Indonesian Builders Advance to Three-Month High on Adhi Forecast

Indonesian construction stocks rose, sending the benchmark index to a three-month high, after Jakarta-based builder PT Adhi Karya (ADHI) forecast 2014 earnings that exceed analysts’ estimates.

The Jakarta Construction, Property and Real Estate Index advanced 1 percent to 383.60 at the midday break, the biggest gain among nine industry groups and heading for the highest close since Nov. 7. Adhi Karya climbed 2.85 percent to 1,985 rupiah, set for the highest close since Oct. 30.

The company’s net income will probably rise about 40 percent this year to 570 billion rupiah as the government boosts infrastructure spending, President Director Kiswodarmawan said in an interview with Bloomberg News in Jakarta yesterday. That’s higher than the 399 billion rupiah average of 11 estimates compiled by Bloomberg and exceeds the most optimistic analyst projection of 507 billion rupiah.

“This is very positive news for the company,” Dwianto Oktory, a Jakarta-based money manager at PT MNC Asset Management, said by phone today. “It also helped sentiment for the sector.”

Construction stocks are among the top picks of PT Mandiri Manajemen Investasi on expectations they will benefit from higher government spending in an election year, Chief Investment Officer Priyo Santoso said in a Feb. 10 interview.

Adhi Karya plans to sign 19 trillion rupiah of new contracts this year and boost sales by about 50 percent to 14.7 trillion rupiah, Kiswodarmawan said. The company is also working on a plan to list its property unit, PT Adhi Persada Properti, in 2015.

Adhi Karya shares are valued at 8.5 times estimated earnings for the next 12 months, versus 9.6 for the construction gauge and 13.5 for the Jakarta Composite Index. The Jakarta measure rose 0.2 percent today.

To contact the reporter on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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