Construction Firm Adhi Karya Thriving on Indonesia's Infrastructure Push
Indonesian publicly-listed construction firm Adhi Karya is expected to be one of the main beneficiaries of the government's push for infrastructure development across the archipelago. Adhi Karya is for 51 percent government-owned and therefore has close ties with the government. In the first ten months of 2015 Adhi Karya clinched IDR 10.6 trillion (approx. USD $774 million) worth of new contracts, up 100 percent from contracts won in the same period last year. Nearly half of these contracts involve projects (partly) financed by the central or local governments' budgets.
Net profit of Adhi Karya is expected to grow by an average 37 percent per year up to 2017 on the back of government-led infrastructure projects and the company's recent rights issue. One example of the projects is the USD $760 million light rail system in Jakarta. This rail system, which is estimated to start operations by 2018, will connect Cibubur (in the eastern part of Jakarta) to Grogol (in West Jakarta) through Cawang and Semanggi in South Jakarta. About 80 percent of this project is funded by the government.
Adhi Karya benefits from this project (with an estimated gross margin of 10-12 percent) being the contractor and through precast concrete sales through its subsidiary Adhi Karya Beton.
Funds Allocated to Infrastructure Spending in the Government's State Budget:
In its recent rights issue Adhi Karya raised IDR 2.7 trillion (approx. USD $197 million) which manages to lower the company's net gearing ratio to 11.2 percent in 2015, from 83.2 percent last year. Its debt-to-equity ratio is projected to decrease to 52 percent this year, compared to 130 percent last year. This means that the company will have more room to take on loans toward the future, with more better interest rates (before the rights issue Adhi Karya had the highest debt ratio among all state-controlled construction companies).
Next year, the company is estimated to collect IDR 16.4 trillion in contracts, from an expected IDR 16 trillion this year.
Adhi Karya posted IDR 137.3 billion in net profit in Q3-2015, up 36 percent from the same period last year.
Adhi Karya's Financial Highlights:
| 2012 | 2013 | 2014 | 2015F | 2016F | 2017F | |
| Revenues | 7,627.7 | 9,799.6 | 8,653.6 | 10,027.0 | 14,792.0 | 20,795.0 |
| Net Income | 211.6 | 406.0 | 324.1 | 416.0 | 609.0 | 847.0 |
| P/E Ratio (x) | 14.6 | 6.7 | 19.3 | 16.0 | 13.2 | 9.5 |
| P/BV (x) | 2.33 | 2.32 | 2.02 | 1.71 |
in billion IDR rupiah unless otherwise stated
Sources: Adhi Karya, Annual Report 2014 & RHB OSK Securities
Stock Quote Adhi Karya - ADHI: