Equity Research

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Monday , 09 Mar 2020 04:37

PT WIJAYA KARYA BETON TBK 

4Q19 Seasonal Peak Effect
 
WTON’s revenue and net profit increased by 56,5% QoQ and 53.1% QoQ attained to Rp 1.7 trillion and to Rp 137 billion in 4Q19 thanks to the seasonal peak of higher government infrastructure spending and its strong new contract realization of +67.9% QoQ. In all, the company’s 2019 result came in line with our expectation in which the revenue and net profit reached 98% and 103% to our 2019F of Rp 7.3 trillion in revenue and Rp 495 billion in net profit, respectively. Keep BUY rating with new fair value of Rp 670 since the price traded at 5.52x PER 2020F which implying an attractive valuation.
 
Continued to record superior 4Q19
On quarterly basis, WTON continued to book a superior result in 4Q19 due to 1) the seasonal peak of higher government infrastructure spending; 2) its strong new contract realization of Rp 3.5 trillion (+67.9% QoQ, mainly dominated from infrastructure segment) and 3) the completion of 2019 Election. We note that the company’s revenue and net profit in 4Q19 soared by 56.5% QoQ and 53.1% QoQ which attained to Rp 2.7 trillion (vs Rp 1.7 trillion in 3Q19) and to Rp 209 billion (vs Rp 137 billion in 3Q19), respectively.  
 
An Inline 2019 Result
Supported by its strong performance during 2H19, WTON’s 2019 result had come in with our expectation in which the revenue and net profit reached 98% and 103% to our 2019F of Rp 7.3 trillion in revenue and Rp 495 billion in net profit, respectively. Note that, the company’s revenue and net profit inched up by 2.2% YoY and 5.4% YoY reached to Rp 7,1 trillion (vs Rp 6,9 trillion in 2018) and to Rp 512 billion (vs Rp 486 billion in 2018), respectively, which was mainly due to the delayed infrastructure tender projects related to 2019 President Election. 
 
Improving profitability
On the profitability side, the company managed to improve its 2019 profitability in which the gross margin surged by 69 bps to the level of 13.4% (vs 12.7% in 2018) thanks to an increases in concrete product and service gross margins by 12 bps (13.5% in 2019 vs 13.3% in 2018) and by 447 bps (13.0% in 2019 vs 8.5% in 2018), respectively. At the bottom line, WTON’s net margin also increased by 22 bps from 7.0% to 7.2% during the same period.
 
Maintain BUY Recommendation – TP Rp 670/share
Based on the discussion with the management, we forecast that the company’s 2020 new contract will attain to Rp 10.3 trillion, lower than the company’s guidance of Rp 11.4 trillion due to considerably the risks of delayed infrastructure projects. Hence, we forecast the revenue will grow 12.4% YoY to Rp 7.9 trillion in 2020F, while net profit will only slightly grow 6.7% YoY to Rp 546.5 billion due to the PSAK 71 implementation this year. As a result, we derive WTON’s new fair value at Rp 670/share (previously at Rp 790/share). Recently, WTON’s share price traded below IPO price which translated into an attractive valuation (PER 2020F 5.52x). Keep BUY rating on the counter with upside potential of 94%. 
 
The Risk: 1) delays in infrastructure projects; 2) rising raw material prices; 3) weakening Rupiah currency; 3) delays in production capacity expansions; 4) contingencies from being labour┬┐intensive; and 5) increasing competition.
 
 

Financial Summary

 (Rp billion)

2018A

2019A

2020F

2021F

2022F

 Revenue

6,931

7,083

7,964

9,121

10,958

 EBITDA

959

1,047

1,122

1,329

1,542

 Net profit

486

512

546

703

830

 EPS (Rp)

56

59

63

81

95

 PER (x)

6.20

5.89

5.52

4.29

3.63

 BVPS (Rp)

352

394

440

501

572

 PBV (x)

0.98

0.88

0.79

0.69

0.60

 EV/EBITDA (x)

4.13

4.01

4.09

3.37

3.23

 Dividend yield (%)

5.06

5.10

5.44

6.99

8.26

 RoE (%)

16.94

15.76

15.04

17.15

17.73

Source: Company data and Lotus Andalan  Research