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Wednesday, June 1, 2011

MORE PROJECTS, MORE REVENUE TO COME - PT Jasa Marga Tbk

by E-Trading Securities

Welcoming Two New Toll Roads

Company revenue is expected to increase along with new operation of two finished projects by this year. These projects are scheduled to be fully operated by this year, i.e Waru‐Sepanjang (2.3km) and Semarang‐ Ungaran (11.3km) projects. However, Semarang‐ Ungaran project has land contour problem, the management still optimistic that the project will be fully operated on schedule in third quarter of 2011.

Meanwhile, Waru‐Sepanjang project will be finished is on 3rd quarter of 2011.

More Projects

Company has successfully acquired Gempol‐Pandaan project which worth IDR 1.6 trillion from foreign investor. This project will be connected with the existing projects that currently under construction, i.e. Surabaya‐Gempol and Gempol‐Pasuruan toll roads. In addition, in April 2011 the company has signed a Consortium Agreement for the construction of Sarangan‐Tanjung Benoa (Bali) toll road with five other state‐owned companies, which Jasa Marga is the biggest shareholders with 60% of ownership. This project is schedule to be completed in mid of 2013 before the APEC meeting in Bali. The project will be build above the sea with the approximately 10 km length.

New Toll Tariff Adjusment

Based on the government policy, every section of toll road’s tariff is adjusted once in every two years. The adjustment will be calculated based on the average of inflation rate in last two years that reported by Central Agency of Statistic (BPS). New tariff formula is calculated as :

New toll tariff = old toll tariff x (1+ Inflation rate). This year, the average tariff of nine toll roads will increase by 11‐12% in September. However, we believe the inflation‐adjusted tariff is within reasonable level and will not give any negative effects for JSMR.

Strong 1Q2011 Result

On 1Q11 Result, Jasa Marga booked at IDR 1,154.7 trillion of revenue, grew by 13.8% qoq and net income was booked at IDR 371.8 billion grew by 27.5% qoq. The company’s 1Q11 result performance is in‐line with our projection. Revenue represents 24.7% and net income represents 26% from our FY11 projection.

Defensive Industry

Toll industry is a defensive industry, which gives an advantage for the company to grow their revenue in the future. Historically, fuel price increment will hinder the car sales growth. However, this situation does not contribute significant effect to the company’s traffic volume. It can be seen when the government raised the fuel price in 2005 and 2008, the car sales record was declining 40.3% and 20% in 2006 and 2009. Meanwhile, Jasa Marga traffic’s volume only turned down 2.3% in 2006 and actually increased 4.1% in 2009.

Valuation

Jasa Marga, as the leading toll Industry operator, is a defensive industry against the economic downturn, has given a steady income from the traffic growth and the toll tariff. Using DCF and assumed WACC 10.61% mixed with 3.75% of terminal growth and risk free rate at 8% the calculation registered IDR 4,050 value of stock, which hides 17% potential upside and reflect 15xPE12F.

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