PT Waskita Karya (Persero) Tbk

Debt Research Construction Debt Issuance

May 2016

PT Waskita Karya (Persero) Tbk The Key Player in National Construction Investment highlights:

Country INDONESIA



Solid position in the construction market. The Company has a solid position in the market by recording construction revenue of Rp12 trillion (27%YoY) in 2015, the largest construction revenue of five listed SOE Construction Companies (in IDX stocks and bonds), with market share maintained at around 28%. The tender value won by the company grew significantly by CAGR (2010-2015) of 42.2% to Rp32.1 trillion with 87% of the projects in 2015 obtained from the Government and State/local Owned Enterprises. We consider the Company's position in the market will remain solid in the future due to its advantages of being owned by the Government; this will also provide a solid position in getting large infrastructure projects planned by the Government.



Growth strategy via stakes in toll-roads. Adding new toll road projects would support Company in obtaining strong sales and new contracts growth. Recent participation of the 75km Batang-Semarang toll road has brought Company’s toll-roads ownership to 14 (with 8 as majority). This strategy has proven to be supportive to its 2015 new contracts of Rp32.1 trillion (+41.7% yoy), the highest among other construction companies. In 2016, the Company should continue to pursue growth strategy in toll road development as we calculate Rp26 trillion worth of projects from its toll-roads are remaining to be tendered.



Strong credit metrics. The Company has strong credit metrics as shown by stable profitability margin, strong interest coverage, good liquidity profile, and strong capital structure. Gross margin and EBITDA margin increased to 13.6% and 13.3% respectively from 9.8% and 6.7% in 2010. EBITDA interest coverage, Current ratio, and Debt to Equity ratio were recorded at 5.5x, 1.3x, and 0.9x respectively as of Dec15, - well maintained above Company’s bond covenant levels of minimum 1.5x for EBITDA to interest, minimum 1x for Current ratio and maximum of 3x for DER. In the end of 1H15, the Company succeeded in doing rights issue with total equity raised about Rp5.3 trillion. This was the second equity raising for the company in short succession after being publicly listed in 2012. Now, the Company is the largest listed and SOE construction company with a total equity of Rp9.7 trillion in Dec15.



The Government support for infrastructure. National construction market is very promising due to an increase in the government budget for infrastructure spending. Infrastructure budget shows rapid increase from Rp86 trillion in 2010 to Rp290 trillion in 2015. According to RPJMN (the National Medium-Term Development Plan), the Government will increase the development of numerous infrastructure projects, such as toll roads and ports, to boost economic acceleration. Meanwhile, the IMF estimates that the ratio of investment spending to Indonesia's GDP will continue to increase and reach 36.9% by 2021 from 34.6% in the current position. This will create more demand for construction projects. Therefore, we believe the demand for construction projects in Indonesia is still strong.

Sovereign rating S&P

BB+/positive

Moody’s

Baa3/stable

Fitch

BBB-/stable

Company rating Pefindo

idA-/Stable

Shareholders (%) Government of The Republic of Indonesia

66.04

Public

33.96

Outstanding Bonds Size Bond ID (Rp bn)

Maturity

Coupon (%) 9.75

WSKT02B

675

5-Jun-17

WSKT01CN1

500

18-Nov-17

10.4

WSKT01ACN2

350

16-Oct-18

10.4

WSKT01BCN2

1,150

16-Oct-20

11.1

Bond offering Waskita Karya Shelf Registered Bond II Phase I 2016 Rating Principal amount Tenor

idA-/Stable max Rp2 trillion 3 years

INVESTMENT PARAMETER

Ali Hasanudin +6221 5296 9629 [email protected]

31 December (Rp billion) 2012 2013 Revenues 8,808 9,687 Total Assets 8,366 8,788 Total debt 1,919 1,623 EBITDA interest coverage (X) 3.22 7.47 Current ratio (X) 1.5 1.4 Debt to equity (X) 1.0 0.7 Source: Company and Mandiri Sekuritas estimation

Please see important disclosure at the back of this report

2014 10,287 12,542 3,163 5.03 1.3 1.1

2015 14,153 30,309 8,292 5.53 1.3 0.9

2016F 24,572 38,725 9,759 4.62 1.3 0.9

2017F 31,242 50,410 15,275 4.00 1.1 1.3

Waskita Karya | May 2016

BOND MARKET OVERVIEW

TINJAUAN PASAR OBLIGASI

IDR Government Bond Market Review

Tinjauan Pasar Obligasi Pemerintah

The Indonesian bond market performance showed positive results at the beginning of this year. According to HSBC Index, Indonesian government bonds reported the highest performance of 11.2% ytd, or 16.05% ytd in US Dollar. This was much higher than the average investment in Asian local currency government bonds of 6.0% ytd per 26-Apr. The global issues and the improving domestic macroeconomic condition have contributed to the rally in the government bond market this year. From the global market, the FFR hike of 25 bps in December 2015, which was not followed by continuous interest rate hike as previously happened in the period of FFR hikes in 2006, has curbed significant increase in US Treasury yield. Besides that, the rally was supported also by continuing dovish statement from Yellen and reconfirmed by the FOMC’s March minutes of the meeting released on 7-April that showed many Fed members are reluctant to hike further in the face of global uncertainty. Meanwhile, the negative interest rate policy in European countries and Japan has also curbed the rise in US Treasury yield and led to US Dollar depreciation. From the domestic market, the improving economic growth, lower inflation, and stable Rupiah exchange rate against the US Dollar have provided leeway for Bank Indonesia to lower its reference rate 3 times in the first-quarter this year by a total of 75 bps from 7.5% to 6.75%. The lower BI rate was also followed by the declining deposit and lending facility rates to 4.75% and 7.25%, respectively.

Kinerja pasar obligasi Indonesia menunjukkan hasil yang positif di awal tahun ini. Berdasarkan perhitungan indeks HSBC, obligasi pemerintah Indonesia mencatatkan kinerja 11.20% ytd atau 16.05% ytd dalam US Dollar. Angka ini jauh lebih tinggi dibandingkan rata-rata investasi di local currency government bond Asia sebesar 6.0% ytd per 26-Apr. Faktor global dan kondisi makroekonomi domestik yang membaik telah mendukung rally di pasar obligasi pemerintah tahun ini. Dari pasar global, kenaikan FFR sebesar 25bps di bulan Desember 2015 yang tidak diiringi dengan kenaikan suku bunga lanjutan seperti periode kenaikan FFR sebelumnya di tahun 2006 telah menahan kenaikan US Treasury yield secara signifikan. Disamping itu, rally di pasar obligasi pemerintah juga didukung oleh pernyataan Yellen yang mengindikasikan adanya kehati-hatian dalam pengetatan kebijakan moneter dan telah dikonfirmasi kembali dalam hasil notulen rapat FOMC bulan Maret yang dirilis pada 7April yang mana menunjukkan bahwa banyak dari anggota Fed keberatan atas kenaikan suku bunga Fed lebih lanjut karena masih besarnya ketidakpastian global saat ini. Selain itu penerapan suku bunga negatif di negara-negara Eropa dan Jepang juga turut menekan laju kenaikan US Treasury dan mendorong turun nilai mata uang US Dollar. Sementara dari domestik, pemulihan pertumbuhan ekonomi, tingkat inflasi yang rendah, dan nilai tukar Rupiah terhadap US Dollar yang relatif stabil memberikan ruang bagi Bank Indonesia (BI) untuk menurunkan suku bunganya sebanyak 3 kali di kuartal pertama tahun ini dengan total penurunan sebesar 75 bps dari 7.5% ke 6.75%. Penurunan BI rate tersebut juga disertai dengan penurunan suku bunga deposito dan lending facility menjadi masing-masing sebesar 4.75% dan 7.25%.

Based on the Shapley Value Index calculation, US Treasury yield and BI rate are the main variables which can explain the movement of the Indonesian government bond yield after Indonesia received investment grade rating. Accordingly, the recent declining US Treasury yield and BI rate were the main catalysts which have lowered the government bond yield by 119 bps to 7.52% ytd, while, on average, the government bond price increased by 8.12% ytd according to Mandiri Sekuritas Government Bond Index (MSGBI) per 27 April 2016. Meanwhile, the government bond yields for 2YR and 10YR tenors have declined by 161 bps to 6.99% and 111 bps to 7.64%, respectively.

Perhitungan Shapley Value Index menunjukkan bahwa US Treasury yield dan BI rate merupakan faktor utama yang dapat menjelaskan pergerakan yield SUN Indonesia setelah Indonesia mendapatkan rating investment grade. Karena itu, penurunan US Treasury yield dan BI rate merupakan katalis utama yang telah mendorong penurunan rata-rata yield SUN sebesar 119 bps menjadi 7.52% ytd. Sementara itu, harga SUN mengalami kenaikan rata-rata sebesar 8.12% ytd berdasarkan Mandiri Sekuritas Government Bond Index (MSGBI) per 27 April 2016. Adapun yield SUN tenor 2YR dan 10YR masing-masing turun sebesar 161 bps ke 6.99% dan 111 bps ke 7.64%.

