Construction sector: Challenging times for construction SOEs' stocks
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Sektor konstruksi: Masa menantang saham BUMN karya
15 August 2023
By: Dionisio Damara
Jakarta - The stock performances of construction state-owned enterprise (SOE) issuers are facing a great challenge amid the bond default case and are negatively impacting the stocks of the construction sector in general.
Until Monday (14/8), the stocks of construction SOEs have been decreasing. For example, the stock of PT Waskita Karya (Persero) Tbk (WSKT) has declined by 43.89% year-to-date (YtD) to Rp202.
WSKT’s stocks are still suspended by Indonesia Stock Exchange due to their default on Continuous Bond IV Waskita Karya Phase I Year 2020.
Meanwhile, the stocks of PT Wijaya Karya (Persero) Tbk (WIKA), PT Adhi Karya (Persero) Tbk (ADHI), and PT PP (Persero) Tbk (PTPP) have also declined.
WIKA’s stock declined by 52% to Rp384. The same goes for PTPP as their stock plummeted by 19.6% to Rp575 per share and ADHI as their stock declined by 9.8% to Rp440.
In the financial performance side, the largest loss in the first half of 2023 was logged by WSKT as their loss reached Rp2 trillion, followed by WIKA with a loss of Rp1.88 trillion. PTPP and ADHI still made profits of Rp124 billion and Rp12 billion per the end of June 2023.
Regarding Waskita Karya’s recovery, the SOE Ministry is currently preparing to transfer the government’s stocks from WSKT to PT Hutama Karya (Persero). This plan is set to be completed at the start of 2024.
SOE observer from Universitas Indonesia Toto Pranoto reckoned that the solution could be a step that could be implemented for Waskita. Hence, WSKT’s financial burden will be lighter as they are supported by Hutama Karya as their parent entity.
“The key is to resolve the current financial issue. If the plan to acquire WSKT by Hutama Karya can be carried out, then their financial burden will be supported by Hutama Karya as the parent entity,” he said to Bisnis on Monday (14/8).
According to him, the solution is also relevant as Hutama Karya is still receiving state equity participation (PMN) to complete the Trans-Sumatra Toll Road project. Hutama Karya is also currently accelerating the construction of six toll segments at the location.
Hence, with the transfer that will be implemented by the SOE Ministry, Waskita’s debt can be restructured through PMN for Hutama Karya. Toto reckoned that Hutama Karya would function Waskita as a contractor.
Previously, SOE Deputy Minister Kartika Wirjoatmodjo said that his agency was currently negotiating with the bondholders of Waskita so that the restructuring process would be completed immediately and Waskita could be a subsidiary of Hutama Karya.
Praus Capital Research Head Alfred Nainggolan stated that he was still optimistic about the government supporting the restructuring of construction SOEs. The government is reckoned to have a significant contribution to the increase in debts of state-owned construction companies.
The number of domestic infrastructure projects assigned is forcing construction SOEs to go into massive debts. However, the pandemic is eroding the cashflow of construction SOEs.
“The Covid-19 pandemic crushed the cashflow of the companies, so they cannot pay their financial burden,” Alfred said to Bisnis last week.
According to him, the construction services sector is currently recovering after the pandemic.
However, construction SOE issuers cannot enjoy the recovery period as they must deal with their decreasing liquidity.
Furthermore, the default potential is lowering the people’s trust. The reputation of construction SOEs in the eyes of the financial industry is also plummeting.
On a separate occasion, Mirae Asset Sekuritas Senior Investment Information Martha Christina predicts that stocks of the construction sector in the short term will still be challenging.
Several projects are predicted to be delayed approaching the elections. The condition will make it more difficult for companies to progress optimally.
“In the short term until next year, I see that the sector will still be challenging. Approaching the elections, projects tend to be put on hold, so the performances of companies are less than optimum,” he stated.
However, Martha predicts that stocks of the construction sector still have a chance to recover after the elections in 2024. It depends on the policy of the future president regarding infrastructure development.
Bonds
Based on Bisnis’ records, three out of four construction SOEs, namely WSKT, WIKA, and ADHI, have bonds payable worth Rp1.56 trillion due in 2023.
Based on the financial report of each company, the bonds payable of WSKT reaches Rp941.75 billion, WIKA’s reaches Rp331 billion, and ADHI’s reaches Rp289.6 billion.
Waskita Karya President Director Mursyid said that WSKT was comprehensively and sustainably improving by being more selective in choosing their projects, especially regarding payment certainty. For example, there is down payment and monthly payments through the construction risk management committee.
“The projects secured by Waskita are expected to progress smoothly and on time to positively impact the company’s performance,” he mentioned.
Meanwhile, WIKA Corporate Secretary Mahendra Vijaya said that his company has secured new contracts worth Rp11.47 trillion per June 2023. The realisation contributes to the increase in order book to Rp57.29 trillion.
