (%) 34.0 FY17 Earnings slightly below our/consensus estimate (96/97%). WIKA
booked earnings of Rp1.2tn (+14% yoy) in FY17, which came slightly below
Avg. 6m dailyT/O (US$ m) 4.1
market expectation, forming 96% of consensus estimate and 97% of our forecast.
Price Performance We believe the earnings shortfall was due to delay in High Speed Railway’s
3M 6M 12M construction. Revenue was Rp26.2tn (+67% yoy) in FY17, however COGS was
growing faster at 73% yoy, resulting in lower gross margin of 11% (FY16: 14%).
Absolute (%) 9.7 -6.7 -29.1
Moreover, despite booking income from JO of Rp573bn (+51% yoy) in FY17,
Relative to JCI (%) 6.4 -14.1 -43.3
operating margin was down by 140bps as WIKA booked increase of opex to
52w high/low (Rp) 2,490 - 1,505 Rp677bn (+28% yoy). Net margin also diminished to 4.6% (FY16: 6.8%) in FY17
from increase from interest expense (+56% yoy) and impairment (130%). In
130
quarterly basis, WIKA booked an earnings of Rp519bn (110% qoq, -12% yoy) in
120
110
4Q17, cumulating to 43% of FY17 target.
100
90 Operating Cash flow of Rp1.8tn and DER of 0.62x. As of FY17, WIKA has the
80 highest operating cash flow position of Rp1.9tn (+234 yoy) where as the other
70 SOE contractors are averaging negative cash flow of Rp1.4bn. Moreover, despite
60
the emerge of some turnkey project, WIKA manage to maintain low debt level
Oct-17
Mar-17

Mar-18
May-17
Jun-17
Jun-17
Jul-17

Jan-18
Jan-18
Apr-17
Apr-17

Aug-17
Aug-17
Sep-17

Nov-17
Nov-17
Dec-17

Feb-18

with gearing and net gearing at 0.62x and -0.15x respectively, which only came
WIKA-Rebase JCI Index-Rebase below PTPP. Going forward, with WIKA is preparing Capex of Rp12tn in FY18,
Major Shareholders
which will be funded from internal cash of Rp11tn, WIKA Realty’s proceed of
Rp1.5-2tn, and Komodo Bond’s proceed of Rp5tn.
Government of Indonesia 65.0%
Public 34.2% New contract achievement 18% of FY18 target of Rp57tn. As of 2M18,
Employee 0.7% WIKA has obtained new contract of Rp10.5tn, cumulating to 18% of company’s
Estimate Change; Vs. Consensus FY18 target of Rp57tn (+32% yoy). The contract is dominated by infrastructure
and building sector (62%), followed by precast (18%), energy & industrial plant
2018 2019
(14.5%) and Property & Realty (5.5%). Please note that WIKA managed to book
Latest EPS (Rp) 178.0 214.1
total new contract of Rp42.4tn in FY17, cumulating to 98% of company’s FY17
Vs. Prior EPS (%) (1.4) (2.5) contract target.
Vs. Consensus (%) 8.4 13.6
Maintain Buy with unchanged TP of Rp2,900. PTPP is our top pick in the
Source: Bloomberg
construction sector given its healthy balance sheet, resilient contract achievement
and its minimum exposure towards turnkey/CPF projects. We maintain our Buy
call on WIKA with unchanged TP of Rp2,900. WIKA is currently trading at 10.6x
PE FY18F, with 66% potential upside. Key risk to our call might come from delay
on land acquisition and loan disbursement for Jakarta-Bandung High Speed
Railway (HSR).

Year To 31 Dec 2016A 2017A 2018F 2019F 2020F

Revenue (RpBn) 15,669 26,176 30,433 36,236 40,702
EBITDA (RpBn) 1,948 2,746 3,379 4,105 4,662
EBITDA Growth (%) 30.1 40.9 23.1 21.5 13.6
Net Profit (RpBn) 1,059 1,202 1,597 1,920 2,290
EPS (Rp) 118 134 178 214 255
EPS Growth (%) 16.1 13.5 32.8 20.3 19.2
Net Gearing (%) (19.7) (15.3) 14.9 23.6 25.7
PER (x) 14.8 13.0 9.8 8.2 6.8
Joey Faustian PBV (x) 1.2 1.1 0.9 0.8 0.8
PT Indo Premier Sekuritas Dividend Yield (%) 1.0 2.2 2.3 3.1 3.7
joey.faustian@ipc.co.id EV/EBITDA (x) 5.6 4.0 4.4 4.0 3.7
+62 21 5793 1168 Source: WIKA, IndoPremier Share Price Closing as of : 15-March-2018

