Being the concrete producing unit of state-controlled Wijaya Karya, Wika Beton is in a good position to benefit from the construction of the Jakarta-Bandung railway project. Puji Haryadi, Corporate Secretary at Wika Beton, said the project requires between IDR 6 trillion (approx. USD $432 million) and IDR 9 trillion (approx. USD $647 million) of precast concrete. The majority - if not all - is expected to be supplied by Wika Beton. As such, this precast concrete producer could become one of the biggest beneficiaries of the Jakarta-Bandung high-speed railway project.

The groundbreaking ceremony for the construction of the railway was held on Thursday (21/01) - in the presence of Indonesian President Joko Widodo. This USD $5.5 billion mega-project is being developed by Kereta Cepat Indonesia China (KCIC), a joint venture that consists of Pilar Sinergi BUMN Indonesia (60 percent stake) and China Railway International Co Ltd (40 percent). Pilar Sinergi BUMN Indonesia is a consortium that consists of Indonesian state-owned companies Wijaya Karya (38 percent stake), Kereta Api Indonesia (25 percent), Perkebunan Nusantara VIII (25 percent), and Jasa Marga (12 percent). With the highest stake in the consortium, Wijaya Karya leads the high-speed rail venture.

Read Column: New Cities and Economic Centers along the Jakarta-Bandung Railway

Apart from the company's closeness to Wijaya Karya, the second reason why Wika Beton is expected to benefit from the Jakarta-Bandung railway project - according to Haryadi - is its ability to supply materials that meet specific requirements that cannot be (easily) met by other firms in Indonesia. Haryadi mentioned materials such as box girders, piers and piles.

Financial Highlights Wijaya Karya Beton:

     2012    2013    2014    2015F    2016F    2017F
Net Sales   2,031   2,644    3,277    2,622    3,287    3,941
Net Income    179    241     322     160     209     262
Income before Tax    234    329     412
Total Assets   2,401   2,917    3,802
P/E Ratio (x)    35.7    26.6     23.7     48.7     37.3     29.7
PBV (x)    10.6     8.8      3.6      3.8      3.6      3.6

in billion IDR rupiah unless otherwise stated
Sources: Wika Beton Annual Report 2014 & RHB OSK Securities

Wika Beton corporate earnings in 2015 have not been good. Up to the third quarter it posted a 60.7 percent (y/y) drop in net profit to IDR 87.8 billion from the same period one year earlier amid the slowdown in Indonesia's property sector, while infrastructure development remained weak in the first half of 2015 (but started to accelerate in the second half).

Since the start of the year, shares of Wika Beton have surged 24 percent.

Stock Quote Wijaya Karya Beton - WTON:

Target Price Shares Wijaya Karya Beton:

Institution Target Price
(per share)
Sinarmas Sekuritas IDR 1,225
Credit Suisse IDR 1,040

Source: Investor Daily