Professional Documents
Culture Documents
Indonesia Construction
Refer to important disclosures at the end of this report
Top picks: PTPP and WSKT. PTPP remains our top pick for its 15
healthy cash flow trend and limited exposure to high-risk, 10
capital intensive infrastructure investments. We believe PTPP is 5
a safer bet to play Indonesias infrastructure theme. We also WSKT PTPP WIKA WTON
upgrade WSKT to BUY due to its strong revenue visibility and
earnings momentum. This comes from its more assured Source: AllianceDBS Research, DBS Vickers
pipeline of high-margin toll contract wins.
ed-JS / sa- MA
Industry Focus
Indonesia Construction
A good time for an infrastructure push progress should be seen in 2H16. In addition, private
sector participation in land compensation payment is
Slowing economy adds to the urgency for infrastructure push. now allowed. The project owner is now able to cover
The slowing economy has seen the following similar trend in the payments to speed up process and ask for
ASEAN countries including Indonesia: rising infrastructure reimbursement from state budget later. One major
spending. In Indonesia, the government has allocated Rp314tn progress made this year is the completion of land
budget for 2016 (+8% y-o-y), which is expected to stimulate jobs clearing for Batang power plant, a project which had
and provide a buffer to the slowing domestic economy. stalled for 4 years due to land issues.
Second year should be better than the first. Joko Widodos Ministry of Public Works & Housings budget absorption
administration announced its ambitious plans in Oct-14 when it 120%
took office, to narrow the infrastructure deficit. Nonetheless,
delivery had been slow in the first few months of his 100% 93%
Target Realization
a) Early auction of road projects. In an attempt to expedite Source: TEPRA, AllianceDBS, DBS Vickers
budget absorption, Ministry of Public Housing and
Works (MoPWH) has tendered out 2016 road projects Ministry of Transportations budget absorption
worth Rp30tn (29% of ministrys budget in FY16) in
120%
4Q15. This was followed by signing of contracts for
100%
projects worth Rp8.8tn in the first week of Jan 2016. 100%
This initiative is expected to push the MoPWHs budget
80%
absorption to 5-6% by the end of January vs. a mere
0.1% recorded in Jan 2015. 60%
72%
c) Continuous land acquisition reform. Land disputes had Expanding role of state-owned contractors
been a persistent stumbling block in the past. In March
2015, Joko Widodos administration enforced the full We believe Indonesia is still in the early phase of the construction
implementation of land clearing act No. 2/2012. The boom as reflected in the low participation rate from the private
new act also provides more clarity on the time frame of sector. Nowadays, most of the infrastructure projects are still
the process by limiting it to 559 days at the longest. The handled by government agencies or assigned to SOEs. These
time frame was further shortened to 512 days through projects will be the first test of the governments ability to tackle
the issuance of Presidential Decree No. 148/2015. More red tape. Successful execution will help to galvanise the
Page 2
Industry Focus
Indonesia Construction
participation of private sector interests in the form of Public The chart below shows a surge in contractors FY16 capex
Private Partnerships (PPP) and lead to more job flows for both budget with WIKA showing the most prominent increase. The
state-run and private contractors in the subsequent stages. company has been building recurring income sources through
investments in power plants and recently the Jakarta-Bandung
Budget structure suggests increasing participation from SOEs. high-speed railway. WIKAs FY16 budget is expected to go up to
2016 state budget structure reflects the governments effort to Rp10.5tn if the rights issue plan goes through this year. This
decentralize the infrastructure budget. The budget at the represents 0.9x of its equity base post rights issue.
ministerial level was reduced by Rp29tn (-15% y-o-y), while
capital injection to SOEs was raised by Rp11tn (+40% y-o-y), State-run contractors capex budget
which shows the governments effort to increase participation Rp bn
from SOEs in narrowing the countrys infrastructure deficit. This 7,000 180%
6,000
is good news for state-own contractors since the additional 6,000
160%
140%
equity will create a multiplier effect on future construction job 5,000 4,500 120%
4,300
flows. 4,000 100%
80%
3,000 60%
Infrastructure budget 2,000 1,740 1,800 40%
APBNP RAPBN Growth 900 20%
1,000 550 528
2015 2016 y-o-y 0%
- -20%
Ministerial spending 196 168 -15% WIKA* PTPP* WSKT WTON
Public Works & Housing 111 101 -9%
Transportation 59 47 -20% Capex FY15 Capex FY16 Growth y-o-y (RHS)
Agriculture 9 6 -30%
Energy & Mineral Resources 8 4 -56% *assuming no rights issue in 2016
Source: Companies, AllianceDBS, DBS Vickers
Non-ministerial spending 7 5 -25%
Transfer to region & village fund 41 79 94% State-run contractors leverage and capex
Special allocation fund 30 57 93%
Village fund 8 19 127% 1.4
1.2
1.2 1.1
Capital expenditure 36 50 41%
Investment 5 9 80% 1.0
Capital injection to SOE 29 40 40% 0.8
0.6
Social infrastructure 7 7 0% 0.6 0.5 0.5
0.4
Infrastructure support 4 5 21% 0.2
0.2
Total 290 314 8% 0.0
- (0.2)
WIKA* PTPP* WSKT WTON
(0.2)
Source: Ministry of Finance, AllianceDBS, DBS Vickers
(0.4)
Net gearing as at 30 Sep 2015 (x) FY16 capex/equity (x)
Capex on the rise. With an estimated Rp4,000tn infrastructure
deficit, the build out tasks are too huge to be handled by the *assuming no rights issue in 2016
government alone. SOEs, including state-run contractors, are Source: Companies, AllianceDBS, DBS Vickers
expected to take part in the infrastructure push by initiating
projects as well as investing in the infrastructure assets. Taking
on this role means that the earnings generated from the related
construction work will be ploughed back into the
SPV/infrastructure assets. We note that infrastructure is a long
term investment, hence cash generation may deteriorate in the
early years of operations. Having said that, we believe a strong
balance sheet is needed to sustain growth. Contractors with
ample room for leverage will have a competitive edge to take up
more projects in the future.
