PT Waskita Karya (Persero) Tbk

Debt Research Construction Debt Issuance

October 2014

PT Waskita Karya (Persero) Tbk The key player in national construction Investment highlights:

Country INDONESIA

Solid position in the construction business. Based on BPS data, there are 131thousand construction companies in Indonesia with Rp504tn total construction value completed in 2013. The Company has a solid position in the market by recording revenue for completed constructions of Rp9.6tn. As of June 2014, the value of new contracts obtained by the Company has reached Rp7.1tn (53.2% FY13) with a project composition of more than 65% from government and state owned/local company. We consider the Company's position in the market will remain solid in the future due to the Company’s advantages of being owned by the Government; this will also provide a solid position in getting large infrastructure projects planned by the Government.

Sound liquidity and good credit metrics. The Company has good ability to meet its short term liabilities with current ratio maintained above 1x in the last five years, and as of Jun14 the current ratio is 1.4x. Current ratio is expected to be maintained above the minimum covenants of 1x in the period of 2014F2017F. On another front, cashflow protection is forecasted to remain sound with EBITDA to interest coverage ratio at minimum of 3.8x-5.1x in 2014F2017F. Meanwhile, debt (interest bearing) to equity ratio (DER) would remain at moderate level of between 0.6x-1.0x, which is still below the maximum covenant level of 3x.

The demand is strong and still growing. The IMF estimates that the ratio of investment spending to Indonesia's GDP will continue to increase and reach 35.8% by 2019 from 33.6% of the current position. This will create more demand for construction projects as statistically there is a strong relationship between investment spending and demand for construction projects. Historically, every Rp1billion of investment spending will create demand for construction projects for around Rp320million. Meanwhile, the value of construction output to Indonesia's GDP is the largest among ASEAN countries amounting to 10% in 2013, compared to Malaysia 4.2% and Philippines 6.3%, proving that the demand for construction projects in Indonesia is very strong compared to peers in ASEAN countries.

Sovereign rating S&P

BB+/stable

Moody’s

Baa3/stable

Fitch

BBB-/stable

Company rating Pefindo

idA/Stable

Shareholders (%) Government of The Republic of Indonesia

67.76

Public

32.24

Outstanding Bonds Size Bond ID (Rp bn)

Maturity

Coupon (%)

WSKT02A

75

5-Jun-15

8.75

WSKT02B

675

5-Jun-17

9.75

Bond offering Waskita Karya Shelf Registered Bond I Phase I 2014 Rating Principal amount

idA/Stable max Rp500billion

Tenor

3 years

INVESTMENT PARAMETER

Ali Hasanudin +6221 5296 9629 [email protected] Handy Yunianto +6221 5296 9568 [email protected]

31 December (Rp billion) 2011 2012 Revenues 7,274 8,808 EBITDA 512 622 Total Assets 5,116 8,366 Total equity 620 2,007 Total debt 1,205 1,919 EBITDA interest coverage (X) 3.3 3.7 Net debt to EBITDA (X) 1.2 (0.5) Current ratio (X) 1.0 1.5 Debt to equity (X) 1.9 1.0 Source: Company and Mandiri Sekuritas estimates

Please see important disclosure at the back of this report

2013 9,687 768 8,788 2,383 1,623 7.9 0.6 1.4 0.7

2014F 11,579 1,062 10,996 2,697 2,637 4.8 1.1 1.4 1.0

2015F 13,848 1,221 12,625 3,066 2,834 5.0 1.1 1.4 0.9

2016F 16,820 1,531 14,773 3,479 3,191 3.8 1.1 1.2 0.9

Waskita Karya | October 2014

BOND MARKET OVERVIEW

TINJAUAN PASAR OBLIGASI

Bond market rebounded in early Q4 this year Since the first quarter of 2014, on average the government bond prices declined in the second and third quarters this year. Based on our Mandiri Securities Government Bond Index (MSGBI) calculation, the average government bond prices fell by 1.3% in Q3 (vs. –1.61% in Q2 and +3.38% in Q1). However, at the beginning of the 4th quarter, the bond market rebounded significantly, where the average price of bonds increased by 2.6% mtd (until 21 October) sending the average bond yield falling to 8.1% from 8.5% the highest end of November. In general, as we expected, the total return from investing (including interest income) in the government bonds is still positive at 10.5% ytd - much better than last year's performance of -13.4%. The return is slightly higher in USD terms as rupiah has also strengthened by 0.86% ytd.

Pasar obligasi rebound di awal Q4 2014 Sejak kuartal pertama tahun 2014, secara umum harga obligasi pemerintah menunjukkan penurunan di kuartal kedua dan ketiga. Berdasarkan perhitungan Mandiri Sekuritas Government Bond Index (MSGBI), rata-rata harga obligasi Pemerintah turun sebesar 1.3% di Q3 (vs. –1.61% di Q2 dan +3.38% di Q1). Namun demikian, di awal kuartal empat tahun ini, pasar obligasi mengalami rebound signifikan, dimana secara rata-rata harga obligasi naik sebesar 2.6% mtd (sampai dengan tanggal 21-Oktober). Hal ini mendorong rata-rata yield SUN turun menjadi 8.1% dibandingkan posisi tertingginya di 8.5% pada akhir November. Secara umum, seperti yang kami perkirakan, total return berinvestasi (termasuk pendapatan bunga) di SUN masih positif sebesar 10.5% ytd – jauh lebih bagus dibandingkan kinerja tahun lalu yang tercatat –13.4%. Dalam US Dollar, total return sedikit lebih tinggi mengingat rupiah mencatatkan apresiasi sebesar 0.86% ytd terhadap US dollar.

FIGURE 1. YIELD CURVE WAS BULLISH FLATTENED COMPARED WITH 2013

9.5

FIGURE 2. ON AVERAGE GOVERNMENT BOND PRICES REBOUNDED IN OCTOBER, AFTER DROPPING IN 2Q AND 3Q 20

Yield (%)

16.2 15

11.7

9.0 10

8.5

9.2

7.6

5

8.15

8.08

6.0 3.4

1.9

2.6

-

8.0

(1.6) (1.3)

(5)

(4.1)

12/31/2013 (10)

3/31/2014

(10.3) (13.8)

Bond Price Return

10/23/2014 (20)

Average Yield SUN

Source: Bloomberg as of 24-Oct

Q3

2012

2011

2010

30

2009

25

2008

15 20 Time to maturity (yrs)

2007

10

2006

5

2004

-

2005

(25)

6.5

2013

(21.7) Oct-14

7.0

(15)

Q2

6/30/2014

Q1

7.5

Source: Mandiri Sekuritas Estimate

FIGURE 3. FOREIGN FUND INFLOWS WAS BEHIND THE BONDS RALLY IN 2014 Net Buy/(Sells)

2010

2011

2012

2013

Q1

Q2

Q3

OCT

YTD 2014

(39.4)

(5.1)

10.9

42.1

5.6

14.9

13.7

(1.2)

33.0

(2.4)

42.8

18.7

35.1

5.0

1.5

0.0

1.6

8.1

Mutual Fund

5.9

(3.9)

(3.9)

(0.7)

1.7

1.7

0.3

0.0

3.7

Insurance

6.7

13.8

13.3

23.2

11.7

10.1

2.7

(0.8)

23.8

Foreign

87.3

27.6

47.7

53.3

37.1

42.7

43.8

(2.9)

120.6

(0.7)

3.7

Banks (excl reverse repo) BI (Incl reverse repo)

Pension Fund

(0.8)

(2.4)

(0.7)

5.9

0.2

0.1

3.3

Securities

(0.3)

0.0

0.2

0.6

(0.1)

0.1

0.0

(0.1)

0.0

Others

2.3

9.6

10.5

15.5

16.3

(11.3)

3.5

(2.5)

6.0

Total

59.3

82.4

96.7

175.0

77.5

58.9

67.8

(5.7)

198.4

Source: DMO and Mandiri Sekuritas

Page 2 of 32


Positive sentiment from global and domestic factors We believe that the bond rebound that occurred at the beginning of Q4 was supported by both global and domestic factors. On the global factors, economic slowdown that occurred in European countries and the threat of deflation caused yields in these countries to continue falling to record lows this year. The 10-yr yields in Europe and Japan stood at 0.9% and 0.47% at the end of August, a drop of 66bps and 17bps from the end of Q1. Meanwhile, despite the US QE tapering, the condition of global interest rates that remain low presses the US Treasury yields to continue to fall. US 10-yr Treasury yield was at 2.25% - the lowest since the Jun-2013. These triggered foreign inflows to continue to enter Asian countries for more attractive investment yields. Based on HSBC bond index calculation, the average total investment in government bonds of Asian countries still recorded positive 1%mtd (or +6% ytd).

Sentimen positif dari global dan domestik Kami melihat bahwa rebound yang terjadi di awal Q4 disebabkan oleh faktor global dan domestik. Jika dilihat dari faktor global, pelemahan ekonomi yang terjadi di negara-negara Eropa dan ancaman deflasi menyebabkan yield di negara-negara tersebut terus turun hingga mencatatkan rekor terendah. Yield 10-yr di Eropa dan Jepang tercatat sebesar 0.9% dan 0.47% di akhir bulan Oktober atau turun sebesar 66bps dan 17bps dibandingkan akhir Q1. Sementara itu, meskipun tapering QE di US tetap dilakukan, kondisi suku bunga global yang tetap rendah mendorong yield US Treasury terus turun. US Treasury yield 10-yr berada di level 2.25% - terendah sejak Jun-2013. Kondisi tersebut mendorong inflow asing terus masuk ke negara-negara Asia untuk mendapatkan yield investasi yang lebih menarik. Berdasarkan perhitungan HSBC bond index, secara rata-rata total berinvestasi di obligasi Pemerintah negara-negara Asia juga tercatat positif 1%mtd (+6% ytd).

Meanwhile the catalyst from the domestic factors came from smaller government bonds supply issuances in 4Q after the government successfully did front loading policy. As of 21-October, the government has issued Rp421.2tn – gross or almost 98% of their target issuance this year. Thus, the government only needs to issue Rp9tn more to fulfill the target. There will be another two conventional bond auction and one sukuk auction until year end 2014. At the current run-rate, the DMO can finish fundraising earlier than December, as on average the government can issue Rp11.5tn per auction.

Sementara itu faktor domestik yang memberikan katalis positif ke pasar obligasi di awal kuartal empat adalah supply SUN yang jauh berkurang dengan suksesnya pemerintah melakukan penerbitan dalam jumlah besar di awal-awal tahun (front loading policy). Hingga 21-Oktober, pemerintah sudah berhasil menerbitkan SUN sebesar Rp421.2tn-gross atau hampir 98% dari target penerbitan tahun ini. Dengan demikian, pemerintah hanya perlu menerbitkan Rp9tn sampai dengan akhir tahun ini. Dengan masih ada dua kali lelang SUN konvensional dan satu kali lelang sukuk, maka kemungkinan besar pemerintah bisa menyelesaikan target penerbitan sebelum bulan Desember, mengingat rata-rata penerbitan SUN di lelang konvensional tercatat Rp11.5tn per lelangnya.