Page 2 of 30


FIGURE 1. GOVERNMENT BOND YIELD 10.00 9.50

GIDN1YR

GIDN3YR

GIDN5YR

GIDN7YR

GIDN10YR

BI RATE

9.00 8.50 8.00 7.50 7.00 6.50 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16

6.00

Source: Bloomberg and Mandiri Sekuritas FIGURE 2. SHAPLEY VALUE ANALYSIS RESULT Significance Weight Variable

Before Investment Grade

After Investment Grade

BI Rate

18.2%

39.0%

Core Inflation (% yoy)

36.5%

4.2%

Change IDR/USD (%yoy)

14.7%

3.8%

CDS-5yr (%)

25.0%

9.9%

UST-10yr (%)

5.6%

43.2%

Source: Mandiri Sekuritas Estimates Looking at the bond fund flow data, foreign investors are the biggest net buyers. Indonesia has become one of the investment choices by foreign investors because it still provides attractive yields and the risk level is relatively low compared to other developing countries. In addition, we see the potential for Indonesia's rating upgrade by S & P in 2016 to investment grade (BBB-) after they raised the outlook to positive last year. Based on the DMO, per 26 April 2016, foreign holdings in government bond market reached Rp624.9tn or equal to 39.1% of the total outstanding government bonds. Note that foreign fund inflow coming into the Indonesian bond market reached Rp66.39tn ytd (vs. Rp45.89tn in the same period last year). Interestingly, in addition to foreign inflow, support also came from onshore investors, such as insurance companies and pension funds. Notice that the ownership of insurance companies and pension funds increased significantly to Rp35.3tn ytd (vs. Rp10.5tn in the same period last year). In addition to the declining deposit interest rates, the new OJK rules that require insurance companies and pension funds to place 2030% of their investments in government bonds have led to the increasing role of local investors in the government bond market.

Jika dilihat dari data aliran dana, investor asing merupakan pembeli terbesar di pasar SUN. Indonesia menjadi salah satu tujuan investasi pihak asing karena masih memberikan yield menarik dan tingkat risikonya relatif rendah dibandingkan negara berkembang lainnya. Selain itu, kami melihat adanya potensi upgrade rating Indonesia oleh S&P di tahun 2016 menjadi investment grade (BBB-) setelah mereka menaikkan outlook menjadi positif tahun lalu. Berdasarkan DMO, per 26 April 2016, kepemilikan asing di pasar SUN mencapai Rp624.9tn atau sama dengan 39.1% dari total outstanding obligasi pemerintah. Tercatat, foreign inflow fund yang masuk ke pasar obligasi Indonesia mencapai Rp66.39tn ytd (vs. Rp45.89tn pada periode yang sama tahun lalu). Pasar SUN semakin menarik karena selain semakin besarnya dana asing yang masuk, juga ada dukungan yang berasal dari para investor lokal seperti perusahaan asuransi dan dana pensiun. Tercatat, porsi kepemilikan perusahaan asuransi dan dana pensiun meningkat sangat signifikan sebesar Rp35.3tn ytd. (vs. Rp10.5tn pada periode yang sama tahun lalu). Selain faktor suku bunga deposito yang terus turun, adanya peraturan OJK baru yang mengharuskan dana kelolaan perusahaan asuransi dan dana pensiun masuk ke instrument SUN sebesar 20-30% dari total dana kelolaannya juga mendukung peran investor lokal di pasar SUN.

Page 3 of 30


With the good condition early this year in the primary market, the government has successfully done front loading; as of 26-April ytd, the government has already issued Rp316.5tn so far this year (gross – including pre funding issuances in December 2015) or almost 58% of the issuance target for this year, assuming budget deficit is 2.1% of GDP. Meanwhile, trading volume in secondary market has slightly increased to Rp14.63tn average per day in the period of January to 27 April 2016, - higher compared with the trading volume in 2015 that reached Rp13tn average per day.

Di pasar perdana, pemerintah sukses menerapkan front loading policy, yang mana sampai dengan 26-April, pemerintah telah menerbitkan Rp316.5tn ytd (gross – termasuk prefunding issuance pada December 2015) atau hampir 58% dari total target penerbitan tahun ini, dengan asumsi budget deficit sebesar 2.1% dari GDP. Sedangkan di pasar sekunder, rata-rata volume transaksi SUN per hari tercatat mencapai Rp14.63tn selama periode dari awal tahun sampai dengan 27 April 2016, lebih tinggi dibandingkan dengan rata-rata volume transaksi SUN di tahun 2015 yang mencapai Rp13tn per hari.

On another front, some risks that may be encountered are: worsening perceptions of investment risk in developing countries (for example, can be triggered by the worsening economic conditions in China or China’s higher currency devaluation), increasing FFR faster than market expectations, or higher default risk of oil companies if oil prices continue to decline. While from domestic, the risk that must be observed is the crowding out effect if the budget deficit increased significantly to 3% of GDP.

Di sisi lain, beberapa risiko yang harus diwaspadai adalah: memburuknya persepsi risiko investasi di negara berkembang (misalnya, dipicu oleh memburuknya ekonomi di China atau devaluasi mata uangnya lebih besar tahun ini), kenaikan FFR lebih cepat dibandingkan ekspektasi pasar, atau meningkatnya risiko gagal bayar perusahaanperusahaan minyak jika harga minyak terus turun. Sementara dari domestik, risiko yang harus dicermati adalah crowding out effect jika defisit anggaran meningkat signifikan ke 3% dari PDB.

FIGURE 3. THERE’S SUPPORT FROM ONSHORE, SUCH AS INSURANCES, PENSION FUNDS, AND RETAIL INVESTORS. Net buy/(sell) - Rp tn

31-Dec-15

% of outstanding

26-Apr-16

% of outstanding

Bank

348.9

23.9%

360.4

29.0%

Central Bank

150.1

10.3%

149.5

2.9%

Mutual Fund

61.60

4.2%

72.1

4.5%

Insurance

171.62

11.7%

199.7

Foreign

558.52

38.2%

624.9

Pension Fund

49.83

3.4%

57.1

3.6%

1.0

7.3

6.5

Individual

42.53

2.9%

49.4

3.1%

(16.4)

6.9

12.1

Others

78.50

5.37%

85.1

5.3%

1.6

6.6

17.2

Total

1,461.85

100.0%

1,598.3

100.0%

23.2

136.4

251.9

mtd

ytd

2015

6.7

11.5

63.1

(0.5)

(0.6)

18.7

4.6

10.5

15.8

12.5%

7.4

28.0

21.0

39.1%

18.8

66.4

97.2

Source: DMO and Mandiri Sekuritas FIGURE 4. THE GOVERNMENT HAS SUCCESSFULLY DONE FRONT LOADING AS IT HAS ALREADY ISSUED RP 316.5TNGROSS OR 57.9% OF ISSUANCE TARGET THIS YEAR Rp trillion Budget deficit (% of GDP) Net Issuances Redemption & buybacks Gross Issuances Domestic bonds Conventional FR/VR

2015

Target 2016

2.5

2.2

YTD 2016

% of target

349.9

327.2

219.2

67.0%

108.0

(152.4)

(219.4)

(97.3)

44.3%

(122.1)

502.3

546.6

316.5

57.9%

230.1

389.4

415.4

234.8

56.5%

180.6

62.3%

49.4

202.1

122.5

T-bills/ZC bonds

52.2

8.0

Retail bonds (ORI & Sukuk)

49.4

31.5

Domestic sukuk

60.0

34.5

Private placement Global bonds

Issuances Need

25.7 112.9

38.3 131.2

81.8

Yankee bonds

57.0

49.0

Global sukuks

26.4

32.8

Samurai bonds

11.1

Euro denominated bond

18.5

Source: DMO and Mandiri Sekuritas

Page 4 of 30


From the credit side, total issuance of corporate bonds at the primary market during 2015 reached Rp62.58tn, with multi-finance and commercial banks still dominating the corporate bond issuance. Meanwhile, until mid April 2016, total corporate bond issuance has reached Rp28.8tn. The decline of BI rate to 75 bps, improving economic growth, and refinancing need of Rp48tn this year, should encourage more companies to issue corporate bonds in 2016.

