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Builders begin to secure contracts from the Nusantara project

Jakarta Globe - September 13, 2022

Parluhutan Situmorang, Jakarta – The government's development project for Nusantara, Indonesia's new capital, has started to grant contracts to listed state-owned builders to boost their financial performance recovery after two years of COVID-19 pandemics.

According to the latest research from a brokerage, CLSA Sekuritas Indonesia, the construction companies have secured 19 projects totaling Rp 5.3 trillion ($357 million). The projects include the construction of roads, highways, bridges, and dams.

"Although the value of the newly offered project has only reached Rp 5.3 trillion, we consider this a good start," CSLA researchers wrote in their report.

The government estimated Nusantara development would cost around $32 billion to develop. The state budget would only bear 19 percent of the cost of building basic infrastructure, parks, and the government's offices and residential buildings for public officials.

It was expected that private or foreign investors, working independently or under a public-private partnership (PPP) scheme, would develop other facilities like schools, hospitals, apartments, and shopping malls.

CSLA said that infrastructure and residential projects were the two main projects of Nusantara, providing a catalyst for contractor and property companies' growth after two years of sluggishness during the pandemic.

"We estimate that the companies' new contract growth will reach 13 percent in 2022, compared to last year's realization of only 4 percent," he said.

Nusantara's residential area's development should give the property companies a positive sentiment. CSLA said Ciputra Development, Summarecon Agung, and Bumi Serpong Damai would benefit most from the new capital development.

Meanwhile, state-owned construction companies PP and Waskita Karya should have a head start on the project, CSLA said. The security firm upgraded its price target for PP to Rp 1,175 per share and Waskita to Rp 630 per share.

CSLA said PP net income should reach Rp 795 billion next year, from an estimated Rp 387 billion in 2022. Waskita would turn to profit next year, booking a net income of Rp 547 billion in 2023, from a net loss of Rp 202 billion this year, CSLA projected.

Source: https://jakartaglobe.id/business/builders-begin-to-secure-contracts-from-the-nusantara-projec