Refer to Important disclosures in the last page of this report

WIKA IJ Results Note

Fig. 1: Revenue by segment, 2015-2019F Fig. 2: Gross profit to grow by 26% CAGR 2017-2019F

Realty & Property Industry EPC Infrastucture & Building

Gross profit Gross margin
(Rp bn)
(Rp bn)

40,000 5,000 16.0%

14.0%
4,500 12.6% 14.0%
35,000 12.1% 12.3%
4,000
11.0% 12.0%
30,000
3,500
25,000 3,000 10.0%

20,000 2,500 8.0%

2,000 6.0%
15,000
1,500
4.0%
10,000 1,000
500 2.0%
5,000
- 0.0%
-
2015A 2016A 2017F 2018F 2019F
2015A 2016A 2017F 2018F 2019F

Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 3: Operating profit to grow by 24% CAGR 2017-2019F Fig. 4: Net profit to grow by 26% CAGR 2017-2019F

Operating profit Operating margin Net profit Net margin

(Rp bn)
(Rp bn)

13.0% 2,500 8.0%

4,000 14.0%
6.8%
11.8% 7.0%
3,500 11.2% 11.1%
10.6% 12.0% 2,000
5.2% 5.3% 6.0%
3,000
10.0%
4.6% 4.6%
2,500 1,500 5.0%
8.0%
2,000 4.0%
6.0% 1,000
1,500 3.0%
4.0% 2.0%
1,000
500
500 2.0% 1.0%

- 0.0% - 0.0%
2014A 2015A 2016A 2017F 2018F 2015A 2016A 2017F 2018F 2019F

Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 5: FY17 Operating cash flow comparison Fig. 6: FY17 Debt-to-Equity comparison

(Rp tn) WIKA PTPP ADHI WSKT (Rp tn) WIKA PTPP ADHI WSKT

3.0 2.0 1.9x

1.9
2.0 1.4 1.8
1.6
1.0 1.4x
1.4
0.0
1.2
-1.0 WIKA PTPP ADHI WSKT
1.0
-2.0 0.8 0.62x 0.6x
-3.0 0.6

-3.2 0.4
-4.0
0.2
-5.0 0.0
-6.0 -5.5 WIKA PTPP ADHI WSKT

Source: Company, IndoPremier Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 2

WIKA IJ Results Note

Fig. 7: WIKA's FY17 earnings

(In Rp bn) FY17 FY16 YoY 4Q17 3Q17 QoQ yoy % of Consensus % of Ours
Revenue 26,176 15,669 67% 10,300 6,392 61% 63% 114% 114%
Gross profit (before JO) 3,449 2,192 57% 1,227 640 92% 14% 119% 123%
Operating profit 2,772 2,044 36% 1,200 595 102% 11% 105% 109%
Net profit 1,202 1,059 14% 519 247 110% -12% 96% 97%

Gross margin 11.0% 14.0% 11.9% 10.0%

Operating margin 10.6% 13.0% 11.7% 9.3%
Net margin 4.6% 6.8% 5.0% 3.9%
Source: Company, IndoPremier

Fig. 8: Changes in earnings forecast

(Old) (New) (Change)
Year to Dec 31 (Rp bn) 2018F 2019F 2018F 2019F 2018F 2019F
Revenue 29,217 35,880 30,433 36,236 4.2% 1.0%
Gross profit 3,607 4,693 3,752 4,574 4.0% -2.5%
Operating profit 3,307 3,872 3,583 4,257 8.3% 9.9%
Net income 1,619 1,969 1,597 1,920 -1.4% -2.5%

Margins
Gross margin 12.3% 13.1% 12.3% 12.6%
Operating margin 11.3% 10.8% 11.8% 11.7%
Net margin 5.5% 5.5% 5.2% 5.3%
Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 3