Dari sisi kredit, penerbitan obligasi korporasi di pasar primer selama tahun 2015 mencapai Rp 62.58tn, dengan sektor Multi-finance dan Bank masih mendominasi penerbitan obligasi korporasi. Sementara itu, sampai dengan pertengahan April 2016, penerbitan obligasi korporasi sudah mencapai Rp28.8tn. Penurunan BI rate yang sudah mencapai 75 bps, perbaikan pertumbuhan ekonomi, dan kebutuhan refinancing yang mencapai Rp48tn, diharapkan dapat mendorong para emiten untuk lebih banyak menerbitkan obligasi korporasi di tahun 2016.

In terms of risk premium, the average risk premium for an A- rated company is 364 bps with the range of minimum to maximum at 337-399 bps. Meanwhile, in the secondary market, for a company with the same rating, the average risk premium is 315 bps, with the range of minimum to maximum at 248-378 bps.

Dari sisi risk premium, rata-rata premi risiko untuk sebuah perusahaan dengan peringkat A- adalah 364 bps dengan kisaran minimum-maksimum 337-399 bps. Di pasar sekunder, untuk perusahaan dengan peringkat yang sama, rata-rata premi risikonya mencapai 315 bps, dengan kisaran minimum –maksimum 248-378 bps.

FIGURE 5. RISK PREMIUM TABLE AT PRIMARY MARKET FOR ANo

Name

Sector

Issue Date

Mature Date

Coupon (%)

Spread Book building

Out standing (Rp Bn)

1

OBL BKLJT I VERENA MULTI FINANCE THP III TH 2014 SERI A

Multifinance

20-Mar-14

29-Mar-15

11.00

399

132

Obligasi V Bank Sulut Tahun 2014 Dengan Bunga Tetap

Bank

9-Oct-14

8-Oct-19

11.90

383

750

Tourism

13-May-15

12-May-18

11.00

339

340

Bank

10-Jun-15

9-Jun-22

12.00

337

1,000

Banking

24-Nov-15

23-Nov-22

12.25

362

500

2

OBL BKLJT I PANORAMA SENTRAWISATA TAHAP II TAHUN 2015 Obligasi Subordinasi Berkelanjutan II Bank Bukopin Tahap I Tahun 2015

3 4 5

Obligasi Subordinasi I Bank Jateng Tahun 2015 Average Risk Premium of A- rated

364

Minimum Risk Premium

337

Maximum Risk Premium

399

Source: Mandiri Sekuritas

FIGURE 6. RISK PREMIUM TABLE AT SECONDARY MARKET FOR ASpread Par Value over risk (Rp bn) free (Bps)

Coupon (%)

Maturity Date

Last Transaction

TTM

Price

YTM (%)

Obligasi Bank Victoria IV Tahun 2013

9.50

27-Jun-18

18-Feb-16

2.36

95.9

11.50

378

200

BVIC03

Obligasi Bank Victoria III Tahun 2012

10.00

27-Jun-17

18-Mar-16

1.28

99.4

10.5

342

200

3

AISA01

Obligasi TPS Food I Tahun 2013

10.25

5-Apr-18

3-May-16

1.92

100.2

10.14

311

600

4

PANR01CN1

Obligasi Berkelanjutan I Panorama Sentrawisata Tahap I Tahun 2013

11.50

9-Jul-18

1-Apr-16

2.27

101.8

10.6

311

100

5

PTHK01C

Obligasi I Hutama Karya Tahun 2013 Seri C

9.50

28-Jun-20

11-Mar-16

4.30

96.2

10.63

302

325

6

LTLS01CN1

Obligasi Berkelanjutan I Lautan Luas Tahap I Tahun 2013

9.75

19-Jun-18

21-Mar-16

2.24

99.6

10.0

248

700

No.

ID

Bonds

1

BVIC04

2

Average Risk Premium of A- rated

315

Minimum Risk Premium

248

Maximum Risk Premium

378

Source: Mandiri Sekuritas

Page 5 of 30


INDUSTRY OVERVIEW

TINJAUAN INDUSTRI

We have a 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 of 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%. Nilai output konstruksi terhadap PDB Indonesia yang 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

Since the decrease in 2013, Indonesia’s investment to GDP has been gradually increasing to 34.6% in 2015. According to IMF estimation, Indonesia’s investment to GDP will reach 36.9% in 2021. The IMF estimation is based on a gradual increase in subsidized fuel prices, so that the savings from fuel subsidies can be allocated for infrastructure expenditure.

Semenjak turun di tahun 2013, pengeluaran investasi terhadap PDB Indonesia secara bertahap mulai meningkat dan mencapai 34.6% di tahun 2015. Berdasarkan perkiraan IMF, pengeluaran investasi terhadap GDP Indonesia pada tahun 2021 akan mencapai 36.9%. Perkiraan IMF ini didasarkan pada peningkatan bertahap harga BBM bersubsidi, sehingga penghematan dari subsidi BBM dapat dialokasikan untuk belanja infrastruktur.

FIGURE 7. TOTAL INVESTMENT AS PERCENTAGE OF GDP % 38.0 37.0 36.0 35.1

35.1

36.1

36.9

34.6 34.6

35.0 33.8

34.0 33.0

35.4

35.7

36.5

33.0

32.9

32.0 31.0 30.0 2010 2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F Source: IMF

The connection with construction sector

Hubungannya dengan sektor konstruksi

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 Rp314million and statistically there is a strong relationship between investment spending and demand for construction projects.

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 Rp314juta dan secara statistik ada hubungan yang kuat antara pengeluaran investasi dan permintaan proyek konstruksi.

Page 6 of 30


FIGURE 8. INVESTMENT SPENDING AND THE CONSTRUCTION OUTPUT Construction output (IDR bn)

1,000,000 y = 0.3137x - 2378.8 R² = 0.9975

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

4,000,000

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 2015, 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 2015, yang menunjukkan bahwa permintaan untuk proyek konstruksi di Indonesia cukup kuat.

FIGURE 9. INDONESIA'S CONSTRUCTION TO GDP IS THE HIGHEST AMONG ASEAN COUNTRIES Construction to GDP (%) 14.0 12.0

10.3

10.0 8.0

6.9

6.0 4.0

4.7 2.5

4.9

5.4

2.8

2.0 0.0 Brunei Thailand Darussalam

Malaysia Singapore Vietnam Philippines Indonesia

Source: CEIC

Most of the construction projects are from the Government

Sebagian besar proyek konstruksi berasal dari Pemerintah

Based on the Ministry of Public Works' data (Information system for investment resources or SISDI), the largest contributor in construction market comes from state & local budgets and SOE funds with a contribution of 64% of the construction value in 2015.

Berdasarkan data SISTEM INFORMASI SUMBER DAYA INVESTASI (SISDI) Kementerian PU, pasar konstruksi nasional terbesar masih berasal dari sumber dana APBN, APBD, dan BUMN dengan kontribusi sebesar 64% dari nilai konstruksi tahun 2015.

Page 7 of 30


FIGURE 10. INDONESIA'S GOVERNMENT FUNDS

CONSTRUCTION

MARKET

MOSTLY

COMES

FROM

100% 90% 80%

Combined Budget Funds

70%

FDI funds

60%

DDI funds

50%

BUMD funds

40%

SOE funds

30%

APBD funds

20%

APBN funds

10% 0% 2011

2012

2013

2014

2015

Source: SISDI-Minsitry of Public Works

Civil construction contributed to more than 50%

Konstruksi sipil berkontribusi lebih dari 50%

In 2014, 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 2014, 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 11. VALUE OF CONSTRUCTION COMPLETED BY TYPE OF CONSTRUCTION

FIGURE 12. CIVIL CONSTRUCTION CONTRIBUTED MORE THAN 50% SINCE 2009

Building Construction Rp trillion 700

Civil Construction

Especialized Construction

Building Construction

Civil Construction

Especialized Construction

100% 90%

600

80% 96

500

86

55 47

200

-

50%

65

300

100

60%

75

400

53

27 50

41 61

49

62

69

71

2005

2006

2007

2008

23 40

87

141

170

202

237

70%

274

309

40% 30% 20%

73

95

109

129

2009

2010

2011

2012

150

170

10% 0%

2013 2014*

2005

2006

2007

2008

2009

2010

2011

2012

2013 2014*

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 Rp86 trillion in 2010 to Rp290 trillion in 2015 or growing by CAGR of 27.5%. Meanwhile, the infrastructure budget to GDP also increased from 1.25% in 2010 to 2.5% in 2015.