Another positive catalyst came from lower inflation this year as the combination of stable raw food prices and the adjustment in base effect following subsidized fuel price hike in Jun13. In September 2014, inflation was recorded only 4.53% yoy (3.65% ytd) or lower than the end of 2013 which recorded 7.04%. This is still in line with the central bank's target range of 3.5-5.5% that would support BI rate flat at 7.5%. However, inflation could be higher than the BI target this year if the government realizes the increase in fuel price subsidy that we expect will occur in November with an increase of Rp2,000/ liter. This potentially can raise inflation to 7.3% in 2014 and we expect BI will respond with increasing BI rate by 25bps to 7.75%. Historically, rising fuel prices will be followed by the increasing yields. Nevertheless, we expect the increase in yield will not be as high in 2008 and 2013 where the average yield increased 5.5ppt, given that the rise in BI rate was just 25bps (vs 150bps in 2008 and 175bps in 2013). Smooth presidential transition from President SBY to President Jokowi in 20October also gave positive sentiment to bond market.

Katalis positif lainnya adalah turunnya angka inflasi di tahun 2014 yang didorong oleh turunnya harga bahan-bahan makanan dan normalisasi inflasi setelah terjadi kenaikan harga BBM di bulan Juni 2013 lalu. Di bulan September 2014, inflasi tercatat hanya 4.53% yoy (3.65%ytd) atau lebih rendah dibandingkan akhir tahun 2013 yang tercatat 7.04%. Hal ini masih sesuai dengan kisaran target BI yakni 3.5-5.5%, sehingga BI rate tetap dijaga di level 7.5%. Namun demikian, tekanan inflasi tahun ini bisa lebih tinggi dari target BI, jika pemerintah merealisasikan kenaikan harga BBM subsidi tahun ini yang kami perkirakan akan terjadi di bulan November dengan kenaikan sebesar Rp2,000/liter. Kenaikan ini akan berpotensi menaikkan inflasi menjadi 7.3% di tahun 2014 dan kami perkirakan akan direspon juga dengan kenaikan BI rate sebesar 25bps menjadi 7.75%. Secara historis, kenaikan harga BBM akan diikuti juga dengan kenaikan yield SUN. Namun demikian, kami perkirakan kenaikan yield SUN tidak akan sebesar seperti kenaikan di tahun 2008 dan 2013 dimana secara rata-rata yield SUN mengalami kenaikan 5.5ppt, mengingat kenaikan suku bunga BI rate untuk kenaikan harga BBM subsidi tahun ini diperkirakan hanya 25bps (vs. 150bps di tahun 2008 dan 175bps di tahun 2013). Lancarnya pelantikan presiden di akhir bulan Oktober juga memberikan sentiment positif ke pasar.

Page 3 of 32


Overall, increasing government bond prices this year was supported by foreign fund inflows. Lower yields in developed countries cause foreign fund inflow to continue in Asian countries. As of 20-October, total foreign ownership in government bond reached Rp444.5tn or reported net inflows of Rp120.6tn ytd. This is the highest ever both in level and portion to total outstanding. Higher foreign participation, while foreign central banks booked net buy of only 20%, could trigger higher volatility if the risk in emerging markets increased or if the UST yields rose due to the Fed rate hike happening earlier than expected.

Secara umum, kenaikan harga obligasi tahun ini didukung oleh foreign fund inflow. Sampai 20 Oktober, kepemilikan SUN oleh investor asing tercatat Rp444.5tn atau mencatatkan net inflow asing ke SUN sebesar Rp120.65tn. Ini merupakan net inflow tertinggi sepanjang sejarah baik dari nilai nominal ataupun rasio terhadap total outstanding. Semakin tingginya dominasi asing di pasar SUN, dapat menyebabkan volatilitas di pasar obligasi meningkat, karena hanya sebesar 20% net buy asing dilakukan oleh bank sentral asing. Tekanan jual asing bisa dipicu oleh meningkatnya risiko di negara-negara berkembang atau kenaikan US Treasury yield yang lebih tinggi jika terjadi ekspektasi kenaikan suku bunga the Fed lebih cepat dari perkiraan.

However, risk premium remains high Despite the decline in government bond yield compared to end of last year, the average risk premium remains high. We think it’s not because of higher credit risk but mostly due to the segmentation in the market. As we mentioned before, the fall in the government bond yields was due to massive foreign fund inflows, but in the corporate bonds the dominant players were still onshore investors – projected more than 90%. Since onshore investors still get higher deposit rates due to Bank Indonesia's tightening, they still demand for higher premium in corporate bonds. Our calculation, based on primary and secondary market, an A rated company on average gives risk premium of 302bps above government bonds for the same tenor

Namun risk premium tetap tinggi Meskipun terjadi perbaikan penurunan yield SUN dibandingkan dengan akhir tahun lalu, rata-rata risk premium masih tetap tinggi. Kami perkirakan hal ini terjadi bukan karena risiko kredit perusahaan yang meningkat namun karena segmentasi pasar yang berbeda antara obligasi Pemerintah dan korporasi. Seperti yang kami sampaikan sebelumnya, penurunan yield pasar SUN disebabkan oleh derasnya aliran dana asing yang masuk, sementara di obligasi korporasi pemain terbesarnya masih investor lokal yang lebih dari 90%. Karena investor lokal masih bisa menempatkan dananya di deposito perbankan dengan suku bunga yang lebih tinggi karena kebijakan pengetatan moneter yang dilakukan oleh BI, maka mereka masih meminta premium yang lebih tinggi untuk obligasi korporasi. Berdasarkan data dari pasar primer dan sekunder, kami perkirakan risk premium yang wajar untuk rating A adalah 302bps di atas yield SUN untuk tenor yang sama

FIGURE 4. A RATED IDR CORPORATE BONDS TRADED IN SECONDARY MARKET

1

Obligasi Bank Sulselbar I Tahun 2011 Seri B

350

10.40

12-May-16

13-Aug-14

101.3

9.6

Spread over risk free (Bps) 203

2

Obligasi Berkelanjutan I PP Tahap I Tahun 2013 Obligasi Surya Semesta Internusa I Tahun 2012 Dengan Tingkat Bunga Tetap Seri B Obligasi VI Bank Nagari Tahun 2010

700

8.38

19-Mar-18

8-Sep-14

95.7

9.8

211

550

9.30

6-Nov-17

17-Oct-14

98.2

10.0

216

500

9.88

13-Jan-16

14-Aug-14

100.1

9.8

247

Obligasi Sumberdaya Sewatama I Tahun 2012 Seri B Obligasi Berkelanjutan I Agung Podomoro Land Tahap I Tahun 2013 Obligasi I Agung Podomoro Land Tahun 2011 Seri B Obligasi Berkelanjutan I Indomobil Finance Dengan Tingkat Bunga Tetap Thp II Tahun 2013 Seri C Obligasi Berkelanjutan I ADHI Tahap II Tahun 2013 Seri B

581

9.60

30-Nov-17

23-Oct-14

98.3

10.2

248

1,200

9.25

27-Jun-18

24-Oct-14

96.5

10.4

259

875

11.00

25-Aug-16

19-Sep-14

101.5

10.1

260

208

8.50

8-May-17

2-Sep-14

95.5

10.4

274

No Bonds

3 4 5 6 7 8 9

Par (Rp bn)

Coupon (%)

Maturity Date

Last Transaction

Price

YTM (%)

500

8.50

15-Mar-20

9-Oct-14

89.8

11.0

280

10 Obligasi II Waskita Karya Tahun 2012 Seri B

675

9.75

5-Jun-17

21-Oct-14

98.1

10.6

287

11 Obligasi I PNM Tahun 2012

500

9.10

12-Oct-17

21-Oct-14

96.0

10.7

294

12 Obligasi V Danareksa Tahun 2010 Seri B

375

10.20

11-Jan-16

15-Sep-14

99.9

10.3

313

13 Obligasi Sumberdaya Sewatama I Tahun 2012 Seri A 14 Obligasi II Agung Podomoro Land Tahun 2012 Obligasi Berkelanjutan I Indomobil Finance Dengan Tingkat 15 Bunga Tetap Thp II Tahun 2013 Seri B 16 Obligasi Berkelanjutan I ADHI Tahap I Tahun 2012 Seri B

219

8.60

30-Nov-15

24-Oct-14

98.4

10.1

317

1,200

9.38

15-Aug-17

24-Oct-14

96.3

10.9

322

295

8.25

8-May-16

24-Sep-14

96.5

10.7

329 332

250

9.80

3-Jul-19

21-Oct-14

94.8

11.2

17 Obligasi Berkelanjutan I ADHI Tahap II Tahun 2013 Seri A

125

8.10

15-Mar-18

1-Sep-14

91.2

11.1

334

18 Obligasi Berkelanjutan I ANTAM Tahap I Tahun 2011 Seri A Obligasi Subordinasi Berkelanjutan I Bank Bukopin Tahap I 19 Tahun 2012

900

8.38

14-Dec-18

23-Oct-14

90.7

11.2

336

1,500

9.25

6-Mar-19

21-Oct-14

93.1

11.3

338

Page 4 of 32


Par (Rp bn)

No Bonds 20 21 22 23 24

Obligasi berkelanjutan I Indomobil Finance dengan Tingkat Bunga Tetap Tahap IV Tahun 2014 Seri B Obligasi Berkelanjutan I Siantar Top Tahap I Tahun 2014 Seri B Obligasi Berkelanjutan I Agung Podomoro Land Tahap II Tahun 2014 Obligasi Berkelanjutan I Indomobil Finance Tahap I Tahun 2012 Seri C Obligasi I Express Transindo Utama Tahun 2014

Coupon (%)

Maturity Date

Last Transaction

Price

YTM (%)

Spread over risk free (Bps)

231

11.25

22-Apr-17

22-Oct-14

100.1

11.2

353

215

11.40

8-Apr-17

9-Oct-14

100.0

11.4

355

750

12.25

6-Jun-19

14-Oct-14

102.0

11.7

359

518

8.25

11-May-16

24-Oct-14

96.0

11.1

381

1,000

12.25

24-Jun-19

21-Oct-14

101.0

12.0

405

Average risk premium

302

Minimum risk premium

203

Maximum risk premium

405

Source: IDX , Mandiri Sekuritas estimated

FIGURE 5. THEORETICAL RISK PREMIUM BY RATING (BPS) Rating

Dec-11

Dec-12

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

AAA

273

270

178

180

196

207

205

190

204

155

AA+

301

302

189

194

212

220

222

209

222

174

AA

333

337

201

209

229

235

240

230

241

AA-

367

376

213

225

247

250

259

252

A+

406

420

226

242

266

267

280

A

448

469

240

261

287

284

Aug-14

2004-Aug2014 Average

StDev

171

173

61

193

194

65

197

217

217

70

262

222

244

243

75

277

285

250

275

273

83

302

305

310

283

310

307

92

A-

495

524

255

281

310

303

327

335

337

319

349

344

103

BBB+

547

585

270

303

334

323

353

368

366

359

393

387

117

BBB

604

654

287

327

361

344

382

405

398

406

442

436

134

BBB-

667

730

305

352

389

367

412

445

432

457

498

491

156

Source: Mandiri Sekuritas estimates

Page 5 of 32


INDUSTRY OVERVIEW

TINJAUAN INDUSTRI

We have stable outlook on the construction sector along with Indonesia’s strong investment spending. The IMF estimates that Indonesia’s ratio of investment to GDP will continue to increase and reach 35.8% by 2019 from the current position that amounted to 33.6%. The value of construction output to Indonesia's GDP is the largest among ASEAN countries, proving that the demand for construction projects in Indonesia is quite strong.

