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WSBP - FY19 RESULTS UPDATE

RUNNING OUT OF GAS

WSBP ended full year 2019 by posting total revenue of Rp7.47 trillion, slipped by - 6.7% Y/Y, surpassing our FY19F at Rp6.97 trillion (107%), yet only 76.1% of WSBP’s FY19 target of Rp9.81 trillion. Bottom line fell by -26.9% Y/Y to amount Rp806 billion, equal to 102.8% of our estimate at Rp784 billion or 87.9% of the Rp917 billion target. Higher-than-forecast COGS eroded gross profit margin and fast-growing operating expenses led other margins to follow suit. 

 

NEW CONTRACTS AND ORDER BOOK

New contracts realization reached Rp7.03 trillion or 87.6% of FY19 target of Rp8.03 trillion, inched higher by +5.5% Y/Y yet was lower than closest peer. The slowdown in new contracts acquisition from Waskita Group amidst pollitical year was held responsible for the missing target. 

 

ON THE WAY TOWARDS INDEPENDENCE

Despite Waskita Group still contributed the most to WSBP’s total revenue, its share diminished to 76% in FY19, compared to historical footprint of 85%-92%. This is in line with WSBP’s aiming to balance its external share. However, it will come at the cost of margins, which in the long-term are expected to normalize to industry level.

 

PRECAST SEGMENT REGAINED ITS DOMINANCE 

Precast segment contributed to 51.4% of FY19 revenue (Rp3.8 trillion), regaining its historical dominance. With thicker margin of 24.2% (compared to FY18 at 20.5%) and WSBP’s better competitiveness on this business, it saved the overall performance from falling even further amidst the unpromising year. Ready mix, with tighter margin of 10.6% (vs. 12.6% last year) and more saturated, price-sensitive market, retreated to 31% share (Rp2.3 trillion). Construction services posted a relatively stable performance with increasing contribution of 17.4% (Rp1.3 trillion).

 

2020 OUTLOOK AND VALUATION

WSBP sets ambitious targets this year, including Rp11.9 trillion of new contracts (+70% Y/Y), Rp10 trillion of revenue (+30% Y/Y), and Rp1.1 trillion of net profit (+25% Y/Y). Infrastructure-related projects, mainly toll road, are estimated to still dominate the mix, with Trans-Sumatera Toll Road is expected to be the next Trans-Java project. The current outbreak of the Covid-19, however, is feared to wreak havoc on the economy, causing the government to temporarily shift focus and resources to dampen the impact, and potentially to put the already planned and ongoing infrastructure projects on hold.

 

On the long-term, we remain cautiously positive on the prospect of precast aheads and therefore on our BUY recommendation. However, taking the current situation into our consideration, TP is revised to Rp414/share (+250.8% upside potential), reflecting the mean of the shares’ 3-year historical meanof PER21F (7.9x) multiplied by EPS21F of 52.

Mon March 23Th, 2020

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