Fitch Believes Construction SOEs Such As PTPP, Waskita Karya, WIKA Etc. Will Bring Good News Later: Raup Profits In Quarter IV

Illustration (Photo: Doc. Antara)

JAKARTA - PT Fitch Ratings Indonesia said that construction companies, especially those related to the government, were in better condition compared to mid-2020.

Fitch Ratings Indonesia analyst Ana Halim said the economic recovery following the easing of daily COVID-19 cases gave this sector a better chance of growth by the end of the year.

In addition, Ana also believes that the pattern of construction work in Indonesia that spurs infrastructure projects at the end of the period strengthens this prediction.

"Fitch estimates that most of the profitability of contractors and new contracts will be realized in the second half of 2021 because the government usually speeds up project tenders and disbursement of infrastructure-related budgets in the fourth quarter," he said in an official statement quoted on Monday, September 20.

According to Ana, the record of new contracts received by construction companies in the first half of 2021 and the gradual easing of mobility will help contractors increase their cash flow.

"Increased business activities will also support contractors in reducing long working capital cycles," he said.

In detail, he explained that the big four new contracts related to the government increased 18 percent year-on-year (yoy) in the first semester of 2021.

For each of these, PT Wijaya Karya Tbk (WIKA) booked a new contract of IDR 10.5 trillion in the first half of 2021. This amount is more than three times higher than the previous year.

Then, PT Adhi Karya's new contract shot up almost 70 percent, while PT PP is said to be in a horizontal trend.

In contrast, another state-owned construction company, PT Waskita Karya Tbk, experienced a 62 percent yoy decline in contracts in the first half of this year. The condition experienced by the WSKT stock coded issuer is the result of the company's steps in debt restructuring.

"The decline was also experienced by PT Hutama Karya, which fell 32 percent yoy, although the company's order book relies on a feasibility study for the Trans Sumatra Toll Road mandated by the government and does not reflect broader industry trends," continued Ana.

For information, Wijaya Karya and Hutama Karya benefit from a manageable debt maturity profile and more solid access to funding.

"This puts Wika and HK in a better position to win contracts and increase the order book compared to other contractors," he said.

To note, Wika does not have long-term debt that will mature in the next 12 months. This state-owned company has also been able to roll over existing short-term bank loans.