Mansek WIKA Thriving steadily

Although WIKA’s 1H10 financial results will come in late due to their limited review, initial number shows results likely to be above expectation. Revenue and net profit may reach Rp2.7tn and Rp122.2bn, which reflect 33% and 48% of their FY10F target. This also shows that net margin is improving, in fact, it would be the highest ever. Furthermore, they are still in a net cash position, reflecting Rp85/shar! e (17% of their current share price). As such, we maintain our Buy call with higher price target to Rp570/share. It reflects PER10-11F of 12.3-9.5x, or 19% discount to JCI (average discount since listing date).

1H10 net profit grew 30% yoy. Wijaya Karya’s President Director reported that the company was able to book 1H10 net profits of Rp122.2bn (+30% yoy), despite slightly lower revenues of Rp2.7tn (-9.0% yoy). Initial 1H10 top line and bottom line figures reflecting 33% and 48% of their FY10 target of Rp8.1tn and Rp253bn, respectively. This is above expectation, as 4-yrs average net profit is at 44.1%. Note that WIKA’s 1H10 financial results will ! come in l ate due to their limited review process, as requested by their board of commissioner.

Improving margin. Such figure reflects 1H10 net profit margin of 4.5%, which is better from its record high of 4.1% in 1H08. Nonetheless, pattern from the past 2 years suggest that it will slightly decrease in 2H, thus FY net margin will be lower of around 1%. Yet, should it decrease by such number, FY10 may reach 3.5%, which is still the highest ever. It is also better than our forecast of 3.3% in 2010.

In a net cash position, reflecting Rp85/share. Company hinted that cash position as per 1H10 would reach Rp800bn, whilst total debt of some Rp300tn. Cash level will gradually increase in 2H10. They expect cash to reach close to Rp1tn in FY10. Current indicative net cash position reflects cash/share of around Rp85/share, or 16.6% of current share price.

Maintain Buy with a TP of Rp570/share. On average, WIKA is trading at 19.4% discount to JCI since it is listing date. Based on our forecast, the company is currently trading at PER10F of 11.0x or around 28.7% discount to JCI (of some 15.5x), very much lower compared with the average discount. As such, we maintain our Buy recommendation with higher target price of Rp570/share, reflecting PER10-11F of 12.3-9.5x.