Ready for The Next Battle
FY22E Outlook: New Capital City Tenders & Expand Overseas Network
• WEGE targets for a new contract reaching IDR7.1tn in FY22E or 163% YoY growth from the realization of the new contract in FY21 worth IDR 2.7tn. This target is based on the type of the owner, which is IDR3.81tn or 53.62% from the government project, IDR2.31tn or 30.28% from SOEs, IDR980bn or 13.79% from the private sector.
• WEGE's usage of modular technology brings potential in gaining tenders related to the new capital city (IKN). The tender and the construction of the new capital city are planned to be constructed on FY22E and the relocation is planned to be started on FY24F. The benefits of modular construction include: 1) efficient worker needs and construction time for up to 50% or more; 2) accessibility to all regions due to the construction are not needed to be located in one construction area.
• Moreover, the success of constructing 17 hospitals with project value up to IDR1 trillion will still be developed more, supported by potential tenders from several regions outside Java. Currently, WEGE is in talks with several state governments for hospital construction on the state. WEGE has a target of 15% new contracts growth, and 10% revenue growth in FY22F.
WEGE Modular Pit Building and Pullman Mandalika Hotel Site Visit
• WEGE built an international-scale Modular Pit Building worth of IDR195bn which is used on the 350 meters long Mandalika circuit with a capacity of 50 garages built with a modular system consisting of three floors. WEGE built in 21 days, with a total of 888 installed modular which is 5.24 meters wide and 18.34 meters long, built with a building area of ±13,700 sqm. Management said 1 modular can accommodate 100 visitors, so the modular Mandalika can accommodate up to 88,800 people. This pit has been used for WSBK international event as well as planned for MotoGP in FY22E.
• WEGE won the MURI record for the Fastest Modular System Pit Building Construction on
an International Standard Circuit. The modular system will be a construction business
opportunity in the future supported by: 1) Cost efficiency up to 20%, 2) Time realization
certainty, 3) Superior quality. In the 2019-11M21 period, it has built various modular
projects such as: hospitals, offices, and sports facilities with a contract value of IDR966bn.
• WEGE built Pullman Mandalika Beach Hotel and Resort worth IDR350bn. The only fivestar hotel in Mandalika with an international standard, especially to support the SEZ and in particular to support the Mandalika race circuit. This hotel has 257 rooms, consisting of 27 villas and 230 rooms, and is equipped with various facilities such as meeting rooms, restaurants, swimming pools. swimming pool, pool bar, gym & spa, as well as religious facilities. Pullman Mandalika is located in the western zone of the area near West Gate, Kuta Beach Park, The Mandalika.
Valuation and Recommendation: BUY at Target Price IDR250
We recommend BUY for WEGE, with a TP: of IDR250 which implies PE/PBV 9.04x/0.94x in FY22E. WEGE’s valuation has become attractive as it is currently trading at a level of 0STD (average 3-years PE). Risks to our call would include: 1) Changes in government policy; 2) Potential delayed project triggered by COVID-19 pandemic.
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