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 Rp86 triliun di tahun 2010 menjadi Rp290 triliun di tahun 2015 atau bertumbuh dengan CAGR sebesar 27.5%. Sementara itu, anggaran infrastruktur terhadap PDB juga

Page 8 of 30


meningkat pesat dari 1.25% di tahun 2010 menjadi 2.5% di tahun 2015. FIGURE 13. STATE BUDGET FOR INFRASTRUCTURE SPENDING State budget for infrastructure spending

percent of GDP (RHS)

Rp trillion 350

% 3.00 290

300

2.50

250

2.00 178

200

100

156

146

150

1.50

114

1.00

86

0.50

50 -

2010

2011

2012

2013

2014

2015

Source: CEIC

SOE dominated the market

BUMN mendominasi pasar

Indonesia’s construction sector is a highly fragmented industry with around 130 thousand players recorded by the BPS; the market is dominated by SOEs. As of 2014, the total market share of the five SOEs (WIKA, Waskita, Hutama Karya, Adhi Karya, and PTPP) was about 6.4% 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 130 ribu pemain; pasarnya didominasi oleh perusahaan kontraktor BUMN. Per 2014, total pangsa pasar dari lima kontraktor BUMN (WIKA, Waskita, Hutama Karya, Adhi Karya, dan PTPP) sebesar 6.4% dari total nilai konstruksi yang tercatat oleh BPS.

FIGURE 14. ALMOST 130 THOUSAND PLAYERS IN THE MARKET, IN WHICH SOE DOMINATED THE MARKET BY 6.4% MARKET SHARE Number of construction company 132,000

SOE market share (RHS) 7.4%

131,080 129,862

130,000

129,819 7.2%

7.0%

6.9%

128,000

6.8%

6.7%

126,000

7.2%

6.6% 124,000

6.4%

122,611

6.4%

122,000

6.2%

120,000

6.0% 5.8%

118,000 2011

2012

2013

2014

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

Page 9 of 30


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, the legal status of Waskita Karya has been changed to “Persero”. From then on, the company started to expand its business as a 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 - yang lebih dikenal dengan nama "Waskita" - telah diubah menjadi "Persero". 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 have 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, which 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, dan Hotel Shangri-La, dan beberapa apartemen bertingkat di Jakarta dan kota-kota lainnya di Indonesia. Di tahun '95 Waskita 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, was able to obtain certification of ISO 9001:2000 and ISO 14001:2004, and renewed its 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 succeeded in its Initial Public Offering by offering 3,082,315,000 of 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 30


In 2014, the Company established new subsidiaries in the field of highway, concrete fabrication, and property; respectively they are Waskita Toll Road, Waskita Precast Concrete, and Waskita Realty, which are as a series of business developments in order to improve the Company's competitiveness and added value for stakeholders.

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

Recently in 2015 the Company Obtained State Capital Participation (PMN), which amounted to Rp3.5 trillion, and Public Fund of Rp1.8 trillion, thus the total amount from Limited Public Offering through rights issue is Rp5.3 trillion. This proves that the Company has strong support from the shareholders.

Dan baru saja di tahun 2015 Perseroan mendapatkan Penyertaan Modal Negara (PMN) sebesar Rp3.5 triliun serta Dana Publik sebesar Rp1.8 triliun sehingga total dari Dana Penawaran Umum Terbatas melalui rights issue adalah Rp5.3 triliun. Hal ini membuktikan bahwa Perseroan memiliki dukungan yang kuat dari pemegang saham.

FIGURE 15. 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)

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

1980s Execute big scale projects such as Soekarno Hatta Airport and Siwabessy

2013 • Bond rating upgrade to A • Establishing Waskita Sangir Energy

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

2014 • Issued Bond Continuous Public Offering (PUB) I phase I with A rating • Established subsidiaries, namely Waskita Toll Road, Waskita Beton Precast, Waskita Karya Realty, Prima Multi Terminal, and Jasamarga Kualanamu Tol

2015 • Obtained State Capital Participation (PMN) amounted to Rp3.5 trillion and Public Fund amounted to Rp1.8 trillion, thus the total amount from Limited Public Offering through rights issue is Rp5.3 trillion • Developing investment in toll road with ownership of both majority and minority in 12 toll road sections with the length of approximately 524 Km in Java or Sumatera

Source: Company

Page 11 of 30


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 66.04% and the public at 33.96% 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 gets excellent projects, such as Jakarta International Airport SoekarnoHatta Airport 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 66.04% dan sisanya dimiliki oleh masyarakat sebesar 33.96%. Sebagai perusahaan yang sebagian besar sahamnya dimiliki oleh Pemerintah, ada 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 Bandara Udara Internasional Jakarta Soekarno-Hatta dan Bandara 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 16. THE COMPANY’S SHAREHOLDER STRUCTURE

66.04% Government of the Republic of Indonesia

33.96% Public

PT Waskita Karya (Persero) tbk Source: Company

Business overview 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%. In 2015, the construction business contribution decreased to 85.16% as the precast business succeeded to grow and contributed to total revenues about 14.62%.

Tinjauan bisnis Perseroan membagi lini bisnisnya menjadi lima, 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%. Pada tahun 2015, kontribusi bisnis konstruksi turun menjadi 85.16% seiring dengan bisnis precast yang sukses bertumbuh dan menyumbang terhadap total pendapatan Perseroan sebesar 14.62%.

Page 12 of 30


FIGURE 17. THE COMPANY’S BUSINESS SEGMENT

FIGURE 18. THE COMPANY'S REVENUES MIX Construction Services

Precast

Toll Road

Building Rentals

Property

Other

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010

Source: Company

2011

2012

2013

2014

2015

Source: Company

FIGURE 19. THE COMPANY’S GROUP STRUCTURE (AS OF 29 FEBRUARY 2016)

Source: Company

Construction business Construction business grew significantly in the last five years. The value of tenders won by the company grew by CAGR of 42.2% from Rp5.5 trillion in 2010 to Rp32.1 trillion (including additional works) in 2015. The average winning rate was about 27% in the last five years and in 2015 reached 38.2%.

Bisnis Konstruksi Bisnis konstruksi mengalami pertumbuhan yang signifikan dalam lima tahun terakhir. Nilai kontrak baru yang dimenangkan Perseroan tiap tahunnya bertumbuh dengan CAGR 42.2% dari Rp5.5 triliun di tahun 2010 menjadi Rp32.1 triliun (termasuk kerja tambahan) di tahun 2015. Rata-rata winning rate 27% dalam lima tahun terakhir dan pada tahun 2015 mencapai 38.2%.

Page 13 of 30


The majority of the projects are obtained from the Government and State/local Owned Enterprise through tender process with total contribution in 2015 of 87% of the total projects. The remaining 12.9% comes from the private sector; this provides diversification for the Company’s if there is slowdown in government projects.

Mayoritas proyek yang diperoleh merupakan proyek Pemerintah dan BUMN/D melalui proses tender dengan total kontribusi pada tahun 2015 sebesar 87% dari total proyek. Sisanya sebesar 12.9% berasal dari proyek swasta, hal ini memberikan diversifikasi terhadap bisnis konstruksi Perseroan jika terjadi penurunan dari proyek Pemerintah.

FIGURE 20. THE VALUE OF NEW CONTRACTS GREW SIGNIFICANTLY BY CAGR OF 42.2% WITH WINNING RATE OF 38.2% IN 2015

FIGURE 21. THE MAJORITY OF THE PROJECTS ARE OBTAINED FROM THE GOVERNMENT AND STATE/LOCAL OWNED ENTERPRISES

Tender Followed

Tender Won

Winning Rate (RHS)

Rp trillion 100 84.1

90 80

38.2

65.3

70

63.5

60 50

22.1

40 30

25.5

23.7 48.0

42.0

34.6

20.98 22.6

24.9

20

12.3

10.0

5.5

10

32.1

13.3

0 2010

2011

2012

2013

2014

Government

% 50

100%

45

90%

40

80%

35

70%

30

60%

25

50%

20

40%

15

30%

10

20%

5

10%

0

0%

2015

2010

2011

SOE & Local SOE

2012

2013

Private

2014

2015

Source: Company

Source: Company

The largest SOE Construction Company The Company has a solid position in the market by recording construction revenue of Rp12 trillion (27%YoY) in 2015, the largest construction revenue of five listed SOE Construction Companies (in IDX stocks and bonds), with market share maintained around 28% in the last five years.

The largest SOE Construction Company Perseroan memiliki posisi yang solid di pasar dengan mencatatkan pendapatan konstruksi sebesar Rp12 triliun (27%YoY) di tahun 2015 yang juga merupakan yang terbesar dari lima perusahaan konstruksi BUMN yang terdaftar di bursa (terdaftar saham maupun obligasinya di BEI), dengan pangsa pasar yang terjaga di sekitar 28% dalam lima tahun terakhir.

