Wijaya Karya. Still waiting for the fast train

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1 Vol m Construction Indonesia December 7, 2017 Company Note Indonesia HOLD (previously ADD) Consensus ratings*: Buy 23 Hold 7 Sell 0 Current price: Rp1,645 Target price: Rp1,800 Previous target: Rp3,500 Up/downside: 9.4% CIMB / Consensus: -31.3% Reuters: Bloomberg: Market cap: Average daily turnover: WIKA.JK WIKA IJ US$1,089m Rp14,755,570m US$2.64m Rp35,884m Current shares o/s: 8,964m Free float: 35.0% *Source: Bloomberg Key changes in this note FY17F core EPS decreased by 9.2% FY18F core EPS decreased by 7.1% FY19F core EPS decreased by 7.4% 2,500 2,000 1, Source: Bloomberg Price performance 1M 3M 12M Absolute (%) Relative (%) Major shareholders % held Government of Indonesia 65.1 Insert Price Close Relative to JCI (RHS) Dec-16 Mar-17 Jun-17 Sep Wijaya Karya Insert Insert Still waiting for the fast train With no material progress on the HSR project, WIKA s FY18F/19F earnings are increasingly at risk given the project is set to contribute 24%/34% of NP, respectively. With a more subdued new contracts outlook in FY18-19F, the weak 9M17 results and higher financing expenses, we cut our FY17-19F earnings by 7-9%. Meanwhile, the balance sheet and cash flow outlook are also burdened by increasing contractor pre-financing (now at Rp14.2tr) and more investments realisation. Downgrade to Hold from Add with lower TP of Rp1,800, now based on SOP valuation, which implies 11.5x P/E FY18F (about -1 s.d. of its 3-year P/E mean, or at 13x). Still waiting for the HSR project loan disbursement WIKA said its HSR project under Kereta Cepat Indonesia China (KCIC) has fulfilled the required condition precedents from the main banker, China Development Bank (CDB). CDB has since requested for an additional supplementary document of approval from all concession shareholders for the increased EPC contracts value. This is then to be followed by the CDB audit process before loan disbursement, resulting in a project delay of almost 2 years. We now assume loan disbursement to only take place in FY18F. Moving HSR contributions to FY18-19F In YTD-17, there has been no material progress in the realisation of the Jakarta-Bandung HSR project as the loan from CDB has yet to be disbursed. We now assume HSR revenue realisation in FY18F/19F with progress realisation of 40%/60% p.a. (previously, 40%/60% p.a. in FY17F/18F). We estimate that the Jakarta-Bandung HSR would contribute for 24%/34% of WIKA s total net profit in FY18F/FY19F. More subdued new contracts outlook 10M17 s new contracts achievement of Rp34.7tr (+34% yoy) accounted for 80% of our/the company s FY17F target. This is ahead its 3-year average achievement in 10M of 62%. Given this was in line with management s guidance, we keep new contracts target in FY17F unchanged. We cut FY18-19F new contracts target growth to 20% yoy p.a. (previously, 27% yoy p.a. in FY18-19F) amid potential jitters during the election years. Bigger debt and cash flow burden WIKA may bear the highest negative operating/free cash flows positions in FY18F and turn positive only in FY19F due to: 1) Increasing contractor pre-financing projects, totaling Rp14.2tr. Only Rp209bn in project payment is expected in FY18F. The rest of the payments are expected in FY19F-20F; 2) More investment plan realisation with capex totaling of Rp6.4tr/Rp5.7tr in FY18F/FY19F, respectively. Hence, total debt may increase to Rp13.6tr/Rp15.1tr in FY18F/FY19F, though DER should be manageable at c.0.9x p.a. Lacklustre 9M17 results Sales were Rp15.9tr (+70% yoy, +13% qoq), accounting for 61% of our full-year forecast, and below its 3-year average achievement of 63%. 