Page 3
Industry Focus
Indonesia Construction
SOE consolidation the next big catalyst It remains to be seen whether the government can execute the
plan as scheduled. The first test will be the acquisition of ADHI by
Planned corporate actions in 2016-2018 WSKT, which is slated to kick off this year. While ADHI should
Year Plan stand to benefit the most from this acquisition plan due to the
high valuation discount relative to WSKT (30-60% discount in
2016 WSKT to acquire ADHI the last 12 months), this acquisition will in return provide WSKT
2017 Indah Karya, Yodya Karya and Bina Karya (not listed) to merge access to ADHIs property business and additional order book
under WIKA
from Jakarta LRT (Rp34tn). This income stream would help to
Assets owned by Brantas Adipraya, Amarta Karya and Rekayasa cover start-up losses from WSKTs toll road business.
Industri (not listed) to be injected to WIKA
ADHI transaction price (Rp/share) 2,300 2,400 2,500 2,600 2,700 2,800 2,900 3,000
Implied PE (x) for acquisition 20.2 21.1 22.0 22.9 23.8 24.6 25.5 26.4
Transaction value (Rp bn) 8,190 8,546 8,903 9,259 9,615 9,971 10,327 10,683
Share swap ratio 1.33 1.38 1.44 1.50 1.56 1.61 1.67 1.73
New shares issued via share price (bn) 6.26 6.81 7.39 8.00 8.62 9.27 9.95 10.65
Enlarged share base (bn shares) 19.83 20.39 20.97 21.57 22.20 22.85 23.52 24.22
WSKT's EPS (Rp) 41.4 40.3 39.2 38.1 37.0 36.0 34.9 33.9
% dilution from base -32% -33% -35% -37% -39% -41% -42% -44%
Merged EPS 61.8 60.1 58.5 56.8 55.2 53.7 52.1 50.6
% dilution/accretion from base 2% -1% -3% -6% -9% -11% -14% -16%
*Based on Bloomberg consensus
Source: Bloomberg Finance L.P, AllianceDBS, DBS Vickers
Page 4
Industry Focus
Indonesia Construction
Government projects & progress made on the Kuala Tanjung and New Makassar ports which
commenced construction in 2015. Overall, seaports
1,000 km new toll roads. Among the various government development was rather slow last year. The mega project,
programs, toll road projects have recorded the most notable Cilamaya deep sea port, was cancelled; however the
progress to date. There were152 km of new toll roads added replacement project will be announced later this year. One big
last year (13% of the 1,000 km target), bringing total port project that will possibly be tendered and awarded this
operational toll roads to 952 km. The government targets to year is Pelindo IIs New Priok port Phase 2 worth c. Rp4tn. PTPP
operate 136 km new toll roads this year, while the remainder is currently finishing the construction work for New Priok port
is expected to come onstream in 2017-2018. There are also Phase 1, worth Rp8.7tn. If it manages to deliver the project
several major toll road projects scheduled to break ground in successfully this year, there is a high chance of PTPP clinching
2016 as shown in the table below. the Phase 2 tender.
Major toll road projects in 2016 15 new airports and revitalisation of 10 airports. The Ministry
Invest- of Transportation is currently renovating 50 airports across
Length ment Potential
Project
(km) value
Progress
contractors Indonesia and building 15 new airports in remote areas.
(Rp tn)
Cikampek 2 64 17 Tender - 1 million houses. The realisation fell short of target with only
Balikpapan- 99 15 Prequalificati WIKA-PTPP, 745,144 houses built in 2015. This year, the government has
Samarinda on WSKT
maintained the target at 1,000,000 units.
Cileunyi- 62 12 - -
Sumedang-
Dawuan There are also 7 mega projects that broke ground in 2015, three
Bandung Intra 27 7 - - of which are projects that were delayed for years due to either
Urban
Serang- 84 7 - -
land acquisition or funding issues. Most of the projects are
Panimbang expected to complete within 2-3 years.
Legundi-Bunder 29 6 - WSKT
Manado-Bitung 40 5 Prequalificati WIKA-PTPP, Mega projects that broke ground in 2015
on WSKT
Invest-
Total 292 56 ment Main project Ground-
Project value Beneficiary
Source: Various media sources, AllianceDBS, DBS Vickers owner breaking
(Rp tn)
Kuala Tanjung 4.8 Pelindo I Jan-15 PTPP
35 GW power plants. As of 2015, PLN had entered into multipurpose
agreements with 46 independent power producers (IPP) for terminal (phase
1)
additional power capacity of 17 GW. These projects are
Trans Sumatera 30 Hutama Apr-15 Hutama
scheduled to break ground in 2016. Within our coverage, toll road, Karya & Jasa karya
WIKA has the highest exposure to power projects. The Palembang- Marga
Indralaya section
company is bidding for 9-40% stakes in 8 power plants with
Trans Java toll 9.5 Jasa Marga Apr-15 WSKT
total capacity of 6 GW. This year, PTPP intends to bid for more road, Solo- & WSKT
IPP projects. Kertosono
section
Makassar New 7 Pelindo IV May-15 PTPP
3,258 km of railways. A significant progress made on the Port (phase 1A)
railway development plan is the groundbreaking of Borneo Batang power 55 Bhimasena Aug-15 Possibly
plant Power WTON
Railway in November 2015 after a delay of 4 years. In the first Indonesia
phase, the Russian Railway will build 192 km railway from Jakarta LRT 34 Gov. of Sep-15 ADHI
Buluminung port to West Kutai in East Kalimantan. For now, Jakarta
WTON is the only state-run precast producer able to produce Borneo Railway 22 Russian Nov-15 Possibly
Railway WTON
railway sleepers. Excellent progress on railway build-out should
translate to larger new orders for WTON. Source: Various medias, AllianceDBS, DBS Vickers
Page 5
Industry Focus
Indonesia Construction
Mega projects to be the main growth driver in 2016 Construction sector 12-month forward PE
30
Despite softer growth of the states infrastructure budget, state-
+2sd
run contractors are guiding for a higher new orders this year at 25
2sd
10
1. Jakarta-Bandung HSR (Rp34tn). The contract will be split
into two phases with a value of Rp17tn each. Phase 1 will be
5
awarded to WIKA this year, contributing 32% to WIKAs Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
new order target for this year.
Source: Bloomberg Finance L.P, AllianceDBS, DBS Vickers
2. Jakarta-Cibubur LRT (Rp34tn). ADHI will be the main
contractor.
