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PRECAST - Initiate Coverage

A TALE OF TWO COMPANIES

 

WSBP IJ

This is the story of a young, highly growing company. With a healthy balance sheet to support the growth and more conducive business environment, new contracts, revenues, and net profit are to grow by 30%, 30%, and 33% in FY20, respectively. As gross gearing ratio is still manageable at 0.84 and total liabilities to equity below 1, ample room for financing is open. High dependence on Waskita Group and much turnkey projects which resulting in long cash conversion cycle are challenges to overcome. However, we should expect an improvement as WSBP aims to balance its new contracts portfolio and reduce its turnkey projects.

 

 

WTON IJ

This is the story of a mature, relatively stable company. A perse market base and therefore less dependency on WIKA Group are comparative advantages. No turnkey projects also make cash conversion cycle more preferable. However, relatively slow growth to respond the market should not turn into trouble in the future. A tight balance sheet might translate to limitation of financing future expansion. An increase of 15%, 12%, and 10% in new contracts, revenues, and net profit in FY20 is expected to materialize.

 

 

VALUATION

We initiate coverage on both WSBP and WTON with BUY recommendation. As we are optimistic about the prospect of precast in the years ahead, we choose to utilizing +1SD of the shares’ 3-year historical mean of PER21F for the valuation. As for WSBP, we arrive at TP of Rp482/share (+51.6% upside potential), whereas for WTON, our estimate results in TP of Rp680/share (+52.5% upside potential).

Thu December 19Th, 2019

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