Jasa Marga 1H11 operating revenue grew by 12.2% YoY (+4.4% QoQ) attained to Rp 2.3 trillion, while its net profit also increased by 16.0% YoY (+1.7% QoQ) to Rp 752 billion.
Its traffic volume increased by 12.5% YoY (+6% QoQ), from 465 million vehicles in 1H10 to 523 million vehicles in 1H11.
Overall, Jasa Marga’s 1H11 results came in line with our projection, where its operating revenue and net profit covered 48% and 55% of our full year forecasts of Rp 4.9 trillion and Rp 1.4 trillion, respectively. Meanwhile, its traffic volume during the same period reached 52% from our 2011 projection of 998 million vehicles.
Although traffic volume figure increased by 12.5% YoY but that it was partly due to the implementation of new toll system calculation of vehicles entering and exiting (implemented in early 2011), therefore the YoY actual traffic volume is not quite comparable to last year’s. The management reported that the changes was due to the relocation of Jagorawi and Jakarta-Cikampek main gates and the changes in toll payment transaction system calculation (applied to its several toll road section, i.e.: Jagorawi, Cikampek and Camareng).
Despite the increase in traffic volume, Jasa Marga’s EBITDA and operating margins were relatively flat in 1H11 and 2Q11 period, which were caused by higher operating cost of toll road services unit (+29.4% YoY, +28.9% QoQ) on the back of widening toll road (Jakarta-Tangerang and Jagorawi sections) and an increases in operating expenses of its subsidiary, PT Marga Sarana Jabar since Bogor Ring Road Section I has full-operated this year. The company’s EBITDA margin came in at 63.9% in 1H11 (vs 64.8% in 1H10) and 63.7% in 2Q11 (vs 64.1% in 1Q11), whilst its operating margin was at 52% in 1H11 (vs 52.1% in 1H10) and 51.9% in 2Q11 (vs 52.1% in 1Q11).
We expect Jasa Marga’s performance to improve in 2H11 onwards, buoyed by (1) the increase of toll tariff for the 11 remaining toll road sections which is scheduled in September 2011; (2) higher traffic volume due to the upcoming festive seasons and (3) the construction of Semarang-Ungaran and Waru-Sepanjang have been completed and ready to commence operation this year, while awaiting toll tariff decision by the Minister of Public Works, scheduled to take place in August 2011.
Based on our new assumption in our 10-years DCF valuation method, i.e.: new WACC assumption of 10.25% and 2012 as a basis year, we value Jasa Marga at Rp 4,350 per share (previously at Rp 4,250 per share), which represents PE-EV/EBITDA of 16.24x-10.69x FY12F. Recently, the counter was trading at PE of 14.66x FY12F and EV/EBITDA of 9.82x FY12F and our fair value still offer 11% upside potential. Hence, we maintain our BUY recommendation.