Construction sector vs. JCI 12-month forward PE
3. Waskita Karyas toll roads (Rp20tn).
30 100%
4. Jawa V power plant (Rp10tn). WIKA has a high chance of
80%
getting this project. 25
60%
20 40%
New order growth 20%
120% 15 0%
107%
-20%
100% 10
83% -40%
80% 5 -60%
Jan-12
Nov-12
Jan-13
Nov-13
Jan-14
Nov-14
Jan-15
Nov-15
Sep-12
Sep-13
Sep-14
Sep-15
May-12
May-13
May-14
May-15
Mar-12
Mar-13
Mar-14
Mar-15
Jul-12
Jul-13
Jul-14
Jul-15
60% 52% 55%
43%
38%
40% 34% 33% 33% Construction PE premium to JCI Construction PE JCI PE
Page 6
Industry Focus
Indonesia Construction
appointed as the main precast supplier for Jakarta-Bandung HSR. WSKTs consensus earnings trend vs. share price
It expects to clinch new orders of Rp6-9tn from projects in 2016- Rp bn
2018, nearly 3x WTONs revenue. The stock has significantly 1,100 2,000
outperformed JCI YTD and now trades at 25x FY16F EPSa level
1,000 1,800
that we believe is fair. There could be upside to our forecast if
900
WIKA, WTONs parent company, wins Jakarta Giant Sea Wall and 1,600
800
Bandung LRT projects. We maintain our HOLD call on WTON 1,400
700
with TP of Rp1,000.
600 1,200
off. The company targets to bag Rp52tn new contracts in FY16, 800 3,000
700
double from FY15. Nonetheless, we doubt that WIKAs earnings 2,500
600
growth will be able to track its order book growth due to
500 2,000
potential margin dilution and high execution risk on some of its
mega projects. Meanwhile, the company may have to look for
alternative sources of funds to finance its projects until PTPP net profit FY15F PTPP net profit FY16F Price (RHS)
government capital injection is approved and disbursed. Maintain
Source: Bloomberg Finance L.P, AllianceDBS, DBS Vickers
HOLD with TP of Rp2,850 (22x FY16F EPS).
(*) ex-high speed railway. Source: Bloomberg Finance L.P, AllianceDBS, DBS Vickers
Source: Companies, Bloomberg Finance L.P, AllianceDBS, DBS Vickers
Page 7
Industry Focus
Indonesia Construction
Source: Bloomberg Finance L.P, AllianceDBS, DBS Vickers Human resource constrains. The huge backlog and future job
flows require contractors to increase human resource capacity.
Key risks The lack of skilled project managers could result in a delay in
project execution.
Tax revenue shortfall. The government has set out an ambitious
tax revenue target of Rp1,360tn in the 2016 state budget, a
28% y-o-y increase from last year. Failure to meet this target
could lead to spending cuts and delays in project execution.
Sector comparison
(IDR bn) (IDR) FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15 FY16 FY15F-17F
Wijaya Karya 17,218 2,800 Hold 2,850 29.0 21.6 3.9 3.3 13.5 13.3 0.7% 0.7% 14% 17% 31%
PT PP (Persero) 19,176 3,960 Buy 4,650 27.7 21.4 5.0 4.2 15.3 10.8 0.7% 0.9% 22% 21% 28%
Waskita Karya 23,684 1,745 Buy 2,150 28.5 19.6 2.6 2.4 19.6 16.7 0.7% 1.0% 14% 13% 10%
Adhi Karya 9,080 2,550 N/R N/A 17.9 16.2 1.8 1.6 7.0 5.7 1.2% 1.3% 13% 12% 22%
Wijaya Karya Beton 8,410 965 Hold 1,000 39.9 24.1 3.7 3.3 16.3 22.1 1.2% 0.8% 10% 15% 51%
Page 8
Industry Focus
Indonesia Construction
Company Guides
Page 9
Indonesia Company Guide
Waskita Karya
Edition 2 | Bloomberg: WSKT IJ | Reuters: WSKT.JK Refer to important disclosures at the end of this report
1,333.4 339
Palembang LRT. The new wins will bring its total order book to
289
Rp78tn, making it one of the strongest contractors in terms of
1,133.4
933.4 239
733.4
533.4
189
139
revenue visibility with an order book of 5.4x FY15F revenue.
333.4 89 Further fund raising needed. The company is guiding for Rp5-
Dec-12 Jan-14 Jan-15 Jan-16
6tn capex in FY16 (vs. Rp4.3tn budgeted in FY15). Capex
Waskita Karya (LHS) Relative JCI INDEX (RHS)
should continue to trend upwards as the company expands its
Forecasts and Valuation toll road portfolio. We estimate that WSKT would need
FY Dec (Rpbn) 2014A 2015F 2016F 2017F
Rp16.9tn to fund its equity stakes in the existing portfolio in
Revenue 10,287 14,327 20,318 25,483
EBITDA 933 1,300 1,954 2,524 2015-2018, c.30% of which was already disbursed last year.
Pre-tax Profit 756 1,125 1,618 1,527 To fund FY16-17 capex, WSKT plans to issue Rp5tn bonds in
Net Profit 502 821 1,191 994 stages with the first Rp2tn being issued in 1H16. It also plans
Net Pft (Pre Ex.) 502 799 1,191 994
to divest 30% of its shares in Waskita Precast this year and
Net Pft Gth (Pre-ex) (%) 36.3 59.2 49.2 (16.6)
EPS (Rp) 51.9 61.3 89.0 74.2 proposes a Rp3.1tn capital injection to the government in
EPS Pre Ex. (Rp) 51.9 59.6 89.0 74.2 2017.
EPS Gth Pre Ex (%) 36 15 49 (17)
Diluted EPS (Rp) 51.9 61.3 89.0 74.2 Valuation:
Net DPS (Rp) 10.4 12.3 17.8 14.8 We value WSKTs construction business at 22x FY16 PE. As for
BV Per Share (Rp) 294 662 739 795
PE (X) 33.4 28.3 19.5 23.4 the toll roads, we value three toll roads that will be operational
PE Pre Ex. (X) 33.4 29.1 19.5 23.4 in 2017 using the DCF method. Our new TP of Rp2,150
P/Cash Flow (X) nm nm nm nm implies 24x FY16F PE.
EV/EBITDA (X) 19.5 16.6 14.2 11.5
Net Div Yield (%) 0.6 0.7 1.0 0.9 Key Risks to Our View:
P/Book Value (X) 5.9 2.6 2.3 2.2
Net Debt/Equity (X) 0.5 CASH 0.4 0.5 Delay in project execution. Delay in project execution could
ROAE (%) 19.2 14.0 12.7 9.7 lead to lower earnings and trigger negative sentiments
Earnings Rev (%): 9 18 5 towards Indonesia's construction sector.