Kami memberikan outlook stabil untuk sektor konstruksi seiring dengan masih kuatnya pengeluaran Investasi Indonesia. IMF memperkirakan rasio pengeluaran investasi terhadap PDB Indonesia akan terus meningkat dan mencapai 35.8% di tahun 2019 dari posisi saat ini yang sebesar 33.6%. Besarnya nilai output konstruksi terhadap PDB Indonesia terbesar di antara negara ASEAN membuktikan bahwa permintaan untuk proyek konstruksi di Indonesia cukup kuat.

Investment spending continues to increase

Pengeluaran Investasi diperkirakan akan terus meningkat

Indonesia’s investment to GDP in the last five years increased by 2.7ppt from 30.9% in 2009 to 33.6% in 2013. According to IMF estimation, Indonesia’s investment to GDP will reach 35.8% in 2019. The IMF estimation is based on a gradual increase in administrative fuel prices, so that the saving from fuel subsidies can be allocated for infrastructure expenditure.

Pengeluaran investasi terhadap PDB Indonesia dalam periode lima tahun terakhir terus meningkat dari 30.9% di tahun 2009 menjadi 33.6% di tahun 2013. Berdasarkan perkiraan IMF, pengeluaran investasi terhadap GDP Indonesia pada tahun 2019 akan mencapai 35.8%. Perkiraan IMF ini didasarkan pada peningkatan bertahap harga BBM bersubsidi, sehingga penghematan dari subsidi BBM dapat dialokasikan untuk belanja infrastruktur.

FIGURE 6. TOTAL INVESTMENT AS PERCENTAGE OF GDP % 37.0 35.8

36.0

35.3 34.8

34.7

35.0

34.3 33.6

34.0

33.4

33.5

2014F

2015F

32.9

33.0

32.3

32.0 31.0 31.0 30.0 2009

2010

2011

2012

2013

2016F

2017F

2018F

2019F

Source: IMF

…the relationship with construction sector We see that the strong investment spending will create strong demand for construction projects as indicated on figure 7. Historically, every Rp1billion of investment spending will create demand for construction projects around Rp320million, and statistically there is a strong relationship between investment spending and demand for construction projects.

Page 6 of 32

…hubungannya dengan sektor konstruksi Kami melihat bahwa pengeluaran investasi yang kuat akan menciptakan permintaan yang kuat untuk proyek konstruksi seperti yang ditunjukkan pada tampilan 7. Secara historis, setiap pengeluaran investasi Rp1miliar akan menciptakan permintaan konstruksi proyek sebesar Rp320juta, dan secara statistik ada hubungan yang kuat antara pengeluaran investasi dan permintaan proyek konstruksi.


FIGURE 7. INVESTMENT SPENDING AND THE CONSTRUCTION OUTPUT

Construction output (IDR bn)

1,000,000 y = 0.3205x - 10628 R² = 0.9994

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 -

1,000,000

2,000,000

3,000,000

Investment spending (IDR bn) Source: CEIC

Indonesia’s construction to GDP ratio is the highest among its peers in ASEAN countries, which amounted to 10% in 2013, which shows that the demand for construction projects in Indonesia is quite strong.

Besarnya pembelanjaan konstruksi Indonesia terhadap PDB merupakan yang tertinggi dibandingkan dengan beberapa negara ASEAN, yaitu sebesar 10% pada tahun 2013, yang menunjukkan bahwa permintaan untuk proyek konstruksi di Indonesia cukup kuat.

FIGURE 8. INDONESIAS CONSTRUCTION TO GDP IS THE HIGHEST AMONG ASEAN COUNTRIES Construction to GDP (%) 12.0

10.0

10.0 8.0 6.0 4.0

2.6

3.4

4.2

4.6

5.3

6.3

2.0 ‐

Source: CEIC

Most of the construction projects are from the Government

Sebagian besar proyek konstruksi berasal dari Pemerintah

Based on Ministry of Public Works data (Information system for investment resources or SISDI), the largest contributor in construction market comes from state and local budgets fund with a contribution of 71% of the construction value in 2013.

Berdasarkan data SISTEM INFORMASI SUMBER DAYA INVESTASI (SISDI) Kementerian PU, pasar konstruksi nasional terbesar masih berasal dari sumber dana APBN dan APBD dengan kontribusi sebesar 71% dari nilai konstruksi tahun 2013.

Page 7 of 32


FIGURE 9. INDONESIAS CONSTRUCTION MARKET MOSTLY COMES FROM GOVERNMENT FUNDS 100% 90% 80%

Sumber dana Gabungan

70%

FDI funds

60%

DDI funds

50%

BUMD funds

40%

SOE funds

30%

APBD funds

20%

APBN funds

10% 0% 2011

2012

2013

Source: SISDI-Minsitry of Public Works

Civil construction contributed to more than 50%

Konstruksi sipil berkontribusi lebih dari 50%

In 2013, BPS records that 53.8% of construction value was contributed by civil construction. This was a new achievement by the civil construction in the last few years, prior to 2009 the contribution was only below 40%. In 2009, civil construction increased significantly by 63% yoy from Rp86.5tn to Rp141tn, along with the fiscal stimulus program in 2009, in which was a part for infrastructure projects.

Pada tahun 2013, BPS mencatat bahwa dari total nilai konstruksi yang diselesaikan, sekitar 53.8% dikontribusi oleh konstruksi bangunan sipil. Angka tersebut merupakan prestasi baru yang diberikan oleh konstruksi sipil dalam beberapa tahun terakhir, karena sebelum tahun 2009 kontribusinya hanya berkisar di bawah 40%. Pada tahun 2009 konstruksi bangunan sipil meningkat pesat sebesar 63%yoy dari Rp86.5tn menjadi Rp141tn. Hal ini seiring dengan program stimulus fiskal di tahun 2009 yang salah satunya mengena pada proyek infrastruktur.

FIGURE 10. VALUE OF CONSTRUCTION COMPLETED BY TYPE OF CONSTRUCTION

FIGURE 11. CIVIL CONSTRUCTION CONTRIBUTED MORE THAN 50% SINCE 2009

Building Construction

Civil Construction

Especialized Construction

IDR trillion 600

Building Construction

Civil Construction

Especialized Construction

100% 90%

500 85 75

400 55 47

200 100 ‐

23 40 49

27 50 62

2005

2006

41 61

53 87

141

170

202

237

70% 60%

65 300

80%

272

50% 40% 30% 20%

69

71

73

95

109

129

2007

2008

2009

2010

2011

2012

148 2013*

10% 0% 2005

2006

2007

2008

2009

2010

2011

2012

2013*

Source: BPS

Source: BPS

Greater government budget for infrastructure spending

Semakin besarnya anggaran Pemerintah untuk pengeluaran infrastruktur

One of the factors that lead to greater civil construction contribution is the size of the government budget for infrastructure spending. Infrastructure budget shows rapid increase from only Rp26.1tn in 2005 to Rp203.9tn in 2013 or growing by CAGR of 29.3%. Meanwhile, the infrastructure budget to GDP also increased from only 0.94% in 2005 to 2.3% in 2013.

Salah satu faktor yang menyebabkan kontribusi konstruksi bangunan sipil semakin besar terhadap nilai konstruksi yang diselesaikan adalah semakin besarnya anggaran Pemerintah untuk pengeluaran infrastruktur. Anggaran infrastruktur menunjukkan peningkatan pesat yaitu dari hanya Rp26.1tn di tahun 2005 menjadi Rp203.9tn di tahun 2013 atau bertumbuh dengan CAGR 29.3%. Sementara itu, anggaran infrastruktur terhadap PDB juga meningkat pesat dari hanya 0.94% ditahun 2005 menjadi 2.3% di tahun 2013.

Page 8 of 32


FIGURE 12. STATE BUDGET FOR INFRASTRUCTURE SPENDING State budget for infrastructure spending IDR trillion 250

percent of GDP (RHS) % 2.5 203.9

200 150

1.5

128.7

100

78.7 54

50

2

174.9

99.4

91.3

1

59.8 0.5

26.1

0

0 2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: Ministry of Finance & Bappenas

Sector with many players in the market

Banyaknya pemain di Industri

Indonesia’s construction sector is a highly fragmented industry with around 131 thousand players recorded by the BPS and the market is dominated by SOEs. As of 2013, the total market share of the five SOE (WIKA, Waskita, Hutama Karya, Adhi Karya and PTPP) was about 7.3% of the total construction value recorded by the BPS.

Industri konstruksi di Indonesia merupakan industri yang sangat terfragmentasi dengan jumlah perusahaan konstruksi yang tercatat oleh BPS sekitar 131ribu pemain dan pasarnya didominasi oleh perusahaan kontraktor BUMN. Per 2013, total pangsa pasar dari lima kontraktor BUMN (WIKA, Waskita, Hutama Karya, Adhi Karya dan PTPP) sebesar 7.3% dari total nilai konstruksi yang tercatat oleh BPS.

FIGURE 13. AROUND 131 THOUSAND PLAYERS IN THE MARKET IN WHICH SOE DOMINATED THE MARKET BY 7.3% MARKET SHARE Number of construction company

SOE market share (RHS)

132,000 129,862

130,000

131,080

7.4%

7.3%

7.3% 7.2%

128,000

7.1%

126,000

7.0%

124,000 122,000

6.9%

6.9%

122,611 6.7%

6.8% 6.7% 6.6%

120,000

6.5% 6.4%

118,000 2011

2012

2013

Source: CEIC, BPS, Companies, , Mandiri Sekuritas estimation

Page 9 of 32


COMPANY PROFILE

PROFIL PERSEROAN

Company history

Sejarah Perseroan

PT. Waskita Karya (Persero) Tbk, was established on January 1, 1961. The Company is one of the leading state owned companies in Indonesia that plays a major role in the development of the country. Originating from a Dutch company named “Volker Aannemings Maatschappij N.V.”, which was expropriated under the Government’s Decree No. 62/1961, the Company initially participated in the water related developments including reclamation, dredging, harbor and irrigation.

PT. Waskita Karya (Persero) Tbk, didirikan pada 1 Januari 1961. Persero merupakan salah satu perusahaan negara yang memiliki peran utama dalam pembangunan negara. Berasal dari perusahaan Belanda bernama Volker Aannemings Maatschappij N.V, yang diambil alih berdasarkan Keputusan Pemerintah No. 62/1961, yang pada awalnya bergerak dalam pembangunan di bidang perairan, terkait reklamasi, pengerukan pelabuhan, dan irigasi.

