PEFINDO lowers WIKA's ratings

(29 May, 2023)--PEFINDO has lowered the ratings for PT Wijaya Karya (Persero) Tbk (WIKA), its Shelf- Registered (SR) Bond I, II, III, and its SR Sukuk Mudharabah I,II, III to idBBB from idA. We revised the outlook to Negative from stable.

The rating action reflects our view on WIKA’s weak financial profile, as shown by its very aggressive capital structure and weak liquidity to service its maturing short-term debt maturities. This is due to WIKA’s lengthened operating cash cycle and high capital expenditures from its investments, making it highly reliant on external funds to finance its construction activities. The Negative outlook reflects our view on WIKA’s heightened refinancing risk due to more limited financial flexibility triggered by weaker financial profile and negative market sentiment towards the construction sector.

The corporate rating reflects WIKA’s strong market position in the domestic construction industry and diversified revenue sources. The rating is constrained by the Company’s weak liquidity profile, risks from previous expansion, and the inherently volatile business environment.

The Company’s inability to address its weak operating management and liquidity issues in the near term may trigger further rating downgrades. However, we may revise the outlook to stable if WIKA significantly improves its business performances and financial indicators while generating stronger cash flow on sustained basis.

Established in 1961, WIKA is one of the state-owned enterprises (SOE) in the construction sector. It covers investments, realty & property, infrastructure & building, energy & industrial plant, and industry segments. As of March 31, 2023, its shareholders were the Indonesian government (65.05%) and the public (34.95%). (ends)