Jan 3, 2011

Duta Graha to grab IDR2.25 trio contracts

Construction company PT Duta Graha Indah Tbk (DGIK) is estimated to grab more than Rp2.25 trillion new contracts in 2011.
In a company report published by PT Pemeringkat Efek Indonesia late last week, Duta Graha already booked IDR1.2 trillion new contracts until September 2010, its only 60% from 2010 target of Rp2 trillion.
"Since so many projects announced in the last quarter 2010 as the delay from government, we estimate that DGIK is able to reach their target of Rp2 trillion this year," said the report.
Actually until mid-December 2010, DGIK’s new contracts already reach Rp1.9 trillion, means that DGIK success to intensify its project tender in 4Q 2010.
It is estimated that for 2011 the construction expenses in Indonesia will grow around 10% to reach above Rp200 trillion figure, so there will be more project to be offered next year.
Duta Graha's efficient cost control makes better profit margins than peers, in 3Q 2010 DGIK had a higher profit margin than average of construction companies.
Gross margin, operating margin, and net margin of DGIK during 3Q10 were 13.8%, 9.6% and 4.5% respectively, while the average margin of peers were 12.3%, 6.8% and 3.9% respectively. Its cost efficiency has made DGIK as second best in the margin after Jaya Konstruksi (JKON).
DGIK’s management that properly manages its efficiency is one of supporting factors. In the last 10 quarters, DGIK record average cost of contract of 87.6% better than peers average of 89.6%, and in 3Q 2010 DGIK cost of contract was well managed so its point to 86.2% figure.
"With consistent management effort to maintain the efficiency, we estimate DGIK can maintain its efficiency so we believe they can book about 13.9% gross margin and 5.5% net margin in FY10."
Business Prospects
Duta Graga growth is closely related to government infrastructure expenditure since more than 70% of it project is government related project.
Government increases their allocation for infrastructure development to Rp105.6 trillion or a 13% increase. Government also has guarantee about Rp350 trillion of infrastructure project for 2010-2014.
"That condition will support Duta Graha to achieved its growth target, we estimate DGIK revenue in 2010 can reach Rp1.34 trillion or increase 3.8% YoY and and 10.2% CAGR from 2009-2014."
Duta Graha Indah established in 1982 by focusing only on projects in Jakarta and Java. Since the 1986, DGIK began entering infrastructure projects and expand its operations into the region. The company has 11 branches spread over strategic cities in Indonesia and 1 branch in Brunei Darussalam.
Until now DGIK has successfully completed more than 100 building projects and 170 infrastructure projects throughout Indonesia.
In 2010, DGIK has many projects in Sumatera, Pagaralam airport in South Sumatera is DGIK latest project that estimated to finish in 2012 worth more than Rp200 billion.

Disclosure: No position at the stock mentioned above.  

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