9M17 s EBIT was Rp417.9bn (+132% yoy, +15% qoq), broadly in line with our expectation, buffered by strong JO profit booking from other projects despite no material progress on the Jakarta-Bandung HSR project yet. Core net profit was Rp682.5bn (+55% yoy, +26% qoq), below our expectation. Downgrade to Hold from Add We cut our EPS by % in FY17-19F. We downgrade our call to Hold from Add with a lower TP Rp1,800, now based on SOP valuation given that two of its subsidiaries are listed in IDX, with the latest addition being WIKA Gedung (ticker: WEGE). Our TP implies 11.5x P/E FY18F. We have incorporated the recent listing of its subs. Upside/downside risks: faster/slower than expected Jakarta-Bandung HSR project realisation and higher/lower new contracts achievements. Analyst(s) Aurelia BARUS T (62) E aurelia.barus@cimb.com Namira LAHUDDIN T (62) E namira.lahuddin@cimb.com Financial Summary Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F Revenue (Rpb) 13,620 15,669 25,015 28,597 34,894 Operating EBITDA (Rpb) 1,758 2,371 2,979 3,768 4,659 Net Profit (Rpb) 631 1,012 1,133 1,398 1,515 Core EPS (Rp) Core EPS Growth (1.0%) 17.6% 8.2% 23.4% 8.4% FD Core P/E (x) DPS (Rp) Dividend Yield 1.22% 0.88% 1.43% 1.60% 1.98% EV/EBITDA (x) P/FCFE (x) NA NA NA NA Net Gearing 16.2% (20.5%) (11.1%) 75.7% 71.0% P/BV (x) ROE 14.6% 9.5% 9.6% 10.8% 10.8% % Change In Core EPS Estimates (9.17%) (7.05%) (7.44%) CIMB/consensus EPS (x) SOURCE: COMPANY DATA, CIMB FORECASTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH. Powered by the EFA Platform

2 Still waiting for the fast train THE JAKARTA-BANDUNG HSR PROJECT OUTLOOK Loan yet to be disbursed Our discussions with the company revealed that Kereta Cepat Indonesia China (KCIC) has fulfilled the required condition of precedents from China Development Bank (CDB) for loan disbursement. KCIC has also received the recommendation letter from Ministry of Finance to be submitted to CDB. However, the loan is yet to be disbursed as it has to fulfill additional supplementary documents required by CDB, i.e. approval letter from all the concession shareholders on the increased EPC contracts value. The HSR s total investment value increased to US$5.9bn from US$5.4bn previously due to a change in project s traces. This is to be followed by a CDB audit process. Loan disbursement is expected to take place thereafter. WIKA continues to expect the loan disbursement to take place by the end of FY17F. However, we think the loan disbursement will only take place in FY18F given there are more required steps to be fulfilled. Change of HSR progress realisation targets to FY18-19F Previously, we had forecast 40%/60% progress realisations of the Jakarta- Bandung HSR in FY17F/FY18F. However, in YTD-17, the progress realisation of the project remains very minimal given the tough negotiation process in the loan disbursement from CDB. Hence, we move our HSR revenue realisation targets to FY18F/FY19F of Rp6.3tr/Rp9.4tr, assuming 40%/60% progress realisation p.a. We estimate that the Jakarta-Bandung HSR would contribute for 24%/34% of WIKA s total net profits in FY18F/FY19F. A MORE SUBDUED NEW CONTRACTS OUTLOOK WIKA booked Rp34.7tr in new contracts (+34% yoy). This accounted for 80% of our/the company s FY17F target, or ahead of its 3-year average achievement in 10M of 62%. Despite the better new contracts achievement in 10M17, we prefer to maintain our new contracts target in FY17F at Rp43.2tr (-21% yoy) as this is already in line with the company s target. In FY18F-FY19F, we lower our new contracts growth targets in both years to +20% yoy p.a. This is on the back of uncertainties in the run-up to the elections (regional election in FY18F and presidential election in FY19F). Figure 1: WIKA's 10M17 new contracts achievement of 80% of our FY17F; ahead its 3- yr average achievement in 10M17 of 62% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% F 1Q-achievement 3Q-achievement 4Q-achievement 1Q-LT average 3Q-LT average 4Q-LT average 2Q-achievement Oct-achievement Remaining to FY17F (CIMBe) 2Q-LT average Oct-LT average 2