FIGURE 22. WASKITA HAS THE LARGEST CONSTRUCTION REVENUE OF FIVE LISTED SOE CONSTRUCTION COMPANIES (IN IDX STOCKS AND BONDS)

FIGURE 23. WASKITA'S MARKET SHARE AROUND 28% IN THE LAST FIVE YEARS

Construction Revenue in 2015

Rp Billion 14,000

Waskita

PTPP

ADHI

WIKA

MAINTAINED

Hutama Karya

100% 12,052

12,000

90%

11,611

80%

10,000

11%

13%

15%

13%

14%

13%

18%

13%

13%

14%

13%

14%

21%

23%

21%

20%

18%

19%

21%

22%

22%

27%

29%

27%

28%

29%

29%

26%

26%

28%

2010

2011

2012

2013

2014

2015

70% 7,994

60%

8,000 5,984 6,000

5,509

50% 40% 30%

4,000

20%

2,000

10%

-

0% Waskita

PTPP

ADHI

WIKA

Hutama Karya

Source: Companies

Source: Companies

Toll roads business In the toll roads business line, the Company has a subsidiary namely Waskita Toll Road (WTR). WTR has invested in several toll road sections, among others are Pejagan-Pemalang with 57.5km, Kanci-Pejagan with 35km, and PasuruanProbolinggo with 31km.

Bisnis Jalan Tol Dalam lini bisnis jalan Tol, Perseroan memiliki Anak Perusahaan yang membidangi jalan tol, yaitu Waskita Toll Road (WTR). WTR melakukan investasi beberapa ruas jalan tol, di antaranya adalah Pejagan-Pemalang dengan panjang 57.5km, Kanci-Pejagan dengan panjang 35km, dan Pasuruan-Probolinggo yang panjangnya 31km.

Page 14 of 30


Adding new toll road projects would support Company in obtaining strong sales and new contracts growth. Recent participation of the 75km Batang-Semarang toll road has brought Company’s toll-roads ownership to 14 (with 8 as majority). This strategy has proven to be supportive to its 2015 new contracts of Rp32.1 trillion (+41.7% yoy), the highest among other construction companies. In 2016, the Company should continue to pursue growth strategy in toll road development as we calculate Rp26 trillion worth of projects from its toll-roads are remaining to be tendered.

Menambahkan proyek jalan tol baru akan mendukung Perseroan dalam memperoleh pertumbuhan penjualan dan kontrak baru yang kuat. Partisipasi terbaru dari jalan tol Batang-Semarang sepanjang 75 kilometer telah membawa kepemilikan tol-jalan Perseroan menjadi sebanyak 14 seksi (dengan 8 sebagai mayoritas). Strategi ini telah terbukti mendukung kontrak baru Perseroan di tahun 2015 yang sebesar Rp32.1 triliun (41.7% yoy), tertinggi di antara perusahaan konstruksi lainnya. Pada tahun 2016, Perseroan akan terus melanjutkan strategi pertumbuhannya dalam pembangunan jalan tol sebagaimana kami perhitungkan masih tersisa sebesar Rp26 triliun dari proyekproyek jalan tol Perseroan untuk ditenderkan.

FIGURE 24. WASKITA TOLL ROADS Majority Ownership

Section

Length (Km)

Shares (%)

Year Completed

1

Bekasi - Cawang - Kampung Melayu

21

60

2017

2

Pejagan - Pemalang

57

99.99

2016

3

Cimanggis - Cibitung

26

90

2018

4

Ciawi - Sukabumi

54

81.64

2018

5

Pasuruan - Probolinggo

31

80

2018

6

Kanci - Pejagan

35

77.69

2017

7

Legundi - Bunder

29

48

2018

8

Pemalang - Batang

39

60

2018

9

Solo - Ngawi

90

40

2018

10

Ngawi - Kertosono

87

40

2018

11

Cinere - Serpong

10

35

2018

12

Depok - Antasari

22

25

2017

13

Medan - Kualanamu - Tb. Tinggi

62

15

2018

14

Batang - Semarang

75

40

2019

Minority Ownership

Source: Company

FIGURE 25. WASKITA TOLL ROADS

Source: Company

Page 15 of 30


Business Precast The Precast business by Waskita Beton Precast (WBP) is assigned to carry out activities in precast marketing, production, design, development, as well as expedition. This business was established in 2013, previously under the Precast Business Unit. WBP has 6 (six) concrete factories in Cibitung, Sidoarjo, Karawang, Kalijati, Sadang, and Palembang that produced and marketed 650,000 tons of concrete in 2013, 800 thousand tons in 2014, and 1.8 million tons in 2015. Currently, with additional capacity of 500,000 tons from two new plants in Bojanegara and Subang the total capacity becomes 2.3 million tons.

Bisnis Precast Bisnis precast (produksi beton) dijalankan oleh Waskita Beton Precast (WBP) yang ditugaskan untuk melaksanakan kegiatan di bidang pemasaran, produksi, design, pengembangan, serta ekspedisi precast. Bisnis ini dibentuk pada tahun 2013 dan sebelumnya merupakan Unit Bisnis. WBP telah memiliki 6 (enam) pabrik beton di Cibitung, Sidoarjo, Karawang, Kalijati, Sadang, dan Palembang dengan kapasitas produksi sebesar 650ribu ton pada 2013, lalu pada 2014 mencapai 800ribu ton dan di 2015 mencapai 1.8juta ton. Saat ini dengan tambahan kapasitas sebesar 500ribu ton dari dua pabrik baru di Bojanegara dan Subang, total kapasitasnya menjadi 2.3 juta ton.

Majority of the precast concrete was used to meet internal needs, while the rest was sold to external user.

Sebagian besar produksi beton precast digunakan untuk mencukupi kebutuhan internal, sedangkan sisanya dijual kepada pihak eksternal.

FIGURE 26. PRECAST CAPACITY

FIGURE 27. PROJECT SAMPLE

Capacity ('000 tons)

Plant

Installed

Normal

Cibitung

437.5

350

Sadang

468.8

375

Palembang

125.0

100

Sidoarjo

406.3

325

Karawang

500.0

400

Kalijati

312.5

250

Subang

375.0

300

Bojanegara

250.0

200

Grand total

2,875

2,300

Source: Company

Source: Company

Realty Business The Realty business is under Waskita Realty. The Company has six investment projects in 2015, they are Brooklyn Apartment in Alam Sutera, 88 Avenue Project in Surabaya, Yukata Suites at Alam Sutera, The Reiz Condo in Medan, Zalakka Hotel and Apartment in Bali, and Dafam Teraskita in Jakarta. Dafam Teraskita is a budget hotel that started operations in January 2016 with 150 rooms. Currently the occupancy rate of Dafam is about 80%.

Bisnis Realty Bisnis Realty berada di bawah Waskita Realty. Pada tahun 2015 Perseroan memiliki enam proyek investasi dalam bidang Realty yang terdiri dari Apartement Brooklyn di Alam Sutera, Proyek 88 Avenue di Surabaya, Yukata Suites di Alam Sutera, The Reiz Condo di Medan, Zalakka Hotel and Apartement di Bali, dan Dafam Teraskita di Jakarta. Dafam Terasskita merupakan hotel budget dan telah mulai beroperasi pada Januari 2016 dengan jumlah kamar sebanyak 150. Saat ini tingkat okupasi Dafam adalah sekitar 80%.

FIGURE 28. WASKITA REALTY PROJECTS No.

Project

Location

Area

Share (%)

Usage

1

Dafam Teraskita

Jakarta

0.3Ha

100

2

Brooklyn

Jakarta

1Ha

51

Hotel & Office

3

Yukata Suites

Jakarta

0.5Ha

40.8

Apartment

4

The Reiz Condo

Apartment & Condo

5

88 Avenue

6

Zalakka

Apartment, SOHO & Office

Medan

0.7Ha

100

Surabaya

3.4Ha

51

Mixed Use

Bali

2Ha

51

Hotel & Apartment

Source: Company

Page 16 of 30


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 Rp266 billion with output capacity of 2x5 MegaWatt. Waskita Sangir Energy is a joint venture company between the Company and PT. Shalawat Power with 85% and 15% shares respectively. The construction begun in may 2014 and the progress already reached 92% in January 2016. The power plant is projected to operate in June16.

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). WSE memiliki total investasi sebesar Rp266 miliar dengan kapasitas output 2x5 MegaWatt. Projek ini merupakan JV antara Perseroan dengan PT Shalawat Power dengan saham masing-masing sebesar 85% dan 15%. Konstruksi dimulai pada bulan Mei 2014 dan sampai dengan Januari 2016 progresnya sudah mencapai 92%. Pembangkit Listrik ini diperkirakan akan beroperasi pada Juni 2016.

FIGURE 29. IPP PROJECT DETAIL Total Investment (Rp bn)

266

Total Construction

213

Construction Period

FIGURE 30. WEIR INTAKE & POWER HOUSE MINI HYDRO

24 mo

Debt to Equity Portion

70:30

IRR

14.5%

Price/KWH (Rp)

1,182

Output Capacity

2x5 MW

Source: Company

Source: Company

An extensive marketing network

Jaringan pemasaran yang luas

Currently, Waskita Karya is one of the largest construction companies in Indonesia with one head office, 30 branches in Indonesia and four branches abroad. The Company has 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 satu kantor pusat, 30 kantor cabang di Indonesia dan empat cabang di luar negri. Perseroan 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 offshore untuk melebarkan sayapnya ke pasar internasional lewat cabang di Saudi Arabia, UEA, Timor Leste, dan Malaysia.