Ever since 1973, however, the legal status of the company has changed to “Persero”. From then on, the company started to expand its business as general contractor engaging in a wider range of construction activities including highways, bridges, ports, airports, buildings, sewage plant, cement plants, factories and other industrial facilities.

Sejak 1973, status hukum Waskita Karya telah diubah menjadi "Persero" PT. Waskita Karya, yang lebih dikenal dengan nama "Waskita". Sejak saat itu, Perseroan mulai mengembangkan usahanya sebagai kontraktor umum dalam kegiatan konstruksi dengan jangkauan yang lebih luas termasuk jalan raya, jembatan, pelabuhan, bandara, bangunan, pabrik pengolahan limbah, pabrik semen, beragam pabrik dan fasilitas industri lainnya.

In 1980, the Company started to undertake a wide variety of projects involving advanced technology. Transfer of technology was conducted through business alliances in the form of joint operations and joint venture with reputable foreign companies. Significant and outstanding accomplishments which become national pride are Soekarno-Hatta Airport, Siwabessy Multipurpose Reactor and Muara Karang Coal Fired Power Plant in Jakarta.

Pada tahun 1980, Waskita mulai melakukan berbagai proyek yang menggunakan teknologi canggih. Transfer teknologi dilakukan melalui aliansi bisnis dalam bentuk operasi bersama dan joint venture dengan perusahaan asing terkemuka. Beberapa prestasi dan pencapaian Perseroan yang menjadi kebanggaan nasional adalah Bandara Soekarno-Hatta, Reaktor Serbaguna Siwabessy, dan Muara Karang Coal Fired Power Plant di Jakarta.

Entering year 1990, the Company completed numerous high-rise buildings with well-earned reputation such as BNI City (the tallest building in Indonesia), Bank Indonesia Office Buildings, Graha Niaga Tower, Mandiri Plaza Tower, Shangri-La Hotel and several multi storey apartment buildings in Jakarta and other cities in Indonesia. Then the Company obtained certification of ISO 9002:1994 in Nov95, whice became a convincing international recognition on the ISO Quality Management System implemented by the company and a starting point towards the era of global competition

Memasuki tahun 1990, Waskita telah menyelesaikan banyak bangunan bertingkat dengan reputasi baik seperti BNI City (bangunan tertinggi di Indonesia), gedung perkantoran Bank Indonesia, Graha Niaga, Plaza Mandiri, Hotel ShangriLa dan beberapa apartemen bertingkat di Jakarta dan kotakota lainnya di Indonesia. Di tahun 95 memperoleh ISO 9002:1994, yang mendapatkan pengakuan dunia internasional bahwa Sistem Manajemen Mutu ISO dilaksanakan oleh Perseroan dan juga sebagai titik awal menuju era kompetisi global.

In the 2000’s, Waskita successfully updated its Quality Management System and was able to obtain certification of ISO 9001:2000, ISO 14001:2004 and renewed OHSAS Certification 18001:2007. All of which become a strong indication on how the company understands and always tries to satisfy specific needs of its customers.

Pada era tahun 2000, Waskita telah berhasil memperbarui Sistem Manajemen Mutu dan mampu mendapatkan sertifikasi ISO 9001:2000, ISO14001:2004 dan OHSAS 18001:2007. Ini menjadi indikasi yang kuat tentang bagaimana Perseroan memahami dan selalu berusaha untuk memenuhi kebutuhan spesifik pelanggan.

In year 2012, the Company issued Rp750billion of A- rated bonds, and succeded in its Initial Public Offering by offering 3,082,315,000 new shares with a nominal value of Rp100 per share with offering price of Rp380 with the name of Series B shares. Then in 2013, the bond rating was upgraded to A and in the same year, the Company established the Waskita Sangir Energi.

Pada tahun 2012 Perseroan menerbitkan obligasi sebesar Rp750miliar dengan rating A-, serta sukses melakukan Penawaran Umum Perdana Saham (Initial Public Offering/IPO) di bulan Desember atas 3,082,315,000 saham baru dengan nilai nominal Rp100 per saham dengan harga penawaran Rp380 yang merupakan saham atas nama Seri B. Kemudian di tahun 2013, rating obligasi Perseroan naik menjadi A dan pada tahun yang sama Perseroan mendirikan Waskita Sangir Energi.

Page 10 of 32


Now in 2014, the Company established a new subsidiary in the field of highway and concrete fabrication, they are Waskita Toll Road and Waskita Precast Concrete, as a series of business development in order to improve the competitiveness and added value for stakeholders.

Dan kini di tahun 2014, Perseroan mendirikan anak usaha baru di bidang jalan tol dan pabrikasi beton yaitu Waskita Toll Road dan Waskita Beton Precast sebagai rangkaian pengembangan bisnis guna meningkatkan daya saing dan nilai tambah bagi stakeholders.

FIGURE 14. THE COMPANY’S MILESTONES

1961 Nationalization of “Volker Aannemings Maatschappij NV” to become Indonesian Goverment’s company

2000's Achieved ISO certification 9001: 2000, ISO 14001: 2004 and renewed OHSAS Certification 18001:2007

1974 Changed status to a Limited Company. (Ltd)

1980s Execute big scale projects such as Soekarno Hatta Airport and Siwabessy Multi‐purpose Reactor

2012 • Issued bonds with Arating in May 2012 • Go Public on December 2012

2013 • Improving bond rating to A • Establishing Waskita Sangir Energy

1990s Completion of high rise buildings, such as: BNI City, Gedung BI, Mandiri Plaza Tower

2014 • Establishment of Waskita Toll Road • Establishment of Waskita Beton Precast

Source: Company

Page 11 of 32


The majority of the Company's shares is owned by the Government Currently, the Company's largest shareholder is the Government of the Republic of Indonesia with 67.76% and the public at 32.24% owns the rest. Being a company that is majority owned by the Government provides a competitive advantage for the Company in the form of a solid position in getting large infrastructure projects planned by the Government. Since the 1980s, Waskita always get excellent projects, such as Jakarta International Airport SoekarnoHatta and Juanda Airport (1985), Suramadu and Pasupati Bridge (2005), Jatigede Dam (2009), Dredging & Embankment for Krakatau Steel (2011), Diversion Tunnel Jatigede (2012), as well as 9 Curved Bridges and Bali Mandara toll roads (2013).

Mayoritas saham Perseroan dimiliki oleh Pemerintah Saat ini, pemegang saham Perseroan terbesar adalah Pemerintah Republik Indonesia dengan kepemilikan sebesar 67.76% dan sisanya dimiliki oleh masyarakat sebesar 32.24%. Menjadi perusahaan yang sebagian besar sahamnya dimiliki oleh Pemerintah, memberikan keunggulan kompetitif bagi Perseroan berupa posisi yang solid dalam mendapatkan proyek-proyek infrastruktur besar yang direncanakan oleh Pemerintah. Sejak tahun 1980-an, Waskita Karya selalu mendapatkan proyek-proyek unggulan, seperti proyek Bandar Udara Internasional Jakarta Soekarno-Hatta dan Bandar Udara Juanda (1985), Jembatan Pasupati dan Suramadu (2005), Bendungan Jatigede (2009), Dredging & Embankment Krakatau Steel (2011), Diversion Tunnel Jatigede (2012), serta Jembatan Kelok 9 dan Jalan Tol Bali Mandara (2013).

FIGURE 15. THE COMPANY’S SHAREHOLDERS STRUCTURE

67.76% Government of the Republic of Indonesia

32.24% Public

PT Waskita Karya (Persero) tbk

15.0%

12.5%

85.00%

99.99%

99.99%

Source: Company

Business overview Currently, the Company is in the process of transformation in developing precast concrete, realty, toll roads and energy business to improve the competitiveness and added value for the stakeholders.

Tinjauan bisnis Perseroan saat ini sedang dalam proses tranformasi dalam mengembangkan bisnis precast beton, realty, investasi jalan tol serta energi guna meningkatkan daya saing dan nilai tambah bagi stakeholders.

The Company divides its business lines into five, which are construction, precast, realty, energy and toll roads. In the period before 2013, the construction business was the largest revenue contributor with a share of almost 100%. As of Jun14, construction business contributed for about 95%, and the remaining 5% contributed by precast business.

Perseroan membagi lini bisnisnya ke dalam lima lini yang terdiri dari konstruksi, precast, realty, energi dan jalan tol. Pada periode sebelum tahun 2013, lini bisnis konstruksi merupakan penyumbang pendapatan terbesar dengan porsi hampir 100%. Per Jun14, kontribusi bisnis konstruksi menjadi 95%, dan sisanya sebesar 5% disumbang oleh bisnis precast.

Page 12 of 32


FIGURE 16. THE COMPANY’S BUSINESS SEGMENT

FIGURE 17. CONSTRUCTION BUSINESS CONTRIBUTED MORE THAN 90% OF TOTAL REVENUE Construction Services

Sales Precast

Properties

Other

Buildings Rental

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009

2010

2011

2012

2013

Jun‐14

Source: Company

Source: Company

Construction business Construction business grew significantly in the last five years. The value of new contracts won by the company grew by CAGR of 24.2% from Rp5.6tn in 2009 to Rp13.3tn in 2013. The majority of the projects are obtained from the Government through the tender process with an average winning rate of 23% in the last five years.

Bisnis Konstruksi Bisnis konstruksi mengalami pertumbuhan yang signifikan dalam lima tahun terakhir. Nilai kontrak baru yang dimenangkan Perseroan tiap tahunnya bertumbuh dengan CAGR 24.2% dari Rp5.6tn di tahun 2009 menjadi Rp13.3tn di tahun 2013. Mayoritas proyek yang diperoleh sebagian besar dari Pemerintah melalui proses tender dengan ratarata winning rate sebesar 23% dalam lima tahun terakhir.

As of June 2014, the value of new contracts obtained by the company already reached Rp 7.1 tn (53.2% of FY13) with more than 65% are Government and State/local Owned Enterprise projects. The remaining 35% comes from the private sector, this provides diversification to the Company’s if there is slowdown in the government project.

Sampai dengan Juni 2014, nilai kontrak baru yang diperoleh Perseroan sudah mencapai Rp7.1tn (53.2%FY13) dengan komposisi lebih dari 65% merupakan proyek Pemerintah dan BUMN/D. Sisanya sekitar 35% berasal dari proyek swasta, hal ini memberikan diversifikasi terhadap bisnis konstruksi Perseroan jika terjadi penurunan dari proyek Pemerintah.