Consensus EPS (Rp): 59.6 78.4 97.4
Other Broker Recs: B: 19 S: 1 H: 5 At A Glance
Issued Capital (m shrs) 13,572
Source of all data: Company, AllianceDBS Research, Bloomberg Finance Mkt. Cap (Rpbn/US$m) 23,548 / 1,723
L.P Major Shareholders
Republic of Indonesia (%) 68.0
Free Float (%) 32.0
3m Avg. Daily Val (US$m) 3.7
ICB Industry : Industrials / Construction & Materials
35,700
Earnings Drivers: 30575
30000
Rerouting business plan. The toll road acquisition spree done 30,600
25,500
last year marked a change in WSKTs business model. The 22625
20,400
company is now aiming to become one of the leading toll road
15,300 13318
operators in Indonesia by 2018. The company currently owns 12
10,200
toll road concessions with total length of 539 km. It recently 5,100
increased its effective ownership in three Trans Java toll roads 0
i.e. Pejagan-Pemalang, Kanci-Pejagan and Pasuruan- 2013A 2014A 2015F 2016F 2017F
worth over Rp40tn. Approximately Rp10tn has been included in 36,200 33,141.0
FY15's new order book. This year, the management expects to 22,133.0
book Rp20tn new contracts from its self-owned toll roads (50% 18,100
roads. The average gross margin for these construction works is Construction Gross Margin (%)
13% vs. 10-11% for other infrastructure projects.
12.0 11.5 11.8
10.1 10.5
Another rights issue in 2017? The cyclical nature of construction 9.6 9.4
long gestation period of the business, the toll road acquisition 2013A 2014A 2015F 2016F 2017F
spree done last year have raised concerns on WSKTs ability to Revenue to order book ratio
fund its expansion plan. 70%
58%
60%
Assuming a capital structure of 70% debt and 30% equity for 50%
the 12 toll roads, WSKT needs to invest Rp16.9tn to fund its 40%
38%
33% 33%
equity stakes. The company will have to increase its gearing 30%
28%
given that the Rp5.3tn rights issue proceeds received last year 20%
2.0
5.0
2015 rights issue Bonds Waskita Precast IPO 2017 rights issue
injection and rights issue in July. However, we expect its debt to 0.80 1.1
rise in the future as the company extends its business model to 0.60 1.0
fund the toll road investments. Aside from the plan to divest its 0.00
2013A 2014A 2015F 2016F 2017F
0.8
stakes in Waskita Precast through IPO, the company also plans Gross Debt to Equity (LHS) Asset Turnover (RHS)
1,000.0
Incremental value from toll roads. To better capture the toll
0.0
road operating business, we incorporate the NPV of WSKTs toll 2013A 2014A 2015F 2016F 2017F
roads that will be operational in 2017 into our TP, i.e. Pejagan- Capital Expenditure (-)
High amount of prepaid tax. Among its SOE peers, WSKT is 3.0 Avg:2.91x
2.5
the most leveraged to governments infrastructure 1sd:2.04x
2.0
development plan. Over the past three years, the government 1.5
combined share of 70%. The tax regulations require WSKT to Company Background
pay the VAT incurred to government or SOE clients which PT Waskita Karya Tbk (WSKT) is a state-owned construction
caused the company to record a high amount of prepaid VAT company engaged in a wide variety of construction activities
(Rp731bn as at Sep 30). It could take more than two years to including toll roads, bridges, ports and buildings. It is the most
disburse the tax refund, and hence further drag operating cash leveraged proxy to the Indonesian construction sector, deriving
flows. c. 80% of its revenues from construction and >50% of its
projects from the Government of Indonesia.
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F
New Contract Wins (Rp 13,318 22,625 30,000 40,000 30,575
Order Book (Rp bn) 22,133 33,141 51,955 77,711 88,640
Construction Gross 9.40 10.2 10.5 11.5 11.8
Segmental Breakdown
FY Dec 2013A 2014A 2015F 2016F 2017F
Revenues (Rpbn)
Construction 9,559 9,484 11,919 16,706 21,084
Building rentals/Property 0.26 0.32 0.26 0.26 0.0
Precast 127 803 2,408 3,612 4,153
Energy 0.0 0.0 0.0 0.0 0.0
Others 0.0 0.0 0.0 0.0 246 Precast revenue to
contribute 18% of
Total 9,687 10,287 14,327 20,318 25,483
WSKT's consolidated
Gross Profit (Rpbn) revenue.
Construction 899 963 1,252 1,921 2,488
Building rentals/Property 0.26 0.32 0.26 0.26 0.0
Precast 11.8 146 349 488 561
Energy 0.0 0.0 0.0 0.0 0.0
Others 0.0 0.0 0.0 0.0 246
Total 911 1,109 1,601 2,409 3,295
Gross Profit Margins (%)
Construction 9.4 10.1 10.5 11.5 11.8
Building rentals/Property 100.0 99.7 99.7 99.7 N/A
Precast 9.3 18.2 14.5 13.5 13.5
Energy N/A N/A N/A N/A N/A
Others N/A N/A N/A N/A 100.0 Construction gross
Total 9.4 10.8 11.2 11.9 12.9 margin is expected to
increase as WSKT
Income Statement (Rpbn) charges a premium for
FY Dec 2013A 2014A 2015F 2016F 2017F its self-owned toll roads
construction works.
Revenue 9,687 10,287 14,327 20,318 25,483
Cost of Goods Sold (8,776) (9,178) (12,727) (17,909) (22,189)
Gross Profit 911 1,109 1,601 2,409 3,295
Other Opng (Exp)/Inc (340) (431) (544) (772) (1,341)
Operating Profit 571 678 1,056 1,637 1,954
Other Non Opg (Exp)/Inc 7.56 20.5 0.0 0.0 0.0
Associates & JV Inc 103 197 186 235 259
Net Interest (Exp)/Inc (69.7) (140) (140) (255) (686) We expect interest
Exceptional Gain/(Loss) 0.0 0.0 22.8 0.0 0.0 expense to surge in
Pre-tax Profit 611 756 1,125 1,618 1,527 FY17F as WSKT will no
Tax (243) (254) (304) (426) (533) longer be able to
Minority Interest 0.09 0.32 0.20 0.29 0.24 capitalise the interest
Preference Dividend 0.0 0.0 0.0 0.0 0.0 costs.