FIGURE 31. 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 13. Jawa Barat

27. Gorontalo 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 17 of 30


Trusted to take the largest and most well-known Indonesian projects

Dipercaya menangani ternama di Indonesia

With a good record of accomplishment, experience, and 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 andal 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 32. THE COMPANY’S LARGEST AND WELL-KNOWN PROJECTS IN INDONESIA

Jakarta - Surabaya Rp 1.17 tn

Jakarta Rp 6.8tn

Sumatera Rp 600 bn

Java & Bali Rp 1.31 tn

Riyadh Saudi Arabia Rp 117bn

Jakarta Rp 370bn

West Java Rp 477 bn

Jakarta Rp 219bn

East Java & West Java Rp 312bn

Jakarta US$ 72.6mn

Surabaya Rp 556bn

Ambon Rp 416bn

Source: Company

Solid Management team

Tim Manajemen yang andal

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 andal, profesional, dan dapat diandalkan dalam penyelesaian proyek tepat waktu. Manajemen Perseroan terdiri dari profesional dengan reputasi dan rekam jejak yang baik dalam industri.

Page 18 of 30


FIGURE 33. BOARD OF COMMISSIONERS AND BOARD OF DIRECTORS

Board of Commissioners Mohamad Hasan - President Commissioner  

Holds the position as President Commissioner since 2012. Previously: Director General of Water Resources, Ministry of Public Works (2012-2014); Commissioner of the Company (2012); Head of Research and Development Agency of the Minister for Inter-Institutional Relationship, Ministry of Public Works (2011-2012); Expert Staff to Minister for Inter-Institutional Relationship, Ministry of Public Works (2008-2010).

Arif Baharudin - Commissioner

 

Holds the position as Commissioner since 2011. Previously: Fiscal Policy Agency Secretary of Fiscal Policy Office of the Ministry of Finance (2015present); Head of Analysis Center and Policy Adjustment of Secretariat General of the Ministry of Finance (2013-2015); Director of Separated State Asset of Directorate General of State Asset Management- Ministry of Finance (2011-2013). Raden Agus Sartono - Commissioner

 

Holds the position as Commissioner since 2015 Previously: Vice Deputy for Education and Religion Coordinating Ministry of Human Development and Culture (2015- present); President Commissioner of PT Barata Indonesia (Persero) (2013-2015); Member of Audit Board, University of Gadjah Mada (2013-present); Deputy for Education and Religion Coordinating, Ministry of People’s Welfare (2010-2014). Danis Hidayat Sumadilaga - Commissioner

 

Holds the position as Commissioner since 2015. Previously: Expert Staff at Ministry of Public Works and Public Housing (2014-present); Head of Public Communication Center, Ministry of Public Works (2013-2014); Head of Data Management Center, Ministry of Public Works (2010-2013); Director of Technical Guide, Directorate General of Bina Marga, Ministry of Public Works (2007-2010).

Viktor S. Sirait - Independent Commissioner

 

Holds the position as Independent Commissioner since 2015 Previously: President Commissioner of PT Mitra Taruli Perkasa (2012-present); Project Manager of PT Hexindo Multi Utama (2011-present); Project Manager of PT Pharma Kasih Sentosa (20082010).

Muhammad Aqil Irham – Independent Commissioner

 

Holds the position as Commissioner since 2015. Previously: Commissioner of PT Hotel Natour (2013-2015); Associate Dean III, Faculty of Ushuluddin, IAIN Raden Intan Bandar Lampung (2003-2007); Secretary to Sociology and Islam Politics Department, Faculty of Ushuluddin, IAIN Raden Intan Bandar Lampung (2001-2003).

Page 19 of 30


Board of Directors M. Choliq - President Director

 

Holds the position as President Director since 2008. Previously: Director of PT. Adhi Karya (2001-2006); Chairperson of Privatization Executive Team of PT Adhi Karya (2003-2004); Head of Finance Division at the Head Office of PT Adhi Karya (1999-2001).

Tunggul Rajagukguk - Director of Finance

 

Holds the position as Director of Finance since 2011. Previously: Finance and Risk Management Director, PT Perseroan Pengelola Aset (Persero) (20092011); Director of PT Trans Pacific Petrochemical Indotama (2008-2009); Senior Vice President, Head of Credit and Property, System, Procedure and Compliance Division of PT Perseroan Pengelola Aset (Persero) (2004-2007). Agus Sugiono - Director of Development and Human Capital

 

Holds the position as Director of Development and Human Capital since 2014 Previously: Director of Operation III (2013-2014); Head of Production Department of Central Office (2010-2013); Company Senior System Manager (2009-2010); Head of Marketing Department of Central Office (2004-2009).

Desi Arryani - Director of Operation I

 

Holds the position as Director of Operation I since 2013 Previously: Direction of Operation II of the Company (2011-2012); Head of Division III, Jakarta (2010-2011); Head of Division II, Jakarta (2009-2010); Head of Civil Division, Jakarta (2008-2009).

Adi Wibowo - Director of Operation II

 

Holds the position as Director of Operation II since 2012 Previously: Head of Division I at the Office of Division I (2008-2012); Deputy Head of Division I at the Office of Building Division (2007-2008); Head of Control Division III at the Office of Division I (2003-2006); Head of Pioneering Division II at the Head Office of PPH Bureau (2002-2004).

Nyoman Wirya Adnyana - Director of Operation III

 

Holds the position as Director of Operation III since 2015. Previously: General Manager of Building Division (2014-2015); Head of Regional Division III (2013-2014); Head of Division VI (2011-2013); Assistant to Director of Operations Unit (20102011); Deputy of Head of Division II (2009-2010).

Source: Company

Page 20 of 30


FINANCIAL OVERVIEW

TINJAUAN KEUANGAN

Strong revenue growth…

Pertumbuhan pendapatan yang kuat…

Along with the growth trend of new contracts, which in the last five years grew by CAGR of 42.2%, the Company’s revenues grew by double digit with CAGR of 19.3% from Rp5.9 trillion in 2010 to Rp14.2 trillion in 2015. The new business of precast has significantly grew by 158%YoY to Rp2 trillion and gave strong support for Company’s growth. In 2015, precast contributed for 15% of the Company’s total revenue. Meanwhile, the value of the order book recorded to revenue in 2015 decreased to 26.9% from 35.4% previously due to very high growth of order book in 2015.

Seiring dengan tren pertumbuhan kontrak baru, yang dalam lima tahun terakhir bertumbuh sebesar CAGR 42.2%, pendapatan usaha bertumbuh double digit sebesar CAGR 19.3% dari Rp5.9 triliun di tahun 2010 menjadi Rp14.2 triliun di tahun 2015. Bisnis baru precast (beton) telah bertumbuh secara signifikan sebesar 158%YoY menjadi Rp2 triliun dan memberikan dukungan yang kuat terhadap pertumbuhan Perseroan. Pada tahun 2015, precast berkontribusi sebesar 15% dari total Pendapatan Perseroan. Sementara itu, nilai order book yang dibukukan sebagai pendapatan pada tahun 2015 turun menjadi 26.9% dari sebelumnya 35.4% karena sangat tingginya pertumbuhan order book pada tahun 2015.

FIGURE 34. THE COMPANY’S ORDER BOOK (EXCLUDING JO) AND ITS PERCENTAGE RECORDED TO CONSTRUCTION REVENUE

FIGURE 35. THE COMPANY’S REVENUE SIGNIFICANTLY BY 37.6%YOY IN 2015

Rp trillion 50

New Order Book % Construction revenue (RHS)

Carry Over Contract % 100

Revenues

Rp trillion 16.0

80 16.6 60.6

30

59.8

60

58.4

56.4

20 10 0

35.4 3.8

6.8 9.5 2013

4.1 5.5

8.4

10.7

2010

2011

2012

28.2

20.1

8.8

30.0

10.3

25.0

7.3

20.0

5.9

6.0

20

4.0

10.0

2.0

5.0

0 2014

10.0

9.7

40 26.9

4.9

12.0

% 40.0 35.0

CAGR: 19.3%

8.0

6.7

Growth YoY (RHS) 14.2

14.0 40

GREW

2015

15.0

-

2010

2011

2012

2013

2014

2015

Source: Company, Mandiri Sekuritas calculation


The gross profit (before joint operation) grew significantly with a CAGR of 27.2% from Rp576 billion in 2010 to Rp1.9 trillion in 2015. This was supported by the high efficiency that the Company practices year by year which decreases cost of contract and increases margin.

