T

he sell-off of shares in state-owned construction firm PT Waskita Karya, which followed the company’s announcement on Tuesday that it had failed to divest ownership of 10 toll-road sections, eased on Wednesday.

Waskita saw its share price fall by 2.12 percent on Wednesday, compared with an 11.27 percent plunge on Tuesday. Its subsidiary, PT Waskita Beton Precast also fell by 1 percent on Wednesday, again not as bad as Tuesday’s decline of 8.63 percent.

Waskita corporate secretary Shastia Hadiarti stated in its disclosure to the Indonesia Stock Exchange (IDX) that the company had canceled the divestment plan, as the prices offered by the bidders were below the firm’s target.

Previously, the company had expected to raise Rp 10 trillion (US$757.12 million) from the divestment with five bidders, foreign and domestic entities, lined up as of Sept. 6.

The market was not worried about the canceled divestment per se, but more about the future cash flow of Waskita Karya as it reported negative operating cash flows amid the huge financing required for its ongoing projects, said Recapital Sekuritas analyst Kiswoyo Adi Joe, suggesting alternative funding sources needed to be found.

“Waskita can draw down loans from banks if it needs cash. Thus, I think the decline in the stock price will be temporary,” he said on Wednesday, adding that Waskita should also seek other financing alternatives such as bonds or toll-road securitization.

According to its first-half financial statement, Waskita’s debt-to-equity ratio (DER) was 2.64 times, still lower than its bank debt covenant of a maximum three times, but the company’s room to withdraw loans from banks is limited.

In terms of bottom line, Waskita booked a 147.13 percent year-on-year (yoy) increase in net income to Rp 1.42 trillion in the first half, while revenues soared by 92.33 percent yoy to Rp 15.55 trillion.

As the government budget can only cover 41.63 percent of the Rp 4.8 quadrillion (US$363.55 billion) needed to build infrastructure until 2019, it has pushed state-owned enterprises (SOEs) to invest in more projects. Thus, the SOEs must make extra efforts to secure capital, from bond and rights offers to assets sales.

Bloomberg reported that Waskita’s revoked divestment plan had cast doubt about funding for the infrastructure program, affecting not only Waskita’s share price but also those of other state-owned construction firms such as PT Wijaya Karya (Wika) and PT Pembangunan Perumahan (PP).

The selling pressure on Wika and PP continued on Wednesday, but not as heavy as on Tuesday. Wika’s shares fell by 2 percent while PP’s shares dropped by 1.56 percent on Wednesday, less than the drops on Tuesday at 2.3 percent and 3.3 percent, respectively.

Indonesia Infrastructure Finance president director Arisudono Soerono said that selling toll roads to investors was never an easy job, especially for foreign investors, as a result of currency mismatches. Toll roads generate income in rupiah while foreign investors want US dollar-based revenue.

Moreover, Indonesia has limited options for hedging in the local financial market as protection from currency fluctuations over the long term.

“Given that investors cannot hedge their long-term investment, they ask for a higher yield,” Arisudono said.

Those problems are usually seen in brownfield investments, while in greenfield investments, the investors face the persistent hurdle of land availability.

“The government has issued new regulations to mitigate those problems, but investors want to see success stories before they invest,” Arisudono said.