Mansek WIKA:Minor noise

Kontan reported that WIKA was late in handing in FY09 financial result revision and the change of use of IPO proceeds to the authority. Yet in fact , they have met with Bapepam rules and requirements as a public company. We view that such revision is insignificant and would not affect future performance. Thus , we maintain our Buy recommendation on WIKA , particularly with the initial number shows results likely will be above expectation , along with strong fundamental. Our target price of Rp570/share reflect s PER10-11F of 12.3-9.5x , or 19% discount to JCI (average discount since listing date).

Reporting misstep. Kontan reported that WIKA was late in handing in the revision to the FY09 financial statement as well as change of use of its IPO proceeds to the capital market regulatory and supervisory body (Bapepam). However , the company informed us that they have reported the error to Bapepam 5 days after they filed its FY09 financial statement , which is on 30 March 2009 , and sent the revision in the forthcoming 11 days. Note that the revision only lies on account reclassifications in their FY09 cash flow statement (Exhibit 1).

Reallocation some of IPO proceeds completed. Regarding the change of use of their IPO proceeds , they have obtained shareholders approval in their EGM back in 27 Jan 2009. They have also reported IPO proceeds realization on 12 October 2009 to Bapepam. The change in IPO proceeds worth Rp100 bn was extended as a loan to a subsidiary (from previously intended for working capital).

No impact. We view that such article could mislead the readers , as WIKA has already complied with Bapepam rules and requirement for public listed company. Moreover , we view that such revision was insignificant , and did not have any effect on FY09 ending balance of cash and cash equivalent.

Maintain Buy with a TP of Rp570/share. Yesterday , WIKA’s share price fell 3.7% from its previous closing , which was likely due to the negative news. We , on the other hand , still like its strong fundamental. In fact , 1H10 results may be better than other publicly listed construction companies , since around 40-50% of its revenue is coming from its non-construction business. Currently , WIKA is trading at PER10-11F of 11.3-8.6x , which still at 28.3% discount to JCI. As such , we maintain our Buy recommendation with target price of Rp570/share.