3 Figure 2: WIKA s major new contracts received as at the end of 10M17 Contracts (Rp bn) Serang-Panimbang toll road 5, Development of storage tank terminal, jetty, and logistic Kunciran-Serpong toll road 1, Lampung toll road phase IV 1, Java III Cilacap 1x1,000 MW steamed engine power plant Lodgement in Harrach Algeria (1,700 units) Lodgement in Dar Al-Algeria (2,225 units) Fixed type gas engine power plant package Bontang steamed engine power plant (civil) Total 13, WEGE HIGH-RISE BUILDING CONTRACTOR ARM The high-rise building contractor arm Wijaya Karya Bangunan Gedung (ticker: WEGE) is WIKA s high-rise building contractor arm. Up to FY15, WEGE was only doing private sector projects. WIKA s building department division unit (divisi bangunan gedung~dbg) served the high-rise building projects coming from the non-private sector (government related entities). In Feb 16, WIKA s building department division unit (divisi bangunan gedung~dbg) was merged into WEGE. Hence, since then all the high-rise building construction projects received by WIKA group have been executed by WEGE. WIKA will continue to only take in the infra projects. IPO details WIKA Gedung, WIKA s high-rise contractors arm, was listed on the IDX on 30 Nov 2017 at a price of Rp290/share. The IPO price implies 5.8x P/E FY18F of the company s target. It raised a total of Rp832bn proceeds, which will be allocated for its business expansion in both forward and backward integration. Aiming for backward and forward integration WEGE plans for business expansion through backward and forward integration strategies, including for: 1. Backward integration strategies It plans to strengthen its supply chain through a backward integration strategy, including expansion in: a. Building precast (WIKA Pracetak Gedung~WPG) WIKA Pracetak Gedung was formed in FY16. WPG is 51% owned by WEGE and 49% owned by WIKA Beton (WTON). The main focus of WPG is production and installation of building precast. Its ultimate project target is the 1m housing development programme, mainly located in Java. b. Geotechnical engineering Geotechnical engineering scope of works includes soil, rock, foundation, and retaining walls strength investigation, which would increase its core competency in high rise building contracting. Geotechnical engineering business will help the company to provide underground space development in dense cities, for example in Jakarta. We understand that WEGE aims to acquire a geotechnical engineering company with strong engineering value, which could add value for company s service to its clients. WEGE aims to own a 60% stake in the acquired company. c. Modular Modular building is a pre-fabricated building that consists of multiple sections called modules, i.e. pre-fabricated restroom. We understand that this expansion shall be done through the formation of a JV company. WEGE aims to own 80% of the JV company. We understand that currently there are no major modular building players in Indonesia and 3

4 most of the modular buildings are imported. On the other hand, demand for modular buildings in Indonesia is increasing. 2. Forward integration strategies The company plans a forward integration strategy via property investment (concessions) and development. We understand that this strategy will help the company to build a recurring income stream. In FY17F and beyond, we understand that the company is aiming for a total of 21 property investments and developments, including for offices, mixed use areas, retail space, hotel, airports, hospitals, etc. We now only forecast capex for a total of 11 property investments (concession) and developments. We expect that its property investment (concession) and developments to start contributing to its earnings in FY18F. Its investment and concessions shall be under five different schemes, including: Public private partnerships with formation of special purpose vehicles (PPP-SPV) In this scheme, we understand that government/regional government would be the project owner and give guarantees such as availability payment and political risk. The company s roles are for financing, design and build, and building maintenance. It will lease the building to SOE/ROE who operate the business. It will receive a fixed lease revenue from the operator as stated in the agreed contract. There will be concession period for this type of project, typically for years. Project example includes regional hospital. Design-build-financing-lease-transfer with formation of special purpose vehicles (DBFLT-SPV) In this scheme, we understand that the company will have synergy together with other SOEs, who are the land owners. The company s roles are for financing, design and build, and building maintenance. After the construction completion, it will lease the majority of the space (40-80%) to the land owner until the end of concession period. The concession period is typically for years. Project examples include office buildings and hospitals. Design-build-financing-lease-hold-transfer with formation of special purpose vehicles (DBFLHT-SPV) In this scheme, we understand that the company will have a cooperation agreement with other SOEs, who are the land owners. The company s roles are to design, build, financing, and marketing/selling the projects. DBFLHT is for strata title property project with impure building rights, meaning that the land rights to the property buyer is limited to a certain time period (30 years). The license for the development shall be right to use on top of land utilisation rights. There might be an extension on the concession period. The land owner may have the rights to buy back the property before the end of concession period at the agreed price for the remaining life of the assets. Project examples include TOD and mixed use area developments. Design-build-financing-operate-transfer with direct investment (DBFOT-DI) In this scheme, we understand that the company will lease the land for its project from the land owners. It will take the design and build, development, financing, and operating roles in this investment. There will be a concession period in this type of investment of years. Project example includes hotel. Joint operations (JO) In this scheme, we understand that its partner will provide the land. The company s roles are for design and build and marketing/selling of the project. This type of project usually has a shorter cooperation period of 3-5 years. 4