Net Profit 368 502 821 1,191 994
Net Profit before Except. 368 502 799 1,191 994
EBITDA 734 933 1,300 1,954 2,524
Growth
Revenue Gth (%) 10.0 6.2 39.3 41.8 25.4
EBITDA Gth (%) 16.2 27.1 39.3 50.4 29.2
Opg Profit Gth (%) 27.5 18.9 55.7 54.9 19.3 Expect a lower net
Net Profit Gth (Pre-ex) (%) 44.9 36.3 59.2 49.2 (16.6) income y-o-y due to toll
roads start-up losses.
Margins & Ratio
Gross Margins (%) 9.4 10.8 11.2 11.9 12.9
Opg Profit Margin (%) 5.9 6.6 7.4 8.1 7.7
Net Profit Margin (%) 3.8 4.9 5.7 5.9 3.9
ROAE (%) 16.8 19.2 14.0 12.7 9.7
ROA (%) 4.3 4.7 5.1 5.0 3.4
ROCE (%) 8.1 8.2 7.9 7.9 6.8
Div Payout Ratio (%) 30.0 20.0 20.0 20.0 20.0
Net Interest Cover (x) 8.2 4.8 7.6 6.4 2.8
Source: Company, AllianceDBS Research
Growth
Revenue Gth (%) (2.2) 138.5 (72.0) 84.0 33.2
EBITDA Gth (%) 9.9 242.5 (81.3) 171.1 14.5
Opg Profit Gth (%) 12.1 394.9 (76.2) 117.5 29.1
Net Profit Gth (Pre-ex) (%) 26.1 445.6 (96.8) 1,238.9 29.0
Margins
Gross Margins (%) 9.0 12.2 11.2 12.5 12.0
Opg Profit Margins (%) 4.3 9.0 7.6 9.0 8.8
Net Profit Margins (%) 3.3 7.4 0.8 6.2 6.7
1944 Rp
Target
S.No. Date Closing Price Rating
Price
1844 4 1: 27 Feb 15 1769 1287 FULLY VALUED
2: 04 May 15 1608 1287 FULLY VALUED
3: 27 May 15 1691 1287 FULLY VALUED
1744 4: 10 Aug 15 1820 1305 FULLY VALUED
1 5: 11 Nov 15 1680 1700 HOLD
1644 2 3 5
1544
1444
Jan-15 May-15 Oct-15
Note : Share price and Target price are adjusted for corporate actions.
Forecasts and Valuation flow positive in the last four years. A key reason is its more
FY Dec (Rp bn) 2014A 2015F 2016F 2017F diversified customer base compared to other SOEs, with the
Revenue 12,427 15,398 19,936 24,243 private sector contributing 50-60% to PTPPs order book. This
EBITDA 1,272 1,735 2,185 2,692
Pre-tax Profit 919 1,272 1,632 2,064 leads to a lower prepaid tax.
Net Profit 532 693 898 1,154
Net Pft (Pre Ex.) 532 693 898 1,154 Valuation:
Net Pft (ex. BA gains) N/A N/A N/A N/A Our revised TP is pegged to 25x FY16 EPS, which is equal to
EPS (Rp) 110 143 185 238
+2SD of 5-year mean forward PE. We believe PTPP deserves to
EPS Pre Ex. (Rp) 110 143 185 238
EPS Gth (%) 26 30 30 29 trade at a high valuation due to its strong track record and
EPS Gth Pre Ex (%) 26 30 30 29 strong EPS growth potential (29% CAGR from FY15F-17F).
Diluted EPS (Rp) 110 143 185 238
Net DPS (Rp) 33 29 37 48
BV Per Share (Rp) 493 791 948 1,149
PE (X) 34.3 26.4 20.3 15.8 Key Risks to Our View:
PE Pre Ex. (X) 34.3 26.4 20.3 15.8 Prolonged slowdown in property sector. PTPP has both direct
P/Cash Flow (X) 64.7 52.5 391.6 46.6 and indirect exposure to property sector. A prolonged
EV/EBITDA (X) 14.6 10.3 9.2 8.1
Net Div Yield (%) 0.9 0.8 1.0 1.3 slowdown in the economy and demand for property can
P/Book Value (X) 7.6 4.8 4.0 3.3 negatively impact earnings and cash flows.
Net Debt/Equity (X) 0.1 CASH 0.3 0.5
ROAE (%) 24.3 22.3 21.3 22.7 At A Glance
Issued Capital (m shrs) 4,842
Earnings Rev (%): (7) (1) 1 Mkt. Cap (Rpbn/US$m) 18,256 / 1,322
Consensus EPS (Rp): 145 194 253
Major Shareholders
Other Broker Recs: B: 24 S: 0 H: 1
Republic of Indonesia (%) 51.0
Source of all data: Company, AllianceDBS, DBS Vickers, Bloomberg Koperasi Karyawan Pemegang 6.2
Finance L.P. Free Float (%) 42.8
3m Avg. Daily Val (US$m) 1.6
ICB Industry : Industrials / Construction & Materials
We cut our net profit by 7%/1% for FY15F/FY16F after Our FY15 revenue and net profit are broadly in line with
imputing a lower order book burn rate. A weaker economic managements revised guidance. Despite the cut, we still
environment has negatively impacted some of PTPPs clients expect PTPPs net profit to grow strongly by 30% in FY15F
this year, causing them to delay their project construction. and FY16F, outpacing its peers.
