Photo credit: Moody's

Moody’s Investors Service has taken a number of rating actions on non-financial corporates in Indonesia that are also government-related issuers. The rating actions follow its earlier announcement that it has upgraded Indonesia’s sovereign rating to Baa2 from Baa3.

As a result of the sovereign rating action, Moody’s has upgraded the issuer and senior unsecured ratings of Pertamina to Baa2 from Baa3. The outlook on these ratings have been revised to stable from positive.

At the same time, Moody’s has affirmed the Baa1 issuer rating of Telekomunikasi Indonesia (Telkom) and the Ba2 corporate family rating of Wijaya Karya, Wika.

The outlook on these ratings is stable.

Ratings Rationale

“Pertamina’s ratings upgrade follows the upgrade of the sovereign rating and reflects the company’s strategically important position as Indonesia’s only national integrated oil and gas company. Its baseline credit assessment (BCA) is affirmed at baa3,” says Rachel Chua, a Moody’s Assistant Vice President and Analyst.

“Telkom’s rating is one notch above the rating of the sovereign and reflects its standalone credit strength without any tangible uplift due to government ownership. The rating reflects the company’s established position as Indonesia’s largest integrated telecommunications operator and an operating and financial profile reflective of a strong investment-grade company,” says Nidhi Dhruv, a Moody’s Vice President and Senior Analyst.

However, Telkom’s rating is also constrained by an evolving acquisition strategy, its exposure to Indonesia’s competitive operating environment, and the risk of intervention from the Government of Indonesia (Baa2 stable), given Telkom is a majority state-owned company.

“WIKA’s ratings are affirmed at Ba2 with stable outlook because WIKA’s rating already incorporates a two-notch uplift from its b1 BCA, given our expectation that it will receive a moderate level of extraordinary support from the Indonesian government in times of need. Accordingly, an upgrade to the sovereign rating does not automatically result in an upgrade of WIKA’s rating,” says Maisam Hasnain, a Moody’s Analyst.

“WIKA’s b1 BCA continues to reflects its leading market position as one of the largest construction companies in Indonesia, with an established track record of completing large projects, with a sizeable order book that provides good revenue and cash flow visibility,” adds Hasnain, also Moody’s Lead Analyst for WIKA.

The principal methodologies used in rating Pertamina were Global Integrated Oil & Gas Industry published in October 2016, and Government-Related Issuers published in August 2017. The principal methodologies used in rating Telekomunikasi Indonesia (P.T.) were Telecommunications Service Providers published in January 2017, and Government-Related Issuers published in August 2017. The principal methodologies used in rating Wijaya Karya Tbk were Construction Industry published in March 2017, and Government-Related Issuers published in August 2017.

Pertamina (Persero) (P.T.) is a 100% Indonesian government-owned,full y-integrated oil and gas corporation, with operations in upstream oil, gas and geothermal exploration and production, downstream oil refining, marketing, distribution, transportation and trading of
petroleum products.

Telekomunikasi Indonesia (P.T.) (Telkom) is the largest integrated telecommunications company in Indonesia. The company, along with majority owned subsidiary, Telekomunikasi Selular (P.T.) (Baa1 stable), generated gross revenue of IDR128.3 trillion (approximately USD9.6 billion) for the 12 months ended 31 December 2017. Telkom is 52.1% owned by the Government of Indonesia.

Established in 1960, Wijaya Karya (Persero) Tbk. (P.T.) (WIKA) is one of the largest EPC companies in Indonesia with annual revenue of around IDR26.2 trillion and an order book of IDR106.6 trillion as of December 2017. WIKA is 65% owned by the Government of Indonesia, with the remaining 35% shares held by the public.

List of rating actions

Issuer: Pertamina

Issuer Rating, upgraded to Baa2 from Baa3

Senior Unsecured MTN Programme, upgraded to (P)Baa2 from (P)Baa3

Senior Unsecured Regular Bond/ Debenture, upgraded to Baa2 from Baa3

Baseline Credit Assessment, affirmed at baa3

Outlook is revised to stable from positive

Issuer: Telekomunikasi Indonesia (P.T.)

Issuer rating — Domestic Currency, affirmed at Baa1

Baseline Credit Assessment, affirmed at baa1

Outlook is maintained at stable

Issuer: Wijaya Karya (Persero) Tbk. (P.T.)

Corporate Family Rating, affirmed at Ba2

Senior Unsecured (Domestic) Rating, affirmed at Ba2

Baseline Credit Assessment, affirmed at b1

Outlook is maintained at stable

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