NISP Wika sales drops, however net income jumps 50.8% YoY (WIKA, Rp590)

• Wijaya Karya reported a drop in sales of 15.2% YoY to only Rp2.52tn in 1H10. However net income was boosted by 50.8% YoY to Rp 140.8bn from Rp93.3bn. As such although sales only were 30.4% of consensus expectation, bottom line was satisfactory, as it made up half of the Rp268.0bn expected for full year.

• The company managed cover for its slumping sales by reducing interest expense to only Rp4.6bn from Rp30.0bn last year. In addition less foreign exchange losses and other expenses as a whole saved the company as other expenses only totaled Rp7.6bn from Rp68.6bn in 1H09.

• Sales were up 21.0% in the second quarter to Rp1.38tn. However COGS rose higher by 27.2% to Rp1.27tn, making gross profit decline by 10.1% QoQ to Rp128.0. Subsequently, margins declined as gross margin and net margin were only 9.3% and 5.5% compared to 12.5% and 5.6% in 1Q10.

• WIKA is trading at 2011F consensus PER of 10.3x and EV/EBITDA of 3.9x.