Laba kotor (sebelum joint operation) bertumbuh signifikan dengan CAGR 27.2% dari Rp576 miliar di tahun 2010 menjadi Rp1.9 triliun di tahun 2015. Hal ini didukung oleh tingginya efisiensi yang diterapkan Perseroan dari tahun ke tahun sehingga menurunkan biaya kontrak dan meningkatkan marjin.

Page 21 of 30


FIGURE 36. GROSS PROFIT (BEFORE JO) INCREASED SIGNIFICANTLY DUE TO COMPANY’S HIGH EFFICIENCY Gross profit before JO

Rp billion 2,000

Growth YoY (RHS) 1,921

% 100

1,800

90

1,600

80 73

1,400 1,109

1,200

60

911

1,000 800

576

600

50

732

663

70

40

31

30 24

400

15

200

22

20

10

10

-

2010

2011

2012

2013

2014

2015

Source: Company

…and efficient operation…

…dan 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 around 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 terjaga di sekitar 3% dalam lima tahun terakhir.

FIGURE 37. EFFICIENTLY OPERATED AS SHOWN BY STABLE OPEX TO REVENUE RATIO Opex (LHS)

Opex to revenues ratios

% 12

Rp billion 600 518

10

500 420 400

8

340 285

300

6

238 202

200

3.5

3.3

4.1

3.5

3.2

3.7

4 2

100 -

0 2010

2011

2012

2013

2014

2015


…led to higher margin

…menghasilkan marjin yang lebih tinggi

Strong revenues growth with high efficiency in business results in higher margin in 2015 compared to the past five years. Gross margin sustainably increased year by year from 9.8% in 2010 to 13.6% in 2015. EBITDA margin is on the increasing trend from 6.7% to 13.3% and the net margin continues to increase from 2.1% in 2010 to 7.4% in 2015.

Pertumbuhan pendapatan yang kuat dan tingkat efisiensi yang tinggi dalam menjalankan bisnis menghasilkan marjin yang lebih tinggi di tahun 2015 dibandingkan dengan lima tahun yang lalu. Gross marjin bertumbuh secara berkelanjutan tahun demi tahun dari 9.8% pada tahun 2010 menjadi 13.6% pada tahun 2015. EBITDA marjin sedang dalam tren yang meningkat dari 6.7% menjadi 13.3% dan net marjin terus meningkat dari 2.1% menjadi 7.4%.

Page 22 of 30


FIGURE 38. PROFIT MARGINS ARE IN THE INCREASING TREND Gross margin

EBITDA margin

Net margin

% 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2010

2011

2012

2013

2014

2015


Proteksi yang baik terhadap bunga utang

Good interest protection The level of protection against interest on debt has continued to improve in the past five years. Supported by revenue growth, increases operating margin and efficient operation, thus the Company’s ability to protect the interest on the debt has improved. EBITDA interest coverage increased from 2.6x in 2010 to 5.5x in 2015, which is far above the Company’s Bond covenant level of a minimum of 1.5x.

Tingkat perlindungan terhadap bunga utang terus membaik dalam lima tahun terakhir. Didukung oleh pertumbuhan pendapatan, marjin usaha yang meningkat, serta operasi secara efisien telah, maka kemampuan Perseroan meningkat dalam memproteksi bunga utang. EBITDA interest coverage meningkat dari 2.6x pada tahun 2010 menjadi 5.5x pada tahun 2015, yang berarti berada pada posisi yang sangat jauh (aman) dari yang dipersyaratkan oleh covenant Obligasi Perseroan yang minimum 1.5x.

FIGURE 39. GOOD INTEREST PROTECTION, EBITDA INTEREST COVERAGE IS FAR ABOVE THE COMPANY’S BOND COVENANT LEVEL OF MINIMUM OF 1.5X EBITDA (LHS) Rp billion 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 -

EBITDA interest coverage 1,880 7.5

X 8 7 6

5.5 5.0

5

923

391

2.6

3.1 472

546

3.2

4

724

3 2 1 0

2010

2011

2012

2013

2014

2015


Page 23 of 30


Sound liquidity

Likuiditas yang baik

The Company's ability to meet its current liabilities is at a good level with the current ratio maintained above 1x in the last five years, 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, 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 utang usaha. Hal ini mengindikasikan bahwa modal kerja Perseroan terpenuhi hanya dari utang usaha saja dan bukan dari pinjaman berbunga.

FIGURE 40. LESS DAYS TO COLLECT COMPARED TO DAYS PAYABLES

FIGURE 41. WELL MAINTAINED CURRENT RATIO ABOVE THE MINIMUM COVENANT LEVEL OF 1X

Days Receivables

Days

RECEIVABLE

Current ratio

Days Payables

X

140

1.6

120

1.4

1.4 1.3

1.1

1.2

100

Cash ratio 1.5

1.1

1.0

1.0

80

0.8 60

0.6

40

0.4

0.4

20

0.2

-

2010

2011

2012

2013

2014

0.2

2015

2010


0.1 2011

2012

0.4 0.2

0.2

2013

2014

2015


FIGURE 42. CASH POSITION COMPARED TO CURRENT MATURITY DEBT Cash

Short-term debt

Cash to short-term debt (RHS)

Rp billion 6,000 5,000

X 2.5 2.0

4,000 1.5 3,000 1.0 2,000 0.5

1,000 -

2010

2011

2012

2013

2014

2015


Page 24 of 30


Sound debt protection

Proteksi utang yang baik

The total debt (interest bearing) to equity ratio (DER) is at a moderate level with the ratio continuing to improve from 2.2x in 2010 to 0.9x in 2015, - in a secure level below its Bonds covenant level of maximum 3x. Meanwhile, the percentage of debt was maintained around 20-30% of total assets.

Total utang berbunga terhadap ekuitas (DER) Perseroan berada pada level yang moderat dengan rasio yang terus membaik, yaitu dari 2.2x di tahun 2010 menjadi 0.9x pada tahun 2015, berarti berada pada posisi yang aman dibanding dengan level covenant obligasi Perseroan yang mengharuskan DER maksimum 3x. Sementara itu, besarnya utang dipertahankan pada kisaran 20-30% dari total aset.

FIGURE 43. GOOD SOLVENCY INDICATOR, DER IN A SECURE LEVEL BELOW ITS BONDS COVENANT LEVEL OF MAXIMUM 3X Debt (LHS) Rp billion 9,000

DER

Net debt to equity

Debt to asset 8,292

2.2

8,000

1.9

7,000 6,000 5,000

1.1 1.0

4,000

0.9 0.7

3,000 2,000

1,011

1,205

2010

2011

1,919

3,163

1,623

1,000 2012

2013

2014

X 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 (0.2) (0.4)

2015


Page 25 of 30


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 investments that lead to the increase and decrease in demand for construction projects.

Risiko perolehan kontrak baru Bisnis konstruksi sangat berkaitan erat dengan kondisi perekonomian, seperti perubahan suku bunga dan inflasi yang akan memengaruhi minat investasi yang berujung pada kenaikan 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 di luar 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 eksposur terhadap faktor-faktor di luar kendali Perseroan yang dapat memengaruhi estimasi biaya, seperti kenaikan harga bahan baku. Hal ini dikarenakan Perseroan sering mendapatkan proyek besar dengan jangka waktu di atas satu tahun, terutama untuk proyekproyek yang diperoleh dari swasta yang tidak menyediakan ruang bagi penyesuaian nilai kontrak apabila terdapat peningkatan biaya-biaya.

Increase in the price of raw materials may result in increase in costs of the construction projects and in turn reduce the profits for 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 for 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 klausul kontraknya dengan cara back to back; dan (3)mencantumkan klausul eskalasi dalam dokumen kontrak dengan pelanggan dan mengajukan eskalasi harga serta mengajukan review desain.

Aggressive Funding In line with business diversification and new business development such as precast and toll projects to support the Company’s growth, the Company requires significant amounts of external funding to finance the projects due to the significant size of the projects. This brings the Company’s total debt to grow significantly by CAGR of 52.3% (2010-2015) and in 2015 increased by 162.2% YoY to Rp8.3 trillion.

Pendanaan yang agresif Sejalan dengan diversifikasi bisnis dan pengembangan bisnis baru seperti precast (beton) dan proyek-proyek tol untuk mendukung pertumbuhan Perseroan, Perseroan membutuhkan sejumlah besar pendanaan eksternal untuk membiayai proyek-proyek karena ukuran proyek tersebut yang sangat besar. Hal ini membawa total utang Perseroan tumbuh secara signifikan dengan CAGR sebesar 52.3% (2010-2015) dan pada tahun 2015 meningkat sebesar 162.2% YoY menjadi Rp8.3 triliun.