FIGURE 18. NEWCONTRACTS GREW BY 21.5% CAGR

FIGURE 19. MORE THAN 65% PROJECT ARE FROM GOVERNMENT & SOE

Tender Followed

Tender Won

IDR trillion 70.0 60.0 50.0

21.5

22.1

23.7

Winning Rate (RHS) % 30.0 63.5

42.0

23.8 21.0

25.0 20.0

26.0

29.8

15.0

24.9

80% 70%

5.6

10.0

12.3

13.3 7.1

5.5

5.0 ‐

Source: Company

2010

30% 20% 10%

0.0 2009

50% 40%

10.0

20.0 10.0

Private

60%

40.0 30.0

SOE & Local SOE

90%

25.5 48.0

Government 100%

2011

2012

2013

1H14

0% 2009

2010

2011

2012

2013

1H14

Source: Company

Page 13 of 32


Business Precast Precast business unit (concrete production) is assigned to carry out the activities in precast marketing, production, design and development as well as expedition. This business unit was just established in 2013, but it has had 5 concrete plants in Benoa, Cibitung, Pasuruan, Sadang and Palembang as well as 3 Batching Plants in Cengkareng, Kertajati and Palembang. They are able to produce and sell 562,154 tons in the same year. The production capacity will target 800,000 tons with a utility rate of 61% in 2014.

Bisnis Precast Unit bisnis precast (produksi beton) bertugas melaksanakan kegiatan di bidang pemasaran, produksi, design dan pengembangan serta ekspedisi precast. Unit bisnis ini baru dibentuk tahun 2013, namun sudah memiliki 5 pabrik beton di Benoa, Cibitung, Pasuruan, Sadang dan Palembang serta 3 Batching Plant di Cengkareng, Kertajati dan Palembang. Pabrik tersebut mampu berproduksi dan menjual sebanyak 562,154 ton di tahun yang sama. Kapasitas produksi pabrik precast Perseroan ditargetkan mencapai 800,000 ton dengan tingkat utilitas 61% pada 2014.

FIGURE 20. PRECAST CAPACITY

FIGURE 21. PROJECT SAMPLE

Capacity ('000 tons) Installed

Normal

Production (F)

Utility rate

Cibitung

325

250

162

65%

Sadang

300

250

175

70%

Palembang

150

125

62.5

50%

225

175

87.5

50%

1,000

800

487

61%

East Java Grand Total

Source: Company

Source: Company

Realty Business The Company has two pilot projects, namely in Cawang and Alam Sutra. For the project in Cawang, the Company plans to build office buildings and hotel. The land size is 3,155 sqm. The office buildings and hotel will be leased and are planned to contribute to the Company’s income in 2015. The current construction progress has reached 32.4% of the target.

Bisnis Realty Perseroan memiliki dua pilot project yaitu di Cawang dan Alam Sutra. Untuk proyek di Cawang, Perseroan berencana membangun gedung kantor dan hotel. Luas lahannya sebesar 3,155 m2. Proyek ini akan disewakan dan direncanakan untuk memberikan kontribusi kepada pendapatan Perseroan di tahun 2015. Saat ini progress pembangunan mencapai 32.4% dari target.

FIGURE 22. BUSINESS REALTY - CAWANG

FIGURE 23. PROGRESS UP TO JULY 2014

Source: Company

Source: Company

Page 14 of 32


Meanwhile, for the Alam Sutra project, with land size of approximately 1 hectare, the Company plans to build apartment, soho and condotel. This project is executed through JO between the Company and PT Triniti Properti Group. The Company has 51% share in this project. On February 16, 2014, soft launching has been conducted for tower I and as many as 884 units have been sold.

Sedangkan proyek di Alam Sutra, dengan luas tanah sekitar 1 hektar, Perseroan berencana membangun apartemen, soho dan condotel. Proyek ini dilakukan dengan KSO antara Perseroan dengan PT Triniti Properti Group. Perseroan memiliki 51% bagian dari proyek ini. Progress pengerjaan projek ini mencapai 9.9% dari target dan ditargetkan rampung pada 2016. Pada tanggal 16 Februari 2014 telah dilakukan soft launching untuk tower I dan sudah terjual sebanyak 884 unit.

FIGURE 24. BUSINESS REALTY-ALAM SUTERA

FIGURE 25. PROGRESS UP TO JULY 2014

Source: Company

Source: Company

The Realty business not only expands in Jabodetabek area. The company plans to build a super block with 10 stages in Surabaya. The land size is 34,109 m2 with a gross floor area of 353, 708m2. The construction will begin in 2015 with an estimated construction period around 84 months. The Company will JO with PT Darmo Permai.

Waskita Karya Realty melakukan ekspansi tidak hanya di Jabodetabek. Perseroan berencana membangun super block dengan 10 tahap di Surabaya. Luas lahan 34,109m2 dengan gross floor area 353,708m2. Konstruksi akan dimulai pada tahun 2015 dengan perkiraan periode konstruksi sekitar 84 bulan. Perseroan Kerja Sama Operasi dengan PT Darmo Permai.

FIGURE 26. BUSINESS REALTY-SURABAYA SUPER BLOCK

FIGURE 27. PROJECTION AND SKETCHES FOR SUPER BLOCK

Source: Company

Source: Company

Energy business In July 2013, the Company has established a subsidiary in the Mini Hydro Power Plant sector under the name Waskita Sangir Energi, which is located in Sangir, West Sumatera. The total investment is Rp180 billion with output capacity of 10 MegaWatt. Waskita Sangir Energy is a joint venture company with PT. Shalawat Power with BOO scheme. The construction begun in may 2014, and will operate in 1H15.

Bisnis Energi Pada bulan Juli 2013, Perseroan telah mendirikan sebuah anak perusahaan di bidang PLTM (pembangkit Listrik Tenaga Minihidro) IPP di Sangir Sumatera Barat yang bernama Waskita Sangir Energi. WSE memiliki total investasi sebesar Rp180 miliar dengan kapasitas output 10 MegaWatt. Projek ini merupakan JV dengan PT Shalawat Power dengan skema BOO. Konstruksi dimulai pada bulan Mei 2014 dan akan beroperasi pada 1H 2015.

Page 15 of 32


FIGURE 28. IPP PROJECT DETAIL Total Investment (Rp bn) Capital Injection until 30th June 2014 (Rp bn)

FIGURE 29. WEIR INTAKE & POWER HOUSE MINI HYDRO 184 6.4

Construction Period

18 mo

Debt to Equity Ratio

80:20

IRR

20%

Price/KWH (Rp)

968

Sales/Year (Rp bn)

60.7

Output Capacity

2x5 MW

Source: Company

Source: Company

Toll roads business In the toll roads business line, the Company has toll roads projects of Depok-Antasari, Pejagan–Pemalang, MedanKuala Namu – Tebing Tinggi, and Legundi Bunder.

Bisnis Jalan Tol Dalam lini bisnis jalan Tol, Perseroan mempunyai proyek Jalan Tol Depok –Antasari, Pejagan-Pemalang, Medan-Kuala Namu-Tebing Tinggi, dan Legundi Bunder.

Depok - Antasari toll road is operated by a subsidiary company named PT. Citra Waspphutowa. The Company owns about 12.5% shares and cooperates with PT Citra Marga Nusaphala (62.5%), PT Pembangunan Perumahan (12.5%) and PT Hutama Karya (12.5%). This toll road has a length of 21 km divided into two sections. Section 1 is Antasari - Krukut with length of 8.4 km and section 2 is Krukut - Bojong Gede with length of 13.1 km.

Jalan tol Depok-Antasari dioperasikan anak perusahaan yang bergerak di bidang Jalan Tol yaitu PT Citra Waspphutowa. Perseroan memiliki saham di perusahaan ini sebesar 12.5% dan bekerja sama dengan PT Citra Marga Nusaphala (62.5%), PT Pembangunan Perumahan (12.5%) dan PT Hutama Karya (12.5%). Ruas jalan tol ini memiliki panjang ruas sebesar 21 km yang terbagi menjadi dua seksi. Seksi 1 adalah ruas Antasari-Krukut sepanjang 8.4 km sedangkan seksi 2 ruas Krukut - Bojong gede sepanjang 13.1 km.

The total investment of this projects reached Rp 4.1 trillion. The construction of section 1 begins in 3Q14 and targeting to operate in 2016.

Total inventasi projek ini mencapai Rp4.1 triliun. Seksi 1 diperkirakan akan mulai masa konstruksi di semester 3Q14 dan mulai beroperasi di tahun 2016.

FIGURE 30. DEPOK – ANTASARI TOLL ROADS

Source: Company

Pejagan – Pemalang toll roads will be built with the length of 57.5 km. This toll road is expected to operate in 2016. The total investment for this toll road reached about Rp2.3 trillion.

Jalan Tol Pejagaan – Pemalang akan dibangun dengan panjang 57.5 km. Jalan tol ini diharapkan dapat beroperasi pada tahun 2016. Total investasi jalan tol tersebut mencapai Rp2.3 triliun.

The total land size for section 1 and 2 are 180 ha, with around 162.72 ha (90.4%) already acquired, while the rest of the 17.28 ha (9.6%) are still in the process of negotiations.

Total lahan untuk seksi 1 dan 2 adalah 180ha, yang sudah diakuisisi sebanyak 162.72ha (90.4%), sementara sisanya 17.28ha (9.6%) masih dalam proses negosiasi

Page 16 of 32


FIGURE 31. PEJAGAN – PEMALANG TOLL ROADS

Source: Company

Tebing Tinggi Toll Road is a joint operation project between the Company (55% share) with PT. Pembangunan Perumahan, PT Hutama Karya and PT Jasa Marga, with shares of 15%, 15%, and 15% respectively. The total investment is about Rp 4.1 trillion. The construction period will be running on the 2015-2017.

Tebing Tinggi Toll Road merupakan proyek kerja sama Perseroan (saham 55%) dengan PT. PP, PT. Hutama Karya dan PT. Jasa Marga, dengan saham masing masing sebesar 15%, 15%, dan 15%. Total investasi projek ini menghabiskan Rp4.1 triliun. Periode konstruksi diperkirakan akan berjalan pada 2015-2017.

FIGURE 32. MEDAN – KUALANAMU – TEBING TINGGI TOLL ROADS

Source: Company

Legundi-Bunder toll road is a joint operation, between the Company and Energi Bumi Mining with the shares of 60% and 40% respectively. The length of this toll road reached 29.2 km and the total investment is about Rp 4.3 trillion. The period of constructrion will begin in 2014-2015.

Jalan Toll Legundi-Bunder merupakan proyek kerja sama Perseroan dengan Energi Bumi Mining dengan saham masing-masing sebesar 60:40. Jalan tol sepanjang 29.2 km ini menghabiskan dana Rp4.3 triliun. Periode konstruksi diperkirakan berjalan pada periode 2014-2015.

Page 17 of 32


FIGURE 33. LEGUNDI - BUNDER TOLL ROADS

Source: Company

Organizational structure that focuses on product and geographical area The company has five divisions based on product (Civil Division, Building Division, EPC Division, Realty Division and Precast Division) and four divisions are based on geographical area (Regional Division I, II, III, and IV). The aims are to focus on contracts with large project value, focus on product-type based projects (by establishing business units for Civil, Building, EPC, Realty and Precast Divisions), and focus on the jobs based on the Regional Division geographical area.

Struktur organisasi yang fokus pada produk dan geografis Perseroan memiliki lima divisi berdasarkan produk ( Divisi Sipil, Divisi Gedung, Divisi EPC, Divisi Reality & Divisi Precast) dan empat Divisi berdasarkan geografis (Divisi Regional I, II, III & IV). Pembagian divisi tersebut bertujuan agar Perseroan fokus pada proyek-proyek dengan nilai kontrak besar, fokus pada pekerjaan berdasarkan jenis produk dengan dibentuknya unit bisnis yaitu Divisi Sipil, Gedung, EPC, Realty dan Precast, dan fokus pada pekerjaan berdasarkan wilayah usaha berupa Divisi Regional.