5 Project examples include apartment development. Figure 3: WEGE s property investment (concessions) and development WIKA Gedung CIMBe Projects Locations Scheme Total Total WG stake, WG portion WG stake, WG portion investment investment % (Rp bn) % (Rp bn) (Rp bn) (Rp bn) Property investment (concessions) 7, % 3, , % 1, Office A Central Jakarta DBFLT-SPV % % Office B Central Jakarta DBFLT-SPV 1, % , % Office C Surabaya DBFLT-SPV % % Hotel Bandung DBFOT-DI % % Retail space (TOD) Bogor DBFLT-SPV % Airport A Banten DBFLT-SPV % % Airport B Bali DBFLT-SPV 2, % 1, SOE hospital A North Jakarta DBFLT-SPV % % SOE hospital B Surabaya DBFLT-SPV % % Regional Hospital A (RSUD A) Sidoarjo PPP-SPV % % Regional Hospital B (RSUD B) Banyuwangi PPP-SPV % Regional Hospital C (RSUD C) Wonogiri PPP-SPV % Property development 2, % 1, , % Apartment/mixed use (A) tower 1 Surabaya JO % % Apartment/mixed use (A) tower 2 Surabaya JO % % Apartment/mixed use (A) tower 3 Surabaya JO % Apartment/mixed use (B) Central Jakarta DBFLHT-SPV % % Apartment/mixed use (C) tower 1 Bogor JO % Apartment/mixed use (C) tower 2 Bogor JO % Apartment/mixed use (D) tower 1 Bogor DBFLHT-SPV % Apartment/mixed use (D) tower 2 Bogor DBFLHT-SPV % Apartment/mixed use (D) tower 3 Bogor DBFLHT-SPV % Total 10, % 4, , % 2,

6 Figure 4: Progress of state capital injection investment as of 9M17 CAPEX AND INVESTMENTS OUTLOOK In 9M17, we calculated that its capex realisation was at Rp1.9tr. This includes for all its business expansions and investments. Up to 9M17, the realisation of investments to be allocated from the state capital injections money received in FY16 was only for the toll roads businesses, and no material progress on other projects yet. It plans to change its targeted investments list (other than toll road projects) as listed in Fig 4. Capital WIKA investment WIKA's investment Projects allocation from state capital Total value injection Est. value Equity Debt value (Rp bn) as at injections (PMN) (Rp bn) Stake allocations (Rp bn) (30%) (70%) end of 9M17 Toll roads Soreang-Pasirkoja 1, % Manado-Bitung 5, % 1, Balikpapan-Samarinda 9, % 1, , Projects status as of 9M17 Power plants Steamed engine power plant Banten 2 X 1,000 MW Steamed engine power plant Aceh 2 X 200 MW 37,500 1,688 15% 5,627 1,688 3,939-10, % 3, ,100 - Likely to be replaced with steam engine power plant Jambi 1 & 2 (2 X 2 X 300 MW) Likely to be replaced with Butu Batu water engine power plant (2 X 100 MW) Clean water treatments WTP Jatiluhur 50,000L/sec 2, % Industrial estate Kuala Tanjung Industrial Estate 8, % 1, ,064 - Not started yet, might be changed to another project located in Java area Total 74,095 4,000 13,322 3,997 9, We expect for a total of Rp3.2tr/Rp6.4tr/Rp5.7tr capex for WIKA in FY17F/FY18F/FY19F, respectively. The big chunks of its capex in FY18F- FY19F shall come from its investments realisation in two power plants projects, Jakarta-Bandung HSR equity injection, and WEGE s property investment (concession) and developments. It mentioned that it has allocated Rp1.1tr injection to Pilar Sinergi BUMN Indonesia (PSBI) for Jakarta-Bandung HSR project, however this remains considered as a shareholders loan as the other shareholders are yet to inject their portions. The shareholders loan is expected to earn 10% interest income, which we now have included in our forecast. Figure 5: WIKA's estimated capex (CIMBe) In Rp bn FY17F FY18F FY19F Infra investments capex Surabaya-Mojokerto toll road Manado-Bitung toll road Jakarta-Bandung HSR 1,027 1,970 1,490 Steamed engine power plant Jambi 1~2 x300 MW Steamed engine power plant Jambi 2~2 x300 MW Water engine power plant Butu Batu~2x100 MW Balikpapan-Samarinda toll road Cengkareng-Kunciran toll road Subtotal 1,150 3,293 3,374 Other capex Propety, plants, and equipments capex 1, Investment in JO projects WEGE capex 296 1,458 1,020 Subtotal 2,034 3,115 2,323 Total capex 3,184 6,408 5,697 6

