Adhi Karya logged new contracts worth Rp19.1 trillion
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.
Investor Daily - Adhi Karya bukukan kontrak baru Rp19.1 triliun
24 November 2022
By: Muhammad Ghafur Fadhillah
PT Adhi Karya Tbk (Persero) (ADHI) successfully realised new contracts worth Rp19.1 trillion until the end of October 2022, which increased by 51% from Rp12.7 trillion last year. The new contract realisation is dominated by the engineering and construction business lines.
“ADHI will continue to increase its contract growth until the end of the year. We will continue to grow ADHI’s contracts until the end of the year. Several plans have been implemented to achieve ADHI’s target in 2022,” ADHI President Director Entus Asnawi said in his written statement on Wednesday (23/11/2022).
Entus revealed that 90% of the new contract realisation is dominated by engineering and construction, 9% by property, and the rest by other business lines. Meanwhile, based on the type of work, 26% of the projects are road and bridge projects, 30% are building projects, and 44% are other infrastructure projects such as dams, airports, railway tracks, energy projects, and other projects.
Based on the funding source, he continued that 39% of the new contract realisation was contributed by the government, 11% by state-owned enterprises (SOEs) and regional SOEs, and 50% by private companies that include investment projects. “New contracts obtained by the company include the centralised domestic wastewater treatment system in Banda Aceh as well as plant road and drainage in Karawang in West Java,” Entus said.
Entus said that the new contract realisation showed ADHI’s consistency to continuously improve the company’s performance amid the current industrial condition. “It is reflected from the new contract realisation that shows ADHI realises that business development based on green economy is necessary for business sustainability,” he stated.
Moreover, previously, Adhi Karya successfully absorbed Rp2.6 trillion from a rights issue. Besides improving the financial ratio, funds from the rights issue will be used for expansion.
Entus revealed that the realisation obtained from the state equity participation (PMN) and rights issue would be used for national strategic projects (PSNs). “Funds from the PMN and rights issue can improve ADHI’s financial ratio. This is marked by the strengthening of the company’s equity. Besides that, funds from the PMN and rights issue will be used to fund the acceleration of PSNs,” he explained.
Moreover, projects funded by the rights issue include Solo-Yogyakarta-YIA Kulonprogo toll road, Yogyakarta-Bawen toll road, and Karian-East Serpong Drinking Water Supply System (SPAM). With this funding, ADHI’s equity also increased by Rp8.8 trillion, which will improve ADHI’s capital structure and the company’s DER (Debt-to-equity ratio). Moreover, this can also strengthen performance with the potential of new projects.
Besides business development, ADHI’s management also explained that the company would provide benefits for the government, the state, and the people. This is achieved through increasing gross domestic product (GDP) and gross regional domestic product (GRDP), opening more jobs, and increasing tax and dividends.
“Another impact that can also be felt is regional connectivity with more access from and to tourism areas,” Entus continued.
Samuel Sekuritas analyst Abraham Timothy in his research said that, compared to other construction companies, ADHI logged the strongest net profit growth in the third quarter of 2022 as it increased by 246% per quarter. “One of the causes is the interest burden efficiency that occurred in the first nine months of 2022 that decreased by 7.1% compared to last year thanks to negotiations with banks that decreased cost of debt to 7.1%-8.25% this year from around 8.25%-9.0% in 2021,” he said.
Abraham added that ADHI’s total debt also decreased by 6.2% year-on-year thanks to the repayment with the highest rate that was partly financed by oversubscribed bonds. The balance sheet in the first nine months of 2022 also improved compared to last year with D/E decreasing from 2.03 to 1.75 and ICR increasing from 0.85 to 0.95
“We are providing the underweight rating for the construction sector as there is no sign that it will recover seeing the performance degradation in the first nine months in 2022, margin constriction, and new contract realisation that is still far from the target. Our top pick is ADHI (BUY, target price Rp700) due to their better performance compared to their peers in the first three quarters of 2022, and their financial condition is also showing signs of recovery,” he said.
