Robust 9M18 earnings, but weak 3Q18. WSKT reported strong 9M18 earnings
of Rp4.5tn in 9M18 (+55% yoy), which came above market expectation, forming
85%/83% of our/consensus’ FY18F estimate. The 9M18 revenue came above
market expectation to Rp36tn in 9M18 (+27% yoy), forming 71/65% of our
FY18F forecast (5-year average: 54%). However, 3Q18 bottom line was weak at
Rp737bn (-50% qoq, -43% yoy) due high opex of Rp574bn (+40% qoq) interest
expense of Rp584bn (-32% qoq) vs. 3Q18 one-off gain of Rp1.8tn from toll road
divestment.
Maintained high burn rate to make up for low new contract. To maintain
revenue growth, WSKT has booked record high burn rate of 50% in the last 12-
months in order to make up for weak new contract attainment. WSKT booked
weak new contract achievement of Rp11.7tn in 9M18 (-74% yoy), forming only
21% of company’s FY18F contract target of Rp55tn. Thus, as of 9M18 WSKT has
total orderbook of Rp102tn, which translate to 1.9x trailing 12-months revenue.
However, WSKT is expected to book 60-70% of their FY18 new contract target in
the remainder of 2018.
Expect DER to improve in 2019. Given huge project payments, we expect
WSKT DER to improve to 2.0x in FY19F (9M18:2.3x) resulting to lower interest
expense and better margin. WSKT has received the fourth payment of LRT
Palembang from Ministry of Transportation amounting Rp3.9tn in September
2018, while the rest of the receivables will be paid in 2019. Several turnkey
construction projects such as Java toll road projects and LRT Palembang is
expected to be completed by the end of 2018. Thus, WSKT has potential cash
inflow of Rp15-20tn from turnkey projects payment and land reimbursement in
the remaining of 2018.
Maintain Buy with TP of Rp2,300. Despite strong 9M18 result, we maintain our
FY18F forecast as we expect low 4Q18 earnings due to high interest expense. We
maintain our Buy ratings for WSKT with unchanged TP of Rp2,300, representing
FY18F P/E of 7.1x, which similar to –STD of WSKT’s 5-year mean. Key risk to our
call might come from turkey project’s payment delay and lower than expected
contract achievement.
Joey Faustian
PT Indo Premier Sekuritas
joey.faustian@ipc.co.id
+62 21 5793 1168
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