7 BALANCE SHEET AND CASH FLOW OUTLOOK Gearing outlook We estimate WIKA to have total debts of Rp7.6tr/Rp13.6tr/Rp15.1tr in FY17F/FY18F/FY19F. The steep increase in its debts are expected to be on the back of increasing capex and CPF projects on its book. Despite that, we estimate that its DER remains manageable at 0.5x/0.9x/0.9x in FY17F/FY18F/FY19F. Free cash flow outlook We estimate that company will have negative FCF given it is in a high capex cycle in FY17F-18F. Figure 6: WIKA's free cash flows outlook in FY17F-FY19F 2,000 - (2,000) (4,000) (6,000) (8,000) (10,000) (12,000) 2017F 2018F 2019F In Rp bn Operating cash flow outlook We estimate that in FY17-18F, it shall have negative operating cash flows as it carries a total of Rp14.2tr contractor pre-financing projects (CPF) currently. We expect the first CPF project payment to take place in FY18F of Rp209bn, and the rest of Rp6.7tr/Rp7.3tr of payments to take place in FY19F/FY20F. Operating cash flows should turn positive in FY19F to Rp3.9tr under the assumption that the company would not take additional CPF moving forward. Figure 7: WIKA's operating cash flow outlook in FY17F-FY18F 6,000 4,000 2,000 - (2,000) (4,000) (6,000) (8,000) (10,000) 2017F 2018F 2019F In Rp bn 7

8 9M17 RESULTS REVIEW 9M17 core net profit below expectations, despite robust yoy growth WIKA booked a Rp15.9tr (+70% yoy, +13% qoq) revenue in 9M17. This accounted for 61% of our full-year forecast, or broadly in line with our expectations (3-yr avg. achievement in 3M: 63%). However, this only accounted for 56% of consensus FY17F, below their expectations. It continued to book JO profit in 9M17 of Rp417.9bn (+132% yoy, +15% qoq) from other projects (non Jakarta-Bandung HSR). We previously estimated that the HSR project shall be the main driver for its strong JO profit. 9M17 s EBIT was at Rp1.6tr (+63% yoy, +11% qoq). This accounted for 56% of our FY17F, or broadly in line (3-year average achievement in 9M: 54%). However, this only accounted for 44% of consensus FY17F. 9M17 s core net profit was at Rp682.5bn (+55% yoy, +26% qoq). This accounted for 55%/47% of CIMB s/consensus FY17F, or below expectations (3- year average achievement in 9M: 61%). Figure 8: Results Comparison FYE Dec (Rp bn) 3QFY17 3QFY16 yoy % qoq % 3QFY17 3QFY16 yoy% Prev. chg chg Cum Cum chg FY17F Revenue 6,392 3, ,876 9, ,849 Operating costs (5,797) (2,958) (14,304) (8,376) 71 (23,035) Income from JO EBITDA ,809 1, ,234 EBITDA margin (%) Depn & amort EBIT , ,814 EBIT margin Interest expense (154) (92) 67 (10) (444) (264) 68 (641) Interest income , Bad debt expenses (2) (15) (90) (94) (28) (16) 81 (77) Pretax profit , ,093 Tax (176) (92) 91 8 (454) (259) 76 (709) Tax rate (%) (3) (3) (3) (3) (3) Minority interests (30) (8) 281 (3) (80) (57) 41 (136) Net profit ,248 Core net profit ,248 Comments Broadly in line with CIMBe FY17F (61%), but behind consensus FY17F (56%)~(3-yr.avg. achievement in 9M: 63%) Broadly in line with CIMBe FY17F (56%), but behind consensus FY17F (44%)~(3-yr.avg. achievement in 9M: 54%) Behind with CIMBe/consensus FY17F (55%/47%)~(3-yr.avg. achievement in 9M: 61%) SOURCES: CIMB, COMPANY REPORTS 8

9 FORECAST CHANGES We cut our FY17F-19F core EPS by 7.1%-9.2% on the back of: 1. Longer than expected Jakarta-Bandung HSR project realization; 2. Lower new contracts growth in FY18F-19F; and 3. Increasing interest expenses for higher estimated total debts. Figure 9: Forecast changes Old New Changes 2017F 2018F 2019F 2017F 2018F 2019F 2017F 2018F 2019F Revenue 25,849 33,920 38,579 25,015 28,597 34, % -15.7% -9.6% Gross profit 3,012 3,890 4,452 2,857 3,186 3, % -18.1% -11.7% Gross profit after JO 3,683 4,580 5,378 3,418 4,280 5, % -6.6% -0.8% Operating profit 2,814 3,440 4,080 2,577 3,318 4, % -3.5% 2.0% EBITDA 3,216 3,889 4,577 2,979 3,768 4, % -3.1% 1.8% Pretax profit 2,093 2,594 2,874 2,037 2,471 2, % -4.7% -4.7% Net profit 1,248 1,505 1,638 1,133 1,398 1, % -7.1% -7.5% Core profit 1,248 1,505 1,638 1,133 1,398 1, % -7.1% -7.5% Gross margin 11.7% 11.5% 11.5% 11.4% 11.1% 11.3% -0.2% -0.3% -0.3% Operating margin 10.9% 10.1% 10.6% 10.3% 11.6% 11.9% -0.6% 1.5% 1.4% Core margin 4.8% 4.4% 4.2% 4.5% 4.9% 4.3% -0.3% 0.5% 0.1% New contract 43,170 54,883 69,862 43,170 51,804 62, % -5.6% -11.0% New contract growth -21.2% 27.1% 27.3% -21.2% 20.0% 20.0% 0.0% -7.1% -7.3% 9

