Deutsche Bank : Indo Struktur: Restart the cycle
All hail positive cash flow; yield play as contractors' near-term upside catalyst
All contractors have reported the year-end results that the market wanted:
• Cash flow turning positive, despite earnings considered below-target, without extraordinary items.
• A growth normalization has been much needed since President Jokowi amplified infrastructure spending three-fold over the last five years.
With almost all major infrastructure projects completed on time, we are finally seeing a stream of cash flow payments that resulted in the first positive operating cash flow seen at all contractors. For this year, we expect three main narratives to foster excitement in the sector:
1) Yield expectation
2) Asset divestment (recycling), and
3) Infra Holding progress.
Our top pick is WSKT on its divestment urgency and necessity, followed by PTPP and ADHI on their cheap valuations, while we maintain our cautious view on WIKA due to the HSR project.
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