Infrastructure Indonesia: Light Rail Transit (LRT) in Palembang
Two state-controlled companies (both listed on the Indonesia Stock Exchange) are expected to feel the positive impact of the light rail transit (LRT) in Palembang (South Sumatra), a transportation project currently under construction. These two companies are construction firm Waskita Karya and cement producer Semen Baturaja. These two companies are heavily involved in the LRT project that is estimated to cost around USD $520 million. This LRT track is supportive infrastructure for the 2018 Asian Games, to be held in South Sumatra in August 2018.
Waskita Karya was appointed directly by the Indonesian government (through a presidential regulation) to construct the track, overpass, stations and operational facilities related to the LRT project in Palembang. The LRT is to connect Sultan Mahmud Badaruddin II International Airport to Jakabaring Sport City through a stop at Palembang Grand Mosque. One of Waskita Karya's subsidiaries - Waskita Beton Precast - is expected to supply part of the building materials. Waskita Beton Precast is a precast concrete producer that has several factories in West Java. Its annual precast concrete production capacity is estimated at slightly over 2 million tons.
The LRT project is estimated to add IDR 9 trillion (approx. USD $680 million) in contracts to Waskita Karya's portfolio. In full-year 2016 the company targets to obtain IDR 63 trillion in contracts, while also aiming to double its net profit to IDR 2 trillion from around IDR 1 trillion in 2015. If achieved, it would make Waskita Karya one of the most profitable state-controlled construction firms in Indonesia. It is also positive that Waskita Karya has diversified its business by adding a LRT project.
Today, shares of Waskita Karya fell 3.53 percent to IDR 2,460 a piece. So far this year, however, its shares have surged 52.69 percent.
Stock Quote Waskita Karya - WSKT:
The other company that is expected to benefit from the construction of the LRT in Palembang is Semen Baturaja, a South Sumatra-based cement producer. Due to its proximity to the LRT project it is expected that Semen Baturaja will supply (most of) the cement for the project.
Today, shares of Semen Baturaja fell 2.45 percent. So far this year, however, the company's shares have surged 68.38 percent.
Stock Quote Semen Baturaja - SMBR: