PEFINDO assigns “idA-” rating to PT Waskita Karya (Persero) Tbk’s planned shelf-registered bonds IV/2019

PEFINDO has affirmed its “idA-” ratings for PT Waskita Karya (Persero) Tbk (WSKT) and its shelf-registered Bonds I/2015, shelfregistered Bonds II/2016, and shelf-registered Bonds II/2017. At the same time, PEFINDO has assigned its “idA-” rating to WSKT’s proposed shelf-registered bonds IV/2019 of up to IDR4.95 trillion, the proceeds of which will be used to fund its order book contracts. The outlook for the corporate rating is “stable”.

An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors.

The minus (-) sign in a particular rating indicates that it is relatively weak within the respective rating category.

The rating reflects WSKT’s strong market position in the construction industry, its good margin on account of a diverse project segment, and its benefits as a major state-owned construction company. The rating is constrained by its high financial leverage, the relatively volatile business environment, and risks related to its aggressive toll road business expansion and divestment plan.

The rating may be raised if WSKT succeeds in timely divesting its toll road assets according to the expected price range, while improving its credit profile to a level that is commensurate with an idA rating, on a sustained basis. This should go together with a good profitability above its peers to compensate for the higher risks coming from its turnkey projects. The rating may be lowered if the Company fails to reach its targeted revenue and if it incurs additional debt than projected, stemming from delayed turnkey project payments , resulting in a deterioration in its credit profile. We could also lower the rating if investments in its toll road business, including its plan to divest toll road assets, fail to perform as expected, resulting in a worsening credit profile.

WSKT is one of the largest construction companies in the country. Its main business, providing construction works, contributed 97% of revenue in 2018. Its other businesses include precast concrete, toll roads, property, and energy. It has an extensive domestic marketing network with 33 marketing offices throughout the country. The Indonesian government held a 66% share on the Company as of June 30, 2019, with the remainder owned by public. (ends)