However, in the past five years the Company has proven its capability to maintained DER in a secure level below its Bonds covenant level of maximum 3x.

Meskipun demikian, dalam lima tahun terakhir Perseroan telah membuktikan kemampuannya untuk menjaga DER pada tingkat yang aman di bawah batas minimum yang dipersyaratkan oleh perjanjian Obligasi yang maksimal 3x.

Page 26 of 30


APPENDIX

Page 27 of 30


FIGURE 44. FINANCIAL PROJECTION Balance sheet YE Dec (Rp bn)

2010A

2011A

2012A

2013A

2014A

2015A

2016F

2017F

2018F

Cash and equivalents

355

583

2,184

1,120

1,675

5,511

2,674

1,995

1,855

Short term investment

340

24

24

24

24

11

11

11

11

Trade receivables

595

972

1,464

1,710

2,307

4,654

5,722

7,275

9,325

Inventories

233

351

413

292

604

826

1,252

1,520

1,830

Fixed assets

152

192

240

415

622

1,923

2,079

2,219

2,343

Other assets

2,404

2,993

4,041

5,226

7,310

17,384

26,986

37,389

45,290

Total assets

4,079

5,116

8,366

8,788

12,542

30,309

38,725

50,410

60,653

Interest bearing liabilities

1,011

1,205

1,919

1,623

3,163

8,292

9,759

15,275

17,656

Trade payables

900

1,662

2,003

2,291

2,572

5,472

7,023

8,905

11,401

Other liabilities

1,717

1,629

2,437

2,549

4,042

6,841

10,896

13,397

16,693

Total liabilities

3,629

4,496

6,359

6,464

9,777

20,605

27,678

37,577

45,750

-

1

6

157

300

698

1,156

450

620

2,007

2,324

2,759

9,547

10,748

12,135

13,747

2010A

2011A

2012A

2013A

2014A

2015A

2016F

2017F

2018F

5,853

7,274

8,808

9,687

10,287

14,153

24,572

31,242

40,043

Gross profit

576

663

732

911

1,109

1,921

3,212

4,155

5,364

EBITDA

391

472

546

724

923

1,880

2,815

3,646

4,251

8

22

6

52

37

465

247

336

319

383

449

540

672

886

1,415

2,568

3,310

3,932

Net interest inc/(exp)

(141)

(125)

(138)

(70)

(140)

(267)

(527)

(866)

(1,119)

Finance charges

(150)

(154)

(170)

(97)

(184)

(340)

(609)

(913)

(1,158)

Finance income

9

28

32

27

43

73

82

47

38

Forex gain/losses

(1)

(4)

2

21

(3)

13

7

(3)

0

Other income/(expense)

(1)

12

55

(12)

24

237

6

4

2

240

332

460

611

766

1,398

2,054

2,445

2,814

Minority interest Shareholders' equity Profit and loss YE Dec (Rp bn) Revenue

Depreciation & amortization EBIT

Pre-tax profit Taxes

(116)

(160)

(206)

(243)

(254)

(350)

(590)

(750)

(1,001)

Minority Interest

-

-

-

0

0

0

51

55

220

Extraordinary gain/(losses)

-

-

-

-

-

-

-

-

-

124

172

254

368

512

1,048

1,516

1,750

2,033

2010A

2011A

2012A

2013A

2014A

2015A

2016F

2017F

2018F

383

449

540

672

886

1,415

2,568

3,310

3,932

8

22

6

52

37

465

247

336

319

(469)

(157)

(435)

(483)

(183)

743

(1,236)

(1,341)

(326) (2,311)

Net profit Cash Flow YE Dec (Rp bn) EBIT Depreciation Working capital Other operating items

79

(75)

(299)

(479)

(445)

(925)

(1,384)

(1,891)

Operating cash flow

1

240

(188)

(239)

295

1,698

196

414

1,614

Capital expenditure

(4)

(203)

(58)

(480)

(1,211)

(9,671)

(4,563)

(6,951)

(4,571)

Free cash flow

(3)

37

(246)

(719)

(916)

(7,974)

(4,367)

(6,537)

(2,957)

0

0

1,139

-

59

5,385

-

-

-

189

194

714

(296)

1,544

5,655

1,506

5,547

2,339

Equity raised/(bought) Net borrowings Other financing

(11)

(2)

(7)

(49)

(131)

769

25

311

479

Net cash flow

175

228

1,601

(1,064)

556

3,836

(2,837)

(679)

(139)

Cash flow at beginning

179

355

583

2,184

1,120

1,675

5,511

2,674

1,995

Cash flow at end

354

583

2,184

1,120

1,675

5,511

2,674

1,995

1,855

Source: Company and Mandiri Sekuritas estimation

Page 28 of 30


FIGURE 45. FINANCIAL PROJECTION - CONTINUED Ratios YE Dec (Rp bn)

2010A

2011A

2012A

2013A

2014A

2015A

2016F

2017F

2018F

Gross profit margin (%)

9.8

9.1

8.3

9.4

10.8

13.6

13.1

13.3

13.4

Operating margin (%)

6.5

6.2

6.1

6.9

8.6

10.0

10.5

10.6

9.8

EBITDA margin (%)

6.7

6.5

6.2

7.5

9.0

13.3

11.5

11.7

10.6

Net margin (%)

2.1

2.4

2.9

3.8

5.0

7.4

6.2

5.6

5.1

Opex to sales (%)

3.5

3.3

3.2

3.5

4.1

3.7

3.4

3.4

4.1

ROAA(%)

3.5

3.7

3.8

4.3

4.8

4.9

4.4

3.9

3.7

ROAE (%)

31.6

32.1

19.3

17.0

20.1

17.0

14.9

15.3

15.7

Operating profit to interest (X)

2.6

2.9

3.2

6.9

4.8

4.2

4.2

3.6

3.4

EBITDA interest coverage (X)

2.6

3.1

3.2

7.5

5.0

5.5

4.6

4.0

3.7

Debt to EBITDA (X)

2.6

2.6

3.5

2.2

3.4

4.4

3.5

4.2

4.2

Net deb to EBITDA (X)

0.8

1.3

(0.5)

0.7

1.6

1.5

2.5

3.6

3.7

Current ratio (X)

1.1

1.0

1.5

1.4

1.3

1.3

1.3

1.1

1.0

Cash ratio (X)

0.2

0.1

0.4

0.2

0.2

0.4

0.2

0.1

0.1

31.8

39.3

50.5

59.8

71.3

89.8

85.0

85.0

85.0

64

71

83

89

97

120

120

120

120

Debt to equity (X)

2.2

1.9

1.0

0.7

1.1

0.9

0.9

1.3

1.3

Net debt to equity (X)

0.7

1.0

(0.1)

0.2

0.5

0.3

0.7

1.1

1.1

Debt to assets (X)

0.2

0.2

0.2

0.2

0.3

0.3

0.3

0.3

0.3

Total liabilities to equity (X)

8.1

7.3

3.2

2.8

3.5

2.2

2.6

3.1

3.3

Total liabilities to total assets (X)

0.9

0.9

0.8

0.7

0.8

0.7

0.7

0.7

0.8

Profitability

Coverage

Liquidity

Days receivable Days payable Capitalization

Source: Company and Mandiri Sekuritas estimation

Page 29 of 30

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 5701 (Debt Sales)

DEBT RESEARCH TEAM

Handy Yunianto Head of Fixed Income Research [email protected] +62 21 5296 9568

Leo Putra Rinaldi Economist [email protected] +62 21 5296 9406

Ali Hasanudin Credit Analyst [email protected] +6221 5296 9629

Wisnu Trihatmojo Research Assistant [email protected] +62 21 5296 9544

Yulia Ansari Credit Analyst [email protected] +62 21 5296 9408

Yudistira Yudadisastra Credit Analyst [email protected] +62 21 5296 9698

DEBT CAPITAL MARKET TEAM

Abdul Hadie Head of Institutional Sales [email protected] +62 21 527 5378

Sita Arvianti Institutional Sales [email protected] +62 21 527 5378

Fonny Supargo Institutional Sales [email protected] +62 21 527 5378

Rininta Rizkia Okitanya Institutional Sales [email protected] +62 21 527 5378

Teguh Suwarno Institutional Sales [email protected] +62 21 527 5378

Mohammad Haikal Institutional Sales [email protected] +62 21 527 5378

SINGAPORE DEBT CAPITAL MARKET TEAM

Chia Soo Meng Head of Fixed Income Sales & Trading [email protected] +65 6589 3898

Miranti Wulansari AVP - Institutional Sales [email protected] +65 6589 3899

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 5701 (Debt Capital Market)

DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX) and Mandiri Sekuritas is registered and supervised by the Financial Services Authority (OJK). 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.

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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