2015 2016
0
of Kuala Tanjung port (Rp18.4tn) and Tanjung Perak port 2013A 2014A 2015F 2016F 2017F
(Rp8.6tn). Both ports were initially built by PTPP, hence Total Order Book (Rp bn)
increasing the company's competitive edge to secure the
86,500 84,941
work contracts once the projects are tendered out. We also
71,217
note that next year, Pelindo I-IV, the SOEs that will carry out 69,200
17,300
Potential contract win from New Priok port Phase 2. The
company won the construction work for the New Priok 0
2013A 2014A 2015F 2016F 2017F
(Kalibaru) port back in 2012. Combined with the additional
work won this year, New Priok port contributes Rp8.7tn to Blended gross margin (%)
PTPPs order book. PTPP had delivered 56% of the 13.6
12.3
13.1 13.2 13.3
Additional growth boost from property arm. Although the Revenue Trend and Forecast
execution of governments infrastructure projects stalled in Rp bn
30,000 50%
1H15, PTPP managed to deliver strong earnings growth
25,000 40%
supported by its subsidiary, PP Properti (PPRO). Looking
20,000
ahead, we expect the EBIT contribution of PPRO to stay at 30%
15,000
22-23% vs. 11% in FY14. As property commands a 20%
10,000
significantly higher EBIT margin (25-27%) compared to core 10%
5,000
business construction (6-8%), this should lift up PTPPs
- 0%
overall profitability. 2013A 2014A 2015F 2016F 2017F
Revenue (LHS) Growth y-o-y (RHS)
PPRO owns a 55-ha land bank with the Grand Kamala
Net Income Trend and Forecast
Lagoon (GKL) superblock in Bekasi, West Java being the Rp bn
largest. GKL is built on 28 ha of land and is strategically 1,400 40%
located near the planned LRT station as well as industrial 1,200
1,000 30%
estates. Recently, PPRO sealed a Rp3tn deal with Hyundai to
800
develop apartment towers in Grand Kamala Lagoon. The JV 20%
600
expects to capture apartment demand from Korean 400 10%
expatriates working in industrial estates in Bekasi. 200
- 0%
2013A 2014A 2015F 2016F 2017F
Net income (LHS) Growth y-o-y (RHS)
bringing its net gearing ratio to 0.4x. The company has 0.80
1.1
shareholders. All of the proceeds will be used to fund Gross Debt to Equity (LHS) Asset Turnover (RHS)
2H16, the rights issue delay should not impact PTPPs work 1,500.0
plan. We also note that the company still has ample room 1,000.0
for new borrowings if the rights issue is delayed further.
500.0
Project execution had been slow in 1H15 with most parties 5.0%
pointing to the merger of Ministry of Public Works and
Ministry of Housing and late budget approval as the main 0.0%
causes. We have seen an improvement in the last four 2013A 2014A 2015F 2016F 2017F
months with Ministry of Public Works and Housings Forward PE Band (x)
(x)
budget absorption and physical progress reaching 58%
27.7
and 66% respectively in 10M15. If the improvement +2sd:26.8x
Avg:14.9x
12.7
Key Risks:
Slowdown in property sector. PTPPs exposure to the 7.7
1sd:9x
4.4
Earnings dilution due to rights issue. PTPP has proposed to 3.4
Avg:3.91x
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F
New Contract Win (Rp bn) 19,584 20,240 26,792 29,956 33,660
Total Order Book (Rp bn) 35,454 42,518 56,659 71,217 84,941
Blended gross margin (%) 10.9 12.3 13.1 13.2 13.3
Segmental Breakdown
FY Dec 2013A 2014A 2015F 2016F 2017F
Revenues (Rp bn)
Construction 9,952 10,662 13,135 17,059 20,763
Real Estate 259 645 1,520 1,925 2,258
Property 1,445 1,091 655 851 1,106
EPC 0 29 88 101 116
Total 11,656 12,427 15,398 19,936 24,243
Gross Profit (Rp bn)
Construction 1,077 1,232 1,419 1,928 2,346
Real Estate 57 250 450 549 692
Property 139 143 75 98 127
EPC 0 (92) 70 56 64
Total 1,273 1,533 2,014 2,630 3,230
Gross Profit Margins (%)
Construction 10.8 11.6 10.8 11.3 11.3
Real Estate 22.0 38.7 29.6 28.5 30.7
Property 9.6 13.1 11.5 11.5 11.5
EPC N/A (313.1) 80.0 55.0 55.0
Total 10.9 12.3 13.1 13.2 13.3
Growth
Revenue Gth (%) 23.1 44.1 (57.1) 63.5 9.7
EBITDA Gth (%) 67.3 62.4 (68.5) 58.5 36.0
Opg Profit Gth (%) 44.5 61.9 (64.9) 59.5 28.9
Net Profit Gth (%) 69.5 66.7 (61.2) (28.1) 223.2
Margins
Gross Margins (%) 12.0 13.2 14.0 12.5 13.9
Opg Margins (%) 10.5 11.8 9.7 9.4 11.1
Net Profit Margins (%) 4.5 5.2 4.7 2.1 6.1
4340 Rp
Target
S.No. Date Closing Price Rating
Price
4140
5 1: 02 Jan 15 3590 3300 BUY
4 2: 26 Jan 15 3750 4650 BUY
3940
3 3: 03 Mar 15 3980 4650 BUY
2
4: 04 May 15 3890 4650 BUY
3740 5: 27 May 15 4010 4650 BUY
3540
1
3340
3140
2940
Dec-14 Apr-15 Aug-15 Dec-15
Note : Share price and Target price are adjusted for corporate actions.
587
charges a modest margin with gross margin at only 6% (vs.
3,923.0
3,423.0 487
2,923.0 normal range of 8-10%) to minimize the investment needed.
387
2,423.0
1,923.0
We also note that the profit will be re-invested into the JV to
287
1,423.0 fund part of the equity investment requirement. While the
187
923.0
railway investment is expected to generate 9% pretax IRR over
423.0 87
Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
40 years, the company may have to endure negative cash
Wijaya Karya (LHS) Relative JCI INDEX (RHS) flows in the initial years of operations before it can start to
Forecasts and Valuation enjoy recurring profit. The consortium is relying on the transit-
FY Dec (Rpbn) 2014A 2015F 2016F 2017F oriented development (TOD) to compensate for this but few
Revenue 12,463 13,799 19,138 27,063 details have been released as the TOD is still in the planning
EBITDA 1,399 1,487 2,050 2,634 phase.
Pre-tax Profit 1,146 1,133 1,536 1,916
Net Profit 615 602 796 977 Slow contract wins as expected. WIKA won Rp17.5tn of new
Net Pft (Pre Ex.) 615 602 796 977
EPS (Rp) 100 97.9 130 159
contracts in 10M15, representing 73% of our full-year
EPS Pre Ex. (Rp) 100 97.9 130 159 forecasts. This achievement is still far behind managements
EPS Gth (%) 8 (2) 32 23 target (55% of FY15 target). However, the company is still
EPS Gth Pre Ex (%) 8 (2) 32 23 maintaining its FY15 target at Rp31.6tn on hope of a faster
Diluted EPS (Rp) 100 97.9 130 159
Net DPS (Rp) 27.8 20.0 19.6 25.9 tender process leading to year-end.
BV Per Share (Rp) 649 727 837 970
PE (X) 28.5 29.1 22.0 17.9 Valuation:
PE Pre Ex. (X) 28.5 29.1 22.0 17.9 We lower our TP slightly to Rp2,850, still based on 22x FY16F
P/Cash Flow (X) nm 27.3 50.1 51.7
EPS (at +1SD of historical mean PE).
