On Tuesday (12/09) shares of government-controlled construction company Waskita Karya plunged 11.27 percent to IDR 1,870 a piece, while shares of its subsidiary Waskita Beton Precast fell 8.64 percent to IDR 402 per share. Hence both companies were among the ten top losers on the Indonesia Stock Exchange yesterday. What explains this huge sell-off?
Yesterday, the management of Waskita Karya said it failed to find suitable buyers for a stake in its subsidiary Waskita Toll Road. Although there were various parties interested to purchase a stake, they could not meet the requirements of Waskita Karya. Divestment and a rights issue are part of the construction company's program to seek funds to construct its part of the central government's toll road development program as well as to fund the company's other projects.
Waskita Toll Road offers the following sections to investors: (1) Kanci-Pejagan, (2) Pejagan-Pemalang, (3) Pemalang-Batang, (4) Batang-Semarang, (5) Solo-Mantingan-Ngawi, (6) Ngawi-Kertosono, (7) Pasuruan-Probolinggo, (8) Bekasi-Cawang-Kampung Melayu, (9) Medan-Kuala Namu-Tebing Tinggi, and (10) Kayu Agung-Palembang-Betung.
It is assumed Waskita Karya's announcement that it failed to find buyers for its ten toll road sections played a significant part in eroding investors' confidence in the company. In August 2017 the construction company had started to tender these sections.
M. Choliq, President Director of Waskita Karya, said there were investors who offered to buy a stake in the toll road sections. However, their offers were below expectations. Meanwhile, there have not been any investors interested in the company's rights issue. He added that the last option would be to list Waskita Toll Road on the Indonesia Stock Exchange through an initial public offering (IPO). However, first the company will try to offload the toll sections through a different scheme.
Precast concrete manufacturer Waskita Beton Precast was also affected by negative sentiments. This subsidiary of Waskita Karya is the main source of precast concrete for its infrastructure development projects.
Meanwhile, investors also keep an eye on the cash flow of Waskita Karya and its precast unit Waskita Beton Precast. During the first half of 2017 Waskita Karya's net cash flow (used for operational activities) was negative (IDR 4 trillion), while that of Waskita Beton Precast was negative as well (IDR 2.54 trillion).
The difficulty to divest part of its shares in Waskita Toll Road (hence unable, yet, to obtain fresh funds) may lead to less new contracts for Waskita Karya in 2017.
So far this year shares of Waskita Karya have slid 26.47 percent, while shares of Waskita Beton Precast have fallen 28.29 percent over the same period.
Stock Quote Waskita Karya - WSKT:
Stock Quote Waskita Beton Precast - WSBP: