Following the significant infrastructure boom in recent years and a never-ending debt restructuring process, the construction sector has long been put on the sideline. Four out of five SOE contractors find their only way out is again to seek a capital injection from the government.
WSKT is poised to receive the largest capital injection among all BUMN in 2024, totaling IDR 18.6 tn. This substantial funding is earmarked for advancing the completion of the first phase of the Sumatra Toll Road, the Bogor-Ciawi Sukabumi Toll Road project, and the Kayu Agung-Palembang-Betung Toll Road project.
WIKA follows closely with a capital injection of IDR 6.12 tn through a rights issue scheme. Meanwhile, ADHI secured a less than modest capital injection of IDR 2.65 tn.
The one that did not seek any injection is PTPP.
Source: Siminvest
While the ongoing debt restructuring for major SOE contractors is still in progress, we believe that PTPP will come out as one of the few-if not the only, contractors able to hold out in the long run and capitalize on the upcoming wave of infrastructure development in the medium term, given their bankability profile.
PTPP's new contracts as of 10M23 exhibited a promising yoy growth of 34.3% totaling to IDR29.3 tn, accompanied by a shift in the shareholder structure, including a 2.8% increase in the portion held by local institutions.
Source: Sucor Sekuritas, Company
The IKN's recent classification as a national strategic project for the next decade, under the upcoming legal revision, makes its development crucial under any future president. This assurance is expected to draw substantial private investments, both domestically and internationally.
According to data from the OIKN, the total funds already allocated for the development of IKN amount to approximately IDR 71 tn. Breakdown reveals that IDR 36 tn comes from investors, while IDR 35 tn is sourced APBN.
PTPP has secured contracts totaling IDR 8.76 tn in IKN (marketing achievement as of 10M23 at IDR 5.62 tn). These contracts include the construction of the presidential office, state palace, civil servant residential towers, and the BI building.
Source: Company
These projects are expected to be completed in 2024, with some planned for use during the celebration of Indonesia's Independence Day on August 17, 2024.
Per our last vist to IKN few weeks ago, we can see that it's in its initial development phase, with a total of 9 BWP planned over the next 10 years. This is just the beginning of phase 1. PTPP is expected to absorb ~25% of the total projects in IKN.
Source: Sucor Sekuritas
Regarding the overall infrastructure budget, it is anticipated to experience an upward trend. As per the latest RAPBN, a IDR 422.7 tn budget is expected to be alocated in 2024 (+7.8% yoy), on top of to the +9.8% yoy rise in 2023.
Source: ResearchGate
Based on the commissioning parties, approximately 42.47% of new contracts obtained by PTPP are government-funded projects. Then, another 40.37% was funded by private companies, while the remaining 17.16% was commissioned by SOE.
Just imagine yourself as a project owner or investor partner. Which contractor would you prefer? One with extensive expertise? Local knowledge? Substantial and financially reliable?
We find PTPP worth considering, given its financial credibility in comparison to other SOE contractors. We are also optimistic that IKN could serve as the economic catalyst needed to stimulate the construction sector and promote economic equalization in Indonesia.
Read our IKN site visit report here: