CIMB WIKA Initiating coverage - Infrastructure hedge

Initiating coverage - Infrastructure hedge - by Liliana Bambang
(WIKA IJ / WIKA.JK, OUTPERFORM, Tgt. Rp270, Construction and Materials)

The bulk of construction-sector growth in Indonesia this year should be powered by government projects, as the government intends to increase its budget by 20%, or Rp12tr, for infrastructure spending. WIKA, in our view, is the best pick for such exposure. WIKA is well-placed to seize the opportunity, as: 1) more than 70% of its construction jobs come from the government and SOEs; 2) 72% of its concrete business caters to SOEs and infrastructure projects; and 3) it has a robust balance sheet. With its well-diversified portfolio, WIKA should be able to expand its order book by 10.8% yoy this year. We initiate coverage with an OUTPERFORM rating and target price of Rp270, based on 8x CY10 earnings, in line with its regional peers.