EV/EBITDA (X) 13.7 13.4 10.4 9.0
Net Div Yield (%) 1.0 0.7 0.7 0.9
P/Book Value (X) 4.4 3.9 3.4 2.9 Key Risks to Our View:
Net Debt/Equity (X) 0.1 0.2 0.4 0.6 Delay in project rollout. Delay in project rollout, especially the
ROAE (%) 17.7 14.2 16.6 17.6
mega high-speed railway project, should lead to lower-than-
Earnings Rev (%): (7) (2) 2 expected revenue and earnings.
Consensus EPS (Rp): 99.7 134 172
Other Broker Recs: B: 14 S: 2 H: 11 At A Glance
Source of all data: Company, AllianceDBS, DBS Vickers, Issued Capital (m shrs) 6,149
Bloomberg Finance L.P Mkt. Cap (Rpbn/US$m) 17,525 / 1,282
Major Shareholders
Republic of Indonesia (%) 65.2
Free Float (%) 33.8
3m Avg. Daily Val (US$m) 2.1
ICB Industry : Industrials / Construction & Materials
51,100
Earnings Drivers:
Expect larger wins in 4Q15. The management remains 43,800
this year. The progress had been slow up to October with 29,200
23,939
contract wins at only Rp17.5tn or 55% of managements 21,900 17,732 17,774
Java 5 power plant (Rp37.5tn), Aceh power plant (Rp10tn) 58,200 53,717
and Samarinda-Balikpapan toll road (Rp8.3tn). In the high- 43,577
speed railway project, the company will have to inject 38,800
38,267
construction works.
Revenue trend and forecasts
WIKAs equity investment in the remaining seven projects will Rp bn
be fully funded by the government. WIKA has proposed to 25,000 40%
obtain a Rp4tn capital injection from the government next 20,000
30%
year. With the project capital structure of 30% equity and
15,000
70% debt and WIKAs minority ownership ranging from 10- 20%
40%, the government's capital injection will be more than 10,000
sufficient to fund WIKAs Rp3.9tn equity investment. 10%
5,000
Meanwhile, the debt will likely be issued on the associates & - 0%
JV level. 2013A 2014A 2015F 2016F 2017F
Being the owner of these assets, WIKA should have an Revenue (LHS) Growth y-o-y (RHS)
advantage in the construction tender process. Based on our
Net income trend and forecasts
estimates, if WIKA wins at least 50% of the construction Rp bn
contracts ex high-speed railway, the company should be able 1,200 40%
to secure Rp12.9tn for its order book over the next 3-4 years. 1,000 30%
If we include the construction work for high-speed railway, 800
the total order book should top Rp42.9tn which is equal to 20%
600
3.1x FY15F revenue. We have yet to factor in the earnings 10%
400
accretion from the seven infrastructure assets funded by the 0%
200
government as the capital injection is now being frozen by
- -10%
the parliament.
2013A 2014A 2015F 2016F 2017F
Measuring the potential earnings dilution. To calculate the Net income (LHS) Growth y-o-y (RHS)
dilution effect, we removed the potential revenue from the
Source: Company, AllianceDBS, DBS Vickers
high-speed railway project, which we had already
incorporated into our base-case earnings forecasts. Assuming areas, i.e. Halim Perdanakusuma (East Jakarta), Karawang
an Rp16.6tn addition to order book, 30% of which will be (West Java), Walini (West Java) and Gedebage (Bandung,
recognised as revenue in FY16F with 2% net margin, we West Java). There is also talk on offering the project to private
expect the rights issue proceeds to add a net profit of developers.
Rp100bn or 12% upside to our FY16F base case. If the
Building recurring revenue stream through IPP. WIKA has
exercise price is set at a 5-10% discount to current price
been actively looking to shift toward a more recurring
(Rp2,850), the potential dilution to EPS will be 17-19%. Note
revenue model. One of the strategies is to participate in
that we have yet to include the NPV generated by WIKAs
Independent Power Producer (IPP) projects. Currently, WIKA
investment in the related infrastructure assets.
has some stakes in Tampomas (West Java) and Rengat (Riau)
Relying on TOD to cover up medium-term earnings risk. For power plants. The company is also bidding for eight power
the high-speed railway project, the JV will rely on the TOD to plant projects in Java and Sumatera with a total capacity of
cover the negative cash flows in the early years of operations. 6,837 MW.
The TOD is currently still in the planning phase with the help
of experts from Singapore. The plan is to build TOD in four
plan is now hanging in the balance after the parliament decided Gross Debt to Equity (LHS) Asset Turnover (RHS)
approves the revised state budget in 1H16. The company is now 2,000.0
looking for a bridging loan to carry on the planned projects while
waiting for the rights issue execution next year. 1,500.0
1,000.0
Listing of WIKA Gedung. WIKA also plans to divest up to 30%
500.0
stake in its subsidiary, WIKA Gedung, through an IPO in 2H16.
The IPO is expected to free up Rp1tn cash for future expansion. 0.0
2013A 2014A 2015F 2016F 2017F
Meanwhile, the IPO of WIKA Realty is further delayed as WIKA
Capital Expenditure (-)
plans to grow the subsidiary before the IPO..
ROE (%)
Share Price Drivers: 20.0%
Lower free cash flow generation in the medium term. Aside from 20.5
Avg:19.8x
being the contractor, WIKA typically owns some stakes in the 15.5
1sd:13.3x
assets being built. This exposes WIKA to the risk of deteriorating 10.5
cash flow generation as such a business model requires high 5.5
2sd:6.8x
capital investment and normally generates negative cash flow in Nov-11 Nov-12 Nov-13 Nov-14 Nov-15
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F
New contract wins (Rp bn) 17,732 17,774 23,939 58,155 33,796
Total order book (Rp bn) 38,267 43,577 53,717 95,234 81,967
Growth
Revenue Gth (%) (10.1) 40.2 (48.0) 38.3 19.5
EBITDA Gth (%) (14.2) 104.7 (65.3) 44.6 83.5
Opg Profit Gth (%) (36.0) 124.0 (72.5) 104.3 80.9
Net Profit Gth (Pre-ex) (%) 2.5 81.7 (71.3) 125.9 36.7
Margins
Gross Margins (%) 9.8 12.6 9.2 11.2 14.6
Opg Profit Margins (%) 6.1 9.7 5.1 7.6 11.4
Net Profit Margins (%) 4.3 5.6 3.1 5.0 5.7
3937 Rp
Closing T arget
S.No. Dat e Rat ing
3737 Pric e Pric e
2 1: 02 J an 15 3675 3200 HOLD
3537 1 2: 26 J an 15 3550 4050 BUY
2737 6
2537
2337
Nov-14 Mar-15 Jul-15 Nov-15
Not e : Share price and Target price are adjusted for corporate actions.
1,531.0
229
utilisation rate improved to 80% of normal capacity in 3Q15
1,331.0 209
Gross profit (Rp bn) 509 380 -25% 661 556 -16%
Net profit (Rp bn) 328 227 -31% 418 349 -17%
Sales volume (000 tons) 1,811 1,386 -23% 2,174 1,868 -14%
Utilization rate (sales volume/installed
79 60 87 75
capacity) (%)
11.3
Earnings Drivers: 9.4
Demand recovery in sight. After the nomenclature issue in 7.5
40% to 1.65m tons p.a. by adding one more shift per day
0.0
from two shifts currently. We note that there could be an 2013A 2014A 2015F 2016F 2017F
upside to the contract value if WTON is able to supply the Railways forecasted precast needs
precast needs for rail pads and the planned 20-km long vs. WTONs capacity
3,300
tunnel. 3,500
3,000
3,000
2,500
2,500
First-mover advantage in ex Java market. WTON has
2,000
continued to expand its coverage to markets outside Java
1,500
where competitors are scarce. In these areas, the company 1,167 1,167 1,167
1,000
often serves as the only large-scale precast producer, allowing
500
it to maintain higher pricing and margins compared to those
-
in Java. Based on our channel check, WTONs state-run 2016F 2017F 2018F
competitors will still be focusing on expanding in the Java
Medium-speed railway ('000 tons) Capacity ('000 tons)
market in the near future. Therefore, we are confident that
WTONs position outside Java markets will remain firm. The
Source: Company, AllianceDBS, DBS Vickers
rollout of toll roads and port projects outside Java should
benefit WTON as the most ready producer to fulfil the precast
needs.
its treasury stocks to the public next year. The planned expansion 0.40
0.9
over the next two years will boost capacity to 3m tons but should 0.30 0.8
be adequately funded by internally generated funds. Assuming 0.20
0.8
the treasury stocks are sold at Rp1,000/share, the proceeds raised 0.10
entire precast needs, hence part of the order will be passed to 300,000.0
200,000.0
WTON. The total precast need of this project is estimated to be 100,000.0
around Rp3.6tn over the next three years. More certainty 0.0
2013A 2014A 2015F 2016F 2017F
regarding the Jakarta-Bandung high-speed railway construction
Capital Expenditure (-)
should also support valuation re-rating, in our view. ROE (%)
positively. 10.0%
5.0%
39.9
Increasing competition in Java market. Major SOE contractors are 34.9
+1sd:37.8x
weaken WTONs pricing power in Java and erode its margins. In 19.9 1sd:20x
PB Band (x)
Bulk of COGS is in USD. Steel and cement make up 30% and 6.7
(x)
20% of WTONs COGS respectively. Additionally, some overhead 6.2
+2sd:6.04x
costs for its production facilities are also in USD, which exposes 5.7
company has mitigated this risk by signing umbrella contracts for 4.7 Avg:4.71x
its key raw materials, enabling it to lock in prices for three 4.2
1sd:4.04x
months. 3.7
2sd:3.38x
3.2
Key Assumptions
FY Dec 2013A 2014A 2015F 2016F 2017F
Gross profit margin (%) 14.7 14.9 13.1 13.4 13.0
Sales volume ('000 tons) 1,457 1,464 1,386 1,868 2,532
Utilization rate (%) 72.8 66.5 60.3 74.7 84.4
Segmental Breakdown
FY Dec 2013A 2014A 2015F 2016F 2017F Better utilisation rate
Revenues (Rp bn) should translate into EBIT
Concrete 2,622 3,228 2,871 4,101 5,780 margin expansion due to
Service 22 50 33 47 55 WTONs high operating
Head office 0 0 0 0 0 leverage.
Total 2,644 3,277 2,904 4,148 5,836
Growth
Revenue Gth (%) (25.5) 48.2 (55.2) 8.5 41.8
EBITDA Gth (%) (47.1) 123.4 (88.9) 291.2 (2.9)
Opg Profit Gth (%) (42.3) 102.1 (87.1) 262.6 (8.7)
Net Profit Gth (%) (44.7) 106.4 (83.8) 114.7 (6.3)
Margins
Gross Margins (%) 12.4 15.7 8.0 17.4 11.3
Opg Margins (%) 9.6 13.1 3.8 12.7 8.2
2Q15 margin was
Net Profit Margins (%) 7.9 11.0 4.0 7.9 5.2 exceptionally high as WTON
received many small-sized,
Balance Sheet (Rp bn) high-margin orders.
FY Dec 2013A 2014A 2015F 2016F 2017F
Rp
1441 Closing T arget
2 S.No. Dat e Rat ing
Pric e Pric e
1341 1: 26 J an 15 1330 1600 BUY
2: 10 Mar 15 1360 1600 BUY
1
1241 3: 04 May 15 975 1200 BUY
4
4: 27 May 15 1170 1200 BUY
1141 5: 10 Aug 15 1060 1200 BUY
1041
5
941
3
841
741
Nov-14 Mar-15 Jul-15 Nov-15
Not e : Share price and Target price are adjusted for corporate actions.
AllianceDBS recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by AllianceDBS Research Sdn Bhd (ADBSR). This report is solely intended for the clients of DBS Bank Ltd
and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the
DBS Vickers Group) only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means
or (ii) redistributed without the prior written consent of AllianceDBS Research Sdn Bhd.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively
refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers,
employees and agents (collectively, the DBS Group)) do not make any representation or warranty as to its accuracy, completeness
or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any
recommendation 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 for the information of addressees only and is not to be taken in
substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The
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arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This
document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its
affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this
document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform
or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report,
and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates,
forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not
guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or
companies) referred to in this report.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of
estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or
more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not
materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts,
ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group
(and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved,
and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts,
ratings or risk assessments stated therein.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or
companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the
futures contract relating to the commodity referred to in this report.
DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or
research department, has not participated in any public offering of securities as a manager or co-manager or in any other
investment banking transaction in the past twelve months and does not engage in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about
the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that
no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in
this report. As of 1 Feb 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do
not hold interests in the securities recommended in this report (interest includes direct or indirect ownership of securities).
Page 39
Industry Focus
Indonesia Construction
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