Indonesian infrastructure plays offer upside

Indonesian infrastructure plays offer upside
Published: 11 November 2009

Indonesian cement producer Semen Gresik and construction firm Wijaya Karya are among stocks set to gain from plans to improve infrastructure over the next five years, a senior fund manager at a unit of Bank Mandiri said.

Abiprayadi Riyanto, president director of PT Mandiri Manajemen Investasi, said he expects several infrastructure sector stocks to benefit from the government’s renewed focus on building roads, ports, and power plants in order to attract foreign investment and lift the pace of economic growth.

Other cement stocks such as Indocement and construction company Adhi Karya , as well as heavy equipment distributor United Tractors , which sells machines used for mining and building roads, are among his stock picks, Riyanto told Reuters in an interview on Wednesday.

United Tractors, up 252 percent this year, and Indocement, up 155 percent, have both outperformed the marketSemen Gresik is up 76.1 percent so far this year, in line with the broader market gain of 75.7 percent.

Semen Gresik is trading on a 2010 forward price-earnings ratio of 13.2 times, while Indocement trades at 16.2 times and United Tractors 13.4 times, compared to 13 times for the main index, based on Reuters data.

Alif Sasetyo, an analyst at Mandiri Sekuritas, said cement stocks tend to trade on a higher multiple because they are more liquid and earn higher margins than the construction firms.

Source: Reuters