Feb. 21 (Bloomberg) -- Indonesia’s four state-owned builders gained in Jakarta share trading on speculation the government may boost the value of construction contracts signed last year to compensate the companies for rising costs.
PT Adhi Karya jumped 6 percent, pacing gains among the four developers and heading for the highest close since Aug. 21. PT Waskita Karya advanced 3.9 percent, poised to close at a five-month high, while PT Pembangunan Perumahan and PT Wijaya Karya rose at least 2 percent. The Jakarta Construction, Property & Real Estate Index added 1.4 percent, the most among nine industry groups in the benchmark Jakarta Composite Index, which climbed 0.7 percent.
The government is in discussions to raise contract values amid increasing costs caused partly by a 20 percent loss in the rupiah last year and an increase in subsidized fuel prices, Muhammad Choliq, president director of Waskita, said yesterday. The rupiah has rallied 3.2 percent this year, the best performer among 12 Asian currencies tracked by Bloomberg.
“Construction shares have declined sharply in previous quarters on concerns about higher costs and a slowdown in private developments,” John Teja, a director at PT Ciptadana Securities, said by phone today. “The remarks from Waskita gave some positive sentiment for investors in the sector.”
Choliq forecast Waskita’s net income would rise to 443 billion rupiah ($37.6 million) this year, from 368 billion rupiah in 2013. That’s higher than the mean estimate of 408.3 billion rupiah in a Bloomberg survey of eight analysts. An upward revision in contract values by the government could boost profits even further, Choliq said.
Hamdi, a spokesman at Bina Marga directorate of the Public Works Ministry, declined to comment on the discussions, saying he’s not involved in the process.
Construction stocks are among the top picks of PT Mandiri Manajemen Investasi, the asset management company owned by Indonesia’s largest bank, PT Bank Mandiri. Mandiri Manajemen cited the outlook for improved earnings from higher government spending during an election year, Chief Investment Officer Priyo Santoso said in a Feb. 10 interview.
Shares of the four companies will gain an average 11 percent over the next 12 months, according to analyst forecasts compiled by Bloomberg.
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