10 VALUATION AND RECOMMENDATION Downgrade to Hold We downgrade our call to Hold from Add, mainly due to prolonged uncertainties of the Jakarta-Bandung HSR project realisation. We change our valuation method to an SOP valuation as two of its subsidiaries are now listed, and arrive at a TP of Rp1,800/sh. Our TP implies 11.5x FY18F P/E. This is below its -1 s.d. of its 3-year mean P/E, 13x. We downgrade our P/E multiple base to 13x P/E FY18F for the holding company, or equal to 1 s.d. below its 3-year mean (previously at its 3-year mean). This is on the back of prolonged uncertainties of the Jakarta-Bandung HSR. We estimate that the Jakarta-Bandung HSR should contribute 24%/34% of WIKA s total net profit in FY18F/FY19F. Hence, a further delay in project realisation may become a potential downside risk to its earnings. Figure 10: WIKA's SOP valuation table In Rp bn, unless otherwise stated 2018F WIKA (excluding WEGE and WTON) Market cap (Rp bn) 12, Net profit (Rp bn) at -1 s.d. of its 3-year mean (x) 13 WIKA Gedung (WEGE) Market cap excluding minority interest (Rp bn) 1, Net profit (Rp bn) % discount to WIKA 9 WIKA Beton (WTON) Market cap excluding minority interest (Rp bn) 1, Net profit (Rp bn) % discount to WIKA 9 WIKA SOP valuation (Rp bn) 16, WIKA number of shares (bn) 8,964 WIKA target price (Rp) 1,838.7 Implied P/E FY18F 11.8 Figure 11: WIKA's LT forward P/E band Mar-13 Mar-14 Mar-15 Mar-16 WIKA P/E 3YR MA +1 St Dev +2 St Dev -1 St Dev -2 St Dev 10

11 Figure 12: Sector Comparisons Company Bloomberg Ticker Rec. Price Target Price Market Cap Core P/E (x) P/BV (x) Recurring ROE (%) Dividend Yield (%) (local curr) (local curr) (US$ m) CY2017 CY2018 CY2017 CY2018 CY2017 CY2018 CY2017 CY2018 Adhi Karya ADHI IJ REDUCE 1,770 1, % 9.4% 1.5% 1.5% Pembangunan Perumahan PTPP IJ ADD 2,450 3,900 1, % 12.7% 1.7% 1.9% Waskita Karya WSKT IJ ADD 1,955 3,400 1, % 21.1% 1.9% 3.6% Wijaya Karya WIKA IJ HOLD 1,645 1,800 1, % 10.8% 1.5% 1.7% Total Bangun Persada TOTL IJ ADD % 25.1% 6.7% 6.4% 11

12 BY THE NUMBERS P/BV vs ROE % 12-mth Fwd FD Core P/E vs FD Core EPS 38.1 Growth 35.0% % % % % % % % % % % 0.70 Jan-13A Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F 8.0% 8.1 Jan-13A Jan-14A Jan-15A Jan-16A Jan-17F Jan-18F -10.0% Rolling P/BV (x) (lhs) ROE (rhs) 12-mth Fwd Rolling FD Core P/E (x) (lhs) FD Core EPS Growth (rhs) Profit & Loss (Rpb) Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F Total Net Revenues 13,909 16,048 25,576 29,691 36,297 Gross Profit 1,943 2,606 3,418 4,280 5,336 Operating EBITDA 1,758 2,371 2,979 3,768 4,659 Depreciation And Amortisation (244) (292) (402) (449) (497) Operating EBIT 1,514 2,079 2,577 3,318 4,162 Financial Income/(Expense) (372) (384) (359) (707) (1,295) Pretax Income/(Loss) from Assoc Non-Operating Income/(Expense) (39) (99) (180) (140) (128) Profit Before Tax (pre-ei) 1,104 1,596 2,037 2,471 2,739 Exceptional Items Pre-tax Profit 1,104 1,596 2,037 2,471 2,739 Taxation (395) (448) (746) (801) (929) Exceptional Income - post-tax Profit After Tax 709 1,147 1,291 1,670 1,809 Minority Interests (78) (135) (159) (272) (294) Preferred Dividends FX Gain/(Loss) - post