WIKA IJ Results Note

Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F

Income Statement

Net Revenue 15,669 26,176 30,433 36,236 40,702

Cost of Sales (13,477) (23,300) (26,680) (31,662) (35,517)
Gross Profit 2,192 2,876 3,752 4,574 5,185
SG&A Expenses (527) (677) (928) (1,173) (1,318)
Operating Profit 1,665 2,200 2,824 3,400 3,867
Net Interest (384) (436) (675) (771) (846)
Forex Gain (Loss) (5) 1 0 0 0
Others-Net 385 328 515 552 682
Pre-Tax Income 1,660 2,092 2,664 3,181 3,704
Income Tax (449) (736) (854) (1,006) (1,117)
Minorities (152) (154) (213) (254) (296)
Net Income 1,059 1,202 1,597 1,920 2,290

Balance Sheet

Cash & Equivalent 9,270 11,274 10,650 10,418 10,742

Receivable 4,538 6,258 7,921 9,580 10,817

Inventory 1,164 1,663 2,219 2,541 3,044

Other Current Assets 8,680 15,715 19,350 22,648 25,948

Total Current Assets 23,652 34,910 40,139 45,187 50,551

Fixed Assets - Net 3,584 4,444 6,400 6,956 7,173

Goodwill 0 0 0 0 0

Non Current Assets 3,771 5,907 7,170 8,653 10,180

Total Assets 31,355 45,684 54,219 61,392 68,612

ST Loans 4,712 6,424 7,304 9,059 10,176

Payable 4,527 8,925 0 11,389 13,057

Other Payables 4,568 10,144 11,650 12,640 14,165

Current Portion of LT Loans 1,102 482 826 727 803

Total Current Liab. 14,909 25,975 29,387 33,814 38,201

Long Term Loans 932 2,108 4,982 5,005 5,085

Other LT Liab. 2,777 2,968 3,514 4,209 4,722

Total Liabilities 18,617 31,052 37,883 43,028 48,008

Equity 8,440 8,773 8,773 8,773 8,773

Retained Earnings 3,105 4,003 5,239 6,681 8,394

Minority Interest 1,293 1,998 2,466 3,052 3,579

Total SHE + Minority Int. 12,838 14,775 16,479 18,506 20,747

Total Liabilities & Equity 31,455 45,826 54,362 61,535 68,755

Source: WIKA, IndoPremier

Refer to Important disclosures in the last page of this report 4

WIKA IJ Results Note

Year to 31 Dec 2016A 2017A 2018F 2019F 2020F

Cash Flow

Net Income (Excl.Extraordinary&Min.Int) 1,211 1,356 1,810 2,175 2,586

Depr. & Amortization 283 547 555 705 795

Changes in Working Capital (1,517) 6,167 (705) (240) 549

Others (1,046) (2,251) (5,027) (2,121) (1,841)

Cash Flow From Operating (1,069) 5,819 (3,367) 520 2,090

Capital Expenditure (923) (3,543) (3,774) (2,744) (2,539)

Others 21 175 160 213 203

Cash Flow From Investing (902) (3,368) (3,614) (2,532) (2,336)

Loans 3,235 2,269 4,098 1,679 1,273

Equity 6,112 0 0 0 0

Dividends (149) (345) (361) (479) (576)

Others 621 458 (30) 94 (189)

Cash Flow From Financing 9,818 2,383 3,707 1,295 508

Changes in Cash 7,848 4,834 (3,274) (718) 261

Financial Ratios

Gross Margin (%) 14.0 11.0 12.3 12.6 12.7

Operating Margin (%) 10.6 8.4 9.3 9.4 9.5

Pre-Tax Margin (%) 10.6 8.0 8.8 8.8 9.1

Net Margin (%) 6.8 4.6 5.2 5.3 5.6

ROA (%) 4.2 3.1 3.2 3.3 3.5

ROE (%) 11.6 8.7 10.2 11.0 11.7

ROIC (%) 8.5 7.2 7.5 7.7 8.2

Acct. Receivables TO (days) 76.1 60.5 67.1 69.5 71.3

Acct. Receivables - Other TO (days) 16.9 14.7 18.0 18.6 20.1

Inventory TO (days) 12.3 16.5 13.7 13.3 12.7

Payable TO (days) 119.9 105.4 126.8 121.0 125.6

Acct. Payables - Other TO (days) 4.5 3.9 4.1 4.4 4.5

Debt to Equity (%) 52.5 61.0 79.6 79.9 77.4

Interest Coverage Ratio (x) 0.3 0.3 0.3 0.3 0.3

Net Gearing (%) (19.7) (15.3) 14.9 23.6 25.7

Source: WIKA, IndoPremier

Refer to Important disclosures in the last page of this report 5

 Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167

INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period

ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any
responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for
general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the
particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or
sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this
report.