Regional Division handles civil and building projects outside Java with project value below Rp 250 billion for civil projects, and below Rp75 billion for building projects.

Divisi Regional menangani proyek sipil dan gedung di luar Jawa yang nilainya di bawah Rp250miliar untuk proyek sipil dan di bawah Rp75miliar untuk proyek gedung.

Regional Division I, domicile in Pekanbaru, with regional operations covering the whole area of Sumatra. Regional Division II, domicile in Balikpapan, with regional operations covering the whole area of Kalimantan. Regional Division III, domicile in Denpasar, with regional operations covering the whole area of Bali, NTB, NTT and Timor-Leste. Regional Division IV, domicile in Makassar, with regional operations covering the whole area of Sulawesi, Maluku and Papua.

Divisi Regional I berkedudukan di Pekanbaru, dengan daerah operasi meliputi seluruh wilayah Sumatera. Divisi Regional II berkedudukan di Balikpapan, dengan daerah operasi meliputi seluruh wilayah Kalimantan. Divisi Regional III berkedudukan di Denpasar, dengan daerah operasi meliputi seluruh wilayah Bali, NTB, NTT dan Timor Leste. Divisi Regional IV berkedudukan di Makassar, dengan daerah operasi meliputi seluruh wilayah Sulawesi, Maluku dan Papua.

Page 18 of 32


FIGURE 34. THE COMPANY’S ORGANIZATION STRUCTURE

Source: Company

An extensive marketing network

Jaringan pemasaran yang luas

Currently, Waskita Karya is one of the largest construction companies in Indonesia with 34 branches that have extensive marketing network and production areas as well as a network of information scattered in almost all provinces in Indonesia. With a broader network, the company has a high ability in capturing business opportunities in various areas. The company also has offshore branches to penetrate the international market through branches in Saudi Arabia, the UAE, Timor-Leste and Malaysia.

Saat ini, Waskita Karya adalah salah satu Perseroan konstruksi terbesar di Indonesia dengan 34 kantor cabang yang memiliki jaringan pemasaran dan wilayah produksi yang luas serta jaringan informasi yang tersebar di hampir seluruh provinsi di Indonesia. Dengan jaringan yang luas, Perseroan memiliki kemampuan yang tinggi dalam menangkap peluang bisnis di berbagai daerah. Perseroan juga memiliki kantor cabang off-shore untuk melebarkan sayapnya ke pasar internasional lewat cabang di Saudi Arabia,UEA, Timor Leste dan Malaysia.

FIGURE 35. THE COMPANY’S BRANCHES AND NETWORK Head Office and Branches in Indonesia 1. Nangroe Aceh Darussalam 16. Jawa Timur 2. Sumatera Utara

17. Kalimantan Barat

3. Riau

18. Kalimantan Selatan dan Tengah

4. Kepulauan Riau

19. Kalimantan Timur

5. Sumatera Barat

20. Bali

6. Jambi

21. Nusa Tenggara Barat

7. Bengkulu

22. Nusa Tenggara Timur

8. Sumatera Selatan

23. Sulawesi Selatan

9. Lampung

24. Sulawesi Tengah

10. Kepulauan Bangka Belitung

25. Sulawesi Tenggara

11. Banten

26. Sulawesi Utara

12. Jakarta - Head Office

27. Gorontalo

13. Jawa Barat

28. Maluku

14. Jawa Tengah

29. Maluku Utara

15. Yogyakarta

30. Papua

Overseas Branches 1. Uni Emirat Arab

3. Timor Leste

2. Saudi Arabia

4. Malaysia

Source: Company

Page 19 of 32


Trusted to take the largest and most well-known Indonesia’s projects

Dipercaya menangani ternama di Indonesia

With a good record of accomplishment, experience, high skill expertise and supported by a vast network, the company is trusted to handle large and famous projects in Indonesia.

Dengan pengalaman dan keahlian yang handal serta rekam jejak yang baik dan didukung oleh jaringan yang luas, Perseroan dipercaya untuk menangani proyek terbesar dan ternama di Indonesia.

proyek

terbesar

dan

FIGURE 36. THE COMPANY’S LARGEST AND WELL-KNOWN PROJECTS IN INDONESIA

Jakarta - Surabaya Rp 17.1 tn

Bali Rp 237bn

Sumatera Rp 600 bn

Riyadh Saudi Arabia Rp 117bn

Java & Bali Rp 1.31 tn

Jakarta Rp 370bn

West Java Rp 477 bn

Jakarta Rp 219bn

East Java & West Java Rp 312bn

Jakarta US$ 72.6mn

Surabaya Rp 556bn

Jakarta

US$ 10mn

Source: Company

Solid Management team

Tim Manajemen yang handal

The management team, employees, and competent human resources have formed a reliable team, - professional and reliable in the timely completion of projects. The Company's management consists of professionals with good reputation and records of accomplishment in the industry.

Susunan manajemen, karyawan, dan program SDM yang kompeten telah membentuk tim Waskita yang handal, profesional, dan dapat diandalkan dalam penyelesaian proyek tepat waktu. Manajemen Perseroan terdiri dari profesional dengan reputasi dan rekam jejak yang baik dalam industri.

Page 20 of 32


FIGURE 37. THE COMPANY’S MANAGEMENT TEAM

M. Choliq President Director 6 years at Waskita

Tunggul Rajagukguk Finance Director 3 years at Waskita

Agus Sugiono Human Capital Resources & Development Director

• Holds the position as President Director of Waskita since 2008 • Previously: Director at PT. Adhi Karya (2001-2006); Chairman of Privatization Executive Team of PT. Adhi Karya (2003-2004)

• Holds the position as Director at Waskita since 2011 • Previously: Finance and Risk Management Director at PT Perseroan Pengelolaan Aset (Persero) (2009-2011); Director of PT. Trans Pacific Petrochemical Indotama (2008-2009)

• Holds the position as Director since 2013 • Previously: Senior Production Manager (2010-2013); Senior System Manager (2009-2010); Senior Marketing Manager (2004-2009)

Desi Arryani Operation Director I 28 years at Waskita

• Holds the position as Director since 2011 • Previously: Head of Division III - Jakarta (2010-2011); Head of Civil Division - Jakarta (20082009); Head of Division II - Jakarta (2009-2010); Head of Division III - Jakarta (2005-2008)

Adi Wibowo Operation Director II 26 years at Waskita

• Holds the position as Director since 2012 • Previously: Head of Division I (2008-2012); Deputy Head of Division I (2007-2008); Head of Control Division III at di Office of Division I (2004-2007)

Didi Triyono Operation Director III 32 years at Waskita

• Holds the position as Director since 2008 • Previously: Head of Region III, Denpasar (2003-2008); Head of Region V, Denpasar (2001); Head of Region IV, Semarang (2000-2001)

Source: Company

Page 21 of 32


FINANCIAL OVERVIEW

TINJAUAN KEUANGAN

Strong revenue growth…

Pertumbuhan pendapatan kuat…

Along with the growth trend of new contracts, which in the last five years grew by CAGR of 24.2%, the Company’s revenues grew by double digit with CAGR of 21.2% from Rp4.5tn in 2009 to Rp9.7tn in 2013. Meanwhile, the average value of the orderbook recorded to revenue was around 57%.

Seiring dengan tren pertumbuhan kontrak baru, yang dalam lima tahun terakhir bertumbuh dengan CAGR 22%, Pendapatan usaha bertumbuh double digit dengan CAGR 21.2% dari Rp4.5tn di tahun 2009 menjadi Rp9.7tn di tahun 2013. Sementara itu, rata-rata nilai orderbook yang dibukukan sebagai pendapatan berada di sekitar 57%.

As of Jun14, the Company recorded revenue of Rp3.2tn or has grown by 5.7% YoY. The growth rate of revenues (YoY) at a glance declined compared to the previous years. This is due to the shift of revenue recognition from some planned projects that initially could be executed by the Company but instead turned into KSOs (Joint Operations). Referring to PSAK 12 regarding joint venture, the Company can only recognize the net income without recording the KSO Revenues.

Per Jun14 Perseroan sudah mencatatkan pendapatan sebesar Rp3.2tn atau bertumbuh 5.7%YoY. Tingkat pertumbuhan pendapatan per tahun (YoY) terlihat menurun di banding tahun-tahun sebelumnya. Hal ini karena terjadi pergeseran pengakuan pendapatan yang disebabkan karena beberapa proyek yang direncanakan dapat dikerjakan sendiri oleh Perseroan, berubah menjadi KSO (Kerjasama Operasi). Berpedoman kepada PSAK 12 mengenai Bagian Partisipasi dalam Ventura bersama, maka Perseroan hanya mengakui bagian dari porsi Laba KSO tanpa dapat membukukan Pendapatan dari KSO tersbut.

FIGURE 38. THE COMPANY’S ORDER BOOK (EXCLUDING JO) AND ITS PERCENTAGE OF CONSTRUCTION REVENUE

FIGURE 39. THE COMPANY’S REVENUE TREND

New Order Book

IDR trillion 20

59.9%

52.1%

56.4%

57.4%

4.9

6.8

3.8

10 3.0

4.1

5.6

5.5

2009

2010

5

Revenues

IDR trillion 12.0 80.0%

60.7% 15

Carry Over Contract

% Construction revenue (RHS)

60.0%

10.0

CAGR: 21.2% 8.8

10.7

9.8

30.0 25.0

5.9

6.0

0

20.0%

0.0% 2011

2012

2013

35.0

9.7

20.0

4.5 4.0

8.4

% 40.0

7.3

8.0

40.0%

Growth YoY (RHS)

3.0

3.2

15.0 10.0

2.0

5.0 -

2009

2010

2011

2012

2013

6M13

6M14

Source: Company, Mandiri Sekuritas calculation


The gross profit (before joint operation) grew with a CAGR of 20% from Rp440billion in 2009 to Rp911 billion in the year 2013. As of Jun14, the Company has booked gross profit about Rp312 billion (16.7% YoY). Meanwhile, the net revenue of construction joint operation (JO) increased significantly from only Rp 42.5 billion in 2009 to more than Rp100 billion in 2013. As of Jun14, JO already recorded of Rp 44.8 billion (210% YoY).

Laba kotor (sebelum joint operation) bertumbuh dengan CAGR 20% dari Rp440miliar di tahun 2009 menjadi Rp911miliar di tahun 2013. Per Jun14, Perseroan sudah membukukan laba kotor sebesar Rp312miliar (16.7%YoY). Sementara itu, pendapatan bersih JO sejak tahun 2012 meningkat tajam dari hanya Rp42.5miliar di tahun 2009 menjadi lebih dari Rp100miliar di tahun 2013. Per Jun14, pendapatan bersih JO sudah tercatat sebesar Rp44.8miliar (210%YoY).

Page 22 of 32


FIGURE 40. THE COMPANY’S GROSS PROFIT (BEFORE JO) Gross profit before JO

IDR billion 1,200

Growth YoY (RHS)

1,000

% 60

IDR billion 120.0

50

100.0

40

80.0

30

60.0

20 312 17

40.0

10

20.0

911 42

800

732

663 576 31

600 440

27

24

400

268

15

101.7

2010

2011

2012

2013

6M13

44.8 24.2

‐

‐ 2009

92.6

42.5

10

200

FIGURE 41. THE COMPANY’S NET REVENUE OF JO

14.4

8.9

-

6M14

2009

2010

2011

2012

2013

6M13

6M14

Source: Company

Source: Company

…and efficient operation…

…operasional yang efisien…

In running its business, the Company has been able to maintain the level of efficiency of the company's operational costs. It is seen from the ratio of operating expenses to revenues that can be maintained at a level of 3% in the last five years.

Dalam menjalankan roda bisnisnya, Perseroan berhasil menjaga tingkat efisiensi biaya operasional perusahaan. Hal ini dilihat dari rasio Beban usaha terhadap Pendapatan yang dapat dijaga pada level 3% dalam lima tahun terakhir.

FIGURE 42. EFFICIENTLY OPERATED AS SHOWN BY STABLE OPEX TO REVENUE RATIO Opex (LHS)

Opex to revenues ratios

%

IDR billion 350

14 298

300 237

250

100

10

198

200 150

12

8

173 144

137 99

3.2

3.0

50

2.7

2.7

3.1

3.3

6

4.3 4 2

‐

0 2009

2010

2011

2012

2013

6M13

6M14


…led to stable margin

…menghasilkan margin yang stabil

In the middle of tight competition, the company maintained the gross margin at around 9% in the last five years. EBITDA margin maintained in the range of 7-8%, and the net margin continues to increase from 1.1% in 2009 to 3.8% in 2013.

Di dalam kondisi persaingan yang ketat saat ini, Perseroan berhasil mempertahankan marjin laba kotornya di kisaran 9% dalam lima tahun terakhir. EBITDA margin terjaga di kisaran 7-8% dan net margin tren nya meningkat terus dari 1.1% di tahun 2009 menjadi 3.8% di tahun 2013.

As has been explained above, regarding the recognition of revenue into KSO in 2012, thus gross profit margin seemed to decrease in 2012 to 8.3% due to shifting in revenue recognition. This can be seen through the EBITDA margin that remains stable at 7.1% in 2012.

Sebagaimana yang telah dijelaskan di atas, mengenai pengakuan pendapatan menjadi KSO di tahun 2012, marjin laba kotor terlihat turun di tahun 2012 menjadi 8.3%. Hal ini hanya perpindahan pengakuan pendapatan saja dari tadinya dibukukan kotor di atas menjadi hanya di akui bersih, terlihat EBITDA margin di tahun 2012 tetap di 7.1%.

Page 23 of 32


FIGURE 43. STABLE MARGIN Gross margin

EBITDA margin

Net margin

% 12.0 10.0 8.0

9.8

9.8

9.4

9.1 8.3

7.8

7.3

7.9

7.1

7.0

9.8 8.9

8.2

6.8

6.0 4.0

3.8 2.1

2.0

2.9

2.4

1.9

1.1

1.9

0.0 2009

2010

2011

2012

2013

6M13

6M14


Good cashflow protection The level of protection against interest on debt has continued to improve since 2009. Supported by revenue growth, stable operating margin, efficient operation, and good debt management, as of Jun14 Net Debt to EBITDA ratio improved to 0.63x in 2013 from the previous 2x in 2009. As of Jun14 the ratio was as high as 2.07x, due to the construction company's debt position was at its highest position in the first half of the period, while the highest revenue will be in the 2nd half. Inline with the performance of the Company growth rate, the Company's EBITDA grew by CAGR of 21.6% from Rp351 billion in 2009 to Rp768 billion in 2013 and as of Jun14 already recorded Rp260 billion (26.8% YoY). Growth in EBITDA is improving the Company’s ability to protect the interest on the debt. EBITDA interest coverage increased from 2.4x in 2009 to 7.9x in 2013. As of Jun14, EBITDA interest coverage is at 3.7x, which is above the Company’s Bond II 2012 covenant level of minimum of 1.5x.

Page 24 of 32

Proteksi arus kas yang baik Tingkat perlindungan terhadap bunga hutang terus membaik sejak tahun 2009. Didukung oleh pertumbuhan pendapatan, marjin usaha yang stabil, operasi secara efisien, serta manajemen utang yang baik, per Jun14 rasio Net Debt to EBITDA membaik menjadi 0.63x di tahun 2013 dari sebelumnya 2x di tahun 2009. Per Jun14 rasio tersebut berada di 2.07x dikarenakan posisi utang untuk perusahaan konstruksi berada pada posisi tertingginya di periode semester 1, sedangkan Pendapatan tertinggi di semester 2. Seiring dengan kinerja pertumbuhan Perseroan, EBITDA Perseroan bertumbuh dengan CAGR 21.6% dari Rp351miliar di tahun 2009 menjadi Rp768miliar di tahun 2013 dan per Jun14 sudah tercatat sebesar Rp260miliar (26.8%YoY). Pertumbuhan EBITDA tersebut meningkatkan kemampuan Perseroan dalam memproteksi bunga hutang. EBITDA interest coverage meningkat dari 2.4x di tahun 2009 menjadi 7.9x di tahun 2013. Per Jun14 EBITDA interest coverage berada di 3.7x. Posisi EBITDA interest coverage tersebut berada pada posisi yang aman dari yang dipersyaratkan oleh covenant Obligasi II Perseroan Tahun 2012 yaitu minimum 1.5x.


FIGURE 44. EBITDA COVERAGE EBITDA (LHS) Net Debt to EBITDA

IDR billion 900

EBITDA interest coverage X 9.0 8.0 7.0 6.0 5.0 4.3 4.0 3.7 3.0 260 2.0 205 1.0 ‐ (1.0) Jun13 Jun14

768 7.9

800 700

622

600

512

500

425 351

400 300

2.8

2.4

3.3

3.7

200 100 ‐ 2009

2010

2011

2012

2013


Sound liquidity

Likuiditas yang baik

The Company's ability to meet its current liabilities are at a good level with the current ratio maintained above 1x in the last five years and as of Jun14 the ratio was at 1.4x, above the minimum covenant level of 1x.

Kemampuan Perseroan dalam memenuhi kewajiban jangka pendeknya berada pada tingkat yang baik dengan rasio lancarnya terjaga di atas 1x dalam lima tahun terakhir dan per Jun14 posisinya berada di 1.4x. Posisi rasio lancar tersebut berada pada tingkat yang sangat aman di bandingkan dengan covenant yang minimum sebesar 1x.

Meanwhile, the number of days required to perform the collection of account receivables was always less than the payment due on trade payables. This indicates that the working capital is sufficiently fulfilled by trade payables without additional loans (interest bearing liabilities).

Sementara itu, jumlah hari yang diperlukan dalam melakukan koleksi terhadap piutang selalu lebih cepat dibanding dengan tempo pembayaran hutang usaha. Hal ini mengindikasikan bahwa modal kerja Perseroan terpenuhi hanya dari hutang usaha saja dan bukan dari pinjaman berbunga.

FIGURE 45. LESS DAYS TO COLLECT COMPARED TO DAYS PAYABLES

FIGURE 46. WELL MAINTAINED CURRENT RATIO

Days Receivables

Days Payables

RECEIVABLE

Current ratio

Operating Cash Cycle

Days 200

Cash ratio

X 1.6 1.5

1.4 150

1.4

1.5

1.4

0.2

0.2

0.1

2013

Jun13

Jun14

1.2 1.0

100

1.1

1.1

1.0

0.8 50

0.6 0.4

0.4

2009

2010

2011

2012

2013

(50) (100)


Jun13

Jun14

0.2 -

0.2 0.1 2009

2010

0.1 2011

2012


Page 25 of 32


FIGURE 47. CASH POSITION COMPARED TO CURRENT MATURITY DEBT Cash IDR billion 2,500

Short‐term debt

Cash to short‐term debt (RHS)

X 2.5

2,000

2.0

1,500

1.5

1,000

1.0

500

0.5

‐

‐ 2009

2010

2011

2012

2013

Jun13

Jun14


Sound debt protection

Proteksi hutang yang baik

The total debt (interest bearing) to equity ratio (DER) are at a moderate level with the ratio continuing to improve from 2.4x in 2009 to 0.7x in 2013, in a secure level below its covenant level of maximum 3x. Meanwhile, the percentage of debt was maintained at around 20% of total assets.

Total hutang berbunga terhadap ekuitas (DER) Perseroan berada pada level yang moderat dengan rasio yang terus membaik yaitu dari 2.4x di tahun 2009 menjadi 0.7x di tahun 2013, berada pada posisi yang aman dibanding dengan level covenant yang mengharuskan DER maksimum 3x. Sementara itu, besarnya hutang dipertahankan pada kisaran 20% dari total aset.

As of Jun14, these ratios increased due to the construction company’s debt position being at its highest position in the second quarter and will go down at the end of the year.

Per Jun14 rasio-rasio tersebut naik karena posisi utang untuk perusahaan konstruksi berada pada posisi tertingginya di periode kuartal II dan akan kembali turun pada akhir tahun.

FIGURE 48. GOOD SOLVENCY INDICATOR Debt (LHS) IDR billion 3,000 2.4

2,500

DER

Net debt to equity

2,404 1.9

2.0

1,919 1,623

1,500

1,205 1,011

1.0

1.0

822

1.5

0.7

-

-

(0.5) 2009


Page 26 of 32

1.0 0.5

500

2.5

2.2

2,000

1,000

Debt to asset X 3.0

2010

2011

2012

2013

Jun14


Key risk

Risiko

The risk in acquisition of new contracts The construction business is very closely related to economic conditions, for example, changes in interest rates and inflation will affect the investment that leads to the increase and decrease in demand for the construction projects.

Risiko perolehan kontrak baru Bisnis konstruksi sangat berkaitan erat dengan kondisi perekonomian, seperti perubahan suku bunga dan inflasi yang akan mempengaruhi minat investasi yang berujung pada kenaikkan dan penurunan permintaan pada proyekproyek konstruksi.

In order to mitigate the above risk, the Company has prepared other projects as backup outside the Company’s target, developed new businesses, done new market penetration (customers) and synergized with new customers by offering an alternative model of EPC projects, Design & Built to Owner.

Dalam memitigasi risiko tersebut, Perseroan melakukan perintisan proyek lain diluar target sebagai cadangan, melakukan pengembangan usaha baru, melakukan penetrasi pasar (pelanggan) baru dan juga bersinergi dengan Pelanggan melalui penawaran alternatif model proyek EPC, Design & Built kepada Owner.

Price increase and availability of raw material The Company has exposure to factors beyond the Company's control that may affect the cost estimates such as increase in raw material prices. This is because the company often gets big projects for periods of over one year, especially for projects from the private sector that do not provide room for adjustment of the contract value when there is an increase in costs.