tax Other Adjustments - post-tax Net Profit 631 1,012 1,133 1,398 1,515 Recurring Net Profit ,133 1,398 1,515 Fully Diluted Recurring Net Profit ,133 1,398 1,515 Cash Flow (Rpb) Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F EBITDA 1,758 2,371 2,979 3,768 4,659 Cash Flow from Invt. & Assoc. Change In Working Capital (1,621) (1,708) (4,319) (7,820) 1,643 (Incr)/Decr in Total Provisions Other Non-Cash (Income)/Expense Other Operating Cashflow 2,338 (131) 1,673 (2,658) (187) Net Interest (Paid)/Received (372) (384) (359) (707) (1,295) Tax Paid (395) (448) (746) (801) (929) Cashflow From Operations 1,707 (300) (772) (8,219) 3,891 Capex (3,053) (2,491) (3,184) (6,408) (5,697) Disposals Of FAs/subsidiaries Acq. Of Subsidiaries/investments Other Investing Cashflow Cash Flow From Investing (3,053) (2,491) (3,184) (6,408) (5,697) Debt Raised/(repaid) 475 3, ,050 1,500 Proceeds From Issue Of Shares Shares Repurchased Dividends Paid (123) (130) (211) (236) (291) Preferred Dividends Other Financing Cashflow 1,252 6,398 3,186 1,113 1,773 Cash Flow From Financing 1,605 9,501 3,875 6,927 2,982 Total Cash Generated 259 6,710 (80) (7,700) 1,175 Free Cashflow To Equity (870) 442 (3,056) (8,577) (306) Free Cashflow To Firm (914) (2,356) (3,315) (13,773) (445) DATA 12

13 BY THE NUMBERS cont d Balance Sheet (Rpb) Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F Total Cash And Equivalents 2,560 9,270 9,190 1,490 2,665 Total Debtors 6,689 8,554 14,171 22,670 22,178 Inventories 1,031 1,164 1,810 2,075 2,529 Total Other Current Assets 2,280 4,638 6,055 6,630 7,635 Total Current Assets 12,560 23,626 31,225 32,866 35,007 Fixed Assets 3,184 3,325 3,716 3,903 4,048 Total Investments 3,425 3,177 5,545 11,198 16,007 Intangible Assets Total Other Non-Current Assets 432 1,150 2,090 2,400 2,984 Total Non-current Assets 7,042 7,652 11,351 17,502 23,040 Short-term Debt 1,222 4,712 4,712 4,712 4,712 Current Portion of Long-Term Debt 574 1,226 1,226 1,226 1,226 Total Creditors 4,862 5,051 7,791 8,881 10,741 Other Current Liabilities 3,940 4,174 8,357 6,975 8,724 Total Current Liabilities 10,598 15,163 22,086 21,794 25,403 Total Long-term Debt 1, ,636 7,686 9,186 Hybrid Debt - Debt Component Total Other Non-Current Liabilities 1,709 2,428 3,846 4,389 5,344 Total Non-current Liabilities 3,355 3,165 5,482 12,075 14,530 Total Provisions Total Liabilities 14,164 18,603 27,988 34,345 40,506 Shareholders' Equity 4,375 11,392 12,313 13,475 14,699 Minority Interests 1,063 1,284 2,275 2,547 2,842 Total Equity 5,438 12,675 14,589 16,023 17,541 Key Ratios Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F Revenue Growth 9.3% 15.0% 59.7% 14.3% 22.0% Operating EBITDA Growth 10.6% 34.9% 25.6% 26.5% 23.7% Operating EBITDA Margin 12.9% 15.1% 11.9% 13.2% 13.4% Net Cash Per Share (Rp) (143) (1,354) (1,390) BVPS (Rp) 711 1,270 1,374 1,503 1,640 Gross Interest Cover Effective Tax Rate 35.8% 28.1% 36.6% 32.4% 33.9% Net Dividend Payout Ratio 17.6% 17.7% 17.7% 17.7% 17.7% Accounts Receivables Days Inventory Days Accounts Payables Days ROIC (%) 17.0% 31.0% 17.0% 19.2% 12.6% ROCE (%) 18.4% 14.8% 13.5% 13.1% 13.3% Return On Average Assets 5.33% 5.60% 4.11% 4.62% 4.92% Key Drivers (Rpb) Dec-15A Dec-16A Dec-17F Dec-18F Dec-19F Outstanding Orderbook 43,355 78, , , ,649 Order Book Depletion 18,057 21,497 36,187 49,915 61,787 Orderbook Replenishment 25,222 54,763 43,170 51,804 62,164 ASP (% chg, main prod./serv.) N/A N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A N/A Util. rate (%, main prod./serv.) 48.6% 35.3% 42.0% 40.0% 40.0% ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A N/A DATA 13

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