Indonesian Companies in Focus: Construction Firm Adhi Karya
State-controlled construction company Adhi Karya's corporate earnings should rise in the years ahead on the back of the light rail transit (LRT) project that is expected to provide IDR 33 trillion (approx. USD $2.5 billion) worth of contracts for the construction company. Adhi Karya was appointed to construct the Greater Jakarta part of the LRT that will connect Jakarta with the satellite cities around the capital city. According to Trimegah Securities, this project will bring plenty of long-term profit for Adhi Karya.
The Jakarta LRT is one of Indonesia's many infrastructure projects that had been delayed for many years. Now, however, the central government and the local Jakarta administration finally seem to have set aside their differences about the route, rail model as well as other issues and gave the green light to complete the project before the start of the 2018 Asian Games. Groundbreaking for the project is scheduled to take place later this month. There will be a LRT in Jakarta and one outside Jakarta that connects the satellite cities.
The one outside Jakarta is called the Greater Jakarta LRT project and will connect Jakarta to the satellite cities Bogor, Depok, Tangerang and Bekasi. Adhi Karya has been appointed to handle the construction of this track that will be built in two phases. The company obtained additional funds from a limited right issue (IDR 2.75 trillion).
In full-year 2015 Adhi Karya was awarded IDR 13.9 trillion worth of contracts. However, due to the LRT project, this year's contracts are expected to more than double. Moreover, Adhi Karya is also still in the race to win the contract to construct the LRT in the city of Jakarta. Furthermore, as a side effect of the LRT development, there should occur property development along the LRT route. This could be another source of revenue for Adhi Karya, one of Indonesia's leading construction firms.
Trimegah Securities set the target price of Adhi Karya's shares at IDR 3,200 per share, reflecting a price-to-earnings ratio of 20.9 times. On Tuesday (14/06), Adhi Karya's shares fell 1.83 percent to IDR 2,680 a piece. So far this year, however, its shares have surged 25.23 percent.
Stock Quote Adhi Karya - ADHI:
In the first quarter of 2016, Adhi Karya's revenues rose 6.5 percent (y/y) to IDR 1.32 trillion, while its net profit was flat at IDR 11 billion. Its gross margin fell from 10.7 percent to 9.5 percent.
Future Forecast Adhi Karya's Financial Highlights:
| 2013 | 2014 | 2015 | 2016F | 2017F | |
| Revenues | 9,799.6 | 8,653.6 | 9,389.6 | 15,030 | 18,722 |
| Net Income | 406.0 | 329.1 | 463.7 | 547 | 740 |
| Earnings per Share¹ | 227 | 183 | 203 | 154 | 208 |
| P/E Ratio (x) | 11.5 | 14.4 | 12.5 | 16.8 | 12.5 |
in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
Source: Trimegah Securities (14/06/2016)