Wijaya Karya Key points from company visit

Wijaya Karya : Key points from company visit (WIKA, Under review, Rp1,730)

Key points from company visit to Wijaya Karya (WIKA IJ):

• 2012 net earnings will most likely be around Rp440bn, which is in line with consensus and 24% yoy growth from 2011. The company expects that the positive momentum will keep going into 2013, where net earnings guidance is at Rp555bn, or 26% yoy growth. The figure is 1% below consensus.

• Supported by positive macro and government initiatives to accelerate infrastructure spending, the industry is experiencing tight supply on contractors (mainly due to human resources). WIKA is utilizing the positive trend to be selective on projects in order to improve margins (gross margin in 2011 and 2012F are 11% and 12%, respectively). It stated that EPC projects will be the key segment where margin improvement is highly possible. EPC equals to around 27.8% of 2012F revenue.

• The company also stated its investment commitment in the power sector. WIKA currently has invested in 5 projects (4 are already in operation with 160MW capacity). It will allocate around Rp645bn for power plant investment in 2013.

• We are currently reviewing our recommendation on this counter. WIKA is currently traded at 18.05x PE13 Cons, or 38% premium to ADHI, 45% premium to PTPP and 13% premium to WSKT.