Wednesday, November 16, 2011

PT Jasa Marga Tbk

by Kresna Securities

Investment Thesis

We reiterate our BUY recommendation with higher 12-month TP of Rp4,825. In 3Q11, the company booked Rp1.23tr in revenue, ticked up by 2.5% QoQ, while operating profit and net income fell by 15.3% QoQ and 21.5% QoQ to Rp530.0bn and Rp297.0bn, respectively, attributable to higher opex from bonuses and compensation recognition during Muslim New Year, as well as higher net interest expenses. However, 9M11 results were still in line; from top to bottom, they formed 71.1%-73.3% of our full-year estimate. We also upgrade our 12-months TP by 12.2% to Rp4,825, after we switch our base year to 2012 and raise FY12/13 earnings by 5.5%/3.6% to Rp1.7tr/Rp1.9tr, respectively.

Key Catalysts

· Revenue ticks up 2.5% QoQ. The company recorded a 2.5% QoQ increase in revenue to Rp1.2tr in 3Q11 on the back of higher traffic volume by 2.4% QoQ to 275.0m vehicles, bringing 9M11 revenue to rise by 12% YoY to Rp3.6tr, from Rp3.2tr in 9M10. Revenue from toll roads of Rp3.5tr (+10.8% YoY) in 9M11 accounted for 97.5% of total revenue, while miscellaneous revenue of Rp89.2bn (+88.0% YoY) accounted for 2.5% of total revenue.

· Operating profit falls by 15.3% QoQ. Operating profit was recorded at Rp530.0bn in 3Q11, falling 15.3% QoQ from Rp625.9bn in 2Q11, as operating expenses rose by 21.8% QoQ to Rp705.6bn. A jump in 3Q11 opex, we believe, was mainly attributable to bonuses and compensation for Idul Fitri (THR). However, operating profit in 9M11 still rose by 11.8% YoY to Rp1.8tr, from Rp1.6tr in 9M10.

· Net income drops by 21.5% QoQ. Higher opex in 3Q11, coupled with rising net interest expenses (21.1% QoQ) has dragged net income down by 21.5% QoQ in 3Q11 to Rp297.0bn vs Rp379.0bn in 2Q11.

· Better performance in 4Q11. Revenue in 4Q11 will accelerate due to higher traffic volume as well as higher tariff imposed early this month on 11 of JSMR's toll roads.

The new tariffs are 5.9%-25% higher than the previous ones, with the highest increase taking place in Pondok Aren-Ulujami (+25.0%) and Surabaya-Gempol (+16.7%), and the lowest in Palimanan-Kanci (+5.9%). The operation of the new Waru-Sepanjang toll road in early Sep11 will also add weight to performance in 4Q11.

Earnings Outlook

· We upgrade our forecast for 2012. From top to bottom, 9M11 results were in line and accounted for 71.1%-73.3% of our full-year estimate; therefore, we maintain our estimate for FY11 projection. However, we raise our earnings forecast by 5.5%/3.6% to Rp1.7tr/Rp1.9tr in 2012/13, respectively, after taking into account several efficiency programs initiated by the company, namely: the implementation of e-toll cards and consistent efforts to maintain its number of employees constant, despite an increase in toll road length.

· Reiterate BUY recommendation with higher TP. Following our earnings upgrades in 2012/13 as well as rolling our base year to 2012, we raise our 12-month TP by 12.2% to Rp4,825.

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