PTPP's new contracts dropped 52% in Q1
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 - Kuartal I, Kontrak Baru PTPP Turun 52%
06 May 2021
Construction projects have yet to increase this year. This condition can be seen from the new contract realisation of PT PP Tbk (PTPP).
Throughout the first quarter of this year, PTPP has secured new contracts worth Rp2.5 trillion. This realisation is still lower by 51.92% compared to the realisation in the first quarter of last year that reached Rp5.2 trillion.
From the new contracts, Rp1.35 trillion are contracts that are secured by PTPP by themselves. The remaining Rp1.15 trillion are new contracts secured by subsidiaries.
For comparison, last year, PTPP’s subsidiaries secured new contracts worth Rp400 billion. The rest of the contracts were secured by PTPP as the parent company.
However, PTPP is optimistic about their performance recovering. “We predict that the new contract realisation in the second quarter of 2021 will be better compared to the previous period,” PTPP Corporate Secretary, Yuyus Juarsa, said to Kontan on Wednesday (5/5).
There are several major projects that will be secured in May and June. Throughout the first quarter of last year, there were project tenders worth Rp8 trillion. However, most of the tenders have yet to announce a winner.
Carry-over projects
This year, PTPP is targeting to secure new contracts worth Rp30 trillion. This amount grew around 35% from the new contract realisation throughout 2020.
NH Korindo Sekuritas analyst, Ajeng Kartika Hapsari, believes that PTPP will not struggle in securing more contracts than last year as there were many projects that were postponed in 2020. These projects will resume this year.
At the same time, PTPP can look for contracts that are tendered this year. “So, PTPP’s new contract realisation will be boosted,” Ajeng wrote in her research. She predicts that PTPP’s new contract realisation this year will grow 26.7% yearly.
Ajeng is maintaining her buy recommendation for PTPP. However, she lowered her target price to Rp1,870 per share.
The target price takes into consideration the forward price to earning ratio (PER) of 23.3. This is slightly higher than the average deviation standard in the last three years.
Rather than pursuing the new contract target, PTPP will support its subsidiary, PT PP Properti Tbk (PPRO), to change its debt profile. PTPP will loan Rp4 trillion to the subsidiary.
The loan will be used to repay some due liabilities from 2021 to 2022, including principals, SKBDN, bonds and MTN (medium-term notes), interests, and reasonable payment. This is expected to improve the company’s financial condition.
Yuyus affirmed that the loan would not disturb the financial health of PTPP. Moreover, the loan is only a plan B.
This means that the loan will only be disbursed if the agreement for funding for PPRO from creditors is not 100% realised. So, the loan will be provided gradually in line with PPRO’s needs. “If the loan for PPTRO is realised, PTPPs financial ratio will still meet the criteria to receive loans from creditors,” Yuyus added.
