Fighting the Waves
3Q18 Highlight: Continuing to Grow,but more Slowly
WSBP recorded top-line growth of 8.53% YoY to IDR5.43 tn in 9M18 (vs IDR5.01 tn in 9M17), reflecting 64.00%/63.09% of the MNCS / Consensus’ estimates. Gross profit increased 15.89% YoY to IDR1.56 tn with GPM 28.69% in 9M18. Operating profit was recorded at IDR1.40 tn, up 14.24 YoY with OPM 25.81%, reflecting 74.66%/73.63% of the estimated MNCS/Consensus. EBITDA was recorded to increase by 23.96% YoY to IDR1.77 tn in 9M18, reflecting 59.75%/61.00% of the MNCS/Consensus’ target. Net income increased 7.23% YoY in 9M18 to IDR884.85 bn (vs IDR825.17 bn in 9M17) with NPM at 16.27%, reflecting 73.33%/72.17% of the MNCS/Consensus target.
Positive cash flow, as well as a More Developing Commitment
Company managed to record positive operating cash flows worth IDR82.45 bn in 9M18 (vs -IDR2.23 tn in 9M17). Positive operating cash flows were supported by receipt of payment of IDR7.16 tn, disbursed for projects originating from five (5) toll road developments. Meanwhile, Management's commitment to cut back on turnkey-based projects will ensure a more secure cash flow for the Company. On the other hand, potential WSBP strategies include: 1) Acquiring companies providing raw materials; 2) Development of 1.1 ha laboratory facility; 3) Plans to increase plant capacity to 3.75 mn tons/year. This strategy will strengthen Company business from upstream to downstream, thus potentially increasing margins in the current period.
Revised New Contract, with Delay of Payments
WSBP was recorded a new contract value of 52.11% from IDR8.3 tn of the revised of new contract value in FY18E. The Company cut the new contract value from the initial target of IDR11.5 tn in the beginning year. The risk of delays in the completion of projects by the parent company, PT Waskita Karya Tbk (WSKT) and the failure to divest two (2) BECAKAYU Toll Roads and KAPALBETUNG Toll Roads, worth IDR3 tn.
Recommendation BUY with TP IDR500
We have a positive outlook on the growth prospects of the Company financial performance, supported by the completion of payments for several projects, such as the KLBM toll road worth Rp3.51 tn. We maintain a BUY recommendation for WSBP with TP: IDR500, which reflects PE/PBV 10.92x/1.70x in FY18E and 9.44x/1.56x in FY19F. Meanwhile, risks that have the potential to hinder performance growth include: 1) New contracts in FY18E below the target; 2) Project delays from the WSKT parent.