Risiko kenaikan harga dan ketersediaan bahan baku Perseroan memiliki eksposure terhadap faktor-faktor di luar kendali Perseroan yang dapat mempengaruhi estimasi biaya seperti kenaikan harga bahan baku. Hal ini dikarenakan Perseroan sering mendapatkan proyek besar dengan jangka waktu di atas satu tahun, terutama untuk proyek-proyek yang diperoleh dari swasta yang tidak menyediakan ruang bagi penyesuaian nilai kontrak apabila terdapat peningkatan biaya biaya.

The increase in the price of raw materials may result increase in costs of the construction projects and in turn reduce the profits of the Company.

Kenaikan harga bahan baku konstruksi dapat mengakibatkan meningkatnya biaya proyek, sehingga dapat mengurangi keuntungan Perseroan.

The Company mitigates the above risks by (1) implementing umbrella contracts for large-scale materials such as concrete steel, concrete, asphalt, cement, etc; (2) binding its partners with contracts for obtained projects, and securing the contract clause by back to back; and (3) applying the escalation clause in the contract documents with the customers and asking for price escalation and also asking for the design reviews.

Perseroan memitigasi risiko di atas dengan melakukan: (1) kontrak-kontrak payung untuk material pabrikan yang berskala besar seperti besi beton, beton, aspal, semen, dll; (2) mengikat calon mitra untuk proyek-proyek yang sudah didapat dengan kontrak dan mengamankan klausal kontraknya dengan cara back to back; dan (3) mencantumkan klausal eskalasi dalam dokumen kontrak dengan pelanggan dan mengajukan eskalasi harga serta mengajukan review desain.

Page 27 of 32


APPENDIX

Page 28 of 32


FIGURE 49. FINANCIAL PROJECTION Balance sheet 31 December (Rp billion)

2010

2011

2012

2013

2014F

2015F

2016F

2017F

Cash and equivalents Trade receivables Retention receivables Due from customer Inventories Others Current assets Investment in Associates Joint Ventures Assets Other Long-Term Investments Fixed assets-net others Total assets

695 595 288 1,653 233 286 3,749 7 65 100 152 5 4,079

607 972 445 1,706 351 522 4,604 7 36 94 192 182 5,116

2,208 1,464 475 2,759 413 470 7,790 8 116 18 240 194 8,366

1,144 1,710 606 3,312 292 717 7,781 8 334 38 415 211 8,788

1,512 2,062 793 3,965 341 889 9,562 208 334 38 817 36 10,996

1,518 2,466 948 4,742 408 1,063 11,145 208 334 38 864 36 12,625

1,546 2,995 1,152 5,760 494 1,291 13,238 208 334 38 918 36 14,773

608 3,593 1,382 6,910 594 1,548 14,634 208 334 38 923 36 16,173

Short term debt Trade payable Others Current portion of long term debt Current liabilities Advances on Long-Term Contract Bonds Payables- Net Total liabilites

1,011 2,041 368 3,420 208 3,629

1,205 2,685 528 4,418 78 4,496

1,172 3,568 552 5,292 320 747 6,359

875 4,086 466 5,427 230 748 6,405

1,389 4,830 602 75 6,897 230 1,172 8,299

1,662 5,775 720 8,157 230 1,172 9,559

2,018 6,999 875 1,172 11,064 230 0 11,294

2,421 8,410 1,049 11,880 230 0 12,110

Share Capital APIC RE others Non Controlling Interest Total Equity Total liablities & equity

655 (202) (3) 450 4,079

655 (32) (3) 620 5,116

963 831 215 (2) 2,007 8,366

963 831 563 25 1 2,383 8,788

963 831 877 25 1 2,697 10,996

963 831 1,246 25 1 3,066 12,625

963 831 1,659 25 1 3,479 14,773

963 831 2,243 25 1 4,063 16,173

Source: Company and Mandiri Sekuritas estimates

Page 29 of 32


FIGURE 50. FINANCIAL PROJECTION - CONTINUED Profit and loss 31 December (Rp billion)

2010

2011

2012

2013

2014F

2015F

2016F

2017F

5,853 (5,277) 576 9 (173) 412 13 425 (150) (22) 240 (116) 124

7,274 (6,611) 663 24 (198) 489 23 512 (154) (3) 332 (160) 172

8,808 (8,076) 732 93 (237) 588 34 622 (170) 41 460 (206) 254

9,687 (8,776) 911 102 (298) 715 53 768 (97) (7) 611 (243) 368

11,579 (10,371) 1,208 121 (365) 964 98 1,062 (222) (29) 714 (289) 424

13,848 (12,399) 1,448 105 (436) 1,117 104 1,221 (245) (30) 843 (346) 497

16,820 (15,027) 1,793 124 (496) 1,421 110 1,531 (399) (39) 982 (421) 562

20,176 (18,057) 2,119 141 (595) 1,665 111 1,776 (348) (60) 1,257 (504) 753

31 December (Rp billion)

2010

2011

2012

2013

2014F

2015F

2016F

2017F

Operating profit Other recurring income / (expenses) Depreciation and Amortization Tax Minority Interest Change in working capital Other operating cash flow Operating cashflow

412 (172) 13 (116) 171 308

489 (157) 23 (160) (138) 57

588 (128) 34 (206) (678) (390)

715 (103) 53 (243) 0 (623) (202)

964 (251) 98 (289) (532) (10)

1,117 (275) 104 (346) (514) 86

1,421 (438) 110 (421) (687) (15)

1,665 (408) 111 (504) (748) 115

Capital expenditure Free Cash Flow (Operating CF after capex) Other investing cash flow Cash flows from investing

(21) 287 19 (2)

(63) (6) (143) (206)

(81) (472) (17) (98)

(228) (431) (255) (483)

(500) (510) (25) (525)

(150) (64) (150)

(165) (180) (165)

(115) 0 (115)

Net change in debts Equity funds raised Div paid Other financing cash flow Cash flows from financing

198 (9) (1) 188

63 0 (2) 61

956 1,140 (7) 2,089

(387) 29 (20) (378)

1,014 (110) 904

197 (127) 70

357 (149) 208

(770) (168) (938)

Net change in cash Cash at beginning Cash at End

494 201 695

(88) 695 607

1,601 607 2,208

(1,064) 2,208 1,144

368 1,144 1,512

6 1,512 1,518

28 1,518 1,546

(938) 1,546 608

Revenue COGS Gross profit (non JO) Profit (loss) from Joint Operation (JO) Operating expense Operating profit (EBIT) Depreciation EBITDA Interest & Financing charge Others income (exp.) Pre-tax Tax Net income

Cash flows


Page 30 of 32


FIGURE 51. FINANCIAL PROJECTION - CONTINUED Financial ratio 31 December (Rp billion)

2010

2011

2012

2013

2014F

2015F

2016F

2017F

9.8 7.0 7.3 2.1 3.0 3.0 27.6

9.1 6.7 7.0 2.4 2.7 3.4 27.7

8.3 6.7 7.1 2.9 2.7 3.0 12.7

9.4 7.4 7.9 3.8 3.1 4.2 15.4

10.4 8.3 9.2 3.7 3.2 3.9 15.7

10.5 8.1 8.8 3.6 3.2 3.9 16.2

10.7 8.4 9.1 3.3 3.0 3.8 16.1

10.5 8.3 8.8 3.7 3.0 4.7 18.5

Coverage Operating profit to interest (X) EBITDA interest coverage (X) Debt to EBITDA Net deb to EBITDA (X)

2.8 2.8 2.4 0.7

3.2 3.3 2.4 1.2

3.5 3.7 3.1 (0.5)

7.4 7.9 2.1 0.6

4.3 4.8 2.5 1.1

4.6 5.0 2.3 1.1

3.6 3.8 2.1 1.1

4.8 5.1 1.4 1.0

Liquidity Current ratio (X) Cash ratio (X) Days receivable Days payable Gross working capital turnover (X) Net working capital turnover (X)

1.1 0.2 55 141 1.6 0.1

1.0 0.1 71 148 1.6 0.0

1.5 0.4 80 161 1.1 0.3

1.4 0.2 87 170 1.2 0.2

1.4 0.2 90 170 1.2 0.2

1.4 0.2 90 170 1.2 0.2

1.2 0.1 90 170 1.3 0.1

1.2 0.1 90 170 1.4 0.1

Capitalisation Debt to equity (X) Net debt to equity (X) Debt to assets (X) Total liabilities to equity (X) Total liabilities to total assets (X)

2.2 0.7 0.2 8.1 0.9

1.9 1.0 0.2 7.2 0.9

1.0 (0.1) 0.2 3.2 0.8

0.7 0.2 0.2 2.7 0.7

1.0 0.4 0.2 3.1 0.8

0.9 0.4 0.2 3.1 0.8

0.9 0.5 0.2 3.2 0.8

0.6 0.4 0.1 3.0 0.7

Profitability Gross profit margin (%) Operating margin (%) EBITDA margin (%) Net margin (%) Opex to sales (%) ROA(%) ROE (%)


Page 31 of 32

Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri 28th Floor, Jl. Jend. Gatot Subroto Kav. 36 - 38, Jakarta 12190, Indonesia General: +62 21 526 3445, Fax : +62 21 527 5711 (Debt Research), +62 21 527 5701 (Debt Sales)

DEBT RESEARCH TEAM Handy Yunianto

Aldian Taloputra

Head of Fixed Income Research

Economist

[email protected]

aldian.taloputra @mandirisek.co.id

+62 21 5296 9568

+62 21 5296 9572

Leo Putra Rinaldi

Ali Hasanudin

Economist

Credit Analyst

[email protected]

[email protected]

+62 21 5296 9406

+6221 5296 9629

Yulia Ansari

Wisnu Trihatmojo

Credit Analyst

Research Assistant

[email protected]

[email protected]

+62 21 5296 9408

+62 21 5296 9569

DEBT CAPITAL MARKET TEAM

Dennis Reshijaya

Head of Institutional Sales

[email protected] +62 21 527 5378

R. Agung Koenoro

Paul Hadi

Institutional Sales

Institutional Sales

[email protected]

[email protected]

+62 21 527 5378

+62 21 527 5378

Sita Arvianti

Teguh Suwarno

Rahmadita Fitria

Institutional Sales

Institutional Sales

Institutional Sales

[email protected]

[email protected]

[email protected]

+62 21 527 5378

+62 21 527 5378

+62 21 527 5378

Indri Ratnasari

Mohammad Haikal

Ranny Rianovita

Institutional Sales

Institutional Sales

Institutional Sales

[email protected]

[email protected]

[email protected]

+62 21 527 5378

+62 21 527 5378

+62 21 527 5378

Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri, 28th Floor Jl. Jend. Gatot Subroto Kav. 36-38 Jakarta 12190 - Indonesia General: +62 21 526 3445 Fax: +62 21 527 5711 (Debt Research) +62 21 527 5701 (Debt Capital Market)

DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number 62-21-5263445 or fax 62-21-5275711.

ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation.

PT Waskita Karya (Persero) Tbk

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